<PAGE>
As filed with the Securities and Exchange Commission on January 23, 1996
================================================================================
Registration No. 33-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-3
REGISTRATION STATEMENT,
POST-EFFECTIVE AMENDMENT NO. 3
AND
POST-EFFECTIVE AMENDMENT NO. 2
UNDER
THE SECURITIES ACT OF 1933
__________________
ASSET BACKED SECURITIES CORPORATION
(Exact name of Registrant as specified in its charter)
on behalf of itself and trusts with respect to which it is the settlor or
depositor
<TABLE>
<S> <C> <C>
Delaware Park Avenue Plaza 13-3354848
(State or other jurisdiction of 55 East 52nd Street (I.R.S. Employer
incorporation or organization) New York, New York 10055 Identification No.)
</TABLE>
(212) 909-2000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Gina Hubbell
Director and Vice President
Asset Backed Securities Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(212) 909-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
__________________
Copy to:
Michael H. Yanowitch
Sidley & Austin
875 Third Avenue
New York, New York 10022
__________________
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
__________________
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 statement number of the earlier effective registration statement
for the same offering. [_] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE(1)
<TABLE>
<CAPTION>
Title of Securities Proposed Maximum Aggregate Proposed Maximum Aggregate
to be Registered Amount to be Registered Price Per Unit (2) Offering Price (2) Amount of Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates $1,000,000 100% $1,000,000 $345
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 429 under the Securities Act of 1933, the Prospectuses
included in this Registration Statement are combined prospectuses and relate to
registration statement Nos. 33-10125 and 33-17232 as previously filed by the
Registrant on Form S-3. Such registration statements were declared effective on
November 20, 1986 and October 6, 1987, respectively. This Registration
Statement, which is a new registration statement, also constitutes Post-
Effective Amendment No. 3 to registration statement No. 33-10125 and Post-
Effective Amendment No. 2 to registration statement No. 33-17232 and such Post-
Effective Amendments shall hereafter become effective concurrently with the
effectiveness of this Registration Statement. Securities in the amount of
$2,123,510,000 that were previously registered by registration statement Nos.
33-10125 and 33-17232, and for which a registration fee of $424,630 was
previously paid, are being carried forward in connection with this Registration
Statement.
(2) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
This Amendment contains three separate base prospectuses for the
securitization of different types of underlying assets as follows: (i) motor
vehicle installment sale contracts and installment loan agreements (the "Auto
Loan Prospectus"), (ii) mortgage loans, manufactured housing installment sale
contracts and installment loan agreements (the "Mortgage Prospectus"), and (iii)
credit card, charge card and other consumer debt receivables (the "Credit Card
Prospectus"), in each case including previously issued securities backed by such
underlying assets. With respect to the Auto Loan Prospectus, four forms of
prospectus supplement have been included. With respect to the Mortgage
Prospectus, seven forms of prospectus supplement have been included. With
respect to the Credit Card Prospectus, three forms of prospectus supplement have
been included. The forms of prospectus supplement included in this Amendment are
illustrative of particular structures of terms of securities that may be offered
under this Registration Statement and are not intended to limit the structures
of terms of securities that may be offered hereunder.
Please note that the full text of this Amendment is contained in two volumes.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to Completion
Prospectus Supplement to Prospectus Dated _________________, 199_
$
CS First Boston Auto Receivables Trust 199_-___
$ % Asset Backed Notes, Class A-1
$ % Asset Backed Notes, Class A-2
$ % Asset Backed Certificates
________________
Asset Backed Securities Corporation
Company
________________
CS First Boston Auto Receivables Trust 199_ - __ (the "Trust") will be formed
pursuant to a trust agreement (the"Trust Agreement") dated as of _________, 199_
(the "Cutoff Date"), between Asset Backed Securities Corporation (the
"Company"), as depositor, and _________ (the "Owner Trustee"), as owner trustee.
The Trust will issue $_________ aggregate principal amount of __________% Asset
Backed Notes, Class A-1 (the "Class A-1 Notes") and $_______________ aggregate
principal amount of _____% Asset Backed Notes, Class A-2 (the "Class A-2 Notes"
and, with the Class A-1 Notes, the "Notes") pursuant to an indenture (the
"Indenture"), dated as of the Cutoff Date, between the Trust and __________,
(the "Indenture Trustee") as indenture trustee. The Trust also will issue
$______________ aggregate principal amount of_____________% Asset Backed
Certificates (the "Certificates").
---------------
(Continued on following page)
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF, OR INTERESTS
IN, CS FIRST BOSTON CORPORATION, THE COMPANY, THE SERVICER, THE SELLER, OR ANY
OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE CERTIFICATES OR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY CS FIRST BOSTON CORPORATION, THE
COMPANY, THE SERVICER, THE SELLER, ANY OF THEIR RESPECTIVE AFFILIATES OR ANY
GOVERNMENTAL AGENCY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER RISK FACTORS
ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 10 OF THE ACCOMPANYING
PROSPECTUS.
________________
<TABLE>
<CAPTION>
Price to the Underwriting Proceeds to the
Public(1) Discount Company(1)(2)
---------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note...................... % % %
Per Class A-2 Note...................... % % %
Per Certificate......................... % % %
Total $ $ $
</TABLE>
(1) Plus accrued interest, if any, from ______________, 199_.
(2) Before deducting expenses, estimated to be $____________.
________________
The Notes and the Certificates are offered subject to prior sale and subject
to the right of CS First Boston Corporation (the "Underwriter") to reject
orders in whole or in part. It is expected that delivery of the Notes and the
Certificates will be made through the Same Day Funds System of the Depository
Trust Company on or about _______, 199_.
[LOGO] CS First Boston
The date of this Prospectus Supplement is __________, 199_.
<PAGE>
(Continued from preceding page)
The assets of the Trust will consist primarily of a pool of motor vehicle
installment loan agreements and motor vehicle retail installment sale contracts
(collectively, the "Receivables") secured by new or used automobiles,vans and
light duty trucks, certain monies due or received thereunder on and after the
Cutoff Date, security interests in the vehicles financed thereby, and certain
other property, as described herein. The Receivables will be transferred to the
Trust by the Company pursuant to the Trust Agreement. The Company will purchase
the Receivables from ________ (in such capacity, the "Seller") pursuant to a
receivables purchase agreement (the "Receivables Purchase Agreement"), dated as
of _________,199_ . The Notes will be secured by the assets of the Trust
pursuant to the Indenture. The Trust may also draw on funds on deposit in a
Reserve Account, to the extent described herein, to meet shortfalls in amounts
due to Securityholders on any Distribution Date. The Reserve Account will not be
part of the Trust.
Interest on each class of Notes will accrue at the fixed per annum rates
specified above and generally will be payable on the __ day of each month,
commencing _______, 199_ (each, a "Distribution Date"). Principal of the Notes
will be payable on each Distribution Date to the extent described herein;
however, no principal will be paid on the Class A-2 Notes until the Class A-1
Notes have been paid in full. The Certificates represent fractional undivided
interests in the Trust. Interest on the Certificates will accrue at the fixed
per annum rates specified above and generally will be payable on each
Distribution Date. No distributions of principal will be made on the
Certificates until all of the Notes have been paid in full. To the extent not
previously paid, the Class A-1 Notes will be payable in full on _______, 199_,
the Class A-2 Notes will be payable in full on ________, 199_, and the
Certificates will be payable in full on ________,199_.
____________________
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR THE
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS
PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS
IN THIS PROS-PECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHER-WISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_____________________
S-2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission"), on behalf of the Trust, a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") of which this Prospectus Supplement is a part under the Securities
Act of 1933, as amended. This Prospectus Supplement does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as are required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are
issued, monthly and annual unaudited reports containing information concerning
the Receivables will be prepared by the Servicer and sent on behalf of the
Trust only to Cede & Co., as nominee of The Depository Trust Company and
registered holder of the Notes and the Certificates. See "Certain Information
Regarding the Securities - Book-Entry Registration" and "-Statements to
Securityholders" in the accompanying Prospectus (the "Prospectus").
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer.............. CS First Boston Auto Receivables Trust 199_-___, a trust
(the "Trust") to be formed pursuant to a trust agreement
(the "Trust Agreement") dated as of ___________, 199_
(the "Cutoff Date"), between the Company and the Owner
Trustee.
Company............. The Company is a special-purpose Delaware corporation
organized for the purpose of causing the issuance of the
Securities and other securities issued under the
Registration Statement backed by receivables or
underlying securities of various types and acting as
settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or limited
partner in partnerships formed to issue securities. It is
not expected that the Company will have any significant
assets. The Company is an indirect, wholly owned finance
subsidiary of Collateralized Mortgage Securities
Corporation which is a wholly owned subsidiary of CS
First Boston Securities Corporation, which is a wholly
owned subsidiary of CS First Boston, Inc. Neither CS
First Boston Securities Corporation nor CS First Boston,
Inc. nor any of their affiliates has guaranteed, will
guarantee or is or will be otherwise obligated with
respect to any Series of Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
Seller.............. _______ (in such capacity, "the Seller"). See "The Seller
and the Servicer" herein.
Servicer............ _______ (in such capacity, the "Servicer") as servicer
under the servicing agreement (the "Servicing Agreement")
dated as of the Cutoff Date, between the Servicer and the
Issuer. See "The Seller and the Servic er" herein.
Indenture Trustee... ____________________, as trustee under the Indenture
(the "Indenture Trustee").
Owner Trustee....... ____________________, as trustee under the Trust
Agreement (the "Owner Trustee") .
The Notes........... The Trust will issue $______ aggregate principal amount
of ___% Asset Backed Notes, Class A-1 (the "Class A-1
Notes") and $______ aggregate principal amount of ___%
Asset Backed Notes, Class A-2 (the "Class A-2 Notes" and,
with the Class A-1 Notes, the "Notes") on ___, 199_ (the
"Closing Date") pursuant to an indenture (the
"Indenture") dated as of the Cutoff Date between the
Issuer and the Indenture Trustee.
Under the terms of the Indenture, the Notes will be
secured by the assets of the Trust.
S-4
<PAGE>
The Certificates.... The Trust will issue $____ aggregate principal amount of
___% Asset Backed Certificates (the "Certificates" and,
with the Notes, the "Securities") on the Closing Date.
The Certificates represent fractional undivided interests
in the Trust and will be issued pursuant to the Trust
Agreement.
The Receivables..... On the Closing Date, the Company will convey the
Receivables to the Trust in an aggregate principal
balance of approximately $_______________ as of the
Cutoff Date, pursuant to the Trust Agreement. See "The
Transfer and Servicing Agreements - Sale and Assignment
of Receivables" and "The Receivables Pool" herein and
"The Receivables Pools" in the Prospectus.
On or before the Closing Date, the Company will purchase
the Receivables from the Seller pursuant to a receivables
purchase agreement (the "Receivables Purchase
Agreement"), dated as of ____________,199_. See "The
Transfer and Servicing Agreements--the Receivables
Purchase Agreement" herein.
The Receivables arise from motor vehicle installment
contracts (each, a "Contract") originated or purchased by
the Seller in the ordinary course of business. The
Receivables have been selected from Contracts owned by
the Seller based on the criteria specified in the
Receivables Purchase Agreement and described herein under
"The Receivables Pool". Approximately __% of the
Receivables were originated in ____________ and
approximately __% of the Receivables were originated in
__________. As of the Cutoff Date, the weighted average
APR of the Receivables was approximately ____ months, the
weighted average remaining term to maturity of the
Receivables was approximately ____ months and the
weighted average original term to maturity of the
Receivables was approximately ____ months. No Receivable
has a scheduled maturity later than ______________ (the
"Final Scheduled Maturity Date").
Pursuant to the terms of the Trust Agreement, the Company
will assign the representations and warranties made by
the Seller to the Owner Trustee for the benefit of
holders of the Certificates and will make certain limited
representations and warranties with respect to the
Receivables. Pursuant to the terms of the Receivables
Purchase Agreement, the Seller will make certain
representations and warranties regarding the
characteristics of the Receivables and will undertake to
repurchase any Receivable with respect to which an
uncured breach of any representation or warranty exists,
if such breach materially and adversely affects the
interests of the Owner Trustee and the Certificateholders
in such Receivable and if such breach is not cured by the
Seller in a timely manner. To the extent that the Seller
does not repurchase a Receivable in the event of a breach
of its representations and warranties with respect to
such Receivable, the Company will not be required to
repurchase such Receivable unless such breach also
constitutes a breach of one of the Company's
representations and warranties with respect to such
Receivable and such breach materially and adversely
affects the interests of the Certificateholders in any
such Receivable. See "The Transfer and Servicing
Agreements" herein. Neither the Seller nor the Company
will have any other obligation with respect to the
Receivables or the Certificates .
Trust Property...... The assets of the Trust (the "Trust Property") include
(i) the Receivables, (ii) all monies (including accrued
interest) received on or with respect to the Receivables
on or after the Cutoff Date, (iii) all amounts and
property from time to time held in or credited to the
Collection Account, (iv) security interests in the
Financed Vehicles and any accessions thereto, (v) the
right to receive proceeds from claims on physical damage,
credit life and disability insurance policies covering
Financed Vehicles or Obligors, as the case may be, (vi)
any property that shall have secured
S-5
<PAGE>
a Receivable and that shall have been acquired by or on
behalf of the Trustee, (vii) all of the Seller's right to
all documents contained in the files pertaining to the
Receivables, (viii) the right to draw on funds on deposit
in the Reserve Account, to the extent described herein,
to meet shortfalls in amounts due to Certificateholders,
and (ix) any and all proceeds of the foregoing. The
Reserve Account will not be property of the Trust. See
"The Certificates-Distribution, and "The Trust".
Terms of the Notes
A. Distribution
Dates........ Payments of interest and principal on the Notes will be
made on the ___ day of each month or, if any such day is
not a Business Day, on the next succeeding Business Day
(each, a "Distribution Date") commencing ____________,
199_. Payments will be made to holders of record of the
Notes (the "Noteholders") as of the day immediately
preceding such Distribution Date (each, a "Record Date").
A "Business Day" is a day other than a Saturday, a Sunday
or day on which banking institutions or trust companies
in The City of New York or the city in which the
corporate trust office of the Indenture Trustee is
located are authorized by law, regulation or executive
order to be closed.
B. Interest Rates Interest will accrue on the Class A-1 Notes at a per
annum rate of ____% (the "Class A-1 Rate") and on the
Class A-2 Notes at a per annum rate of ____% (the "Class
A-2 Rate"), in each case, calculated on the basis of a
360-day year consisting of twelve 30-day months. The
Class A-1 Rate and the Class A-2 rate are sometimes
referred to herein collectively as the "Interest Rates".
C. Interest..... Interest on the outstanding principal amount of the Class
A-1 Notes and the Class A-2 Notes in respect of any
Distribution Date will accrue at the Class A-1 Rate and
the Class A-2 Rate, respectively, from and including the
most recent Distribution Date on which interest payments
were distributed to Noteholders (or, in the case of the
first Distribution Date, from and including the Closing
Date) to but excluding such Distribution Date. Interest
will be paid to the Noteholders on each Distribution
Date, to the extent of the Total Distribution Amount (as
defined herein) after payment of the Servicing Fee and
from the Reserve Account. See "The Notes - Payments of
Interest" herein.
D. Principal... Principal of the Class A-1 Notes will be payable on each
Distribution Date in an amount equal to the Total
Distribution Amount remaining following payment of the
Servicing Fees and the Noteholders' Interest
Distributable Amount (as defined herein) on such date. On
each Distribution date from and including the
Distribution Date on which the Class A-1 Notes are paid
in full, principal of the Class A-2 Notes will be payable
on each Distribution Date in an amount equal to the Total
Distribution Amount remaining following payment of the
Servicing Fee, the Noteholders' Interest Distributable
Amount and, on the Distribution Date on which the Class
A-1 Notes are paid in full, any amount distributed as
principal to holders of the Class A-1 Notes. No principal
payment will be made on the Class A-2 Notes until the
Class A-1 have been paid in full.
The outstanding principal amount, if any, of the Class
A-1 Notes will be payable in full on ____________, 199_
(the "Class A-1 Final Scheduled Payment Date") and the
outstanding principal amount, if any, of the Class A-2
Notes will be payable in full on ____________, 199_ (the
"Class A-2 Final Scheduled Payment Date").
See "The Notes - Payments of Principal" herein.
S-6
<PAGE>
E. Optional
Redemption.... The Class A-2 Notes may be redeemed in whole, but not in
part, on a Distribution Date on which the Servicer
exercises its option to purchase the Receivables. Under
the terms of the Servicing Agreement, the Servicer may
purchase the Receivables when the aggregate principal
balance of the Receivables (the "Pool Balance") has been
reduced to 10% or less of the initial Pool Balance. The
redemption price for the Class A-2 Notes will equal the
unpaid principal amount of the Class A-2 Notes plus
accrued interest at the Class A-2 Rate.
Terms of the Certificates
A. Distribution
Dates......... Distributions with respect to the Certificates will be
made on each Distribution Date to holders of record of
the Certificates (the "Certificateholders", and, together
with the Noteholders, the "Securityholders") as of the
related Record Date.
B. Pass-Through
Rate.......... Interest will accrue on the Certificates at a per annum
rate of ___% (the "Certificate Pass-Through Rate"),
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
C. Interest...... On each Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders accrued
interest at the Certificate Pass-Through Rate on the
Certificate Balance as of the preceding Distribution Date
(after giving effect to distributions made on such
Distribution Date) generally to the extent of funds
available following payment of the Servicing Fee and the
Noteholders' Distributable Amount (as defined herein)
from the Total Distribution Amount and the Reserve
Account. Interest on the Certificates in respect of any
Distribution Date will accrue from the most recent
Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding
such Distribution Date. See "The Certificates -
Distributions of Interest" herein.
D. Principal .... On each Distribution Date on and after the date on which
the Class A-2 Notes are paid in full, principal of the
Certificates will be payable in an amount generally equal
to the Total Distribution Amount remaining after payment
of the Servicing Fee, the Noteholders' Distributable
Amount (on the Distribution Date on which the outstanding
principal amount of the Class A-2 Notes is reduced to
zero) and the Certificateholders' Interest Distributable
Amount.
The outstanding principal amount, if any, of the
Certificates will be payable full on ____________, 199_
(the "Final Scheduled Distrib ution Date").
See "The Certificates - Distributions of Principal" and
"Description of the Transfer and Servicing Agreements -
Distributions" here in.
E. Optional
Prepayment.... If the Servicer exercises its option to purchase the
Receivables, which it may do when the Pool Balance is 10%
or less of the initial Pool Balance, the
Certificateholders will receive an amount in respect of
the Certificates equal to the Certificate Balance plus
accrued interest at the Certificate Pass-Through Rate,
and the Certificates will be retired. See "The
Certificates- Optional Prepayment" and "The Notes -
Optional Redemption" herein .
Reserve Account...... The Reserve Account will be created with an initial
deposit by the Company on the Closing Date of cash or
Eligible Investments having a value of at least $________
(the "Reserve Account Initial Deposit"). Funds will be
withdrawn from the Reserve Account on any Distribution
Date if, and to the extent that, the Total
S-7
<PAGE>
Distribution Amount for the related Collection Period
remaining after payment of the Servicing Fee is less than
the Noteholders' Distributable Amount and will be
deposited in the Note Distribution Account for
distribution to the Noteholders. In addition, funds will
be withdrawn from the Reserve Account to the extent that
the portion of the Total Distribution Amount remaining
after payment of the Servicing Fee and the Noteholders'
Distributable Amount is less than the Certificateholders'
Distributable Amount and will be deposited in the
Certificate Distribution Account for distribution to the
Certificateholders.
Funds in any Reserve Account may be invested in
securities that will not mature prior to the date of such
next scheduled distribution with respect to the
Certificates and will not be sold prior to maturity to
meet any shortfalls. Thus, the amount of available funds
on deposit in the Reserve Account at any time may be less
than the balance of the Reserve Account. If the amount
required to be withdrawn from the Reserve Account to
cover shortfalls in collections on the related
Receivables exceeds the amount of available funds on
deposit in the Reserve Account, a temporary shortfall in
the amounts distributed to the Certificateholders could
result.
On each Distribution Date, the amount available in the
Reserve Account will be reinstated up to the Specified
Reserve Account Balance by the deposit thereto of the
amount, if any, remaining in the Collection Account after
payment on such date of the Servicing Fee, the
Noteholders' Distributable Amount and the
Certificateholders' Distributable Account. The "Specified
Reserve Account Balance" with respect to any Distribution
Date generally will be equal to [state formula]. Certain
amounts in the Reserve Account on any Distribution Date
(after giving effect to all distributions to be made on
such Distribution Date) in excess of the Specified
Reserve Account Balance for such Distribution Date will
be released to the Company and will no longer be
available to the Securityholders.
The Reserve Account will be maintained with the Indenture
Trustee as a segregated trust account, but will not be
part of the Trust. See "The Transfer and Servicing
Agreements - Reserve Account" herein.
Collection Account.. Except under certain conditions described in the
Prospectus under "Description of the Transfer and
Servicing Agreements - Collections," the Servicer will be
required to remit collections received with respect to
the Receivables within two Business Days of receipt
thereof to one or more accounts in the name of the
Indenture Trustee (the "Collection Account"). Pursuant to
the Indenture, the Indenture Trustee will withdraw funds
on deposit in the Collection Account and apply such funds
on each Distribution Date to the following (in the
priority indicated): (i) the Servicing Fee for the
related Collection Period and any overdue Servicing Fees
to the Servicer, (ii) the Noteholders' Interest
Distributable Amount and the Noteholders' Principal
Distributable Amount to the Note Distribution Account,
(iii) the Certificateholders' Interest Distributable
Amount and, after the Class A-2 Notes have been paid in
full, the Certificates' Principal Distributable Amount to
the Certificate Distribution Account, and (iv) the
remaining balance, if any, to the Reserve Account. See
"The Transfer and Servicing Agreements - Distributions"
and" - Reserve Account" herein.
Advances............ If a shortfall should occur in any Collection Period
between the amount due as interest on the Receivables
during such Collection Period (assuming the Receivables
were paid on their respective scheduled payment dates)
and the amount actually received in respect of the
Receivables during such Collection Period and allocable
to interest, the Servicer will advance an amount equal to
such shortfall (an "Advance"). The Servicer will be
reimbursed for Advances (i) from
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collections and other amounts received on the Receivables
with respect to which such Advances were made; (ii) from
collections and other amounts received in respect of
other Receivables; or (iii) by reducing the Repurchase
Amount (as defined herein) due from the Servicer by the
amount of any unreimbursed Advances. The Servicer may
elect not to make an Advance with respect to any
Receivable to the extent that the Servicer determines, in
its sole discretion, that it is unlikely to be able to
recover such Advances from future collections and other
payments in respect of the Receivables. See "The Transfer
and Servicing Agreements-Advances" herein.
Certain Legal
Aspects........... The Seller shall repurchase certain Receivables with
respect to which any prior security interest in such
Receivable is found to exist, any laws have been
violated, or the Seller's security interest in the
respective Financed Vehicle has not been properly
assigned to the Trustee. The Trustee's security interest
in the Financed Vehicle may be not be properly assigned
in the event of (i) the relocation or resale of the
Financed Vehicle in another state without the Servicer's
re-perfecting the Trustee's security interest, (ii) the
imposition certain tax or possessory liens, or (iii)
fraud or negligence. In addition, certain consumer
protection laws allow an Obligor (as defined herein)
under a Receivable to assert certain claims and defenses
against a holder of the Receivable thus possibly
rendering a Receivable partly or wholly uncollectible.
See "Risk Factors - Security Interests in the Financed
Vehicles" herein and "Risk Factors - Certain Legal
Aspects - Security Interests in Financed Vehicles" and
"Certain Legal Aspects of the Receivables" in the
Prospectus.
Tax Status.......... In the opinion of Sidley & Austin ("Federal Tax
Counsel"), the Trust will not be an association (or
publicly traded partnership) taxable as a corporation for
federal income tax purposes. The Trust will agree, and
the owners of beneficial interests in the Notes will
agree by their purchase of Notes, to treat the Notes as
debt for federal tax purposes. Federal Tax Counsel has
advised the Trust that the Notes will be classified as
debt for federal income tax purposes. The Trust will also
agree, and the related owners of beneficial interests in
the Certificates ("Certificate Owners") will agree by
their purchase of Certificates, to treat the Trust as a
partnership for purposes of federal and state income tax,
franchise tax and any other tax measured in whole or in
part by income, with the assets of the partnership being
the assets held by the Trust, the partners of the
partnership being the Certificate Owners (including, to
the extent relevant, the Seller in its capacity as
recipient of distributions from any Reserve Fund), and
the Notes being debt of the partnership. See "Certain
Federal Income Tax Consequences" in the Prospectus for
additional information concerning the application of
federal income tax laws to the Trust and the Securities.
ERISA Considerations. Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Notes
are eligible for purchase by employee benefit plans. The
Certificates may not be acquired by employee benefit
plans subject to the Employee Retirement Income Security
Act of 1974, as amended, or by "plans" as defined in
Section 4975 of the Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" herein and in the
Prospectus.
Ratings of the
Securities........ It is a condition to the issuance of the Notes and
Certificates that the Class A-1 Notes be rated at least
"______", the Class A-2 Notes be rated at least "_______"
and the Certificates be rated at least "__________" or
its equivalent, in each case by at least two nationally
recognized rating agencies.
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<PAGE>
A rating is not a recommendation to purchase, hold or
sell the Notes or Certificates, inasmuch as such rating
does not comment as to market price or suitability for a
particular investor. A rating addresses the likelihood
that principal of and interest on a particular class of
Notes or the Certificates, as applicable, will be paid
pursuant to its terms. There can be no assurance that a
rating will not be lowered or withdrawn by a rating
agency if circumstances so warrant. See "Risk Factors -
Ratings of the Securities" herein.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully consider
the following risk factors before investing in the Securities.
Limited Liquidity. There is currently no secondary market for the
Securities. CS First Boston Corporation (the "Underwriter") currently intends
to make a market in the Securities, but is under no obligation to do so. There
can be no assurance that a secondary market will develop or, if a secondary
market does develop, that it will provide Securityholders with liquidity of
investment or that it will continue for the life of the Securities.
Servicer Default. If a Servicer Default occurs, the Indenture
Trustee or the Noteholders may remove the Servicer without the consent of the
Owner Trustee or the Certificateholders, in the manner described in the
Prospectus under "Description of the Transfer and Servicing Agreements -- Rights
upon Servicer Default". Neither the Owner Trustee nor the Certificateholders
will have the ability to remove the Servicer if a Servicer Default occurs. In
addition, the Noteholders have the ability with certain specific exceptions, to
waive defaults by the Servicer, including defaults that might have a materially
adverse effect on Certificateholders. See "Description of the Transfer and
Servicing Agreements -- Waiver of Past Defaults" in the Prospectus.
Subordination, Limited Assets. Distributions of interest and
principal on the Certificates will be subordinated in priority of payment to
interest and principal due on the Notes. Consequently, Certificateholders will
not receive any distributions with respect to a Collection Period until full
amount of interest on and principal of the Notes distributable on such
Distribution Date has been deposited in the Note Distribution Account. The
Certificateholders will not receive any distributions of principal until after
the Notes have been paid in full. See "The Transfer and Servicing Agreements -
Distributions" herein.
The Trust will not have any significant assets or sources of funds
other than the Receivables, the proceeds thereof and access to funds in the
Reserve Account. Securityholders must rely on payments on the Receivables and,
if and to the extent available, amounts on deposit in the Reserve Account.
Although any funds available in the Reserve Account on each Distribution Date
will be applied to cover shortfalls in distribution of interest and principal
on the Notes and the Certificates, the funds to be deposited in the Reserve
Account are limited in amount. If the Reserve Account is exhausted, the Trust
will depend solely on current distributions on the Receivables to make payments
on the Notes and the Certificates. See "The Trust" and "The Transfer and
Servicing Agreements - Reserve Account" herein.
Funds in any Reserve Account may be invested in securities that
will not mature prior to the date of such next scheduled distribution with
respect to the Certificates and will not be sold prior to maturity to meet any
shortfalls. Thus, the amount of available funds on deposit in the Reserve
Account at any time may be less than the balance of the Reserve Account. If
the amount required to be withdrawn from the Reserve Account to cover
shortfalls in collections on the related Receivables exceeds the amount of
available funds on deposit in the Reserve Account, a temporary shortfall in the
amounts distributed to the Certificateholders could result.
Security Interests in the Financed Vehicles. To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian of the Receivables and the related documents by the
Trustee, but will not stamp the Receivables to reflect the sale and assignment
of the Receivables to the Trust or amend the certificates of title of the
Financed Vehicles. In the absence of amendments to the certificates of title,
the Trustee may not have perfected security interests in the Financed Vehicles
securing the Receivables in some states. See "Risk Factors - Certain Legal
Aspects - Security Interests in Financed Vehicles" and "Certain Legal Aspects
of the Receivables" in the Prospectus.
Ratings of the Securities. It is a condition to the issuance of
the Notes and the Certificates that the Class A-1 Notes be rated "___________",
the Class A-2 Notes be rated "________" and the Certificates be rated
"_________" or its equivalent, in each case by at least two nationally
recognized rating agencies (the "Rating Agencies"). A rating is not a
recommendation to purchase, hold or sell Securities, inasmuch as such rating
does not comment as to market price or suitability for a particular investor.
The ratings of the Securities address the
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<PAGE>
likelihood of the timely payment of interest on, and the ultimate repayment of
principal of, the Securities pursuant to their terms. There can be no
assurance that a rating will be retained for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances in the future so warrant. In the event that a rating is
subsequently lowered or withdrawn, no person or entity will be required to
provide any additional credit enhancement. The ratings of the Notes are based
primarily on the credit quality of the Receivables, the subordination provided
by the Certificates and the availability of funds in the Reserve Account. The
ratings of the Certificates are based primarily on the credit quality of the
Receivables and the availability of funds in the Reserve Account.
Trust's Relationship to the Company. The Company is generally not
obligated to make any payments in respect of the Notes, the Certificates or the
Receivables. The Company has assigned the representations and warranties of the
Seller under the Receivables Purchase Agreement to the Trustee. In addition the
Company has made certain representations and warranties regarding the
characteristics of the Receivables and is required under the Trust Agreement to
repurchase Receivables with respect to which such representations and
warranties have been breached. It is not anticipated that the Company will have
any significant assets with which to fund such repurchases.
Trust's Relationship to the Seller and the Servicer. Neither the
Seller nor the Servicer is generally obligated to make any payments in respect
of the Notes, the Certificates or the Receivables. If _______ were to cease
acting as Servicer, delays in processing payments on the Receivables and
information in respect thereof could occur and result in delays in payment to
the Securityholders. The Seller has made certain representations and
warranties regarding the characteristics of the Receivables and is required
under the Receivables Purchase Agreement to repurchase Receivables with respect
to which such representations and warranties have been breached. See "The
Transfer and Servicing Agreements -- The Receivables Purchase Agreement".
THE TRUST
GENERAL
The Issuer, CS First Boston Auto Receivables Trust 199_-_, is a
business trust formed under the laws of the State of Delaware pursuant to the
Trust Agreement for the transactions described in this Prospectus Supplement.
After its formation, the Trust will not engage in any activity other that (i)
acquiring, holding and managing the Receivables and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes and the Certificates,
(iii) making payments on the Notes and the Certificates, and (iv) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust initially will be capitalized with equity equal to
$____________. Certificates with an original principal balance of
$____________ (which represents approximately [1]% of the initial Certificate
Balance) will be sold to ____________ and the remaining Certificates will be
sold to third party investors which are expected to be unaffiliated with the
Seller, the Servicer and the Trust. The proceeds from the initial sale of the
Notes and Certificates will be used by the Trust to purchase the Receivables
from the Company pursuant to the Trust Agreement. The Servicer will service
the Receivables pursuant to the Servicing Agreement and will be compensated for
acting as Servicer. See "The Transfer and Servicing Agreements - Servicing
Compensation" herein.
If the protection provided to the Securityholders by the Reserve
Account is insufficient, the Trust will look only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed
Vehicles that secure defaulted Receivables to fund distributions of principal
and interest on the Securities. In such event, certain factors, such as the
Trust's not having a first priority perfected security interest in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables and thus may reduce the proceeds to be distributed to
Securityholders with respect to the Securities. See "The Transfer and
Servicing Agreements - Distributions" and "-Reserve Account" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
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<PAGE>
The Trust's principal offices are located in _____________________,
Delaware, in care of ____________________, as Owner Trustee, at the address
listed below under "-The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as
of the Cutoff Date, as if the issuance and sale of the Notes and the
Certificates had taken place on such date:
Class A-1 Notes .................... $
Class A-2 Notes.......................
Certificates..........................
-------------------------------
Total.......................... $
===============================
THE OWNER TRUSTEE
____________________ is the Owner Trustee under the Trust
Agreement. ________________________ is a banking corporation and its principal
offices are located at __________________________. The Owner Trustee's
liability in connection with the issuance and sale of the Notes and
Certificates is limited solely to the express obligations of the Owner Trustee
set forth in the Trust Agreement and the Servicing Agreement. The Seller, the
Company and their respective affiliates may maintain normal commercial banking
relations with the Owner Trustee and its affiliates.
THE RECEIVABLES POOL
The pool of Receivables conveyed to the Trust (the "Receivables
Pool") was originated or purchased by the Seller in the ordinary course of
business, and were or will be selected from the Seller's portfolio for
inclusion in the Receivables Pool based on several criteria, including the
following: (i) as of the Cutoff Date each Receivable had, or will have, an
outstanding gross balance of at least $1,000; (ii) as of the Cutoff Date, no
Receivable will be more than 90 days past due; and (iii) as of the Cutoff Date,
no Obligor on any Receivable was noted in the records of the Seller as being
the subject of a bankruptcy proceeding. Certain additional criteria that each
Receivable must meet are set forth in the Prospectus under "The Receivables
Pools". No selection procedures believed by the Seller to be adverse to
Securityholders were, or will be, used in selecting the Receivables.
The composition, distribution by APR and geographic distribution of
the Receivables as of the Cutoff Date are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Weighted Aggregate principal Number of Weighted Average Weight Average Average Principal
Average APR Balance Receivables Remaining Term Original Term Balance
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
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<PAGE>
DISTRIBUTION OF RECEIVABLES BY APR AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Number of Aggregate Principal Percentage of Aggregate
APR Range Receivables Balance Principal Balance
<S> <C> <C> <C>
0.00% to 3.00%
3.01% to 4.00%
4.01% to 5.00%
5.01% to 6.00%
6.01% to 7.00%
7.01% to 8.00%
8.01% to 9.00%
9.01% to 10.00%
10.01% to 11.00%
11.01% to 12.00%
12.01% to 13.00%
13.01% to 14.00%
14.01% to 15.00%
15.01% to 16.00%
16.01% to 17.00%
17.01% to 18.00%
18.01% to 19.00%
Greater than 20.00%
----------- ---------- -----------
Total
=========== ========== ===========
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE (1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percentage of Aggregate
Receivables Balance Principal Balance
----------- ------------------- -----------------------
<S> <C> <C> <C>
New York...............
California.............
Other..................
----------- ---------- -----------
Total.............
=========== ========== ===========
</TABLE>
(1) Based on billing addresses of the Obligers as of the Cutoff Date.
By aggregate principal balance, approximately ___% of the
Receivables constitute Precomputed Receivables and ___% of the Receivables
constitute Simple Interest Receivables. See "The Receivables Pools" in the
Prospectus for a description of the characteristics of Precomputed Receivables
and Simple Interest Receivables. As of the Cutoff Date, approximately ___% of
the Receivables by aggregate principal balance, constituting ___% of the number
of Receivables, represent used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the delinquency,
repossession and net loss experience of the Seller pertaining to retail new and
used automobile, van and light duty truck receivables. The delinquency,
repossession and credit loss data presented in the following tables are for
illustrative purposes only. There is no assurance that the Seller's
delinquency, repossession and credit loss experience with respect to
automobile, van and light duty truck receivables in the future, or the
experience of the Trust with respect to the Receivables, will be similar to
that set forth below. Delinquencies, repossessions and net losses on new and
used automobiles, vans and light duty trucks are affected by social and
economic conditions generally and, in particular, in the States of ______ and
_______, where ___% and ___%, respectively, of the Financed Vehicles were
purchased.
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<PAGE>
DELINQUENCY EXPERIENCE (1)
<TABLE>
<CAPTION>
At December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Portfolio Outstanding at End of Period
Delinquencies at End of Period(2)
30-59 Days
60-89 Days
90 Days or More
Total Delinquencies
Total Delinquencies as a Percentage of
Portfolio Outstanding at End of Period
</TABLE>
________________
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance
and other charges.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
At December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Average Amount Outstanding During the Period
Average Number of Contracts Outstanding
during the Period
Repossessions as a Percentage of Average
Number of Contracts Outstanding
Net Losses as a Percentage of
Liquidations (2)(3)
Net Losses as a Percentage of Average
Amount Outstanding(3)
</TABLE>
________________
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance
and other charges.
(2) Net losses are equal to the aggregate of the net balances of all
contracts that were determined to be uncollectible in the period, less
any recoveries on contracts charged off in the period or any prior
periods, excluding any losses resulting from the failure to recover
commissions to dealers with respect to contracts that are prepaid or
charged off.
(3) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
THE SELLER AND THE SERVICER
[Information regarding the Seller and the Servicer to be supplied.]
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment
considerations with respect to the Securities is set forth under "Weighted
Average Life of the Securities" in the Prospectus. In addition, holders of the
Class A-2 Notes will not receive any principal payments until the Class A-1
Notes are paid in full, and holders of the Certificates will not receive any
principal payments until the Class A-1 Notes and the Class A-2 Notes have been
paid in full. See "The Notes - Payments of Principal" and "The Certificates -
Distributions of Principal" herein. As the rate of payment of principal of
each class of Notes and the Certificates depends on the rate of payment
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<PAGE>
(including prepayments) of the principal balance of the Receivables, final
payment of the Class A-1 Notes or the Class A-2 Notes and the final
distribution in respect of the Certificates could occur significantly earlier
than the Class A-1 Final Scheduled Payment Date, the Class A-2 Final Scheduled
Payment Date or the Final Scheduled Distribution Date, as applicable.
Securityholders will bear the risk of being able to reinvest principal payments
on the Securities at yields at least equal to the yield on their Securities.
THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement. A
copy of the Indenture will be filed with the Commission following the issuance
of the Securities. The following summary describes certain terms of the Notes
and the Indenture. The summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Notes and the Indenture. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given Series and the related Indenture set forth
under the headings "Description of the Notes" and "Certain Information
Regarding the Securities" in the Prospectus, to which description reference is
hereby made.
PAYMENTS OF INTEREST
Interest on the principal balance of the Class A-1 Notes and the
Class A-2 Notes will accrue at the Class A-1 Rate and Class A-2 Rate,
respectively, and will be payable to the holders of the Class A-1 Notes and the
Class A-2 Notes monthly on each Distribution Date. Interest with respect to
any Distribution Date will accrue from and including the most recent
Distribution Date on which interest was distributed to Noteholders (or, with
respect to the first Distribution Date, from and including the Closing Date) to
but excluding such Distribution Date. Interest on each class of Notes will be
calculated on the basis of a 360-day year of twelve 30-day months. Interest
accrued but not paid on any Distribution Date will be due on the next
Distribution Date, together with interest on such amount at the applicable
Interest Rate (to the extent lawful). Interest payments on the Notes will
generally be derived from the Total Distribution Amount remaining after the
payment of the Servicing Fee and from the Reserve Account. See "The Transfer
and Servicing Agreements - Distributions" and "- Reserve Account" herein.
Interest payments to holders of both classes of Notes will have the same
priority. Under certain circumstances, the amount available for such payments
could be less than the amount of interest payable on the Notes on any
Distribution Date, in which case the holders of each class of Notes will
receive their ratable share (based on the aggregate amount of interest due on
such class of Notes) of the aggregate amount available for distribution in
respect of interest on the Notes.
PAYMENTS OF PRINCIPAL
On each Distribution Date for as long as the Class A-1 Notes are
outstanding, principal of the Class A-1 Notes will be distributed to holders of
the Class A-1 Notes in an amount equal to the Total Distribution Amount
remaining after payment of the Servicing Fee and the Noteholder's Interest
Distributable Amount. On each Distribution Date from and including the
Distribution Date on which the Class A-1 Notes are paid in full and for as long
as the Class A-2 Notes are outstanding, principal will be distributed to
holders of the Class A-2 Notes in an amount equal to the Total Distribution
Amount remaining after payment of the Servicing Fee, the Noteholders' Interest
Distributable Amount and, on the Distribution Date on which the outstanding
principal amount of the Class A-1 Notes is reduced to zero, any amounts
distributed as principal to holders of the Class A-1 Notes. No principal will
be paid on the Class A-2 Notes until the Class A-1 Notes have been paid in
full. See "The Transfer and Servicing Agreements - Distributions" and "-
Reserve Account" herein.
The principal balance of the Class A-1 Notes, to the extent not
previously paid, will be due on the Class A-1 Final Scheduled Payment Date and
the principal balance of the Class A-2 Notes, to the extent not previously
paid, will be due on the Class A-2 Final Scheduled Payment Date. The actual
date on which the
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<PAGE>
aggregate outstanding principal amount of either the Class A-1 Notes or the
Class A-2 Notes is paid in full may be earlier than the applicable Final
Scheduled Payment Date set forth above due to a variety of factors, including
those described under "Weighted Average Life of the Securities" herein and in
the Prospectus.
OPTIONAL REDEMPTION
The Class A-2 Notes may be redeemed in whole, but not in part, on a
Distribution Date on which the Servicer exercises its option to purchase the
Receivables, which the Servicer may do after the aggregate outstanding
principal amount of the Receivables is reduced to 10% or less of the initial
Pool Balance. See "Description of the Transfer and Servicing Agreements -
Termination" in the Prospectus. The redemption price for the Class A-2 Notes
will equal the unpaid principal amount of the Class A-2 Notes plus accrued and
unpaid interest thereon to the redemption date.
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the Certificates and the Trust Agreement. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provision of the
Certificates of any given Series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
DISTRIBUTIONS OF INTEREST
Interest on the principal balance of the Certificates will accrue
at the Pass-Through Rate. Interest with respect to any Distribution Date will
accrue from and including the most recent Distribution Date on which interest
was distributed to Certificateholders (or, with respect to the first
Distribution Date, from and including the Closing Date) to but excluding such
Distribution Date and will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued but not distributed on any Distribution
Date will be due on the next Distribution Date, together with interest on such
amount at the Pass-Through Rate (to the extent lawful). Interest distributions
with respect to the Certificates generally will be funded from the portion of
the Total Distribution Amount and funds in the Reserve Account remaining after
the distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "The Transfer and Servicing Agreements - Distributions" and " -
Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will not be entitled to distributions of
principal on any Distribution Date until the Notes have been paid in full. On
each Distribution Date on and after the Distribution Date on which the Class
A-2 Notes are paid in full, the Certificateholders will be entitled to
distributions of principal in a maximum amount equal to the lesser of (i) the
Total Distribution Amount plus any funds in the Reserve Account remaining after
payment of the Servicing Fee, the Noteholders' Distributable Amount (on the
Distribution Date on which the outstanding principal amount of the Class A-2
Notes is reduced to zero) and the Certificateholders' Interest Distributable
Amount and (ii) the outstanding Certificate Balance. See "The Transfer and
Servicing Agreements - Distributions" and "- Reserve Account" herein.
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<PAGE>
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables,
which it may do when the aggregate outstanding principal amount of the
Receivables is reduced to 10% or less of the initial Pool Balance, the
Certificateholders will receive an amount in respect of the Certificates equal
to the outstanding Certificate Balance, together with accrued interest thereon
at the Pass-Through Rate to the redemption date, which distribution shall
effect an early retirement of the Certificates. See "Description of the
Transfer and Servicing Agreements - Termination" in the Prospectus.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Servicing
Agreement, the Receivables Purchase Agreement and the Trust Agreement
(collectively, the "Transfer and Servicing Agreements"). Forms of the Transfer
and Servicing Agreements have been filed as exhibits to the Registration
Statement. A copy of the Transfer and Servicing Agreements will be filed with
the Commission following the issuance of the Securities. This summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of Transfer and
Servicing Agreements (as such term is used in the Prospectus) set forth under
the heading "Description of the Transfer and Servicing Agreements" in the
Prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the
Receivables to the Seller to the Company and from the Company to the Trust on
the Closing Date is set forth under "Description of the Transfer and Servicing
Agreements - Sale and Assignment of Receivables" in the Prospectus. See also
"The Receivables Pool" herein and "The Receivables Pools" in the Prospectus for
additional information regarding the Receivables and certain obligations of the
Seller and the Servicer with respect to the Receivables.
ACCOUNTS
In addition to the Accounts referred to under "Description of the
Transfer and Servicing Agreements - Accounts" in the Prospectus, the Servicer
with also establish and maintain the Reserve Account with the Indenture
Trustee, in the name of the Indenture Trustee on behalf of the Noteholders and
the Certificateholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to 1.00% per annum of the Pool Balance as
of the first day of such Collection Period. The Servicing Fee (together with
any portion of the Servicing Fee that remains unpaid from prior Distribution
Dates) will be paid on each Distribution Date solely to the extent of the
Interest Distribution Amount; however, the Servicing Fee will be paid to the
Servicer prior to the distribution of any portion of the Interest Distribution
Amount to Noteholders and Certificateholders. See "Description of the Transfer
and Servicing Agreements - Servicing Compensation and Payment of Expenses" in
the Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or about the _____ Business Day
of each month, the Servicer will provide the Indenture Trustee with certain
information with respect to the related Collection Period, including the
aggregate amount of collections on the Receivables, Advances and Repurchase
Amounts, as well as the Total Distribution Amount, the Interest Distribution
Amount and the Principal Distribution Amount.
S-18
<PAGE>
On or before each Distribution Date, the Servicer will cause the
Total Distribution Account to be deposited into the Collection Account. The
"Total Distribution Amount" for a Distribution Date will equal the sum of the
Interest Distribution Amount and the Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal.
The "Interest Distribution Amount" for a Distribution Date will
equal the sum of the following amounts with respect to the related Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest, (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the related Obligor (such net amount "Liquidation Proceeds"), to the extent
allocable to interest; (iii) all recoveries in respect of Liquidated
Receivables that were written off in prior Collection Periods; (iv) all
Advances made by the Servicer; (v) the Repurchase Amount of each Receivable
that was repurchased by the Seller or the Company during the related Collection
Period, to the extent allocable to interest; and (vi) Investment Earnings for
such Distribution Date.
The "Principal Distribution Amount" for a Distribution Date will
equal the sum of the following amounts with respect to the related Collection
Period: (i) that portion of all collections on the Receivables allocable to
principal; (ii) Liquidation Proceeds to the extent attributable to the
principal, plus all Realized Losses with respect to such Liquidated
Receivables; (iii) all Precomputed Advances made by the Servicer of principal
due on the Precomputed Receivables; (iv) to the extent attributable to
principal, the Repurchase Amount received with respect to each Receivable
repurchased by the Seller or the Company; (v) partial prepayments relating to
refunds of extended warranty protection plan costs or of physical damage,
credit life or disability insurance policy premiums, but only if such costs or
premiums were financed by the respective Obligor as of the date of the original
Contract; and (vi) on the Final Scheduled Distribution Date, any amounts
advanced by the Servicer with respect to principal on the Receivables.
The Interest Distribution Amount and the Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) amounts realized on Precomputed Receivables to the
extent that the Servicer has previously made an unreimbursed Precomputed
Advance;
(ii) Liquidation Proceeds with respect to a particular
Precomputed Receivable to the extent of any unreimbursed Precomputed
Advances thereon;
(iii) all payments and proceeds (including Liquidation
Proceeds) of any Receivables the Repurchase Amount of which has been
included in the Total Distribution Amount in a prior Collection Period;
(iv) amounts received in respect of interest on Simple
Interest Receivables during the related Collection Period in excess of
the amount of interest that would have been due during the Collection
Period on Simple Interest Receivables at their respective APRs (assuming
that a payment is received on each Simple Interest Receivable on the due
date thereof); and
(v) Liquidation Proceeds with respect to a Simple Interest
Receivable attributable to accrued and unpaid interest thereon (but not
including interest for the then current Collection Period) to the extent
of any unreimbursed Simple Interest Advances.
Deposits to the Distribution Accounts. On each Distribution Date,
the Servicer will instruct the Trustee to make the following deposits and
distributions, to the extent of the Total Distribution Amount, in the following
order of priority:
S-19
<PAGE>
(i) to the Servicer, from the Interest Distribution Amount,
the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Certificateholders' Interest Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distributable Amount; and
(vi) to the Reserve Account, the Total Distribution Amount
remaining after the application of clauses (i) through (v).
For purposes hereof, the following terms shall have the following
meanings:
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including the Closing Date
to but excluding such Distribution Date) on the Class A-1 Notes and the Class
A-2 Notes at the Class A-1 Rate and the Class A-2 Rate, respectively, on the
outstanding principal balance of the Notes of such class on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, on
the Closing Date) after giving effect to all payments of principal to the
Noteholders of such class on or prior to such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, (i) the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date, plus any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus (ii) interest on
the amount of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the respective Interest
Rates borne by each class of the Notes from such preceding Distribution Date to
but excluding such current Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Distributable Amount shall
not exceed the outstanding principal balance of the Notes. In addition, (i) on
the Class A-1 Final Scheduled Payment Date, the Noteholder's Principal
Distributable Amount will not be less than the amount that is necessary (after
giving effect to all other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal balance of the Class A-1 Notes to zero; and (ii) on the
Class A-2 Final Scheduled Payment Date the Noteholders' Principal Distributable
Amount will not be less than the amount that is necessary (after giving effect
to all other amounts to
S-20
<PAGE>
be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-2 Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date for as long as the Class A-1 Notes or the
Class A-2 Notes are outstanding, 100% of the Principal Distribution Amount;
provided, however, that on the Distribution Date on which the principal balance
of the Class A-2 Notes is reduced to zero, the portion, if any, of the
Principal Distribution Amount that is not applied to the principal of the Class
A-2 Notes will be applied to the Certificate Balance.
"Noteholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Certificateholders' Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholder's Principal
Distributable Amount and the Certificateholders' Interest Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, 30 days of interest (or, in the case of
the first Distribution Date, interest accrued from and including the Closing
Date to but excluding such Distribution Date) at the Pass-Through Rate on the
Certificate Balance on the last day of the preceding Collection Period (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all distributions of principal to the Certificateholders on or prior
to such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Certificateholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by
law, at the Pass-Through Rate from such preceding Distribution Date to but
excluding such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover shortfall as of the close of the
preceding Distribution Date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance. In
addition, on the Final Scheduled Distribution Date, the principal required to
be distributed to Certificateholders will include the lesser of (a)(i) any
scheduled payments of principal due and remaining unpaid on each Precomputed
Receivable and (ii) any principal due and remaining unpaid on each Simple
Interest Receivable, in each case, in the Trust as of the Final Scheduled
Maturity Date or (b) the amount that is necessary (after giving effect to the
other amounts to be deposited in the Certificate Distribution Account on such
Distribution Date and allocable to principal) to reduce the Certificate Balance
to zero.
"Certificateholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date prior to the Distribution Date on which
the Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, 100%
of the Principal Distribution Amount (less, on the Distribution Date on which
the Notes are paid in full, the portion thereof payable as principal of the
Notes).
S-21
<PAGE>
"Certificateholders' Principal Carryover Shortfall" means, as of
the close of any Distribution Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account.
"Certificate Balance" equals, initially, $______ and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note
Distribution Account generally will be paid in the following order of priority:
(i) without regard to Class, to the applicable Noteholders,
accrued and unpaid interest on the outstanding principal balance of the
applicable class of Notes at the applicable Interest Rate;
(ii) to the Class A-1 Noteholders in reduction of principal
until the principal balance of the Class A-1 Notes has been reduced to
zero; and
(iii) to the Class A-2 Noteholders in reduction of principal
until the principal balance of the Class A-2 Notes has been reduced to
zero.
On each Distribution Date, all amounts on deposit in the
Certificate Distribution Account will be distributed to the Certificateholders.
RESERVE ACCOUNT
The Reserve Account will be created by the deposit thereto by the
Company on the Closing Date of the Reserve Account Initial Deposit and will be
increased up to the Specified Reserve Account Balance by the deposit thereto on
each Distribution Date on the amount, if any, remaining from the Total
Distribution Amount after payment of the Servicing Fee, the Noteholders'
Distributable Amount and the Certificateholders' Distributable Amount. If the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such Distribution
Date), is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer will instruct the Indenture Trustee to
distribute an amount equal to such excess to the Company. Upon any
distribution to the Company of amounts from the Reserve Account, neither the
Noteholders nor the Certificateholders will have any rights in, or claim to,
such amounts.
Amounts held from time to time in the Reserve Account will continue
to be held for the benefit of the Noteholders and Certificateholders. Funds
will be withdrawn from cash in the Reserve Account to the extent that the Total
Distribution Amount (after the payment of the Servicing Fee) with respect to
any Collection Period is less than the Noteholders' Distributable Amount and
will be deposited to the Note Distribution Account for distribution to the
Noteholders. In addition, funds will be withdrawn from cash in the Reserve
Account to the extent that the portion of the Total Distribution Amount
remaining after the payment of the Servicing Fee and the deposit of the
Noteholders' Distributable Amount to the Note Distribution Account is less than
the Certificateholders' Distributable Amount and will be deposited to the
Certificate Distribution Account for distribution to the Certificateholders.
The subordination of the Certificates and access to funds in the
Reserve Account are intended to enhance the likelihood of receipt by
Noteholders of the full amount of principal and interest due to them and to
decrease the likelihood that the Noteholders will experience losses. In
addition, the Reserve Account is intended to enhance the likelihood of receipt
by Certificateholders of the full amount of principal and interest due to them
and to decrease the likelihood that the Certificateholders will experience
losses. However, in certain circumstances, the Reserve Account could be
depleted. In addition, subject to certain conditions, funds in the Reserve
Account may be invested in securities that will not mature prior to a
particular Distribution Date and will not be sold prior to maturity to meet any
shortfalls that might occur on such Distribution Date. Thus, the amount of
cash in the Reserve Account at any time may be less than the balance of the
Reserve Account. If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the Receivables exceeds the
amount of
S-22
<PAGE>
cash in the Reserve Account, a temporary shortfall in the amounts distributed
to the Noteholders or the Certificateholders could result, which could, in
turn, increase the average life of the Notes or the Certificates.
ADVANCES
If a shortfall should occur in any Collection Period between (i) the
aggregate amount of interest due on the Receivables during such Collection
Period, assuming each Receivable was paid on its scheduled payment date under
the related Contract, and (ii) the amount actually received on or in respect of
the Receivables during such Collection Period and allocable to interest, the
Servicer will deposit an amount (an "Advance") equal to such deficiency in the
Collection Amount on or before the applicable Distribution Date. The Servicer
will be allowed to recover any Advances so made (a) from collections and other
amounts received on the Receivables with respect to which such Advances were
made, (b) from collections or any other amounts received in respect of any
other Receivables and (c) by reducing any Repurchase Amount due from the
Servicer by the amount of any unreimbursed Advances. The Servicer may elect
not to make an Advance with respect to any Receivable to the extent that the
Servicer determines that it is unlikely to be able to recover such Advance from
payments on or with respect to the Receivables or from any other source.
THE RECEIVABLES PURCHASE AGREEMENT
On or prior to the Closing Date, the Seller will transfer and assign to
the Company pursuant to the Receivables Purchase Agreement, all of its right,
title and interest in and to Receivables in the outstanding principal amount of
$_________ including its security interests in the related Financed Vehicles.
Each Receivable will be identified in a schedule appearing as an exhibit to the
Receivables Purchase Agreement (the "Schedule of Receivables"). The Seller
will sell the Receivables to the Company without recourse, except that, as
described in the following paragraph, the Seller will be required to repurchase
Receivables with respect to which it is in breach of a representation or
warranty, if such breach materially and adversely affects the right of the
related Trust and Certificateholders in and to such Receivables. Concurrently
with or subsequent to the transfer and assignment of the Receivables to the
Company, the Company will transfer and assign the Receivables to the Trust, and
Trustee will execute, authenticate and deliver the Certificates. The net
proceeds from the sale of the Notes and the Certificates will be applied to the
purchase of the Receivables.
In the Receivables Purchase Agreement, the Seller will represent and
warrant to the Company, among other things, that (i) the information set forth
in the Schedule of Receivables is correct in all material respects as of the
Cutoff Date; (ii) the Obligor on each Receivable is contractually required to
maintain physical damage insurance covering the related Financed Vehicle in
accordance with the Seller's normal requirements; (iii) on the Closing Date, to
the best of its knowledge, the Receivables are free and clear of all security
interests, liens, charges and encumbrances, and no offsets, defenses or
counterclaims have been asserted or threatened; (iv) at the Closing date, each
of the Receivables is, or will be, secured by a perfected, first-priority
security interest in the related Financed Vehicle in favor of the Seller; and
(v) each Receivable, at the time it was originated, complied and, on the
Closing Date complies, in all material respects with applicable federal and
state laws, including, without limitation, consumer credit, truth-in-lending,
equal credit opportunity and disclosure laws.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an "employee benefit plan" as defined
in and subject to the provisions of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or a "plan" as described in Section
4975 (e) (1) of the Internal Revenue Code of 1986, as amended (the "Code") each
such "employee benefit plan" and "plan," a "Plan"). A fiduciary of a Plan must
determine that the purchase of a Note is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Notes under ERISA, see "ERISA
Considerations" in the Prospectus.
S-23
<PAGE>
THE CERTIFICATES
The Certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(l) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a Certificate, each
Certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. For additional information regarding
treatment of the Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the respective
underwriting agreements relating to the Notes and the Certificates (the
"Underwriting Agreements"), the Company has agreed to cause the Trust to sell
to CS First Boston Corporation (the "Underwriter"), and the Underwriter has
agreed to purchase, all of the Securities.
The Underwriter proposes to offer the Securities to the public
initially at the public offering prices set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such prices less a concession
of ___% per Class A-1 Note, ___% per Class A-2 Note and ___% per Certificate;
and, the Underwriter and such dealers may allow a discount of ___% per Class
A-1 Note, ___% per Class A-2 Note and ___% per Certificate on sales to certain
other dealers; and after the initial public offering of the Securities, such
public offering prices and the concessions and discounts to dealers may be
changed by the Underwriter.
The Underwriting Agreements provide that the Seller will indemnify
the Underwriter against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriter may be
required to make in respect thereof.
The Trust may, from time to time, invest the funds in the Trust
Accounts in Eligible Investments acquired from the Underwriter.
The closing of the sale of the Certificates is conditioned on the
closing of the sale of the Notes, and the closing of the sale of the Notes is
conditioned on the closing of the sale of the Certificates.
Upon receipt of a request by an investor who has received an
electronic Prospectus Supplement and Prospectus from the Underwriter within the
period during which there is an obligation to deliver a Prospectus Supplement
and Prospectus, the Company or the Underwriter will promptly deliver, or cause
to be delivered, without charge, a paper copy of the Prospectus Supplement and
the Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed
upon by Sidley & Austin, New York, New York.
S-24
<PAGE>
INDEX OF TERMS
Business Day............................................................S-
Certificate Balance.....................................................S-
Certificateholders......................................................S-
Certificateholders' Distributable Amount................................S-
Certificateholders' Interest Carryover Shortfall........................S-
Certificateholders' Interest Distributable Amount.......................S-
Certificateholders' Monthly Interest Distributable Amount...............S-
Certificateholders' Monthly Principal Distributable Amount..............S-
Certificateholders' Principal Carryover Shortfall.......................S-
Certificateholders' Principal Distributable Amount......................S-
Certificates............................................................S-
Class A-1 Final Scheduled Payment Date..................................S-
Class A-1 Notes.........................................................S-
Class A-1 Rate..........................................................S-
Class A-2 Final Scheduled Payment Date..................................S-
Class A-2 Notes.........................................................S-
Class A-2 Rate..........................................................S-
Closing Date............................................................S-
Code....................................................................S-
Collection Account......................................................S-
Commission..............................................................S-
Cutoff Date.............................................................S-
Distribution Date.......................................................S-
ERISA...................................................................S-
Federal Tax Counsel.....................................................S-
Final Scheduled Distribution Date.......................................S-
Final Scheduled Maturity Date...........................................S-
Indenture...............................................................S-
Indenture Trustee.......................................................S-
Interest Distribution Amount............................................S-
Interest Rates..........................................................S-
Liquidated Receivables..................................................S-
Liquidated Proceeds.....................................................S-
Noteholders.............................................................S-
Noteholders' Interest Carryover Shortfall...............................S-
Noteholders' Interest Distributable Amount..............................S-
Noteholders' Monthly Interest Distributable Amount......................S-
Noteholders' Monthly Principal Distributable Amount.....................S-
Noteholders' Principal Carryover Shortfall..............................S-
Noteholders' Principal Distributable Amount.............................S-
Notes...................................................................S-
Owner Trustee...........................................................S-
Pass-Through Rate.......................................................S-
Plan....................................................................S-
Pool Balance............................................................S-
Principal Distribution Amount...........................................S-
Prospectus..............................................................S-
Rating Agencies.........................................................S-
Realized Losses.........................................................S-
Receivable..............................................................S-
Record Date.............................................................S-
Reserve Account.........................................................S-
S-25
<PAGE>
Securities..............................................................S-
Securityholders.........................................................S-
Seller..................................................................S-
Servicer................................................................S-
Servicing Agreement.....................................................S-
Specified Reserve Account Balance.......................................S-
Total Distribution Amount...............................................S-
Transfer and Servicing Agreements.......................................S-
Trust...................................................................S-
Trust Agreement.........................................................S-
Underwriting............................................................S-
Underwriting Agreements.................................................S-
S-26
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to Completion
Prospectus Supplement to Prospectus dated , 199
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-___
$ % ASSET BACKED CERTIFICATES, CLASS A
________________
ASSET BACKED SECURITIES CORPORATION
COMPANY
________________
CS First Boston Auto Receivables Trust 199 - (the "Trust") will be formed
pursuant to a pooling and servicing agreement (the "Pooling and Servicing
Agreement"), dated as of _______________, 199_ (the "Cutoff Date"),
among Asset Backed Securities Corporation (the "Company") as
depositor, _________ (in such capacity, the "Servicer"), as
servicer, and _________________ (the "Trustee") as trustee,
and will issue $____________ aggregate principal amount of
____ % Asset Backed Certificates, Class A (the "Class A
Certificates") and $_______________ aggregate principal
amount of _____ % Asset Backed Certificates, Class B
(the "Class B Certificates" and, with the Class A
Certificates, the "Certificates"). Only the Class
A Certificates are being offered hereby.
(Continued on following page)
________________
THE CLASS A CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN
THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN CS FIRST BOSTON CORPORATION, THE COMPANY,
THE SERVICER, THE SELLER, OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CLASS A CERTIFICATES NOR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY CS FIRST
BOSTON CORPORATION, THE COMPANY, THE SERVICER,
THE SELLER, ANY OF THEIR RESPECTIVE AFFILIATES
OR ANY GOVERNMENTAL AGENCY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 10 OF
THE ACCOMPANYING PROSPECTUS.
________________
<TABLE>
<CAPTION>
Price to the Underwriting Proceeds to the
Public(1) Discount Company(1)(2)
------------ ------------ ---------------
<S> <C> <C> <C>
Per Class A Certificate.............. % % %
$ $ $
</TABLE>
(1) Plus accrued interest, if any, from ______________, 199_.
(2) Before deducting expenses, estimated to be $____________.
________________
The Class A Certificates are offered subject to prior sale and subject
to the right of CS First Boston Corporation (the "Underwriter") to reject orders
in whole or in part. It is expected that delivery of the Class A Certificates
will be made through the Same Day Funds System of the Depository Trust Company
on or about _______________, 199_.
LOGO CS First Boston
The date of this Prospectus Supplement is , 199 .
<PAGE>
(Continued from preceding page)
The assets of the Trust will consist primarily of a pool of motor
vehicle installment loan agreements and motor vehicle retail
installment sale contracts (collectively, the "Receivables")
secured by new or used automo-biles, vans and light duty
trucks, certain monies due or received thereunder on and
after the Cutoff Date, security interests in the vehicles
financed thereby, and certain other property, as des-
cribed herein. The Receivables will be transferred to
the Trust by the Company pursuant to the Pooling and
Servicing Agreement. The Company will purchase the
Receivables from ________ (in such capacity, the
"Seller") pursuant to a receivables purchase
agreement (the "Receivables Purchase Agree-
ment"), dated as of __________, 199_ . The
Trust may also draw on funds on deposit in
a Reserve Account, to the extent described
herein, to meet shortfalls in amounts due
to Cer-tificateholders on any Distri-
bution Date. The Reserve Account will
not be part of the Trust.
The Class A Certificates will evidence in the aggregate an
undivided ownership interest in approximately % of the
Trust. The Class B Certificates, which are not being
offered hereby, will evidence in the aggregate an
undivided ownership interest in approximately
_______% of the Trust. Principal and interest
at the applicable Pass-Through Rate generally
will be distributed to holders of Certificates
on the ________ day of each month, commencing
__________, 199_. The rights of the holders
of Class B Certifi-cates to receive distri-
butions are subordinated to the rights of
the holder of Class A Certifi-cates to
the extent described herein. The out-
standing principal amount, if any, of
the Certificates will be due and
payable on ______________, 199_.
________________
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CLASS A CERTIFICATES. ADDITIONAL INFORMATION IS CON-
TAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO
READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
FULL. SALES OF THE CLASS A CERTIFICATES MAY NOT BE CON-
SUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS. TO THE EXTENT ANY STATEMENTS IN THIS
PROSPECTUS SUPPLEMENT CONFLICT WITH
STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
________________
S-2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), on behalf of the Trust, a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") of which this Prospectus Supplement is a part under the Securities
Act of 1933, as amended. This Prospectus Supplement does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as are required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co., as
nominee of The Depository Trust Company and registered holder of the Class A
Certificates. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Statements to Securityholders" in the accompanying
Prospectus (the "Prospectus").
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer.............. CS First Boston Auto Receivables Trust 199_-___, a trust
(the "Trust") to be formed pursuant to a pooling and
servicing agreement (the "Pooling and Servicing
Agreement") dated as of ___________, 199_ (the "Cutoff
Date"), among the Company, the Servicer and the Trustee.
Company............. The Company is a special-purpose Delaware corporation
organized for the purpose of causing the issuance of the
Certificates and other securities issued under the
Registration Statement backed by receivables or underlying
securities of various types and acting as settlor or
depositor with respect to trusts, custody accounts or
similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not
expected that the Company will have any significant
assets. The Company is an indirect, wholly owned finance
subsidiary of Collateralized Mortgage Securities
Corporation which is a wholly owned subsidiary of CS First
Boston Securities Corporation, which is a wholly owned
subsidiary of CS First Boston, Inc. Neither CS First
Boston Securities Corporation nor CS First Boston, nor any
of their affiliates has guaranteed, will guarantee or is
or will be otherwise obligated with respect to any Series
of Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New York
10055, and its telephone number is (212) 909-2000.
Seller.............. _______ (in such capacity, "the Seller"). See "The Seller
and the Servicer" herein.
Servicer............ _______ (in such capacity, the "Servicer"). See "The
Seller and the Servicer" herein.
Trustee............. _______, as trustee under the Pooling and Servicing
Agreement (the "Trustee"). See "The Trustee" herein.
The Certificates.... The Trust will issue $_________ aggregate principal amount
of _____% Asset Backed Certificates, Class A (the "Class A
Certificates") and $____________ aggregate principal
amount of % Asset Backed Certificates, Class B (the "Class
B Certificates" and, with the Class A Certificates, the
"Certificates") on ____________, 199_ (the "Closing
Date"). Each Certificate will represent a fractional
undivided interest in the Trust. The Class A Certificates
will evidence in the aggregate an undivided ownership
interest in approximately __% of the Trust (the "Class A
Percentage") and the Class B Certificates will evidence in
the aggregate an undivided ownership interest in
approximately __% of the Trust (the "Class B Percentage").
Only the Class A Certificates are being offered hereby.
S-4
<PAGE>
The Class B Certificates will be subordinated to the Class
A Certificates to the extent described herein. See "The
Certificates" herein.
The Receivables..... On the Closing Date, the Company will convey the
Receivables to the Trust in an aggregate principal balance
of approximately $_______________ as of the Cutoff Date.
The Company will convey the Receivables, and the Servicer
will agree to service the Receivables, pursuant to the
Pooling and Servicing Agreement. See "The Pooling and
Servicing Agreement - Sale and Assignment of Receivables"
and "The Receivables Pool" herein and "The Receivables
Pools" in the Prospectus.
On or before the Closing Date, the Company will purchase
the Receivables from the Seller pursuant to a receivables
purchase agreement (the "Receivables Purchase Agreement"),
dated as of ____________,199_. See "The Receivables
Purchase Agreement" herein.
The Receivables arise from motor vehicle installment
contracts (each, a "Contract") originated or purchased by
the Seller in the ordinary course of business. The
Receivables have been selected from Contracts owned by the
Seller based on the criteria specified in the Receivables
Purchase Agreement and described herein under "The
Receivables Pool". Approximately __% of the Receivables
were originated in ____________ and approximately __% of
the Receivables were originated in __________. As of the
Cutoff Date, the weighted average APR of the Receivables
was approximately ____, the weighted average remaining
term to maturity of the Receivables was approximately ____
months and the weighted average original term to maturity
of the Receivables was approximately ____ months. No
Receivable has a scheduled maturity later than
______________ (the "Final Scheduled Maturity Date").
Pursuant to the terms of the Pooling and Servicing
Agreement, the Company will assign the representations and
warranties made by the Seller to the Trustee for the
benefit of holders of the Certificates and will make
certain limited representations and warranties with
respect to the Receivables. Pursuant to the terms of the
Receivables Purchase Agreement, the Seller will make
certain representations and warranties regarding the
characteristics of the Receivables and will undertake to
repurchase any Receivable with respect to which an uncured
breach of any representation or warranty exists, if such
breach materially and adversely affects the interests of
the Trustee and the Certificateholders in such Receivable
and if such breach is not cured by the Seller in a timely
manner. To the extent that the Seller does not repurchase
a Receivable in the event of a breach of its
representations and warranties with respect to such
Receivable, the Company will not be required to repurchase
such Receivable unless such breach also constitutes a
breach of one of the Company's representations and
warranties with respect to such Receivable and such breach
materially and adversely affects the interests of the
Certificateholders in any such Receivable. See "The
Pooling and Servicing Agreement," and "The Receivables
Purchase Agreement" herein. Neither the Seller nor the
Company will have any other obligation with respect to the
Receivables or the Certificates.
Trust Property...... The assets of the Trust (the "Trust Property") include (i)
the Receivables, (ii) all monies (including accrued
interest) received on or with respect to the Receivables
on or after the Cutoff Date, (iii) all amounts and
property from time to time held in or credited to the
Collection Account, (iv) security interests in the
Financed
S-5
<PAGE>
Vehicles and any accessions thereto, (v) the right to
receive proceeds from claims on physical damage, credit
life and disability insurance policies covering Financed
Vehicles or Obligors, as the case may be, (vi) any
property that shall have secured a Receivable and that
shall have been acquired by or on behalf of the Trustee,
(vii) all of the Seller's right to all documents contained
in the files pertaining to the Receivables, (viii) the
right to draw on funds on deposit in the Reserve Account,
to the extent described herein, to meet shortfalls in
amounts due to Certificateholders, and (ix) any and all
proceeds of the foregoing. The Reserve Account will not be
property of the Trust. See "The Certificates-
Distribution," "-Subordination of the Class B
Certificates; Reserve Account," and "The Trust".
Terms of the Certificates
A. Distribution
Dates .......... Distributions of interest and principal on the
Certificates will be made on the ____ day of each month
or, if such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution Date"),
commencing _________, 199_. Distributions will be made to
holders of record of the Certificates (the
"Certificateholders") as of the day immediately preceding
such Distribution Date (each, a "Record Date"). A
"Business Day" is a day other than a Saturday, a Sunday or
day on which banking institutions or trust companies in
The City of New York or the city in which the corporate
trust office of the Trustee is located are authorized by
law, regulation or executive order to be closed.
B. Pass-Through
Rates .......... Interest will accrue on the Class A Certificates at the
rate of ___% per annum (the "Class A Pass-Through Rate")
and on the Class B Certificates at the rate of ___% per
annum (the "Class B Pass-Through Rate"), in each case,
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
C. Interest........ On each Distribution Date, the Trustee will distribute pro
rata to holders of the Class A Certificates (the "Class A
Certificateholders") accrued interest at the Class A Pass-
Through Rate on the Class A Certificate Balance as of the
preceding Distribution Date (after giving effect to
distributions made on such Distribution Date), to the
extent of funds available therefor, following payment of
the Servicing Fee, from (i) the Class A Percentage of the
Interest Distribution Amount, (ii) the Reserve Account,
and (iii) the Class B Percentage of the Total Distribution
Amount.
D. Principal....... Principal of the Class A Certificates will be payable on
each Distribution Date, pro rata to the Class A
Certificateholders, in a maximum amount equal to the Class
A Principal Distributable Amount for the calendar month
preceding such Distribution Date or, in the case of the
first Distribution Date, the period from and including the
Cutoff Date through the last day of the calendar month
immediately preceding such Distribution Date (the
"Collection Period"). The Class A Principal Distributable
Amount with respect to any Distribution Date will equal
the Class A Percentage of the Principal Distribution
Amount for the related Collection Period and generally
will be payable to the extent of funds available therefor,
following payment of the Servicing Fee and the Class A
Interest Distributable Amount, from (i) the Class A
Percentage of the Principal Distribution Amount (exclusive
of the portion thereof attributable to Realized Losses),
(ii) the Reserve Account, and (iii) the Class B Percentage
of the Total Distribution Amount.
S-6
<PAGE>
On each Distribution Date, subject to the prior
distribution on such date of the Servicing Fee, the Class
A Interest Distributable Amount and the Class A Principal
Distributable Amount, the Trustee will distribute to
holders of the Class B Certificates (the "Class B
Certificateholders") (i) the Class B Interest
Distributable Amount to the extent of funds available
therefor from the Class B Percentage of the Interest
Distribution Amount and the Reserve Account and (ii) the
Class B Principal Distributable Amount to the extent of
funds available therefor from the Class B Percentage of
the Principal Distribution Amount and the Reserve Account.
The outstanding principal amount of the Class A
Certificates and the Class B Certificates, if any, will be
payable in full on ____________, 199_ (the "Final
Scheduled Distribution Date").
See "The Pooling and Servicing Agreement - Distributions -
Calculation of Amounts to be Distributed" herein.
E. Optional
Prepayment ..... If the Servicer exercises its option to purchase the
Receivables, which it may do after the aggregate principal
balance of the Receivables (the "Pool Balance") declines
to 10% or less of the initial Pool Balance, the Class A
Certificateholders will receive an amount equal to the
Class A Certificate Balance together with accrued interest
at the Class A Pass-Through Rate, the Class B
Certificateholders will receive an amount equal to the
Class B Certificate Balance together with accrued interest
at the Class B Pass-Through Rate, and the Certificates
will be retired. See "The Certificates - Optional
Prepayment" herein.
Collection Account.. Except under certain conditions described in the
Prospectus under "Description of the Transfer and
Servicing Agreements - Collections," the Servicer will be
required to remit collections received with respect to the
Receivables within two Business Days of receipt thereof to
one or more accounts in the name of the Trustee (the
"Collection Account"). Pursuant to the Pooling and
Servicing Agreement, the Trustee will withdraw funds on
deposit in the Collection Account and apply such funds on
each Distribution Date to the following (in the priority
indicated): (i) the Servicing Fee for the related
Collection Period and any overdue Servicing Fees to the
Servicer, (ii) the Class A Interest Distributable Amount
and the Class A Principal Distributable Amount to the
Class A Certificateholders, (iii) the Class B Interest
Distributable Amount and the Class B Principal
Distributable Amount to the Class B Certificateholders,
and (iv) the remaining balance, if any, to the Reserve
Account. See "The Pooling and Servicing Agreement -
Distributions" herein.
Credit Enhancement.. Subordination. The rights of the Class B
Certificateholders to receive distributions to which they
would otherwise be entitled with respect to the
Receivables are subordinated to the rights of the Class A
Certificateholders, as described more fully herein. See
"The Pooling and Servicing Agreement -Distributions"
and"-Subordination of the Class B Certificates; Reserve
Account" herein.
Reserve Account. The Reserve Account will be created with
an initial deposit by the Company on the Closing Date of
cash or Eligible Investments having a value of at least
$________ (the "Reserve Account Initial Deposit"). Funds
will be withdrawn from the Reserve Account on any
Distribution Date if, and to the extent that, the Total
Distribution Amount for the related Collection Period
remaining
S-7
<PAGE>
after payment of the Servicing Fee is less than the Class
A Distributable Amount. Such funds will be distributed to
the Class A Certificateholders. In addition, after giving
effect to any such withdrawal and distribution to the
Class A Certificateholders, funds will be withdrawn from
the Reserve Account if, and to the extent that, the
portion of the Total Distribution Amount remaining after
payment of the Servicing Fee and the Class A Distributable
Amount is less than the Class B Distributable Amount. Such
funds will be distributed to the Class B
Certificateholders.
Funds in any Reserve Account may be invested in securities
that will not mature prior to the date of such next
scheduled distribution with respect to the Certificates
and will not be sold prior to maturity to meet any
shortfalls. Thus, the amount of available funds on deposit
in the Reserve Account at any time may be less than the
balance of the Reserve Account. If the amount required to
be withdrawn from the Reserve Account to cover shortfalls
in collections on the related Receivables exceeds the
amount of available funds on deposit in the Reserve
Account, a temporary shortfall in the amounts distributed
to the Certificateholders could result.
On each Distribution Date, the Reserve Account will be
reinstated up to the Specified Reserve Account Balance by
the deposit thereto of the portion, if any, of the Total
Distribution Amount remaining after payment of the
Servicing Fee, the Class A Distributable Amount and the
Class B Distributable Amount. The "Specified Reserve
Account Balance" with respect to any Distribution Date
generally will be equal to [state formula]. Certain
amounts in the Reserve Account on any Distribution Date
(after giving effect to all distributions to be made on
such Distribution Date) in excess of the Specified Reserve
Account Balance for such Distribution Date will be
released to the Company and will no longer be available to
the Certificateholders.
The Reserve Account will be maintained with the Trustee as
a segregated trust account, but will not be part of the
Trust. See "The Pooling and Servicing Agreement -
Subordination of the Class B Certificates; Reserve
Account" herein.
Advances............ If a shortfall should occur in any Collection Period
between the amount due as interest on the Receivables
during such Collection Period (assuming the Receivables
were paid on their respective scheduled payment dates) and
the amount actually received in respect of the Receivables
during such Collection Period and allocable to interest,
the Servicer will advance an amount equal to such
shortfall (an "Advance"). The Servicer will be reimbursed
for Advances (i) from collections and other amounts
received on the Receivables with respect to which such
Advances were made; (ii) from collections and other
amounts received in respect of other Receivables; or (iii)
by reducing the Repurchase Amount (as defined herein) due
from the Servicer by the amount of any unreimbursed
Advances. The Servicer may elect not to make an Advance
with respect to any Receivable to the extent that the
Servicer determines, in its sole discretion, that it is
unlikely to be able to recover such Advances from future
collections and other payments in respect of the
Receivables. See "The Certificates-Advances" herein.
Certain Legal
Aspects ............ The Seller shall repurchase certain Receivables with
respect to which any prior security interest in such
Receivable is found to exist, any laws have been violated,
or the Seller's security interest in the respective
Financed Vehicle has not been properly assigned to the
Trustee. The Trustee's security interest in the Financed
S-8
<PAGE>
Vehicle may be not be properly assigned in the event of
(i) the relocation or resale of the Financed Vehicle in
another state without the Servicer's re-perfecting the
Trustee's security interest, (ii) the imposition certain
tax or possessory liens, or (iii) fraud or negligence. In
addition, certain consumer protection laws allow an
Obligor (as defined herein) under a Receivable to assert
certain claims and defenses against a holder of the
Receivable thus possibly rendering a Receivable partly or
wholly uncollectible. See "Risk Factors - Security
Interests in the Financed Vehicles" herein and "Risk
Factors - Certain Legal Aspects - Security Interests in
Financed Vehicles" and "Certain Legal Aspects of the
Receivables" in the Prospectus.
Tax Status.......... In the opinion of Sidley & Austin ("Federal Tax Counsel"),
the Trust will be classified as a grantor trust for
federal income tax purposes and will not be classified as
an association taxable as a corporation. Subject to the
discussion under "Certain Federal Income Tax Consequences"
in the Prospectus, each Owner of a beneficial interest in
the Certificates must include in income its pro rata share
of interest and other income from the Receivables and,
subject to certain limitations, may deduct its pro rata
share of fees and other deductible expenses paid by the
Trust. See "Certain Federal Income Tax Consequences" in
the Prospectus for additional information concerning the
application of federal income tax laws to the Trust and
the Certificates.
ERISA Considerations Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Class A
Certificates will be eligible for purchase by employee
benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended, and "plans" as defined
in Section 4975 of the Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" herein and in the
Prospectus.
Ratings of the
Certificates ....... It is a condition to the issuance of the Class A
Certificates that they be rated at least _____ by at least
two nationally recognized rating agencies. A rating is not
a recommendation to purchase, hold or sell the Class A
Certificates, inasmuch as such rating does not comment as
to market price or suitability for a particular investor.
The ratings address the likelihood that principal of and
interest on the Class A Certificates will be paid pursuant
to their terms. There can be no assurance that a rating
will not be lowered or withdrawn by a rating agency if
circumstances so warrant. See "Risk Factors -Ratings of
the Class A Certificates" herein.
S-9
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully consider
the following risk factors before investing in the Class A Certificates.
Limited Liquidity. There is currently no secondary market for the Class
A Certificates. CS First Boston Corporation (the "Underwriter") currently
intends to make a market in the Class A Certificates, but is under no
obligation to do so. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide the Class
A Certificateholders with liquidity of investment or that it will continue for
the life of the Class A Certificates.
Limited Assets. The Trust will not have, nor is it permitted or expected
to have, any significant assets or sources of funds other than the Receivables
and access to funds in the Reserve Account. Certificateholders generally must
rely on payments on the Receivables for distributions of interest and principal
on the Certificates. Although funds in the Reserve Account will be generally
available on each Distribution Date to cover shortfalls in distributions of
interest and principal on the Certificates, amounts to be deposited in the
Reserve Account are limited in amount. If the Reserve Account is exhausted,
the Trust will depend solely on current distributions on the Receivables to
make distributions on the Certificates.
Funds in any Reserve Account may be invested in securities that will not
mature prior to the date of such next scheduled distribution with respect to the
Certificates and will not be sold prior to maturity to meet any shortfalls.
Thus, the amount of available funds on deposit in the Reserve Account at any
time may be less than the balance of the Reserve Account. If the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the related Receivables exceeds the amount of available funds on deposit in the
Reserve Account, a temporary shortfall in the amounts distributed to the
Certificateholders could result.
Security Interests in the Financed Vehicles. To facilitate servicing and
to minimize administrative burden and expense, the Servicer will be appointed
custodian of the Receivables and the related documents by the Trustee, but will
not stamp the Receivables to reflect the sale and assignment of the Receivables
to the Trust or amend the certificates of title of the Financed Vehicles. In
the absence of amendments to the certificates of title, the Trustee may not
have perfected security interests in the Financed Vehicles securing the
Receivables in some states. See "Risk Factors - Certain Legal Aspects -
Security Interests in Financed Vehicles" and "Certain Legal Aspects of the
Receivables" in the Prospectus.
Ratings of the Class A Certificates. It is a condition to the issuance
of the Class A Certificates that they be rated at least or its equivalent by at
least two nationally recognized rating agencies (the "Rating Agencies"). A
rating is not a recommendation to purchase, hold or sell the Class A
Certificates, inasmuch as a rating does not comment as to market price or
suitability for a particular investor. The ratings of the Class A Certificates
address the likelihood of the timely payment of interest on, and the ultimate
repayment of principal of, the Class A Certificates pursuant to their terms.
There can be no assurance that a rating will be retained for any given period
of time or that a rating will not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. In the event
that a rating is subsequently lowered or withdrawn, no person or entity will be
required to provide any additional credit enhancement. The ratings of the
Class A Certificates are based primarily on the credit quality of the
Receivables, the subordination of the Class B Certificates and the availability
of funds in the Reserve Account.
Trust's Relationship to the Company. The Company is generally not
obligated to make any payments in respect of the Certificates or the
Receivables. The Company has assigned the representations and warranties of the
Seller under the Receivables Purchase Agreement to the Trustee. In addition
the Company has made certain representations and warranties regarding the
characteristics of the Receivables and is required under the Pooling and
Servicing Agreement to repurchase Receivables with respect to which such
representations and warranties have been
S-10
<PAGE>
breached. It is not anticipated that the Company will have any significant
assets with which to fund such repurchases.
Trust's Relationship to the Seller and the Servicer. Neither the Seller
nor the Servicer is generally obligated to make any payments in respect of the
Certificates or the Receivables. If _______ were to cease acting as Servicer,
delays in processing payments on the Receivables and information in respect
thereof could occur and result in delays in payment to the Class A
Certificateholders. The Seller has made certain representations and warranties
regarding the characteristics of the Receivables and is required under the
Receivables Purchase Agreement to repurchase Receivables with respect to which
such representations and warranties have been breached. See "The Receivables
Purchase Agreement - Sale and Assignment of Receivables herein and "Description
of the Receivables Purchase Agreements - Sale and Assignment of Receivables" in
the Prospectus.
THE TRUST
GENERAL
The Company will establish the Trust by selling and assigning the Trust
Property to the Trustee in exchange for the Certificates. The Servicer will
service the portion of such assets consisting of the Receivables pursuant to
the Pooling and Servicing Agreement and will be compensated for acting as the
Servicer. See "The Pooling and Servicing Agreement - Servicing Compensation"
herein and "The Transfer and Servicing Agreements - Servicing Compensation and
Payment of Expenses" in the Prospectus.
If the protection provided to Certificateholders by the Reserve Account
and, in the case of the Class A Certificateholders, the subordination of the
Class B Certificates is insufficient, the Trust will look only to the Obligors
on the Receivables and the proceeds from the repossession and sale of Financed
Vehicles that secure defaulted Receivables to fund distributions of principal
and interest on the Certificates. In such event, certain factors, such as the
Trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables and thus may reduce the proceeds to be distributed to
Certificateholders with respect to the Certificates. See "The Pooling and
Servicing Agreement - Distributions" and "- Subordination of the Class B
Certificates, Reserve Account" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
Each Certificate represents a fractional undivided ownership interest in
the Trust. The assets of the Trust (the "Trust Property") include (i) the
Receivables, (ii) all monies (including accrued interest) received on or with
respect to the Receivables on or after the Cutoff Date, (iii) all amounts and
property from time to time held in or credited to the Collection Account, (iv)
security interests in the Financed Vehicles and any accessions thereto, (v) the
right to receive proceeds from claims on physical damage, credit life and
disability insurance policies covering Financed Vehicles or Obligors, as the
case may be, (vi) any property that shall have secured a Receivable and that
shall have been acquired by or on behalf of the Trustee, (vii) all of the
Seller's right to all documents contained in the files pertaining to the
Receivables, (viii) the right to draw on funds on deposit in the Reserve
Account, to the extent described herein, to meet shortfalls in amounts due to
Certificateholders, and (ix) any and all proceeds of the foregoing. The
Reserve Account will be maintained by the Trustee for the benefit of the
Certificateholders, but will not be part of the Trust.
THE TRUSTEE
__________ is Trustee under the Pooling and Servicing Agreement.
__________ is a __________ banking corporation, and its principal offices are
located at __________. The Company, the Seller or any of their respective
affiliates may maintain normal commercial banking relations with the Trustee
and its affiliates.
S-11
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables conveyed to the Trust (the "Receivables Pool")
were originated or purchased by the Seller in the ordinary course of business,
and were or will be selected from the Seller's portfolio for inclusion in the
Receivables Pool based on several criteria, including the following: (i) as of
the Cutoff Date each Receivable had, or will have, an outstanding gross balance
of at least $1,000; (ii) as of the Cutoff Date, no Receivable will be more than
90 days past due; and (iii) as of the Cutoff Date, no Obligor on any Receivable
was noted in the records of the Seller as being the subject of a bankruptcy
proceeding. Certain additional criteria that each Receivable must meet are set
forth in the Prospectus under "The Receivables Pools". No selection procedures
believed by the Seller to be adverse to Certificateholders were or will be used
in selecting the Receivables.
The composition, distribution by APR and geographic distribution of the
Receivables as of the Cutoff Date are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<S> <C> <C> <C> <C> <C>
Weighted Aggregate principal Number of Weighted Average Weighted Average Average Principal
Average APR Balance Receivables Remaining Term Original Term Balance
% $ months months $
</TABLE>
DISTRIBUTION OF RECEIVABLES BY APR AS OF THE CUTOFF DATE
Number of Aggregate Principal Percentage of Aggregate
APR Range Receivables Balance Principal Balance
0.00% to 3.00%
3.01% to 4.00%
4.01% to 5.00%
5.01% to 6.00%
6.01% to 7.00%
7.01% to 8.00%
8.01% to 9.00%
9.01% to 10.00%
10.01% to 11.00%
11.01% to 12.00%
12.01% to 13.00%
13.01% to 14.00%
14.01% to 15.00%
15.01% to 16.00%
16.01% to 17.00%
17.01% to 18.00%
18.01% to 19.00%
Greater than 20.00% ____________ ____________ ______________
Total ======= ======= =======
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE (1)
Number of Aggregate Principal Percentage of Aggregate
Receivables Balance Principal Balance
----------- ------------------- -----------------------
New York.......
California.....
Other.......... ----------- ---------- -----------
Total........ ====== ====== ======
(1) Based on billing addresses of the Obligers as of the Cutoff Date.
S-12
<PAGE>
By aggregate principal balance, approximately ___% of the Receivables
constitute Precomputed Receivables and ___% of the Receivables constitute Simple
Interest Receivables. See "The Receivables Pools" in the Prospectus for a
description of the characteristics of Precomputed Receivables and Simple
Interest Receivables. As of the Cutoff Date, approximately ___% of the
Receivables by aggregate principal balance, constituting ___% of the number of
Receivables, represent used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the delinquency,
repossession and net loss experience of the Seller pertaining to retail new and
used automobile, van and light duty truck receivables. The delinquency,
repossession and credit loss data presented in the following tables are for
illustrative purposes only. There is no assurance that the Seller's delinquency,
repossession and credit loss experience with respect to automobile, van and
light duty truck receivables in the future, or the experience of the Trust with
respect to the Receivables, will be similar to that set forth below.
Delinquencies, repossessions and net losses on new and used automobiles, vans
and light duty trucks are affected by social and economic conditions generally
and, in particular, in the States of ______ and _______, where ___% and ___%,
respectively, of the Financed Vehicles were purchased.
DELINQUENCY EXPERIENCE (1)
At December 31,
1994 1993 1992 1991 1990
(Dollars in Thousands)
Portfolio Outstanding at End of Period
Delinquencies at End of Period(2)
30-59 Days
60-89 Days
90 Days or More
Total Delinquencies
Total Delinquencies as a Percentage of
Portfolio Outstanding at End of Period
________________
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance
and other charges.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
At December 31,
1994 1993 1992 1991 1990
(Dollars in Thousands)
Average Amount Outstanding During the
Period
Average Number of Contracts
Outstanding during the Period
Repossessions as a Percentage of
Average Number of Contracts
Outstanding
Net Losses as a Percentage of
Liquidations (2)(3)
Net Losses as a Percentage of Average
Amount Outstanding(3)
________________
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance
and other charges.
(2) Net losses are equal to the aggregate of the net balances of all
contracts that were determined to be uncollectible in the period, less
any recoveries on contracts charged off in the period or any prior
periods, excluding any losses resulting from the failure to recover
commissions to dealers with respect to contracts that are prepaid or
charged off.
(3) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
S-13
<PAGE>
THE SELLER AND THE SERVICER
[Information regarding the Seller and the Servicer to be supplied.]
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the
Certificates depends on the rate of payment (including prepayments) of the
principal balance of the Receivables, the final distribution in respect of the
Certificates could occur significantly earlier that the Final Scheduled
Distribution Date. Certificateholders will bear the risk of being able to
reinvest principal payments on the Certificates at yields at least equal to the
yield on the Certificates.
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will be
filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Certificates and the Pooling and Servicing Agreement. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Certificates of any given
Series and the related Pooling and Servicing Agreement set forth in the
Prospectus, to which description reference is hereby made.
The "Class A Certificate Balance" initially will equal $__________
and, as of any date of determination thereafter, will equal such initial Class
A Certificate Balance less the sum of all amounts previously distributed to
Class A Certificateholders allocable to principal. The "Class B Certificate
Balance" initially will equal $_________ and, as of any date of determination
thereafter, will equal such initial Class B Certificate Balance less the sum of
all amounts previously distributed to Class B Certificateholders allocable to
principal and any Realized Losses allocable to the Class B Certificates. The
Class A Certificates will evidence in the aggregate an undivided ownership
interest in approximately _____% of the Trust, and the Class B Certificates
will evidence in the aggregate an undivided ownership interest in approximately
_____% of the Trust. The Class B Certificates are not being offered hereby and
initially will be held by ______.
DISTRIBUTIONS
Deposits to Collection Account. On or about the ____ Business Day
of each month, the Servicer will provide the Trustee with certain information
with respect to the preceding Collection Period, including the aggregate amount
of collections on the Receivables, the Advances and Repurchase Amounts, as well
as the Total Distribution Amount, the Interest Distribution Amount, the
Principal Distribution Amount, the Class A Interest Distributable Amount, the
Class A Principal Distributable Amount, the Class B Interest Distributable
Amount and the Class B Principal Distributable Amount.
On or before each Distribution Date, the Servicer will cause the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for any Distribution Date will equal the sum of the
Interest Distribution Amount and the Principal Distribution Amount for such date
(other than the portion
S-14
<PAGE>
hereof attributable to Realized Losses). "Realized Losses" means the excess of
the principal balance of a Liquidated Receivable over Liquidation Proceeds with
respect thereto to the extent allocable to principal.
The "Interest Distribution Amount" for a Distribution Date generally will
equal the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the obligor on such Liquidated Receivables (such net amount, "Liquidation
Proceeds"), to the extent attributable to interest due thereon; (iii) all
recoveries in respect of Liquidated Receivables that were written off in prior
Collection Periods; (iv) all Advances made by the Servicer; (v) the Repurchase
Amount of each Receivable that was repurchased by the Seller or the Company, to
the extent attributable to interest due thereon; and (vi) Investment Earnings
for such Distribution Date.
The "Principal Distribution Amount" for a Distribution Date generally will
equal the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
principal; (ii) Liquidation Proceeds to the extent attributable to principal,
plus the amount of Realized Losses with respect to the related Liquidated
Receivables; and (iii) the Repurchase Amount of each Receivable that was
repurchased by the Seller or the Company to the extent allocable to principal.
The Interest Distribution Amount and the Principal Distribution Amount on any
Distribution Date shall exclude the following:
(i) amounts received on Receivables to the extent that the
Servicer has previously made an unreimbursed Advance;
(ii) Liquidation Proceeds with respect to a particular
Receivable to the extent of any unreimbursed Advances thereon; and
(iii) all payments and proceeds (including Liquidation
Proceeds) of any Receivables the Repurchase Amount of which has been
included in the Total Distribution Amount in a prior Collection Period.
Calculation of Distributable Amounts. The "Class A Distributable
Amount" with respect to a Distribution Date will equal the sum of (i) the
"Class A Principal Distributable Amount", consisting of the Class A Percentage
of the Principal Distribution Amount, plus (ii) the "Class A Interest
Distributable Amount", consisting of thirty days' interest at the Class A
Pass-Through Rate on the Class A Certificate Balance as of the preceding
Distribution Date (after giving effect to distribution made on such
Distribution Date). In addition, on the Final Scheduled Distribution Date, the
Class A Principal Distributable Amount will include the lesser of (a) the Class
A Percentage of (i) any scheduled payments of principal due and remaining
unpaid on each Precomputed Receivable and (ii) any principal due and remaining
unpaid on each Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Maturity Date or (b) the amount that is necessary (after giving
effect to the other amounts to be distributed to Class A Certificateholders on
such Distribution Date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class B Distributable Amount" with respect to a Distribution Date will
equal the sum of (i) the "Class B Principal Distributable Amount", consisting of
the Class B Percentage of the Principal Distribution Amount, plus (ii) the
"Class B Interest Distributable Amount", consisting of thirty days' interest at
the Class B Pass-Through Rate on the Class B Certificate Balance as of the
preceding Distribution Date (after giving effect to distributions made on such
Distribution Date). In addition, on the Final Scheduled Distribution Date, the
Class B Principal Distributable Amount will include the lesser of (a) the Class
B Percentage of (i) any scheduled payments of principal due and remaining unpaid
on each Precomputed Receivable and (ii) any principal due and remaining
S-15
<PAGE>
unpaid on each Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Maturity Date or (b) the amount that is necessary (after giving
effect to the other amounts to be distributed to Class B Certificateholders on
such Distribution Date and allocable to principal) to reduce the Class B
Certificate Balance to zero.
Amounts Distributed. The Class A Certificateholders will receive on any
Distribution Date, to the extent of available funds, the Class A Distributable
Amount and any outstanding Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall as of the close of the preceding Distribution
Date.
On each Distribution Date on which the sum of the Class A Interest
Distributable Amount and any outstanding Class A Interest Carryover Shortfall
from the preceding Distribution Date (plus interest on such Class A Interest
Carryover Shortfall at the Class A Pass-Through Rate from such preceding
Distribution Date to the current Distribution Date, to the extent permitted by
law) exceeds the Class A Percentage of the Interest Distribution Amount (after
payment of the Servicing Fee) on such Distribution Date, the Class A
Certificateholders will be entitled to receive such amounts, first, from the
Class B Percentage of the Interest Distribution Amount; second, if such amounts
are insufficient, from amounts available in the Reserve Account, and, third, if
such amounts are insufficient, from the Class B Percentage of the Principal
Distribution Amount (other than any portion thereof allocable to Realized
Losses). "Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class A Interest Distributable Amount for
the preceding Distribution Date, plus any outstanding Class A Interest Carryover
Shortfall on such preceding Distribution Date, over the amount of interest
actually distributed to Class A Certificateholders on such preceding
Distribution Date, plus interest on such excess at the Class A Pass-Through Rate
from such preceding Distribution Date to the current Distribution Date, to the
extent permitted by law.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Principal Distribution Amount on such Distribution Date, the Class A
Certificateholders will be entitled to receive such amounts, first, from the
Class B Percentage of the Principal Distribution Amount (other than any portion
thereof attributable to Realized Losses); second, if such amounts are
insufficient, from amounts available in the Reserve Account; and, third, if
such amounts are insufficient, from the Class B Percentage of the Interest
Distribution Amount. "Class A Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A Principal
Distributable Amount for the preceding Distribution Date plus any outstanding
Class A Principal Carryover Shortfall on such preceding Distribution Date, over
the amount of principal actually distributed to Class A Certificateholders on
such preceding Distribution Date.
THE POOLING AND SERVICING AGREEMENT
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables by the
Seller to the Trust on the Closing Date pursuant to the Pooling and Servicing
Agreement is set forth under "Description of the Transfer and Servicing
Agreements - Sale and Assignment of Receivables" in the Prospectus.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each Collection
Period in an amount equal to _____% per annum of the Pool Balance as of the
first day of such Collection Period. The Servicing Fee (together with any
portion of the Servicing Fee that remains unpaid from prior Distribution Dates)
will be paid on each Distribution Date solely to the extent of the Interest
Distribution Amount for the related Collection Period; however, the Servicing
Fee will be paid to the Servicer prior to the distribution of any portion of the
Interest
S-16
<PAGE>
Distribution Amount to Certificateholders. See "Description of the Transfer
and Servicing Agreements - Servicing Compensation and Payment of Expenses" in
the Prospectus.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables,
which it may do when the aggregate outstanding principal amount of the
Receivables declines to 10% or less of the initial Pool Balance, the Class A
Certificateholders will receive an amount in respect of the Class A
Certificates equal to the outstanding Class A Certificate Balance, together
with accrued interest to the redemption date at the Class A Pass-Through Rate,
and the Class B Certificateholders will receive an amount in respect of the
Class B Certificates equal to the outstanding Class B Certificate Balance,
together with accrued interest to the redemption date at the Class B
Pass-Through Rate, which distributions shall effect the early retirement of the
Certificates. See "Description of the Transfer and Servicing Agreements -
Termination" in the Prospectus.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
Subordination of the Class B Certificates. The rights of the Class
B Certificateholders to receive distributions with respect to the Receivables
generally will be subordinated to the rights of the Class A Certificateholders
in the event of defaults or delinquencies on the Receivables as provided in the
Pooling and Servicing Agreement and described herein. The protection afforded
to the Class A Certificateholders through subordination will be effected by the
preferential right of the Class A Certificateholders to receive current
distributions with respect to the Receivables.
Reserve Account. The Reserve Account will be created by the
deposit thereto by the Company on the Closing Date of the Reserve Account
Initial Deposit and will be increased up to the Specified Reserve Account
Balance by the deposit thereto on each Distribution Date on the amount, if any,
remaining from the Total Distribution Amount after payment of the Servicing
Fee, the Class A Distributable Amount and the Class B Distributable Amount. If
the amount on deposit in the Reserve Account on any Distribution Date (after
giving effect to all deposits thereto or withdrawals therefrom on such date) is
greater than the Specified Reserve Account Balance for such Distribution Date,
the Trustee will release such excess to the Company. Upon any such
distribution to the Company, the Certificateholders will have no rights in, or
claims to such amounts. Amounts held from time to time in the Reserve Account
will continue to be held for the benefit of the Class A Certificateholders and
the Class B Certificateholders.
Funds in the Reserve Account will be invested in Eligible Investments, as
provided in the Pooling and Servicing Agreement. Funds in any Reserve Account
may be invested in securities that will not mature prior to the date of such
next scheduled distribution with respect to the Certificates and will not be
sold prior to maturity to meet any shortfalls. Thus, the amount of available
funds on deposit in the Reserve Account at any time may be less than the balance
of the Reserve Account. If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the related Receivables exceeds
the amount of available funds on deposit in the Reserve Account, a temporary
shortfall in the amounts distributed to the Certificateholders could result. The
Reserve Account will not be part of or otherwise includible in the Trust and
will be a segregated trust account held by the Trustee.
ADVANCES
If a shortfall should occur in any Collection Period between (i) the aggregate
amount of interest due on the Receivables during such Collection Period,
assuming each Receivable was paid on its scheduled payment date under the
related Contract, and (ii) the amount actually received on or in respect of the
Receivables during such Collection Period and allocable to interest, the
Servicer will deposit an amount (an "Advance") equal to such deficiency in the
Collection Amount on or before the applicable Distribution Date. The Servicer
will be allowed
S-17
<PAGE>
to recover any Advances so made (a) from collections and other amounts received
on the Receivables with respect to which such Advances were made, (b) from
collections or any other amounts received in respect of any other Receivables
and (c) by reducing any Repurchase Amount due from the Servicer by the amount
of any unreimbursed Advances. The Servicer may elect not to make an Advance
with respect to any Receivable to the extent that the Servicer determines that
it is unlikely to be able to recover such Advance from payments on or with
respect to the Receivables or from any other source.
THE RECEIVABLES PURCHASE AGREEMENT
On or prior to the Closing Date, the Seller will transfer and assign to the
Company pursuant to the Receivables Purchase Agreement, all of its right, title
and interest in and to Receivables in the outstanding principal amount of
$_________ including its security interests in the related Financed Vehicles.
Each Receivable will be identified in a schedule appearing as an exhibit to the
Receivables Purchase Agreement (the "Schedule of Receivables"). The Seller will
sell the Receivables to the Company without recourse, except that, as described
in the following paragraph, the Seller will be required to repurchase
Receivables with respect to which it is in breach of a representation or
warranty, if such breach materially and adversely affects the right of the
related Trust and Certificateholders in and to such Receivables. Concurrently
with or subsequent to the transfer and assignment of the Receivables to the
Company, the Company will transfer and assign the Receivables to the Trust, and
Trustee will execute, authenticate and deliver the Certificates. The net
proceeds from the sale of the Certificates will be applied to the purchase of
the Receivables.
In the Receivables Purchase Agreement, the Seller will represent and warrant
to the Company, among other things, that (i) the information set forth in the
Schedule of Receivables is correct in all material respects as of the Cutoff
Date; (ii) the Obligor on each Receivable is contractually required to maintain
physical damage insurance covering the related Financed Vehicle in accordance
with the Seller's normal requirements; (iii) on the Closing Date, to the best of
its knowledge, the Receivables are free and clear of all security interests,
liens, charges and encumbrances, and no offsets, defenses or counterclaims have
been asserted or threatened; (iv) at the Closing date, each of the Receivables
is, or will be, secured by a perfected, first-priority security interest in the
related Financed Vehicle in favor of the Seller; and (v) each Receivable, at the
time it was originated, complied and, on the Closing Date complies, in all
material respects with applicable federal and state laws, including, without
limitation, consumer credit, truth-in-lending, equal credit opportunity and
disclosure laws.
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations
- - Prohibited Transaction Exemption for Senior Certificates Issued by Grantor
Trusts" in the Prospectus, the Class A Certificates may be purchased by an
"employee benefit plan" as defined in and subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(each such "employee benefit plan" and "plan a "Plan"). A fiduciary of a Plan
must determine that the purchase of a Class A Certificate is consistent with
its fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code.
For additional information regarding treatment of the Class A Certificates
under ERISA, see "ERISA Considerations" in the Prospectus.
S-18
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement relating to the Class A Certificates (the "Underwriting Agreement"),
the Company has agreed to cause the Trust to sell to the Underwriter, and the
Underwriter has agreed to purchase, the entire principal amount of the Class A
Certificates.
The Underwriter proposes to offer the Class A Certificates to the
public initially at the public offering price set forth on the cover page of
this Prospectus Supplement, and to certain dealers at such price less a
concession of % per Class A Certificates; the Underwriter and such dealers
may allow a discount of % per Class A Certificates on sales to certain
other dealers; and after the initial public offering of the Class A
Certificates, the public offering price and the concessions and discounts to
dealers may be changed by the Underwriter.
The Underwriting Agreement provides that the Seller will indemnify
the Underwriter against certain liabilities under applicable securities laws,
or contribute to payments the Underwriter may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds in the Trust Accounts in
Eligible Investments acquired from the Underwriter.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter within the period
during which there is an obligation to deliver a Prospectus Supplement and
Prospectus, the Company or the Underwriter will promptly deliver, or cause to be
delivered, without charge, a paper copy of the Prospectus Supplement and
Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon by
Sidley & Austin, New York, New York.
S-19
<PAGE>
INDEX OF TERMS
Business Day...............................................................S-
Certificates...............................................................S-
Certificateholders.........................................................S-
Class A Certificate Balance ...............................................S-
Class A Certificateholders ................................................S-
Class A Certificates.......................................................S-
Class A Distributable Amount...............................................S-
Class A Interest Carryover Shortfall.......................................S-
Class A Interest Distributable Amount......................................S-
Class A Pass-Through Rate..................................................S-
Class A Percentage.........................................................S-
Class A Principal Carryover Shortfall......................................S-
Class A Principal Distributable Amount.....................................S-
Class B Certificate Balance................................................S-
Class B Certificateholders.................................................S-
Class B Certificates.......................................................S-
Class B Distributable Amount...............................................S-
Class B Interest Distributable Amount......................................S-
Class B Pass-Through Rate..................................................S-
Class B Percentage.........................................................S-
Class B Principal Distributable Amount.....................................S-
Closing Date...............................................................S-
Code.......................................................................S-
Collection Account.........................................................S-
Collection Period..........................................................S-
Commission.................................................................S-
Cutoff Date................................................................S-
Distribution Date..........................................................S-
ERISA......................................................................S-
Federal Tax Counsel........................................................S-
Final Scheduled Distribution Date..........................................S-
Final Scheduled Maturity Date..............................................S-
Funding Period.............................................................S-
Interest Distribution Amount...............................................S-
Liquidated Receivables.....................................................S-
Liquidation Proceeds.......................................................S-
Plan.......................................................................S-
Pool Balance...............................................................S-
Pooling and Servicing Agreement............................................S-
Principal Distribution Amount..............................................S-
Prospectus.................................................................S-
Rating Agencies............................................................S-
Realized Losses............................................................S-
Receivables................................................................S-
Receivables Pool...........................................................S-
Receivables Purchase Agreement.............................................S-
Record Date................................................................S-
Reserve Account............................................................S-
S-20
<PAGE>
Reserve Account Initial Deposit............................................S-
Seller.....................................................................S-
Servicer...................................................................S-
Specified Reserve Account Balance..........................................S-
Total Distribution Amount..................................................S-
Trust......................................................................S-
Trust Accounts.............................................................S-
Trustee....................................................................S-
Underwriter................................................................S-
Underwriting Agreement.....................................................S-
S-21
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to Completion
Prospectus Supplement to Prospectus Dated __________________, 199_
CS First Boston Auto Receivables Securities Trust
199_-___
$ ______________ % Asset Backed Certificates, Class A
________________
Asset Backed Securities Corporation
Company
________________
CS First Boston Auto Receivables Securities Trust 199__ -___ (the "Trust") will
be formed pursuant to a pooling and servicing agreement (the "Pooling and
Servicing Agreement"), dated as of __________, 199_ (the "Cutoff Date"), among
Asset Backed Securities Corporation (the "Company") as depositor, ________ (the
"Servicer"), as servicer, and ________________, (the "Trustee") as trustee, and
will issue $____________ aggregate principal amount of ____ % Asset Backed
Certificates, Class A (the "Class A Certificates") and $_____________aggre-gate
principal amount of ____ % Asset Backed Certificates, Class B (the "Class B
Certificates" and, with the Class A Certificates, the "Certificates"). Only the
Class A Certificates are being offered hereby.
(Continued on following page)
________________
THE CLASS A CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN CS FIRST BOSTON CORPORATION, THE
COMPANY, THE SERVICER, ANY SELLER, OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE
OF THE CLASS A CERTIFICATES, THE COLLATERAL CERTIFICATES (AS DEFINED HEREIN), OR
THE RECEIVABLES ARE INSURED OR GUARANTEED BY CS FIRST BOSTON CORPORATION, THE
COMPANY, THE SERVICER, ANY SELLER, ANY OF THEIR RESPECTIVE AFFILIATES OR ANY
GOVERNMENTAL AGENCY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 10 OF THE
ACCOMPANYING PROSPECTUS.
________________
Price to the Underwriting Proceeds to the
Public(1) Discount Company(1)(2)
------------ ------------ ---------------
Per Class A Certificate......... % % %
$ $ $
(1) Plus accrued interest, if any, from ______________, 199_.
(2) Before deducting expenses, estimated to be $____________.
________________
The Class A Certificates are offered subject to prior sale and subject to
the right of CS First Boston Corporation (the "Underwriter") to reject orders in
whole or in part. It is expected that delivery of the Class A Certificates will
be made through the Same Day Funds System of the Depository Trust Company on or
about _______________, 199_.
[LOGO] CS First Boston
The date of this Prospectus Supplement is ________________, 199__.
<PAGE>
(Continued from preceding page)
The assets of the Trust will consist primarily of certain asset backed
certificates or notes (collectively, Collateral Certificates"), each issued
pursuant to a pooling and servicing agreement, sale and servicing agreement,
trust agreement or indenture (each, an "Underlying Agreement"). Each Collateral
Certificate represents an interest in a trust fund created pursuant to such
Underlying Agreement consisting of a pool of motor vehicle installment loan
agreements and motor vehicle retail installment sale contracts (collectively,
the "Receivables") secured by new or used automobiles, vans and light duty
trucks, security interests in in the vehicles financed thereby, and certain
other property. The Collateral Certificates [will be transferred to the Trust by
the Company pursuant to the Pooling and Servicing Agreement] [will be purchased
by the Trust with funds received from the Company in exchange for the
Certificates] [. The Company will purchase the Collateral Certificates] from
Certain Sellers (each, a "Seller"). The Trust may also draw on funds on deposit
in a Reserve Account, to the extent described herein, to meet shortfalls in
amounts due to Certificateholders on any Distribution Date. The Reserve Account
will not be part of the Trust.
The Class A Certificates will evidence in the aggregate an undivided ownership
interest in approximately % of the Trust. The Class B Certificates, which are
not being offered hereby, will evidence in the aggregate an undivided ownership
interest in approximately _______% of the Trust. Principal and interest at the
applicable Pass-Through Rate generally will be distributed to holders of
Certificates on the ________ day of each month, commencing __________, 199_. The
rights of the holders of Class B Certificates to receive distributions are
subordinated to the rights of the holder of Class A Certificates to the extent
described herein. The outstanding principal amount, if any, of the Certificates
will be due and payable on ______________, 199_.
________________
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CLASS A CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. INFORMATION WITH RESPECT TO EACH
COLLATERAL CERTIFICATE IS CONTAINED IN SCHEDULE I AND APPENDIX A HERETO. SALES
OF THE CLASS A CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE
PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
________________
S-2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), on behalf of the Trust, a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement"), of which this Prospectus Supplement is a part under the Securities
Act of 1933, as amended. This Prospectus Supplement does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as are required
under the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and
the rules and regulations of the Commission thereunder.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co., as
nominee of The Depository Trust Company and registered holder of the Class A
Certificates. See "Certain Information Regarding the Securities - Book-Entry
Registration" and "- Statements to Securityholders" in the accompanying
Prospectus (the "Prospectus").
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer.............. CS First Boston Auto Receivables Securities Trust 199_-
___, a trust (the "Trust") to be formed pursuant to a
pooling and servicing agreement (the "Pooling and
Servicing Agreement") dated as of ___________, 199_ (the
"Cutoff Date"), among the Company, the Servicer and the
Trustee.
Company............. The Company is a special-purpose Delaware corporation
organized for the purpose of causing the issuance of the
Certificates and other securities issued under the
Registration Statement backed by receivables or
underlying securities of various types and acting as
settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or
limited partner in partnerships formed to issue
securities. It is not expected that the Company will
have any significant assets. The Company is an indirect,
wholly owned finance subsidiary of Collateralized
Mortgage Securities Corporation which is a wholly owned
subsidiary of CS First Boston Securities Corporation,
which is a wholly owned subsidiary of CS First Boston,
Inc. Neither CS First Boston Securities Corporation nor
CS First Boston, Inc. nor any of their affiliates has
guaranteed, will guarantee or is or will be otherwise
obligated with respect to any Series of Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
Servicer............ _______ (in such capacity, the "Servicer"). See "The
Servicer" herein.
Trustee............. _______, as trustee under the Pooling and Servicing
Agreement (the "Trustee"). See "The Trustee" herein.
The Certificates.... The Trust will issue $_________ aggregate principal
amount of _____% Asset Backed Certificates, Class A (the
"Class A Certificates") and $____________ aggregate
principal amount of % Asset Backed Certificates, Class B
(the "Class B Certificates" and, with the Class A
Certificates, the "Certificates") on ____________, 199_
(the "Closing Date"). Each Certificate will represent a
fractional undivided interest in the Trust. The Class A
Certificates will evidence in the aggregate an undivided
ownership interest in approximately __% of the Trust
(the "Class A Percentage") and the Class B Certificates
will evidence in the aggregate an undivided ownership
interest in approximately __% of the Trust (the "Class B
Percentage"). Only the Class A Certificates are being
offered hereby. The Class B Certificates will be
subordinated to the Class A Certificates to the extent
described herein. See "The Certificates" herein.
The Collateral
Certificates........ The Collateral Certificates are described in Schedule I
hereto. The Collateral Certificates consist of certain
asset backed certificates or notes, each issued
S-4
<PAGE>
pursuant to a pooling and servicing agreement, sale and
servicing agreement, trust agreement or indenture (each,
an "Underlying Agreement"). Each Collateral Certificate
represents an interest in a trust fund (an "Underlying
Trust Fund") created pursuant to such Underlying
Agreement. The assets of each Underlying Trust Fund
consist primarily of a pool of motor vehicle installment
loan agreements and motor vehicle retail installment
sale contracts (collectively, the "Receivables") secured
by new or used automobiles, vans and light duty trucks,
certain monies due or received thereunder, security
interests in the vehicles financed thereby, and certain
other property. Holders of a Collateral Certificate are
entitled to receive distributions of interest and
principal in respect thereof as described herein.
Trust Property...... The assets of the Trust (the "Trust Property") include
(i) the Collateral Certificates, (ii) all monies
(including accrued interest) received on or with respect
to the Collateral Certificates on or after the Cutoff
Date, (iii) all amounts and property from time to time
held in or credited to the Collection Account, (iv) the
right to draw on funds on deposit in the Reserve
Account, to the extent described herein, to meet
shortfalls in interest due to Certificateholders, and
(v) any and all proceeds of the foregoing. The Reserve
Account will not be property of the Trust. See "The
Certificates-Distribution," "-Subordination of the Class
B Certificates; Reserve Account," and "The Trust".
Terms of the Certificates
A. Distribution
Dates....... Distributions of interest and principal on the
Certificates will be made on the __ day of each month
or, if such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution Date"),
commencing _________, 199_. Distributions will be made
to holders of record of the Certificates (the
"Certificateholders") as of the day immediately
preceding such Distribution Date (each, a "Record
Date"). A "Business Day" is a day other than a Saturday,
a Sunday or day on which banking institutions or trust
companies in The City of New York or the city in which
the corporate trust office of the Trustee is located are
authorized by law, regulation or executive order to be
closed.
B. Pass-Through
Rates....... Interest will accrue on the Class A Certificates at the
rate of ___% per annum (the "Class A Pass-Through Rate")
and on the Class B Certificates at the rate of ___% per
annum (the "Class B Pass-Through Rate"), in each case,
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
C. Interest..... On each Distribution Date, the Trustee will distribute
pro rata to holders of the Class A Certificates (the
"Class A Certificateholders") accrued interest at the
Class A Pass-Through Rate on the Class A Certificate
Balance as of the preceding Distribution Date (after
giving effect to distributions made on such Distribution
Date), to the extent of funds available therefor,
following payment of the Servicing Fee, from (i) the
Class A Percentage of the Interest Distribution Amount,
(ii) the Reserve Account, and (iii) the Class B
Percentage of the Total Distribution Amount.
D. Principal... Principal of the Class A Certificates will be payable on
each Distribution Date, pro rata to the Class A
Certificateholders, in a maximum amount equal to the
Class A Principal Distributable Amount for the calendar
month preceding such Distribution Date or, in the case
of the first Distribution Date, the period from and
including the Cutoff Date through the last day of the
calendar month immediately preceding
S-5
<PAGE>
such Distribution Date (the "Collection Period"). The
Class A Principal Distributable Amount with respect to
any Distribution Date will equal the Class A Percentage
of the Principal Distribution Amount for the related
Collection Period.
On each Distribution Date, subject to the prior
distribution on such date of the Servicing Fee, the
Class A Interest Distributable Amount and the Class A
Principal Distributable Amount, the Trustee will
distribute to holders of the Class B Certificates (the
"Class B Certificateholders") (i) the Class B Interest
Distributable Amount to the extent of funds available
therefor from the Class B Percentage of the Interest
Distribution Amount and the Reserve Account and (ii) the
Class B Principal Distributable Amount.
The outstanding principal amount of the Class A
Certificates and the Class B Certificates, if any, will
be payable in full on ____________, 199_ (the "Final
Scheduled Distribution Date").
See "The Pooling and Servicing Agreement -
Distributions -Calculation of Amounts to be Distributed"
herein.
E. Optional
Prepayment.. If the Servicer exercises its option to purchase the
Collateral Certificates, which it may do after the
aggregate principal balance of the Collateral
Certificates (the "Pool Balance") declines to 10% or
less of the initial Pool Balance, the Class A
Certificateholders will receive an amount equal to the
Class A Certificate Balance together with accrued
interest at the Class A Pass-Through Rate, the Class B
Certificateholders will receive an amount equal to the
Class B Certificate Balance together with accrued
interest at the Class B Pass-Through Rate, and the
Certificates will be retired. See "The Certificates -
Optional Prepayment" herein.
Collection Account.. Except under certain conditions described in the
Prospectus under "Description of the Transfer and
Servicing Agreements - Collections," the Servicer will
be required to remit collections received with respect
to the Collateral Certificates within two Business Days
of receipt thereof to one or more accounts in the name
of the Trustee (the "Collection Account"). Pursuant to
the Pooling and Servicing Agreement, the Trustee will
withdraw funds on deposit in the Collection Account and
apply such funds on each Distribution Date to the
following (in the priority indicated): (i) the Servicing
Fee for the related Collection Period and any overdue
Servicing Fees to the Servicer, (ii) the Class A
Interest Distributable Amount and the Class A Principal
Distributable Amount to the Class A Certificateholders,
(iii) the Class B Interest Distributable Amount and the
Class B Principal Distributable Amount to the Class B
Certificateholders, and (iv) the remaining balance, if
any, to the Reserve Account. See "The Pooling and
Servicing Agreement - Distributions" herein.
Credit Enhancement.. Subordination. The rights of the Class B
Certificateholders to receive distributions to which
they would otherwise be entitled with respect to the
Collateral Certificates are subordinated to the rights
of the Class A Certificateholders, as described more
fully herein. See "The Pooling and Servicing Agreement -
Distributions" and "- Subordination of the Class B
Certificates; Reserve Account" herein.
Reserve Account. The Reserve Account will be created
with an initial deposit by the Company on the Closing
Date of cash or Eligible Investments having a value
S-6
<PAGE>
of at least $________ (the "Reserve Account Initial
Deposit"). Funds will be withdrawn from the Reserve
Account on any Distribution Date if, and to the extent
that, the Total Distribution Amount for the related
Collection Period remaining after payment of the
Servicing Fee is less than the Class A Distributable
Amount. Such funds will be distributed to the Class A
Certificateholders. In addition, after giving effect to
any such withdrawal and distribution to the Class A
Certificateholders, funds will be withdrawn from the
Reserve Account if, and to the extent that, the portion
of the Total Distribution Amount remaining after payment
of the Servicing Fee and the Class A Distributable
Amount is less than the Class B Distributable Amount.
Such funds will be distributed to the Class B
Certificateholders.
Funds in the Reserve Account may be invested in
securities that will not mature prior to the date of
such next scheduled distribution with respect to the
Certificates and will not be sold prior to maturity to
meet any shortfalls. Thus, the amount of available funds
on deposit in the Reserve Account at any time may be
less than the balance of the Reserve Account. If the
amount required to be withdrawn from the Reserve Account
to cover shortfalls in collections on the related
Receivables exceeds the amount of available funds on
deposit in the Reserve Account, a temporary shortfall in
the amounts distributed to the Certificateholders could
result.
On each Distribution Date, the Reserve Account will be
reinstated up to the Specified Reserve Account Balance
by the deposit thereto of the portion, if any, of the
Total Distribution Amount remaining after payment of the
Servicing Fee, the Class A Distributable Amount and the
Class B Distributable Amount. The "Specified Reserve
Account Balance" with respect to any Distribution Date
generally will be equal to [state formula]. Certain
amounts in the Reserve Account on any Distribution Date
(after giving effect to all distributions to be made on
such Distribution Date) in excess of the Specified
Reserve Account Balance for such Distribution Date will
be released to the Company and will no longer be
available to the Certificateholders.
The Reserve Account will be maintained with the Trustee
as a segregated trust account, but will not be part of
the Trust. See "The Pooling and Servicing Agreement -
Subordination of the Class B Certificates; Reserve
Account" herein.
Tax Status.......... In the opinion of Sidley & Austin ("Federal Tax
Counsel"), the Trust will be classified as a grantor
trust for federal income tax purposes and will not be
classified as an association taxable as a corporation.
Subject to the discussion under "Certain Federal Income
Tax Consequences" in the Prospectus, each holder of a
beneficial interest in the Certificates must include in
income its pro rata share of interest and other income
from the Collateral Certificates and, subject to certain
limitations, may deduct its pro rata share of fees and
other deductible expenses paid by the Trust. See
"Certain Federal Income Tax Consequences" in the
Prospectus for additional information concerning the
application of federal income tax laws to the Trust and
the Certificates.
S-7
<PAGE>
ERISA Considerations Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Class
A Certificates will be eligible for purchase by employee
benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended, and "plans" as defined
in Section 4975 of the Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" herein and in the
Prospectus.
Ratings of the
Certificates....... It is a condition to the issuance of the Class A
Certificates that they be rated at least _____ by at
least two nationally recognized rating agencies. A
rating is not a recommendation to purchase, hold or sell
the Class A Certificates, inasmuch as such rating does
not comment as to market price or suitability for a
particular investor. The ratings address the likelihood
that principal of and interest on the Class A
Certificates will be paid pursuant to their terms. There
can be no assurance that a rating will not be lowered or
withdrawn by a rating agency if circumstances so
warrant. See "Risk Factors -Ratings of the Class A
Certificates" herein.
S-8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully consider
the following risk factors before investing in the Class A Certificates.
Limited Liquidity. There is currently no secondary market for the Class
A Certificates. CS First Boston Corporation (the "Underwriter") currently
intends to make a market in the Class A Certificates, but is under no
obligation to do so. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide the Class
A Certificateholders with liquidity of investment or that it will continue for
the life of the Class A Certificates.
Limited Assets. The Trust will not have, nor is it permitted or expected
to have, any significant assets or sources of funds other than the Collateral
Certificates and access to funds in the Reserve Account. Certificateholders
must rely on payments on the Collateral Certificates for distributions of
interest and principal on the Certificates. Although funds in the Reserve
Account will be available on each Distribution Date to cover shortfalls in
distributions of interest and principal on the Certificates, amounts to be
deposited in the Reserve Account are limited in amount. If the Reserve Account
is exhausted, the Trust will depend solely on distributions on the Collateral
Certificates to make distributions on the Certificates.
Funds in the Reserve Account may be invested in securities that will not
mature prior to the date of such next scheduled distribution with respect to
the Certificates and will not be sold prior to maturity to meet any shortfalls.
Thus, the amount of available funds on deposit in the Reserve Account at any
time may be less than the balance of the Reserve Account. If the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the related Receivables exceeds the amount of available funds on deposit in the
Reserve Account, a temporary shortfall in the amounts distributed to the
Certificateholders could result.
Ratings of the Class A Certificates. It is a condition to the issuance
of the Class A Certificates that they be rated at least ______ or its
equivalent by at least two nationally recognized rating agencies (the "Rating
Agencies"). A rating is not a recommendation to purchase, hold or sell the
Class A Certificates, inasmuch as a rating does not comment as to market price
or suitability for a particular investor. The ratings of the Class A
Certificates address the likelihood of the timely payment of interest on, and
the ultimate repayment of principal of, the Class A Certificates pursuant to
their terms. There can be no assurance that a rating will be retained for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a Rating Agency if in its judgment circumstances in the future so warrant.
In the event that a rating is subsequently lowered or withdrawn, no person or
entity will be required to provide any additional credit enhancement. The
ratings of the Class A Certificates are based primarily on the credit quality
of the Receivables, the subordination of the Class B Certificates and the
availability of funds in the Reserve Account.
Trust's Relationship to the Company. The Company is generally not
obligated to make any payments in respect of the Certificates or the Collateral
Certificates.
Considerations Regarding Collateral Certificates. Prospective investors
in the Certificates should consider carefully the factors set forth under the
caption "Risk Factors" or "Special Considerations" in the excerpted sections of
the prospectuses relating to the Collateral Certificates attached hereto as
Appendix A for certain additional considerations relating to the Collateral
Certificates and investments backed by Receivables. Neither the Company nor
the Underwriter participated in the preparation of the prospectuses relating to
the Collateral Certificates or the offering of the Collateral Certificates, and
neither has made any due diligence inquiry with respect to the information
provided therein. Although neither the Company nor the Underwriter is aware of
any material misstatements or omissions in any such prospectus, the information
provided therein or in the publicly available documents referred to below is
not guaranteed as to accuracy or completeness, and is not to be construed as a
representation, by the Company or the Underwriter. In particular, information
set forth in any prospectus relating to the Collateral
S-9
<PAGE>
Certificates speaks only as of the date of such prospectus; there can be no
assurance that events have not occurred, which may or may not have been
publicly disclosed, that would affect the accuracy or completeness of any such
statements.
Each originator of an Underlying Trust Fund is subject to the
informational requirements of the Exchange Act. Accordingly, such originator
files annual and periodic reports and other information with the Commission.
Copies of such reports and other information may be inspected and copies at
certain offices of the Commission at the addresses listed under "Available
Information" herein.
THE TRUST
GENERAL
The Company will establish the Trust [by selling and assigning]
[transferring funds to be used by the Trust to purchase] the Trust Property (as
defined below) to the Trustee in exchange for the Certificates. The Servicer
will service such assets pursuant to the Pooling and Servicing Agreement and
will be compensated for acting as the Servicer. See "The Pooling and Servicing
Agreement - Servicing Compensation" herein and "The Transfer and Servicing
Agreements - Servicing Compensation and Payment of Expenses" in the Prospectus.
If the protection provided to Certificateholders by the Reserve Account and, in
the case of the Class A Certificateholders, the subordination of the Class B
Certificates is insufficient, the Trust will look only to the Collateral
Certificates to fund distributions of principal and interest on the
Certificates.
Each Certificate represents a fractional undivided ownership interest in
the Trust. The assets of the Trust (the "Trust Property") include (i) the
Collateral Certificates, (ii) all monies (including accrued interest) received
on or with respect to the Collateral Certificates on or after the Cutoff Date,
(iii) all amounts and property from time to time held in or credited to the
Collection Account, (iv) the right to draw on funds on deposit in the Reserve
Account, to the extent described herein, to meet shortfalls in interest due to
Certificateholders, and (v) any and all proceeds of the foregoing. The Reserve
Account will be maintained by the Trustee for the benefit of the
Certificateholders, but will not be part of the Trust.
THE TRUSTEE
__________ is Trustee under the Pooling and Servicing Agreement.
__________ is a __________ banking corporation, and its principal offices are
located at __________. The Company, the Seller or any of their respective
affiliates may maintain normal commercial banking relations with the Trustee
and its affiliates.
THE SERVICER
[Information regarding the Servicer to be supplied.]
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the
Certificates depends on the rate of payment (including prepayments) of the
Collateral Certificates, the final distribution in respect of the Certificates
could occur significantly earlier than the Final Scheduled Distribution Date.
Certificateholders will bear the risk of being able to reinvest principal
payments on the Certificates at yields at least equal to the yield on the
Certificates.
S-10
<PAGE>
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will be
filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Certificates and the Pooling and Servicing Agreement. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given Series and the related Pooling and Servicing
Agreement set forth in the Prospectus, to which description reference is hereby
made.
The "Class A Certificate Balance" initially will equal $__________ and,
as of any date of determination thereafter, will equal such initial Class A
Certificate Balance less the sum of all amounts previously distributed to Class
A Certificateholders allocable to principal. The "Class B Certificate Balance"
initially will equal $_________ and, as of any date of determination
thereafter, will equal such initial Class B Certificate Balance less the sum of
all amounts previously distributed to Class B Certificateholders allocable to
principal and any Realized Losses (as defined below) allocable to the Class B
Certificates. The Class A Certificates will evidence in the aggregate an
undivided ownership interest in approximately _____% of the Trust, and the
Class B Certificates will evidence in the aggregate an undivided ownership
interest in approximately _____% of the Trust. The Class B Certificates are
not being offered hereby and initially will be held by ______.
DISTRIBUTIONS
Deposits to Collection Account. On or about the ____ Business Day of
each month, the Servicer will provide the Trustee with certain information with
respect to the preceding Collection Period, including the aggregate amount of
collections on the Collateral Certificates, as well as the Total Distribution
Amount, the Interest Distribution Amount, the Principal Distribution Amount,
the Class A Interest Distributable Amount, the Class A Principal Distributable
Amount, the Class B Interest Distributable Amount and the Class B Principal
Distributable Amount.
On or before each Distribution Date, the Servicer will cause the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for any Distribution Date will equal the sum of the
Interest Distribution Amount and the Principal Distribution Amount for such
date (other than the portion thereof attributable to Realized Losses).
"Realized Losses" means the excess of the principal balance of a Liquidated
Receivable over Liquidation Proceeds with respect thereto to the extent
allocable to principal.
The "Interest Distribution Amount" for a Distribution Date generally will
equal the sum of (i) that portion of all collections on the Collateral
Certificates allocable to interest; and (ii) Investment Earnings, if any, for
such Distribution Date each, with respect to the preceding Collection Period.
The "Principal Distribution Amount" for a Distribution Date will equal
that portion of all collections on the Collateral Certificates allocable to
principal.
Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date will equal the sum of (i) the "Class A
Principal Distributable Amount", consisting of the Class A Percentage of the
Principal Distribution Amount, plus (ii) the "Class A Interest Distributable
Amount", consisting of thirty days' interest at the Class A Pass-Through Rate
on the Class A Certificate Balance as of the preceding Distribution Date (after
giving effect to distribution made on such Distribution Date). In addition, on
the Final Scheduled
S-11
<PAGE>
Distribution Date, the Class A Principal Distributable Amount will include the
lesser of (a) the Class A Percentage of any payments of principal on each
Collateral Certificate and (b) the amount that is necessary (after giving
effect to the other amounts to be distributed to Class A Certificateholders on
such Distribution Date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class B Distributable Amount" with respect to a Distribution Date
will equal the sum of (i) the "Class B Principal Distributable Amount",
consisting of the Class B Percentage of the Principal Distribution Amount, plus
(ii) the "Class B Interest Distributable Amount", consisting of thirty days'
interest at the Class B Pass-Through Rate on the Class B Certificate Balance as
of the preceding Distribution Date (after giving effect to distributions made
on such Distribution Date). In addition, on the Final Scheduled Distribution
Date, the Class B Principal Distributable Amount will include the lesser of (a)
the Class B Percentage of any payments of principal on each Collateral
Certificate and (b) the amount that is necessary (after giving effect to the
other amounts to be distributed to Class B Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class B Certificate
Balance to zero.
Amounts Distributed. The Class A Certificateholders will receive on any
Distribution Date, to the extent of available funds, the Class A Distributable
Amount and any outstanding Class A Interest Carryover Shortfall as of the close
of the preceding Distribution Date.
On each Distribution Date, principal distributions will be made on the
Certificates in an aggregate amount equal to distributions with respect to
principal received on the Collateral Certificates during the preceding
Collection Period.
On each Distribution Date on which the sum of the Class A Interest
Distributable Amount and any outstanding Class A Interest Carryover Shortfall
from the preceding Distribution Date (plus interest on such Class A Interest
Carryover Shortfall at the Class A Pass-Through Rate from such preceding
Distribution Date to the current Distribution Date, to the extent permitted by
law) exceeds the Class A Percentage of the Interest Distribution Amount (after
payment of the Servicing Fee) on such Distribution Date, the Class A
Certificateholders will be entitled to receive such amounts, first, from the
Class B Percentage of the Interest Distribution Amount; second, if such amounts
are insufficient, from funds available in the Reserve Account, and, third, if
such amounts are insufficient, from the Class B Percentage of the Principal
Distribution Amount. "Class A Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A Interest
Distributable Amount for the preceding Distribution Date, plus any outstanding
Class A Interest Carryover Shortfall on such preceding Distribution Date, over
the amount of interest actually distributed to Class A Certificateholders on
such preceding Distribution Date.
DESCRIPTION OF THE COLLATERAL CERTIFICATES
GENERAL
This Prospectus Supplement sets forth certain relevant terms of the
Collateral Certificates. It does not purport to summarize such securities or
to provide complete or updated information with respect to the issuer thereof
or the Receivables relating thereto. Schedule I to this Prospectus Supplement
contains a summary of the terms of the Collateral Certificates. Appendix A to
this Prospectus Supplement contains excerpts from each prospectus pursuant to
which Collateral Certificates were offered and sold. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Collateral Certificates. See "Special Considerations-Considerations
Regarding Collateral Certificates".
Although the Company has no reason to believe the information concerning
the Underlying Trust Fund or the prospectus relating to the Collateral
Certificates is not reliable, the Company has not verified either its accuracy
S-12
<PAGE>
or its completeness. Neither the Company nor the Underwriter warrants that
there events have not occurred , which would affect either the accuracy or the
completeness of the information contained therein. See "Special
Considerations-Considerations Regarding Collateral Certificates" and "-Certain
Updated Information with Respect to the Collateral Certificates".
CERTAIN UPDATED INFORMATION WITH RESPECT TO THE COLLATERAL CERTIFICATES
The originator of each Underlying Trust Fund is subject to the
information requirements of the Exchange Act. Accordingly, such originator
files reports and other information with respect to each Underlying Trust Fund,
including monthly servicer reports ("Servicer Reports") regarding the
Receivables, with the Commission. A summary of certain of the information
included in the most recent Servicer Reports filed with the Commission is
included as Appendix B hereto. Copies of such reports and other information
may be inspected and copied at certain offices of the Commission at the address
listed under "Available Information" herein.
Neither the Company nor the Underwriter participated in the preparation
of such Servicer Reports, and the information provided therein or in the
publicly available documents referred to above is not guaranteed as to accuracy
or completeness, and is not to be construed as a representation, by the Company
or the Underwriter. In particular, information set forth in the Servicer
Reports speaks only as of the date of such Servicer Report; there can be no
assurance that events have not occurred that would affect the accuracy or
completeness of any statements included in such Servicer Reports or in the
publicly available documents filed by or on behalf of each Underlying Trust
Fund.
THE POOLING AND SERVICING AGREEMENT
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Collateral
Certificates by the Seller to the Trust on the Closing Date pursuant to the
Pooling and Servicing Agreement is set forth under "Description of the Transfer
and Servicing Agreements - Sale and Assignment of Receivables" in the
Prospectus.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to _____% per annum of the Pool Balance as
of the first day of such Collection Period. The Servicing Fee (together with
any portion of the Servicing Fee that remains unpaid from prior Distribution
Dates) will be paid on each Distribution Date solely to the extent of the
Interest Distribution Amount for the related Collection Period; however, the
Servicing Fee will be paid to the Servicer prior to the distribution of any
portion of the Interest Distribution Amount to Certificateholders. See
"Description of the Transfer and Servicing Agreements - Servicing Compensation
and Payment of Expenses" in the Prospectus.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Collateral
Certificates, which it may do when the aggregate outstanding principal amount
of the Collateral Certificates declines to 10% or less of the initial Pool
Balance, the Class A Certificateholders will receive an amount in respect of
the Class A Certificates equal to the outstanding Class A Certificate Balance,
together with accrued interest to the redemption date at the Class A
Pass-Through Rate, and the Class B Certificateholders will receive an amount in
respect of the Class B Certificates equal to the outstanding Class B
Certificate Balance, together with accrued interest to the redemption date at
the Class B Pass-Through Rate, which distributions shall effect the early
retirement of the Certificates. See "Description of the Transfer and Servicing
Agreements - Termination" in the Prospectus.
S-13
<PAGE>
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
Subordination of the Class B Certificates. The rights of the Class B
Certificateholders to receive distributions with respect to the Collateral
Certificates generally will be subordinated to the rights of the Class A
Certificateholders in the event of defaults or delinquencies on the Collateral
Certificates as provided in the Pooling and Servicing Agreement and described
herein. The protection afforded to the Class A Certificateholders through
subordination will be effected by the preferential right of the Class A
Certificateholders to receive current distributions with respect to the
Collateral Certificates.
Reserve Account. The Reserve Account will be created by the deposit
thereto by the Company on the Closing Date of the Reserve Account Initial
Deposit and will be increased up to the Specified Reserve Account Balance by
the deposit thereto on each Distribution Date on the amount, if any, remaining
from the Total Distribution Amount after payment of the Servicing Fee, the
Class A Distributable Amount and the Class B Distributable Amount. If the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such date) is
greater than the Specified Reserve Account Balance for such Distribution Date,
the Trustee will release such excess to the Company. Upon any such
distribution to the Company, the Certificateholders will have no rights in, or
claims to such amounts. Amounts held from time to time in the Reserve Account
will continue to be held for the benefit of the Class A Certificateholders and
the Class B Certificateholders.
Funds in the Reserve Account will be invested in Eligible Investments, as
provided in the Pooling and Servicing Agreement. Funds in the Reserve Account
may be invested in securities that will not mature prior to the date of such
next scheduled distribution with respect to the Certificates and will not be
sold prior to maturity to meet any shortfalls. Thus, the amount of available
funds on deposit in the Reserve Account at any time may be less than the
balance of the Reserve Account. If the amount required to be withdrawn from
the Reserve Account to cover shortfalls in collections on the related
Receivables exceeds the amount of available funds on deposit in the Reserve
Account, a temporary shortfall in the amounts distributed to the
Certificateholders could result. The Reserve Account will not be part of or
otherwise includible in the Trust and will be a segregated trust account held
by the Trustee.
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations -
Prohibited Transaction Exemption for Senior Certificates Issued by Grantor
Trusts" in the Prospectus, the Class A Certificates may be purchased by an
"employee benefit plan" as defined in and subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or a "plan" as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")(each
such "employee benefit plan" and "plan," a "Plan"). A fiduciary of a Plan must
determine that the purchase of a Class A Certificate is consistent with its
fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code.
For additional information regarding treatment of the Class A Certificates
under ERISA, see "ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement relating to the Class A Certificates (the "Underwriting Agreement"),
the Company has agreed to cause the Trust to sell to the Underwriter, and the
Underwriter has agreed to purchase, the entire principal amount of the Class A
Certificates.
S-14
<PAGE>
The Underwriter proposes to offer the Class A Certificates to the public
initially at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
of _____% per Class A Certificates; the Underwriter and such dealers may allow
a discount of _____% per Class A Certificates on sales to certain other
dealers; and after the initial public offering of the Class A Certificates, the
public offering price and the concessions and discounts to dealers may be
changed by the Underwriter.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain liabilities under applicable securities laws, or
contribute to payments the Underwriter may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds in the Trust Accounts
in Eligible Investments acquired from the Underwriter.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter within the period
during which there is an obligation to deliver a Prospectus Supplement and
Prospectus, the Company or the Underwriter will promptly deliver, or cause to
be delivered, without charge, a paper copy of the Prospectus Supplement and
Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon by
Sidley & Austin, New York, New York.
S-15
<PAGE>
INDEX OF TERMS
Business Day...............................................................S-
Certificates...............................................................S-
Certificateholders.........................................................S-
Class A Certificate Balance ...............................................S-
Class A Certificateholders ................................................S-
Class A Certificates.......................................................S-
Class A Distributable Amount...............................................S-
Class A Interest Carryover Shortfall.......................................S-
Class A Interest Distributable Amount......................................S-
Class A Pass-Through Rate..................................................S-
Class A Percentage.........................................................S-
Class A Principal Carryover Shortfall......................................S-
Class A Principal Distributable Amount.....................................S-
Class B Certificate Balance................................................S-
Class B Certificateholders.................................................S-
Class B Certificates.......................................................S-
Class B Distributable Amount...............................................S-
Class B Interest Distributable Amount......................................S-
Class B Pass-Through Rate..................................................S-
Class B Percentage.........................................................S-
Class B Principal Distributable Amount.....................................S-
Closing Date...............................................................S-
Code.......................................................................S-
Collection Account.........................................................S-
Collection Period..........................................................S-
Commission.................................................................S-
Cutoff Date................................................................S-
Distribution Date..........................................................S-
ERISA......................................................................S-
Federal Tax Counsel........................................................S-
Final Scheduled Distribution Date..........................................S-
Final Scheduled Maturity Date..............................................S-
Funding Period.............................................................S-
Interest Distribution Amount...............................................S-
Liquidated Receivables.....................................................S-
Liquidation Proceeds.......................................................S-
Plan.......................................................................S-
Pool Balance...............................................................S-
Pooling and Servicing Agreement............................................S-
Principal Distribution Amount..............................................S-
Prospectus.................................................................S-
Rating Agencies............................................................S-
Realized Losses............................................................S-
Receivables................................................................S-
Receivables Pool...........................................................S-
Receivables Purchase Agreement.............................................S-
Record Date................................................................S-
Reserve Account............................................................S-
S-16
<PAGE>
Reserve Account Initial Deposit............................................S-
Seller.....................................................................S-
Servicer...................................................................S-
Specified Reserve Account Balance..........................................S-
Total Distribution Amount..................................................S-
Trust......................................................................S-
Trust Accounts.............................................................S-
Trustee....................................................................S-
Underwriter................................................................S-
Underwriting Agreement.....................................................S-
S-17
<PAGE>
SCHEDULE I
----------
Class __
CUSIP #___________ Rating: ______________
[Monthly][Quarterly]
[Semi-Annual] Aggregate
Payment Dates Interest Payment Interest Payment
- ------------- ---------------- ----------------
$___________________ $___________________
Aggregate Face
Amount Minimum
of Principal Authorized
Component Denomination Interest Rate
--------- ------------ -------------
$____________ $______________ _________%
I-1
<PAGE>
Appendix A
[To be Supplied]
A-1
<PAGE>
Appendix B
[To be Supplied]
B-1
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to Completion
Prospectus Supplement to Prospectus Dated _________________, 199_
$
CS First Boston Auto Receivables Securities Trust 199_-___
$ % Asset Backed Notes, Class A-1
$ % Asset Backed Notes, Class A-2
$ % Asset Backed Certificates
________________
Asset Backed Securities Corporation
Company
________________
CS First Boston Auto Receivables Securities Trust 199___ -___ (the "Trust") will
be formed pursuant to a trust agreement (the "Trust Agreement") dated as of
__________, 199__ (the "Cutoff Date"), between Asset Backed Securities
Corporation (the "Depositor"), as depositor, and ____________ (the "Owner
Trustee"), as owner trustee. TheTrust will issue $__________ aggregate principal
amount of ________% Asset Backed Notes, Class A-1 (the "Class A-1 Notes") and
$______________ aggregate principal amount of __________% Asset Backed Notes,
Class A-2 (the "Class A-2 Notes" and, with the Class A-1 Notes, the "Notes")
pursuant to an indenture (the "Indenture"), dated as of the Cutoff Date, between
the Trust and _______, (the "Indenture Trustee") as indenture trustee. The Trust
also will issue $_____ aggregate principal amount of ________% Asset Backed
Certificates (the "Certificates").
(Continued on following page)
________________
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF, OR INTERESTS
IN, CS FIRST BOSTON CORPORATION, THE COMPANY, THE SERVICER, ANY SELLER, OR ANY
OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE CERTIFICATES OR THE
COLLATERAL CERTIFICATES (AS DEFINED HEREIN) ARE INSURED GUARANTEED BY CS FIRST
BOSTON CORPORATION, THE COMPANY, THE SERVICER, ANY SELLER, ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY GOVERNMENTAL AGENCY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER RISK FACTORS
ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 10 OF THE ACCOMPANYING
PROSPECTUS.
________________
Price to the Underwriting Proceeds to the
Public(1) Discount Depositor(1)(2)
------------ ------------ ----------------
Per Class A-1 Note......... % % %
Per Class A-2 Note......... % % %
Per Certificate............ % % %
Total $ $ $
(1) Plus accrued interest, if any, from ______________, 199_.
(2) Before deducting expenses, estimated to be $____________.
________________
The Notes and the Certificates are offered subject to prior sale and
subject to the right of CS First Boston Corporation (the "Underwriter") to
reject orders in whole or in part. It is expected that delivery of the Notes and
the Certificates will be made through the Same Day Funds System of the
Depository Trust Company on or about _______, 199_.
[LOGO] CS First Boston
The date of this Prospectus Supplement is __________, 199_.
<PAGE>
(Continued from preceding page)
The assets of the Trust will consist primarily of certain asset backed
certificates or notes (collectively, "Collateral Certificates"), each issued
pursuant to a pooling and servicing agreement, sale and servicing agree ment,
trust agreement or indenture (each, an "Underlying Agreement"). Each Collateral
Certificate represents an interest in a trust fund created pursuant to such
Underlying Agreement consisting of a pool of motor vehicle installment loan
agreements and motor vehicle retail installment sales contracts (collectively,
the "Receivables") secured by new or used automobiles, vans and light duty
trucks, certain monies due or received thereunder on and after the Cutoff Date,
security interests in the vehicles financed thereby, and certain other property,
as descried herein. The Collateral Certificates [will be tran sferred to the
Trust by the Company pursuant to the Trust Agreement][will be purchased by the
Trust with funds received from the Company in exchange for the Certificates].
The Company will purchase the Collateral Certificates] from a certain seller or
sellers (each, a "Seller"). The Notes will be secured by the assets of the
Trust pursuant to the Indenture. The Trust may also draw on funds on deposit in
a Reserve Account, to the extent described herein, to meet shortfalls in
interest due to Securityholders on any Distribution Date. The Reserve Account
willnot be part of the Trust.
Interest on each class of Notes will accrue at the fixed per annum rates
specified above and generally will be payable on the __ day of each month,
commencing ______, 199_ (each, a "Distribution Date"). Principal of the Notes
will be payable on each Distribution Date to the extent described herein;
however, no principal will be paid on the Class A-2 Notes until the Class A-1
Notes have been paid in full. The Certificates represent fractional undivided
interests in the Trust. Interest on the Certificates will accrue at the fixed
per annum rates specified above and generally will be payable on each
Distribution Date. No distributions of principal will be made on the
Certificates until all of the Notes have been paid in full. To the extent not
previously paid, the Class A-1 Notes will be payable in full on _______, 199_,
the Class A-2 Notes will be payable in full on _______, 199_, and the
Certificates will be payable in full on _______,199_.
____________________
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. INFORMATION WITH RESPECT TO
EACH COLLATERAL CERTIFICATE IS CONTAINED IN SCHEDULE I AND APPENDIX A HERETO.
SALES OF THE NOTES OR THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO
THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS
IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
S-2
<PAGE>
IN CONNECTION WITH THIS OFFERING THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
AND THE CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHER-
WISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_____________________
S-3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission"), on behalf of the Trust, a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement"), of which this Prospectus Supplement is a part under the Securities
Act of 1933, as amended. This Prospectus Supplement does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as are required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder.
REPORTS TO SECURITY HOLDERS
Unless and until Definitive Notes or Definitive Certificates are
issued, monthly and annual unaudited reports containing information concerning
the Receivables will be prepared by the Servicer and sent on behalf of the
Trust only to Cede & Co., as nominee of The Depository Trust Company and
registered holder of the Notes and the Certificates. See "Certain Information
Regarding the Securities - Book-Entry Registration" and "-Statements to
Securityholders" in the accompanying Prospectus (the "Prospectus").
S-4
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer.............. CS First Boston Auto Receivables Securities Trust 199_-
___, a trust (the "Trust") to be formed pursuant to a
trust agreement (the "Trust Agreement") dated as of
___________, 199_ (the "Cutoff Date"), between the
Company and the Owner Trustee.
Company............. The Company is a special-purpose Delaware corporation
organized for the purpose of causing the issuance of the
Securities and other securities issued under the
Registration Statement backed by receivables or
underlying securities of various types and acting as
settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or
limited partner in partnerships formed to issue
securities. It is not expected that the Company will
have any significant assets. The Company is an indirect,
wholly owned finance subsidiary of Collateralized
Mortgage Securities Corporation which is a wholly owned
subsidiary of CS First Boston Securities Corporation,
which is a wholly owned subsidiary of CS First Boston,
Inc. Neither CS First Boston Securities Corporation nor
CS First Boston, Inc. nor any of their affiliates has
guaranteed, will guarantee or is or will be otherwise
obligated with respect to any Series of Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
Servicer............ _______ (in such capacity, the "Servicer") as servicer
under the servicing agreement (the "Servicing
Agreement") dated as of the Cutoff Date, between the
Servicer and the Issuer. See "The Servicer" herein.
Indenture Trustee... ____________________, as trustee under the Indenture
(the "Indenture Trustee").
Owner Trustee....... ____________________, as trustee under the Trust
Agreement (the "Owner Trustee").
The Notes........... The Trust will issue $______ aggregate principal amount
of ___% Asset Backed Notes, Class A-1 (the "Class A-1
Notes") and $______ aggregate principal amount of ___%
Asset Backed Notes, Class A-2 (the "Class A-2 Notes"
and, with the Class A-1 Notes, the "Notes") on ___, 199_
(the "Closing Date") pursuant to an indenture (the
"Indenture") dated as of the Cutoff Date between the
Issuer and the Indenture Trustee.
Under the terms of the Indenture, the Notes will be
secured by the assets of the Trust.
The Certificates.... The Trust will issue $____ aggregate principal amount of
___% Asset Backed Certificates (the "Certificates" and,
with the Notes, the "Securities") on the Closing Date.
The Certificates represent fractional undivided
interests in the Trust and will be issued pursuant to
the Trust Agreement.
S-5
<PAGE>
The Collateral
Certificates........ The Collateral Certificates are described in Schedule I
hereto. The Collateral Certificates consist of certain
asset backed certificates or notes, each issued pursuant
to a pooling and servicing agreement, sale and servicing
agreement, trust agreement or indenture (each, an
"Underlying Agreement"). Each Collateral Certificate
represents an interest in a trust fund (an "Underlying
Trust Fund") created pursuant to such Underlying
Agreement. The assets of each Underlying Trust Fund
consist primarily of a pool of motor vehicle installment
loan agreements and motor vehicle retail installment
sale contracts (collectively, the "Receivables") secured
by new or used automobiles, vans and light duty trucks,
certain monies due or received thereunder, security
interests in the vehicles financed thereby, and certain
other property. Holders of a Collateral Certificate are
entitled to receive distributions of interest and
principal in respect thereof as described herein.
Trust Property...... The assets of the Trust (the "Trust Property") include
(i) the Collateral Certificates, (ii) all monies
(including accrued interest) received on or with respect
to the Collateral Certificates on or after the Cutoff
Date, (iii) all amounts and property from time to time
held in or credited to the Collection Account, (iv) the
right to draw on funds on deposit in the Reserve
Account, to the extent described herein, to meet
shortfalls in interest due to Certificateholders, and
(v) any and all proceeds of the foregoing. The Reserve
Account will not be property of the Trust. See "The
Certificates-Distributions of Interest", "-Distributions
of Principal" and "The Trust".
Terms of the Notes
A. Distribution
Dates....... Payments of interest and principal on the Notes will be
made on the ___ day of each month or, if any such day is
not a Business Day, on the next succeeding Business Day
(each, a "Distribution Date") commencing ____________,
199_. Payments will be made to holders of record of the
Notes (the "Noteholders") as of the day immediately
preceding such Distribution Date (each, a "Record
Date"). A "Business Day" is a day other than a Saturday,
a Sunday or day on which banking institutions or trust
companies in The City of New York or the city in which
the corporate trust office of the Indenture Trustee is
located are authorized by law, regulation or executive
order to be closed.
B. Interest Rates Interest will accrue on the Class A-1 Notes at a per
annum rate of ____% (the "Class A-1 Rate") and on the
Class A-2 Notes at a per annum rate of ____% (the "Class
A-2 Rate"), in each case, calculated on the basis of a
360-day year consisting of twelve 30-day months. The
Class A-1 Rate and the Class A-2 rate are sometimes
referred to herein collectively as the "Interest Rates".
C. Interest..... Interest on the outstanding principal amount of the
Class A-1 Notes and the Class A-2 Notes in respect of
any Distribution Date will accrue at the Class A-1 Rate
and the Class A-2 Rate, respectively, from and including
the most recent Distribution Date on which interest
payments were distributed to Noteholders (or, in the
case of the first Distribution Date, from and including
the Closing Date) to but excluding such Distribution
Date. Interest will be paid to the Noteholders on each
Distribution Date, to the extent of the Total
Distribution Amount (as defined herein) after payment of
the Servicing Fee and from the Reserve Account. See "The
Notes - Payments of Interest" herein.
D. Principal... On each Distribution Date for as long as the Class A-1
Notes are outstanding, principal of the Class A-1 Notes
will be payable on each Distribution Date in an amount
equal to the Total Distribution Amount remaining
following payment of the Servicing Fees and the
Noteholders' Interest Distributable Amount (as defined
S-6
<PAGE>
herein) on such date. On each Distribution Date from and
including the Distribution Date on which the Class A-1
Notes are paid in full and for as long as the Class A-2
Notes are outstanding, principal of the Class A-2 Notes
will be payable on each Distribution Date in an amount
equal to the Total Distribution Amount remaining
following payment of the Servicing Fee, the Noteholders'
Interest Distributable Amount and, on the Distribution
Date on which the Class A-1 Notes are paid in full, any
amount distributed as principal to holders of the Class
A-1 Notes. No principal payment will be made on the
Class A-2 Notes until the Class A-1 Notes have been paid
in full.
The outstanding principal amount, if any, of the Class
A-1 Notes will be payable in full on ____________, 199_
(the "Class A-1 Final Scheduled Payment Date") and the
outstanding principal amount, if any, of the Class A-2
Notes will be payable in full on ____________, 199_ (the
"Class A-2 Final Scheduled Payment Date").
See "The Notes - Payments of Principal" herein.
E. Optional
Redemption. The Class A-2 Notes may be redeemed in whole, but not in
part, on a Distribution Date on which the Servicer
exercises its option to purchase the Collateral
Certificates. Under the terms of the Servicing
Agreement, the Servicer may purchase the Collateral
Certificates when the aggregate principal balance of the
Collateral Certificates (the "Pool Balance") has been
reduced to 10% or less of the initial Pool Balance. The
redemption price for the Class A-2 Notes will equal the
unpaid principal amount of the Class A-2 Notes plus
accrued interest at the Class A-2 Rate.
Terms of the Certificates
A. Distribution
Dates...... Distributions with respect to the Certificates will be
made on each Distribution Date to holders of record of
the Certificates (the "Certificateholders", and,
together with the Noteholders, the "Securityholders") as
of the related Record Date.
B. Pass-Through
Rate....... Interest will accrue on the Certificates at a per annum
rate of ___% (the "Certificate Pass-Through Rate"),
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
C. Interest..... On each Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders accrued
interest at the Certificate Pass-Through Rate on the
Certificate Balance as of the preceding Distribution
Date (after giving effect to distributions made on such
Distribution Date) generally to the extent of funds
available following payment of the Servicing Fee and the
Noteholders' Distributable Amount (as defined herein)
from the Total Distribution Amount and the Reserve
Account. Interest on the Certificates in respect of any
Distribution Date will accrue from the most recent
Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding
such Distribution Date. See "The Certificates -
Distributions of Interest" herein.
D. Principal .... On each Distribution Date on and after the date on which
the Class A-2 Notes are paid in full, principal of the
Certificates will be payable in an amount generally
equal to the Total Distribution Amount remaining after
payment of the Servicing Fee, the Noteholders'
Distributable Amount (on the Distribution Date on which
the outstanding principal amount of the Class A-2 Notes
is reduced to zero) and the Certificateholders' Interest
Distributable Amount.
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The outstanding principal amount, if any, of the
Certificates will be payable full on ____________, 199_
(the "Final Scheduled Distribution Date").
See "The Certificates - Distributions of Principal" and
"Description of the Transfer and Servicing Agreements -
Distributions" herein.
E. Optional
Prepayment If the Servicer exercises its option to purchase the
Collateral Certificates, which it may do when the Pool
Balance is 10% or less of the initial Pool Balance, the
Certificateholders will receive an amount in respect of
the Certificates equal to the Certificate Balance plus
accrued interest at the Certificate Pass-Through Rate,
and the Certificates will be retired. See "The
Certificates - Optional Prepayment" and "The Notes -
Optional Redemption" herein.
Reserve Account..... The Reserve Account will be created with an initial
deposit by the Company on the Closing Date of cash or
Eligible Investments having a value of at least
$________ (the "Reserve Account Initial Deposit"). Funds
will be withdrawn from the Reserve Account on any
Distribution Date if, and to the extent that, the Total
Distribution Amount for the related Collection Period
remaining after payment of the Servicing Fee is less
than the Noteholders' Interest Distributable Amount and
will be deposited in the Note Distribution Account for
distribution to the Noteholders. In addition, funds will
be withdrawn from the Reserve Account to the extent that
the portion of the Total Distribution Amount remaining
after payment of the Servicing Fee and the Noteholders'
Distributable Amount is less than the
Certificateholders' Interest Distributable Amount and
will be deposited in the Certificate Distribution
Account for distribution to the Certificateholders.
Funds in the Reserve Account may be invested in
securities that will not mature prior to the date of
such next scheduled distribution with respect to the
Notes or Certificates and will not be sold prior to
maturity to meet any shortfalls. Thus, the amount of
available funds on deposit in the Reserve Account at any
time may be less than the balance of the Reserve
Account. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in collections on
the related Receivables exceeds the amount of available
funds on deposit in the Reserve Account, a temporary
shortfall in the amounts distributed to the Noteholders
or Certificateholders could result.
On each Distribution Date, the amount available in the
Reserve Account will be reinstated up to the Specified
Reserve Account Balance by the deposit thereto of the
amount, if any, remaining in the Collection Account
after payment on such date of the Servicing Fee, the
Noteholders' Distributable Amount and the
Certificateholders' Distributable Account. The
"Specified Reserve Account Balance" with respect to any
Distribution Date generally will be equal to [state
formula]. Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions to be made on such Distribution Date) in
excess of the Specified Reserve Account Balance for such
Distribution Date will be released to the Company and
will no longer be available to the Securityholders.
The Reserve Account will be maintained with the
Indenture Trustee as a segregated trust account, but
will not be part of the Trust. See "The Transfer and
Servicing Agreements - Reserve Account" herein.
Collection Account.. Except under certain conditions described in the
Prospectus under "Description of the Transfer and
Servicing Agreements - Collections," the Servicer will
be required to remit collections received with respect
to the Collateral Certificates within two Business Days
of receipt thereof to one or more accounts in the name
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of the Indenture Trustee (the "Collection Account").
Pursuant to the Indenture, the Indenture Trustee will
withdraw funds on deposit in the Collection Account and
apply such funds on each Distribution Date to the
following (in the priority indicated): (i) the Servicing
Fee for the related Collection Period and any overdue
Servicing Fees to the Servicer, (ii) the Noteholders'
Interest Distributable Amount and the Noteholders'
Principal Distributable Amount to the Note Distribution
Account, (iii) the Certificateholders' Interest
Distributable Amount and, after the Class A-2 Notes have
been paid in full, the Certificates' Principal
Distributable Amount to the Certificate Distribution
Account, and (iv) the remaining balance, if any, to the
Reserve Account. See "The Transfer and Servicing
Agreements -Distributions" and" - Reserve Account"
herein.
Tax Status.......... In the opinion of Sidley & Austin ("Federal Tax
Counsel"), the Trust will not be an association (or
publicly traded partnership) taxable as a corporation
for federal income tax purposes. The Trust will agree,
and the owners of beneficial interests in the Notes will
agree by their purchase of Notes, to treat the Notes as
debt for federal tax purposes. Federal Tax Counsel has
advised the Trust that the Notes will be classified as
debt for federal income tax purposes. The Trust will
also agree, and the related owners of beneficial
interests in the Certificates ("Certificate Owners")
will agree by their purchase of Certificates, to treat
the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets
of the partnership being the assets held by the Trust,
the partners of the partnership being the Certificate
Owners (including, to the extent relevant, the Seller in
its capacity as recipient of distributions from any
Reserve Fund) and the Notes being debt of the
partnership. See "Certain Federal Income Tax
Consequences" in the Prospectus for additional
information concerning the application of federal income
tax laws to the Trust and the Securities.
ERISA Considerations Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Notes
are eligible for purchase by employee benefit plans. The
Certificates may not be acquired by employee benefit
plans subject to the Employee Retirement Income Security
Act of 1974, as amended, or by "plans" as defined in
Section 4975 of the Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" herein and in the
Prospectus.
Ratings of the
Securities......... It is a condition to the issuance of the Notes and
Certificates that the Class A-1 Notes be rated at least
"______", the Class A-2 Notes be rated at least
"_______" and the Certificates be rated at least
"__________" or its equivalent, in each case by at least
two nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or
sell the Notes or Certificates, inasmuch as such rating
does not comment as to market price or suitability for a
particular investor. A rating addresses the likelihood
that principal of and interest on a particular class of
Notes or the Certificates, as applicable, will be paid
pursuant to its terms. There can be no assurance that a
rating will not be lowered or withdrawn by a rating
agency if circumstances so warrant. See "Risk Factors -
Ratings of the Securities" herein.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully consider
the following risk factors before investing in the Securities.
Limited Liquidity. There is currently no secondary market for the
Securities. CS First Boston Corporation (the "Underwriter") currently intends
to make a market in the Securities, but is under no obligation to do so. There
can be no assurance that a secondary market will develop or, if a secondary
market does develop, that it will provide Securityholders with liquidity of
investment or that it will continue for the life of the Securities.
Servicer Default. If a Servicer Default occurs, the Indenture
Trustee or the Noteholders may remove the Servicer without the consent of the
Owner Trustee or the Certificateholders, in the manner described in the
Prospectus under "Description of the Transfer and Servicing Agreements - Rights
upon Servicer Default". Neither the Owner Trustee nor the Certificateholders
will have the ability to remove the Servicer if a Servicer Default occurs. In
addition, the Noteholders have the ability with certain specific exceptions, to
waive defaults by the Servicer, including defaults that might have a materially
adverse effect on Certificateholders. See "Description of the Transfer and
Servicing Agreements - Waiver of Past Defaults" in the Prospectus.
Subordination; Limited Assets. Distributions of interest and
principal on the Certificates will be subordinated in priority of payment to
interest and principal due on the Notes. Consequently, Certificateholders will
not receive any distributions with respect to a Collection Period until full
amount of interest on and principal of the Notes distributable on such
Distribution Date has been deposited in the Note Distribution Account. The
Certificateholders will not receive any distributions of principal until after
the Notes have been paid in full. See "The Transfer and Servicing Agreements -
Distributions" herein.
The Trust will not have, nor is it permitted or expected to have,
any significant assets or sources of funds other than the Collateral
Certificates and access to funds in the Reserve Account. Securityholders must
rely on payments on the Collateral Certificates and, if and to the extent
available, amounts on deposit in the Reserve Account. Although any funds
available in the Reserve Account on each Distribution Date will be applied to
cover shortfalls in distribution of interest on the Notes and the Certificates,
the funds to be deposited in the Reserve Account are limited in amount. If the
Reserve Account is exhausted, the Trust will depend solely on distributions on
the Collateral Certificates to make distributions on the Notes and the
Certificates. See "The Trust" and "The Transfer and Servicing Agreements -
Reserve Account" herein.
Funds in the Reserve Account may be invested in securities that
will not mature prior to the date of such next scheduled distribution with
respect to the Notes or Certificates and will not be sold prior to maturity to
meet any shortfalls. Thus, the amount of available funds on deposit in the
Reserve Account at any time may be less than the balance of the Reserve
Account. If the amount required to be withdrawn from the Reserve Account to
cover shortfalls in collections on the related Receivables exceeds the amount
of available funds on deposit in the Reserve Account, a temporary shortfall in
the amounts distributed to the Noteholders or Certificateholders could result.
Ratings of the Securities. It is a condition to the issuance of
the Notes and the Certificates of the Notes and the Certificates that the Class
A-1 Notes be rated "___________", the Class A-2 Notes be rated "________" and
the Certificates be rated "_________" or its equivalent, in each case by at
least two nationally recognized rating agencies (the "Rating Agencies"). A
rating is not a recommendation to purchase, hold or sell Securities, inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. The ratings of the Securities address the likelihood of
the timely payment of interest on, and the ultimate repayment of principal of,
the Securities pursuant to their terms. There can be no assurance that a
rating will be retained for any given period of time or that a rating will not
be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant. In the event that a rating is
subsequently lowered or withdrawn, no person or entity will be required to
provide any additional credit enhancement. The ratings of the Notes are based
primarily on the credit quality of the Receivables, the subordination provided
by the Certificates and the
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availability of funds in the Reserve Account. The ratings of the Certificates
are based primarily on the credit quality of the Receivables and the
availability of funds in the Reserve Account.
Trust's Relationship to the Depositor. The Company is generally not
obligated to make any payments in respect of the Certificates or the Collateral
Certificates.
Considerations Regarding Collateral Certificates. Prospective
investors in the Certificates should consider carefully the factors set forth
under the caption "Risk Factors" or "Special Considerations" in the excerpted
sections of the prospectuses relating to the Collateral Certificates attached
hereto as Appendix A for certain additional considerations relating to the
Collateral Certificates and investments backed by Receivables. Neither the
Company nor the Underwriter participated in the preparation of the prospectuses
relating to the Collateral Certificates or the offering of the Collateral
Certificates, and neither has made any due diligence inquiry with respect to
the information provided therein. Although neither the Company nor the
Underwriter is aware of any material misstatements or omissions in any such
prospectus, the information provided therein or in the publicly available
documents referred to below is not guaranteed as to accuracy or completeness,
and is not to be construed as a representation, by the Company or the
Underwriter. In particular, information set forth in any prospectus relating
to the Collateral Certificates speaks only as of the date of such prospectus;
there can be no assurance that events have not occurred, which may or may not
have been publicly disclosed, that would affect the accuracy or completeness of
any such statements.
Each originator of an Underlying Trust Fund is subject to the
informational requirements of the Exchange Act. Accordingly, such originator
files annual and periodic reports and other information with the Commission.
Copies of such reports and other information may be inspected and copies at
certain offices of the Commission at the addresses listed under "Available
Information" herein.
THE TRUST
GENERAL
The Issuer, CS First Boston Auto Receivables Securities Trust
199_-_, is a business trust formed under the laws of the State of Delaware
pursuant to the Trust Agreement for the transactions described in this
Prospectus Supplement. After its formation, the Trust will not engage in any
activity other that (i) acquiring, holding and managing the Collateral
Certificates and the other assets of the Trust and proceeds therefrom, (ii)
issuing the Notes and the Certificates, (iii) making payments on the Notes and
the Certificates, and (iv) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The Trust initially will be capitalized with equity equal to
$____________, excluding amounts in the Reserve Account. Certificates with an
original principal balance of $____________ (which represents approximately
[1]% of the initial Certificate Balance) will be sold to ____________ and the
remaining Certificates will be sold to third party investors the are expected
to be unaffiliated with the Company and the Trust. The proceeds from the
initial sale of the Notes and Certificates will be used by the Trust to
purchase the Collateral Certificates from the Company pursuant to the Trust
Agreement. The Servicer will service the Collateral Certificates pursuant to
the Servicing Agreement and will be compensated for acting as Servicer. See
"The Transfer and Servicing Agreements - Servicing Compensation" herein.
The Trust's principal offices are located in _______________________,
Delaware, in care of ____________________, as Owner Trustee, at the address
listed below under "-The Owner Trustee".
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CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as
of the Cutoff Date, as if the issuance and sale of the Notes and the Notes and
the Certificates had taken place on such date:
Class A-1 Notes .................... $
Class A-2 Notes.......................
Certificates.......................... --------------------------------
Total.......................... $
================================
THE OWNER TRUSTEE
____________________ is the Owner Trustee under the Trust Agreement.
________________________ is a banking corporation and its principal offices are
located at __________________________. The Owner Trustee's liability in
connection with the issuance and sale of the Notes and Certificates is limited
solely to the express obligations of the Owner Trustee set forth in the Trust
Agreement and the Servicing Agreement. The Seller, the Company and their
respective affiliates may maintain normal commercial banking release with the
Owner Trustee and its affiliates.
THE SERVICER
[Information regarding the Servicer to be supplied.]
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. In addition, holders of the Class A-2 Notes will
not receive any principal payments until the Class A-1 Notes are paid in full,
and holders of the Certificates will not receive any principal payments until
the Class A-1 Notes and the Class A-2 Notes have been paid in full. See "The
Notes - Payments of Principal" and "The Certificates -Distributions of
Principal" herein. As the rate of payment of principal of each class of Notes
and the Certificates depends on the rate of payment (including prepayments) of
the Collateral Certificates, final payment of the Class A-1 Notes or the Class
A-2 Notes and the final distribution in respect of the Certificates could occur
significantly earlier than the Class A-1 Final Scheduled Payment Date, the Class
A-2 Final Scheduled Payment Date or the Final Scheduled Distribution Date, as
applicable. Securityholders will bear the risk of being able to reinvest
principal payments on the Securities at yields at least equal to the yield on
their Securities.
THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement. A
copy of the Indenture will be filed with the Commission following the issuance
of the Securities. The following summary describes certain terms of the Notes
and the Indenture. The summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Notes and the Indenture. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given Series and the related Indenture set forth
under the headings "Description of the Notes" and "Certain Information
Regarding the Securities" in the Prospectus, to which description reference is
hereby made.
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<PAGE>
PAYMENTS OF INTEREST
Interest on the principal balance of the Class A-1 Notes and the
Class A-2 Notes will accrue at the Class A-1 Rate and Class A-2 Rate,
respectively, and will be payable to the holders of the Class A-1 Notes and the
Class A-2 Notes monthly on each Distribution Date. Interest with respect to
any Distribution Date will accrue from and including the most recent
Distribution Date on which interest was distributed to Noteholders (or, with
respect to the first Distribution Date, from and including the Closing Date) to
but excluding such Distribution Date. Interest on each class of Notes will be
calculated on the basis of a 360-day year of twelve 30-day months. Interest
accrued but not paid on any Distribution Date will be due on the next
Distribution Date, together with interest on such amount at the applicable
Interest Rate (to the extent lawful). Interest payments on the Notes will
generally be derived from the Total Distribution Amount remaining after the
payment of the Servicing Fee and from the Reserve Account. See "The Transfer
and Servicing Agreements - Distributions" and "- Reserve Account" herein.
Interest payments to holders of both classes of Notes will have the same
priority. Under certain circumstances, the amount available for such payments
could be less than the amount of interest payable on the Notes on any
Distribution Date, in which case the holders of each class of Notes will
receive their ratable share (based on the aggregate amount of interest due on
such class of Notes) of the aggregate amount available for distribution in
respect of interest on the Notes.
PAYMENTS OF PRINCIPAL
On each Distribution Date for as long as the Class A-1 Notes are
outstanding, principal of the Class A-1 Notes will be distributed to holders of
the Class A-1 Notes in an amount equal to the Total Distribution Amount
remaining after payment of the Servicing Fee and the Noteholder's Interest
Distributable Amount. On each Distribution Date from and including the
Distribution Date on which the Class A-1 Notes are paid in full and for as long
as the Class A-2 Notes are outstanding, principal will be distributed to
holders of the Class A-2 Notes in an amount equal to the Total Distribution
Amount remaining after payment of the Servicing Fee, the Noteholders' Interest
Distributable Amount and, on the Distribution Date on which the outstanding
principal amount of the Class A-1 Notes is reduced to zero, any amounts
distributed as principal to holders of the Class A-1 Notes. No principal will
be paid on the Class A-2 Notes until the Class A-1 Notes have been paid in
full. See "The Transfer and Servicing Agreements - Distributions" and "-
Reserve Account" herein.
The principal balance of the Class A-1 Notes, to the extent not
previously paid, will be due on the Class A-1 Final Scheduled Payment Date and
the principal balance of the Class A-2 Notes, to the extent not previously
paid, will be due on the Class A-2 Final Scheduled Payment Date. The actual
date on which the aggregate outstanding principal amount of either the Class
A-1 Notes or the Class A-2 Notes is paid in full may be earlier than the
applicable Final Scheduled Payment Date set forth above due to a variety of
factors, including those described under "Weighted Average Life of the
Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class A-2 Notes may be redeemed in whole, but not in part, on a
Distribution Date on which the Servicer exercises its option to purchase the
Collateral Certificates, which the Servicer may do after the aggregate
outstanding principal amount of the Collateral Certificates is reduced to 10%
or less of the initial Pool Balance. See "Description of the Transfer and
Servicing Agreements - Termination" in the Prospectus. The redemption price
for the Class A-2 Notes will equal the unpaid principal amount of the Class A-2
Notes plus accrued and unpaid interest thereon.
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the
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Certificates and the Trust Agreement. This summary does not purport to be
complete and is subject to, and qualified is its entirety by reference to, all
the provisions of the Certificates and the Trust Agreement. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provision of the Certificates of any given
Series and the related Trust Agreement set forth in the Prospectus, to which
description reference is hereby made.
DISTRIBUTIONS OF INTEREST
Interest on the principal balance of the Certificates will accrue
at the Pass-Through Rate. Interest with respect to any Distribution Date will
accrue from and including the most recent Distribution Date on which interest
was distributed to Certificateholders (or, with respect to the first
Distribution Date, from and including the Closing Date) to but excluding such
Distribution Date and will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued but not distributed on any Distribution
Date will be due on the next Distribution Date, together with interest on such
amount at the Pass-Through Rate (to the extent lawful). Interest distributions
with respect to the Certificates generally will be funded from the portion of
the Total Distribution Amount and funds in the Reserve Account remaining after
the distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "The Transfer and Servicing Agreements - Distributions" and " -
Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will not be entitled to distributions of
principal on any Distribution Date until the Notes have been paid in full. On
each Distribution Date on and after the Distribution Date on which the Class
A-2 Notes are paid in full, the Certificateholders will be entitled to
distributions of principal in a maximum amount equal to the lesser of (i) the
Total Distribution Amount plus any funds in the Reserve Account remaining after
payment of the Servicing Fee, the Noteholders' Distributable Amount (on the
Distribution Date on which the outstanding principal amount of the Class A-2
Notes is reduced to zero) and the Certificateholders' Interest Distributable
Amount and (ii) the outstanding Certificate Balance. See "The Transfer and
Servicing Agreements - Distributions" and "- Reserve Account" herein.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Collateral
Certificates, which it may do when the aggregate outstanding principal amount
of the Collateral Certificates is reduced to 10% or less of the initial Pool
Balance, the Certificateholders will receive an amount in respect of the
Certificates equal to the outstanding Certificate Balance, together with
accrued interest thereon at the Pass-Through Rate, which distribution shall
effect an early retirement of the Certificates. See "Description of the
Transfer and Servicing Agreements - Termination" in the Prospectus.
DESCRIPTION OF THE COLLATERAL CERTIFICATES
GENERAL
This Prospectus Supplement sets forth certain relevant terms of the
Collateral Certificates. It does not purport to summarize such securities or
to provide complete or updated information with respect to the issuer thereof
or the Receivables relating thereto. Schedule I to this Prospectus Supplement
contains a summary of the terms of the Collateral Certificates. Appendix A to
this Prospectus Supplement contains excerpts from each prospectus pursuant to
which Collateral Certificates were offered and sold. This Prospectus
Supplement relates only to the Certificates offered hereby and does not relate
to the Collateral Certificates. See "Special Considerations-Considerations
Regarding Collateral Certificates".
Although the Company has no reason to believe the information concerning
the Underlying Trust Fund or the prospectus relating to the Collateral
Certificates is not reliable, the Company has not verified either its accuracy
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or its completeness. Neither the Company nor the Underwriter warrants that
there events have not occurred , which would affect either the accuracy or the
completeness of the information contained therein. See "Special
Considerations-Considerations Regarding Collateral Certificates" and "-Certain
Updated Information with Respect to the Collateral Certificates".
CERTAIN UPDATED INFORMATION WITH RESPECT TO THE COLLATERAL CERTIFICATES
The originator of each Underlying Trust Fund is subject to the
information requirements of the Exchange Act. Accordingly, such originator
files reports and other information with respect to each Underlying Trust Fund,
including monthly servicer reports ("Servicer Reports") regarding the
Receivables, with the Commission. A summary of certain of the information
included in the most recent Servicer Reports filed with the Commission is
included as Appendix B hereto. Copies of such reports and other information
may be inspected and copied at certain offices of the Commission at the address
listed under "Available Information" herein.
Neither the Company nor the Underwriter participated in the preparation
of such Servicer Reports, and the information provided therein or in the
publicly available documents referred to above is not guaranteed as to accuracy
or completeness, and is not to be construed as a representation, by the Company
or the Underwriter. In particular, information set forth in the Servicer
Reports speaks only as of the date of such Servicer Report; there can be no
assurance that events have not occurred that would affect the accuracy or
completeness of any statements included in such Servicer Reports or in the
publicly available documents filed by or on behalf of each Underlying Trust
Fund.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Servicing
Agreement and the Trust Agreement (together, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed
as exhibits to the Registration Statement. A copy of the Transfer and
Servicing Agreements will be filed with the Commission following the issuance
of the Securities. This summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Transfer and Servicing Agreements. The following summary supplements, and to
the extent inconsistent therewith replaces, the description of the general
terms and provisions of Transfer and Servicing Agreements (as such term is used
in the Prospectus) set forth under the heading "Description of the Transfer and
Servicing Agreements" in the Prospectus, to which description reference is
hereby made.
ACCOUNTS
In addition to the Accounts referred to under "Description of the
Transfer and Servicing Agreements - Accounts" in the Prospectus, the Servicer
with also establish and maintain the Reserve Account with the Indenture
Trustee, in the name of the Indenture Trustee on behalf of the Noteholders and
the Certificateholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to 1.00% per annum of the Pool Balance as
of the first day of such Collection Period. The Servicing Fee (together with
any portion of the Servicing Fee that remains unpaid from prior Distribution
Dates) will be paid on each Distribution Date solely to the extent of the
Interest Distribution Amount; however, the Servicing Fee will be paid to the
Servicer prior to the distribution of any portion of the Interest Distribution
Amount to Noteholders and Certificateholders. See "Description of the Transfer
and Servicing Agreements - Servicing Compensation and Payment of Expenses" in
the Prospectus.
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DISTRIBUTIONS
Deposits to Collection Account. On or about the _____ Business Day
of each month, the Servicer will provide the Indenture Trustee with certain
information with respect to the related Collection Period, including the
aggregate amount of collections on the Collateral Certificates, as well as the
Total Distribution Amount, the Interest Distribution Amount and the Principal
Distribution Amount.
On or before each Distribution Date, the Servicer will cause the
Total Distribution Account to be deposited into the Collection Account. The
"Total Distribution Amount" for a Distribution Date will equal the aggregate
amount of the distributions received on the Collateral Certificates.
The "Interest Distribution Amount" for a Distribution Date will
equal the sum of the portion of all collections on the Collateral Certificates
allocable to interest, and Investment Earnings for such Distribution Date in
each case, with respect to the related Collection Period. The "Principal
Distribution Amount" for a Distribution Date will equal the portion of all
collections on the Collateral Certificates allocable to principal, with respect
to the related collection period.
Deposits to the Distribution Accounts. On each Distribution Date,
the Servicer will instruct the Trustee to make the following deposits and
distributions, to the extent of the Total Distribution Amount, in the following
order of priority:
(i) to the Servicer, from the Interest Distribution Amount,
the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Certificateholders' Interest Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distributable Amount; and
(vi) to the Reserve Account, the Total Distribution Amount
remaining after the application of clauses (i) through (v).
For purposes hereof, the following terms shall have the following
meanings:
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including the Closing Date
to but excluding such Distribution Date) on the Class A-1 Notes and the Class
A-2 Notes at the Class A-1 Rate and the Class A-2 Rate, respectively, on the
outstanding principal balance of the Notes of such class on
S-16
<PAGE>
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date) after giving effect to all payments of
principal to the Noteholders of such class on or prior to such Distribution
Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, (i) the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date, plus any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus (ii) interest on
the amount of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the respective Interest
Rates borne by each class of the Notes from such preceding Distribution Date to
but excluding such current Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect
to any Distribution Date for as long as the Class A-1 Notes or the Class A-2
Notes are outstanding, 100% of the Principal Distribution Amount; provided,
however, that on the Distribution Date on which the principal balance of the
Class A-2 Notes is reduced to zero, the portion, if any, of the Principal
Distribution Amount that is not applied to the principal of the Class A-2 Notes
will be applied to the Certificate Balance; provided further, however, that the
Noteholders' Principal Distributable Amount shall not exceed the outstanding
principal balance of the Notes.
"Certificateholders' Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholder's Principal
Distributable Amount and the Certificateholders' Interest Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, 30 days of interest (or, in the case of
the first Distribution Date, interest accrued from and including the Closing
Date to but excluding such Distribution Date) at the Pass-Through Rate on the
Certificate Balance on the last day of the preceding Collection Period (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all distributions of principal to the Certificateholders on or prior
to such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Certificateholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by
law, at the Pass-Through Rate from such preceding Distribution Date to but
excluding such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, 100%
of the Principal Distribution Amount (less, on the Distribution Date on which
the Notes are paid in full, the portion thereof payable as principal of the
Notes); provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance.
"Certificate Balance" equals, initially, $______ and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note
Distribution Account generally will be paid in the following order of priority:
(i) to the applicable Noteholders, accrued and unpaid
interest on the outstanding principal balance of the applicable class of
Notes at the applicable Interest Rate;
S-17
<PAGE>
(ii) to the Class A-1 Noteholders in reduction of principal
until the principal balance of the Class A-1 Notes has been reduced to
zero; and
(iii) to the Class A-2 Noteholders in reduction of principal
until the principal balance of the Class A-2 Notes has been reduced to
zero.
On each Distribution Date, all amounts on deposit in the
Certificate Distribution Account will be distributed to the Certificateholders.
RESERVE ACCOUNT
The Reserve Account will be created by the deposit thereto by the
Company on the Closing Date of the Reserve Account Initial Deposit and will be
increased up to the Specified Reserve Account Balance by the deposit thereto on
each Distribution Date on the amount, if any, remaining from the Total
Distribution Amount after payment of the Servicing Fee, the Noteholders'
Distributable Amount and the Certificateholders' Distributable Amount. If the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such Distribution
Date), is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer will instruct the Indenture Trustee to
distribute an amount equal to such excess to the Depositor. Upon any
distribution to the Company of amounts from the Reserve Account, neither the
Noteholders nor the Certificateholders will have any rights in, or claim to,
such amounts.
Amounts held from time to time in the Reserve Account will continue
to be held for the benefit of the Noteholders and Certificateholders. Funds
will be withdrawn from cash in the Reserve Account to the extent that the Total
Distribution Amount (after the payment of the Servicing Fee) with respect to
any Collection Period is less than the Noteholders' Interest Distributable
Amount and will be deposited to the Note Distribution Account for distribution
to the Noteholders. In addition, funds will be withdrawn from cash in the
Reserve Account to the extent that the portion of the Total Distribution Amount
remaining after the payment of the Servicing Fee and the deposit of the
Noteholders' Distributable Amount to the Note Distribution Account is less than
the Certificateholders' Interest Distributable Amount and will be deposited to
the Certificate Distribution Account for distribution to the
Certificateholders.
The subordination of the Certificates and the Reserve Account are
intended to enhance the likelihood of receipt by Noteholders of the full amount
of interest due to them and to decrease the likelihood that the Noteholders
will experience losses. In addition, the Reserve Account is intended to
enhance the likelihood of receipt by Certificateholders of the full amount of
interest due to them and to decrease the likelihood that the Certificateholders
will experience losses. However, in certain circumstances, the Reserve Account
could be depleted. In addition, subject to certain conditions, funds in the
Reserve Account may be invested in securities that will not mature prior to a
particular Distribution Date and will not be sold prior to maturity to meet any
shortfalls that might occur on such Distribution Date. Thus, the amount of
cash in the Reserve Account at any time may be less than the balance of the
Reserve Account. If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the Collateral Certificates
exceeds the amount of cash in the Reserve Account, a temporary shortfall in the
amounts distributed to the Noteholders or the Certificateholders could result.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an "employee benefit plan" as defined
in and subject to the provisions of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or a "plan" as described in Section
4975(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code") (each
such "employee benefit "plan" and "plan," a "Plan"). A fiduciary of a Plan
must determine that the purchase of a Note is consistent with its fiduciary
duties under ERISA and does not result in a nonexempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Notes under ERISA, see "ERISA
Considerations" in the Prospectus.
S-18
<PAGE>
THE CERTIFICATES
The Certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(l) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a Certificate, each
Certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. For additional information regarding
treatment of the Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the respective
underwriting agreements relating to the Notes and the Certificates (the
"Underwriting Agreements"), the Company has agreed to cause the Trust to sell
to CS First Boston Corporation (the "Underwriter"), and the Underwriter has
agreed to purchase, all of the Securities.
The Underwriter proposes to offer the Securities to the public
initially at the public offering prices set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such prices less a concession
of ___% per Class A-1 Note, ___% per Class A-2 Note and ___% per Certificate;
however, the Underwriter and such dealers may allow a discount of ___% per
Class A-1 Note, ___% per Class A-2 Note and ___% per Certificate on sales to
certain other dealers; and after the initial public offering of the Securities,
and public offering prices and the concessions and discounts to dealers may be
changed by the Underwriter.
The Underwriting Agreements provide that the Seller will indemnify
the Underwriter against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriter may be
required to make in respect thereof.
The Trust may, from time to time, invest the funds in the Trust
Accounts in Eligible Investments acquired from the Underwriter.
The closing of the sale of the Certificates is conditioned on the
closing of the sale of the Notes, and the closing of the sale of the Notes is
conditioned on the closing of the sale of the Certificates.
Upon receipt of a request by an investor who has received an
electronic Prospectus Supplement and Prospectus from the Underwriter within the
period during which there is an obligation to deliver a Prospectus Supplement
and Prospectus, the Company or the Underwriter will promptly deliver, or cause
to be delivered, without charge, a paper copy of the Prospectus Supplement and
the Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon by
Sidley & Austin, New York, New York.
S-19
<PAGE>
INDEX OF TERMS
Business Day................................................................S-
Certificate Balance.........................................................S-
Certificateholders..........................................................S-
Certificateholders' Distributable Amount....................................S-
Certificateholders' Interest Carryover Shortfall............................S-
Certificateholders' Interest Distributable Amount...........................S-
Certificateholders' Principal Carryover Shortfall...........................S-
Certificateholders' Principal Distributable Amount..........................S-
Certificates................................................................S-
Class A-1 Final Scheduled Payment Date......................................S-
Class A-1 Notes.............................................................S-
Class A-1 Rate..............................................................S-
Class A-2 Final Scheduled Payment Date......................................S-
Class A-2 Notes.............................................................S-
Class A-2 Rate..............................................................S-
Closing Date................................................................S-
Code........................................................................S-
Collateral Certificates.....................................................S-
Collection Account..........................................................S-
Commission..................................................................S-
Cutoff Date.................................................................S-
Distribution Date...........................................................S-
ERISA.......................................................................S-
Federal Tax Counsel.........................................................S-
Final Scheduled Distribution Date...........................................S-
Final Scheduled Maturity Date...............................................S-
Indenture...................................................................S-
Indenture Trustee...........................................................S-
Interest Distribution Amount................................................S-
Interest Rates..............................................................S-
Liquidated Receivables......................................................S-
Liquidated Proceeds.........................................................S-
Noteholders.................................................................S-
Noteholders' Interest Carryover Shortfall...................................S-
Noteholders' Interest Distributable Amount..................................S-
Noteholders' Monthly Interest Distributable Amount..........................S-
Noteholders' Principal Distributable Amount.................................S-
Notes.......................................................................S-
Owner Trustee...............................................................S-
Pass-Through Rate...........................................................S-
Plan........................................................................S-
Pool Balance................................................................S-
Principal Distribution Amount...............................................S-
Prospectus..................................................................S-
Rating Agencies.............................................................S-
Realized Losses.............................................................S-
Receivable..................................................................S-
Record Date.................................................................S-
Reserve Account.............................................................S-
Securities..................................................................S-
Securityholders.............................................................S-
Seller......................................................................S-
S-20
<PAGE>
Servicer....................................................................S-
Servicing Agreement.........................................................S-
Specified Reserve Account Balance...........................................S-
Total Distribution Amount...................................................S-
Transfer and Servicing Agreements...........................................S-
Trust.......................................................................S-
Trust Agreement.............................................................S-
Underwriting................................................................S-
Underwriting Agreements.....................................................S-
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<PAGE>
SCHEDULE I
----------
Class __
CUSIP #___________ Rating: ______________
[Monthly][Quarterly]
[Semi-Annual] Aggregate
Payment Dates Interest Payment Interest Payment
- ------------- ---------------- ----------------
$___________________ $___________________
Aggregate Face
Amount Minimum
of Principal Authorized
Component Denomination Interest Rate
--------- ------------ -------------
$____________ $___________ ___________%
I-1
<PAGE>
APPENDIX A
[To be Supplied]
A-1
<PAGE>
APPENDIX B
[To be Supplied]
B-1
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This 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
CS FIRST BOSTON AUTO [RECEIVABLES] [RECEIVABLES SECURITIES]
TRUSTS
Asset Backed Notes
Asset Backed Certificates
---------------------
Asset Backed Securities Corporation
Company
---------------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each Series of Securities will be issued by a trust (each, a "Trust") to be
formed with respect to such Series and may include one or more classes of Notes
and/or one or more classes of Certificates. The property of each Trust will
include assets composed of (a) Primary Assets, which may include (i) one or more
pools of motor vehicle installment loan agreements or motor vehicle retail
installment sale contracts secured by new and used automobiles, vans and light
duty trucks (the "Receivables"), and security interests in the vehicles financed
thereby or (ii) Collateral Certificates (as defined herein), (b) certain monies
due or received under the terms of the Primary Assets, on or after the
applicable cutoff date, (c) the rights to certain credit and cash flow
enhancement as described herein, and (d) certain other property, as more fully
described herein and in the related Prospectus Supplement. [The Primary Assets
will be sold to a Trust by Asset Backed Securities Corporation, a Delaware
corporation (the "Company").] [Asset Backed Securities Corporation (the
"Company") will transfer funds to a Trust in exchange for the Certificates. Such
Trust will use such funds to purchase the Primary Assets].
Except as otherwise specified in the related Prospectus Supplement,
each class of Securities of any Series will represent the right to receive a
specified amount of payments of principal and interest on the related Primary
Assets, at the rates, on the dates and in the manner described herein and in the
related Prospectus Supplement. As more fully described herein and in the related
Prospectus Supplement, distributions on any class of Securities may be senior or
subordinate to distributions on one or more other classes of Securities of the
same Series, and payments on the Certificates of a Series may be subordinated in
priority to payments on the Notes of such Series. If provided in the related
Prospectus Supplement, a Series of Securities may include one or more classes of
Securities entitled to principal distributions with disproportionate, nominal or
no distributions in respect of interest, or to interest distributions with
disproportionate, nominal or no distributions in respect of principal.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT,
THE NOTES OF A SERIES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES WILL REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY, AND WILL
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED
BY, CS FIRST BOSTON CORPORATION, THE COMPANY, ANY OF THEIR RESPECTIVE
AFFILIATES, OR ANY GOVERNMENTAL AGENCY.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" IN THIS PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Securities of any Series unless accompanied by a
Prospectus Supplement.
---------------------
[LOGO] CS First Boston
This date of this Prospectus is __________, 199_.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be
offered hereunder will, among other things, set forth with respect to such
Series of Securities: (i) the aggregate principal amount, interest rate and
authorized denominations of each Class of such Securities; (ii) certain
information concerning the Primary Assets and the related Seller and Servicer,
as applicable; (iii) the terms of any Credit or Cash Flow Enhancement
applicable to any Class or Classes of such Securities; (iv) information
concerning any other assets in the related Trust; (v) the expected date or
dates on which the principal amount of each Class of such Securities will be
paid to holders of such Securities; (vi) the extent to which any Class within
such Series is subordinated to any other Class of such Series; and (vii)
additional information with respect to the plan of distribution of such
Securities. To the extent that the terms of this Prospectus conflict or are
otherwise inconsistent with the terms of the related Prospectus Supplement, the
terms of such related Prospectus Supplement shall govern.
REPORTS TO SECURITYHOLDERS
With respect to each Series of Securities, the Servicer (as defined in
the related Prospectus Supplement) of the related Primary Assets will prepare
for distribution to the related Securityholders certain monthly and annual
reports concerning such Securities and the related Trust. See, "Certain
Information Regarding the Securities - Statements to Securityholders".
AVAILABLE INFORMATION
The Company, as originator of the Trusts, has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, (the "Securities
Act") with respect to the Securities being offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the
rules and regulations of the Commission. In addition, Company is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the Commission. Such Registration Statement, reports
and other information are available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such information can be obtained from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Underwriter will
promptly deliver, or cause to be delivered, without charge, to such investor a
paper copy of the Prospectus Supplement and Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company on behalf of the Trust referred to in
the accompanying Prospectus Supplement with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the "Exchange Act" after the date of this
Prospectus and prior to the termination of the offering of the Securities
offered by such Trust shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the dates of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the accompanying Prospectus Supplement) or in any subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so
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<PAGE>
modified or superseded shall not be deemed, except as so modified or supersede,
to constitute a part of this Prospectus.
The Company on behalf of any Trust will provide without charge to each
person to whom a copy of this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents. Requests for such
copies should be directed to __________________________________________________
___________________________________________________. Telephone requests may be
directed to ________________ at _________________________.
-3-
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to each Series of Securities contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index
of Terms".
Issuer................. With respect to any Series of Securities, a Trust
formed pursuant to either (i) a pooling and servicing
agreement (a "Pooling and Servicing Agreement") among
the Company, the Servicer and the Trustee for such
Trust (each such Trust being referred to herein as a
"Grantor Trust") or (ii) a trust agreement (a "Trust
Agreement") between the Company and the Trustee for
such Trust (each such Trust being referred to herein as
an "Owner Trust").
Company................ The Company is a special-purpose Delaware corporation
organized for the purpose of issuing the Securities and
other securities issued under the Registration
Statement backed by receivables or underlying
securities of various types and acting as settlor or
depositor with respect to trusts, custody accounts or
similar arrangements or as general or limited partner
in partnerships formed to issue securities. It is not
expected that the Company will have any significant
assets. The Company is an indirect, wholly owned
finance subsidiary of CS First Boston USA, Inc., which
is a wholly owned subsidiary of CS First Boston, Inc.
Neither CS First Boston USA, Inc. nor CS First Boston,
Inc. nor any of their affiliates has guaranteed, will
guarantee or is or will be otherwise obligated with
respect to any Series of Securities.
The Company's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
Trustee................ With respect to each Owner Trust and each Grantor
Trust, the trustee specified in the related Prospectus
Supplement (the "Trustee").
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<PAGE>
Servicer............... With respect to each Owner Trust and each Grantor
Trust, the servicer specified in the related Prospectus
Supplement (the "Servicer").
Indenture Trustee...... With respect to any Series of Securities that is issued
by an Owner Trust and includes one or more classes of
Notes, the indenture trustee specified in the related
Prospectus Supplement (the "Indenture Trustee").
Securities Offered..... Each Series of Securities issued by an Owner Trust will
include one or more classes of Certificates and may
also include one or more classes of Notes. Each Series
of Securities issued by a Grantor Trust will include
one or more classes of Certificates, but will not
include any Notes. Each class of Notes will be issued
pursuant to an indenture (each, an "Indenture") between
the related Owner Trust and the Indenture Trustee
specified in the related Prospectus Supplement. Each
class of Certificates will be issued pursuant to the
related Trust Agreement (in the case of Certificates
issued by an Owner Trust) or the related Pooling and
Servicing Agreement (in the case of Certificates issued
by a Grantor Trust). The related Prospectus Supplement
will specify which class or classes of Notes and/or
Certificates of the related Series are being offered
thereby.
Notes.................. Unless otherwise specified in the related Prospectus
Supplement, each class of Notes will have a stated
principal amount and will bear interest at a specified
rate or rates (with respect to each class of Notes, the
"Interest Rate"). Each class of Notes may have a
different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate or any combination of the
foregoing. The related Prospectus Supplement will
specify the Interest Rate, or the method for
determining the Interest Rate, for each class of Notes.
A Series of Securities issued by an Owner Trust may
include two or more classes of Notes that differ as to
timing and priority of payments, seniority, allocations
of losses, Interest Rate or amount of payments of
principal or interest. Additionally, payments of
principal or interest in respect of any such class or
classes may or may not be made upon the occurrence of
specified events or on the basis of collections from
designated portions of the Primary Assets. If specified
in the related Prospectus Supplement, one or more
classes of Notes ("Strip Notes") may be entitled to (i)
principal payments with disproportionate, nominal or no
interest payments or (ii) interest payments with
disproportionate,
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<PAGE>
nominal or no principal payments. See "Description of
the Notes-Distributions of Principal and Interest".
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof
and will be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, Noteholders will be able to receive
Definitive Notes only in the limited circumstances
described herein or in the related Prospectus
Supplement. See "Certain Information Regarding the
Securities-Definitive Securities".
If the Servicer exercises its option to purchase the
Primary Assets of a Trust (or if not and, if and to the
extent provided in the related Prospectus Supplement,
satisfactory bids for the purchase of such Primary
Assets are received), in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing Agreements-
Termination", the outstanding Notes will be redeemed as
set forth in the related Prospectus Supplement.
The Certificates....... Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have a
stated certificate balance (the "Certificate Balance")
and will accrue interest on such Certificate Balance at
a specified rate (with respect to each class of
Certificates, the "Pass-Through Rate"). Each class of
Certificates may have a different Pass-Through Rate,
which may be a fixed, variable or adjustable Pass-
Through Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the Pass-
Through Rate, or the method for determining the
applicable Pass-Through Rate, for each class of
Certificates.
A Series of Securities may include two or more classes
of Certificates that differ as to timing and priority
of distributions, seniority, allocations of losses,
Pass-Through Rate or amount of distributions in respect
of principal or interest. Additionally, distributions
in respect of principal or interest in respect of any
such class or classes may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the related
Primary Assets. If specified in the related Prospectus
Supplement, one or more classes of Certificates ("Strip
Certificates") may be entitled to (i) principal
distributions with disproportionate, nominal or no
interest distributions or (ii) interest distributions
with disproportionate, nominal or no principal
distributions. See "Description of the
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<PAGE>
Certificates-Distributions of Principal and Interest".
If a Series of Securities issued by an Owner Trust
includes classes of Notes, distributions in respect of
the Certificates will be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase
in a minimum denomination of $10,000 and in integral
multiples of $1,000 in excess thereof and will be
available in book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
Certificateholders will be able to receive Definitive
Certificates only in the limited circumstances
described herein or in the related Prospectus
Supplement. See "Certain Information Regarding the
Securities-Definitive Securities".
If the Servicer exercises its option to purchase the
Primary Assets of a Trust (or if not and, if and to the
extent provided in the related Prospectus Supplement,
satisfactory bids for the purchase of such Primary
Assets are received), in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing Agreements-
Termination", the Certificates will be prepaid as set
forth in the related Prospectus Supplement.
The Trust Property
General.............. On or prior to the date of issuance of a Series of
Securities specified in the related Prospectus
Supplement (the "Closing Date"), [the seller or sellers
specified in the related Prospectus Supplement, which
seller or sellers may also be the Servicer, (the
"Seller") will sell] [the Company will own and will
sell] Primary Assets having the aggregate principal
balance specified in such Prospectus Supplement as of
the date specified therein (the "Cutoff Date") [to the
Company and the Company will sell or transfer such
Primary Assets] to the Trust being formed on such date
pursuant to either (i) a Pooling and Servicing
Agreement (in the case of a Grantor Trust) or (ii) a
trust agreement (a "Trust Agreement") (in the case of
an Owner Trust).
The property of each Trust also will include amounts on
deposit in certain trust accounts, including the
related Collection Account and any other account
identified in the
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applicable Prospectus Supplement. See "Description of
the Transfer and Servicing Agreements-Trust Accounts".
Receivables.......... Receivables consist of Motor Vehicle Installment
Contracts secured by new or used automobiles, vans or
light duty trucks and the right to receive certain
payments made with respect to such Receivables,
security interests in the vehicles financed thereby
(the "Financed Vehicles"), certain accounts and the
proceeds thereof, and any proceeds from claims under
certain related insurance policies.
Receivables arise or will arise, from motor vehicle
installment loan agreements originated by [the Seller
or Sellers specified in the related Prospectus
Supplement (collectively, the "Seller")] [the Seller]
or motor vehicle retail installment sale contracts
acquired by the Seller (collectively, the "Motor
Vehicle Installment Contracts"), in each case secured
by new or used automobiles, vans or light duty trucks
purchased by the obligors on such Receivables (each, an
"Obligor") from motor vehicle dealers (the "Dealers").
The Receivables for any given Receivables Pool will be
selected from the Motor Vehicle Installment Contracts
owned by a Seller based on the criteria specified in
the related Receivables Purchase Agreement, and
described herein under "The Receivables Pools" and
"Description of the Transfer and Servicing Agreement-
Sale and Assignment of Receivables" and in the related
Prospectus Supplement under "The Receivables Pool."
Collateral
Certificates......... The Collateral Certificates consist of certain asset
backed certificates or notes, each issued pursuant to a
pooling and servicing agreement, sale and servicing
agreement, trust agreement or indenture (each, an
"Underlying Agreement"). Each Collateral Certificate
represents an interest in a trust fund ("an Underlying
Trust Fund") created pursuant to such Underlying
Agreement. The assets of each Underlying Trust Fund
consist primarily of a pool of motor vehicle
installment loan agreements and motor vehicle retail
installment sale contracts secured by new or used
automobiles, vans and light duty trucks, certain monies
due or received thereunder, security interests in the
vehicles financed thereby, and certain other property.
Holders of a Collateral Certificate are entitled to
receive distributions of interest and principal in
respect thereof as described herein. The Collateral
Certificates are more particularly described in related
Prospectus Supplement.
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Credit and Cash Flow
Enhancement........ If and to the extent specified in the related
Prospectus Supplement, credit enhancement with respect
to a Trust or any class or classes of Securities may
include any one or more of the following: subordination
of one or more other classes of Securities of the same
Series, reserve funds, spread accounts, yield
supplement accounts, surety bonds, insurance policies,
letters of credit, credit or liquidity facilities, cash
collateral accounts, over-collateralization, guaranteed
investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, other
agreements with respect to third party payments or
other support, cash deposits, or other arrangements
that are incidental to or related to the Primary Assets
included in a Trust. To the extent specified in the
related Prospectus Supplement, a form of credit
enhancement with respect to a Trust or class or classes
of Securities will be subject to certain limitations
and exclusions from coverage thereunder.
Transfer and Servicing
Agreements........... [The Seller will sell Receivables to the Company
pursuant to a Receivables Purchase Agreement. The
Company will (i) sell or transfer Receivables and will
assign certain rights and benefits received under a
Receivables Purchase Agreement or (ii) sell or transfer
Collateral Certificates to a Trust pursuant to a
Pooling and Servicing Agreement or a Trust Agreement.
The rights and benefits of an Owner Trust under any
such agreement will be assigned to the related
Indenture Trustee as collateral for the Notes of the
related Series.] [The Company will sell Collateral
Certificates held by it to the Trust] [The Company will
transfer funds to the Trust. The Trust will purchase
[Receivables] [Collateral Certificates] with such
funds].
A Servicer will agree with a Trust pursuant to the
Pooling and Servicing Agreement (in the case of a
Grantor Trust) or pursuant to a servicing agreement (a
"Servicing Agreement") (in the case of an Owner Trust)
to be responsible for servicing, managing, maintaining
custody of and making collections on Receivables.
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will advance scheduled
payments under each Precomputed Receivable that are not
timely made (a "Precomputed Advance") to the extent
that the Servicer, in its sole discretion, expects to
recoup the Precomputed Advance from subsequent payments
on or with respect to
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such Receivable or from other Precomputed Receivables.
With respect to Simple Interest Receivables, the
Servicer will advance any interest shortfall (a "Simple
Interest Advance"). As used herein, "Advance" means any
Precomputed Advance or Simple Interest Advance. The
Servicer will be entitled to reimbursement of Advances
from subsequent payments on or with respect to the
Receivables to the extent described in the related
Prospectus Supplement.
Unless otherwise provided in the related Prospectus
Supplement, the Seller will be obligated to repurchase
any Receivable in which the interest of the applicable
Trust is material and adversely affected as a result of
a breach of any representation or warranty made by the
Seller in the related Receivables Purchase Agreement if
such breach is not cured in a timely manner following
the discovery by or notice to the Seller thereof.
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will be obligated under the
Receivables Purchase Agreement to purchase or make
Advances with respect to any Receivable if, among other
things, it extends the date for final payment by the
Obligor thereon beyond the final scheduled maturity
date for the related Receivables Pool specified in the
related Prospectus Supplement (the "Final Scheduled
Maturity Date"), changes the annual percentage rate
(the "APR") or the amount of the scheduled monthly
payments on such Receivable or fails to maintain a
perfected security interest in the Financed Vehicle
related to such Receivable.
Unless otherwise specified in the related Prospectus
Supplement, the Servicer will receive a fee for
servicing the Receivables of each Trust equal to the
percentage specified in the related Prospectus
Supplement of the aggregate outstanding principal
balance of the related Receivables Pool, plus certain
late fees, prepayment charges and other administrative
fees or similar charges. See "Description of the
Transfer and Servicing Agreements-Servicing
Compensation and Payment of Expenses" herein and
"Description of the Transfer and Servicing Agreements-
Servicing Compensation" in the related Prospectus
Supplement.
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Certain Legal Aspects
of Receivables;
Repurchase
Obligations.......... Unless otherwise specified in the related Prospectus
Supplement, the Seller will be obligated to repurchase
any Receivable sold to a Trust as to which a first
perfected security interest in the name of the Seller
in the Financed Vehicle securing such Receivable shall
not exist as of the date such Receivable is purchased
by such Trust, if such breach shall materially
adversely affect the interest of such Trust in such
Receivable and if such failure or breach is not cured
by the Seller by the last day of the second month
following the discovery by or notice to the Seller of
such breach.
In connection with the sale of Receivables to a Trust,
security interests in the Financed Vehicles securing
such Receivables will be assigned by the Seller to such
Trust. Due to administrative burden and expense,
however, the certificates of title to such Financed
Vehicles will not be amended to reflect such assignment
to the Trust. In the absence of such an amendment, the
Trust may not have a perfected security interest in the
Financed Vehicles securing the Receivables in some
states. If a Trust does not have a perfected security
interest in a Financed Vehicle, its ability to realize
on such Financed Vehicle in the event of a default may
be adversely affected.
To the extent the security interest is perfected, such
Trust will have a prior claim over subsequent
purchasers of such Financed Vehicle and holders of
subsequently perfected security interests. However, as
against liens for repairs of Financed Vehicles or for
taxes unpaid by the related Obligor, or through fraud
or negligence, a Trust could lose its security
interest, or the priority of its security interest, in
a Financed Vehicle. Neither the Seller nor the Servicer
will be obligated to repurchase a Receivable with
respect to which a Trust loses its security interest or
the priority of its security interest in the related
Financed Vehicle for any such cause after the Closing
Date.
Federal and state consumer protection laws impose
requirements on creditors in connection with extensions
of credit and collections of retail installment loans,
and certain of these laws make an assignee of such a
loan liable to the obligor thereon for any violation by
the lender. Unless otherwise specified in the related
Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable that
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fails to comply with such requirements. See "Certain
Legal Aspects of the Receivables".
Tax Considerations..... If a Prospectus Supplement specifies that the related
Trust will be an Owner Trust, upon the issuance of the
related Series of Securities Federal Tax Counsel to
such Trust will deliver an opinion to the effect that,
for federal income tax purposes: (i) any Notes of such
Series will be characterized as debt and (ii) such
Trust will not be characterized as an association or a
publicly traded partnership taxable as a corporation.
In respect of any such Series, each holder of a Note
(each, a "Noteholder"), by the acceptance of a Note of
such Series, will agree to treat such Note as
indebtedness, and each holder of a Certificate (each, a
"Certificateholder"), by the acceptance of a
Certificate of such Series, will agree to treat such
Trust as a partnership in which such Certificateholder
is a partner for federal income tax purposes.
Alternative characterizations of such Trust and such
Certificates are possible, but would not result in
materially adverse tax consequences to
Certificateholders.
If a Prospectus Supplement specifies that the related
Trust will be a Grantor Trust, except as otherwise
provided in such Prospectus Supplement, upon the
issuance of the related Series of Certificates Federal
Tax Counsel to such Trust will deliver an opinion to
the effect that such Trust will be treated as a grantor
trust for federal income tax purposes and will not be
subject to federal income tax.
See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences with respect to Owner
Trusts" for additional information regarding the
application of tax laws.
ERISA Considerations... Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, and unless otherwise specified therein, (i)
the Notes of any Series issued by an Owner Trust and
(ii) any Certificates issued by a Grantor Trust that
are not subordinated to any other security and that
meet certain other requirements are eligible for
purchase by employee benefit plans.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of any Series that are
subordinated to any other Security of that Series may
not be acquired by any "employee benefit plan" as
defined in and
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<PAGE>
subject to the Employee Retirement Income Security Act
of 1974, as amended, or by any "plan" as defined in
Section 4975 of the Code. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
Legal Investment....... Investors whose investment authority is subject to
legal restrictions should consult their own legal
advisors to determine whether and to what extent the
Certificates or Notes constitute legal investments for
them.
Ratings................ It is a condition to the issuance of the Securities to
be offered hereunder that they be rated in one of the
four highest rating categories by at least one
nationally recognized statistical rating organization.
A rating is not a recommendation to purchase, hold or
sell Securities inasmuch as such rating does not
comment as to market price or suitability for a
particular investor. Ratings of Securities will address
the likelihood of the payment of principal and interest
thereon pursuant to their terms. There can be no
assurance that a rating will remain for a given period
of time or that a rating will not be lowered or
withdrawn entirely by a rating agency if in its
judgment circumstances in the future so warrant. For
more detailed information regarding the ratings
assigned to any class of a particular Series of
Securities, see "Summary of Terms-Rating of the
Securities" and "Risk Factors -Ratings of the
Securities" in the related Prospectus Supplement.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in
the related Prospectus Supplement to be prepared and delivered in connection
with the offering of any Series of Securities, prospective investors should
carefully consider the following risk factors before investing in any class or
classes of Securities of any such Series.
Certain Legal Aspects - Security Interests in Financed Vehicles.
Security interests in the Financed Vehicles securing Receivables will be
assigned to the related Trust. Due to administrative burden and expense,
however, the certificates of title to the Financed Vehicles will not be amended
to reflect such assignment to the Trust. In the absence of such amendments, a
Trust may not have perfected security interest in the Financed Vehicles
securing the Receivables in some states.
If a Trust does not have a perfected security interest in a Financed
Vehicle, its ability to realize in the event of a default on such Financed
Vehicle may be adversely affected. To the extent the security interest is
perfected, the Trust will have a prior claim over subsequent purchasers of such
Financed Vehicle and holders of subsequently perfected security interests;
however, the Trust could lose its security interest or the priority of its
security interest as against liens for repairs to Financed Vehicles or for
taxes unpaid by an Obligor under a Receivable or through fraud or negligence.
Neither the Seller nor the Servicer will have any obligation to repurchase a
Receivable in respect of which a Trust so loses its security interest in the
related Financed Vehicle after the date such security interest was conveyed to
such Trust. See "Certain Legal Aspects of the Receivables - Security Interests
in Financed Vehicles".
Unless otherwise provided in the related Prospectus Supplement, the
Seller will be obligated to repurchase any Receivable sold to a Trust as to
which a perfected security interest in the name of the Seller in the Financed
Vehicle securing such Receivable shall not exist as of the date such Receivable
is transferred to such Trust, if such breach shall materially adversely affect
the interest of the Trust in such Receivable and if such failure or breach is
not timely cured following discovery by or notice thereof to the Seller.
Certain Legal Aspects - Consumer Protection Laws. Federal and state
consumer protection laws impose requirements on creditors in connection with
extensions of credit and collections of retail installment obligations, and
certain of these laws make an assignee of such a loan (such as a Trust) liable
to the obligor thereon for any violation by the lender. To the extent
specified herein and in the related Prospectus Supplement, the Seller will be
obligated to repurchase any Receivable that fails to comply with such
requirements. See "Certain Legal Aspects of the Receivables - Consumer
Protection Laws".
Certain Legal Aspects - Insolvency Considerations. Each Seller intends
that the transfer of the Receivables by it under each Receivables Purchase
Agreement constitute a sale. Notwithstanding the foregoing, in the event that
such Seller were to become a debtor in a bankruptcy case a court could take the
position that the sale of Receivables to the Company
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should be treated as a pledge of such Receivables to secure a borrowing by such
Seller. If the transfer to the Trust were to be characterized as a secured
loan, to the extent that the Seller would be deemed to have granted a security
interest in the Receivables to the Trust, and that interest had been validly
perfected before the Seller's insolvency and had not been taken in
contemplation of insolvency, that security interest should not be subject to
avoidance, and payments to be with respect to the Receivables should not be
subject to recovery by a receiver of the Seller. However, in such a case,
delays in payments on the Notes and the Certificates and possible reductions in
the amount of those payments could occur.
Recent Developments. The U.S. Court of Appeals for the Tenth Circuit in
its decision in Octagon Gas Systems, Inc. v. Rimmer (In re Meridian Reserve,
Inc.) (decided May 27, 1993) concluded (noting that its position is in contrast
to that taken by another court) that accounts receivable sold by the debtor
prior to the filing for bankruptcy remain property of the debtor's bankruptcy
estate. The Seller will warrant in each Receivables Purchase Agreement that
the sale of Receivables to the related Trust is a valid sale of such
Receivables to such Trust. For a discussion of certain consequences of
characterization of a transaction as a sale or a pledge, see Certain Legal
Aspects - Bankruptcy Considerations above.
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one or more
classes of Certificates of a Series may be subordinated in priority of payment
to interest and principal due on the Notes, if any, of such Series or one or
more classes of Certificates of such Series. Moreover, none of the Trusts will
have, nor will any such Trust be permitted or expected to have, any significant
assets or sources of funds other than the Primary Assets and, to the extent
provided in the related Prospectus Supplement, access to funds in Reserve
Account or other form of credit enhancement. The Notes, if any, of any Series
will represent obligations solely of, and the Certificates of any such Series
will represent interests solely in, the related Trust, and neither the Notes
nor the Certificates of any such Series will represent obligations of or
interests in, or be insured or guaranteed by, the Company, related Seller,
Servicer, Trustee or Indenture Trustee, or any other entity. Consequently,
holders of the Securities of any Series must rely for repayment upon payments
on the related Primary Assets and, if and to the extent available, amounts
payable under any available form of credit enhancement, as specified in the
related Prospectus Supplement.
Maturity and Prepayment Considerations - Receivables. All of the
Receivables are prepayable at any time. When used herein with respect to any
Receivable, the term "prepayment" includes prepayments in full, partial
prepayments (including those related to rebates of extended warranty contract
costs and insurance premiums) and liquidation due to default, as well as
receipts of proceeds from physical damage, credit life and disability insurance
policies and Repurchase Amounts (as defined herein) with respect to certain
other Receivables repurchased for administrative reasons. The rate of
prepayments on the Receivables may be influenced by a variety of economic,
social and other factors, including the fact that an Obligor generally may not
sell or transfer the Financed Vehicle securing a Receivable without the consent
of the Seller. The rate of prepayment on the Receivables may also be
influenced by the
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<PAGE>
structure of the underlying loans. See "Weighted Average Life of the
Securities". In addition, pursuant to each Receivables Purchase Agreement, the
Seller will be obligated to repurchase Receivables in respect of which it is in
breach of certain representations, warranties or covenants. See "Description
of the Transfer and Servicing Agreements - Sale and Assignment of Receivables".
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables held by a Trust will be borne entirely by the Holders
of the related Series of Securities. See also "Description of the Transfer and
Servicing Agreements-Termination" regarding the Servicer's option to purchase
the Receivables of a given Receivables Pool.
Maturity and Prepayment Considerations - Collateral Certificates. The
rate of payment of principal of Securities, and the aggregate amount of each
distribution on and the yield to maturity of all Securities will depend on a
number of factors, including the performance of the Collateral Certificates and
the rate of payment of principal (including prepayments) thereof. Each of the
Collateral Certificates is subject to prepayment, which may result from the
occurrence of the events described herein and in the prospectus used in
connection with the offering of such Collateral Certificates.
The rate of payment of principal of the Securities may also be affected
by the repurchase of the underlying receivables, and the corresponding
retirement of the Collateral Certificates. In such event, the amount paid in
respect of the Collateral Certificates held by the Trust would be treated as
prepayment of principal and accrued interest of the Collateral Certificates and
thus would be passed through to the Securityholders.
Risk of Commingling. With respect to each Trust, the Servicer will
deposit all payments on the related Primary Assets (from whatever source) and
all proceeds of such Primary Assets collected during the period specified in
the related Prospectus Supplement (a "Collection Period") into the related
Collection Account within two business days of receipt thereof. However, in
the event that a Servicer satisfies certain requirements for monthly or less
frequent remittances and the Rating Agencies (as such term is defined in the
related Prospectus Supplement) affirm their initial rating of the related
Securities, then for so long as such Servicer is the Servicer and provided that
(i) no Servicer Default exists and (ii) each other condition to making monthly
or less frequent deposits as may be specified by the Rating Agencies and
described in the related Prospectus Supplement is satisfied, the Servicer will
not be required to deposit such amounts into the Collection Account of such
Trust until the business day preceding each Distribution Date. The Servicer
will deposit the aggregate Repurchase Amount for Receivables purchased by the
Servicer during the related Collection Period into the applicable Collection
Account on or before the business day preceding each Distribution Date.
Pending deposit into such Collection Account, collections may be invested by
the Servicer at its own risk and for its own benefit and will not be segregated
from funds of the Servicer. If the Servicer were unable to remit such funds,
the applicable Securityholders might incur a loss. To the extent set forth in
the related Prospectus Supplement, the Servicer may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related Trust to secure timely remittances of collections on
the related Primary Assets or
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<PAGE>
payment of the aggregate Repurchase Amount with respect to Receivables
purchased by the Servicer.
Servicer Default. Unless otherwise provided in the related Prospectus
Supplement with respect to a Series of Securities issued by an Owner Trust,
upon the occurrence of a Servicer Default the related Indenture Trustee or
Noteholders may remove the Servicer without the consent of the related Trustee
or any Certificateholders. The Trustee or the Certificateholder with respect
to such Series will not have the ability to remove the Servicer if a Servicer
Default occurs. In addition, the Noteholders with respect to such Series have
the ability, with certain specified exceptions, to waive defaults by the
Servicer, including defaults that could materially adversely affect the
Certificateholders of such Series. See "Description of the Transfer and
Servicing Agreements - Waiver of Past Defaults".
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, each class of the Securities of a given Series initially
will be represented by one or more certificates registered in the name of Cede
& Co. ("Cede"), or any other nominee of The Depository Trust Company ("DTC")
set forth in the related Prospectus Supplement, and will not be registered in
the names of the holders of the Securities of such Series or their nominees.
Because of this, unless and until Definitive Securities for such Series are
issued, holders of such Securities will not be recognized by the applicable
Trustee or Indenture Trustee as "Certificateholders", "Noteholders" or
"Securityholders", as the case may be (as such terms are used herein or in the
related Pooling and Servicing Agreement or the related Indenture and Trust
Agreement, as applicable). Hence, until Definitive Securities are issued,
holders of such Securities will be able to exercise the rights of
Securityholders only indirectly through DTC and its participating
organizations. See "Certain Information Regarding the Securities - Book-Entry
Registration" and "- Definitive Securities".
THE TRUSTS
With respect to each Series of Securities, the Company will establish a
separate Trust pursuant to a Trust Agreement or Pooling and Servicing
Agreement, as applicable, for the transactions described herein and in the
related Prospectus Supplement. The property of each Trust will include Primary
Assets and all payments due thereunder on and after the applicable Cutoff Date
in the case of Precomputed Receivables and all payments received thereunder on
and after the applicable Cutoff Date in the case of Simple Interest Receivables
or Collateral Certificates. On the applicable Closing Date, after the issuance
of the Notes and/or Certificates of a given Series, the Company will transfer
or sell Primary Assets to the Trust in the outstanding principal amount
specified in the related Prospectus Supplement. The property of each Trust may
also include (i) such amounts as from time to time may be held in separate
trust accounts established and maintained pursuant to the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, and the proceeds
of such accounts, as described herein and in the related Prospectus Supplement;
(ii) security interests in Financed Vehicles and any other interest of a Seller
in such Financed Vehicles; (iii) the rights to proceed from claims on certain
physical damage, credit life and disability insurance policies covering
Financed Vehicles or the
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Obligors, as the case may be; (iv) any property that shall have secured a
Receivable and that shall have been acquired by the applicable Trust; and (v)
any and all proceeds of the Primary Assets or the foregoing. To the extent
specified in the related Prospectus Supplement, a Reserve Account or other form
of credit enhancement may be a part of the property of a given Trust or may be
held by the Trustee for the benefit of holders of the related Securities.
The Servicer specified in the related Prospectus Supplement, as servicer
under the Pooling and Servicing Agreement or Servicing Agreement, as
applicable, will service the Primary Assets held by each Trust and will receive
fees for such services. See "Description of the Transfer and Servicing
Agreements - Servicing Compensation and Payment of Expenses" herein and
"Description of the Transfer and Servicing Agreement - Servicing Compensation"
in the related Prospectus Supplement. To facilitate the servicing of Primary
Assets, each Seller and each Trustee will authorize the Servicer to retain
physical possession of the Receivables held by each Trust and other documents
relating thereto as custodian for each such Trust. Due to the administrative
burden and expense, the certificates of title to the Financed Vehicles will not
be amended to reflect the sale and assignment of the security interest in the
Financed Vehicles to a Trust. In the absence of such an amendment, a Trust may
not have a perfected security interest in certain of the Financed Vehicle in
some states. See "Certain Legal Aspects of the Receivables" and "Description
of the Transfer and Servicing Agreements - Sale and Assignment of Receivables".
If the protection provided to (i) holders of Notes issued by an Owner
Trust by the subordination of the related Certificates and by the Reserve
Account, if any, or any other available form of credit enhancement for such
Series or (ii) Certificateholders by any such Reserve Account or other form of
credit enhancement is insufficient, such Noteholders or Certificateholders, as
the case may be, will have to look to payments or by or on behalf of Obligors
on Receivables or on the Collateral Certificates, as applicable, and the
proceeds from the repossession and sale of Financed Vehicles that secure
defaulted Receivables for distributions of principal and interest on the
Securities. In such event, certain factors, such as the applicable Trust's not
having perfected security interests in all of the Financed Vehicles, may limit
the ability of a Trust to realize on the collateral securing the related
Primary Assets, or may limit the amount realized to less than the amount due
under Motor Vehicle Installment Contracts. Securityholders may be subject to
delays in payment on, or may incur losses on their investment in, such
Securities as a result of defaults or delinquencies by Obligors and
depreciation in the value of the related Financed Vehicles. See "Description
of the Transfer and Servicing Agreements - Credit and Cash Flow Enhancement"
and "Certain Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
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THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and Servicing Agreement or the
related Pooling and Servicing Agreement, as applicable. A Trustee may resign
at any time, in which event the Servicer will be obligated to appoint a
successor trustee. The Servicer may also remove the related Trustee if such
Trustee ceases to be eligible to continue as Trustee under the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, and will be
obligated to appoint a successor trustee. Any resignation or removal of a
Trustee and appointment of a successor trustee will not become effective until
the acceptance of the appointment by the successor trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in a Receivables Pool have been or will be originated or
acquired by a Seller in the ordinary course of business, in accordance with its
credit and underwriting standards as described in the related Prospectus
Supplement.
The Receivables to be sold to each Trust will be selected from a Seller's
portfolio for inclusion in a Receivables Pool based on several criteria,
including that, unless otherwise provided in the related Prospectus Supplement,
each Receivable (i) is secured by a new or used vehicle, (ii) was originated or
acquired (either from a motor vehicle dealer or a financial institution) by the
Seller (iii) provides for level monthly payments (except for the last payment,
which may be minimally different from the level payments) that full amortize
the amount financed over the original term to maturity of the related Motor
Vehicle Installment Contract, (iv) is a Precomputed Receivable or a Simple
Interest Receivable and (v) satisfies the other criteria, if any, set forth in
the related Prospectus Supplement. No selection procedures believed by the
Seller to be adverse to Securityholders were or will be used in selecting the
Receivables.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78s" ("Rule of 78s
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level monthly installment payments. Each monthly
installment, including the monthly installment representing the final payment
on the Receivable, consists of (x) an amount of interest equal to 1/12 of the
stated contract interest rate under the related Motor Vehicle Installment
Contract multiplied by the unpaid principal balance of such loan, plus (y) an
amount allocable to principal equal to the remainder of the monthly payment. A
Rule of 78s Receivable provides for the payment by the obligor of a specified
total amount of payments, payable in equal monthly installments on each due
date, which total represents the principal amount financed plus add-on interest
in an amount calculated at the stated contract interest rate under
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the related Motor Vehicle Installment Contract for the term of the receivable.
The rate at which such amount of add-on interest is earned and,
correspondingly, the amount of each fixed monthly payment allocated to
reduction of the outstanding principal amount are calculated in accordance with
the Rule of 78s.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed thereunder over a series of fixed level
monthly payments. However, unlike the monthly payment under an Actuarial
Receivable, each monthly payment consists of an installment of interest that is
calculated on the basis of the outstanding principal balance of the receivable
multiplied by the stated contract interest rate under the related Motor Vehicle
Installment Contract and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Simple Interest Receivable, the amount
received is applied first to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if an
obligor pays a fixed monthly installment before its scheduled due date, the
portion of the payment allocable to interest for the period since the preceding
payment was made will be less than it would have been had the payment been made
as scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since preceding payment was
made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly less. In either case, the obligor is
obligated to pay a fixed monthly installment until the final scheduled payment
date, at which time the amount of the final installment may be increased or
decreased as necessary to repay the then outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration)
of a Rule of 78s Receivable, under the terms of the contract a "refund" or
"rebate" will be made to the Obligor of the portion of the total amount of
payments then due and payable allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78s. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the obligor is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78s Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule.
Unless otherwise provided in the related Prospectus Supplement, each
Trust will account for the Rule of 78s Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of
78s Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to Noteholders or passed through to Certificateholders
of the applicable Series, but will be paid to the Servicer as additional
servicing compensation.
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Information with respect to each Receivables Pool will be set forth in
the related Prospectus Supplement, including, to the extent appropriate, the
composition and distribution by APR and by states of origination of the
Receivables, the portion of such Receivables Pool consisting of Precomputed
Receivables and of Simple Interest Receivables, and the portion of such
Receivables Pool secured by new vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of a Seller pertaining to
delinquencies, repossessions and net losses with respect to Motor Vehicle
Installment Contracts will be set forth in each Prospectus Supplement. There
can be no assurance that the delinquency, repossession and net loss experience
on any Receivables Pool will be comparable to prior experience or to such
information.
THE COLLATERAL CERTIFICATES
GENERAL
Primary Assets for a Series may consist, in whole or in part, of
Collateral Certificates which include certificates evidencing an undivided
interest in, or notes or loans secured by, motor vehicle installment loan
agreements and motor vehicle retail installment sale contracts. Such
certificates, notes or loans will have previously been offered and distributed
to the public pursuant to an effective registration statement or are being
registered under the Securities Act in connection with the offering of a Series
of Securities. Collateral Certificates will have been issued pursuant to a
pooling and servicing agreement, a sale and servicing agreement, a trust
agreement, an indenture or similar agreement (an "Underlying Trust Agreement").
The servicer (the "Underlying Servicer") of such underlying motor vehicle
installment loans or sale contracts will have entered into the Underlying Trust
Agreement with a trustee (the "Underlying Trustee").
The issuer of the Collateral Certificates (the "Underlying Issuer") will
be a financial institution, corporation, or other entity engaged generally in
the business of purchasing or originating motor vehicle installment loan
agreements and motor vehicle retail installment sale contracts; or a limited
purpose corporation organized for the purpose of, among other things,
establishing trusts and acquiring and selling receivables to such trusts, and
selling beneficial interests in such trusts; or one of such trusts. If so
specified in the related Prospectus Supplement, the Underlying Issuer may be an
affiliate of the Company. The obligations of the Underlying Issuer will
generally be limited to certain representations and warranties with respect to
the assets conveyed by it to the related trust. Unless otherwise specified in
the related Prospectus Supplement, the Underlying Issuer will not have
guaranteed any of the assets conveyed to the related trust or any of the
Collateral Certificates issued under the Underlying Trust Agreement.
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Distributions of principal and interest will be made on the Collateral
Certificates on the dates specified in the related Prospectus Supplement. The
Collateral Certificates may be entitled to receive nominal or no principal
distribution or nominal or no interest distributions. Principal and interest
distributions will be made on the Collateral Certificates by the Underlying
Trustee or the Underlying Servicer. The Underlying Issuer or the Underlying
Servicer may have the right to repurchase assets underlying the Collateral
Certificates after a certain date or under other circumstances specified in the
related Prospectus Supplement.
ENHANCEMENT RELATING TO COLLATERAL CERTIFICATES.
Enhancement in the form of reserve funds, subordination of other
Securities issued in connection with the Collateral Certificates, guarantees,
letters of credit, cash collateral accounts, insurance policies or other types
of enhancement may be provided with respect to the Receivables underlying the
Collateral Certificates or with respect to the Collateral Certificates
themselves. The type, characteristics and amount of enhancement will be a
function of certain characteristics of the Receivables and other factors and
will have been established for the Collateral Certificates on the basis of
requirements of rating agencies.
ADDITIONAL INFORMATION.
The related Prospectus Supplement for a Series for which the Primary
Assets include Collateral Certificates will specify, to the extent relevant and
to the extent such information is reasonably available to the Company and the
Company reasonably believes such information to be reliable: (i) the aggregate
approximate principal amount and type of the Collateral Certificates to be
included in the Primary Assets; (ii) certain characteristics of the receivables
which comprise the underlying assets for the Collateral Certificates; (iii) the
expected and final maturity of the Collateral Certificates; (iv) the interest
rate of the Collateral Certificates; (v) the Underlying Issuer, the Underlying
Servicer (if other than the Underlying Issuer) and the Underlying Trustee for
such Collateral Certificates; (vi) certain characteristics of the enhancement,
if any, such as reserve funds, insurance funds, insurance policies, letters of
credit or guarantees relating to the receivables underlying the Collateral
Certificates or to such Collateral Certificates themselves; (vii) the terms on
which the underlying receivables for such Collateral Certificates may, or are
required to, be purchased prior to their stated maturity or the stated maturity
of the Collateral Certificates; and (viii) the terms on which receivables may
be substituted for those originally underlying the Collateral Certificates.
If information of the nature described above representing the Collateral
Certificates is not known to the Company at the time the Certificates are
initially offered, approximate or more general information of the nature
described above will be provided in the related Prospectus Supplement and the
additional information, if available, will be set forth in a Current Report on
Form 8-K to be available to investors on the date of issuance of the related
Series and to be filed with the Commission within 15 days of the initial
issuance of such Certificates.
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WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates of
any Series generally will be influenced by the rate at which the principal
balances of the related Primary Assets are paid, which payment may be in the
form of scheduled amortization or prepayments. With respect to Securities
backed by Receivables and to receivables underlying Collateral Certificates,
the term "prepayments" includes prepayments in full, partial prepayments
(including those related to rebates of extended warranty contract costs and
insurance premiums), liquidations due to defaults, as well as receipts of
proceeds from physical damage, credit life and disability insurance policies,
or the Repurchase Amount of Receivables repurchased by the Company or a Seller
or purchased by a Servicer for administrative reasons. Substantially all of
the Receivables are prepayable at any time without penalty to the Obligor. The
rate of prepayment of automotive receivables is influenced by a variety of
economic, social and other factors, including the fact that an Obligor
generally may not sell or transfer the Financed Vehicle securing a receivable
without the consent of the related seller. The rate of prepayment on the
receivables may also be influenced by the structure of the loan. In addition,
under certain circumstances, the related Seller will be obligated to repurchase
Receivables from a given Trust pursuant to the related Receivables Purchase
Agreement as a result of breaches of representations and warranties, and the
Servicer will be obligated to purchase receivables from such Trust pursuant to
the Servicing Agreement or Pooling and Servicing Agreement as a result of
breaches of certain covenants. See "Description of the Transfer and Servicing
Agreements - Sale and Assignment of Receivables" and "- Servicing Procedures".
See also "Description of the Transfer and Servicing Agreements - Termination"
regarding the Servicer's option to purchase Primary Assets from a given Trust.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes and/or Certificates of a
Series on each Distribution Date since such amount will depend, in part, on the
amount of principal collected on the related Primary Assets during the
applicable Collection Period. Any reinvestment risks resulting from a faster
or slower incidence of payment of Primary Assets will be borne entirely by the
Noteholders and Certificateholders. The related Prospectus Supplement may set
forth certain additional information with respect to the maturity and
prepayment considerations applicable to particular Primary Assets and the
related Series of Securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such class of Notes indicating the remaining outstanding principal balance
of such class of Notes, as of the applicable Distribution Date (after giving
effect to payments to be made on such Distribution Date), as a fraction of the
initial outstanding principal balance of such class of Notes. The "Certificate
Pool Factor" for each class of Certificates will be a seven-digit decimal which
the Servicer will compute prior to each distribution with respect to such class
of Certificates indicating the
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remaining Certificate Balance of such class of Certificates, as of the
applicable Distribution Date (after giving effect to distributions to be made
on such Distribution Date), as a fraction of the initial Certificate Balance of
such class of Certificates. Each Note Pool Factor and each Certificate Pool
Factor will be 1.0000000 as of the related Closing Date, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes or the reduction of the Certificate Balance of the
applicable class of Certificates. A Noteholder's portion of the aggregate
outstanding principal balance of the related class of Notes will be the product
of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor at the time of determination. A
Certificateholder's portion of the aggregate outstanding Certificate Balance
for the related class of Certificates will be the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the applicable
Certificate Pool Factor at the time of determination.
Unless otherwise provided in the related Prospectus Supplement, the
Noteholders, if any, and the Certificateholders will receive reports on or
about each Distribution Date concerning payments received on the Receivables,
the Pool Balance and each Note Pool Factor or Certificate Pool Factor, as
applicable. In addition, Securityholders of record during any calendar year
will be furnished information for tax reporting purposes not later than the
latest date permitted by law. See "Certain Information Regarding the
Securities - Statements to Securityholders".
THE SELLER AND THE SERVICER
Certain information with respect to the Seller and the Servicer will be
set forth in the related Prospectus Supplement.
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the Securities of a Series will be applied by the
applicable Trust to the purchase of the Primary Assets from [the Company] [the
Seller]. The Company will use the portion of such proceeds paid to it to
purchase the Primary Assets.
DESCRIPTION OF THE NOTES
GENERAL
Each Owner Trust will issue one or more classes of Notes pursuant to an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The following summary does
not purport to be complete and is subject to, and is qualified in its entirely
by reference to, the provisions of the related Notes and Indenture.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially by represented by one or more certificates
registered in the name of the nominee of
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DTC (together with any successor depository selected by the Trust, the
"Depository"). Unless otherwise specified in the related Prospectus
Supplement, the Notes will be available for purchase in minimum denominations
of $1,000 and integral multiples thereof in book-entry form only. The Company
has been informed by DTC that DTC's nominee will be Cede unless another nominee
is specified in the related Prospectus Supplement. Accordingly, such nominee
is expected to be the holder of record of the Notes of each class. Unless and
until Definitive Notes are issued under the limited circumstances described
herein or in the related Prospectus Supplement, no Noteholder will be entitled
to receive a physical certificate representing a Note. All references herein
and in the related Prospectus Supplement to actions by Noteholders refer to
action taken by DTC upon instructions from it participating organizations, and
all references herein and in the related Prospectus Supplement to
distributions, notices, reports and statements to Noteholders refer to
distributions, notices, reports and statements to DTC or its nominee, as
registered holder of the Notes, for distribution to Noteholders in accordance
with DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities - Book-Entry Registration" and "- Definitive Securities".
DISTRIBUTION OF PRINCIPAL AND INTEREST
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a Series will be described in the related
Prospectus Supplement. The right of holders of any class of Notes to receive
payments of principal and interest may be senior or subordinate to the rights
of holders of one or more other class or classes of Notes of such Series, as
described in the related Prospectus Supplement. Unless otherwise provided in
the related Prospectus Supplement, payments of interest on the Notes will be
made prior to payments of principal thereon. If so provided in the related
Prospectus Supplement, a Series of Notes may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments with disproportionate,
nominal or no principal payments. Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest Rate (and
which may be zero for certain classes of Strip Notes), or any combination of
the foregoing. The related Prospectus Supplement will specify the Interest
Rate for each class of Notes of a Series or the method for determining such
Interest Rate. One or more classes of Notes of a Series may be redeemable in
whole or in part under the circumstances specified in the related Prospectus
Supplement, including as a result of the exercise by the Servicer of its option
to purchase the related Receivable Pool. See "Description of the Transfer and
Servicing Agreements - Termination".
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a given Series may have fixed principal payment schedules, as set
forth in such Prospectus Supplement. Holders of any Notes will be entitled to
receive payments of principal on any given Distribution Date in the applicable
amount set forth on such schedule with respect to such Notes, in the manner and
to the extent set forth in the related Prospectus Supplement.
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Unless otherwise specified in the related Prospectus Supplement, payment
of interest to Noteholders of all classes within a Series will have the same
priority. Under certain circumstances, the amount available for such payments
could be less than the amount of interest payable on the Notes on a
Distribution Date, in which case each class of Notes will receive its ratable
share (based upon the aggregate amount of interest due to such class of Notes)
of the aggregate amount available to be distributed on such date as interest on
the Notes of such Series. See "Description of the Transfer and Servicing
Agreements - Distribution" and "- Credit and Cash Flow Enhancement".
In the case of a Series of Securities issued by an Owner Trust that
includes two or more classes of Notes, the sequential order and priority of
payment in respect of principal and interest, and any schedule or formula or
other provisions applicable to the determination thereof, of each such class
will be set forth in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, payments in respect of
principal of and interest on any class of Notes will be made on pro rata basis
among all the Noteholders of such class.
CERTAIN PROVISIONS OF THE INDENTURE
Events of Default; Rights upon Event of Default. Unless otherwise
specified in the related Prospectus Supplement, "Events of Default" in respect
of a Series of Notes under the related Indenture will consist of: (i) a default
for five days or more in the payment of any interest on any such Note: (ii) a
default in the payment of the principal of, or any installment of the principal
of, any such Note when the same becomes due and payable; (iii) a default in the
observance of performance in any material respect of any covenant or agreement
of the related Trust made in such Indenture and the continuation of any such
default for a period of 30 days after notice thereof is given to the related
Trust by the applicable Indenture Trustee or to such Trust and the related
Indenture Trustee by the holders of 25% of the aggregate outstanding principal
amount of such Notes; (iv) any representation or warranty made by such Trust in
the related Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, if such breach is not cured with 30 days after notice thereof is given to
such Trust by the applicable Indenture Trustee or to such Trust and such
Indenture Trustee by the holder of 25% of the aggregate outstanding principal
amount of such Notes; and (v) certain events of bankruptcy, insolvency,
receivership or liquidation with respect to such Trust. The amount of
principal required to be paid to Noteholders of each Series under the related
Indenture on any Distribution Date generally will be limited to amounts
available to be deposited in the applicable Note Distribution Account;
therefore, unless otherwise specified in the related Prospectus Supplement, the
failure to pay principal on a class of Notes generally will not result in the
occurrence of an Event of Default until the applicable final scheduled
Distribution Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any Series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes may declare the principal of such Notes to be
immediately due and payable. Such declaration
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may, under certain circumstances, be rescinded by the holders of a majority in
principal amount of such Notes then outstanding.
If the Notes of any Series are declared due and payable following an
Event of Default, the related Indenture Trustee may institute proceedings to
collect amounts due thereon, foreclose on the property of the Trust, exercise
remedies as a secured party, sell the related Primary Assets or elect to have
the applicable Trust maintain possession of such Primary Assets and continue to
apply collections on such Primary Assets as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, the Indenture Trustee will be prohibited from selling the Primary
Assets following and Event of Default, other than a default in the payment of
any principal of, or a default for five days or more in the payment of any
interest on, any Note of such Series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of the Primary Assets would not be sufficient on
an ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding principal amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a Series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders of such Notes if it
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities that might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the related Indenture, the holders of a majority of the aggregate
outstanding principal amount of the Notes of a Series will have the right to
direct the time, method and place of conducting any proceeding or exercising
any remedy available to the related Indenture Trustee; in addition, the holders
of Notes representing a majority of the aggregate outstanding principal amount
of such Notes may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal of or interest on any Note or a
default in respect of a covenant or provision of such Indenture that cannot be
modified or amended without the waiver or consent of the holders of all the
outstanding Notes of such Series.
Unless otherwise specified in the related Prospectus Supplement, no
holder of a Note will have the right to institute any proceeding with respect
to the related Indenture, unless (i) such holder previously has given to the
applicable Indenture Trustee written notice of a continuing Event of Default;
(ii) the holders of not less than 25% of the outstanding principal amount of
such Notes have made written request to such Indenture Trustee so institute
such proceeding in its own name as Indenture Trustee; (iii) such holder or
holders have offered such Indenture
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Trustee reasonable indemnity; (iv) such Indenture Trustee has for 60 days
failed to institute such proceeding; and (v) no direction inconsistent with
such written request has been given to such Indenture Trustee during such
60-day period by the holders of a majority of the outstanding principal amount
of the Notes of such Series.
With respect to any Owner Trust, none of the related Indenture Trustee in
its individual capacity, the related Trustee in its individual capacity, any
holder of a Certificate representing an ownership interest in such Trust, or
any of their respective beneficiaries, agents, officers, directors, employees,
affiliates, successors or assigns will, in the absence of an express agreement
to the contrary, be personally liable for the payment of the principal of or
interest on the related Notes or for the agreements of such Trust contained in
the applicable Indenture.
No Trust may engage in any activity other than as described herein or in
the related Prospectus Supplement. No Trust will incur, assume or guarantee
any indebtedness other than indebtedness incurred pursuant to the related Notes
and the related Indenture, pursuant to any Advances made to it by the Servicer
or otherwise in accordance with the Related Documents (as defined herein).
Certain Covenants. Each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia; (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments
upon the Notes of the related Series and to perform or observe every agreement
and covenant of such Trust under the Indenture; (iii) no Event of Default shall
have occurred and be continuing immediately after such merger or consolidation;
(iv) such Trust has been advised by each Rating Agency that such merger or
consolidation will not result in the qualification, reduction or withdrawal of
its then-current rating of any class of the Notes or Certificates of such
Series; and (v) such Trust has received an opinion of counsel to the effect
that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any related Noteholder or Certificateholder.
No Owner Trust will (i) except as expressly permitted by the applicable
Indenture, the applicable Transfer and Servicing Agreements or certain other
documents with respect to such Trust (the "Related Documents"), sell, transfer,
exchange or otherwise dispose of any of the assets of such Trust; (ii) claim
any credit on or make any deduction from the principal and interest payment in
respect to the related Notes (other than amounts withheld under the Code or
applicable state tax laws) or assert any claim against any present or former
holder of such Notes because of the payment of taxes levied or assessed upon
such Trust; (iii) dissolve or liquidate in whole or in part; (iv) permit the
validity or effectiveness of the related Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to the
related Notes under such Indenture except as may be expressly permitted
thereby; (v) permit any lien, charge, excise, claim, security interest,
mortgage, or other encumbrance to be created on or extent to or otherwise arise
upon or burden the assets of such Trust or any part thereof, or any interest
therein or the proceeds thereof; or (vi) permit the lien of the related
Indenture
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not to constitute a valid first priority security interest (other than with
respect to a tax, mechanics' or similar lien) in the asset of such Trust.
Each Indenture Trustee and the related Noteholders, by accepting the
related Notes, will covenant that they will not at any time institute against
the applicable Trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
Modification of Indenture. Each Owner Trustee and the related Indenture
Trustee may, with the consent of the holders of a majority of the aggregate
outstanding principal amount of the Notes of the related Series, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related Indenture, or modify (except as provided below)
in any manner the rights of the related Noteholders. Unless otherwise
specified in the related Prospectus Supplement, without the consent of the
holder of each outstanding Note affected thereby, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest
on any such Note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price with respect thereto or change any
place of payment where or the coin or currency in which any such Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the related Indenture regarding payment;
(iii) reduce the percentage of the aggregate amount of the outstanding Notes of
such Series, the consent of the holders of which is required for any such
supplemental indenture or for any waiver of compliance with certain provisions
of the related Indenture or of certain defaults thereunder and their
consequences as provided for in such Indenture; (iv) modify or alter the
provisions of the related Indenture regarding the voting of Notes held by the
applicable Owner Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate
outstanding amount of such Notes, the consent of the holders of which is
required to direct the related Indenture Trustee to sell or liquidate the
Primary Assets if the proceeds of such sale would be insufficient to pay the
principal amount and accrued and unpaid interest on the outstanding Notes of
such Series; (vi) decrease the percentage of the aggregate principal amount of
such Notes required to amend the sections of the related Indenture that specify
the percentage of the aggregate principal amount of the Notes of such Series
necessary to amend such Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien
of the related Indenture with respect to any of the collateral for such Notes
or, except as otherwise permitted or contemplated in such Indenture, terminate
the lien of such Indenture on any such collateral or deprive the holder of any
such Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, an
Owner Trust and the related Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
Series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders;
provided that such action will not materially and adversely affect the interest
of any such Noteholder.
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Annual Compliance Statement. Each Owner Trust will be required to file
annually with the related Indenture Trustee a written statement as to the
fulfillment of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Owner
Trust will be required to mail each year to all related Noteholders a brief
report relating to its eligibility and qualification to continue as Indenture
Trustee under the related Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of certain indebtedness,
if any, owing by such Owner Trust to the applicable Indenture Trust in its
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects the related
Notes that has not been previously reported.
Satisfaction and Discharge of Indenture. Each Indenture will be
discharged with respect to the collateral securing the related Notes upon the
delivery to the related Indenture Trustee for cancellation of all such Notes
or, with certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a Series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any Series may resign
at any time, in which event the related Owner Trust will be obligated to
appoint a successor indenture trustee for such Series. An Owner Trust may also
remove the related Indenture Trustee if such Indenture Trustee ceases to be
eligible to continue as such under the related Indenture or if such Indenture
Trustee becomes insolvent. In such circumstances, such Owner Trust will be
obligated to appoint a successor indenture trustee for the applicable Series of
Notes. No resignation or removal of the Indenture Trustee and appointment of a
successor indenture trustee for a Series of Notes will become effective until
the acceptance of the appointment by the successor indenture trustee for such
Series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each Trust will issue one or more classes of Certificates pursuant to a
Trust Agreement or Pooling and Servicing Agreement, as applicable. A form of
each of the Trust Agreement and the Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the provisions of
the related Certificates and Trust Agreement or Pooling and Servicing
Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a Series purchased by an affiliate of
CS First Boston or a Seller or an
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affiliate of such Seller, each class of Certificates will initially be
represented by one or more certificates registered in the name of the
Depository. Unless otherwise specified in the related Prospectus Supplement,
the Certificates will be available for purchase in minimum denominations of
$10,000 and integral multiples of $1,000 in excess thereof in book-entry form
only. The Company has been informed by DTC that DTC's nominee will be Cede,
unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any Series. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than an affiliate of CS
First Boston or a Seller or an affiliate of such Seller) will be entitled to
receive a physical certificate representing a Certificate. All references
herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants, and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities-Book-Entry Registration" and "-Definitive Securities". Any
Certificate of a Series owned by an affiliate of CS First Boston or a Seller or
an affiliate of such Seller will be entitled to equal and proportionate
benefits under the applicable Trust Agreement or Pooling and Servicing
Agreement, as applicable, except that such Certificates will be deemed not to
be outstanding for the purpose of determining whether the requisite percentage
of Certificateholders has given any request, demand, authorization, direction,
notice, or consent or taken any other action under the Related Documents.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, Pass-Through Rate and amount of or method of determining distributions
with respect to principal and interest on each class of Certificates of a
Series will be described in the related Prospectus Supplement. Distributions
of interest on such Certificates will be made on the dates specified in the
related Prospectus Supplement (the "Distribution Date") and will be made prior
to distributions with respect to principal of such Certificates. To the extent
provided in the related Prospectus Supplement, a Series of Certificates may
include one or more classes of Strip Certificates entitled to (i) principal
distributions with disproportionate, nominal or no interest distributions or
(ii) interest distributions with disproportionate, nominal or no principal
distributions. Each class of Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate (and which
may be zero for certain classes of Strip Certificates) or any combination of
the foregoing. The related Prospectus Supplement will specify the Pass-Through
Rate for each class of Certificates of a Series or the method for determining
such Pass-Through Rate.
In the case of a Series of Securities that includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and
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principal, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be as set forth in the related
Prospectus Supplement. In the case of Certificates issued by an Owner Trust,
distributions in respect of such Certificates will be subordinated to payments
in respect of the Notes of such Series as more fully described in the related
Prospectus Supplement. Distributions in respect of interest on and principal
of any class of Certificates will be made on a pro rata basis among all holders
of Certificates of such class.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, DTC will
act as securities depository for each class of Securities offered hereby. Each
class of Securities initially will be represented by one or more certificates
registered in the name of Cede, the nominee of DTC. As such, it is anticipated
that the only "Noteholder" and/or "Certificateholder" with respect to a Series
of Securities will be Cede, as nominee of DTC. Beneficial owners of the
Securities ("Security Owners") will not be recognized as "Noteholders" by the
related Indenture Trustee, as such term is used in each Indenture, or as
"Certificateholders" by the related Trustee, as such term is used in each Trust
Agreement or Pooling and Servicing Agreement, and Security Owners will be
permitted to exercise the rights of Noteholders or Certificateholders only
indirectly through DTC and its participating members ("Participants").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, 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") in effect in the
State of New York, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for the Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic
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 banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly (the "Indirect Participants").
Unless otherwise specified in the related Prospectus Supplement, Security
Owners that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or an interest in, the
Securities may do so only through Participants and Indirect Participants. In
addition, all Security Owners will receive all distributions of principal and
interest from the related Indenture Trustee or the related Trustee, as
applicable, through Participants. Under a book-entry format, Security Owners
may experience some delay in their receipt of payments, since such payments
will be forwarded by the applicable Trustee or Indenture Trustee to DTC's
nominee. DTC will then forward such payments to the Participants, which
thereafter will forward them to Indirect Participants or Security Owners.
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Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Securities and
to receive and transmit distributions of principal of and interest on the
Securities. Participants and Indirect Participants with which Security Owners
have accounts with respect to the Securities similarly are required to make
book-entry transfers and to receive and transmit such payments on behalf of
their respective Security Owners. Accordingly, although Security Owners will
not possess physical certificates representing the Securities, the Rules
provide a mechanism by which Participants and Indirect Participants will
receive payments and transfer or exchange interests, directly or indirectly, on
behalf of Security Owners.
Because DTC can act only on behalf of Participants, who in turn may act
on behalf of Indirect Participants and, the ability of a Security Owner to
pledge Securities to persons or entities that do not participate in the DTC
system, or otherwise take actions with respect to such Securities, may be
limited due to the lack of a physical certificate representing such Securities.
DTC has advised the Company that it will take any action permitted to be
taken by a Security Owner under the Indenture, Trust Agreement or Pooling and
Servicing Agreement, as applicable, only at the direction of one or more
Participants to whose account with DTC the Securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, none of CS First Boston, the Company, the
related Seller, the related Servicer, or related Indenture Trustee, if any, or
the related Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
Securities of any Series held by DTC's nominee, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise stated in the related Prospectus Supplement, the Notes
and/or Certificates of a given Series will be issued in fully registered,
certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and, collectively, "Definitive Securities") to Noteholders or
Certificateholders or their respective nominees, rather than to DTC or its
nominee, only if (i) the related Trustee of a Grantor Trust or the related
Indenture Trustee in the case of an Owner Trust, as applicable, determines that
DTC is no longer willing or able to discharge properly its responsibilities as
Depository with respect to the related Securities and such Indenture Trustee or
Trustee, as applicable, is unable to locate a qualified successor, (ii) the
Indenture Trustee or Trustee, as applicable, elects, at its option, to
terminate the book-entry system through DTC or (iii) after the occurrence of an
Event of Default or Servicer Default, Security Owners representing at least a
majority of the outstanding principal amount of the Notes or Certificates, as
applicable, of such Series, advise the related Trustee through DTC that the
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continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interests of the related Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustee or Indenture Trustee, as applicable,
will be required to notify the related Security Owners, through Participants,
of the availability of Definitive Securities. Upon surrender by DTC of the
certificates representing all Securities of any affected class and the receipt
of instructions for re-registration, the Trustee will issue Definitive
Securities to the related Security Owners. Distributions on the related
Definitive Securities will be made thereafter by the related Trustee or
Indenture Trustee, as applicable, directly to the holders in whose name the
related Definitive Securities are registered at the close of business on the
applicable record date, in accordance with the procedures set forth herein and
in the related Indenture or the related Trust Agreement or Pooling and
Servicing Agreement, as applicable. Distributions will be made by check mailed
to the address of such holders as they appear on the register specified in the
related Indenture, Trust Agreement or Pooling and Servicing Agreement, as
applicable; however, the final payment on any Securities (whether Definitive
Securities or Securities registered in the name of a Depository or its nominee)
will be made only upon presentation and surrender of such Securities at the
office or agency specified in the notice of final distribution to
Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the related Trustee or Indenture Trustee (or any security registrar
appointed thereby), as applicable. No service charge will be imposed for any
registration of transfer or exchange, but such Trustee or Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
STATEMENTS TO SECURITYHOLDERS
With respect to each Series of Securities, on or prior to each
Distribution Date, the related Servicer will prepare and forward to the related
Indenture Trustee or Trustee to be included with the distribution to each
Securityholder of record a statement setting forth for the related Collection
Period the following information (and any other information specified in the
related Prospectus Supplement):
(i) the amount of the distribution allocable to principal of each class
of Securities of such Series;
(ii) the amount of the distribution allocable to interest on each class
of Securities of such Series;
(iii) the amount of the Servicing Fee paid to the related Servicer with
respect to the related Collection Period;
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(iv) the outstanding principal balance and Note Pool Factor for each
class of Notes, if any, and the Certificate Balance and Certificate Pool Factor
for each class of Certificates of such Series as of the related record date;
(v) the balance of any Reserve Account or other form of credit
enhancement, after giving effect to any additions thereto or withdrawals
therefrom or reductions thereto to be made on the following Distribution Date;
and
(vi) the aggregate amount of realized losses, if any, in respect of
Receivables for the related Collection Period.
Items (i), (ii) and (iv) above with respect to the Notes or Certificates
of a Series will be expressed as a dollar amount per $1,000 of initial
principal balance of such Notes or the initial Certificate Balance of such
Certificates, as applicable.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of each Trust, the
related Trustee or Indenture Trustee, as applicable, will mail to each person
who at any time during such calendar year shall have been a registered
Securityholder a statement containing certain information for the purposes of
such Securityholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences".
LIST OF SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, three or
more holders of the Notes of any Series or one or more holders of such Notes
evidencing not less than 25% of the aggregate outstanding principal balance
thereof may, by written request to the related Indenture Trustee, obtain access
to the list of all Noteholders maintained by such Indenture Trustee for the
purpose of communicating with other Noteholders with respect to their rights
under the related Indenture or under such Notes. Such Indenture Trustee may
elect not to afford the requesting Noteholders access to the list of
Noteholders if it agrees to mail the desired communication or proxy, on behalf
of and at the expense of the requesting Noteholders, to all Noteholders of such
Series.
Unless otherwise specified in the related Prospectus Supplement, three or
more holders of the Certificates of any Series or one or more holders of such
Certificates evidencing not less than 25% of the Certificate Balance of such
Certificates may, by written request to the related Trustee, obtain access to
the list of all Certificateholders maintained by such Trustee for the purpose
of communicating with other Certificateholders with respect to their rights
under the related Trust Agreement or Pooling and Servicing Agreement, as
applicable, or under such Certificates.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Receivables
Purchase Agreement pursuant to which a Trust will purchase Receivables from a
Seller, each Trust Agreement or Pooling and Servicing Agreement pursuant to
which a Trust will be created, Certificates will be issued, and pursuant to
which the Servicer will service Receivables (in the case of a Grantor Trust),
and each Servicing Agreement pursuant to which the Servicer will service
Receivables (in the case of an Owner Trust) (collectively the "Transfer and
Servicing Agreements"). Forms of the Transfer and Servicing Agreements have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the provisions of
the related Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
In the case of Primary Assets consisting of Receivables, on or prior to
the related Closing Date, a Seller will transfer and assign to the Company,
pursuant to a Receivables Purchase Agreement without recourse, all of its
right, title and interest in and to Receivables in the outstanding principal
amount specified in the related Prospectus Supplement, including its security
interests in the related Financed Vehicles. Each such Receivable will be
identified in a schedule appearing as an exhibit to the related Receivables
Purchase Agreement (the "Schedule of Receivables").
In each Receivables Purchase Agreement the Seller will represent and
warrant to the Company, among other things, that (i) the information set forth
in the Schedule of Receivables is correct in all material respects as of the
applicable Cutoff Date; (ii) the Obligor on each Receivable is contractually
required to maintain physical damage insurance covering the related Financed
Vehicle in accordance with the Seller's normal requirements; (iii) on the
Closing Date, to the best of its knowledge, the Receivables are free and clear
of all security interests, liens, charges and encumbrances, and no offsets,
defenses or counterclaims have been asserted or threatened; (iv) at the Closing
Date, each of the Receivables is secured by a perfected, first-priority
security interest in the related Financed Vehicle in favor of the Seller; (v)
each Receivable, at the time it was originated, complied and, on the Closing
Date complies, in all material respects with applicable federal and state laws,
including, without limitation, consumer credit, truth-in-lending, equal credit
opportunity and disclosure laws; and (vi) any other representations and
warranties that may be set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, as of
the last day of the second Collection Period (or, if the Seller so elects, the
last day of the first Collection Period) following the discovery by or notice
to the Seller of any breach of a representation and warranty of the Seller that
materially and adversely affects the interests of the related Trust in any
Receivable, the Seller will be obligated to repurchase such Receivable, unless
the Seller cures such breach in a timely fashion. The purchase price for any
such Receivable will be equal to the unpaid principal balance owed by the
Obligor on such Receivable, plus interest on such
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unpaid principal balance at the applicable APR to the last day of the month of
repurchase (the "Repurchase Amount"). This repurchase obligation will
constitute the sole remedy available to the Securityholders, the related
Trustee and any related Indenture Trustee for any such uncured breach.
On the related Closing Date, the Company will transfer and assign to the
related Trust, pursuant to a Trust Agreement or Pooling and Servicing
Agreement, as applicable, without recourse, all of its right, title and
interest in and to Receivables in the outstanding principal amount specified in
the related Prospectus Supplement. Concurrently with the transfer and
assignment of such Receivables to the related Trust, the related Trustee or
Indenture Trustee, as applicable, will execute, authenticate and deliver the
related Securities. Unless otherwise provided in the related Prospectus
Supplement, the net proceeds from the sale of the Securities will be applied to
the purchase of the related Receivables.
Pursuant to the terms of the Trust Agreement or the Pooling and Servicing
Agreement, as applicable, the Company will assign the representations and
warranties made by the related Seller to the related Trust for the benefit of
the related Securityholders and will make certain limited representations and
warranties with respect to the Receivables. To the extent that the related
Seller does not repurchase a Receivable in the event of a breach of its
representations and warranties with respect to such Receivable, the Company
will not be required to repurchase such Receivable unless such breach also
constitutes a breach of one of the Company's representations and warranties
with respect to such Receivable and such breach materially and adversely
affects the interests of the Securityholders in any such Receivable. Neither
the Seller nor the Company will have any other obligation with respect to the
Receivables or the Certificates.
TRUST ACCOUNTS
With respect to each Owner Trust, the Servicer will establish and
maintain with the related Indenture Trustee (a) one or more accounts, in the
name of the Indenture Trustee on behalf of the related Securityholders, into
which all payments made on or in respect of the related Primary Assets will be
deposited (the "Collection Account") and (b) an account, in the name of the
Indenture Trustee on behalf of the Noteholders, into which amounts released
from the Collection Account and any Reserve Account or other form of credit
enhancement for payment to such Noteholders will be deposited and from which
all distributions to such Noteholders will be made (the "Note Distribution
Account"). With respect to each Owner Trust and Grantor Trust, the Servicer
will establish and maintain an account with the related Trustee, in the name of
such Trustee on behalf of the Certificateholders, into which amounts released
from the Collection Account and any Reserve Account or other form of credit
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to any Grantor Trust, the
Servicer will also establish and maintain the Collection Account and any other
Trust Account in the name of the related Trustee on behalf of the related
Certificateholders.
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If so provided in the related Prospectus Supplement, the Servicer will
establish for each Series of Securities an additional account (the "Payahead
Account"), in the name of the related Indenture Trustee (in the case of an
Owner Trust) or Trustee (in the case of a Grantor Trust), into which, to the
extent required in the related Servicing Agreement or Pooling and Servicing
Agreement, as applicable, early payments made by or on behalf of Obligors on
Precomputed Receivables will be deposited until such time as such payments
become due. Until such time as payments are transferred from the Payahead
Account to the Collection Account, they will not constitute collected interest
or collected principal and will not be available for distribution to
Noteholders or Certificateholders. Any other accounts to be established with
respect to a Trust will be described in the related Prospectus Supplement.
For each Series of Securities, funds in the Collection Account, Note
Distribution Account and Certificate Distribution Account and any Reserve
Account or other accounts identified as such in the related Prospectus
Supplement (collectively, the "Trust Accounts") will be invested as provided in
the related Servicing Agreement or Pooling and Servicing Agreement, as
applicable, in Eligible Investments. "Eligible Investments" will generally be
limited to investments acceptable to the Rating Agencies as being consistent
with the rating of the related Securities. Except as described hereafter or in
the related Prospectus Supplement, Eligible Investments will be limited to
obligations or securities that mature on or before the date of the next
scheduled distribution to Securityholders of such Series. However, to the
extent permitted by the Rating Agencies, funds in any Reserve Account may be
invested in securities that will not mature prior to the date of such next
scheduled distribution with respect to such Notes or Certificates and will not
be sold prior to maturity to meet any shortfalls. Thus, the amount of
available funds on deposit in a Reserve Account at any time may be less than
the balance of such Reserve Account. If the amount required to be withdrawn
from a Reserve Account to cover shortfalls in collections on the related
Receivables (as provided in the related Prospectus Supplement) exceeds the
amount of available funds on deposit in such Reserve Account, a temporary
shortfall in the amounts distributed to the related Noteholders or
Certificateholders could result, which could, in turn, increase the average
life of the related Notes or Certificates. Except as otherwise specified in
the related Prospectus Supplement, investment earnings on funds deposited in
the Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), will be deposited in the applicable Collection Account
on each Distribution Date and will be treated as collections of interest on the
related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories that signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or Trustee, as applicable, or (b) a
depository institution organized under the laws of the United States of America
or any one of
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the states thereof or the District of Columbia (or any domestic branch of a
foreign bank) (i) that has either (A) a long-term unsecured debt rating
acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC.
SERVICING PROCEDURES
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Company and each Trust will designate the Servicer as
custodian to maintain possession, as such Trust's agent, of the related Motor
Vehicle Installment Contracts and any other documents relating to the
Receivables. The Seller's and the Servicer's accounting records and computer
systems will be marked to reflect the sale and assignment of the related
Receivables to each Trust, and UCC financing statements reflecting such sale
and assignment will be filed.
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables and will, consistent with the related Servicing
Agreement or Pooling and Servicing Agreement, as applicable, follow such
collection procedures as it follows with respect to comparable Motor Vehicle
Installment Contracts it services for itself and others. Consistent with its
normal procedures, the Servicer may, in its discretion, arrange with the
Obligor on a Receivable to extend or modify the payment schedule, but no such
arrangement will, for purposes of any Servicing Agreement or Pooling and
Servicing Agreement, modify the original due dates or the amount of the
scheduled payments or extend the final payment date of any Receivable beyond
the Final Scheduled Maturity Date (as such term is defined with respect to any
Receivables Pool in the related Prospectus Supplement). Some of such
arrangements may result in the Servicer purchasing the Receivables for the
Repurchase Amount, while others may result in the Servicer making Advances.
The Servicer may sell the related Financed Vehicle securing any Receivable at a
public or private sale, or take any other action permitted by applicable law.
See "Certain Legal Aspects of the Receivables".
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Primary Assets (from whatever source) and all proceeds of such Primary
Assets, collected during a Collection Period into the related Collection
Account not later than two business days after receipt thereof. However,
notwithstanding the foregoing, such amounts may be remitted to the Collection
Account by the Servicer on a monthly basis on or prior to the applicable
Distribution Date if no Servicer Default exists and each other condition to
making deposits less frequently than daily as may be specified by the Rating
Agencies or set forth in the related Prospectus Supplement is satisfied.
Pending deposit into the Collection Account, collections may be invested by the
Servicer at its own risk and for its own benefit and will not be segregated
from its own funds. If the Servicer were unable to remit such funds to the
Collection Account on any Distribution Date, Securityholders might incur a
loss. To the extent set forth in the related Prospectus Supplement, the
Servicer may, in order to satisfy the requirements described above, obtain a
letter of credit or other security for the benefit of the related Trust to
secure timely
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remittances of collections on the related Primary Assets and payment of the
aggregate Repurchase Amount with respect to Receivables repurchased by the
Servicer.
Collections on a Precomputed Receivable during any Collection Period will
be applied first to the repayment of any outstanding Precomputed Advances made
by the Servicer with respect to such Receivable (as described below), and then
to the scheduled monthly payment due on such Receivable. Any portion of such
collections remaining after the scheduled monthly payment has been made (such
excess amounts, the "Payaheads") will, unless such remaining amount is
sufficient to prepay the Precomputed Receivable in full and unless otherwise
provided in the related Prospectus Supplement, generally will be transferred to
and kept in the Payahead Account until such later Distribution Date on which
such Payaheads may be applied either to the scheduled monthly payment due
during the related Collection Period or to prepay such Receivable in full.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, to the
extent the collections of interest and principal on a Precomputed Receivable
for a Collection Period fall short of the related scheduled payment, the
Servicer will make a Precomputed Advance of the shortfall. The Servicer will
be obligated to make a Precomputed Advance on a Precomputed Receivable only to
the extent that the Servicer, in its sole discretion, expects to recoup such
Advance from subsequent collections or recoveries on such Receivable or other
Precomputed Receivables in the related Receivables Pool. The Servicer will
deposit the Precomputed Advance in the applicable Collection Account on or
before the business day proceeding the applicable Distribution Date. The
Service will recoup its Precomputed Advance from subsequent payments by or on
behalf of the related Obligor or from insurance or liquidation proceeds with
respect to the related Receivable and will release its right to reimbursement
in conjunction with its purchase of the Receivable as Servicer or, upon
determining that reimbursement from the preceding sources is unlikely, will
recoup its Precomputed Advance from any collections made on other Precomputed
Receivables in the related Receivables Pool.
Unless otherwise provided in the related Prospectus Supplement, on or
before the business day prior to each Distribution Date, the Servicer will
deposit into the related Collection Account as a Simple Interest Advance an
amount equal to the amount of interest that would have been due on the related
Simple Interest Receivables at their respective APRs for the related Collection
Period (assuming that such Simple Interest Receivables are paid on their
respective due dates) minus the amount of interest actually received on such
Simple Interest Receivables during the applicable Collection Period. If such
calculation results in a negative number, an amount equal to such amount shall
be paid to the Servicer in reimbursement of outstanding Simple Interest
Advances. In addition, in the event that a Simple Interest Receivable becomes
a Liquidated Receivable (as such term is defined in the related Prospectus
Supplement), the amount of accrued and unpaid interest thereon (but not
including interest for the then current collection Period) will be withdrawn
from the Collection Account and paid to the Servicer in
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reimbursement of outstanding Simple Interest Advances. No advances of
principal will be made with respect to Simple Interest Receivables.
NET DEPOSITS
For administrative convenience, unless the Servicer is required to remit
collections to the Collection Account on a daily basis as described under "-
Collections" above, the Servicer will be permitted to make deposits of
collections, aggregate Advances and Repurchase Amounts for any Trust for or in
respect of each Collection Period net of distributions to be made to the
Servicer with respect to such Collection Period. The Servicer also may cause a
single, net transfer to be made from the Collection Account to the Payahead
Account, or vice versa. The Servicer, however, will account to the Trustee, to
the Indenture Trustee, if any, and to the related Securityholders as if all
deposits and distributions were made individually.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Trust the related Servicer will be entitled to receive, out of
interest collected on or in respect of the related Primary Assets, a fee for
each Collection Period (the "Servicing Fee") in an amount equal to the
percentage per annum specified in the related Prospectus Supplement (the
"Servicing Fee Rate") of the Pool Balance as of the first day of such
Collection Period. The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates) will be paid
solely to the extent of the Interest Distribution Amount; however, the
Servicing Fee will be paid prior to the distribution of any portion of the
Interest Distribution Amount to the holders of the Notes or Certificates of any
Series.
Unless otherwise provided in the related Prospectus Supplement, the
Servicer will also collect and retain any late fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to Receivables and will be entitled to reimbursement from each Trust
for certain liabilities. Payments by or on behalf of Obligors will be
allocated to scheduled payments under the related Motor Vehicle Installment
Contract and late fees and other charges in accordance with the Servicer's
normal practices and procedures.
If applicable, the Servicing Fee will compensate the Servicer for
performing the functions of a third party servicer of motor vehicle receivables
as an agent for the related Trust, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment statements and reporting the collateral. The
Servicing Fee will also compensate the Servicer for administering the Primary
Assets, including making Advances, accounting for collection, furnishing
monthly and annual statements to the related Indenture Trust and/or Trustee,
and generating federal income tax information for such Trust and for the
related Noteholders and/or Certificateholders as well as the Trust's compliance
with the reporting provisions under the Exchange Act. The Servicing Fee also
will reimburse the Servicer for certain taxes, the fees of the related
Indenture Trustee and/or Trustee,
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accounting fees, outside auditor fees, date processing cost and other costs
incurred in connection with administering the Primary Assets.
DISTRIBUTIONS
With respect to each Series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of principal
and interest (or, where applicable, principal only or interest only) on each
class of Securities entitled thereto will be made by the related Trustee or
Indenture Trustee, as applicable, to the Certificateholders and Noteholders of
such Series. The timing, calculation, allocation, order, source and priorities
of, and requirements for, all payments to the holders of each class of Notes
and/or distributions to holders of each class of Certificates will be set forth
in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on or
in respect of the related Primary Assets will be transferred from the
Collection Account to the Note Distribution Account or Certificate Distribution
Account, as applicable, for distribution to the Noteholders and
Certificateholders to the extent provided in the related Prospectus Supplement.
Credit enhancement, such as a Reserve Account, will be available to cover
shortfalls in the amount available for distribution on such date to the extent
specified in the related Prospectus Supplement. As more fully described in the
related Prospectus Supplement, and unless otherwise specified therein,
distributions in respect of principal of a class of Securities of a Series will
be subordinate to distributions in respect in respect of interests on such
class, and distributions in respect of one or more classes of Certificates of
such Series will be subordinate to payments in respect of the Notes, if any, of
such Series or other classes of Certificates. Distributions of principal on
the Securities of a Series may be based on the amount of principal collected or
due, or the amount of realized losses incurred, in a Collection Period.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of any credit and cash flow enhancement
arrangements and the provider thereof, if applicable, with respect to each
class of Securities of a Series will be set forth in the related Prospectus
Supplement. To the extent provided in the related Prospectus Supplement,
credit or cash flow enhancement may be in the form of subordination of one or
more classes of Securities, Reserve Accounts, spread accounts, letters of
credit, surety bonds, insurance policies, over-collateralization, credit or
liquidity facilities, guaranteed investment contracts, swaps or other interest
rate protection agreements, repurchase obligations, other agreements with
respect to third party payments or other support, cash deposits, or such other
arrangements that are incidental to or related to the Primary Assets included
in a Trust as may be described in the related Prospectus Supplement, or any
combination of the foregoing. If specified in the applicable Prospectus
Supplement, credit or cash flow enhancement for a class of Securities may cover
one or more other classes of Securities of the same Series, and credit
enhancement for a Series of Securities may cover one or more other Series of
Securities.
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The existence of a Reserve Account or other form of credit enhancement
for the benefit of any class or Series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or Series of the
full amount of principal and interest due thereon and to decrease the
likelihood that such Securityholders will experience losses. Unless otherwise
specified in the related Prospectus Supplement, the credit enhancement for a
class or Series of Securities will not provide protection against all types of
loss and will not guarantee repayment of all principal and interest thereon.
If losses occur which exceed the amount covered by such credit enhancement or
which are not covered by such credit enhancement, Securityholders will bear
their allocable share of such losses, as described in the Prospectus
Supplement. In addition, if a form of credit enhancement covers more than one
Series of Securities, Securityholders of any such Series will be subject to the
risk that such credit enhancement may be exhausted by the claims of
Securityholders of other Series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Servicing Agreement or Pooling and Servicing Agreement,
as applicable, the Company will establish for a Series or class or classes of
Securities an account (the "Reserve Account"), which will be maintained with
the related Indenture Trustee or Trustee, as applicable. Unless otherwise
provided in the related Prospectus Supplement, a Reserve Account will be funded
by an initial deposit by the Company on the Closing Date in the amount set
forth in the related Prospectus Supplement. As further described in the
related Prospectus Supplement, the amount on deposit in the Reserve Account may
be increased or reinstated on each Distribution Date, to the extent described
in the related Prospectus Supplement, by the deposit there of amounts from
collections on the Primary Assets. The related Prospectus Supplement will
describe the circumstances under which and the manner in which distributions
may be made out of any such Reserve Account, either to holders of the
Securities covered thereby or to the Company or to any other entity.
EVIDENCE AS TO COMPLIANCE
Each Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will provide that a firm of independent public accountants will
furnish annually to the related Trust and Indenture Trustee and/or Trustee a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such statement, during such shorter period that
shall have elapsed since the applicable Closing Date) with certain standards
relating to the servicing of the Receivables, the Servicer's accounting records
and computer files with respect thereto and certain other matters.
Each Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will also provide for delivery to the related Trust and Indenture
Trustee and/or Trustee each year of a certificate signed by an officer of the
Servicer stating that the Servicer has fulfilled it obligations under the
related Servicing Agreement or Pooling and Servicing Agreement, as applicable,
throughout the preceding twelve months (of, in the case of the first such
certificate, during such shorter period that shall have elapsed since the
applicable Closing Date) or, if there has been a default in the fulfillment of
any such obligation, describing each such default. The Servicer will
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agree to give each Indenture Trustee and/or Trustee, as applicable, notice of
certain Servicer Defaults under the related Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Copies of the foregoing statements and certificates may be obtained by
Securityholders by a request in writing addressed to the related Trustee or
Indenture Trustee, as applicable, at the Corporate Trust Officer for such
Trustee or Indenture Trustee specified in the related Prospectus Supplement.
STATEMENTS TO TRUSTEES AND THE TRUST
Prior to each Distribution Date with respect to each Series of
Securities, the Servicer will provide to the applicable Indenture Trustee, if
any, and the applicable Trustee as of the close of business on the last day of
the preceding Collection Period a statement setting forth substantially the
same information as is required to be provided in the periodic reports provided
to Securityholders of such Series as described under "certain Information
Regarding the Securities - Reports to Securityholders".
CERTAIN MATTERS REGARDING THE SERVICER
Each Servicing Agreement and Pooling and Servicing Agreement will provide
that the Servicer may not resign from it's obligations and duties as Servicer
thereunder, except upon determination that such Servicer's performance of such
duties is not longer permissible under applicable law. No such resignation
will become effective until the related Indenture Trustee or Trustee, as
applicable, or a successor servicer has assumed the servicing obligations and
duties under the related Servicing Agreement or Pooling and Servicing
Agreement, as applicable.
Each Servicing Agreement and Pooling and Servicing Agreement will further
provide that neither the Servicer nor any of its directors, officers, employees
and agents will be under any liability to the related Trust or Securityholders
for taking any action or for refraining from taking any action pursuant to the
related Servicing Agreement or Pooling and Servicing Agreement or for errors in
judgement; provided, however, that neither the Servicer nor any such person
will be protected against any liability that would otherwise be imposed by
reason of wilful misfeasance, bad faith or negligence in the performance of the
Servicer's duties or by reason of reckless disregard of its obligations and
duties thereunder. In addition, each Servicing Agreement and Pooling and
Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to its
servicing responsibilities under such Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and that, in its opinion, may cause it to
incur any expense or liability.
Under the circumstances specified in each Servicing Agreement and Pooling
and Servicing Agreement, any entity into which the Servicer may be merged or
consolidated, or any entity resulting from any merger or consolidation to which
the Servicer is a party, or any entity succeeding to all or substantially all
of the business of the Servicer, or any corporation which
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assumes the obligations of the Servicer, will be the successor to the Servicer
under the related Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
SERVICER DEFAULTS
Unless otherwise provided in the related Prospectus Supplement, a
"Servicer Default" under each Servicing Agreement and Pooling and Servicing
Agreement will consist of: (i) any failure by the Servicer to deliver to the
related Trustee or Indenture Trustee, as applicable, for deposit in any of the
Trust Accounts any required payment or to direct the related Trustee or
Indenture Trust, as applicable, to make any required distributions therefrom,
which failure continues unremedied for five business days after discovery by an
officer of the Servicer or written notice of such failure is given (a) to the
Servicer by the related Trustee or Indenture Trustee, as applicable, or (b) to
the Servicer and to the related Trustee or Indenture Trustee, as applicable, by
holders of Notes, if any, evidencing not less that 25% of the aggregate
outstanding principal amount thereof or, in the event a Series of Securities
includes no Notes or if such Notes have been paid in full, by holders of
Certificates evidencing not less that 25% of the Certificate Balance; (ii) any
failure by the Servicer duly to observe or perform in any material respect any
covenant or agreement in the related Servicing Agreement or Pooling and
Servicing Agreement, as applicable, which failure materially and adversely
affects the rights of the related Securityholders and which continues
unremedied for 60 days after written notice of such failure is given to the
Servicer in the same manner described in clause (i) above; and (iii) certain
events of bankruptcy, insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by the Servicer
indicating its insolvency, reorganization pursuant to bankruptcy proceedings or
inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
Unless otherwise provided in the related Prospectus Supplement, in the
case of any Owner Trust, as long as a Servicer Default under the related
Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related Series evidencing not less than 25% of the
aggregate principal amount of such Notes then outstanding may terminate all the
rights and obligations of the Servicer under such Servicing Agreement,
whereupon such Indenture Trustee or a successor servicer appointed by such
Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Servicing Agreement and will be entitled
to similar compensation arrangements. In the case of any Grantor Trust, unless
otherwise provided in the related Prospectus Supplement, as long as a Servicer
Default under the related Pooling and Servicing Agreement remains unremedied,
the related Trustee or holders of Certificates of the related Series evidencing
not less than 25% of the Certificate Balance may terminate all the rights and
obligations of the Servicer under such Pooling and Servicing Agreement,
whereupon such Trustee or a successor servicer appointed by such Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such Pooling and Servicing Agreement and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Servicer Default other
than such appointment has occurred, such trustee or
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official may have the power to prevent any Indenture Trustee or the related
Noteholders or such Trustee or the related Certificateholders from effecting a
transfer of servicing. In the event that the related Indenture Trustee, if
any, or the related Trustee is unwilling or unable to act as successor to the
Services, such Indenture Trustee or Trustee, as applicable, may appoint, or may
petition a court of competent jurisdiction to appoint, a successor with a net
worth of at least $100,000,000 and whose regular business includes the
servicing of motor vehicle receivables. The Indenture Trustee, if any, or the
Trustee may arrange for compensation to be paid to such paid to such successor
servicer, which in no event may be greater than the compensation payable to the
Servicer under the related Servicing Agreement or Pooling and Servicing
Agreement, as applicable.
WAIVER OF PAST DEFAULTS
Unless otherwise provided in the related Prospectus Supplement, (i) in
the case of each Owner Trust, holders of the related Notes evidencing not less
than a majority of the aggregate outstanding principal amount of the Notes (or
of Certificates evidencing not less than a majority of the outstanding
Certificate Balance, in the case of any default that does not adversely affect
the Indenture Trustee or Noteholders) and (ii) in the case of each Grantor
Trust, holders of Certificates evidencing not less than a majority of the
Certificate Balance, may, on behalf of all such Noteholders and Certificate
holders, waive any default by the Servicer in the performance of its
obligations under the related Servicing Agreement or Pooling and Servicing
Agreement, as applicable, and its consequences, except a default in making any
required deposits to or payments from any Trust Account or in respect of a
covenant or provision in the Servicing Agreement or Pooling and Servicing
Agreement, as applicable, that cannot be modified or amended without the
consent of each Securityholder (in which event the related waiver will require
the approval of holders of all of the Securities of such Series). No such
waiver will impair the Securityholders' right with respect to any subsequent
Servicer Default.
AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, each of
the Transfer and Servicing Agreements may be amended by the parties thereto
without the consent of the related Noteholders or Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Transfer and Servicing Agreements or of modifying
in any manner the rights of such Noteholders or Certificateholders, provided,
that any such action will not, in the opinion of counsel satisfactory to the
related Trustee or Indenture Trustee, as applicable, materially and adversely
affect the interest of any such Noteholder or Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and Servicing Agreements may also be amended from time to time by the
parties thereto with the consent of the holders of Notes evidencing at least a
majority of the aggregate principal amount of the then outstanding Notes, if
any, and with the consent of the holders of Certificates evidencing at least a
majority of the aggregate principal amount of the then outstanding
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Certificates, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders, as applicable; provided that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on or in respect of the related Primary
Assets or distributions that are required to be made for the benefit of such
Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of
the Notes or Certificates of such Series the holders of which are required to
consent to any such amendment, without the consent of the holders of all of the
outstanding Notes or Certificates, as the case may be, of such Series.
PAYMENT IN FULL OF THE NOTES
Upon the payment in full of all outstanding Notes of a given Series and
the satisfaction and discharge of the related Indenture, the related Trustee
will succeed to all the rights of the Indenture Trustee, and the
Certificateholders of such Series will succeed to all the rights of the
Noteholders of such Series under the related Servicing Agreement, except as
otherwise provided therein.
TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the related Servicer, the related Seller, the related Trustee
and the related Indenture Trustee, if any, with respect to a Trust pursuant to
the related Transfer and Servicing Agreements will terminate upon the earliest
to occur of (i) the maturity or other liquidation of the last Primary Asset and
the disposition of any amounts received upon liquidation of any such remaining
Primary Asset, (iii) the payment to Noteholders, if any, and Certificateholders
of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iv) the occurrence of either event described below.
Unless otherwise specified in the related Prospectus Supplement, in order
to avoid excessive administrative expenses, the related Servicer will be
permitted, at its option, to purchase from a Trust all remaining Primary Assets
as of the end of any Collection Period, if the then outstanding Pool Balance is
10% or less of the original Pool Balance (as defined in the related Prospectus
Supplement), at a purchase price equal to the aggregate of the Repurchase
Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement, the
Indenture Trustee or Trustee, as applicable, will, within ten days following a
Distribution Date as of which the Pool Balance is equal to or less than the
percentage of the original Pool Balance specified in the related Prospectus
Supplement, solicit bids for the purchase of the Primary Assets remaining in
such Trust, in the manner and subject to the terms and conditions set forth in
such Prospectus Supplement. If such Indenture Trustee or Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the Primary
Assets remaining in such Trust will be sold to the highest bidder.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN FINANCED VEHICLES
In states in which retail installment contracts such as the Receivables
evidence the credit sale of automobiles, vans and light duty trucks by dealers
to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC as in effect in such states. Perfection of security interests in the
automobiles, vans and light duty trucks financed, directly or indirectly, by a
Seller is generally governed by the motor vehicle registration laws of the
state in which the vehicle is located. In general, a security interest in
automobiles, vans and light-duty trucks is perfected by obtaining the
certificate of title to the financed vehicle or notation of the secured party's
lien on the vehicles' certificate of title.
All of the Motor Vehicle Installment Contracts name the Seller as obligee
or assignee and as the secured party. The Seller will take all actions
necessary under the laws of the state in which the financed vehicle is located
to perfect the Seller's security interest in such financed vehicle, including,
where applicable, having a notation of its lien recorded on such vehicle's
certificate of title. If the Seller, because of clerical error or otherwise,
has failed to take such action with respect to financed vehicle, it will not
have a perfected security interest and its security interest may be subordinate
to the interest of, among others, subsequent purchasers of the financed vehicle
that give value without notice of the Seller's security interest and to whom a
certificate of ownership is issued in such purchaser's name, holders of
perfected security interests in the financed vehicle and the trustee in
bankruptcy of the Obligor. The Seller's security interest may also be
subordinate to such third parties in the event of fraud or forgery by the
Obligor or administrative error by state recording officials or in the
circumstances noted below.
Pursuant to each Servicing Agreement and Pooling and Servicing Agreement,
the Seller will assign its interests in the Financed Vehicles securing the
related Receivables to the related Trust; however, because of administrative
burden and expense, neither the Seller nor the related Trustee will amend any
certificate of title to identify such Trust as the new secured party on the
certificates of title relating to the Financed Vehicles. Also, the Servicer
will hold certificates of title relating to the Financed Vehicles in its
possession as custodian for the Trust pursuant to the related Servicing
Agreement or Pooling and Servicing Agreement, as applicable. See "Description
of the Transfer and Servicing Agreements - Sale and Assignment of Receivables".
In most states, assignments such as those under each Trust Agreement or
Pooling and Servicing Agreement are effective conveyances of a security
interest in the related financed vehicle without amendment of any lien noted on
such vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. Although re-registration of the motor
vehicle is not necessary in such states to convey a perfected security interest
in the Financed Vehicles to a Trust, because the related Trust will not be
listed as legal owner on the
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certificates of title to the Financed Vehicles, a Trust's security interest
could be defeated through fraud or negligence. However, in the absence of
fraud or forgery by the vehicle owner or the Servicer or administrative error
by state of local agencies, the notation of the Seller's lien on a certificate
of title will be sufficient to protect a Trust against the rights of subsequent
purchasers of a Financed Vehicle or subsequent creditors who take a security
interest in a Financed Vehicle. If there are any Financed Vehicles as to which
the Seller fails to obtain a first-priority perfected security interest, the
Trust's security interest would be subordinate to, among others, subsequent
purchasers of such Financed Vehicles and holders of perfected security
interests therein. Such a failure, however, would constitute a breach of the
Seller's representations and warranties under the Receivables Purchase
Agreement and the Seller will be required to repurchase such Receivable from
the Trust unless the breach is cured in a timely manner. See "Description of
the Transfer and Servicing Agreements - Sale and Assignment of Receivables" and
"Risk Factors - Certain Legal Aspects - Security Interests in Financed
Vehicles".
Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a new state
from the one in which it is initially registered and thereafter until the owner
re-registers such motor vehicle in the new state. A majority of states require
surrender of a certificate of title to re-register a vehicle. Accordingly, a
secured party must surrender possession if it holds the certificate of title of
the vehicle or, in the case of vehicles registered in states providing for the
notation of a lien on the certificate of title but not possession by the
secured party, the secured party would receive notice of surrender from the
state of re-registration if the security interest is noted on the certificate
of title. Thus, the secured party would have the opportunity to reperfect its
security interest in the vehicle in the state of relocation. However, these
procedural safeguards will not protect the secured party if, through fraud,
forgery or administrative error, an Obligor somehow procures a new certificate
of title that does not list the secured party's lien. Additionally, in states
that do not require a certificate of title for registration of a vehicle,
re-registration could defeat perfection. In the ordinary course of servicing
the Receivables, the Servicer will take steps to effect re-perfection upon
receipt of notice of re-registration or information from the Obligor as to
relocation. Similarly, when an Obligor sells a Financed Vehicle and the
purchaser thereof attempts to re-register such vehicle, the Seller must
surrender possession of the certificate of title or will receive notice as a
result of having its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Receivable before its lien
is released. Under each Servicing Agreement and Pooling and Servicing
Agreement, the Servicer will be obligated to take appropriate steps, at its own
expense, to maintain perfection of security interests in the related Financed
Vehicles and is obligated to purchase the related Receivable if it fails to do
so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected,
first-priority security interest in such vehicle. The Code also grants
priority to certain federal tax liens over the lien of a secured party. The
laws of certain states and federal law permit the confiscation of motor
vehicles by governmental authorities under certain circumstances if used in
unlawful activities, which may result in the loss of a secured party's
perfected security interest in a confiscated motor vehicle.
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In each Receivables Purchase Agreement, the Seller will represent and warrant
that, as of the date any Receivable is sold to the Trust, the security interest
in the related Financed Vehicle is or will be prior to all other present liens
(other than tax liens and other liens that arise by operation of law) upon and
security interests in such Financed Vehicle. However, liens for repairs or
taxes could arise, or the confiscation of a Financed Vehicle could occur, at
any time during the term of a Receivable. No notice will be given to the
related Trustee, the related Indenture Trustee, if any, or related
Securityholders in the event such a lien arises or confiscation occurs. Any
such lien or confiscation arising or occurring after the Closing Date will not
give rise to a repurchase obligation of the Seller under the related
Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an Obligor, the holder of the related retail
installment sale contract has all the remedies of a secured party under the
UCC, except where specifically limited by other state laws. The UCC remedies
of a secured party include the right to repossession by self-help means, unless
such means would constitute a breach of the peace. Self-help repossession is
the method employed by the Servicer in most cases and is accomplished simply by
taking possession of the related motor vehicle. In cases where the Obligor
objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order.
In some jurisdictions, the secured party is required to notify an Obligor
debtor of the default and the intent to repossess the collateral and to give
such Obligor a period of time within which to cure the default prior to
repossession. Generally, such right to cure may only be exercised on a limited
number of occasions during the term of the related contract.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held.
The Obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation,
accrued interest thereon, plus reasonable expenses for repossessing, holding
and preparing the collateral for disposition and arranging for its sale, plus,
in some jurisdictions, reasonable attorneys' fees or, in some states, by
payment of delinquent installments or the unpaid principal balance of the
related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of the resale of any Financed Vehicle generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the related indebtedness. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
any such resale do not cover the full amount of the indebtedness, a deficiency
judgment
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can be sought in certain other states that do not prohibit or limit such
judgments. However, the deficiency judgment would be a personal judgment
against the Obligor for the shortfall, and a defaulting Obligor can be expected
to have very little capital or sources of income available following
repossession; in many cases, therefore, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible. In addition to the notice requirement, the UCC
requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable".
Generally, courts have held that when a sale is not "commercially reasonable",
the secured party loses its right to a deficiency judgment. In addition, the
UCC permits the debtor or other interested party to recover for any loss caused
by noncompliance with the provisions of the UCC. Also, prior to a sale, the
UCC permits the debtor or other interested person to restrain the secured party
from disposing of the collateral if it is established that the secured party is
not proceeding in accordance with the "default" provisions under the UCC.
Occasionally, after the resale of a motor vehicle and payment of all
related expenses and indebtedness, there is a surplus of funds. In that case,
the UCC requires the creditor to remit the surplus to any holder of a
subordinate lien with respect to such vehicle or, if no such lienholder exists,
to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon creditors and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Relief Act, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail installment sales acts and other similar
laws. Also, the laws of certain states impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures in
addition to those required under other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect the ability of an assignee, such as a Trust, to enforce consumer finance
contracts such as Receivables.
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses that the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract,
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor. Most of the Receivables will be
subject to the requirements of the FTC Rule. Accordingly, each
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Trust, as holder of the related Receivables, will be subject to any claims or
defenses that the purchasers of the related Financed Vehicles may assert
against the sellers of such Financed Vehicles. If an Obligor were successful
in asserting any such claims or defenses, such claim or defense would
constitute a breach of the Seller's warranties under the related Receivables
Purchase Agreement and would create an obligation of the Seller to repurchase
the Receivable unless such breach is cured in a timely manner. See
"Description of the Transfer and Servicing Agreements - Sale and Assignment of
Receivables."
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United
States. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditors' repossession
and resale do not involve sufficient state action to afford constitutional
protection to borrowers.
Under each Receivables Purchase Agreement the Seller will represent and
warrant that each Receivable complies in all material respects with all
applicable federal and state laws. Accordingly, if an Obligor has a claim
against a Trust for a violation of any law and such claim materially and
adversely affects the interests of such Trust in a Receivable, such violation
would constitute a breach of such representation and warranty and would create
an obligation of the Seller to repurchase such Receivable unless the breach is
cured. See "Description of the Transfer and Servicing Agreements - Sale and
Assignment of Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a motor vehicle and, as part of the rehabilitation
plan, may reduce the amount of the secured indebtedness to the market value of
the motor vehicle at the time of bankruptcy (as determined by the court),
leaving the party providing financing as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under the related contract or change the rate of interest and time
of repayment of the indebtedness.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of Securities. The
summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to
special rules. For example, it does not discuss the tax treatment of
beneficial owners of Notes ("Note Owners") or Certificates ("Certificate
Owners") that are insurance companies, regulated investment companies or
dealers in securities. Moreover, there are no cases or Internal Revenue
Service ("IRS") rulings on similar transactions involving both debt and equity
interests issued by a trust with terms similar to those of the Notes and the
Certificates. As a result, the IRS might disagree with all or part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes
and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be
provided with an opinion of Sidley & Austin ("Federal Tax Counsel") regarding
certain federal income tax matters. An opinion of Federal Tax Counsel,
however, is not binding on the IRS or the courts. No ruling on any of the
issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the Notes, the Certificates and
related terms, parties and documents shall be deemed to refer, unless otherwise
specified herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
OWNER TRUSTS
TAX CHARACTERIZATION OF THE OWNER TRUSTS
In the case of an Owner Trust, Federal Tax Counsel will deliver its
opinion that the Trust will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. The
opinion of Federal Tax Counsel will be based on the assumption that the terms
of the Trust Agreement and related documents will be complied with, and on such
counsel's conclusions that (i) the Trust will not have certain characteristics
necessary for a trust to be classified as an association taxable as a
corporation and (ii) the nature of the income of the Trust, and the
restrictions (if any) on transfers of the Certificates, will exempt the Trust
from the rule that certain publicly traded partnerships are taxable as
corporations.
If a Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would
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include all of its income on the related Receivables, which might be reduced by
its interest expense on the Notes. Any such corporate income tax could
materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificate Owners (and possibly Note
Owners) could be liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO NOTE OWNERS
Treatment of the Notes as Indebtedness. The Trust will agree, and the
Note Owners will agree by their purchase of Notes, to treat the Notes as debt
for federal tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Owner Trust that the
Notes will be classified as debt for federal income tax purposes. If, contrary
to the opinion of Federal Tax Counsel, the IRS successfully asserted that one
or more of the Notes did not represent debt for federal income tax purposes,
the Notes might be treated as equity interests in the Trust. If so treated,
the Trust might be taxable as a corporation with the adverse consequences
described above (and the resulting taxable corporation would not be able to
reduce its taxable income by deductions for interest expense on Notes
recharacterized as equity). Alternatively, the Trust might be treated as a
publicly traded partnership that would not be taxable as a corporation unless
it met certain qualifying income tests. Treatment of the Notes as equity
interests in a partnership could have adverse tax consequences to certain
holders, even if the Trust were not treated as a publicly traded partnership
taxable as a corporation. For example, income to certain tax-exempt entities
(including pension funds) would be "unrelated business taxable income", income
to foreign holders generally would be subject to U.S. tax and U.S. tax return
filing and withholding requirements, and individual holders might be subject to
certain limitations on their ability to deduct their share of Trust expenses.
The discussion below assumes that the Notes will be characterized as debt for
federal income tax purposes.
Interest Income on the Notes. The taxation of interest on a Note will
depend on whether the interest constitutes "qualified stated interest" (as
defined below). Interest on a Note that constitutes qualified stated interest
is includible in a Note Owner's income as ordinary interest income when
actually or constructively received, if such Note Owner uses the cash method of
accounting for federal income tax purposes, or when accrued, if such Note Owner
uses an accrual method of accounting for federal income tax purposes. Interest
that does not constitute qualified stated interest is included in a Note
Owner's income under the rules described below under "--Original Issue
Discount", regardless of such Note Owner's method of accounting, or, in certain
circumstances, under rules governing contingent payments under which the
interest is recognized as ordinary gross income only as the interest payments
become fixed in each accrual period. Notwithstanding the foregoing, interest
that is payable on a Note with a maturity of one year or less from its issue
date is included in a Note Owner's income under the rules described below under
"--Short Term Notes". It is believed that any prepayment premium paid as a
result of a mandatory redemption will be taxable as contingent interest when it
becomes fixed and unconditionally payable.
In general, "qualified stated interest" is stated interest that, during
the entire term of the Note, is unconditionally payable at least annually at a
single fixed rate of interest or, subject to
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certain exceptions summarized below, at a variable rate that is a single
"qualified floating rate" or a single "objective rate" (each as described
below). If stated interest is unconditionally payable at two or more qualified
floating rates, a single fixed rate and one or more qualified floating rates,
or a single fixed rate and a single objective rate that is a "qualified inverse
floating rate" (as defined below), all or a portion of the stated interest
might be treated as "qualified stated interest". Under the OID Regulations,
interest is considered unconditionally payable only if late payment or
nonpayment is expected to be penalized or reasonable remedies exist to compel
payment. If stated interest is payable at a variable rate other than in
accordance with the foregoing, the interest will not be treated as "qualified
stated interest", and it is unclear whether such payments must be treated as
part of a Note's "stated redemption price at maturity" and governed by the
rules described below under "--Original Issue Discount" or, alternatively, must
be taxed as contingent interest that is recognized as ordinary gross income
only as the interest payments become fixed in each accrual period.
Stated interest generally qualifies as "qualified floating rate" if
variations in the value of the rate can reasonably be expected to measure
contemporaneous fluctuations in the cost of newly borrowed funds in the
currency in which the Note is denominated. A variable rate will be considered
a qualified floating rate if the variable rate equals (i) the product of an
otherwise qualified floating rate and a fixed multiple that is greater than
zero but not more than 1.35 or (ii) an otherwise qualified floating rate (or
the product described in clause (i)) plus or minus a fixed rate. If the
variable rate equals the product of an otherwise qualified floating rate and a
single multiplier greater than 1.35, however, such rate will generally
constitute an objective rate, described more fully below.
Stated interest generally qualifies as an "objective rate" if variations
in the rate are determined using a single fixed formula and are based on (i)
one or more qualified floating rates, (ii) one or more rates where each rate
would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Note is denominated, (ii) the
yield or changes in the price of one or more items of personal property that
are "actively traded", or (iv) a combination of rates described in the three
foregoing clauses. The IRS may designate other objective rates. An objective
rate is a qualified inverse floating rate if (a) the rate is equal to a fixed
rate minus a qualified floating rate and (b) the variations in the rate can
reasonably be expected to reflect inversely contemporaneous variations in the
cost of newly borrowed funds (disregarding certain caps, floors, governors or
similar restrictions).
All or a portion of interest that otherwise is treated as qualified
stated interest under the rules summarized above will not be treated as
qualified stated interest if, among other circumstances: (i) the variable rate
of interest is subject to one or more minimum or maximum rate floors or
ceilings which are not fixed throughout the term of the Note and which are
reasonably expected as of the issue date to cause the rate in certain accrual
periods to be significantly higher or lower than the overall expected return on
the Note determined without such floor or ceiling; (ii) it is reasonably
expected that the average value of the variable rate during the first half of
the term of the Note will be either significantly less than or significantly
greater than the average value of the rate during the final half of the term of
the Note; (iii) the
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"issue price" of the Note (as described below) exceeds the total noncontingent
principal payments by more than an amount equal to the lesser of .015
multiplied by the product of the total noncontingent principal payments and the
number of complete years to maturity from the issue date (or, in certain cases,
its weighted average maturity) and 15 percent of the total noncontingent
principal, (iv) the Note dues not provide that a qualified floating rate or
objective rate in effect at any time during the term of the Note is set at the
value of the rate on any day that is no earlier than three months prior to the
first day on which the value is in effect and no later than one year following
that first day, or (v) if interest is not unconditionally payable. In these
situations, as well as others, it is unclear whether such interest payments
constitute qualified stated interest, or must be treated either as part of a
Note's "stated redemption price at maturity" (as described below) resulting in
original issue discount, or represent contingent payments which are recognized
as ordinary gross income for federal income tax purposes only as the interest
payments become fixed in each accrual period.
Original Issue Discount. Notes may be issued with "original issue
discount". Rules governing original issue discount are set forth in Sections
1271-1273 and 1275 of the Code and the Treasury Regulations issued thereunder
in January, 1994 (the "OID Regulations"). The discussion herein is based in
part on the OID Regulations, which generally apply to debt instruments issued
on or after April 4, 1994. Note Owners also should be aware that the OID
Regulations do not address certain issues relevant to prepayable securities
such as the Notes.
In general, a Note's original issue discount, if any, is the difference
between the "stated redemption price at maturity" of the Note and its "issue
price".
The original issue discount with respect to a Note will be considered to
be zero if it is less than a specified de minimis amount of 0.25% of the Note's
stated redemption price at maturity multiplied by the number of complete years
from the date of issue of such Note to its maturity date or, in the case of
Notes that have more than one principal payment or that have interest payments
that are not qualified stated interest the weighted average maturity of the
Note. Because of the possibility of prepayments, it is not clear how the de
minimis rules will apply to the Notes. It is possible that the anticipated
rate of prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption") will be required to be used in determining the weighted average
maturity of the Notes. In the absence of authority to the contrary, the Company
presently expects to apply the de minimis rule by using the Prepayment
Assumption. Generally, an original Note Owner includes de minimis original
issue discount in income as principal payments are made. The amount includable
in income with respect to each principal payment equals a pro rata portion of
the entire amount of de minimis original issue discount with respect to that
Note. Any de minimis amount of original issue discount includable in income by
a Note Owner is generally treated as a capital gain if the Note is a capital
asset in the hands of the Note Owner.
The "stated redemption price at maturity" of a Note generally will be
equal to the sum of all payments, whether denominated as principal or interest,
to be made with respect thereto other than "qualified stated interest".
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In general, the "issue price" of a Note is the first price at which a
substantial amount of the Notes of such class are sold for money to the public
(excluding bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers).
If the Notes are determined to be issued with original issue discount, a
holder of a Note must generally include the original issue discount in ordinary
gross income for federal income tax purposes as it accrues in advance of the
receipt of any cash attributable to such income. The amount of original issue
discount, if any, required to be included in a Note Owner's ordinary gross
income for federal income tax purposes in any taxable year will be computed in
accordance with Section 1272(a) of the Code and the OID Regulations. Under such
section and the OID Regulations, original issue discount accrues on a daily
basis under a constant yield method that takes into account the compounding of
interest. The amount of original issue discount to be included in income by a
holder of a debt instrument, such as a Note, under which principal payments may
be subject to acceleration because of prepayments of other debt obligations
securing such an instrument, is computed by taking into account the Prepayment
Assumption.
The amount of original issue discount includable in income by a Note
Owner is the sum of the "daily portions" of the original issue discount for
each day during the taxable year on which the holder held the Note. The daily
portions of original issue discount are determined by allocating to each day in
any "accrual period" a pro rata portion of the excess, if any, of the sum of
(i) the present value of all remaining payments to be made on the Note as of
the close of the "accrual period" and (ii) the payments during the accrual
period of amounts included in the stated redemption price of the Note over the
"adjusted issue price" of the Note at the beginning of the accrual period.
Generally, the "accrual period" for the Notes corresponds to the intervals at
which amounts are paid or compounded with respect to such Note, beginning with
their date of issuance and ending with the maturity date. The "adjusted issue
price" of a Note at the beginning of any accrual period is the sum of the issue
price and accrued original issue discount for each prior accrual period reduced
by the amount of payments other than payments of qualified stated interest made
during each prior accrual period. The Code requires the present value of the
remaining payments to be determined on the bases of (a) the original yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period), (b) events,
including actual prepayments, which have occurred before the close of the
accrual period and (c) the assumption that the remaining payments will be made
in accordance with the original Prepayment Assumption. Although original issue
discount, if any, will be reported to Note Owners based on the Prepayment
Assumption, no representation is made to Note Owners that the Notes will be
prepaid at that rate or at any other rate.
In general, a subsequent purchaser of a Note will also be required to
include in such purchaser's ordinary gross income for federal income tax
purposes the original issue discount, if any, accruing with respect to such
Note, unless the price paid equals or exceeds the Note's stated redemption
price at maturity. If the price paid exceeds the Note's "adjusted issue price"
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(as described above), but does not equal or exceed the stated redemption price
at maturity, the amount of original issue discount to be accrued will be
reduced in accordance with a formula set forth in Section 1272(a)(7)(B) of the
Code. If the price paid is less than the Note's adjusted issue price, the
purchaser will be required to include in income any original issue discount on
the Note and, to the extent the price paid is less than the adjusted issue
price, the Note will be treated as having been purchased with "market
discount". See "--Market Discount", below.
The Company believes that the owner of a Note determined to be issued
with original issue discount will be required to include the original issue
discount in ordinary gross income for federal income tax purposes computed in
the manner described above. However, the OID Regulations either do not address
or are subject to varying interpretations with respect to several issues
concerning the computation of original issue discount for obligations such as
the Notes.
If a variable rate Note is deemed to have been issued with original issue
discount, as described above, the amount of original issue discount accrues on
a daily basis under a constant yield method that takes into account the
compounding of interest; provided, however, that the interest associated with
such a Note generally is assumed to remain constant throughout the term of the
Note at a rate that, in the case of a qualified floating rate, equals the value
of such qualified floating rate as of the issue date of the Note, or, in the
case of an objective rate, at a fixed rate that reflects the yield that is
reasonably expected for the Note. A holder of such a Note would then recognize
original issue discount during each accrual period which is calculated based
upon such Note's assumed yield to maturity. If the interest actually accrued
or paid during an accrual period exceeds (or is less than) the constant
interest assumed to be accrued or paid during the accrual period under the
foregoing rules, qualified stated interest or original issue discount allocable
to an accrual period is increased (or decreased) under rules set forth in the
OID Regulations.
The OID Regulations either do not address or are subject to varying
interpretations with respect to several issues concerning the computation of
original issue discount on the Notes, including variable rate Notes. Additional
information regarding the manner of reporting original issue discount to the
Service and to holders of variable rate Notes will be set forth in the
Prospectus Supplement relating to the issuance of such Notes.
Market Discount. Notes, whether or not issued with original issue
discount, will be subject to the market discount rules of the Code. A purchaser
of a Note who purchases the Note at a price that is less than the Note's
"stated redemption price at maturity" or, in the case of a Note issued with
original issue discount, at a price that is less than the Note's "adjusted
issue price" (as such terms are described above under "--Original Issue
Discount") will be required to recognize accrued market discount as ordinary
income as payments of principal are received on such Note or upon the sale or
exchange of the Note. In general, the holder of a Note may elect to treat market
discount as accruing either (i) under a constant yield method that is similar to
the method for the accrual of original issue discount or (ii) in proportion to
accruals of original issue discount (or, if there is no original issue discount,
in proportion to accruals of stated interest), in each case computed taking into
account the Prepayment Assumption. The
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amount of accrued market discount for purposes of determining the amount of
ordinary income to be recognized with respect to subsequent payments on such a
Note is to be reduced by the amount previously treated as ordinary income.
The Code provides that the market discount in respect of a Note will be
considered to be zero if the amount allocable to the Note is less than a
specified de minimis amount of 0.25% of the Note's stated redemption price at
maturity multiplied by the number of complete years remaining to its maturity
after the holder acquired the Note. If market discount is treated as de minimis
under this rule, the actual discount would be allocated among the scheduled
payments included in the stated redemption price at maturity of such Note, and
the portion of the discount allocable to each such payment would be reported as
income when such payment occurs or is due.
The Code grants authority to the Treasury Department to issue regulations
providing for the computation of accrued market discount on debt instruments
such as certain of the Notes. Until such time as regulations are issued, rules
described in the legislative history for these provisions of the Code will
apply. Note Owners who acquire a Note at a market discount should consult their
tax advisors concerning various methods which are available for accruing that
market discount.
In general, the Code requires a holder of a Note having market discount
to defer a portion of the interest deductions attributable to any indebtedness
incurred or continued to purchase or carry such Note. Alternatively, a holder
of a Note may elect to include market discount in gross income as it accrues
and, if he makes such an election, is exempt from this rule. The adjusted basis
of a Note subject to such election will be increased to reflect market discount
included in gross income, thereby reducing any gain or increasing any loss on a
sale or other taxable disposition.
Amortizable Premium. A holder of a Note who holds the Note as a capital
asset and who purchased the Note at a price greater than its stated redemption
price at maturity will be considered to have purchased the Note at a premium.
In general, the Note Owner may elect to deduct the amortizable bond premium as
it accrues under a constant yield method. A Note Owner's tax basis in the Note
will be reduced by the amount of the amortizable bond premium deducted. In
addition, it appears that the same methods which apply to the accrual of market
discount on obligations providing for principal payments prior to maturity are
intended to apply in computing the amortizable bond premium deduction with
respect to a Note. It is not clear, however, (i) whether the alternatives to
the constant-yield method which may be available for the accrual of market
discount are available for amortizing premium on Notes and (ii) whether the
Prepayment Assumption should be taken into account in determining the term of a
Note for this purpose. Note Owners who pay a premium for a Note should consult
their tax advisors concerning such an election and rules for determining the
method for amortizing bond premium.
Gain or Loss on Disposition. If a Note is sold, the selling Note Owner
will recognize gain or loss equal to the difference between the amount realized
from the sale and the selling
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Note Owner's adjusted basis in such Note. The adjusted basis generally will
equal the cost of such Note to the seller, increased by any original issue
discount and market discount on such Note included in the seller's income and
reduced (but not below zero) by any payments on the Note other than qualified
stated interest and any amortizable premium. Similarly, a Note Owner who
receives a principal payment with respect to a Note will recognize gain or loss
equal to the difference between the amount of the payment and the owner's
allocable portion of its adjusted basis in the Note. Except as discussed above
or with respect to market discount, any gain or loss recognized upon a sale,
exchange, retirement, or other disposition of a Note will be capital gain if the
Note is held as a capital asset.
Short-Term Notes. In the case of a Note with a maturity of one year or
less from its issue date (a "Short-Term Note"), no interest is treated as
qualified stated interest, and therefore all interest is included in original
issue discount. Note Owners that report income for federal income tax purposes
on an accrual method and certain other Note Owners, including banks and dealers
in securities, are required to include original issue discount in income on
such Short-Term Notes on a straight-line basis, unless an election is made to
accrue the original issue discount according to a constant yield method based
on daily compounding.
Any other Note Owner of a Short Term Note is not required to accrue
original issue discount for federal income tax purposes, unless it elects to do
so. In the case of a Note Owner that is not required, and does not elect, to
include original issue discount in income currently, any gain realized on the
sale, exchange or retirement of a Short-Term Note is ordinary income to the
extent of the original issue discount accrued on a straight-line basis (or, if
elected, according to a constant yield method based on daily compounding)
through the date of sale, exchange or retirement. In addition, Note Owners
that are not required, and do not elect, to include original issue discount in
income currently are required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry a Short-Term Note in an
amount not exceeding the deferred interest income with respect to such
Short-Term Note (which includes both the accrued original issue discount and
accrued interest that are payable but that have not been included in gross
income), until such deferred interest income is realized. Such a Note Owner
may elect to apply the foregoing rules (except for the rule characterizing gain
on sale, exchange or retirement as ordinary) with respect to "acquisition
discount" rather than original issue discount. Acquisition discount is the
excess of the stated redemption price at maturity of the Short-Term Note over
the Note Owner's basis in the Short-Term Note. This election applies to all
obligations acquired by the taxpayer on or after the first day of the first
taxable year to which such election applies, unless revoked with the consent of
the IRS. A Note Owner's tax basis in a Short-Term Note is increased by the
amount included in such Owner's income on such a Note.
Taxation of Certain Foreign Note Owners. As used herein, the term
"Non-United States Holder" means a Note Owner that is, for United States
federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign
corporation, (iii) a nonresident alien fiduciary of a foreign estate or trust
or (iv) a foreign partnership one or more of the members of which is, for
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United States federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate or
trust.
In general, Non-United States Holders will not be subject to United
States federal withholding tax with respect to payments of principal and
interest on Notes, provided that certain conditions are met. Under United
States federal income tax law now in effect, and subject to the discussion of
backup withholding in the following section, payments of principal and interest
(including original issue discount) with respect to a Note to any Non-United
States Holder will not be subject to United States federal withholding tax,
provided, in the case of interest (including original issue discount), that (i)
such Holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of equity of the Trust, (ii) such Holder
is not for federal income tax purposes a controlled foreign corporation
related, directly or indirectly, to the Trust through equity ownership, (iii)
such Holder is not a bank receiving interest described in Section 881(c)(3)(A)
of the Code and (iv) either (A) the Note Owner certifies, under penalties of
perjury, to the Trust or paying agent, as the case may be, that such Holder is
a Non-United States Holder and provides such Holder's name and address, or (B)
a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note, certifies, under penalties of
perjury, to the Trust or paying agent, as the case may be, that such Note has
been received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
thereof. A certificate described in this paragraph is effective only with
respect to payments of interest (including original issue discount) made to the
certifying Non-United States Holder after the issuance of the certificate in
the calendar year of its issuance and the two immediately succeeding calendar
years.
Notwithstanding the foregoing, interest described in Section 871(h)(4) of
the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to
certain exceptions) any interest the amount of which is determined by reference
to receipts, sales or other cash flow of the issuer or a related person, any
income or profits of the issuer or a related person, any change in the value of
any property of the issuer or a related person or any dividends, partnership
distribution or similar payments made by the issuer or a related person.
Interest described in Section 871(h)(4) of the Code may include other types of
contingent interest identified by the IRS in future Treasury Regulations. If
the Trust issues Notes the interest on which is described in Section 871(h)(4)
of the Code, the United States withholding tax consequences of any such Notes
will be described in the applicable Prospectus Supplement.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including original issue discount) on the Note is
effectively connected with the conduct of such trade or business, the Non-United
States Holder, although exempt from the withholding tax discussed in the two
preceding paragraphs, will be subject to United States federal income tax on
such interest (including original issue discount) in the same manner as if it
were a United States person (as defined below). In lieu of the certificate
described above, such Holder will
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be required to provide a properly executed IRS Form 4224 in order to claim an
exemption from withholding tax. In addition, if such Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate as may be specified by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to adjustments. For
this purpose, interest (including original issue discount) on a Note will be
included in the earnings and profits of such Holder if such interest (including
original issue discount) is effectively connected with the conduct by such
Holder of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or original issue discount) realized upon the sale, exchange,
retirement or other disposition of a Note will not be subject to United States
federal income tax unless (i) such gain or income is effectively connected with
a trade or business in the United States of the Non-United States Holder or
(ii) in the case of a Non-United States Holder who is a nonresident alien
individual, the Non-United States Holder is present in the United States for
183 days or more in the taxable year of such sale, exchange, retirement or
other disposition and either (a) such individual has a "tax home" (as defined
in Section 911(d)(3) of the Code) in the United States or (b) the gain is
attributable to an office or other fixed place of business maintained by such
individual in the United States.
Backup Withholding and Information Reporting. Under current United
States federal income tax law, information reporting requirements apply to
interest (including original issue discount) and principal payments made to,
and to the proceeds of sales before maturity by, certain non-corporate Note
Owners that are not Non-United States Holders. In addition, a 31% backup
withholding tax will apply if such non-corporate Note Owner (i) fails to
furnish its Taxpayer Identification Number ("TIN") (which, for an individual,
would be his or her Social Security Number) to the payor in the manner
required, (ii) furnishes an incorrect TIN and the payor is so notified by the
IRS, (iii) is notified by the IRS that it has failed properly to report
payments of interest and dividends or (iv) in certain circumstances, fails to
certify, under penalties of perjury, that it has not been notified by the IRS
that it is subject to backup withholding for failure properly to report
interest and dividend payments. Backup withholding will not apply with respect
to payments made to certain exempt recipients, such as corporations (within the
meaning of Section 7701(a) of the Code) and tax-exempt organizations.
In the case of a Non-United States Holder, under Treasury Regulations,
backup withholding and information reporting will not apply to payments of
principal and interest made by the Trust or any paying agent thereof on a Note
with respect to which such holder has provided the required certification under
penalties of perjury that it is a Non-United States Holder or has otherwise
established an exemption, provided that (i) the Trust or paying agent, as the
case may be, does not have actual knowledge that the payee is a United States
person and (ii) certain other conditions are satisfied.
Subject to the discussion below, payments to or through the United States
office of a broker will be subject to backup withholding and information
reporting unless the holder certifies under penalties of perjury as to its
status as a Non-United States Holder and certain other
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qualifications (and no agent of the broker who is responsible for receiving or
reviewing such statement has actual knowledge that it is incorrect) and provides
his or her name and address or the holder otherwise establishes an exemption.
In general, if principal or interest payments on a Note are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a Note Owner, such custodian, nominee or other agent
will not be required to apply backup withholding to such payments made to such
owner and will not be subject to information reporting. However, if such
custodian, nominee or other agent is a United States person, a controlled
foreign corporation for United States tax purposes, or a foreign person 50% or
more of whose gross income is effectively connected with its conduct of a
United States trade or business for a specified three-year period, such
custodian, nominee or other agent may be subject to certain information
reporting (but not backup withholding) requirements with respect to such
payment unless such custodian, nominee or other agent has in its records
documentary evidence that the Note Owner is not a United States person and
certain conditions are met or the Note Owner otherwise establishes an
exemption. Under proposed Treasury Regulations, backup withholding may apply
to any payment which such custodian, nominee or other agent is required to
report if such custodian, nominee or other agent has actual knowledge that the
payee is a United States person.
Under Treasury Regulations, payments on the sale, exchange or retirement
of a Note to or through a foreign office of a broker will not be subject to
backup withholding. However, if such broker is a United States person, a
controlled foreign corporation for United States tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with its
conduct of a United States trade or business for a specified three-year period,
information reporting (but not backup withholding) will be required unless such
broker has in its records documentary evidence that the Note Owner is not a
United States person and certain other conditions are met or the Note Owner
otherwise establishes an exemption. Under proposed Treasury Regulations,
backup withholding may apply to any payment which such broker is required to
report if such broker has actual knowledge that the payee is a United States
person.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a Note Owner under the backup withholding rules will
be allowed as a refund or a credit against such owner's United States federal
income tax, provided that the required information is furnished to the IRS.
Note Owners should consult their tax advisors regarding the application
of information reporting and backup withholding to their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining
such an exemption, if available.
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TAX CONSEQUENCES TO CERTIFICATES OWNERS
Treatment of the Trust as a Partnership. The Trust will agree, and the
related Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of federal and state income tax,
franchise tax and any other tax measured in whole or in part by income, with
the assets of the partnership being the assets held by the Trust, the partners
of the partnership being the Certificate Owners (including, to the extent
relevant, the Seller in its capacity as recipient of distributions from any
Reserve Fund), and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller, the Company and the Servicer is not
certain because there is no authority on transactions closely comparable to
that contemplated herein. A variety of alternative characterizations are
possible. For example, to the extent the Certificates have certain features
characteristic of debt, the Certificates might be considered debt of the
Seller, the Company or the Trust. Any such characterization would not result
in materially adverse tax consequences to Certificate Owners as compared to the
consequences from treatment of the Certificates as equity in a partnership,
described below.
The following discussion assumes that the Certificates represent equity
interests in a partnership, that all payments on the Certificates are
denominated in United States dollars, none of the Certificates represents Strip
Certificates and that a Series of Securities includes a single class of
Certificates. If these conditions are not satisfied with respect to any given
Series of Certificates, additional tax considerations with respect to such
Certificates will be disclosed in the related Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificate Owner will be required to take
into account separately such Owner's allocated share of income, gains, losses,
deductions and credits of the Trust (whether or not there is a corresponding
cash distribution). Thus, cash basis holders will in effect be required to
report income from the Certificates on the accrual basis and Certificate Owners
may become liable for taxes on Trust income even if they have not received cash
from the Trust to pay such taxes. The Trust's income will consist primarily of
interest and finance charges earned on the related Receivables (including
appropriate adjustments for market discount, original issue discount and bond
premium) and any gain upon collection or disposition of such Primary Assets.
The Trust's deductions will consist primarily of interest accruing with respect
to the Notes, servicing and other fees, and losses or deductions upon
collection or disposition of Primary Assets.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(i.e., the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificate Owners will be allocated taxable
income of the Trust for each month equal to the sum of: (i) the interest or
other income that accrues on the Certificates in accordance with their terms
for such month including, as applicable, interest accruing at the related
Pass-Through Rate for such month and interest on amounts previously due on the
Certificates but not yet distributed; (ii) any Trust
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income attributable to discount on the related Receivables that corresponds to
any excess of the principal amount of the Certificates over their initial issue
price; (iii) any prepayment premium payable to the Certificate Owners for such
month; and (iv) any other amounts of income payable to the Certificate Owners
for such month. Such allocation will be reduced by any amortization by the
Trust of premium on Receivables that corresponds to any excess of the issue
price of Certificates over their principal amount. All remaining taxable
income of the Trust will be allocated to the Seller.
Based on the economic arrangement of the parties, the foregoing approach
for allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require
a greater amount of income to be allocated to Certificate Owners. Moreover,
even under the foregoing method of allocation, Certificate Owners may be
allocated income equal to the entire Pass-Through Rate plus the other items
described above, even though the Trust might not have sufficient cash to make
current cash distributions of such amount. In addition, because tax allocations
and tax reporting will be done on a uniform basis for all Certificate Owners,
but Certificate Owners may be purchasing Certificates at different times and at
different prices, Certificate Owners may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
All of the taxable income allocated to a Certificate Owner that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees
to the Servicer, but not interest expense) would be miscellaneous itemized
deductions and thus deductible only to the extent such expenses plus all other
Section 212 expenses exceed two percent of such individual's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of
itemized deductions (including those provided for in Section 212 of the Code)
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds a threshold amount specified in the Code ($114,700 in 1995 in
the case of a joint return) will be reduced by the lessor of (i) 3% of the
excess of adjusted gross income over the specified threshold amount or (ii) 80%
of the amount of itemized deductions otherwise allowable for such taxable year.
Accordingly, such deductions might be disallowed to such individual in whole or
in part and might result in such Certificate Owner being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder over
the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificate Owners on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the
Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificate Owners.
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Discount and Premium. Except as otherwise provided in the related
Prospectus Supplement, it is believed that the Receivables were not issued with,
and, therefore, the Trust should not have original issue discount income.
However, the purchase price paid by the Trust for the related Primary
Assets may be greater or less than the remaining principal balance of the
Primary Assets at the time of purchase. If so, the Primary Assets will have
been acquired at a premium or market discount, as the case may be. See "Tax
Consequences to Note Owners--Market Discount" and "--Amortizable Premium"
above. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a Primary
Asset-by-Primary Asset basis.)
If the Trust acquires the Receivables at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to Certificate
Owners.
Section 708 Termination. Under Section 708 of the Code, the Trust will
be deemed to terminate for federal income tax purpose if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificate Owner's tax basis in a Certificate will generally equal
its cost, increased by its share of Trust income allocable to such Certificate
Owner and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the
amount realized on a sale of a Certificate would include the Certificate
Owner's share (determined under Treasury Regulations) of the Notes and other
liabilities of the Trust. A Certificate Owner acquiring Certificates at
different prices will generally be required to maintain a single aggregate
adjusted tax basis in such Certificates and, upon a sale or other disposition
of some of the Certificates, allocate a portion of such aggregate tax basis to
the Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
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If a Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificate Owners in
proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a Certificate Owner
purchasing Certificates may be allocated tax items (which will affect the
purchaser's tax liability and tax basis) attributable to periods before the
actual transaction.
The use of such a monthly convention may not be permitted by existing
Treasury Regulations. If a monthly convention is not allowed (or only applies
to transfers of less than all of the partner's interest), taxable income or
losses of the Trust might be reallocated among the Certificate Owners. The
Seller will be authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would
be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust will not make such
election. As a result, Certificate Owners might be allocated a greater or
lesser amount of Trust income than would be appropriate based on their own
purchase price for Certificates.
Administrative Matters. The Trustee is required to keep complete and
accurate books of the Trust. Such books will be maintained for financial
reporting and tax purposes on an accrual basis, and the fiscal year of the
Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificate Owner's allocable share of items of
Trust income and expense to holders and the IRS on Schedule K-1. The Trust
will provide the Schedule K-1 information to nominees that fail to provide the
Trust with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent
with the information return filed by the Trust or be subject to penalties
unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee
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and (ii) as to each beneficial owner (a) the names address and identification
number of such person, (b) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or
any wholly owned agency or instrumentality of either of the foregoing, and (c)
certain information on Certificates that were held, bought or sold on behalf of
such person throughout the year. In addition, brokers and financial
institutions that hold Certificates through a nominee are required to furnish
directly to the Trust information as to themselves and their ownership of
Certificates. A clearing agency registered under Section 17A of the Exchange
Act is not required to furnish any such information statement to the Trust.
The information referred to above for any calendar year must be furnished to
the Trust on or before the following January 31. Nominees, brokers and
financial institutions that fail to provide the Trust with the information
described above may be subject to penalties.
The Company will be designated as the tax matters partner for each Trust
in the related Trust Agreement and, as such, will be responsible for
representing the Certificate Owners in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations
for partnership items does not expire before three years after the date on
which the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the Certificate
Owners, and, under certain circumstances, a Certificate Owner may be precluded
from separately litigating a proposed adjustment to the items of the Trust. An
adjustment could also result in an audit of a Certificate Owner's returns and
adjustments of items not related to the income and losses of the Trust.
Taxation of Certain Foreign Certificate Owners. As used herein, the
term "Non-United States Owner" means a Certificate Owner that is, for United
States federal income tax purposes, (i) a nonresident alien individual, (ii) a
foreign corporation, (iii) a nonresident alien fiduciary of a foreign estate or
trust or (iv) a foreign partnership one or more of the members of which is, for
United States federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate or
trust.
It is not clear whether the Trust would be considered to be engaged in a
trade or business in the United States for purposes of federal withholding
taxes with respect to Non-United States Owners because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. Although it is not expected that the Trust would be engaged
in a trade or business in the United States for such purposes, the Trust will
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold
on the portion of its taxable income that is allocable to Non-United States
Owners pursuant to Section 1446 of the Code, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for Non-United States
Owners that are taxable as corporations and 39.6% for all other such Owners.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures. In determining a Certificate Owner's withholding
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status, the Trust may rely on IRS Form W-8, IRS Form W-9 or the Certificate
Owner's certification of nonforeign status signed under penalties of perjury.
Each Non-United States Owner might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each Non-United States
Owner must obtain a taxpayer identification number from the IRS and submit that
number to the Trust on Form W-8 in order to assure appropriate crediting of the
taxes withheld. Assuming the Trust is not engaged in a U.S. trade or business,
a Non-United States Owner would be entitled to a refund with respect to taxes
withheld by the Trust if such Owner's allocable share of interest from the
Trust constituted "portfolio interest" under the Code.
Such interest, however, may not constitute "portfolio interest" if, among
other reasons, the underlying obligation is not in registered form or if the
interest is determined without regard to the income of the Trust (in the later
case, such interest being properly characterized as a guaranteed payment under
Section 707(c) of the Code). If this were the case, Non-United States Owners
would be subject to a United States federal income and withholding tax at a
rate of 30 percent (without any deductions or other allowances for costs and
expenses incurred in producing such income), unless reduced or eliminated
pursuant to an applicable treaty. In such case, a Non-United States Owner
would only be entitled to a refund for that portion of the taxes in excess of
the taxes that should have been withheld with respect to such interest.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE GRANTOR TRUSTS
Characterization. In the case of a Grantor Trust, Federal Tax Counsel
will deliver its opinion that the Trust will not be classified as an
association taxable as a corporation and that such Trust will be classified as
a grantor trust under subpart E, Part I of subchapter J of the Code. In this
case, beneficial owners of Certificates (referred to herein as "Grantor Trust
Certificateholders") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates".
Taxation of Grantor Trust Certificateholders--General. Subject to the
discussion below under "--Stripped Certificates" and "--Subordinated
Certificates", each Grantor Trust Certificateholder will be treated as the
owner of a pro rata undivided interest in the Receivables
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and other assets of the Trust. Accordingly, and subject to the discussion
below of the recharacterization of the Servicing Fee, each Grantor Trust
Certificateholder must include in income its pro rata share of the interest and
other income from the Primary Assets (including any interest, original issue
discount, market discount, prepayment fees, assumption fees, and late payment
charges with respect to such assets), and, subject to certain limitations
discussed below, may deduct its pro rata share of the fees and other deductible
expenses paid by the Trust, at the same time and to the same extent as such
items would be included or deducted by the Grantor Trust Certificateholder if
the Grantor Trust Certificateholder held directly a pro rata interest in the
assets of the Trust and received and paid directly the amounts received and
paid by the Trust. Any amounts received by a Grantor Trust Certificateholder
in lieu of amounts due with respect to any Receivable 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.
Under Sections 162 and 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 Servicer, provided that such amounts are reasonable
compensation for services rendered to the Trust. Grantor Trust
Certificateholders that are individuals, estates or trusts will be entitled to
deduct their share of expenses only to the extent such expenses plus all
certain itemized deductions exceed two percent of the Grantor Trust
Certificateholder's adjusted gross income. In addition, Section 68 of the Code
provides that the amount of itemized deductions (including those provided for
in Section 212 of the Code) otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds a threshold amount specified in
the Code ($114,700 in 1995 in the case of a joint return) will be reduced by
the lessor of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. The servicing compensation to be received by
the Servicer may be questioned by the Service with respect to certain
Certificates or Receivables as exceeding a reasonable fee for the services
being performed in exchange therefor, and a portion of such servicing
compensation could be recharacterized as an ownership interest retained by the
Servicer or other party in a portion of the interest payments to be made
pursuant to the Contracts. In this event, a Certificate might be treated as a
Stripped Certificate subject to the stripped bond rules of Section 1286 of the
Code and the original issue discount provisions rather than to the market
discount and premium rules. See the discussion below under "-- Stripped
Certificates". Except as discussed below under "--Stripped Certificates" or
"--Subordinated Certificates", this discussion assumes that the servicing fees
paid to the Servicer do not exceed reasonable servicing compensation.
A purchaser of a Grantor Trust Certificate will be treated as
purchasing an interest in each Primary Asset in the Trust at a price determined
by allocating the purchase price paid for the Certificate among all Primary
Assets in proportion to their fair market values at the time of the purchase of
the Certificate. To the extent that the portion of the purchase price of a
Grantor Trust Certificate allocated to a Primary Asset is less than or greater
than the portion of the stated redemption price at maturity of the Primary
Asset, the interest in the Primary Asset
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will have been acquired at a discount or premium. See "--Market Discount" and
"--Premium", below.
The treatment of any discount on a Primary Asset will depend on
whether the discount represents original issue discount or market discount.
Except as indicated otherwise in the applicable Prospectus Supplement, it is
not expected that any Primary Asset will have original issue discount (except
as discussed below under "--Stripped Certificates" or "--Subordinated
Certificates").
The information provided to Grantor Trust Certificateholders will
not include information necessary to compute the amount of discount or premium,
if any, at which an interest in each Primary Asset is acquired.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Primary Assets may be subject to the market discount
rules of Sections 1276 through 1278 to the extent an undivided interest in a
Primary Asset is considered to have been purchased at a "market discount".
Generally, the amount of market discount is equal to the amount by which the
purchase price of a Grantor Trust Certificate allocated to a Primary Asset is
less than the portion of the stated redemption price at maturity of the Primary
Asset. Market discount with respect to an interest in a Primary Asset will be
considered to be zero if the amount of market discount is less than 0.25% of
the stated redemption price at maturity of the interest in the Primary Asset
multiplied by the weighted average maturity of the Primary Asset 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 Sections 1276 and
1278 of the Code.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain or disposition of a market discount bond 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 Code grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments
such as the Primary Assets, 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, in the case of a debt
instrument not issued with original issue discount, according to the following
alternative method. Under the alternative method, 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. Because the regulations
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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
Certificateholder.
A Grantor Trust Certificateholder that acquired an interest in a Primary
Asset at a market discount also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such interest. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such Grantor Trust
Certificateholder 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. To the extent a Grantor Trust Certificateholder is considered
to have purchased an undivided interest in a Primary Asset for an amount that
is greater than the stated redemption price at maturity of such interest, such
Grantor Trust Certificateholder will be considered to have purchased the
interest in the Primary Asset with "amortizable bond premium" equal in amount
to such excess. A Grantor Trust Certificateholder who holds the Certificate as
a capital asset may elect under Section 171 of the Code to amortize such
premium. Under the Code, premium is allocated among the interest payments on
the Primary Assets to which it relates and is considered as an offset against
(and thus reduction of) such interest payments. With certain exceptions, such
an election would apply to all debt instruments held or subsequently acquired
by the electing holder. Absent such an election, the premium will be
deductible as an ordinary loss only upon disposition of the Certificate or pro
rata as principal is paid on the Primary Asset.
Stripped Certificates. Certain classes of Certificates may be subject to
the stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates". In general, a
Stripped Certificate will be subject to the stripped bond rules where there has
been a separation of ownership of the right to receive some or all of the
principal payments on a Contract from ownership of the right to receive some or
all of the related interest payments. In general, where such separation has
occurred, under the stripped bond rules of Section 1286 of the Code the holder
of a right to receive a principal or interest payment on the bond is required
to accrue into income, on a constant yield basis under rules governing original
issue discount (see "Owner Trust--Tax Consequences to Note Owners--Original
Issue Discount"), the difference between the holder's initial purchase price
for such right and the principal or interest payment to be received with
respect to such right.
Certificates will constitute Stripped Certificates and will be subject to
these rules under various circumstances, including the following: (i) if any
servicing compensation is deemed to exceed a reasonable amount (see "--Taxation
of Grantor Trust Certificateholders--General", above); (ii) if the Company or
any other party retains a retained yield with respect to the Primary Assets
held by the Trust; (iii) if two or more classes of Certificates are issued
representing the right to non-pro rata percentages of the interest or principal
payments on the
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Contracts; or (iv) if Certificates are issued which represent the right to
interest-only payments or principal-only payments.
The tax treatment of the Stripped Certificates with respect to the
application of the original issue discount provisions of the Code is currently
unclear. However, the Trustee intends to treat each Stripped Certificate as a
single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount. Original issue discount with respect
to a Stripped Certificate must be included in ordinary gross income for federal
income tax purposes as it accrues in accordance with the constant yield method
that takes into account the compounding of interest and such accrual of income
may be in advance of the receipt of any cash attributable to such income. See
"Owner Trust--Tax Consequences to Note Owners--Original Issue Discount" above.
For purposes of applying the original issue discount provisions of the Code,
the issue price of a Stripped Certificate will be the purchase price paid by
each holder thereof and the stated redemption price at maturity may include the
aggregate amount of all payments to be made with respect to the Stripped
Certificate whether or not denominated as interest. The amount of original
issue discount with respect to a Stripped Certificate may be treated as zero
under the original issue discount de minimis rules described above.
When an investor purchases more than one class of Stripped Certificates
it is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
Notwithstanding the position that the Trustee intends to take, it is
possible that the Service may take a contrary position for purposes of applying
the original issue discount provisions of the Code to the Stripped
Certificates. For example, a holder of a Stripped Certificate might be treated
as the owner of (i) as many stripped bonds or stripped coupons as there are
scheduled payments of principal and/or interest on each Primary Asset or (ii) a
separate installment obligation for each Primary Asset representing the
Stripped Certificate's pro rata share of principal and/or interest payments to
be made with respect thereto. As a result of these possible alternative
characterizations, investors should consult their own tax advisors regarding
the proper treatment of Stripped Certificates for federal income tax purposes.
Subordinated Certificates. In the event the Trust issues two classes of
Grantor Trust Certificates that are identical except that one class is a
subordinate class (with a relatively high Pass Through Rate)and the other is a
senior class (with a relatively low Pass Through Rate (referred to herein as
the "Subordinate Certificates" and "Senior Certificates", respectively), the
Trust will be deemed to have acquired the following assets: (i) the principal
portion of each Primary Asset plus a portion of the interest due on each
Primary Asset (the "Trust Stripped Bond"), and (ii) a portion of the interest
due on each Primary Asset equal to the difference between the Pass Through Rate
on the Subordinate Certificates and the Pass Through Rate on the Senior
Certificates, if any, which difference is then multiplied by the Subordinate
Class Percentage (the "Trust Stripped Coupon"). The "Subordinate Class
Percentage" equals the
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initial aggregate principal amount of the Subordinate Certificates divided by
the sum of the initial aggregate principal amount of the Subordinate
Certificates and the Senior Certificates. The "Senior Class Percentage" equals
the initial aggregate principal amount of the Senior Certificates divided by
the sum of the initial aggregate principal amount of the Subordinate
Certificates and the Senior Certificates.
The Senior Certificateholders in the aggregate will own the Senior Class
Percentage of the Trust Stripped Bond and accordingly each Senior
Certificateholder will be treated as owning its pro rata share of such asset.
The Senior Certificateholders will not own any portion of the Trust Stripped
Coupon. The Subordinate Certificateholders in the aggregate own both the
Subordinate Class Percentage of the Trust Stripped Bond plus 100% of the Trust
Stripped Coupon, if any, and accordingly each Subordinate Certificateholder
will be treated as owning its pro rata share in both such assets. The Trust
Stripped Bond will be treated as a "stripped bond" and the Trust Stripped
Coupon will be treated as "stripped coupons" within the meaning of Section 1286
of the Code. Because the purchase price paid by each Subordinate
Certificateholder will be allocated between that Certificateholder's interest
in the Trust Stripped Bond and the Trust Stripped Coupon based on the relative
fair market value of each asset on the date such Subordinate Certificate is
purchased, the Trust Stripped Bond may be issued with original issue discount.
Except to the extent modified below, the income of the Trust Stripped
Bond represented by a Certificate will be reported in the same manner as
described generally above for holders of Certificates. The interest income on
the Subordinate Certificates at the Senior Certificate Pass-Through Rate and
the portion of the Servicing Fee that does not constitute excess servicing will
be treated as qualified stated interest.
The Trust Stripped Coupon will be treated as a debt instrument with
original issue discount equal to the excess of the total amount payable with
respect to such Trust Stripped Coupon (based on the prepayment assumption used
in pricing the Certificates) over the portion of the purchase price allocated
thereto. The sum of the daily portions of original issue discount on the Trust
Stripped Coupon for each day during a year in which the Subordinate
Certificateholder holds the Trust Stripped Coupon will be included in the
Subordinate Certificateholder's income.
If the Subordinate Certificateholders receive distribution of less than
their share of the Trust's receipts of principal or interest (the "Shortfall
Amount") because of the subordination of the Subordinate Certificates, holders
of Subordinate Certificates would probably be treated for federal income tax
purposes as if they had (i) received as distributions their full share of such
receipts, (ii) paid over to the Senior Certificateholders an amount equal to
such Shortfall Amount and (iii) retained the right to reimbursement of such
amounts to the extent such amounts are otherwise available as a result of
collections on the Primary Assets or amounts available from a Reserve Account
or other form of credit enhancement, if any.
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Under this analysis, (a) Subordinate Certificateholders would be required
to accrue as current income any interest income or original issue discount of
the Trust that was a component of the Shortfall Amount, even though such amount
was in fact paid to the Senior Certificateholders, (b) a loss would only be
allowed to the Subordinate Certificateholders when their right to receive
reimbursement of such Shortfall Amount became worthless (i.e., when it becomes
clear that amount will not be available from any source to reimburse such loss)
and (c) reimbursement of such Shortfall Amount prior to such a claim of
worthlessness would not be taxable income to Subordinate Certificateholders
because such amount was previously included in income. Those results should
not significantly affect the inclusion of income for Subordinate
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to Subordinate Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear. Subordinate
Certificateholders are strongly urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any losses sustained
with respect to the Subordinate Certificates including any loss resulting from
the failure to recover previously accrued interest or discount income.
Election to Treat All Interest as Original Issues Discount. The OID
regulations permit a Grantor Trust Certificateholder to elect to accrue all
interest, discount (including de minimis market or original issue discount) and
premium in income as interest, based on a constant yield method. If such an
election were to be made with respect to an interest in a Primary Asset with
market discount, the Certificate Owner 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 Grantor Trust Certificateholder
acquires during the year of the election or thereafter. Similarly, a Grantor
Trust Certificateholder that makes this election for an interest in a Primary
Asset 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 Grantor Trust Certificateholder owns or acquires. See
"- Premium". The election to accrue interest, discount and premium on a
constant yield method with respect to a Grantor Trust Certificate is
irrevocable.
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 realized (exclusive of
amounts attributable to accrued and unpaid interest, which will be treated as
ordinary income) allocable to the Primary Asset and the owner's adjusted basis
in the Grantor Trust Certificate. Such adjusted basis generally will equal the
Seller's cost for the Grantor Trust Certificate, increased by the original
issue discount and any market discount included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced (but not below zero)
by any premium amortized by the Seller and by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will,
except as discussed below, be capital gain or loss to an owner for which a
Grantor Trust Certificate is a "capital asset" within the meaning of Section
1221, except that gain will be treated in whole or in part as ordinary interest
income to the extent of the Seller's interest in accrued market discount not
previously taken into income on underlying Primary Assets having a fixed
maturity
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date of more than one year from the date of origination. A capital gain or
loss will be long-term or short-term depending on whether or not the Grantor
Trust Certificate has been owned for the long-term capital gain holding period
(currently more than one year).
Notwithstanding the foregoing, any gain realized on the sale or exchange
of a Grantor Trust Certificate will be ordinary income to the extent of the
seller's interest in accrued market discount on Primary Assets not previously
taken into income. See "--Market Discount", above.
Non-United States Grantor Trust Certificate Owners. Amounts paid to
Non-United States Owners of Grantor Trust Certificates will be treated as
interest for purposes of United States withholding tax. Such interest
attributable to the underlying Receivables will not be subject to the normal
30% (or such lower rate provided for by an applicable tax treaty) withholding
tax imposed on such amounts provided that (i) the Non-U.S. Certificate Owner
does not own, directly or indirectly, 10% or more of, and is not a controlled
foreign corporation (within the definition of Section 957) related to the
Seller and (ii) such Certificate Owner fulfills certain certification
requirements. Under these requirements, the Certificate Owner must certify,
under penalty of perjury, that it is not a "United States person" and must
provide its name and address. "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is includible in
gross income for United States federal income tax purposes, without regard to
its source. If, however, interest or gain is effectively connected to the
conduct of a trade or business within the United States by such Certificate
Owner, such owner will be subject to United States federal income tax thereon
at graduated rates. Potential investors who are not United States persons
should consult their own tax advisors regarding the specific tax consequences
of owning a Certificate.
Backup Withholding. Distributions made on the Grantor Trust Certificates
and proceeds from the sale of such Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Grantor Trust Certificateholder
fails to comply with certain identification procedures, unless such holder is
an exempt recipient under applicable provisions of the Code.
***
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
NOTEHOLDER'S OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE
PURCHASERS OF NOTES OR CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
GENERAL
Set forth below are certain consequences under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code that a fiduciary
(a "Plan Fiduciary") of an "employee benefit plan" (as defined in and subject
to ERISA) or of a "plan" (as defined in Section 4975 of the Code) who has
investment discretion should consider before deciding to invest the plan's
assets in Securities. The following summary is intended to be a summary of
certain relevant ERISA issues and does not purport to address all ERISA
considerations that amy be applicable to a particular plan.
In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code (a "Plan") refer to any plan or
account of various types which provide retirement benefits or welfare benefits
to an individual or to an employer's employees and their beneficiaries. Plans
include corporate pension and profit-sharing plans, "simplified employee
pension plans", Keogh plans for self-employed individuals (including partners
in a partnership), individual retirement accounts described in Section 408 of
the Code and health insurance plans.
Each Plan Fiduciary must give appropriate consideration to the facts and
circumstances that are relevant to an investment in the Securities plays in the
Plan's investment portfolio. Each Plan Fiduciary before deciding to invest in
the Securities, must be satisfied that investment in the Securities is a
prudent investment for the Plan, that the investments of the Plan, including
the investment in the Securities, are diversified so as to minimize the risks
of large losses and that an investment in the Securities complies with the Plan
and related trust documents.
Each Plan considering acquiring a Security should consult its own legal
and tax advisors before doing so.
EXEMPT PLANS
ERISA and Section 4975 of the code do not apply to governmental plans and
certain church plans, each as defined in Section 3 of ERISA and Section 4975(g)
of the Code. However, fiduciaries with respect to these plans may be subject
to federal, state or other laws similar in effect to ERISA and Section 4975 of
the code. The discussion below does not purport to address considerations
under such federal, state or other laws.
PLAN ASSETS
It is possible that the purchase of a Security by a Plan will cause, for
purposes of Title I of ERISA and Section 4975 of the Code, the related assets
of a Trust to be treated as assets of that Plan. A regulation (the "DOL
Regulation") issued under ERISA by the United States Department of Labor (the
"DOL") contains rules for determining when an investment by a Plan
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in an entry will result in the underlying assets of the entity being plan
assets. The rules provide that the assets of an entity will not be "plan
assets" of a Plan that purchases an interest therein if such interest is not an
"equity interest". The DOL Regulation defines an equity interest as an
interest other than an instrument that is treated as indebtedness under
applicable local law and that has no substantial equity features. The DOL
Regulation provide with respect to the purchase of an equity interest by a
Plan, that the assets of an entity will not be plan assets of a Plan that
purchases an interest therein if certain exceptions apply including the
following: (i) the investment by all "benefit plan investors" is not
"significant"; or (ii) the security issued by the entity is a "publicly offered
security". The Prospectus Supplement will specify whether any of the
exceptions set forth in the regulation under ERISA may apply with respect to a
Series of Securities.
If none of the exceptions set forth in the DOL Regulation apply, the
assets of a Trust will be deemed to be the assets of each Plan investor for the
purposes of ERISA and Section 4975 of the code. In such a case, the discussion
set forth in the following sections will apply.
Consequences of Characterization as Plan Assets
If the assets of a Trust are plan assets, the Trustee will be a
fiduciary under ERISA with respect to Plan investors and its duties and
liabilities will be subject to the provision of ERISA.
In addition, Section 406 of ERISA will prohibit the Trustee, among
others, from causing the assets of the Trust to be involved, directly or
indirectly, in certain types of transactions with "parties in interest" to
investing Plans unless statutory or administrative exemption applies. If the
prohibited transaction restrictions of Section 406 of ERISA are violated, ERISA
generally provides for criminal and civil penalties upon the Plan Fiduciary and
possibly other persons. Section 4975(c) of the code generally imposes excise
tax on "disqualified persons" who engage, directly or indirectly, in similar
types of transactions with the assets of Plans subject to such Section (except
that an IRA that engages in a prohibited transaction may instead forfeit its
tax exempt status) and also requires recession of such transaction.
PROHIBITED TRANSACTION EXEMPTION FOR SENIOR CERTIFICATES ISSUED BY GRANTOR
TRUSTS
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Grantor Trust.
The U.S. Department of Labor has granted to the underwriter (or in the
case of series offered by more than one underwriter, the lead underwriter)
named in each Prospectus Supplement an exemption (the "Exemption") from certain
of the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by Plans of certificates
representing interests in asset-backed pass-through trusts that consist of
certain
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receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption
include motor vehicle installment sales contracts such as the Receivables. The
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Plan, provided that certain conditions (certain of which are
described below) are met.
Among the conditions that must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Plan is on
terms (including the price for the Senior Certificates) that are at least
as favorable to the Plan as they would be in an arm's length transaction
with an unrelated party;
(2) The rights and interests evidenced by the Senior certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from either Standard & Poor's Ratings
Group, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co.
or Fitch Investors Services, L.P.;
(4) The related Trustee is not an affiliate of any other member
of the Restricted Group (as defined below);
(5) The sum of all payments made to the underwriters in
connection with the distribution of the Senior Certificates represents
not more than reasonable compensation for underwriting the Senior
Certificates; the sum of all payments made to and retained by the Seller
pursuant to the sale of the Contracts to the related Trust repayments
represents not more that the fair market value of such Contracts; and the
sum of all payments made to and retained by the Servicer represents not
more than reasonable compensation for the Servicer's services under the
related Pooling and Servicing Agreement and reimbursement of the
Servicer's reasonable expenses in connections therewith; and
(6) The Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Moreover, the Exemption would provide relief from certain self-dealing or
conflict of interest prohibited transactions if, among other requirements, (i)
in the case of the acquisition of Senior Certificates in connection with the
initial issuance, at least fifty percent of the Senior Certificates are
acquired by persons independent of the Restricted Group (as defined below),
(ii) the Benefit Plan's investment in Senior Certificates does not exceed
twenty-five percent of all of the Senior Certificates outstanding at the time
of the acquisition and (ii) immediately after the
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acquisition, no more than twenty-five percent of the assets of the benefit Plan
are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by any underwriter, the related Trustee, the related
Seller, the related Servicer, any obligor with respect to Contracts included in
the related Trust constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust, or any affiliate of
such parties (the "Restricted Group").
The Company believes that the Exemption will apply to the acquisition and
holding by Plans of Senior Certificates sold by the underwriter or underwriters
named in the Prospectus Supplement and that all conditions of the Exemption
other that those within the control of the investors have been met. In
addition, as of the date hereof, no obligor with respect to Contracts included
in the Trust constitutes more than five percent of the aggregate unamortized
principal balance of the assets of the Trust.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given Series and an underwriting agreement
with respect to the Certificates of such Series (collectively, the
"Underwriting Agreements"), the Company will agree to cause the related Trust
to sell to the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase, the
principal amount of each class of Notes and Certificates, as the case may be,
of the related Series set forth therein and in the related Prospectus
Supplement.
In the Underwriting Agreements with respect to any given Series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all of the Notes and Certificates, as
the case may be, described therein that are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may
be, are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to
certain dealers participating in the offering of such Notes and Certificates,
as the case may be, or (ii) specify that the related Notes and Certificates, as
the case may be, are to be resold by the underwriters in negotiated
transactions at varying prices to be determined at the time of such sale.
After the initial public offering of any such Notes and Certificates, as the
case may be, such public offering prices and such concessions may be changed.
Each Underwriting Agreement will provide that the related Seller will
indemnify the related underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
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Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters.
Pursuant to each of the Underwriting Agreements with respect to a given
Series of Securities, the closing of the sale of any class of Securities will
be conditioned on the closing of the sale of all other such classes under such
Underwriting Agreement.
The place and time of delivery for the Notes and Certificates, as the
case may be, in respect of which this Prospectus is delivered will be set forth
in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Securities of any Series will be
passed upon by Sidley & Austin, New York, New York. Certain federal income tax
and other matters will be passed upon for each Trust by Sidley & Austin and
certain state tax and other matters will be passed upon for each Trust by
__________________________.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
--------------------------------
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<S> <C>
Prospectus Supplement................................................. 2
Reports to Securityholders............................................ 2
Additional Information................................................ 2
Incorporation of Certain Information by Reference..................... 2
Summary of Terms...................................................... 4
Risk Factors.......................................................... 14
The Trusts............................................................ 17
The Receivables Pools................................................. 19
The Collateral Certificates........................................... 21
Weighted Average Life of the Securities............................... 23
Pool Factors and Trading Information.................................. 23
The Seller and the Servicer........................................... 24
Description of the Certificates....................................... 30
Certain Information Regarding the Securities.......................... 32
Description of the Transfer and Servicing Agreements.................. 36
Certain Legal Aspects of the Receivables.............................. 48
Certain Federal Income Tax Consequences............................... 53
Owner Trusts.......................................................... 53
Grantor Trusts........................................................ 69
ERISA Considerations.................................................. 77
Plan of Distribution.................................................. 80
Legal Matters......................................................... 81
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Asset Backed
Securities Corporation
Depositor
[$ % Asset Backed Notes, Class]
[$ % Asset Backed Certificates]
Series 199 - ___
PROSPECTUS
CS FIRST BOSTON
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 1995
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
$ (Approximate)
ASSET BACKED SECURITIES CORPORATION
Depositor
Conduit Mortgage Pass-Through Certificates, Series
% Pass-Through Rate
Principal and interest payable on the day
of each month, beginning , 19
_________________
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET
BACKED SECURITIES CORPORATION OR ANY AFFILIATE THEREOF. NEITHER THE
CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
The Conduit Mortgage Pass-Through Certificate, Series (the "Certificates")
offered hereby evidence undivided fractional interests in a trust to be created
by Asset Backed Securities Corporation (the "Depositor") on or about
, 199 (the "Trust"). The Trust property will consist of a pool of
[conventional] [fixed-rate] [mortgage loans [and]] [mortgage participation
certificates evidencing participation interests in such mortgage loans and
meeting the requirements of the nationally recognized rating agency or agencies
rating the Certificates (collectively, the "Rating Agency") for a rating in one
of the two highest rating categories of such Rating Agency] (the "Mortgage
Loans") and certain related property to be conveyed to the Trust by the
Depositor (the "Trust Fund"). The Mortgage Loans will be transferred to the
Trust, pursuant to a Pooling and Servicing Agreement (as defined herein), dated
as of , 19 , by the Depositor in
exchange for the Certificates and are more fully described in this Prospectus
Supplement and in the accompanying Prospectus. The Certificates offered by this
Prospectus Supplement constitute a separate series of the Certificates being
offered by the Depositor from time to time pursuant to its Prospectus dated
, 199 , which accompanies this Prospectus Supplement and of which this
Prospectus Supplement forms a part. The Prospectus contains important
information regarding this offering that is not contained herein, and
prospective investors are urged to read the Prospectus and this Prospectus
Supplement in full.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for
the Certificates [but [is] [are] under no obligation to do so]. There can be no
assurance that a secondary market will develop, or if it does develop, that it
will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate Mortgage
Investment Conduit (a "REMIC"). See "Certain Federal Income Tax Consequences"
in the Prospectus.]
_________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount Depositor (1)(2)
- -------------------------------------------------------------------------------------------------------------
Per Certificate % % %
- -------------------------------------------------------------------------------------------------------------
Total $ $ $
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deduction of expenses payable by the Depositor estimated at $
.
---------------
</TABLE>
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [their] [its] right to
reject orders in whole or in part. It is expected that the Certificates, in
definitive fully registered form, will be ready for delivery on or about
, 19 .
CS FIRST BOSTON
The date of this Prospectus Supplement is ,19
<PAGE>
This Prospectus Supplement does not contain complete information about the
Certificates offered hereby. Additional information is contained in the
Prospectus, and purchasers are urged to read both this Prospectus Supplement and
the Prospectus in full. Sales of the Certificates may not be consummated unless
the purchaser has received both this Prospectus Supplement and the Prospectus.
_________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_________________
Until , 19 , all dealers effecting transactions in
the 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 obligation of dealers to deliver a Prospectus Supplement and
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
_________________
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Trust can be inspected and copied at the Public Reference Room of
the Commission at 450 Fifth Street, N.W., Washington, D.C., and at the
Commission's regional offices at 75 Park Place, 14th Floor, New York, New York
10007; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
SECURITIES OFFERED..... Conduit Mortgage Pass-Through Certificates, Series
, % Pass-Through Rate (the "Certificates").
AMOUNT................. $ (Approximate: subject to a permitted
variance of up to 5%).
DEPOSITOR.............. Asset Backed Securities Corporation
(the "Depositor").
MASTER SERVICER........
DENOMINATIONS.......... The minimum denomination of a Certificate (a "Single
Certificate") will initially represent
approximately $ aggregate principal amount
of the Mortgage Loans.
CUT-OFF DATE........... , 19 .
DELIVERY DATE.......... On or about , 19 .
INTEREST............... Passed through monthly at the rate of % per annum
(the "Pass-Through Rate"), on the day of each
month (each, a "Distribution Date") commencing
, 19 .
PRINCIPAL (INCLUDING
PREPAYMENTS) Passed through monthly on the Distribution Date,
commencing , 19 .
MORTGAGE POOL.......... The Mortgage Pool will consist of [fixed rate],
fully amortizing, [level-payment] mortgage loans
[and mortgage participation certificates
evidencing participation interests in such
mortgage loans that meet the requirements of the
nationally recognized rating agency or agencies
rating the Certificates (collectively the "Rating
Agency") for a rating in one of the two highest
rating categories of such Rating Agency] secured
by mortgages on one- to four-family residential
properties [located in the states of ,
and (the "Mortgage Loans").] All Mortgage Loans
will have original maturities of at least [15 but
no more than 30] years. See "Description of the
Mortgage Pool and the Underlying Properties"
herein.
[LETTER OF CREDIT...... The maximum liability of [ ] under an irrevocable
standby letter of credit for the Mortgage Pool
(the "Letter of Credit"), net of unreimbursed
payments thereunder, will be no more than [10%] of
the initial aggregate principal balance of the
Mortgage Pool (the "Letter of Credit Percentage").
The maximum amount available to be paid under the
Letter of Credit will be determined in accordance
with the Pooling and Servicing Agreement referred
to herein. The duration of coverage and the amount
of frequency of any reduction in coverage will be
in compliance with the requirements established by
the Rating Agency, in order to obtain a rating in
one of the two highest rating categories of such
Rating Agency. The amount available
S-3
<PAGE>
under the Letter of Credit shall be reduced by the
amount of unreimbursed payments thereunder. See
"Description of the Certificates-Credit Support-
The Letter of Credit" in the Prospectus.]
[POOL INSURANCE POLICY Subject to the limitations described herein, a pool
insurance policy for certain of the Mortgage Loans
(the "Pool Insurance Policy") will cover losses
due to default on such Mortgage Loans in an
initial amount of not less than [5%] of the
aggregate principal balance as of the Cut-off Date
of all Mortgage Loans that are not covered as to
their entire outstanding principal balance by
primary policies of mortgage guaranty insurance.
The Pool Insurance Policy will be subject to the
limitations described under "Description of
Insurance-the Pool Insurance Policy" in the
Prospectus.]
HAZARD INSURANCE [AND
SPECIAL HAZARD
INSURANCE POLICY]..... All of the Mortgage Loans will be covered by
standard hazard insurance policies insuring
against losses due to various causes, including
fire, lightning and windstorm. [An insurance
policy (the "Special Hazard Insurance Policy")
will cover losses with respect to the Mortgage
Loans that result from certain other physical
risks that are not otherwise insured against
(including earthquakes and mudflows). The Special
Hazard Insurance Policy will be limited in scope
and will cover losses in an initial amount equal
to the greater of % of the aggregate principal
balance of the Mortgage Loans or times the unpaid
principal balance of the largest Mortgage Loan.]
Any hazard losses not covered by [either] standard
hazard insurance policies [or the Special Hazard
Insurance Policy] will not be insured against and
[, to the extent that the amount available under
any alternative method of credit support is
exhausted,] will be borne by holders of the
Certificates (the "Certificateholders"). The
hazard insurance policies [and the Special Hazard
Insurance Policy] will be subject to the
limitations described under "Description of
Insurance-Hazard Insurance" [and "-Special Hazard
Insurance Policies"] in the Prospectus.
[MORTGAGOR BANKRUPTCY
BOND.................. The Depositor will obtain a bond or similar form of
insurance coverage (the "Mortgagor Bankruptcy
Bond"), providing coverage against losses that
result from proceedings with respect to obligors
under the Mortgage Loans (the "Mortgagors") under
the federal Bankruptcy Code. See "Description of
the Certificates-Mortgagor Bankruptcy Bond" herein
and "Description of Insurance-The Mortgagor
Bankruptcy Bond" in the Prospectus.]
[OPTIONAL TERMINATION. The Depositor may, at its option, Repurchase from
the Trust all Mortgage Loans remaining outstanding
at such time as the aggregate unpaid principal
balance of such Mortgage Loans is less than [10%]
of the aggregate principal balance of the Mortgage
Loans on the Cut-off Date. The repurchase price
will equal the aggregate unpaid principal balance
of such Mortgage Loans together with accrued
interest thereon at the Pass-Through Rate through
the last day of the month during which such
repurchase occurs, plus the appraised value of any
property acquired in respect thereof. [Any such
repurchase will be effected in compliance with the
requirements of Section 860F(a)(iv) of the
Internal Revenue Code of 1986 (the "Code") so as
to constitute a "qualifying liquidation"
thereunder.]. See "Termination;
S-4
<PAGE>
Repurchase of Mortgage Loans", herein and
"Description of the Certificates-Termination;
Repurchase of Certificates in the Prospectus."]
ADVANCES.............. The Servicers of the Mortgage Loans (and the Master
Servicer, with respect to each Mortgage Loan that
it services directly and otherwise, to the extent
the related Servicer does not do so) will be
obligated to advance delinquent installments of
principal and interest on the Mortgage Loans under
certain circumstances. See "Description of the
Certificates-Advances" in the Prospectus.
TRUSTEE............... See "Description of the Certificates-Trustee"
herein.
CERTIFICATE RATING.... It is a condition of issuance that the Certificates
be rated in one of the two highest rating
categories of [ ], (the ["]Rating Agency[")].
ERISA CONSIDERATIONS.. See "ERISA Considerations" in the Prospectus [and
herein].
LEGAL INVESTMENT...... The Certificates constitute "mortgage related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the "Enhancement
Act"), and, as such, are legal investments for
certain entities to the extent provided in the
Enhancement Act. See "Legal Investment" in the
Prospectus.
TAX ASPECTS........... The Depositor [intends] [does not intend] to make an
election to treat the Trust as a Real Estate
Mortgage Investment Conduit (a "REMIC"), pursuant
to the Internal Revenue Code of 1986, as amended.
See "Certain Federal Income Tax Consequences" in
the Prospectus.
S-5
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
AND THE UNDERLYING PROPERTIES
The Mortgage Pool will consist of Mortgage Loans evidenced by mortgage
notes with aggregate unpaid principal balances outstanding as of the Cut-off
Date, after deducting payments of principal due on such date, of approximately
$ . This amount is subject to a permitted variance of up to %.
The Mortgage Pool will consist of -year, [fixed-rate], fully-
amortizing, [level-payment] Mortgage Loans, as more fully described in the
Prospectus.
The weighted average interest rate (individually, a "Mortgage Rate")
of the Mortgage Loans as of the Cut-off Date will be at least % but
no more than %. All Mortgage Loans will have Mortgage Rates of at
least % but no more than %. The weighted average maturity of the
Mortgage Loans, as of the Cut-off Date, will be at least years but
no more than years. All Mortgage Loans will have original
maturities of at least but no more than years. None of the Mortgage
Loans will have been originated prior to or after , 19 . None of the
Mortgage Loans will have a scheduled maturity later than .
The Mortgage Loans will have the following characteristics as of the
Cut-off Date (expressed as a percentage of the outstanding aggregate principal
balances of the Mortgage Loans having such characteristics relative to the
outstanding aggregate principal balances of all Mortgage Loans):
No more than % of the Mortgage Loans will have been originated
before , and no more than % of the Mortgage Loans
will have been originated before . See "Certain
Federal Income Tax Consequences-Mortgage Pools," "-Taxation of Owners of Trust
Fractional Certificates" and "-Market Discount and Premium" in the Prospectus
for information regarding such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each
having outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans each
having outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-value
ratios at origination in excess of 80%, and no Mortgage Loan will have had a
loan-to-value ratio at origination in excess of 95%.
[All the Mortgage Loans with loan-to-value ratios at origination in
excess of 80% will be covered by a policy of private mortgage insurance until
the outstanding principal balance is reduced to 75% of the Original Value. ]
At least % of the Mortgage Loans will be secured by Mortgages on
single-family dwellings.
No more than % of the Mortgage Loans will be secured by Mortgages
on condominiums.
No more than %, by aggregate principal balance, of the Mortgage
Loans will be Mortgage Loans for which Buy-Down Funds have been provided, and
no more than % of the outstanding principal balance of any such Mortgage Loan
will be represented by Buy-Down Funds.
No more than %, by aggregate principal balance, of the Mortgage
Loans will be GPM Loans.
At least % of the Mortgage Loans will be secured by an owner-
occupied Mortgaged Property. Such determination will have been made on the
basis of a representation by the Mortgagor at the time of origination of the
Mortgage Loan that such Mortgagor then intended to occupy the underlying
property or, in the absence of such a representation, various factors
indicating that the underlying property is owner-occupied.
No more than [5%] of the Mortgage Loans will be secured by Mortgages
on properties located in any one zip code.
S-6
<PAGE>
The Mortgage Loans will be secured by Mortgages on properties located
in the states of .
Specific information with respect to the Mortgage Loans will be
available to purchasers of the Certificates offered hereby at or before the
time of issuance of such Certificates. Such specific information will include
the precise amount of the aggregate principal balances of the Mortgage Loans
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Mortgage Loans: years of origination,
types of dwellings on the underlying properties, the sizes of Mortgage Loans
and distribution of Mortgage Loans by Mortgage Rate, and will be set forth in a
Current Report on Form 8-K that will be filed with the Securities and Exchange
Commission by the Depositor within 15 days after the issuance of the
Certificates.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms"), as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date (the
"Reference Agreement" and, together with the Standard Terms, the "Pooling and
Servicing Agreement") among the Depositor, , as master
servicer (the "Master Servicer"), and , as trustee (the
"Trustee"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement forms a part. Reference is made
to the accompanying Prospectus for important additional information regarding
the terms and conditions of the Pooling and Servicing Agreement and the
Certificates. Each of the Certificates at the time of issuance will qualify as a
"mortgage related security" within the meaning of the Secondary Mortgage Market
Enhancement Act of 1984.
Distributions of principal and interest as set forth above will be
made by the Master Servicer by check mailed to each Certificateholder entitled
thereto at the address appearing in the Certificate Register to be maintained
with the Trustee or, if eligible for wire transfer as provided in the Pooling
and Servicing Agreement, by wire transfer to the account of such
Certificateholder; provided, however, that the final distribution in retirement
of the Certificates will be made only upon presentation and surrender of the
Certificates at the office specified in the notice to Certificateholders of
such final distribution.
The Certificates will be transferable and exchangeable on a
Certificate Register to be maintained by the Trustee at the office or agency of
the Master Servicer maintained for that purpose in New York, New York.
Certificates surrendered to the Trustee for registration of transfer or
exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or other governmental charge may be required. Such
office or agency is currently located at .
TRUSTEE
The Trustee for the Certificates will be , a bank organized
and existing under the laws of with its principal office located at
.
THE MASTER SERVICER
The Master Servicer is a corporation that
commenced operation in . The Master Servicer is a FNMA/FHLMC
approved seller-servicer based in . As of , the Master Servicer
serviced, for other investors and for its own account, approximately
mortgage loans
with an aggregate principal balance in excess of $ . The Master Servicer
conducts operations through FHA approved branch offices in .
The Master Servicer originated approximately $ in mortgage loans in
19 . The Master Servicer's consolidated stockholders' equity as of was
approximately $ .
S-7
<PAGE>
The information set forth above has been provided by the Master
Servicer. The Depositor makes no representation as to the accuracy or
completeness of such information.
The Master Servicer shall obtain and maintain in effect a bond,
corporate guaranty or similar form of insurance coverage (the "Performance
Bond"), insuring against loss occasioned by the errors and omissions of the
Master Servicer's officers, employees and any other person acting on behalf of
the Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer to
purchase certain Mortgage Loans and to make advances, as described in the
Prospectus under "Description of the Certificates-Assignment of Mortgage Loans"
and "-Advances," in an amount acceptable to the nationally recognized
statistical rating organization or organizations rating the Certificates
(collectively, the "Rating Agency").
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be
equal to an amount, payable out of each interest payment on a Mortgage Loan,
equal to the excess of each interest payment on a Mortgage Loan over the Pass-
Through Rate, less [(a)] any servicing compensation payable to the Servicer of
such Mortgage Loan under the terms of the agreement with the Master Servicer
pursuant to which such Mortgage Loan is serviced (the "Servicing Agreement")
(including such compensation paid to the Master Servicer as the direct servicer
of a Mortgage Loan for which there is no Servicer) [.] [, and (b) the amount
payable to the Depositor, as described below.] [Pursuant to the Pooling and
Servicing Agreement, on each Distribution Date, the Master Servicer will remit
to [the Depositor] in respect of each interest payment on a Mortgage Loan an
amount equal to % of the outstanding principal balance of such Mortgage Loan
before giving effect to any payments due on the preceding Due Date.] The Master
Servicer will be permitted to withdraw from the Certificate Account, in respect
of each interest payment on a Mortgage Loan, an amount equal to % of the
outstanding principal balance of such Mortgage Loan, before giving effect to
any payments due on the preceding Due Date. See "Description of the
Certificates-Servicing and Other Compensation and Payment of Expenses" in the
Prospectus for information regarding other possible compensation to the Master
Servicer and the Servicers. The Servicers and the Master Servicer will pay all
expenses incurred in connection with their responsibilities under the Servicing
Agreements and the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without limitation,
the various items of expense enumerated in the Prospectus.
Investors are advised to consult with their own tax advisors regarding
the likelihood that a portion of such servicing compensation might be
characterized as an ownership interest in the interest payments on the Mortgage
Loans ("Retained Yield") for federal income tax purposes, by reason of the
extent to which either the weighted average Mortgage Rate, or the stated
interest rates on the Mortgage Loans exceeds the Pass-Through Rate, and the tax
consequences to them of such a characterization. In this regard, there are no
authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable in
the context of this or similar transactions or whether the reasonableness of
servicing compensation should be determined on a weighted average or loan-by-
loan basis. [The Depositor intends to treat % of such servicing compensation
and % of the amount payable to it described above as Retained Yield for
federal income tax purposes in reports to the Certificateholders and to the
Internal Revenue Service.] See "Certain Federal Income Tax Consequences-
Mortgage Pools" and "-Taxation of Owners of Trust Fractional Certificates" in
the Prospectus for information regarding the characterization of servicing
compensation [and the amounts payable to the Depositor].
[TERMINATION; REPURCHASE OF MORTGAGE LOANS
The Pooling and Servicing Agreement provides that the Depositor may
purchase from the Trust all Mortgage Loans remaining in the Mortgage Pool and
thereby effect early retirement of the Certificates, provided that the
aggregate unpaid balances of the Mortgage Loans at the time of such repurchase
is less than [10%] of the aggregate principal balance of the Mortgage Loans on
the Cut-off Date. The purchase price for any such optional repurchases shall be
equal to the outstanding principal balance of such Mortgage Loans, together
with accrued interest at the Pass-Through Rate to the first day of the month
following such repurchase plus the appraised value of any acquired property
with respect to the Mortgage
S-8
<PAGE>
Loans. [Any such repurchase will be effected in compliance with the
requirements of Section 860F(a)(iv) of the Code in order to constitute a
"qualifying liquidation" thereunder.] In no event will the Trust continue
beyond the expiration of 21 years from the death of the last survivor of the
persons named in the Pooling and Servicing Agreement.]
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of
unreimbursed payments thereunder, for the Certificates will be no more than
[10%] of the aggregate principal balance of the Mortgage Loans on the Cut-off
Date. The duration of coverage and the amount and frequency of any reduction in
coverage will be in compliance with the requirements established by the Rating
Agency rating the Certificates, in order to obtain a rating in one of the two
highest rating categories of the Rating Agency. The precise amount of coverage
under the Letter of Credit and the duration and frequency of reduction of such
coverage will be set forth in the Current Report on Form 8-K referred to above.
See "Description of the Certificates-Credit Support-The Letter of Credit" in
the Prospectus.]
[THE POOL INSURANCE POLICY
Subject to the limitations described under "Description of Insurance-
Pool Insurance Policy" in the Prospectus, the Pool Insurance Policy will cover
losses by reason of default on the Mortgage Loans that are not covered as to
their entire outstanding principal balances by primary mortgage insurance, in
an amount equal to % of the aggregate principal balance of such Mortgage
Loans on the Cut-off Date.
The Pool Insurance Policy will be issued by , a corporation
(the "Pool Insurer"), which is engaged principally in the business of insuring
mortgage loans on residential properties against default in payment by the
Mortgagor. At , 19 , the Pool Insurer had insurance in force in the form
of primary policies covering approximately $ billion of residential mortgages.
At such date, the Pool Insurer had total assets of approximately $ million,
capital and surplus aggregating $ million and statutory contingency reserves
of $ million, resulting in total policyholders' reserves of $ million.
The information set forth above has been provided by the Pool Insurer.
The Depositor makes no representation as to the accuracy or completeness of such
information.]
[THE SPECIAL HAZARD INSURANCE POLICY
The Special Hazard Insurance Policy will cover certain risks not
otherwise insured against under hazard insurance policies, subject to the
limitations described in the Prospectus, and will be issued by , a
corporation (the "Special Hazard Insurer"). Claims under such policy will be
limited to % of the aggregate principal balance of the Mortgage Loans or
times the principal balance of the Mortgage Loan with the highest outstanding
principal balance at the Cut-off Date, whichever is greater. At , 198 , the
Special Hazard Insurer had total assets of approximately $ million and total
policyholders' surplus of $ million. The claims-paying ability of the Special
Hazard Insurer is presently rated by the Rating Agency. In accordance with
standard rating agency practice, the Rating Agency may, at any time, revise or
withdraw such rating.
The information set forth above has been provided by the Special
Hazard Insurer. The Depositor makes no representation as to the accuracy or
completeness of such information.]
[MORTGAGOR BANKRUPTCY BOND
The Depositor will obtain a bond or similar form of insurance coverage
(the "Mortgage Bankruptcy Bond") for proceedings with respect to Mortgagors
under the federal Bankruptcy Code. The Mortgagor Bankruptcy Bond will cover
certain losses resulting from a reduction by a bankruptcy court of scheduled
payments of principal and interest on a
S-9
<PAGE>
Mortgage Loan or a reduction by such court of the principal amount of a
Mortgage Loan and will cover certain unpaid interest on the amount of such a
principal reduction from the date of the filing of a bankruptcy petition.
The initial amount of coverage provided by the Mortgagor Bankruptcy
Bond will be $ plus the greater of (i) % of the aggregate principal
balances of the Mortgage Loans secured by second residences and investor-owned
residences or (ii) times the largest principal balance of any such Mortgage
Loan. The coverage provided by the Mortgagor Bankruptcy Bond will be reduced by
payments thereunder.
The Mortgagor Bankruptcy Bond will be issued by
, a corporation. At , 19 ,
had admitted assets of approximately $ and total policyholders' surplus of
approximately $ .
The information set forth above concerning has been
provided by it. The Depositor makes no representation as to the
accuracy or completeness of such information.]
CERTIFICATE RATING
It is a condition to the issuance of the Certificates that they be
rated in one of the two highest categories of the Rating Agency prior to
issuance.
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.
[ERISA CONSIDERATIONS]
[Describe whether any exemption from "plan asset" treatment is
available with respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see
"ERISA Considerations-Prohibited Transaction Class Exemption" in the
Prospectus).]
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] CS First Boston Corporation, an affiliate of the
Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase from the Depositor [all] [the
following respective principal amounts] of the Certificates:
[UNDERWRITER
CS First Boston Corporation ....... $
-----------------
Total ............................. $
=================
After the initial public offering, the public offering prices and the
concessions and discounts to dealers may be changed by [the Underwriter] [the
Representative].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
S-10
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered
hereby will be passed upon for the Depositor and for the Underwriter[s] by
Sidley & Austin, New York, New York.
USE OF PROCEEDS
The Depositor will apply all of the net proceeds of the offering of
the Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more affiliates
of the Depositor, which will have acquired such Mortgage Loans from time to
time in privately negotiated transactions.
S-11
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED , 1995
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
$ (Approximate)
Asset Backed Securities Corporation
Depositor
Conduit Mortgage Pass-Through Certificates, Class A, Series
Principal and interest payable on the th day
of each month, beginning , 19
Class A-1 % of principal payments on the Mortgage Loans; % of interest
payments at an % pass-through rate on the Mortgage Loans (the "Pass-Through
Rate") (Interest at an % annual rate on unpaid Class A-1 principal amount)
Class A-2 No principal payments on the Mortgage Loans; % of interest
payments at an % Pass-Through Rate on the Mortgage Loans (Interest at an %
annual rate on the Class A-2 notional amount)
The Conduit Mortgage Pass-Through Certificates (the "Certificates") will be
composed of two classes (each, a "Class"), entitled Conduit Mortgage Pass-
Through Certificates, Class A (the "Class A Certificates"), and Conduit Mortgage
Pass-Through Certificates, Class B (the "Class B Certificates"). The Class A
Certificates offered hereby will be divided into two subclasses (each, a
"Subclass") entitled Class A-1 (the "Class A-1 Certificates") and Class A-2 (the
"Class A-2 Certificates") and will evidence undivided percentage ownership
interests in a trust (the "Trust") composed of [conventional] [fixed-rate] [one-
to four-family residential mortgage loans,] [mortgage loans secured by
multifamily residential rental properties consisting of five or more dwelling
units or apartment buildings owned by cooperative housing corporations,] [loans
made to finance the purchase of certain rights relating to cooperatively owned
properties secured by a pledge of shares of a cooperative corporation and an
assignment of a proprietary lease or occupancy agreement on a cooperative
dwelling ("Cooperative Loans"),] [and mortgage participation certificates
evidencing participation interests in such loans and meeting the requirements of
the nationally recognized rating agency or agencies rating the certificates
(collectively, the "Rating Agency") for a rating in one of the two highest
rating categories of such Rating Agency] (the "Mortgage Loans") and certain
related property to be conveyed to the Trust by the Depositor (the "Trust
Fund"). The Mortgage Loans will be transferred to the Trust, pursuant to a
Pooling and Servicing Agreement (as defined herein) dated as of , 199 , by
Asset Backed Securities Corporation ( the "Depositor") in exchange for the
Certificates and are more fully described in this Prospectus Supplement and in
the accompanying Prospectus.
The Class A-1 Certificates evidence ownership of % of each principal
payment on the Mortgage Loans and % of each interest payment on the Mortgage
Loans (representing interest at a rate of % per annum on the unpaid principal
amount of the Class A-1 Certificates). The Class A-2 Certificates evidence
ownership of % of each interest payment at the Pass-Through Rate on the
Mortgage Loans (representing interest at a rate of % per annum on the
notional amount of the Class A-2 Certificates). The rights of the Class B
Certificateholders to receive distributions with respect to the Mortgage Loans
will be subordinated to the rights of the Class A Certificateholders to the
extent described herein and in the Prospectus.
[The Depositor intends to offer the Class B Certificates to sophisticated
institutional investors from time to time in transactions not requiring
registration under the Securities Act of 1933.]
The Certificates do not represent an obligation of or interest in Asset
Backed Securities Corporation or any affiliate thereof. Neither the
Certificates nor the underlying mortgage loans are insured or guaranteed by any
governmental agency or instrumentality.
The Mortgage Loans may be prepaid at any time without penalty. [A lower
rate of principal prepayments than anticipated would negatively affect the total
return to investors in Class A-1 Certificates, which are being offered at a
discount to their principal amount.] Yields on the Class A-2 Certificates will
be extremely sensitive to the prepayment experience on the Mortgage Loans, and
prospective investors in such Certificates should fully consider the associated
risks, including the risk that such investors, in circumstances of higher than
anticipated prepayment, could fail to fully recoup their initial investment. See
"The Mortgage Pool," "Yield Considerations" and "Maturity and Prepayment
Considerations" in this Prospectus Supplement.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for
the Class A Certificates [but [is] [are] under no obligation to do so]. There
can be no assurance that a secondary market will develop or, if it does develop,
that it will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate
Mortgage Investment Conduit (a "REMIC"). See "Certain Federal Income Tax
Consequences" in the Prospectus.]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Public (1) Underwriting Discount Proceeds to the Depositor (1)(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate % % %
- ----------------------------------------------------------------------------------------------------------------------------------
Per Class A-2 Certificate % % %
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ $ $
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deducting expenses payable by the Depositor estimated at $
</TABLE>
The Class A Certificates are offered by the [several] Underwriter[s] when, as
and if issued and accepted by the Underwriter[s] and subject to [its] [their]
right to reject orders in whole or in part. It is expected that the Class A
Certificates, in definitive fully registered form, will be ready for delivery on
or about , 19 .
CS First Boston
The date of this Prospectus Supplement is , 19 .
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state.
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE CERTIFICATES OFFERED HEREBY. ADDITIONAL
INFORMATION IS CONTAINED IN THE PROSPECTUS, AND 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.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF
THE CERTIFICATES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
UNTIL , 19 , ALL DEALERS AFFECTING TRANSACTIONS IN THE
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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
ADDITIONAL INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and
other information filed by the Trust can be inspected and copied at the
Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C., and at the Commission's regional offices at 75 Park
Place, 14th Floor, New York, New York 10007; and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
S-2
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus. Capitalized terms used in this Prospectus Supplement and not
otherwise defined shall have the meanings given in the Prospectus.
SECURITIES OFFERED................... Conduit Mortgage Pass-Through
Certificates, Class A, Series (the
"Class A Certificates").
$ Original Principal
Amount Class A-1 Certificates
(approximate).
No Original Principal Amount Class
A-2 Certificates.
The Class A-1 Certificates represent
undivided percentage interests in
approximately % of each
principal payment on the Mortgage
Loans (the "Principal Distribution")
and undivided percentage interests in
approximately % of each
interest payment at the Pass-Through
Rate on the Mortgage Loans (the
"Interest Distribution") (representing
interest at a rate of % per annum on
the unpaid principal amount of the Class
A-1 Certificates). The individual
percentage interest (the "Percentage
Interest") of any Class A-1 Certificate
will be equal to the percentage obtained
by dividing the original principal
amount of such Class A-1 Certificate by
the aggregate original principal amount
of all Class A-1 Certificates.
The Class A-2 Certificates represent
Percentage Interests in approximately
% of the Interest Distribution
(representing interest at a rate of
% per annum on the unpaid notional
amount of the Class A-2
Certificates). The Class A
Certificates will not receive
distributions of principal with
respect to the Mortgage Loans. The
Percentage Interest of any Class A-2
Certificate will be equal to the
percentage obtained by dividing the
original notional amount of such
Class A-2 Certificate by the
aggregate original notional amount of
the Class A-2 Certificates. The
notional amount of the Class A-2
Certificates is equal to the
aggregate unpaid principal amount of
the Class A Certificates, and is used
solely for purposes of determining
interest payments and certain other
rights of holders of the Class A-2
Certificates and does not represent
any interest in such principal
payments.
The Class A Certificates represent in
the aggregate an approximate
% undivided interest in the Trust
Fund. The remaining approximate
% undivided interest in the Trust
Fund is evidenced by the Class B
Certificates, which are subordinated
in certain respects to the Class A
Certificates, as more fully described
herein and in the Prospectus. [The
Class B Certificates are not being
offered hereby, and may be retained
by the Depositor or sold by the
Depositor at any time to one or more
sophisticated institutional investors
in privately negotiated transactions
not requiring registration under the
Securities Act of 1933.]
S-3
<PAGE>
DEPOSITOR............................ Asset Backed Securities Corporation
(the "Depositor").
MASTER SERVICER......................
CUT-OFF DATE......................... , 19 .
DELIVERY DATE........................ On or about , 19 .
DENOMINATIONS........................ The minimum denomination of a Class
A-1 Certificate will represent
approximately $ aggregate
principal balance of the Mortgage
Loans on the Cut-off Date. The
minimum denomination of a Class A-2
Certificate will represent
approximately $
notional amount.
INTEREST............................. Passed through monthly, on the
day of each month (each, a
"Distribution Date") commencing ,
19 . The Pass-Through Rate on the
Mortgage Loans is % per annum.
See "Description of the Certificates"
in the Prospectus.
PRINCIPAL (INCLUDING
PREPAYMENTS)........................ Passed through monthly on the
Distribution Date, commencing on
, 19 . See "Description of the
Certificates" in the Prospectus.
MORTGAGE POOL........................ The Mortgage Pool will consist of
[fixed rate,] [fully-amortizing,]
[level-payment] mortgage loans
secured by Mortgages on [one- to
four-family residential properties,
loans (the "Cooperative Loans") made
to finance the purchase of certain
rights relating to cooperatively
owned properties secured by a pledge
of shares of a cooperative
corporation (the "Cooperative") and
an assignment of a proprietary lease
or occupancy agreement on a
cooperative dwelling (a "Cooperative
Dwelling" and, together with one- to
four-family residential properties,
"Single Family Property"), or
mortgage loans secured by multifamily
residential rental properties
consisting of five or more dwelling
units or apartment buildings owned by
cooperative housing corporations
("Multifamily Property")] [located in
the states of and
] [and mortgage participation
certificates evidencing participation
interests in such loans that meet the
requirements of the nationally
recognized rated agency or agencies
rating the certificates
(collectively, the "Rating Agency")
for a rating in one of the two
highest rating categories of such
Rating Agency] (the "Mortgage
Loans"). All Mortgage Loans will have
original maturities of at least but
not more than years. See
"Description of the Mortgage Pool and
the Underlying Properties" herein.*
- -----------------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in manufactured housing conditional sales
contracts and installment loan agreements ("Contracts"), the disclosure to be
set forth will be substantially similar to the disclosure set forth in Version
E under "Summary of Terms-Contract Pool."
S-4
<PAGE>
CLASS B CERTIFICATES................. The rights of the Class B
Certificateholders to receive
distributions with respect to the
Mortgage Loans are subordinated to
the rights of the Class A
Certificateholders to receive such
distributions to the extent of the
Subordinated Amount described below.
This subordination is intended to
enhance the likelihood of regular
receipt by Class A Certificateholders
of the full amount of scheduled
payments of principal and interest
and to decrease the likelihood that
the Class A Certificateholders will
experience losses. The extent of such
subordination (the "Subordinated
Amount") will be determined as
follows: on the Cut-off Date and on
each anniversary of the Cut-off Date
until , the
Subordinated Amount will equal
% of the original aggregate principal
balance of the Mortgage Loans less
the amount of "Aggregate Losses" (as
defined in the Prospectus) since the
Cut-off Date through the last day of
the month preceding such anniversary
date; from the th anniversary
of the Cut-off Date, the Subordinated
Amount will gradually decline in
accordance with a schedule set forth
in the Pooling and Servicing
Agreement.
[RESERVE FUND........................ The protection afforded to the Class
A Certificateholders from the
subordination feature described above
will be effected both by the
preferential right of the Class A
Certificateholders to receive current
distributions with respect to the
Mortgage Loans (to the extent of the
Subordinated Amount) and by the
establishment of a reserve (the
"Reserve Fund"). The Reserve Fund is
not included in the Trust Fund. The
Reserve Fund will be created by the
Depositor and shall be funded by the
retention of all of the scheduled
distributions of principal otherwise
distributable to the Class B
Certificateholders on each
Distribution Date until the Reserve
Fund reaches an amount (the "Required
Reserve") that will equal
[; thereafter, the Reserve Fund must
be maintained at the following
levels: ]. See "Description
of the Certificates--Subordinated
Certificates" and "--Reserve Fund" in
the Prospectus.]
[OPTIONAL TERMINATION................ The Depositor may, at its option,
repurchase from the Trust all
Mortgage Loans remaining outstanding
[at such time as the aggregate unpaid
principal balance of such Mortgage
Loans is less than 10% of the
aggregate principal balance of the
Mortgage Loans on the Cut-off Date].
The repurchase price will equal [the
aggregate unpaid principal balance of
such Mortgage Loans, together with
accrued interest thereon at the
Pass-Through Rate through the last
day of the month during which such
repurchase occurs plus the appraised
value of any property with respect
thereof]. [Any such termination will
be effected in compliance with the
requirements of Section 860F(a)(iv)
of the Internal Revenue Code of 1986,
so as to constitute a "qualifying
liquidation" thereunder.] See
"Description of the
Certificates--Termination; Repurchase
of Certificates" in the Prospectus.]
ADVANCES............................. The Servicers of the Mortgage Loans
(and the Master Servicer, with
respect to each Mortgage Loan that it
services directly and otherwise, to
the extent the related Servicer does
not do so) will be obligated to
advance delinquent installments of
principal and interest on the
Mortgage Loans under certain
circumstances. See "Description of
Certificates-- Advances" in the
Prospectus.
TRUSTEE.............................. (the "Trustee").
See "Description of the Certificates--
Trustee" herein.
S-5
<PAGE>
CERTIFICATE RATING................... It is a condition of issuance of the
Class A Certificates that they be
rated in one of the two highest
rating categories of the Rating
Agency prior to issuance. See
"Rating" herein.
LEGAL INVESTMENT..................... The Class A Certificates constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the
"Enhancement Act"), and, as such, are
legal investments for certain
entities to the extent provided in
the Enhancement Act. See "Legal
Investment" in the Prospectus.
ERISA CONSIDERATIONS................. See "ERISA Considerations" in the
Prospectus [and herein].
TAX ASPECTS.......................... The Depositor [intends] [does not
intend] to make an election to treat
the Trust as a Real Estate Mortgage
Investment Conduit (a "REMIC")
pursuant to the Internal Revenue Code
of 1986, as amended. See "Certain
Federal Income Tax Consequences" in
the Prospectus.
S-6
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
AND THE UNDERLYING PROPERTIES*
The Mortgage Pool will consist of Mortgage Loans evidenced by notes with
aggregate unpaid principal balances outstanding as of the Cut-off Date,
after deducting payments of principal due on such date, of approximately $
. The amount is subject to a permitted variance of up to %. The
Mortgage Pool will consist of [ ] -year, [fixed-] rate, fully-
amortizing, [level-payment] Mortgage Loans, as more
fully described in the Prospectus.
The weighted average interest rate of the Mortgage Loans as of the Cut-
off Date will be at least % but no more than %. All
Mortgage Loans will have interest rates of at least % but no
more than %. The weighted average maturity of the Mortgage
Loans, as of the Cut-off Date, will be at least years but no
more than years. All Mortgage Loans will have original
maturities of at least but no more than years.
None of the Mortgage Loans will have been originated prior to
or after 19 . None of the Mortgage Loans will have a
scheduled maturity later than .
The Mortgage Loans will have the following characteristics as of the
Cut-off Date (expressed as a percentage of the outstanding aggregate
principal balances of the Mortgage Loans having such characteristics
relative to the outstanding aggregate principal balances of all Mortgage
Loans):
No more than % of the Mortgage Loans will have been
originated before . See "Certain Federal Income
Tax Consequences--Mortgage Pools." "--Taxation of Owners of Trust
Fractional Certificates" and "--Market Discount and Premium" in the
Prospectus for information regarding such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each
having outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans
each having outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-
value ratios at origination in excess of 80%, and no Mortgage Loan will
have had a loan-to-value ratio at origination in excess of [95%].
All of the Mortgage Loans with loan-to-value ratios at origination in
excess of 80% will be covered by a policy of private mortgage insurance
until the outstanding principal balance is reduced to 75% of the Original
Value.
[ % of the Mortgage Loans will be secured by Mortgages on
single-family dwellings] [ % of the Mortgage Loans will be
secured by Multifamily Properties][ % of the Mortgage Loans
will be secured by a pledge of shares of a Cooperative and an assignment
of a proprietary lease or occupancy agreement on a Cooperative Dwelling.]
No more than % of the Mortgage Loans will be secured by
Mortgages on condominiums.
No more than %, by aggregate principal balance, of the
Mortgage Loans will be Mortgage Loans for which Buy-Down Funds have been
provided and no more than % of the principal balance of any
such Mortgage Loan will be represented by Buy-Down Funds.
No more than %, by aggregate principal balance, of the Mortgage
Loans will be GPM Loans.
- -------------------------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth will
be substantially similar to the disclosure set forth in Version E under
"Description of the Contract Pool."
S-7
<PAGE>
At least % of the Mortgage Loans will be secured by an owner-
occupied Mortgaged Property. Such determination will have been made on the
basis of a representation by the Mortgagor at the time of origination of
the Mortgage Loan that he then intended to occupy the underlying property
or, in the absence of such a representation, various factors indicating
that such underlying property is owner-occupied.
No more than [ ]% of the Mortgage Loans will be secured by
Mortgages on properties located in any one zip code.
The Mortgage Loans will be secured by Mortgages on properties located in
the states of .
Specific information with respect to the Mortgage Loans will be
available to purchasers of the Certificates offered hereby at or before
the time of issuance of such Certificates. Such specific information will
include the precise amount of the aggregate principal balances of the
Mortgage Loans outstanding as of the Cut-off Date, and will also set forth
tables reflecting the following information regarding the Mortgage Loans:
years of origination, types of dwellings on the underlying properties, the
sizes of Mortgage Loans and distribution of Mortgage Loans by Mortgage
Rate, and will be set forth in a Current Report on Form 8-K that will be
filed with the Securities and Exchange Commission by the Depositor within
15 days after the issuance of the Certificates.
YIELD CONSIDERATIONS
PREPAYMENT EXPERIENCE ON THE MORTGAGE LOANS
The rate of principal payments on the Class A-1 Certificates and Class
A-2 Certificates, the aggregate amount of each interest payment on the
Class A-1 Certificates and Class A-2 Certificates and the yield to
maturity of the Class A-1 and Class A-2 Certificates will correspond
directly to the rate of payments of principal on the Mortgage Loans
(including, for this purpose, scheduled amortization, payments resulting
from liquidation due to default, casualty, condemnation and the like and
repurchases by the Servicers under the circumstances described herein and
in the Prospectus). The rate of principal payments on pools of mortgages
or loans are influenced by a variety of economic, geographic, social and
other factors. In general, however, if prevailing interest rates fall
significantly below the interest rates on the Mortgage Loans, the Mortgage
Loans are likely to be subject to higher prepayment rates than if
prevailing rates remain at or above the interest rates on the Mortgage
Loans. The rate of payment of principal may also be affected by any
repurchase of the Mortgage Loans by the Servicers. See "Termination;
Repurchase of Mortgage Loans" herein and "Description of the Certificates-
-Assignment of Mortgage Loans" in the Prospectus. In any such event, the
repurchase price would be passed through to Certificateholders as a
prepayment of principal. See "Maturity and Prepayment Considerations" in
the Prospectus.
[[All] [ %] of the Mortgage Loans contain "due-on-sale" provisions.
Consequently, acceleration of mortgage payments as a result of transfers
of the related mortgaged property will affect the level of prepayments on
the Mortgage Loans. In addition, Mortgagors may prepay the Mortgage Loans
at any time without penalty.]
[As the Class A-1 Certificates are being offered at discounts from their
original principal amounts, if the purchaser of a Class A-1 Certificate
calculates is anticipated yield to maturity based on an assumed rate of
payment of principal that is faster than that actually received on the
Mortgage Loans, its actual yield to maturity will be lower than that so
calculated.] Since the Class A-2 Certificates are being offered without
any original principal amount, if the purchaser of a Class A-2 Certificate
calculates its anticipated yield to maturity based on an assumed rate of
payment of principal that is slower than that actually received on the
Mortgage Loans, its actual yield to maturity will be lower than that so
calculated.
The timing of changes in the rate of prepayments of the Mortgage Loans
may significantly affect an investor's actual yield to maturity, even if
the average rate of principal payments is consistent with an investor's
expectation. In general, the earlier a prepayment of principal on the
Mortgage Loans the greater the effect on an investor's yield to maturity.
As a result, 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 the period immediately following the issuance of the
Certificates may not be offset by a subsequent like reduction (or
increase) in the rate of principal payments.
S-8
<PAGE>
[BECAUSE THE CLASS A-1 CERTIFICATES ARE BEING OFFERED AT A DISCOUNT FROM
THEIR ORIGINAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY ON SUCH
CERTIFICATES WILL BE SENSITIVE TO THE RATE OF PRINCIPAL PREPAYMENTS ON THE
MORTGAGE LOANS.]
BECAUSE THE CLASS A-2 CERTIFICATES ARE BEING OFFERED WITHOUT ANY
PRINCIPAL AMOUNT, THE YIELD TO MATURITY ON THE CLASS A-2 CERTIFICATES WILL
BE EXTREMELY SENSITIVE TO THE RATE OF PRINCIPAL PREPAYMENTS ON THE
MORTGAGE LOANS AND MAY FLUCTUATE SIGNIFICANTLY FROM TIME TO TIME.
PROSPECTIVE INVESTORS IN THE CLASS A-2 CERTIFICATES SHOULD FULLY CONSIDER
THE ASSOCIATED RISKS, INCLUDING THE RISK THAT IF THE RATE OF PRINCIPAL
PREPAYMENTS ON THE MORTGAGE LOANS IS RAPID SUCH INVESTORS MAY NOT FULLY
RECOUP THEIR INITIAL INVESTMENT.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus
Supplement, the Standard Prepayment Assumption ("SPA"), represents an
assumed rate of prepayment each month relative to the then outstanding
principal balance of a pool of new mortgage loans. SPA assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such
mortgage loans in the first month of life of the mortgage loans and an
additional 0.2% per annum in each month thereafter until the thirtieth
month. Beginning in the thirtieth month and in each month thereafter
during the life of the mortgage loans, SPA assumes a constant prepayment
rate of 6% per annum. SPA does not purport to be either a historical
description of the prepayment experience of any pool of mortgage loans, or
of the Mortgage Loans in the Mortgage Pool.
The following table illustrates, in general, the effect of prepayment
rates on the timing and amount of distributions on the Class A
Certificates and their resulting weighted average lives. The table does
not purport to represent the anticipated rate of prepayment on the
Mortgage Loans or the resulting anticipated rate of distributions on the
Class A Certificates.
The table sets for the projected annual aggregate distributions that
would be made on the Class A-1 and Class A-2 Certificates, and their
resulting weighted average lives, based on various assumed percentages of
SPA. The column headed "0%" assumes that no Mortgage Loans are prepaid
before maturity. The columns headed " %", " %" and "
%" assume that prepayments are made at the specified percentages of SPA.
It has been assumed in preparing the table that (i) all of the Mortgage
Loans have identical payment provisions, (ii) the original term to
maturity of each Mortgage Loan was [ ] years, (iii) all Mortgage
Loans are prepaid at the indicated percentage of SPA for the life of the
Certificates, (iv) the weighted average remaining term to maturity of the
Mortgage Loan is years, (v) the interest rate on each Mortgage
Loan is 0. % in excess of the Pass-Through Rate, and (vi) the Mortgage
Loans are not repurchased at the option of the Depositor.
S-9
<PAGE>
PROJECTED ANNUAL AGGREGATE DISTRIBUTIONS ON THE CLASS A CERTIFICATES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A-1 CERTIFICATES CLASS A-2 CERTIFICATES
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDING 0% SPA % SPA % SPA % SPA 0% SPA % SPA % SPA % SPA
- ----------- ------ ----- ----- ----- ------ ----- ----- -----
$ $ $ $ $ $ $ $
------ ----- ----- ----- ------ ----- ----- -----
Total distributions.... $ $ $ $ $ $ $ $
Weighted average life
(years)(1)............
</TABLE>
(1) The weighted average life of the Class A-2 Certificates, which is
assumed to be equal to the weighted average life of the Class A-1
Certificates, is determined by (i) multiplying the amount of each assumed
principal distribution by the number of years from the date of issuance of
the Certificates to the related Distribution Date, (ii) summing the
results and (iii) dividing the sum by the total principal distributions on
the Certificates.
The characteristics of the Mortgage Loans will not correspond exactly to
those assumed in preparing the statistics above. The annual cash flows on
the Class A Certificates will therefore differ from those set forth above
even if all the Mortgage Loans prepay monthly at the related assumed
percentage of SPA. In addition, it is not likely that any Mortgage Loan
will prepay at a constant rate until maturity or that all of the Mortgage
Loans will prepay at the same rate and the timing of changes in the rate
of prepayments may significantly affect the total cash flow received by a
holder of a Class A Certificate.
The Depositor makes no representation that the Mortgage Loans will
prepay in the manner or at any of the rates assumed in the table set forth
above. Each prospective investor must make its own decision as to the
appropriate prepayment assumption to be used in deciding whether or not to
purchase the Class A Certificates.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms") as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date
(the "Reference Agreement" and, together with the Standard Terms, the
"Pooling and Servicing Agreement") among the Depository, ,
as master servicer (the "Master Servicer"), and , as trustee
(the "Trustee"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part.
Reference is made to the accompanying Prospectus for important additional
information regarding the terms and conditions of the Pooling and
Servicing Agreement and the Certificates. The Percentage Interest
evidenced by each Class A-1 Certificate will be determined by dividing the
original principal amount of such Class A-1 Certificate by the aggregate
original principal amount of all Class A-1 Certificates. The Percentage
Interest evidenced by each Class A-2 Certificate will be determined by
dividing the original notional amount of such Class A-2 Certificate by the
aggregate original notional amount of all Class A-2 Certificates. The
Class A Certificates will be issued only in fully registered form in
denominations of $ and integral multiples thereof.
S-10
<PAGE>
The Master Servicer will allocate each month's distributions of
principal and interest on the Mortgage Loans at the Pass-Through Rate as
follows: % of the monthly Principal Distribution and
% of the Interest Distribution will be allocated to the Holders of the
Class A-1 Certificates (such sum being the "Class A-1 Distribution
Amount"); % of the Interest Distribution will be allocated to the
Holders of the Class A-2 Certificates (such amount being the "Class A-2
Distribution Amount"). Holders of Class A-2 Certificates will not receive
distributions of principal with respect to the Mortgage Loans. On each
Distribution Date, the Master Servicer will distribute to each Holder of a
Class A Certificate an amount equal to the Certificateholder's Percentage
Interest evidenced by the Class A Certificate in the Class A-1 or the
Class A-2 Distribution Amount, as the case may be. The remaining
distribution will be made to the Holders of the Class B Certificates, as
more fully set forth below. Such distributions will be made to
Certificateholders of record on the Record Date for such Distribution
Date.
On each Distribution Date, the Master Servicer will distribute to the
Class A Certificateholders, in the manner set forth above, an amount (the
"Required Distribution") equal to the sum of:
(i) the aggregate undivided interest evidenced by all Class A
Certificates (such aggregate undivided interest being the sum of the
aggregate interests evidenced by the Class A Certificates in the Principal
Distribution and the Interest Distribution) (the "Senior Interest") in:
(a) until such time as the Subordinated Amount is reduced to zero, all
scheduled payments of principal and interest (including any advances
thereof), adjusted to the applicable Pass-Through Rate, which payments
became due on the due Date to which such Distribution Date relates (the
"Due Date"), whether or not such payments are actually received; and (b)
after the Subordinated Amount is reduced to zero, all payments of
principal and interest, adjusted to the applicable Pass-Through Rate due
on such Due Date or due, but not previously received, since the time the
Subordinated Amount was reduced to zero, but only to the extent such
payments are actually received or advanced prior to the Determination
Date;
(ii) the Senior Interest in all principal prepayments received during
the month prior to the month of distribution and, interest at the Pass-
Though Rate to the end of the month in which such principal prepayments
occur;
(iii) the Senior Interest in the sum of (a) the outstanding principal
balance of each Mortgage Loan or property acquired in respect thereof that
was repurchased pursuant to the Pooling and Servicing Agreement or
liquidated or foreclosed during the monthly period ending on the day prior
to the Due Date to which such distribution relates, calculated as of the
Date each such Mortgage Loan was repurchased, liquidated or foreclosed,
and (b) accrued but unpaid interest on such principal balance, adjusted to
the Pass-Through Rate, to the first day of the month following the month
of such repurchase, liquidation or foreclosure.
The Required Distribution will be distributed to the Class A
Certificateholders to the extent that there are sufficient eligible funds
available for distribution to such Class A Certificateholders on a
Distribution Date. Funds eligible for such purpose with respect to each
Distribution Date shall be as set forth in the Prospectus under "Payments
on Mortgage Loans."
If the funds in the Certificate Account eligible for distribution to the
Class A Certificateholders (including all funds required to be deposited
therein from the Reserve Fund and any Advances by the Servicers or the
Master Servicer) are not sufficient to make the full distribution of the
Required Distribution on any Distribution Date, the Master Servicer shall
distribute on such Distribution Date to the Class A Certificateholders the
amount of funds eligible for distribution to such Class A
Certificateholders. If, on any Distribution Date, prior to the time the
Subordinated Amount has been reduced to zero, the class A
Certificateholders do not receive the Required Distribution, the Holders
of the Class B Certificates will not receive any distributions on such
Distribution Date. Any amounts in the Certificate Account after the
Required Distribution is made to the Class A Certificateholders will be
paid to the holders of the Class B Certificates. Holders of the Class B
Certificates will not be required to refund any amounts that have
previously been properly distributed to them directly from the Certificate
Account, regardless of whether there are sufficient funds on such
Distribution Date to make a full distribution to the Class A
Certificateholders. The subordination of distributions allocable to
Holders of the Class B Certificates is limited to the Subordinated Amount,
which will decrease over time as more fully set forth in the Pooling and
Servicing Agreement, and such subordination will apply on any Distribution
Date only to then current distributions allocable to the Class B
Certificateholders.
S-11
<PAGE>
Distributions to Holders of Class A and Class B Certificates will be
made on a pro rata basis, in accordance with the aggregate Percentage
Interests of each Class held by each Certificateholder of the related
Class.
Distributions of principal and interest as set forth above will be made
by the Master Servicer by check mailed to each Certificateholder entitled
thereto at the address appearing in the Certificate Register to be
maintained with the Trustee or, if eligible for wire transfer as provided
in the pooling and Servicing Agreement, by wire transfer to the account of
such Certificateholder, provided, however, that the final distribution in
retirement of the Class A Certificates will be made only upon presentation
and surrender of the Class A Certificates at the office or agency
specified in the notice of Certificateholders of such final distribution.
The Class A Certificates will be transferable and exchangeable on a
Certificate Register to be maintained at the office or agency of the
Master Servicer maintained for the purpose in New York, New York. Class A
Certificates surrendered to the Trustee for registration of transfer or
exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of Class A Certificates, but payment
of a sum sufficient to cover any tax or other governmental charge may be
required. Such office or agency is currently located at
.
TRUSTEE
The Trustee for the Certificates will be , a
bank organized and existing under the laws of with its principal
office located at .
THE MASTER SERVICER
The Master Servicer is a corporation that
commenced operations in . The Master Servicer is a
FNMA/FHLMC approved seller-Servicer based in . As
of , the Master Servicer serviced, for other
investors and for its own account, approximately mortgage loans with an
aggregate principal balance in excess of $ . The
Master Servicer originated approximately $ in
mortgage loans in 19 . The Master Servicer's consolidated stockholder's
equity as of was approximately $
.
The information set forth above has been provided by the Master
Servicer. The Depositor makes no representation as to the accuracy or
completeness of such information.
The Master Servicer will obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond")
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of
the Master Servicer in its capacity as Master Servicer and guaranteeing
the performance, among other things, of the obligations of the Master
Servicer to purchase certain Mortgage Loans and to make advances as
described in the Prospectus under "Description of the Certificates--
Assignment of Mortgage Loans" and "--Advances" in an amount and form
acceptable to the nationally recognized statistical rating organization or
organizations rating the Class A Certificates (collectively, the "Rating
Agency").
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal
to an amount, payable out of each interest payment on a Mortgage Loan,
equal to the excess of each interest payment on a Mortgage Loan over the
Pass-Through Rate, less [(a)] any serving compensation payable to the
Servicer of such Mortgage Loan under the terms of the agreement with the
Master Servicer pursuant to which such Mortgage Loan is serviced (the
"Servicing Agreement") (including such compensation paid to the Master
Servicer as the direct servicer of a Mortgage Loan for which there is no
Servicer)[.] [, and (b) the amount payable to the Depositor, as directed
below.] [Pursuant to the Pooling and Servicing Agreement, on each
Distribution Date, the Master Servicer will remit to [the Depositor] in
respect of each interest payment on a Mortgage Loan an amount equal to
% of the outstanding principal balance of such Mortgage Loan, before
giving effect to any payments due on the preceding Due Date.] The Master
Servicer will be permitted to withdraw from the Certificate Account, in
respect of each interest payment on a Mortgage Loan, an amount equal to
% of the outstanding principal balance of such
S-12
<PAGE>
Mortgage Loan, before giving effect to any payments due on the preceding
Due Date. See "Description of the Certificates--Servicing and Other
Compensation and Payment of Expenses" in the Prospectus for information
regarding other possible compensation to the Master Service and the
Servicers. The Servicers and the Master Servicer will pay all expenses
incurred in connection with their responsibilities under the Servicing
Agreements and the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without
limitation, the various items of expense enumerated in the Prospectus.
Investors are advised to consult with their own tax advisors regarding
the likelihood that a portion of such servicing compensation and amounts
payable to Depositor might be characterized as an ownership interest in
the interest payments on the Mortgage Loans ("Retained Yield") for federal
income tax purposes, by reason of the extent to which either the weighted
average Mortgage Rate, or the stated interest rates on the Mortgage Loans
exceeds the Pass-Through Rate, and the tax consequences to them of such a
characterization. In this regard, there are no authoritative guidelines
for federal income tax purposes as to either the maximum amount of
servicing compensation that may be considered reasonable in the context of
this or similar transactions or whether the reasonableness of servicing
compensation should be determined on a weighted averaged or loan-by-loan
basis. [The Depositor intends to treat % of such servicing
compensation and % of the amount payable to it described
above as Retained Yield for federal income tax purposes in reports to the
Certificateholders and to the Internal Revenue Service.] See "Certain
Federal Income Tax Consequences--Mortgage Pools" and "--Taxation of Owners
of Trust Fractional Certificates" in the Prospectus for information
regarding the characterization of servicing compensation [and the amounts
payable to the Depositor].
[TERMINATION; REPURCHASE OF MORTGAGE LOANS
The Pooling and Servicing Agreement provides that the Depositor may
purchase from the Trust all Mortgage Loans remaining in the Mortgage Pool
and thereby effect early retirement of the Certificates, provided that
[the aggregate unpaid balances of the Mortgage Loans at the time of such
repurchase is less than [10]% of the aggregate principal balance of the
Mortgage Loans on the Cut-off Date]. The purchase price for any such
repurchase [will be the outstanding principal balance of such Mortgage
Loans together with accrued and unpaid interest at the Pass-Through Rate
to the last day of the month of such repurchase, plus the appraiser value
of any property acquired in respect thereof.] [Any such repurchase will
be effected in compliance with the requirements of Section 860F(a)(iv) of
the Code in order to constitute a "qualifying liquidation" thereunder.]
In no event will the Trust continue beyond the expiration of 21 years from
the death of the last survivor of the persons named in the Pooling and
Servicing Agreement.]
RATING
It is a condition to the issuance of the Class A certificates that they
be rated " " by the Rating Agency. Such rating addresses
the likelihood that the holders of the Class A Certificates will receive
payments required under the Pooling and Servicing Agreement. In assigning
such a rating, to mortgage pass-through certificates, the Rating Agency
takes into consideration the credit quality of mortgage pool, including
any credit support providers, structural and legal aspects associated with
such certificates, and the extent to which the payment stream on such
mortgage pool is adequate to make required payments on such certificates.
Such rating does not, however, represent an assessment of the likelihood
that principal prepayments will be made by mortgagors or the degree to
which such payments might differ from that originally anticipated. As a
result, holders of the Class A Certificates might suffer a lower than
anticipated yield, and holders of the Class A-2 Certificates might fail,
in circumstances of extreme prepayment, to recoup their original
investment.
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.
S-13
<PAGE>
[ERISA CONSIDERATIONS]*
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see "ERISA
Considerations--Prohibited Transaction Class Exemption" in the
Prospectus).]
To qualify for exemption under PTCE 83-1 (see "ERISA Considerations--
Prohibited Transaction Class Exemption" in the Prospectus), a Class A
Certificate of an Exempt Series must entitle its holder to pass-through
payments of both principal and interest on the Mortgage Loans. Because
holders of Class A-2 Certificates are only entitled to pass-through
payments of interest (but not principal). PTCE 83-1 will not exempt Plans
which acquire the Class A-2 Certificates from the prohibited transaction
rules of ERISA. Any Plan fiduciary who proposes to cause a Plan to
purchase Class A Certificates should consult with its counsel with respect
to the potential consequences under ERISA and the Code of the Plan's
acquisition and ownership of Class A Certificates. However, the other
PTCE's or the Underwriter's PTE may be applicable. See "ERISA
Considerations--Prohibited Transaction Class Exemption" in the Prospectus.
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] CS First Boston Corporation, an affiliate of the
Depositor [, is acting as Representative.] The [Underwriter[s] named
below] [has] [have severally] agreed to purchase from the Depositor the
[entire] [following respective] principal amount[s] of the Class A
Certificates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
[UNDERWRITER CERTIFICATES CERTIFICATES TOTAL
------------ ------------ ------------ -----
<S> <C> <C> <C>
CS First Boston Corporation $ $ $
Total........................ $ $ $ ]
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and
that the Underwriter[s] will be obligated to purchase the entire principal
amount of the Class A Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Class A Certificates to the public
initially at the public offering prices set forth on the cover page of
this Prospectus Supplement [, and through the Representative,] to certain
dealers at such prices less the following concessions and that the
Underwriter[s] and such dealers may allow the following discounts on sales
to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION (PERCENT DISCOUNT (PERCENT OF
OF PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
------------------- ---------------------
<S> <C> <C>
Class A-1...... % %
Class A-2...... % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the
[Representative] [Underwriter].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
- -----------------
* If the Series of Certificates offered pursuant to this Version B Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth
will be substantially similar to the disclosure set forth in Version E under
"ERISA Considerations" or in the Prospectus under "ERISA Considerations."
S-14
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered hereby
will be passed upon for the Depositor and for the Underwriter[s] by Sidley
& Austin, New York, New York.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the Class A
Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be
acquired in privately negotiated transactions by the Depositor from one or
more affiliates of the Depositor, which will have acquired such Mortgage
Loans from time to time in the open market or in privately negotiated
transactions.
S-15
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities are not to be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
State.
SUBJECT TO COMPLETION, DATED , 1995
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
$ (Approximate)
Asset Backed Securities Corporation
Depositor
Conduit Mortgage Pass-Through Certificates, [Class A], Series
$[Variable Rate] [ %] Class A-1 Certificates $ % Class A-3 Certificates
$[Variable Rate] [ %] Class A-2 Certificates $ % Class A-4 Certificates
The [Class A] Certificates (the "Certificates") offered hereby
evidence ownership interests in a trust to be created by Asset Backed Securities
Corporation (the "Depositor") on or about , 199 (the "Trust"). The Trust
property will consist of a pool of [conventional] [fixed rate] [mortgage loans
and] [mortgage participation certificates, evidencing participation interests in
such mortgage loans and meeting the requirements of the nationally recognized
rating agency or agencies rating the [Class A] Certificates (collectively, the
"Rating Agency") for a rating in one of the two highest rating categories of
such Rating Agency] (the "Mortgage Loans") and certain related property to be
conveyed to the Trust by the Depositor (the "Trust Fund"). The Mortgage Loans
will be transferred to the Trust, pursuant to a Pooling and Servicing Agreement
(as defined herein), dated as of , 199 , by the Depositor in exchange for the
Certificates and are more fully described in the Prospectus Supplement and in
the accompanying Prospectus.
Interest on the Class A-1, Class A-2 and Class A-3 Certificates, at
the rate of interest set forth above for each such Class, will be distributed
[monthly] on each Distribution Date, commencing , 199 . Distributions of
interest on the Class A-4 Certificates will commence after distributions in
reduction of the Stated Principal Balance (as defined herein) of the Class A-3
Certificates have reduced the Stated Principal Balance of such Class to zero.
Prior to that time, interest will accrue on the Class A-4 Certificates and the
amount so accrued will be added to the Stated Principal Balance thereof on each
Distribution Date. Distributions in reduction of Stated Principal Balance of the
Certificates of each Class will be made on a pro rata basis among the
Certificates of such Class, in the order of their respective Final Scheduled
Distribution Dates (as defined herein), so that no distribution in reduction of
the Stated Principal Balance of any Certificate will be made until the Stated
Principal Balance of each Class of Certificates having a prior Final Scheduled
Distribution Date has been reduced to zero.
Scheduled distributions on the Mortgage Loans included in the Mortgage
Pool, together with certain other funds, as set forth more fully herein, will be
sufficient to make timely distributions of interest and distributions in
reduction of Stated Principal Balance on the [Class A] Certificates and to
reduce the Stated Principal Balance thereof to zero not later than the Final
Scheduled Distribution Dates set forth herein. However, the actual final
distribution on the [Class A] Certificates could occur significantly earlier
than the Final Scheduled Distribution Dates set forth herein. The [Class A]
Certificates will be subject to Special Distributions under the circumstances
specified herein. [The Depositor intends to offer the Class B Certificates (as
defined herein) to sophisticated institutional investors in transactions not
requiring registration under the Securities Act of 1933. The rights of the Class
B Certificateholders to receive distributions with respect to the Mortgage Loans
will be subordinated to the rights of the Class A Certificateholders to the
extent described herein and in the Prospectus.]
The Underwriter[s] [do[es] not] intend to make a secondary market for
the [Class A] Certificates [but [is] [are] under no obligation to do so]. There
can be no assurance that a secondary market for the Class A Certificates will
develop or, if it does develop, that it will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate
Mortgage Investment Conduit (a "REMIC"). See "Certain Federal Income Tax
Consequences" in the Prospectus.]
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
ASSET BACKED SECURITIES CORPORATION OR ANY AFFILIATE THEREOF, NEITHER THE
CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Interest Rate Final Price to Underwritng Proceeds to the
Scheduled Public (2) Discount Depositor
Distribution (2)(3)
Date (1)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Per Class A-1 Certificate (4) % % %
- ----------------------------------------------------------------------------------------------------------------------------
Per Class A-2 Certificate (4) % % %
- ----------------------------------------------------------------------------------------------------------------------------
Per Class A-3 Certificate % % %
- ----------------------------------------------------------------------------------------------------------------------------
Per Class A-4 Certificate % % %
- ----------------------------------------------------------------------------------------------------------------------------
Total % % %
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These dates are prepayments on that the calculated the Mortgage
characteristics assuming, among Loans in the of such other things,
Mortgage Pool and Mortgage Loans that there are no are as described under
"Description of the Trust Fund--The Mortgage Pool" herein.
(2) Plus accrued interest, if any, at the applicable rate from , 199 .
(3) Before deduction of expenses payable by the Depositor estimated at $ .
(4) The Class A-1 Certificates will bear interest at the per annum rate of %
through , 19 , and thereafter at a variable per annum rate of % above
the arithmetic mean of the London interbank offered rates for [ ] month
Eurodollar deposits ("LIBOR"), determined as set forth herein,
subject to a maximum interest rate of %.
(5) The Class A-2 Certificates will , 19 , and thereafter at a to [ % - ( x
LIBOR), determined bear interest at the per annum variable per annum rate
equal as set forth herein, subject to a rate of % through minimum
interest rate of %.]
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [its] [their] right to
reject orders in whole or in part. It is expected that the Certificates, in
definitive fully registered form, will be ready for delivery on or about 199 .
CS FIRST BOSTON
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
CERTIFICATES OFFERED HEREBY. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND 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.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER[S] MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES AT
LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
UNTIL , 19 , ALL DEALERS EFFECTING TRANSACTIONS IN THE 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 OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information filed
by the Trust can be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C., and at the Commission's
regional offices at 75 Park Place, 14th Floor, New York, New York 10007; and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
SECURITIES OFFERED................. Conduit Mortgage Pass-Through
Certificates, [Class A] Series (the
"[Class A] Certificates").
$[Variable] [%] Class A-1 Certificates.
$[Variable][%] Class A-2 Certificates.
$ % Class A-3 Certificates.
$ % Class A-4 Certificates.
[The Class A-1 and Class A-2
Certificates are Variable Rate
Certificates. The Class A-3 and
Class A-4 Certificates are Fixed
Interest Rate Certificates, as
described herein.]
[The Class A-4 Certificates are Compound
Interest Certificates for the purposes
of this Prospectus Supplement.]
[The Class A Certificates represent in
the aggregate an approximate % undivided
interest in the Trust Fund. The
remaining approximate % undivided
interest in the Trust Fund is
represented by the Class B Certificates,
which are subordinated in certain
respects to the Class A Certificates, as
more fully described herein and in the
Prospectus. [The Class B Certificates
are not being offered hereby, and may be
retained by the Depositor or sold by the
Depositor at any time to one or more
sophisticated institutional investors in
privately negotiated transactions not
requiring registration under the
Securities Act of 1933.]]
DENOMINATIONS AND RECORD DATES..... The [Class A] Certificates will be
issued in fully registered form in
minimum denominations of $
and integral multiples of $
in excess of such amount. [The
Record Date for each regular
distribution on the [Class A]
Certificates is the close of business
on the [last] day [of other [second]
month] immediately preceding the
applicable Distribution Date.] [The
Record Date for each regular
distribution on the Variable Rate
certificates is the close of business
on the th day of the month in
which the applicable Distribution
Date occurs. The Record Date for
each regular distributio on the Fixed
Rate Certificates is the close of
business on the th day of the
month immediately preceding the month
in which the applicable Distribution
Date occurs.]
DEPOSITOR.......................... Asset Backed Securities Corporation
(The "Depositor").
MASTER SERVICER.................... (the "Master Servicer")
CUT-OFF DATE....................... , 19 .
DELIVERY DATE...................... On or about , 19 .
INTEREST DISTRIBUTIONS............. [Interest will be distributed on [the
th day of each month] [each , ,
and ] (each, a "Distribution
Date") on the Stated Principal
Balance (as defined herein) of the
Certificates at the applicable rate
of interest specified on the cover
page hereof (the "Interest Rate") for
the Class A-1, Class A-2 and Class
A-3 Certificates, commencing
, 19 .] [Interest will be
distributed on the Class A-1
Certificates at the per annum rate of
% through , 19 , and
thereafter at a variable per annum
rate of % above LIBOR, determined
as set forth herein, subject to a
maximum interest rate of %.
Interest will be distributed on the
Class A-2 Certificates at the per
annum rate of % through
S-3
<PAGE>
, 19 , and thereafter at a variable per
annum rate equal to % -( x LIBOR),
determined as set forth herein, subject
to a minimum interest rate of %.
Interest will be distributed on the
Class A-3 and Class A-4 Certificates
(the "Fixed Rate Certificates") at the
respective per annum rates specified on
the cover page hereof.] [Interest
distributable on the Certificates will
accrue from the [first day of the month
preceding the] prior Distribution Date
(or from , 19 in the case of the First
Distribution Date) through the last day
of the [second] month preceding the then
current Distribution Date.] [Interest
will accrue on the Variable Rate
Certificates from the preceding
Distribution Date (or from , 19 in the
case of the first Distribution Date)
through the day preceding each
Distribution Date. Interest will accrue
on the Fixed Rate Certificates from the
th day of the month preceding the month
in which the prior Distribution Date
occurred (or from , 19 in the case of
the first Distribution Date) through the
th day of the month preceding the month
in which the current Distribution Date
occurs.] Distributions of interest on
the Class A-4 Certificates will commence
after distributions in reduction of
Stated Principal Balance of the Class A-
3 Certificates have reduced the Stated
Principal Balance of such Class to zero.
Prior to that time, interest will accrue
on the Class A-4 Certificates and the
amount so accrued will be added to the
Stated Principal Balance thereof on each
Distribution Date. See "Description of
the Certificates-Distributions of
Interest" herein.
[The distribution of interest on the
Class A-3 Certificates (and the addition
of accrued interest to the Stated
Principal Balance of the Class A-4
Certificates prior to the reduction of
the Stated Principal Balance of the
Class A-3 Certificates to zero) one
month after the date to which interest
accrues thereon and the calculation of
accrued interest on such Certificates
based on the assumption that
distributions in reduction of Stated
Principal Balance are made one month
prior to the date on which such
distributions actually are made will
reduce the effective yield to the
holders of the Class A-3 Certificates
from that which would be the case if
interest distributable on such
Certificates on a Distribution Date were
to accrue to such Distribution Date. See
"Description of the [Class A]
Certificates-Distributions of Interest
[on the Class A Certificates]" herein.]
DISTRIBUTIONS IN REDUCTION OF
STATED PRINCIPAL BALANCE........... The Stated Principal Balance of a [Class
A] Certificate at any time represents
the maximum specified dollar amount
(exclusive of interest at the related
Interest Rate) to which the holder
thereof is entitled from the cash flow
on the Mortgage Loans comprising the
Mortgage Pool and will decline to the
extent distributions in reduction of
Stated Principal Balance are received by
such holder. The Initial Stated
Principal Balance of each Class of
Certificates is set forth on the cover
of this Prospectus Supplement.
Allocation of distributions in reduction
of Stated Principal Balance will be made
to the [Subc] [C]lasses of the [Class A]
Certificates in the order of their
respective Final Scheduled Distribution
Dates, so that no distribution in
reduction of Stated Principal Balance
will be made to any [Subc] [C]lass of
[Class A] Certificates until
distributions in reduction of Stated
Principal Balance made to each [Subc]
[C]lass of [Class A] Certificates having
a prior Final Scheduled Distribution
Date have reduced the Stated Principal
Balance of such [Subc] [C]lass to zero.
Distributions in reduction of Stated
Principal Balance on the [Class A]
Certificates will be made on each
Distribution Date on which such
distributions are due in an aggregate
amount equal to the sum of (i) the
amount of interest accrued on the Class
A-4 Certificates from the [first day of
the month preceding the prior]
Distribution Date (or from , 19 in the
case of the first Distribution Date)
through the last day of the [second]
month preceding the then current
Distribution Date but not then
distributable (the "Accrual Distribution
Amount"), (ii) the [Class A] Stated
Principal Distribution Amount (as
described below) [and (iii) % of Excess
Cash Flow (as defined herein)]. The
[Class A]
S-4
<PAGE>
Stated Principal Distribution Amount
with respect to a Distribution Date
equals the amount, if any, by which the
aggregate Stated Principal Balance of
the [Class A] Certificates (before
taking into account the amount of
interest accrued on the Class A-4
Certificates to be added to the Stated
Principal Balance thereof on such
Distribution Date) exceeds the Asset
Value, as defined herein, of the
Mortgage Loans comprising the Mortgage
Pool as of the Business Day prior to
such Distribution Date. For purposes of
determining the Stated Principal
Distribution Amount, the Asset Value of
the Mortgage Loans comprising the
Mortgage Pool will be reduced by taking
into account [the Senior Interest (as
defined herein) in] all distributions of
principal thereof (including
prepayments) received or due to be
received by the Trustee or its nominee
during the period (a "Due Period")
ending on the Business Day prior to such
Distribution Date. See "Description of
the [Class A] Certificates--
Distributions in Reduction of Stated
Principal Balance" herein.
FINAL SCHEDULED DISTRIBUTION
DATE............................... Class A-1 Certificates .
Class A-2 Certificates .
Class A-3 Certificates .
Class A-4 Certificates .
The Final Scheduled Distribution Date
for each [Subc][C]lass of [Class A]
Certificates is the latest date on which
the Stated Principal Balance of all the
Certificates of such [Subc] [C]lass will
have been reduced to zero, and is
calculated by assuming, among other
things, that (i) scheduled interest and
principal payments (with no prepayments)
on the Mortgage Loans comprising the
Mortgage Pool are timely received and
(ii) such amounts are reinvested at an
assumed reinvestment rate of % per annum
to , 19 , % per annum from , 19 to , 19
and % per annum thereafter (the "Assumed
Reinvestment Rate"). Since the rate of
distributions in reduction of Stated
Principal Balance of each [Subc] [C]lass
of [Class A] Certificates will depend on
the rate of payment (including
prepayments) on the principal of the
Mortgage Loans, the actual final
distribution of any [Subc] [C]lass of
[Class A] Certificates could occur
significantly earlier than its Final
Scheduled Distribution Date. The rate of
payments on the Mortgage Loans will
depend on their particular
characteristics, as well as on
prevailing interest rates from time to
time and other economic factors, and no
assurance can be given as to the actual
payment experience of the Mortgage
Loans. See "Yield Considerations"
herein.
[SPECIAL DISTRIBUTIONS............. The [Class A] Certificates may receive
special distributions in reduction of
Stated Principal Balance ("Special
Distributions") on the first day of any
month, other than a month in which a
Distribution Date occurs, if, as a
result of principal prepayments on the
Mortgage Loans comprising the Mortgage
Pool and/or low reinvestment yields, the
Trustee determines, based on assumptions
specified in the Pooling and Servicing
Agreement, that interest requirements on
any portion of the [Class A]
Certificates would not be met. The
amount of any such Special Distribution
would not exceed the amount of
distributions in reduction of Stated
Principal Balance of the [Class A]
Certificates that would otherwise be
required to be made on the next
Distribution Date. As a result, a
Special Distribution on the [Class A]
Certificates would not result in a
distribution to [Class A]
Certificateholders more than two months
earlier than the Distribution Date on
which such distribution would otherwise
have been received. The [Class A]
Certificates will be redeemable in the
same priority and manner as
distributions in reduction of Stated
Principal Balance are made on a
S-5
<PAGE>
Distribution Date. See "Description of
the [Class A] Certificates--Special
Distributions" herein.]
[OPTIONAL TERMINATION.............. On any Distribution Date on or after the
[later] of or the date on which the
Stated Principal Balance of the [Class
A-3] Certificates has been reduced to
zero, the Depositor will have the right
to repurchase, in whole, but not in
part, the Mortgage Loans comprising the
Mortgage Pool. Additionally, on any
Distribution Date on which the aggregate
principal amount of the Mortgage Loans
comprising the Mortgage Pool is less
than [10%] of the initial aggregate
principal amount of such Mortgage Loans,
the Depositor will have the right to
repurchase, in whole, but not in part,
such Mortgage Loans. Any such repurchase
will be made at a purchase price equal
to [the aggregate principal amount of
such Mortgage Loans plus accrued
interest thereon to the last day of the
month of such repurchase, together with
the appraised value of any property
acquired in respect of such Mortgage
Loans]. [Any such termination will be
effected in compliance with the
requirements of Section 860F(a) (iv) of
the Internal Revenue Code of 1986 (the
"Code") so as to constitute a
"qualifying liquidation" thereunder. The
proceeds of any such repurchase will be
treated as a distribution on the
Mortgage Loans for purposes of
distributions to the Certificateholders.
In no event will the Trust continue
beyond the expiration of 21 years from
the death of the last survivor of the
person named in the Pooling and
Servicing Agreement.] See "Description
of the [Class A] Certificates--Optional
Termination" herein.]
TRUST FUND......................... The Certificates evidence ownership
interest in the Trust Fund, the assets
of which will consist of the following:
A. MORTGAGE POOL................ The Mortgage Pool will consist of
[fixed-rate,] fully amortizing,
[level-payment] mortgage loans [and
mortgage participation certificates
evidencing participation interests in
such mortgage loans that meet the
requirements of the nationally
recognized rating agency or agencies
rating the Certificates (collectively,
the "Rating Agency") for a rating in one
of the two highest rating categories of
such Rating Agency] secured by mortgages
on one- to four-family residential
properties located in the states of ,
and (the "Mortgage Loans"). All
Mortgage Loans will have original
maturities of at least [15] but no more
than [30] years. See "Description of the
Trust Fund--The Mortgage Pool" herein.*
B. CERTIFICATE ACCOUNT.......... There will be deposited in an account
(the "Certificate Account") to be
established with the Trustee all
distributions on or with respect to the
Mortgage Loans comprising the Mortgage
Pool, together with reinvestment income
thereon [, the amount of cash initially
deposited therein by the Depositor, and
any amounts withdrawn from any Reserve
Fund, GPM Fund or Buy-Down Fund (as
described below)]. Funds on deposit in
the Certificate Account will be
available to make distributions in
reduction of Stated Principal Balance
and distributions of interest on the
[Class A] Certificates on each
Distribution Date. See "Description of
the Trust Fund--Certificate Account"
herein.
[C. BUY-DOWN FUND................ The Depositor will deliver to the
Trustee cash, a letter of credit or a
guaranteed investment contract to fund
the Buy-Down Fund for the [Class A]
Certificates. The Assumed Reinvestment
Rate for the Buy-Down Fund will be the
same as that of the Certificate Account.
The Trustee may withdraw excess funds in
the Buy-Down Fund on any Distribution
Date. See "Description of the Trust
Fund--Buy-Down Fund" herein.]
- ---------------------
*If the Series of Certificates offered pursuant to this Version C Prospectus
Supplement evidences interest in manufactured housing conditional sales
contracts and installment loan agreements ("Contracts"), the disclosure to be
set forth will be substantially similar to the disclosure set forth in Version E
under "Summary of Terms-Contract Pool."
S-6
<PAGE>
[D. GPM FUND...................... The Depositor will deliver to the
Trustee cash, a letter of credit or a
guaranteed investment contract to
fund the GPM Fund for the [Class A]
Certificates. The Assumed
Reinvestment Rate for the GPM Fund
will be the same as that of the
Certificate Account. The Trustee may
withdraw excess funds in the GPM on
any Distribution Date. See
"Description of the Trust Fund--GPM
Fund" herein.]
[E. REINVESTMENT All amounts on deposit in the
AGREEMENT................... Certificate Account [and the GPM and
Buy-Down Funds] will be reinvested with
by the Trustee pursuant to a guaranteed
investment contract (the "Reinvestment
Agreement") at a rate of % per annum.
See "Description of the Trust Fund--
Reinvestment Agreement" herein.]
[F. LETTER OF CREDIT............. The maximum liability of [ ]
under an irrevocable standby letter
of credit, for the Mortgage Pool (the
"Letter of Credit"), net of
unreimbursed payments thereunder,
will be no more than [10%] of the
initial aggregate principal balance
of the Mortgage Pool (the "Letter of
Credit Percentage"). The maximum
amount available to be paid under the
Letter of Credit will be determined
in accordance with the Pooling and
Servicing Agreement referred to
herein. The duration of coverage and
the amount and frequency of any
reduction in coverage will be in
compliance with the requirements for
a rating in one of the two highest
rating categories of the Rating
Agency. The amount available under
the Letter of Credit shall be reduced
by the amount of unreimbursed
payments thereunder. See "Description
of the Certificates--Credit
Support--The Letter of Credit" in the
Prospectus.]
[G. POOL INSURANCE POLICY........ [Neither the Certificates nor the
Mortgage Loans will be insured or
guaranteed by any governmental
agency.] Subject to the limitations
described herein, a pool insurance
policy for certain of the Mortgage
Loans (the "Pool Insurance Policy"),
will cover losses due to default on
such Mortgage Loans in an initial
amount of not less than [5%] of the
aggregate principal balance as of the
first day of the month of the
creation of the Trust (the "Cut-off
Date") of all Mortgage Loans that
are not covered as to their entire
outstanding principal balance by
primary policies of mortgage guaranty
insurance. See "Description of the
Trust Fund-The Pool Insurance Policy"
herein. The Pool Insurance Policy
will be subject to the limitations
described under "Description of
Insurance-the Pool Insurance Policy"
in the Prospectus.]
[H. HAZARD INSURANCE [AND
SPECIAL HAZARD
INSURANCE All of the Mortgage Loans will be
POLICY]..................... covered by standard hazard insurance
policies insuring against losses due to
various causes, including fire,
lightning and windstorm. [An insurance
policy (the "Special Hazard Insurance
Policy") will cover losses with respect
to the Mortgage Loans that result from
certain other physical risks that are
not otherwise insured against (including
earthquakes and mudflows). The Special
Hazard Insurance Policy will be limited
in scope and will cover losses in an
initial amount equal to the greater of %
of the aggregate principal balance of
the Mortgage Loans or times the unpaid
principal balance of the largest
Mortgage Loan.] Any hazard losses not
covered by [either] standard hazard
insurance policies [or the Special
Hazard Insurance Policy] will not be
insured against and [, to the extent
that the amount available under the
Letter of Credit or any alternative
method of credit support is exhausted,]
will be borne by the Certificateholders.
See "Description of the Trust Fund--The
Special Hazard Insurance Policy" herein.
The hazard insurance policies [and the
Special Hazard Insurance Policy] will be
subject to the limitations described
under "Description of Insurance--Hazard
Insurance" and "--Special Hazard
Insurance Policies"] in the Prospectus.
S-7
<PAGE>
[I. MORTGAGOR BANKRUPTCY
BOND......................... The Depositor will obtain a bond or
similar form of insurance coverage
(the "Mortgagor Bankruptcy Bond"),
providing coverage against losses
that result from proceedings with
respect to obligors under the
Mortgage Loans (the "Mortgagor")
under the federal Bankruptcy Code.
See "Description of the Trust
Fund--Mortgagor Bankruptcy Bond"
herein and "Description of
Insurance--The Mortgagor Bankruptcy
Bond" in the Prospectus.]
[CLASS B CERTIFICATES.............. The rights of the Class B
Certificateholders to receive
distributions with respect to the
Mortgage Loans are subordinated to
the right of the Class A
Certificateholders to receive such
distributions to the extent of the
Subordinated Amount described below.
This subordination is intended to
enhance the likelihood of regular
receipt by Class A Certificateholders
of the full amount of scheduled
distributions of interest and
distributions in reduction of Stated
Principal Balance and to decrease the
likelihood that the Class A
Certificateholders will experience
losses. The extent of such
subordination (the "Subordinated
Amount") will be determined as
follows: on the Cut-off Date and on
each anniversary of the Cut-off Date
until , the
Subordinated Amount will equal % of
the original aggregate principal
balance of the Mortgage Loans less
the amount of "Aggregate Losses" (as
defined in the Prospectus) since the
Cut-off Date through the last day of
the month preceding such anniversary
date; from the th anniversary of
the Cut-off Date onward, the
Subordinated Amount will gradually
decline in accordance with a schedule
set forth in the Pooling and
Servicing Agreement.]
[RESERVE FUND...................... The protection afforded to the Class
A Certificateholders from the
subordination feature described above
will be effected both by the
preferential right of the Class A
Certificateholders to receive current
distributions with respect to the
Mortgage Loans (to the extent of the
Subordinated Amount) and by the
establishment of a reserve (the "Reserve
Fund"). The Reserve Fund is not included
in the Trust Fund. The Reserve Fund will
be created by the Depositor and shall be
funded by the retention of all of the
scheduled distributions of principal of
the Mortgage Loans otherwise
distributable to the Class B
Certificateholders on each Distribution
Date until the Reserve Fund reaches an
amount (the "Required Reserve") that
will equal [; thereafter, the Reserve
Fund must be maintained at the following
levels: ]. See "Description of the
Certificates--Subordinated Certificates"
and "--Reserve Fund" in the Prospectus.]
MASTER SERVICING AND SERVICING
AGREEMENTS........................ The Depositor will enter into a
Master Servicing Agreement with
, which will have entered into Servicing
Agreements with various entities (each a
"Servicer") with respect to the
servicing of the Mortgage Loans. Among
other things, the Servicers and the
Master Servicer are obligated under
certain circumstances to make advances
with respect to the Mortgage Loans, to
purchase any Mortgage Loans for which
mortgage insurance coverage is denied on
the grounds of fraud or
misrepresentation and to purchase
certain Mortgage Loans with respect to
which a breach of a representation or
warranty has occurred. The Depositor
will assign to the Trustee its rights
under the Master Servicing Agreement and
the Servicing Agreements with respect to
the Certificates.
ADVANCES........................... Any Servicer of the Mortgage Loans
(and the Master Servicer, with
respect to each Mortgage Loan that it
services directly and otherwise, to
the extent the applicable Servicer
does not do so) will be obligated to
advance delinquent installments of
principal and interest on the
Mortgage Loans under certain
circumstances. See "Description of
the Certificates--Advances" in the
Prospectus.
S-8
<PAGE>
SUBSTITUTION OF MORTGAGE
LOANS............................. Within three months following the
date of the issuance of the
Certificates, the Depositor may
deliver to the Trustee Mortgage Loans
in substitution for any one or more
of the Mortgage Loans initially
included in the Trust Fund but which
do not conform in one or more
respects to the description thereof
contained in this Prospectus
Supplement or in the Current Report
on Form 8-K referred to herein. See
"The Mortgage Pool-Substitution of
Mortgage Loans" in the Prospectus.
RESIDUAL CERTIFICATES............... Upon the issuance of the
Certificates, [the Depositor will
retain] an interest in the Mortgage
Pool [that] will be represented by a
class of certificates (the "Residual
Certificates") that the Depositor
will designate as "residual
interests" under Section 860G(a)(2)
of the Internal Revenue Code of 1986
(the "Code"). The Residual
Certificates will represent the right
to receive distributions equal to
% of the Excess Cash Flow, if any,
with respect to each Distribution
Date. The Residual Certificates are
not being offered hereby. [The
Depositor may, but need not, sell
some or all of such Residual
Certificates after the date of
issuance of the Certificates to
sophisticated institutional investors
in transactions not requiring
registration under the Securities Act
of 1933.]
TRUSTEE............................. (the "Trustee"). See
"Description of the [Class A]
Certificates-Trustee" herein.
LEGAL INVESTMENT.................... The [Class A] Certificates constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the
"Enhancement Act"), and, as such, are
legal investments for certain
entities to the extent provided in
the Enhancement Act. See "Legal
Investment" in the Prospectus.
CERTIFICATE RATING.................. It is a condition of issuance that
the [Class A] Certificates be rated
in one of the two highest rating
categories of the Rating Agency prior
to issuance.
ERISA LIMITATIONS................... See "ERISA Considerations" in the
Prospectus.
TAX ASPECTS......................... The Depositor [intends] [does not
intend] to make an election to treat
the Trust Fund as a Real Estate
Mortgage Investment Conduit (a
"REMIC"), pursuant to the Internal
Revenue Code of 1986, as amended.
See "Certain Federal Income Tax
Consequences" in the Prospectus.
S-9
<PAGE>
DESCRIPTION OF THE TRUST FUND
THE MORTGAGE POOL/*/
The Mortgage Pool will consist of Mortgage Loans evidenced by mortgage
notes with aggregate unpaid principal balances outstanding as of the first day
of the month of the creation of the Trust (the "Cut-off Date"), after
deducting payments of principal due on such date, of approximately $ .
This amount is subject to a permitted variance of up to %. [The Mortgage
Pool will consist of -year, [fixed-rate], fully-amortizing, [level-
payment] Mortgage Loans, as more fully described in the Prospectus.]
The weighted average interest rate (individually, a "Mortgage Rate") of
the Mortgage Loans as of the Cut-off Date will be at least % but no more
than %. All Mortgage Loans will have Mortgage Rates of at least % but no
more than %. The weighted average maturity of the Mortgage Loans, as of the
Cut-off Date, will be at least years but no more than years. All
Mortgage Loans will have original maturities of at least but no more than
years. None of the Mortgage Loans will have been originated prior to
or after , 19 . None of the Mortgage Loans will have a scheduled
maturity later than .
The Mortgage Loans will have the following characteristics as of the Cut-
off Date (expressed as a percentage of the outstanding aggregate principal
balances of the Mortgage Loans having such characteristics relative to the
outstanding aggregate principal balances of all Mortgage Loans):
No more than % of the Mortgage Loans will have been originated
before , and no more than % of the Mortgage Loans will
have been originated before . See "Certain Federal Income
Tax Consequences--Mortgage Pools," "--Taxation of Owners of Trust
Fractional Certificates," and "--Market Discount and Premium" in the
Prospectus for information regarding such Mortgage Loans.
At least % of the Mortgage Loans will be Mortgage Loans each
having outstanding principal balances of less than $ .
No more than % of the Mortgage Loans will be Mortgage Loans
each having outstanding principal balances of more than $ .
No more than % of the Mortgage Loans will have had loan-to-
value ratios at origination in excess of [80]%, and no Mortgage Loan will
have had a loan-to-value ratio at origination in excess of 95%.
All of the Mortgage Loans with loan-to-value ratios at origination
in excess of 80% will be covered by a policy of primary mortgage
insurance until the outstanding principal balance is reduced to 75% of
the Original Value.
At least % of the Mortgage Loans will be secured by mortgages
on one-family dwellings.
No more than % of the Mortgage Loans will be secured by
Mortgages on condominiums.
No more than %, by aggregate principal balance, of the Mortgage
Loans will be Mortgage Loans for which Buy-Down Funds have been provided,
and no more than % of the principal balance of any such Mortgage Loan
will be represented by Buy-Down Funds.
No more than %, by aggregate principal balance, of the Mortgage
Loans will be GPM Loans.
At least % of the Mortgage Loans will be secured by a Mortgage
on an owner-occupied Mortgaged Property. Such determination will have
been made on the basis of a representation by the Mortgagor at the time
of origination of the Mortgage Loan that such Mortgagor then intended to
occupy the underlying property or, in the absence of such a
representation, on the basis of various factors indicating that the
underlying property is owner-occupied.
No more than [5%] of the Mortgage Loans will be secured by Mortgages
on properties located in any one zip code.
The Mortgage Loans will be secured by Mortgages on properties located in
the states of .
- ----------
/*/ If the Series of Certificates offered pursuant to this Version C
Prospectus Supplement evidences interests in Contracts, the disclosure to be
set forth will be substantially similar to the disclosure set forth in
Version E under "Description of the Contract Pool."
S-10
<PAGE>
Specific information with respect to the Mortgage Loans will be available
to purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Mortgage Loans
outstanding as of the Cut-off Date, and will also set forth tables reflecting
the following information regarding the Mortgage Loans: years of
origination, types of dwellings on the underlying properties, the sizes of
Mortgage Loans and distribution of Mortgage Loans by Mortgage Rate, and will
be set forth in a Current Report on Form 8-K that will be filed with the
Securities and Exchange Commission by the Depositor within 15 days after the
issuance of the Certificates.
CERTIFICATE ACCOUNT
There will be deposited in an account (the "Certificate Account") to be
established with the Trustee all distributions on or with respect to the
Mortgage Loans comprising the Mortgage Pool, together with reinvestment income
thereon. [Until such time as the Subordinated Amount is reduced to zero, f]
[F]unds on deposit in the Certificate Account will be available to make
distributions in reduction of Stated Principal Balance and distributions of
interest on the Certificates on each Distribution Date, as more fully set
forth herein. [Any funds remaining in the Certificate Account after making
required distributions to holders of the Class A Certificates will be
distributed to the holders of the Class B Certificates.] [Any amounts
remaining in the Certificate Account after making required distributions on
the Class B Certificates will be distributed to the holders of the Residual
Certificates.]
[BUY-DOWN FUND
The Depositor will deliver cash, a letter of credit or a guaranteed
investment contract to the Trustee to fund the Buy-Down Fund for the [Class A]
Certificates. [The Senior Interest in] Buy-Down Mortgage Loans not valued
solely on the basis of the scheduled monthly payments required of the
Mortgagor will be valued by taking into account funds available from the Buy-
Down Fund and reinvestment income thereon at the same Assumed Reinvestment
Rate as that of the Certificate Account.
The Trustee may withdraw excess funds from the Buy-Down Fund on any
Distribution Date. Any amounts so withdrawn shall be distributed [first, to
restore the amount in the Reserve Fund to the Required Reserve, and then to
the holders of the Class B Certificates to the extent of any deficiency in
scheduled distributions on such Class B Certificates on such Distribution
Date. Any amounts remaining will be distributed] to the holders of the
Residual Certificates.]
[GPM FUND
To the extent that [the Senior Interest in] a Mortgage Loan providing for
payments during a portion of its term that are less than the actual amounts of
principal and interest payable thereon (a "GPM Loan") is valued on the basis
of its maximum principal balance, rather than on the basis of scheduled
payments by the Mortgagor, the Depositor will deliver cash, a letter of credit
or a guaranteed investment contract to fund the GPM Fund for the [Class A]
Certificates. The Assumed Reinvestment Rate for the GPM Fund is the same as
that of the Certificate Account.
The Trustee may withdraw excess funds from the GPM Fund on any
Distribution Date. Any amounts so withdrawn shall be distributed [first, to
restore the amount in the Reserve Fund to the Required Reserve, and then to
the holders of the Class B Certificates to the extent of any deficiency in
scheduled distributions on such Class B Certificates on such Distribution
Date. Any amounts remaining will be distributed] to the holders of the
Residual Certificates.]
[REINVESTMENT AGREEMENT
All amounts on deposit in the Certificate Account [, the Buy-Down
Fund and the GPM Fund] will be reinvested with by the Trustee
pursuant to a guaranteed investment contract (the "Reinvestment Agreement") at
a rate of % per annum.]
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of
unreimbursed payments thereunder, for the Certificates will be no more than
% of the aggregate principal balance of the Mortgage Loans on the Cut-off
Date. The duration of coverage and the amount and frequency of any reduction
in coverage will be in compliance with the requirements established by the
Rating Agency rating the Certificates in order to obtain a rating in one of
the two highest ratings categories of the Rating Agency. The precise amount of
coverage under the Letter of Credit and the duration and frequency of
reduction of such coverage will be set forth in the Current Report on Form 8-K
referred to above. See "Description of the Certificates--Credit Support--The
Letter of Credit" in the Prospectus.]
[THE POOL INSURANCE POLICY
Subject to the limitations described under "Description of Insurance--
Pool Insurance Policy" in the Prospectus, the Pool Insurance Policy will cover
losses by reason of default on the Mortgage Loans that are not covered as to
their entire outstanding principal balances by primary mortgage insurance, in
an amount equal to % of the aggregate principal balance of such Mortgage
Loans on the Cut-off Date.
S-11
<PAGE>
The Pool Insurance Policy will be issued by , a corporation
(the "Pool Insurer"), which is engaged principally in the business of insuring
mortgage loans on residential properties against default in payment by the
Mortgagor. At , 19 , the Pool Insurer had insurance in force in the
form of primary policies covering approximately $ billion of residential
mortgages. At such date, the Pool Insurer had total assets of approximately $
million, capital and surplus aggregating $ million and statutory
contingency reserves of $ million, resulting in total policyholders'
reserves of $ million. The claims-paying ability of the Pool Insurer is
currently rated by . In accordance with standard rating agency
practice, may, at any time, revise or withdraw such rating.
The information set forth above has been provided by the Pool Insurer.
The Depositor makes no representation as to the accuracy or completeness of
such information.]
[THE SPECIAL HAZARD INSURANCE POLICY
The Special Hazard Insurance Policy will cover certain risks not
otherwise insured against under hazard insurance policies, subject to the
limitations described in the Prospectus, and will be issued by ,
corporation (the "Special Hazard Insurer"). Claims under such policy will be
limited to % of the aggregate principal balance of the Mortgage Loans or
twice the principal balance of the Mortgage Loan with the highest outstanding
principal balance at the Cut-off Date, whichever is greater. At , 19
, the Special Hazard Insurer had total assets of approximately $ million
and total policyholders' surplus of $ . The claims-paying ability of the
Special Hazard Insurer is presently rated by . In accordance with
standard rating agency practice, may, at any time, revise or withdraw
such rating.
The information set forth above has been provided by the Special Hazard
Insurer. The Depositor makes no representation as to the accuracy or
completeness of such information.]
[MORTGAGOR BANKRUPTCY BOND
The Depositor will obtain a bond or similar form of insurance coverage
(the "Mortgagor Bankruptcy Bond") for proceedings with respect to Mortgagors
under the federal Bankruptcy Code. The Mortgagor Bankruptcy Bond will cover
certain losses resulting from a reduction by a bankruptcy court of
scheduled payments of principal and interest on a Mortgage Loan or a reduction
by such court of the principal amount of a Mortgage Loan and will cover
certain unpaid interest on the amount of such a principal reduction from the
date of the filing of a bankruptcy petition.
The initial amount of coverage provided by the Mortgagor Bankruptcy Bond
will be $ plus the greater of (i) % of the aggregate principal balances of
the Mortgage Loans secured by second residences and investor-owned residences
or (ii) times the largest principal balance of any such Mortgage Loan. The
coverage provided by the Mortgagor Bankruptcy Bond will be reduced by
payments thereunder.
The Mortgagor Bankruptcy Bond will be issued by , a corporation.
At , 19 , had admitted assets of approximately $ and
total policyholders' surplus of approximately $ .
The information set forth above concerning has been provided by it.
The Depositor makes no representation as to the accuracy or completeness of
such information.]
YIELD CONSIDERATIONS
Principal payments on mortgage loans may be in the form of scheduled
amortization payments or prepayments (for this purpose, the term "prepayment"
includes prepayments and liquidation due to default or other dispositions of
the loans). Prepayments on the Mortgage Loans comprising the Mortgage Pool
will be passed through to the Trustee, as the assignee of the Mortgage Loans,
and such prepayments will be [available to be] applied to distributions in
reduction of the Stated Principal Balance on the [Class A] Certificates [, as
more fully set forth herein]. Prepayments on mortgage loans are commonly
measured by a prepayment standard or model. The model used in this Prospectus
Supplement, the Standard Prepayment Assumption ("SPA"), represents an assumed
rate of prepayment each month relative to the outstanding principal balance of
a pool of mortgage loans. A prepayment assumption of 100% SPA assumes
prepayment rates of 0.2% per annum of the then outstanding principal balance
of such mortgage loans in the first month of the life of the mortgage loans
and an additional 0.2% per annum in each month thereafter until the 30th
month. Beginning in the 30th month and in each month thereafter during the
life of the mortgage loans. 100% SPA assumes a constant prepayment rate of 6%
per annum each month. As used in the table set forth below " % SPA" assumes
prepayment rates equal to % of 100% SPA; " % SPA" assumes prepayment
rates equal to % of 100% SPA; and " % SPA" assumes prepayment rates
equal to % of 100% SPA. SPA does not purport to be a historical
description of prepayment experience or a prediction of the anticipated rate
of prepayment of any pool of mortgage loans.
S-12
<PAGE>
The rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors,
including the level of mortgage interest rates and the rate at which
homeowners sell their homes or default on their mortgages. In general,
however, if prevailing interest rates fall significantly below the interest
rates on the Mortgage Loans comprising the Mortgage Pool, the Certificates are
likely to be subject to higher prepayment rates than if prevailing rates
remain at or above the interest rates on the Mortgage Loans comprising the
Mortgage Pool. In addition, as homeowners move or default on their mortgages,
their houses are generally sold and the mortgages prepaid. As the rate of
distributions in reduction of Stated Principal Balance of each [Subc] [C]lass
of [Class A] Certificates will depend on the rate of payment (including
prepayments) of the Mortgage Loans comprising the Mortgage Pool, the actual
final distribution made on any [Subc] [C]lass of [Class A] Certificates is
likely to occur earlier than its Final Scheduled Distribution Date.
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar in reduction of the principal of
such security will be distributed to the investor. The weighted average life
of a [Class A] Certificate is determined by (i) multiplying the amount of each
distribution in reduction of Stated Principal Balance by the number of years
from the date of issuance of the [Class A] Certificate to the related
Distribution Date, (ii) summing the results and (iii) dividing the sum by the
total distributions in reduction of Stated Principal Balance made on the Class
A Certificate [, including, in the case of a Class A-4 Certificate, any
interest accrued and added to the Stated Principal Balance of such
Certificate].
The table set forth below has been prepared on the basis of the
characteristics of the Mortgage Loans that are expected to be included in the
Mortgage Pool. The table assumes, among other things, that each Mortgage Loan
comprising the Mortgage Pool has a remaining term to maturity of years,
bears interest at a rate of % per annum and has payments of principal
that are timely received. There may be discrepancies between the
characteristics of the Mortgage Loans actually included in the Mortgage Pool
and the characteristics of the Mortgage Loans expected to be so included. Any
such discrepancy may have an effect on the percentages of Initial Stated
Principal Balance outstanding set forth in the table (and the weighted average
lives of each Class [Subclass] of the [Class A] Certificates. In addition, to
the extent that the Mortgage Loans that actually are included in the Mortgage
Pool have characteristics that differ from those assumed in the following
table, the Stated Principal Balance of any Class [Subclass] of the [Class A]
Certificates will be reduced to zero earlier or later than indicated by the
table.
Variations in actual prepayment experience and the balance of mortgage
loans that prepay may increase or decrease the percentages of initial Stated
Principal Balance and the weighted average lives shown in the following table.
Such variation may occur even if the average prepayment experience of all such
Mortgage Loans equals the indicated levels of SPA.
Based on the foregoing assumptions, [including an assumed interest rate
of % on the Class A-1 Certificates and an assumed interest rate of
% on the Class A-2 Certificates,] the following table indicates the projected
weighted average life of each [Subc] [C]lass of [Class A] Certificates and
sets forth the percentages of the initial Stated Principal Balance of each
[Subc] [C]lass of [Class A] Certificates that would be outstanding after each
of the dates shown at various percentages of SPA.
PERCENTAGE OF INITIAL STATED PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING
PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF
SPA (1) SPA (1) SPA (1) SPA (1)
-------------- -------------- -------------- ---------------
PAYMENT DATE 0% % % % 0% % % % 0% % % % 0% % % %
- -------------------- -------------- -------------- -------------- ---------------
Original Balance
<C> <S> <C> <C> <C>
, 1995............
, 1996............
, 1997............
, 1998............
, 1999............
, 2000............
, 2001............
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING AT THE FOLLOWING
PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF PERCENTAGES OF
SPA (1) SPA (1) SPA (1) SPA (1)
-------------- -------------- -------------- ---------------
PAYMENT DATE 0% % % % 0% % % % 0% % % % 0% % % %
- -------------------- -------------- -------------- -------------- ---------------
<C> <S> <C> <C> <C>
,2002.............
,2003.............
,2004.............
,2005.............
,2006.............
,2007.............
,2008.............
,2009.............
,2010.............
,2011.............
,2012.............
,2013.............
,2014.............
,2015.............
,2016.............
Weighted average life
(Years)...........
</TABLE>
- ----------
(1) The table assumes, among other things, [at each level of SPA,] prepayment
of Mortgage Loans comprising the Mortgage Pool at the indicated rate and
Reinvestment Income at the Assumed Reinvestment Rate of % per annum [and
annual estimated administrative fees and expenses of approximately $ .]
S-14
<PAGE>
DESCRIPTION OF THE [CLASS A] CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Standard Terms and
Provisions of Pooling and Servicing (the "Standard Terms") as amended and
supplemented by a Reference Agreement to be dated as of the Cut-off Date (the
"Reference Agreement" and, together with the Standard Terms, the "Pooling and
Servicing Agreement") among the Depositor, , as master servicer (the
"Master Servicer"), and , as trustee (the "Trustee"), a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement forms a part. Reference is made to the accompanying
Prospectus for important additional information regarding the terms and
conditions of the Pooling and Servicing Agreement and the Certificates. Each
of the [Class A] Certificates at the time of issuance will qualify as a
"mortgage related security" within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984.
Distribution of principal and interest as set forth above will be made by
the Trustee by check mailed to each Certificateholder entitled thereto at the
address appearing in the Certificate Register to be maintained with the
Trustee or, if eligible for wire transfer as provided in the Pooling and
Servicing Agreement, by wire transfer to the account of such
Certificateholder; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency specified in the notice
to Certificateholders of such final distribution.
The [Class A] Certificates will be transferable and exchangeable on a
Certificate Register to be maintained by the Trustee at the office or agency
of the Master Servicer maintained for that purpose in New York, New York.
[Class A] Certificates surrendered to the Trustee for registration of transfer
or exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of [Class A] Certificates, but payment of
a sum sufficient to cover any tax or other governmental charge may be
required. Such office or agency of the Master Servicer is currently located at
. The Corporate Trust Office of the Trustee is currently located at .
[DISTRIBUTIONS GENERALLY]
[On each Distribution Date, the Trustee will distribute to the Class A
Certificateholders, in the manner set forth below, an amount (the "Required
Distribution") equal to the sum of:
(i) the aggregate fractional undivided interest evidenced by all
Class A Certificates (the "Senior Interest") in: (a) until such time as
the Subordinated Amount is reduced to zero, all scheduled payments of
principal and interest (including any advances thereof), net of servicing
fees and other compensation payable to the Servicers and the Master
Servicer, which payments became due on the due date to which such
Distribution Date relates (the "Due Date"), whether or not such payments
are actually received; and (b) after the Subordinated Amount is reduced
to zero, all payments of principal and interest, net of servicing fees
and other compensation payable to the Servicers and the Master Servicer,
but not previously received, since the time the Subordinated Amount was
reduced to zero, but only to the extent such payments are actually
received or advanced prior to the Determination Date;
(ii) the Senior Interest in all principal prepayments received
during the month prior to the month of distribution and, interest to the
last day of the month in which such principal prepayments occur, net of
servicing fees and other compensation payable to the Servicers and the
Master Servicer; and
(iii) the Senior Interest in the sum of (a) the outstanding
principal balance of each Mortgage Loan or property acquired in respect
thereof that was repurchased pursuant to the Pooling and Servicing
Agreement or liquidated or foreclosed during the monthly period ending on
the day prior to the Due Date to which such distribution relates,
calculated as of the date of each such Mortgage Loan as repurchased,
liquidated or foreclosed, and (b) accrued but unpaid interest on such
principal balance, net of servicing fees and other compensation payable
to the Servicers and the Master Servicer, to the first day of the month
following the month of such repurchase, liquidation or foreclosure.
The Required Distribution will be distributed to the Class A
Certificateholders, in the manner set forth below, to the extent that there
are sufficient eligible funds available for distribution to such Class A
Certificateholders on a Distribution Date. Funds eligible for such purpose
with respect to each Distribution Date shall be as set forth in the Prospectus
under "Payments on Mortgage Loans."
If the funds in the Certificate Account eligible for distribution to the
Class A Certificateholders (including all funds required to be deposited
therein from the Reserve Funds and any Advances by the Servicers or the Master
Servicer) are not sufficient to make the Required Distribution on any
Distribution Date, the Trustee shall distribute on such Distribution Date to
the Class A Certificateholders the amount of funds eligible for distribution
to such Class A Certificateholders, in the manner set forth below. If, on any
Distribution Date, prior to the time the Subordinated Amount has been reduced
to zero, the Class A Certificateholders do not receive the Required
Distribution, the holders of the Class B Certificates will not receive any
distributions on such Distribution Date. Any
S-15
<PAGE>
amounts in the Certificate Account after the Required Distribution is made to
the Class A Certificateholders will be distributed [first, to restore the
amount in the Reserve Fund to the Required Reserve, and then to the holders of
the Class B Certificates to the extent of any deficiency in the scheduled
distribution to such Certificateholders. Any excess will then be distributed
to the holders of the Residual Certificates, as set forth more fully below].
Holders of the Class B Certificates [or the Residual Certificates] will not be
required to refund any amounts that have previously been properly distributed
to them directly from the Certificate Account, regardless of whether there are
sufficient funds on such Distribution Date to make a full distribution to the
Class A Certificateholders. The subordination of distributions allocable to
holders of the Class B Certificates is limited to the Subordinated Amount,
which will decrease over time as more fully set forth in the Pooling and
Servicing Agreement, and such subordination applies on any Distribution Date
only to then current distributions allocable to the Class B
Certificateholders.
DISTRIBUTIONS OF INTEREST
The Certificates of each Class will bear interest at the Interest Rates
specified on the cover page hereof. Interest on the Class A-1 Certificates,
Class A-2 Certificates and Class A-3 Certificates will be distributable
[monthly] on each Distribution Date, commencing , 19 . [Interest
distributable on the Certificates on a Distribution Date will accrue from the
[first day of the month preceding the] prior Distribution Date (or from
, 19 (the "Accrual Date") in the case of the first Distribution Date)
through the [last] day [of the [second] month] preceding the then current
Distribution Date. [Interest will accrue on the Variable Rate Certificates
from the preceding Distribution Date (or from , 19 , in the case of
the first Distribution Date) through the th day of the month preceding
each Distribution Date. Interest will accrue on the Fixed Rate Certificates
from the th day of the month [preceding the month] in which the prior
Distribution Date occurs (or from , 19 , in the case of the first
Distribution Date) through the th day of the month [preceding the month]
in which the current Distribution Date occurs.] Distributions of interest on
the Class A-4 Certificates will commence after distributions in reduction of
Stated Principal Balance of the Class A-3 Certificates have reduced the Stated
Principal Balance of such Class to zero. Prior to that time, interest will
accrue on the Class A-4 Certificates and the amount so accrued will be added
to the Stated Principal Balance thereof on each Distribution Date. [Interest
accrued on the [Subc] [C]lass of [Class A] Certificates currently receiving
distributions in reduction of Stated Principal Balance (and on the Class A-4
Certificates) during any period described above will be calculated on the
assumption that such distributions are made (and accrued interest added to the
Stated Principal Balance of the Class A-4 Certificates) on the [[first] day of
the month preceding] the next Distribution Date, and not on the Distribution
Date when actually made or added.
[Interest will accrue on the Class A-1 and Class A-2 Certificates through
, 19 at the rates of % and %, respectively. Commencing , 19
, interest will accrue on the Variable Rate Certificates at rates determined
as set forth below. For each interest accrual period other than the first
interest accrual period
--Interest will accrue on the Class A-1 Certificates at a per annum rate
of % above LIBOR, subject to a maximum interest rate of %.
--Interest will accrue on the Class A-2 Certificates at a per annum rate
equal to % -- ( x LIBOR), subject to a minimum interest rate of %.
The rate at which interest will accrue on the Class A-2 Certificates will
thus vary inversely with changes in LIBOR. Interest will accrue on the Class
A-2 Certificates at the minimum rate of % whenever LIBOR is % or
above, and the maximum rate at which interest will accrue on the Class A-2
Certificates will be % per annum, which would be the rate in effect if
LIBOR were determined to be %.
The following table illustrates the relationship between LIBOR rates and
the rate at which interest will accrue on the Class A-1 and Class A-2
Certificates.
<TABLE>
<CAPTION>
LIBOR CLASS A-1 CLASS A-2
----- ---------- ---------
<S> <C> <C>
% % %
% % %
% % %
</TABLE>
The [Trustee] will determine LIBOR for a given interest accrual period on
the second business day prior to the Distribution Date on which such interest
accrual period commences (an "Interest Rate Determination Date"). For this
purpose, a "business day" is any day on which banks in London and New York
City are open for the transaction of international business. Promptly after
each Interest Rate Determination Date, the Trustee will cause the Interest
Rates, the Stated Principal Balances of the Variable Rate Certificates for the
interest accrual period following such Determination Date, and the amounts of
interest payable on the Distribution Date following such interest accrual
period in respect of each $1,000 of such Stated Principal Balance, to be
published in an English language newspaper of general circulation published
each business day in New York City. The Stated Principal Balances and the
Interest Rates on the Variable Rate Certificates applicable to the then
current and the immediately preceding interest accrual periods may be obtained
by telephoning the Trustee at its Corporate Trust Office at .
S-16
<PAGE>
The determination of the rates at which interest will accrue on the
Variable Rate Certificates after , 19 will be made in accordance
with the following provisions:
(i) On each Interest Rate Determination Date, the Trustee will
determine LIBOR on the basis of quotations [provided by [four] Reference
Banks as of 11:00 A.M. (London time) as such quotations appear on the
Reuters Screen LIBOR Page (as defined in the International Swap Dealers
Association, Inc. Code of Standard Wording, Assumptions and Provisions
for SWAPS, 1986 edition).] LIBOR as determined by the Trustee is the
arithmetic mean of such quotations (rounded upward, if necessary, to the
nearest multiple of of 1%).
(ii) If, on any Interest Rate Determination Date, at least two but
fewer than all of the Reference Banks provide quotations, LIBOR will be
determined in accordance with (i) above on the basis of the offered
quotations of those Reference Banks providing such quotations.
(iii) If, on any Interest Rate Determination Date, only one or none
of the Reference Banks provides such offered quotations, LIBOR will be
the higher of:
(a) LIBOR as determined on the previous Interest Rate
Determination Date; and
(b) the Reserve Interest Rate. The "Reserve Interest Rate" will
be the rate per annum (rounded upward as aforesaid) that the Trustee
determines to be either (x) the arithmetic mean of the offered
quotations that leading banks in New York City selected by the
Trustee (after consultation with the Depositor) are quoting on the
relevant Interest Rate Determination Date for [ ] month United
States dollar deposits to the principal London office of each of the
Reference Banks or those of them (being at least two in number) to
which such offered quotations are, in the opinion of the Trustee,
being so made or (y) in the event that the Trustee can determine no
such arithmetic mean, the arithmetic mean of the offered quotations
that leading banks in New York City selected by the Trustee (after
consultation with the Depositor) are quoting on such Interest Rate
Determination Date to leading European banks for [ ] month United
States dollar deposits; provided, however, that if the banks
selected as aforesaid by the Trustee are not quoting as mentioned
above, LIBOR for the next accrual period will be LIBOR as specified
in (a) above.
The rate at which interest will accrue on the Class A-1 Certificates will
in no event exceed % per annum, and the rate at which interest will accrue on
the Class A-2 Certificates will in no event be less than % per annum.
Each Reference Bank shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, shall not
control, be controlled by, or be under common control with, the Depositor and
shall have an established place of business in London.
[The distribution of interest on the [Class A] Certificates (and the
addition of accrued interest to the Stated Principal Balance of the Class A-4
Certificates prior to the reduction of the Stated Principal Balance of the
Class A-3 Certificates to zero) [30] days after the date to which interest
accrues thereon and the calculation of accrued interest on the Certificates
based on the assumption that distributions in reduction of Stated Principal
Balance of the [Class A] Certificates are made [one month] prior to the actual
Distribution Date will reduce the effective yield to holders of the [Class A]
Certificates from that which would otherwise be the case if interest
distributable on the [Class A] Certificates (or added to the Stated Principal
Balance of the Class A-4 Certificates) on a Distribution Date were to accrue
to such Distribution Date.]
[The effective yield to the Class A-3 and Class A-4 Certificateholders
will be less than the yield that would otherwise be produced if interest
distributable on the Certificates (or to be added to the Stated Principal
Balance of the Class A-4 Certificates) on a Distribution Date were to accrue
to such Distribution Date because (i) on the first Distribution Date, [ ]
months' interest is distributable on the Certificates (or to be added to the
Stated Principal Balance of the Class A-4 Certificates) even though [ ]
months will have elapsed from the date on which interest begins to accrue on
the Certificates and (ii) on each succeeding Distribution Date, the interest
distributable on the Certificates (or to be added to the Stated Principal
Balance of the Class A-4 Certificates) is the interest accrued during the
period described above even though this accrual period ends [30] days prior to
such Distribution Date. In addition, during the first month of each interest
accrual period (other than the first such period) for the Class of
Certificates on which distributions in reduction of Stated Principal Balance
are being distributed, interest accrues on a principal balance that is less
than the Stated Principal Balance of such Class of Certificates, because
interest due on such Class on a Distribution Date is calculated on the Stated
Principal Balance of such Class since the preceding Distribution Date.]
DISTRIBUTIONS IN REDUCTION OF STATED PRINCIPAL BALANCE
Distributions in reduction of Stated Principal Balance on the [Class A]
Certificates will be made on each Distribution Date on which distributions are
due in an aggregate amount equal to the sum of the Accrual Distribution Amount
and the Stated Principal Distribution Amount. For purposes of determining the
Stated Principal Distribution Amount, the Asset Value of the Mortgage Loans
S-17
<PAGE>
comprising the Mortgage Pool will be reduced by taking into account [the
Senior Interest in] all distributions of principal thereof (including
prepayments) received or due to be received by the Trustee during the Due
Period prior to such Distribution Date.
Distributions in reduction of Stated Principal Balance on the [Class A]
Certificates will be made first to the Class A-1 Certificates until the Stated
Principal Balance of the Class A-1 Certificates has been reduced to zero; next
to the Class A-2 Certificates until the Stated Principal Balance of the Class
A-2 Certificates has been reduced to zero; next to the Class A-3 Certificates
until the Stated Principal Balance of the Class A-3 Certificates has been
reduced to zero; and then to the Class A-4 Certificates. Distributions in
reduction of Stated Principal Balance on [Certificates of a particular Class]
[Class A Certificates of a particular Subclass] will be made to the holder of
the Certificates of such [Class] [Subclass] either pro rata in the proportion
which the Stated Principal Balance of each Certificate of such [class]
[subclass] bears to the aggregate Stated Principal Balance of all the
Certificates of such [Class] [Subclass] or by random lot. Except as provided
herein, the Final Scheduled Distribution Date of each [Class] [Subclass] of
[Class A] Certificates has been determined based upon [the Senior Interest in]
scheduled payments of principal and interest on the Mortgage Loans comprising
the Mortgage Pool assuming no prepayments. Reinvestment Income at the Assumed
Reinvestment Rate, [and application of % of the Excess Cash Flow, as
defined herein, to the payment of Certificates.] The rate of prepayments on
the Mortgage Loans will depend on the prevailing level of interest rates and
other economic factors, and no assurance can be given as to the actual
prepayment rate of any Mortgage Loan.
The aggregate initial Asset Value of the Mortgage Loans comprising the
Mortgage Pool will be equal to at least 100% of the initial aggregate Stated
Principal Balance of the [Class A] Certificates.
The Asset Value of the Mortgage Loans comprising the Mortgage Pool will
be equal to the lesser of (a) the then present value of the [Senior Interest
in the] stream of remaining regularly scheduled monthly payments of principal
and interest on such Mortgage Loans [(after taking into account the applicable
portion of the Reserve Fund and the Buy-Down Fund)] together with Reinvestment
Income thereon from the assumed date of receipt of such payments to the next
succeeding Distribution Date at the Assumed Reinvestment Rate, discounted at
the rate of % per annum with the same frequency as distributions are made
on the Certificates and (b) the product of the Asset Value Cap calculated from
time to time in the manner provided in the Pooling and Servicing Agreement and
the then outstanding principal balance of such Mortgage Loan.
[ % of the Excess Cash Flow will be applied to the distributions on
[Class A] Certificates on each Distribution Date until such time that, even in
the event of excessive prepayments of the Mortgage Loans, sufficient funds
will be available to make distributions of interest on the [Class A]
Certificates on each succeeding Distribution Date. Thereafter, it will no
longer be necessary to provide for the possibility of a Special Distribution
on the [Class A] Certificates in respect of prepayments on such Mortgage
Loans.]
On each Distribution Date, the distributions in reduction of Stated
Principal Balance on the [Class A] Certificates will be equal to the [Class A]
Stated Principal Distribution Amount. The [Class A] Stated Principal
Distribution Amount will be the amount by which (i) the Stated Principal
Balance of the [Class A] Certificates (before taking into account the amount
of interest accrued on the Class A-4 Certificates to be added to the Stated
Principal Balance thereof on the Distribution Date), exceeds (ii) the
aggregate Asset Value of the Mortgage Loans comprising the Mortgage Pool as of
such Distribution Date.
[In addition, % of the Excess Cash Flow from the Mortgage Loans
comprising the Mortgage Pool will be applied to the distributions of the
[Class A] Certificates on each Distribution Date until ]. Excess Cash Flow
as of each Distribution Date will be the amount, if any, by which (i) the
[Senior Interest in the] cash flow received from the Mortgage Loans and
deposited in the Certificate Account for the Certificates [and any amounts
deposited in such Certificate Account from any related Buy-Down Fund and GPM
Fund on the date of issuance of the Certificates], plus any Reinvestment
Income thereon, [together with any amounts otherwise distributable to the
Class B Certificateholders or in the Reserve Fund that are required to be
distributed to holders of the Class A Certificates] exceeds (ii) the sum of
(a) the [Class A] Stated Principal Distribution Amount on such Distribution
Date and (b) all interest accrued, whether or not then payable, on the Stated
Principal Balance of the [Class A] Certificates since the preceding
Distribution Date, and (c) any Special Distributions in reduction of Stated
Principal Balance made since the preceding Distribution Date (or since the
date of issuance of the Certificates in the case of the first Distribution
Date). [On any Distribution Date, Excess Cash Flow not so applied will be
[distributed first to restore the amount in the Reserve Fund to the Required
Reserve, and then] to the holders of the Class B Certificates to the extent of
any current deficiency in scheduled distributions to such Certificateholders
on such Distribution Date.] [Any excess will then be distributed to holders of
the Residual Certificates. Any Excess Cash Flow so distributed will not be
available to make subsequent distributions on the [Class A] Certificates.]
[SPECIAL DISTRIBUTIONS
The [Class A] Certificates may receive special distributions in reduction
of Stated Principal Balance ("Special Distributions") as a consequence of
principal prepayments on the Mortgage Loans comprising the Mortgage Pool
and/or low yields then available for reinvestment. The Trustee will be
required each month to determine, based on assumptions specified in the
Pooling and Servicing Agreement, the amount that will be available in the
Certificate Account for the distribution of interest that will have accrued on
such [Class A] Certificates (the "Available Interest Amount") through the
earlier of the last day of the month of determination or the last day of the
[second] month preceding the next Distribution Date (the earlier of such dates
being referred to as the "Available Interest Accrual
S-18
<PAGE>
Date"). If the Available Interest Amount as so determined is less than the
amount of interest that will have accrued on such [Class A] Certificates to
the Available Interest Accrual Date, there will be distributed, on the first
day of the month succeeding the month of determination (the "Special
Distribution Date"), the portion of the Stated Principal Balance of the [Class
A] Certificates that will cause the Available Interest Amount to equal the
amount of interest that will have accrued to the Available Interest Accrual
Date on the Certificates to be outstanding immediately after such
distribution. The amount of the Special Distribution on the Certificates
distributed on any Special Distribution Date will not exceed the amount of
distributions in reduction of Stated Principal Balance on such Certificates
that would otherwise be required to be made on the next Distribution Date.
The Trustee will notify each registered holder of [Class A] Certificates
to receive a Special Distribution by letter mailed at least five days prior to
the date set for such Special Distribution.]
[OPTIONAL TERMINATION
On any Distribution Date on or after the [later] of or the date
on which the Stated Principal Balance of the [Class A-3] Certificates has been
reduced to zero, the Depositor will have the right to repurchase, in whole,
but not in part, the Mortgage Loans comprising the Mortgage Pool.
Additionally, on any Distribution Date on which the aggregate principal amount
of the Mortgage Loans comprising the Mortgage Pool is less than [10]% of the
initial aggregate principal amount of such Mortgage Loans, the Depositor will
have the right to repurchase, in whole, but not in part, such Mortgage Loans.
Any such repurchase will be made at a purchase price equal to [the outstanding
principal balance of such Mortgage Loans, together with accrual and unpaid
interest thereon, net of servicing fees and other compensation, to the last
day of the month of such repurchase, plus the appraised value of any property
acquired in respect thereof]. Any such termination will be effected in
compliance with the requirements of Section 860F(a)(iv) of the Code so as to
constitute a "qualifying liquidation" thereunder. The proceeds of any such
repurchase will be treated as a distribution on the Mortgage Loans for
purposes of distributions to the Certificateholders. In no event will the
Trust continue beyond the expiration of 21 years from the death of the last
survivor of the persons named in the Pooling and Servicing Agreement.]
TRUSTEE
The Trustee for the Certificates will be
, a bank organized and existing under the laws of the with
its principal office located at ,
.
THE MASTER SERVICER
The Master Servicer is a corporation that commenced operation
in , . The Master Servicer may be an affiliate of the
Depositor. The Master Servicer is a FNMA/FHLMC approved seller-servicer based
in . As of , the Master Servicer serviced, for other investors
and for its own account, approximately mortgage loans with an aggregate
principal balance in excess of $ . The Master Servicer
originated approximately $ in mortgage loans in 19 . The
Master Servicer's consolidated stockholder's equity as of was
approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
The Master Servicer shall obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond"),
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer to
purchase certain Mortgage Loans and to make advances, as described in the
Prospectus under "Description of the Certificates--Assignment of Mortgage
Loans" and "--Advances", in an amount acceptable to the Rating Agency.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal
to % of the outstanding principal balance of each Mortgage Loan in
the Mortgage Pool less [(a)] any servicing compensation to the servicer of
each such Mortgage Loan (the "Servicer") (including such compensation paid to
the Master Servicer as the direct Servicer of a Mortgage Loan for which there
is no Servicer) under the terms of an agreement with the Master Servicer
pursuant to which the Servicer services such Mortgage Loan (a "Servicing
Agreement") [.] [, and (b) the amount payable to the Depositor, as described
below.] [Pursuant to the Pooling and Servicing Agreement, on each Distribution
Date, the Master Servicer will remit to [the Depositor] in respect of each
interest payment on a Mortgage Loan an amount equal to % of the
outstanding principal balance of such Mortgage Loan, before giving effect to
any payments due on the preceding Due Date.] The Master Servicer will be
permitted to withdraw from the Certificate Account, in respect of each
interest payment on a Mortgage Loan, an amount equal to % of the
outstanding principal balance of such Mortgage Loan, before giving effect to
any payments due on the preceding Due Date. Servicing compensation to the
Servicers of the Mortgage Loans shall be payable by withdrawal from the
related Servicing Account (as defined in the Prospectus) prior to deposit in
the Certificate Account. In addition, each Servicer (with respect to the
Mortgage Loans serviced by it) and the Master Servicer will be entitled to
S-19
<PAGE>
servicing compensation out of insurance proceeds or liquidation proceeds.
Additional servicing compensation in the form of prepayment charges,
assumption fees, late payment charges or otherwise shall be retained by the
Servicers and the Master Servicer to the extent not required to be deposited
in the Certificate Account. The Servicers and the Master Servicer will pay all
expenses incurred in connection with its responsibilities under the Servicing
Agreements and the Pooling and Servicing Agreement (subject to limited
reimbursement as described in the Prospectus), including, without limitation,
the various items of expense enumerated in the Prospectus.
CERTIFICATE RATING
It is a condition to the issuance of the [Class A] Certificates that they
be rated in one of the two highest categories of the Rating Agency.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
Rating Agency.
[ERISA CONSIDERATIONS]/*/
[Describe whether any exemption from "plan asset" treatment is available
with respect to the Series.]
[State whether the Series is an Exempt or Nonexempt Series (see "ERISA
Considerations-Prohibited Transaction Class Exemption" in the Prospectus).]
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters for whom] CS First Boston Corporation, an affiliate of the
Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase the [entire] [following respective]
Stated Principal Balance of each [Subc] [C]lass of the [Class A] Certificates:
<TABLE>
<CAPTION>
[UNDERWRITERS CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
CS First Boston Corporation $ $ $ $
- -----------------------------------------------------------------------
$ $ $ $
- -----------------------------------------------------------------------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase all of the Certificates if
any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer each [Subc] [C]lass of the Certificates to
the public at the public offering prices set forth on the cover page of this
Prospectus Supplement and [through the Representative,] to certain dealers at
such prices less the following concessions and such dealers may allow the
following discounts on sales to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION DISCOUNT
(PERCENT OF PRINCIPAL AMOUNT) (PERCENT OF
PRINCIPAL AMOUNT)
- --------------------------------------------------------------------------
<S> <C> <C>
Class A-1 Certificates % %
- --------------------------------------------------------------------------
Class A-2 Certificates % %
- --------------------------------------------------------------------------
Class A-3 Certificates % %
- --------------------------------------------------------------------------
Class A-4 Certificates % %
- --------------------------------------------------------------------------
</TABLE>
- ----------
/*/ If the Series of Certificates offered pursuant to this Version C Prospectus
Supplement evidences interests in Contracts, the disclosure to be set forth will
be substantially similar to the disclosure set forth in Version E under "ERISA
Considerations."
S-20
<PAGE>
After the initial public offering, the public offering prices and
concessions and discounts to dealers may be changed by the [Representative]
[Underwriter].
The Depositor has agreed to indemnify the Underwriter[s] against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered hereby
will be passed upon for the Depositor and for the Underwriter[s] by Sidley &
Austin, New York, New York.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans
comprising the Mortgage Pool. All of the Mortgage Loans will be acquired in
privately negotiated transactions by the Depositor from one or more affiliates
of the Depositor, which will have acquired such Mortgage Loans from time to
time in the open market or in privately negotiated transactions.
S-21
<PAGE>
SUBJECT TO COMPLETION, DATED , 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus Dated ,19 )
- --------------------------------------------------------------------------------
$ (Approximate)
ASSET BACKED SECURITIES CORPORATION
Depositor
Conduit Mortgage Pass-Through Certificates, Series
Class -1 Certificates
$ Original Principal Amount (Approximate)
100% of principal payments of the Underlying Certificates
0% of interest payments on the Underlying Certificates
Class -2 Certificates
No Original Principal Amount
0% of principal payments on the Underlying Certificates
Interest at % Annual Rate on Class -2 Certificates notional amount
-----------------------
The Conduit Mortgage Pass-Through Certificates, Series (the
"Certificates"), offered hereby evidence undivided percentage ownership
interests in a trust (the "Trust") composed of Conventional Mortgage Pass-
Through Certificates, each having a pass-through rate of % (the "Underlying
Certificates"). The mortgage pool underlying the Underlying Certificates
consists of conventional one- to four-family residential mortgage loans
originated and serviced by and certain related property. The Underlying
Certificates will be transferred to the Trust, pursuant to a Deposit Trust
Agreement dated as of 1, 199 , by Asset Backed Securities Corporation (the
"Depositor") in exchange for the Certificates and are more fully described in
this Prospectus Supplement and in the accompanying Prospectus.
The Certificates will be issued in two classes, Class -1 (the "Class -1
Certificates") and Class -2 (the "Class -2 Certificates"). The Class -1
Certificates evidence ownership interests in all of the principal payments on
the Underlying Certificates. The Class -2 Certificates evidence ownership
interests in all of the interest payments on the Underlying Certificates, net of
a servicing fee as described herein (the "Servicing Fee"). Interest
distributions allocable to the Class -2 Certificates will be passed through
monthly at the annual rate of % (the "Annual Rate") on the then aggregate
outstanding notional amount of the Class -2 Certificates. The notional amount
is used solely for purposes of the determination of interest payments and
certain other rights and obligations of Holders of Class -2 Certificates and
does not represent an interest in principal payments on the Underlying
Certificates.
Principal payments and interest at the Annual Rate will be distributed to
the holders of Certificates ("Certificateholders" or "Holders") entitled thereto
on the [last] day of the month (or if such day is not a business day, on the
next business day) (the "Distribution Date"), or under the circumstances
described herein, on the Distribution Date in the next month. The first
distribution will be made on , 199 .
The Certificates do not represent an obligation of or interest in Asset
Backed Securities Corporation or any affiliate thereof or of , any affiliate
thereof or any other governmental agency or instrumentality.
There is currently no secondary market for the Certificates and there is no
assurance that one will develop. The Underwriter[s] expect[s] to establish a
market in the Certificates, but [is] [are] under no obligation to do so. There
is no assurance that a secondary market will develop, or, if it does develop,
that it will continue.
The yield to maturity on the Certificates will depend on the rate of
principal payments (including prepayments) on the Underlying Certificates. The
mortgage loans underlying the Underlying Certificates are conventional loans and
may be prepaid at any time without penalty. A lower rate of principal than
anticipated would negatively affect the total return to investors in Class -1
Certificates, which are being offered at a discount to their principal amount.
The yield to maturity on the Class -2 Certificates will be extremely sensitive
to the rate of principal payments on the Underlying Certificates and may
fluctuate significantly from time to time. Investors should fully consider the
associated risks, including the risk that a rapid rate of principal payments
could result in the failure of investors in Class -2 Certificates to recoup
their initial investment. See "Yield Considerations."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Depositor (2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class -1 Certificates % % %
- ----------------------------------------------------------------------------------------------------------------------------
Per Class -2 Certificates %(3) % %(3)
- ----------------------------------------------------------------------------------------------------------------------------
Total $ $ $
- ----------------------------------------------------------------------------------------------------------------------------
(1) Calculated as a percent of gross proceeds of the offering of each Class of Certificates.
(2) Before deduction of expenses payable by the Depositor estimated at $[ ].
(3) Plus accrued interest, if any, on the Class -2 Certificates from 1, 199 (the "Cut-off Date").
</TABLE>
---------------------
The Certificates are offered by the [several] Underwriter[s] when, as and if
issued and accepted by the Underwriter[s] and subject to [its] [their] rights to
reject orders in whole or in part. It is expected that the Certificates, in
definitive, fully registered form, will be ready for delivery on or about , 199.
CS FIRST BOSTON
The date of this Prospectus Supplement is ,19
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS .
----------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER[S] MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
----------------------
UNTIL , 19 , ALL DEALERS EFFECTING TRANSACTIONS IN THE
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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
-----------------------
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Trust, can be inspected and copied at the Public Reference Room
of the Commission at 450 Fifth Street, N.W., Washington, D.C., and at the
Commission's regional offices at 75 Park Place, 14th Floor, New York, New York
10007; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
S-2
<PAGE>
SUMMARY OF THE TERMS
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Capitalized terms used in this Prospectus Supplement
and not otherwise defined herein shall have the meanings given in the
Prospectus.
SECURITIES OFFERED ........ Conduit Mortgage Pass-Through Certificates,
Series (the "Certificates").
$ original principal amount Class -1 Certificates
(approximate). No original Principal Amount
Class - 2 Certificates. The Class -1 Certificates
represent an undivided percentage ownership
interest in 100% of the monthly principal payments
on the Underlying Certificates (the "Mortgage
Certificates Principal Distribution"). The Class -
1 Certificates do not evidence an ownership
interest in the monthly interest payments on the
Underlying Certificates .
The Class -2 Certificates represent an undivided
percentage ownership interest in 100% of the
monthly interest payment on the Underlying
Certificates (the "Mortgage Certificate Interest
Certificate Interest Distribution"), net of the
Servicing Fee as described herein (such net rate
of interest on the Class -2 Certificates then
outstanding notional amount being referred to
herein as the "Annual Rate"). The Annual Rate is
%. The notional amount for the Class -2
Certificates is equal to the aggregate unpaid
principal balance of the Certificates, but is used
solely for purposes of determining interest
payments and certain other rights and obligations
of holders of Class -2 Certificates and does not
represent any interest in principal payments.
The Certificates will be issued pursuant to a
deposit trust agreement, dated as 1,19 (the
"Deposit Trust Agreement"), between, as trustee
(the "Trustee") and Asset Backed Securities
Corporation (the "Depositor").
DEPOSITOR.................. Asset Backed Securities Corporation.
CUT-OFF DATE............... , 19.
DELIVERY DATE.............. On or about ,19.
DENOMINATIONS.............. The Class -1 Certificates will be offered in
fully registered form, in minimum denominations
of $[ ] original principal amount and multiples
of $[ ] in excess thereof. The Class -2
Certificates will be offered in fully registered
form, in minimum denominations of $[ ] original
notional amount and multiples of $[ ] in excess
thereof.
PRINCIPAL................. The Class -1 Certificates will receive all
principal payments on the Underlying Certificates
(including prepayments). The Class -2
Certificates receive no principal payments on
the Underlying Certificates.
INTEREST................. The Class -2 Certificates will receive all
interest payments on the Underlying Certificates,
after deduction of the Servicing Fee, as described
herein. The Class -1 Certificates will receive no
interest payments on the Underlying Certificates.
S-3
<PAGE>
DISTRIBUTION DATES....... Distributions on the Underlying Certificates that
are received by the Trustee and become cleared
funds in the hands of the Trustee prior to 1:00
p.m. on the [last] day of each month following the
distribution date for the Underlying Certificates,
or, if such day is not a business day, on the next
business day will be distributed to
Certificateholders on such day (each, a
"Distribution Date"). Distributions on the
Underlying Certificates that are received by the
Trustee and become cleared funds in the hands of
the Trustee at or after 1:00 p.m. on any
Distribution Date will be distributed to
Certificate holders on the Distribution Date in
the next month. Distributions will be made only
if, and to the extent that, payments are made on
the Underlying Certificates and received by the
Trustee. The first Distribution Date will be ,
19 . The Cut-off Date will be , 19 .
UNDERLYING CERTIFICATES.. % [Name of Underlying Certificates] in the
aggregate outstanding principal balance of $[ ]as
of the Cut-off Date. See "The Certificate Pool".
YIELD CONSIDERATIONS..... The rate of payment of principal of the Class -1
Certificates, and the aggregate amount of each
distribution on and the yield to maturity of all
Certificates, will depend on the rate of payment
of principal (including prepayments) of the
mortgage loans underlying the Underlying
Certificates. The mortgage loans underlying the
Underlying Certificates are conventional mortgage
loans and can be prepaid at any time without
penalty. The rate of payment of principal varies
significantly from time to time and between pools
of mortgage loans at any time and will be affected
by a variety of factors.
The yield to maturity on the Class -2
Certificates, which are being offered without any
original principal amount, is extremely sensitive
to the rate of payment of principal of the
mortgage loans underlying the Underlying
Certificates and may fluctuate significantly from
time to time. Investors should fully consider the
associated risks, including the risk that if the
rate of principal payment is rapid such investors
may not recoup their initial investment. See
"Yield Considerations".
OPTIONAL TERMINATION.... The mortgage loans underlying the Underlying
Certificates are subject to repurchase at
the option of at such time as the
outstanding principal balance of such mortgage
loans is less than 10% of their outstanding
principal balance as of .The Depositor may,
in the event such option is exercised, or
otherwise, at such time as the outstanding
principal balance of the Certificates is less than
10% of their aggregate principal balance as of the
Cut-off Date purchase the Certificates, in whole,
but not in part, at the purchase price set forth
herein. See "Description of the Certificates-
Optional Termination" herein.
LEGAL INVESTMENT......... The Certificates constitute "mortgage-related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act (the "Enhancement Act"),
and, as such, are legal investments for certain
entities to the extent provided in the Enhancement
Act. See "Legal Investment" in the Prospectus.
S-4
<PAGE>
TRUSTEE.................. (the "Trustee"). See "Description of the
Certificates-Trustee" herein.
CERTIFICATE RATING....... It is a condition of issuance of the Certificates "
that they be rated " "by the Rating Agency prior
to issuance. See "Rating" herein.
ERISA CONSIDERATIONS..... See "ERISA Considerations" in the Prospectus.
TAX ASPECTS.............. See "Certain Federal Income Tax Consequences" in
the Prospectus. Purchasers of Class -1 Certificates
should see "Certain Federal Income Tax
Consequences-Mortgage Pools-Taxation of Owners of
Trust Fractional Certificates" and "-Taxation of
Owners of Trust Fractional Certificates-Application
of Stripped Bond Rules" in the Prospectus for
discussions of certain tax considerations
particular to the Class -1 Certificates. Purchasers
of Class -2 Certificates should see "Certain
Federal Income Tax Consequences-Mortgage Pools-
Taxation of Owners of Trust Interest Certificates"
in the Prospectus for discussions of certain tax
considerations particular to the Class -2
Certificates.
S-5
<PAGE>
DESCRIPTION OF THE UNDERLYING CERTIFICATES
THE UNDERLYING CERTIFICATES
The Underlying Certificates are backed by a pool of conventional one to
four-family residential mortgage loans, originated and serviced by , and
certain related property conveyed to the trust by.
On the Closing Date, the Depositor will deliver to the Trustee
Underlying Certificates having an aggregate principal balance of $[ ] (subject
to a permitted variance of up to 5%) and pass-through rates of [ ]%. The
mortgage loans underlying such Underlying Certificates are expected to have a
weighted average coupon of approximately % per annum based upon actual
information regarding the coupon rates on the mortgage loans.
The Underlying Certificates are expected to have a weighted average
remaining term to maturity of approximately years based upon actual
information regarding the remaining terms to maturity of the mortgage loans
underlying the Underlying Certificates that the Depositor anticipates delivering
to the Trustee. Under the terms of Underlying Certificates, the final payment
thereon will not be later than ,.
The information presented in this section has been derived from the
Current Report on Form 8-K filed by with respect to the Underlying Certificates
and certain other publicly available statistical information regarding the
Underlying Certificates and is derived from the expected balances as of
the Cut-off Date of the mortgage loans underlying the Underlying Certificates,
such balances being estimated using the method customarily employed by
the Depositor. [Prospective investors should be aware that the Depositor may,
in certain unforeseeable circumstances, deliver to the Trustee Underlying
Certificates having characteristics different from those described herein.]
Specific information withrespect to the Underlying Certificates will be
forth in a Current Report on Form 8-K that will be filed by the Depositor, on
behalf of the Trust, with the Securities and Exchange Commission within 15
days after the issuance of the Certificates. [Set forth additional information
with respect to the Underlying Certificates.] [A copy of the Prospectus with
respect to the Underlying Certificates will be made available to any
registered holder of a Certificate upon written request of such
Certificateholder directed to ].
YIELD CONSIDERATIONS
PREPAYMENT EXPERIENCE
Because principal payments on the mortgage loans underlying the Underlying
Certificates will be passed through to the holders of the Class -1 Certificates
and will reduce the notional amount of the Class -2 Certificates, the rate of
payment of principal of the Class -1 Certificates and the aggregate amount of
distributions on Class -1 Certificates and Class -2 Certificates will be
directly related to the rate of payment of principal of the mortgage loans
underlying the Underlying Certificates. The rate of principal payments on the
underlying mortgage loans will in turn be affected by the rate of principal
prepayments thereon (including, for this purpose, payments resulting from
liquidations of the mortgage loans due to defaults, casualties, condemnations or
other dispositions). The mortgage loans are conventional and can be prepaid at
any time without penalty. Prepayments with respect to the Underlying
Certificates may also occur as a result of guaranty payments and the optional
repurchase provision on the Underlying Certificates. Accordingly, the rate of
prepayments on the underlying mortgage loans and rate of payment of principal of
the Underlying Certificates will depend upon future events and a variety of
factors, and no assurance can be given as to either such rate.
The yield to maturity of any Certificates will be affected by the rate of
payment of principal of the Underlying Certificates. Specifically, as the Class
- -1 Certificates are being offered at significant discounts from their original
principal amounts, if the purchaser of a Class -1 Certificate calculates its
anticipated yield to maturity based on an assumed rate of payment of principal
that is faster than that actually received on the Underlying Certificates, its
actual yield to maturity will be lower than that so calculated. Conversely, as
the Class -2 Certificates are being offered without any original principal
amount, if the purchaser of a Class -2 Certificate calculates its anticipated
yield to maturity based on an assumed rate of payment of principal that is
slower than that actually received on the Underlying Certificates, its actual
yield to maturity will be lower than that so calculated.
The timing of changes in the rate of prepayments on the mortgage loans
under the Underlying Certificates may significantly affect an investor's actual
yield to maturity, even if the average rate of principal payments is consistent
with an investor's expectation. In general, the earlier a prepayment of
principal on the mortgage loans underlying the Underlying Certificates the
greater the effect on an investor's yield to maturity. As a result, the effect
on an investor's yield of principal
S-6
<PAGE>
payments occurring at a rate higher (or lower) than the rate anticipated by the
investor during the period immediately following the issuance of the
Certificates may not be offset by a subsequent like reduction (or increase) in
the rate of principal payments.
[BECAUSE THE CLASS -1 CERTIFICATES ARE BEING OFFERED AT A DISCOUNT FROM
THEIR ORIGINAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY THEREON WILL BE SENSITIVE
TO THE RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS UNDERLYING THE
UNDERLYING CERTIFICATES.]
BECAUSE THE CLASS -2 CERTIFICATES ARE BEING OFFERED WITHOUT ANY PRINCIPAL
AMOUNT, THE YIELD TO MATURITY ON THE CLASS -2 CERTIFICATES WILL BE EXTREMELY
SENSITIVE TO PREPAYMENT EXPERIENCE ON THE MORTGAGE LOANS UNDERLYING THE
UNDERLYING CERTIFICATES AND MAY FLUCTUATE SIGNIFICANTLY FROM TIME TO TIME.
PROSPECTIVE INVESTORS IN THE CLASS -2 CERTIFICATES SHOULD FULLY CONSIDER THE
ASSOCIATED RISKS, INCLUDING THE RISK THAT IF THE RATE OF PAYMENT IS RAPID SUCH
INVESTORS MAY NOT FULLY RECOUP THEIR INITIAL INVESTMENT.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Standard Prepayment Assumption ("SPA"), represents an assumed rate of prepayment
each month relative to the then outstanding principal balance of a pool of new
mortgage loans. SPA assumes prepayment rates of 0.2% per annum of the then
outstanding principal balance of such mortgage loans in the first month of the
life of the mortgage loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month and in
each month thereafter during the life of the mortgage loans, SPA assumes a
constant prepayment rate of 6% per annum. SPA does not purport to be either a
historical description of the prepayment experience of any pool of mortgage
loans, or of the Mortgage Loans in the Mortgage Pool.
The following table illustrates, in general, the effect of prepayment rates
on the timing and amount of distributions on each Class of Certificates and
their resulting weighted average lives. The table does not purport to represent
the anticipated rate of prepayment on the mortgage loans underlying the
Underlying Certificates or the resulting anticipated rate of distributions of
each Class of the Certificates.
The table sets forth the projected annual aggregate distributions that
would be made on the Class -1 Certificates and Class -2 Certificates, and their
resulting weighted average lives, based on various assumed percentages of SPA.
The column headed "0%" assumes that no mortgage loans underlying the Underlying
Certificates are prepaid before maturity. The columns headed " %", " %" and " %"
assume that prepayments are made at the specified percentages of SPA. It has
been assumed in preparing the table that (i) the Underlying Certificates consist
of $ principal amount of % [Name of Underlying Certificates], (ii) the
mortgage loans underlying the Underlying Certificates have the characteristics
described above in "Description of the Underlying Certificates," (iii) all
mortgage loans are prepaid at the indicated percentage of SPA for the life of
the Certificates, (iv) the weighted average remaining term to maturity of the
mortgage loans is years, (v) the interest rate on each mortgage loan is
. % in excess of the pass-through rate on the related Underlying Certificate,
and (vi) the Certificates are not repurchased at the option of the Depositor.
S-7
<PAGE>
PROJECTED ANNUAL AGGREGATE DISTRIBUTIONS ON THE CERTIFICATES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Class -1 Certificates Class -2 Certificates
------------------------------------------ ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ending 0% SPA % SPA % SPA % SPA 0% SPA % SPA % SPA % SPA
- ----------- ------ ----- ----- ----- ------ ----- ----- -----
$ $ $ $ $ $ $ $
Total distributions............ $ $ $ $ $ $ $ $
Weighted average life (years)(1)
- -------------
</TABLE>
(1) The weighted average of life of the Class -2 Certificates which is
assumed to be equal to the weighted average life of the Class -1
Certificates, is determined by (i) multiplying the amount of each assumed
principal distribution by the number of years from the date of issuance
of the Certificates to the related Distribution Date, (ii) summing the
results and (iii) dividing the sum by the total principal distributions
on the Certificates.
The characteristics of the mortgage loans underlying the Underlying
Certificates, will not correspond exactly to those assumed in preparing the
statistics above. The total cash flows of the Class -2 Certificates will
therefore differ from those set forth above even if all of the mortgage loans
prepay monthly at the related assumed prepayment rate. In addition, it is not
likely that any mortgage loan will repay at a constant rate until maturity or
that all of the mortgage loans will prepay at the same rate, and the timing of
changes in the rate of prepayments may significantly affect the total cash flow
received by Holder of a Class -2 Certificate.
The Depositor makes no representation that the mortgage loans will prepay in
the manner or at any of the rates assumed in the table set forth above. Each
investor must make his own decision as to the appropriate prepayment assumption
to be used in deciding whether or not to purchase any of the Certificates.
The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. See "Yield
Considerations" in the Prospectus. In addition, the rate of principal
prepayments on the mortgage loans underlying the Underlying Certificates may
differ among pools of mortgage loans at any time because of specific factors
relating to the mortgage loans in the particular pool, including, among other
things, the age of the loans, the interest rates on the loans, the terms to
stated and remaining maturity of the loans, the geographic locations of the
properties securing the loans, the extent of the mortgagors' equity in real
property securing the loans, changes in mortgagors' housing needs, job
transfers, unemployment and servicing decisions.
Generally, however, if prevailing interest rates vary significantly from the
interest rates on the mortgage loans underlying the Underlying Certificates, the
Underlying Certificates are likely to be subject to higher or lower prepayment
rates than if prevailing rates remain at or near the interest rates on the
mortgage loans underlying the Underlying Certificates. In general, if prevailing
interest rates fall significantly below the interest rates on the mortgage loans
underlying the Underlying Certificates, the Underlying Certificates are likely
to be subject to higher prepayment rates than if prevailing rates remain at or
above the interest rates on the mortgage loans underlying the Underlying
Certificates. Conversely, if interest rates rise above the interest rates on the
mortgage loans underlying the Underlying Certificates, the rate of prepayment
would be expected to decrease.
The Depositor believes that the historical payment experience on such
securities is not necessarily indicative of the future payment experience on the
mortgage loans underlying the Underlying Certificates. Since the rate of
principal payments (including prepayments) on such mortgage loans will
significantly affect the yield to maturity on the Certificates,
S-8
<PAGE>
prospective investors are urged to consult their investment advisors as to both
the anticipated rate of future principal payments (including prepayments) on the
underlying mortgage loans and the suitability of the Certificates to their
investment objectives.
PAYMENT DELAY
The effective yield to Certificateholders will be lower than the yield
otherwise produced by the Annual Rate and purchase price since the monthly
distributions on the Underlying Certificates will not be paid to the Holders
until on or after the [last] day of the month next succeeding the month of
accrual. See "Pooling and Servicing Agreement" in the Prospectus. To the extent
that a monthly distribution on an Underlying Certificate does not become cleared
funds in the hands of the Trustee prior to 1:00 p.m. on the Distribution Date in
the month such distribution is required to be made by the issuer of such
Underlying Certificates, the effective yield to the Certificateholders will be
further reduced since such distribution will not be paid to the Holders until
the Distribution Date in the next succeeding month. See "Description of the
Certificates."
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a deposit trust agreement, dated
as of , 19 (the "Deposit Trust Agreement"), between
, as trustee (the "Trustee"), and the Depositor. Pursuant to the Deposit Trust
Agreement, the Depositor will transfer the Underlying Certificates to the
Trustee in exchange for the Certificates on or about , 19 (the "Delivery
Date"). The Underlying Certificates will be registered in the name of the
Trustee and payments on the Underlying Certificates will be made directly to the
Trustee.
The Certificates are to be issued in two classes, Class -1 Certificates (the
"Class -1 Certificates") and Class -2 Certificates (the "Class -2
Certificates"). The Class -1 Certificates evidence the Holders' beneficial
ownership of an undivided interest in all of the principal payments of the
Underlying Certificates. The Class -2 Certificates evidence the Holders'
beneficial ownership of an undivided interest in all of the interest payments on
the Underlying Certificates after deduction of the Servicing Fee (as defined
herein). Payments of interest on the Class -2 Certificates will be passed
through monthly to Holders thereof at a % Annual Rate on the outstanding
notional amount of such Certificates as of the month preceding the month in
which the related distribution of interest is to be made.
The outstanding principal amount or notional amount, as the case may be, of
each Class of Certificates for any month will be equal to the aggregate
outstanding principal balance of the Underlying Certificates for that month. The
notional amount is used solely for purposes of the determination of interest
payments and certain other rights and obligations of Holders of Class -2
Certificates, and Holders of Class -2 Certificates shall not have any interest
in, or be entitled to any payment with respect to, principal payments on the
Underlying Certificates. The aggregate original principal amount of the Class -
1 Certificates and the aggregate original notional amount of the Class -2
Certificates will each be $ at the Cut-off Date.
Each Class -1 Certificate will evidence a Percentage Interest in the monthly
distributions of principal of the Underlying Certificates. Each Class -2
Certificate will evidence a Percentage Interest in the monthly distributions of
interest on the Underlying Certificates, net of the Servicing Fee. The
Percentage Interest evidenced by each Certificate will be determined by dividing
the denomination of such Certificate by the aggregate denominations of all
Certificates of the same Class. On each Distribution Date, the Trustee will
distribute to each Holder of a Certificate of a Class an amount equal to the
product of such Certificateholder's Percentage Interest evidenced by such
Certificate and the interest of such Class in the Mortgage Certificate Principal
Distribution or the Mortgage Certificate Interest Distribution, as applicable.
The Certificates will be issued only in fully registered form. The Class -1
Certificates will be issued in minimum denominations of $ and multiples of $
in excess thereof. The Class -2 Certificates will be issued in minimum
denominations of $ and multiples of $ in excess thereof.
Principal and interest at a % pass-through rate in respect of the Underlying
Certificates is required to be paid by the issuer of the Underlying Certificates
by check mailed directly to the registered holder thereof on the day of each
month. Payments of principal and interest will be collected by the Trustee and
held in a segregated non-interest-bearing trust account in the name of and for
the benefit of the Trust. Distributions on the Underlying Certificates that are
received by the Trustee and become cleared funds in the hands of the Trustee
prior to 1:00 p.m. on the day of the month or, if such a day is not a
business day, on the next business day, will be distributed to
Certificateholders on such day (each, a "Distribution
S-9
<PAGE>
Date"). Distributions on the Underlying Certificates that are received by the
Trustee and become cleared funds in the hands of the Trustee at or after 1:00
p.m. on any Distribution Date will be distributed to the Certificateholders on
the Distribution Date in the next month. In each case the distribution will be
made to the Holders of record of the Certificates on the close of business on
the last business day of the month preceding the month in which such
distribution is made (the "Record Date"). The first Distribution Date will be ,
19 . Distribution of principal and interest as set forth above will be made by
the Trustee by check mailed to each Certificateholder entitled thereto at the
address appearing in the Certificate Register to be maintained with the Trustee
or, at the request of a Certificateholder, by wire transfer to the account of
such Certificateholder; provided, however, that the final distribution in
retirement of a Certificate will be made only upon presentation and surrender of
the Certificate at the office of the Trustee specified in the notice to
Certificateholders of such final distribution. Wire transfers will be made at
the expense of Certificateholders requesting such wire transfers by deducting a
wire transfer fee from the related transfer.
The Certificates will be transferable and exchangeable on the Certificate
Register at the office or agency of the Trustee maintained for that purpose in
the City of New York. Certificates surrendered to the Trustee for registration
of transfer or exchange must be accompanied by a written instrument of transfer
in form satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or other governmental charge may be required. Such
office or agency is currently located at .
TRUSTEE
The Trustee for the Certificates will be , a bank organized
and existing under the laws of with its principal office
located at .
SERVICING FEE
The Deposit Trust Agreement provides for a servicing fee (the "Servicing Fee")
in an amount equal to % of each interest distribution on the Underlying
Certificates. The Servicing Fee will be deducted by the Trustee prior to making
any payment of interest to Holders of the Class -2 Certificates.
OPTIONAL TERMINATION
The Deposit Trust Agreement provides that the Depositor may purchase
Certificates at such time as (i) the mortgage loans underlying the Underlying
Certificates are repurchased by , or (ii) the aggregate unpaid principal
balance of the Certificates is less than [10]% of the aggregate unpaid principal
balance of the Certificates as of the Cut-off Date.
In such event the Class -1 Certificates will be repurchased at % of their
outstanding principal amount and the Class -2 Certificates will be repurchased
at % of their outstanding notional amount, in each case, as of the date of such
repurchase. In no event will the Trust continue beyond the expiration of 21
years from the death of the last survivor of the persons named in the Deposit
Trust Agreement.
RATING
It is a condition to the issuance of the Certificates that they be rated " "
by the Rating Agency. Such rating addresses the likelihood that the holders of
the Certificates will receive payments required under the Deposit Trust
Agreement. In assigning such a rating to mortgage pass-through certificates, the
Rating Agency takes into consideration the credit quality of the mortgage pool,
including any credit support providers, structural and legal aspects associated
with such certificates, and the extent to which the payment stream on such
mortgage pool is adequate to make required payments on such certificates. Such
rating does not, however, represent an assessment of the likelihood that
principal prepayments will be made by mortgagors or the degree to which such
payments might differ from that originally anticipated. As a result, holders of
the Certificates might suffer a lower than anticipated yield, and holders of the
Class -2 Certificates might fail, in circumstances of extreme prepayment, to
recoup their original investment.
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.
S-10
<PAGE>
[ERISA CONSIDERATIONS]
[Describe whether any exemption from "plan asset" treatment is available with
respect to the Series.]
[State whether the Series is an Exempt or a Nonexempt Series (see "ERISA
Considerations-Prohibited Transaction Class Exemption" in the Prospectus).]
To qualify for exemption under PTCE 83-1 (see "ERISA-Prohibited Transaction
Class Exemption" in the Prospectus), a certificate of an Exempt Series must
entitle its holder to pass-through payments of both principal and interest on
the Mortgage Loans. Because holders of Class -1 Certificates or Class -2
Certificates are only entitled to pass-through payments of principal (but not
interest) or interest (but not principal), PTCE 83-1 will not exempt Plans that
acquire the Class -1 Certificates or Class -2 Certificates from the prohibited
transaction rules of ERISA. Any Plan fiduciary who proposes to cause a Plan to
purchase Class -1 Certificates or Class -2 Certificates should consult with its
counsel with respect to the potential consequences under ERISA and the Code of
the Plan's acquisition and ownership of such Certificates. However, one of the
other PTCE's or the Underwriter's PTE may be applicable. See "ERISA
Considerations-Prohibited Transaction Class Exemption" in the Prospectus.
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] CS First Boston Corporation, an affiliate of the
Depositor [, is acting as Representative.] The [Underwriter[s] named below]
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amount[s] of the Certificates:
<TABLE>
<CAPTION>
Class -1 Class -2
[Underwriter Certificates Certificates Total
- --------------- ------------ ------------ -----
<S> <C> <C> <C>
CS First Boston Corporation $ $ $
Total $ $ $ ]
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter[s]
[is] [are] subject to certain conditions precedent, and that the Underwriter[s]
will be obligated to purchase the entire principal amount of the Certificates if
any are purchased.
The Depositor has been advised [by the Representative] that the Underwriter[s]
propose[s] to offer each Class of the Certificates to the public initially at
the public offering prices set forth on the cover page of this Prospectus
Supplement [, and through the Representative,] to certain dealers at such prices
less the following concessions and that the Underwriter[s] and such dealers may
allow the following discounts on sales to certain other dealers:
<TABLE>
<CAPTION>
CONCESSION DISCOUNT
(PERCENT OF (PERCENT OF
GROSS GROSS
PROCEEDS) PROCEEDS)
------------ ------------
<S> <C> <C>
Class -1 Certificates % %
Class -2 Certificates % %
</TABLE>
After the initial public offering, the public offering prices and concessions
and discounts to dealers may be changed by the [Representative] [Underwriter].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
S-11
<PAGE>
All of the Underlying Certificates will be acquired in a privately negotiated
transaction by the Depositor from CS First Boston Corporation on terms
substantially similar to those that the Depositor would obtain in an arm's
length transaction. CS First Boston Corporation will have acquired such
Certificates in a privately negotiated transaction.
LEGAL MATTERS
Certain legal matters in connection with Certificates offered hereby will be
passed upon for the Depositor and for the Underwriter[s] by Sidley & Austin, New
York, New York.
USE OF PROCEEDS
The Depositor will apply substantially all of the net proceeds of the offering
of the Certificates towards the simultaneous purchase of the Underlying
Certificates.
S-12
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities are not to be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
State.
SUBJECT TO COMPLETION, DATED , 1995
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus Dated , 1995)
- --------------------------------------------------------------------------------
$ (Approximate)
Asset Backed Securities Corporation
Depositor
Conduit Manufactured Housing Contract Pass-Through Certificates, Series
% Pass-Through Rates
Principal and interest payble on the th day
of each month, beginning , 19
---------------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET
BACKED SECURITIES CORPORATION, OR ANY AFFILIATE THEREOF. [NEITHER THE
CERTIFICATES NOR THE UNDERLYING CONTRACTS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.]
---------------
The Conduit Manufactured Housing Contract Pass-Through Certificates, Series
, % Pass-Through Rate (the "Certificates") offered hereby evidence
undivided fractional interests in a trust to be created by Asset Backed
Securities Corporation (the "Depositor") on or about , 199 (the "Trust").
The Trust property will consist of a pool of [conventional] [FHA Insured]
[VA-guaranteed] [fixed-rate] [variable-rate] manufactured housing conditional
sales contracts and installment loan agreements (the "Contracts") and certain
related property to be conveyed to the Trust by the Depositor (the "Trust
Fund"). The Contracts will be transferred to the Trust, pursuant to a Pooling
and Servicing Agreement (as defined herein), dated as of , 199 , by the
Depositor in exchange for the Certificates and are more fully described in this
Prospectus Supplement and in the accompanying Prospectus. The Certificates
offered by this Prospectus Supplement constitute a separate series of the
Certificates being offered by the Depositor from time to time pursuant to its
Prospectus dated , 199 , which accompanies this Prospectus Supplement and
of which this Prospectus Supplement forms a part. The Prospectus contains
important information regarding this offering that is not contained herein, and
prospective investors are urged to read the Prospectus and this Prospectus
Supplement in full.
The Underwriter[s] [do[es] not] intend[s] to make a secondary market for
the Certificates [but [is] [are] under no obligation to do so]. There can be no
assurance that a secondary market will develop, or if it does develop, that it
will continue.
[The Depositor has elected to treat the Trust Fund as a Real Estate
Mortgage Investment Conduit (a "REMIC"). See "Certain Federal Income Tax
Consequences" in the Prospectus.]
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================
Price to Underwriting Proceeds to the
Public (1) Discount Depositor (1)(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Certificate % % %
- ------------------------------------------------------------------------------
Total $ $ $
==============================================================================
</TABLE>
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deduction of expenses payable by the Depositor estimated at $ .
The Certificates are offered by the [several] Underwriter[s] when, as and
if issued and accepted by the Underwriter[s] and subject to [their] [its]
right to reject orders in whole or in part. It is expected that the
Certificates, in definitive fully registered form, will be ready for
delivery on or about , 199 .
CS First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 1995.
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE CERTIFICATES OFFERED HEREBY. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT
BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
CERTIFICATES AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
UNTIL , 19 , ALL DEALERS AFFECTING TRANSACTIONS IN THE
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 OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Trust will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and
other information filed by the Trust can be inspected and copied at the
Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C., and at the Commission's regional offices at 75 Park
Place, 14th Floor, New York, New York 10007; and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Capitalized terms used in this Prospectus Supplement and not
defined shall have the meanings given in the Prospectus.
SECURITIES OFFERED................... Conduit Manufactured Housing Contract
Pass-Through Certificates, Series
, % Pass-Through Rate (the
"Certificates").
PRINCIPAL AMOUNT..................... $ (approximate: subject to
a permitted variance of up to %).
DEPOSITOR............................ Asset Backed Securities Corporation
(the "Depositor").
MASTER SERVICER...................... (the "Master Servicer").
DENOMINATIONS........................ The minimum denomination of a
Certificate (a "Single Certificate")
will initially represent
approximately $ aggregate
principal amount of Contracts (as
hereinafter defined).
CUT-OFF DATE......................... , 19 .
DELIVERY DATE........................ On or about , 19 .
INTEREST............................. Passed through monthly at the rate of
% per annum (the "Pass-Through
Rate"), on the day of each month
(each, a "Distribution Date")
commencing , 19 to those
persons in whose name the
Certificates are registered as of
[the last Business Day of the month
preceding the Distribution Date] (the
"Record Date"). [The Pass-Through
Rate for each Contract will equal the
annual percentage rate (the "APR")
then borne by such Contract less a
fee for the servicing of the Contract
(the "Servicing Fee") [, less a fee
for the Limited Guarantee (the
"Limited Guarantee Fee")] [and less
the excess interest (the "Excess
Interest")], as described herein
under "Description of the
Certificates--Servicing Compensation,
[Limited Guarantee Fee] and Payment
of Expenses."
PRINCIPAL (INCLUDING
PREPAYMENTS)......................... Passed through monthly on the
Distribution Date, commencing
, 19 .
CONTRACT POOL........................ [Conventional] [FHA-insured]
[VA-guaranteed] [fixed rate]
[variable rate] manufactured housing
conditional sales contracts and
installment loan agreements
(collectively, the "Contracts")
secured by manufactured homes (as
described herein) (the "Manufactured
Homes") [located in the states of
and ]. The Contracts have
been originated [or acquired] by.
See "Description of the Contract
Pool" herein.
[LIMITED GUARANTEE................... Subject to the limitations described
below, the Limited Guarantee will
cover the difference between the
amount available for distribution to
the Certificateholders [including
Advances] on any [monthly]
Distribution Date and the amount due
the Certificateholders on such
Distribution Date to the extent such
shortfall is attributable to
delinquent payments by borrowers on
the Contracts (each, an "Obligor")
and losses on Defaulted Contracts
(as hereinafter defined). The first
$ of the Guarantee
Amount, as defined below, will
consist of the general
S-3
<PAGE>
guarantee obligation of .
The obligation of will be
backed by the Standby Letter of
Credit issued by and confirmed by
, (as described below). The balance
of the Guarantee Amount consists of
the Direct Letter of Credit issued
by and confirmed by
, described below (the Standby
Letter of Credit and the Direct
Letter of Credit sometimes
collectively are referred to herein
as the "Letters of Credit"). The
amount of the Limited Guarantee
(the "Guarantee Amount") on the
first Distribution Date will be $
. Thereafter, the Guarantee Amount
available on any Distribution Date,
. See "The Limited Guarantee."]
The Standby Letter of Credit (the
"Standby Letter of Credit") is an
irrevocable obligation supporting
the obligation of under
the Limited Guarantee. If does not
make a payment required of it under
the Limited Guarantee, the Trustee
immediately will draw such amount
under the Standby Letter of Credit.
If for any reason does not
honor a draw under the Standby
Letter of Credit, is
obligated to honor the Standby
Letter of Credit.
The Direct Letter of Credit (the
"Direct Letter of Credit") will be
an irrevocable direct pay letter of
credit and will be issued by and
confirmed by .
[The initial Letters of Credit will
expire no earlier than
.] The Master Servicer will be
required to replace or renew the
Letters of Credit prior to their
expiration until the Trust Fund is
terminated. In the event the Master
Servicer does not renew or replace a
Letter of Credit, prior to its
expiration, the Trustee will draw
under such Letter of Credit an
amount equal to the required
coverage of that Letter of Credit on
such date and will transfer such
funds to a separate trust fund (the
"Limited Guarantee Fund").
Thereafter the Trustee will draw
upon such funds on each Distribution
Date if and to the extent draws
would have been required under the
corresponding Letter of Credit. The
Letters of Credit will not be
available to support any obligations
of the Depositor, the Master
Servicer or the Unaffiliated Seller.
See "The Limited Guarantee."]
[LETTER OF CREDIT.................... The maximum liability of
under an irrevocable standby letter
of credit for the Contract Pool
(the "Letter of Credit"), net of
unreimbursed payments thereunder,
will be no more than [ %] of the
initial aggregate principal balance
of the Contract Pool (the "Letter of
Credit Percentage"). The maximum
amount available to be paid under
the Letter of Credit will be
determined in accordance with the
Pooling and Servicing Agreement
referred to herein. The duration
of coverage and the amount and
frequency of any reduction in
coverage will be in compliance with
the requirements established by the
Rating Agency, in order to obtain a
rating in one of the two highest
rating categories of such Rating
Agency. The amount available under
the Letter of Credit shall be
reduced by the amount of
unreimbursed payments thereunder.
See "Credit Support-Letters of
Credit" in the Prospectus.]
HAZARD INSURANCE..................... All of the Contracts will be covered by
standard hazard insurance policies with
respect to each Manufactured Home in an
amount at least equal to the lesser of
its maximum insurable value or the
remaining principal balance on the
related Contract. The standard hazard
insurance policies, at a minimum, will
provide for fire, lightning, windstorm
and extended coverage on terms and
conditions customary in manufactured
housing hazard insurance policies. See
"Description of the Certificates--Hazard
Insurance Policies" herein.
S-4
<PAGE>
[OPTIONAL TERMINATION................ The [Depositor] may, at its option,
repurchase from the Trust all Contracts
remaining outstanding at such time as
the aggregate unpaid principal balance
of such Contracts is less than [10%] of
the aggregate principal balance of the
Contracts on the Cut-off Date. The
repurchase price will equal the
aggregateunpaid principal balance of
such Contracts together with accrued
interest thereon at the Pass-Through
Rate through the last day of the month
during which such repurchase occurs,
plus the appraised value of any property
acquired in respect thereof. [Any such
repurchase will be effected in
compliance with the requirements of
Section 860F(a)(iv) of the Internal
Revenue Code of 1986 (the "Code") so as
to constitute a "qualifying liquidation"
thereunder.] See "Description of the
Certificates--Termination; Repurchase of
Certificates" herein.
ADVANCES............................. The Servicers of the Contracts (and
the Master Servicer, with respect to
each Contract that it services
directly and otherwise, to the extent
the related Servicer does not do so)
will be obligated to advance
delinquent installments of principal
and interest on the Contracts under
certain circumstances. See
"Description of the
Certificates--Advances" in the
Prospectus.
SECURITY INTERESTS AND OTHER
ASPECTS OF THE CONTRACTS............ In connection with the transfer of
the Contracts from the Depositor to
the Trustee, the Depositor has
assigned the security interests in
the Manufactured Homes securing the
Contracts to the Trustee. The
[Master Servicer] shall take such
steps as are necessary to perfect and
maintain perfection of such security
interest in each Manufactured Home
and, to the extent such interest is
perfected, the Trustee will have a
prior claim over subsequent
purchasers of the Manufactured Home
and holders of subsequently perfected
security interests. Under most state
laws Manufactured Homes constitute
personal property, and perfection of
a security interest in the
Manufactured Home is obtained,
depending on applicable state law,
either by noting the security
interest on the certificate of title
for the Manufactured Home or by
filing a financing statement under
the Uniform Commercial Code. [The
certificates of title or Uniform
Commercial Code financing statements
will not be amended to identify the
Trustee as the new secured party
because of the administrative burden
and expense.] In the absence of such
an endorsement, the Trustee may not
have a perfected security interest in
Manufactured Homes registered in
certain states. In addition, if the
Manufactured Home were relocated to
another state without reperfection of
the security interest, or if the
Manufactured Home were to become
attached to its site and a
determination were made that the
security interest was subject to real
estate title and recording laws, or
as a result of fraud or negligence,
the Trustee could lose its prior
preferred security interest in a
Manufactured Home. Federal and state
consumer protection laws impose
requirements upon creditors in
connection with extensions of credit
and collections on installment sales
contracts, and certain of these laws
make an assignee of such a contract,
such as the Trustee, liable to the
obligor thereon for any violation by
the lender. The [Master Servicer]
has agreed to repurchase any Contract
as to which it has failed to perfect
a security interest in the
Manufactured Home securing such
Contract, or as to which a breach of
federal or state laws exists if such
breach materially adversely affects
the Trustee's interest in the
Contract, unless such failure or
breach has been cured within [90]
days from notice of such breach. See
"Special Considerations" herein and
"Certain Legal Aspects of the
Mortgage Loans and Contracts--The
Contracts" in the Prospectus.
S-5
<PAGE>
TRUSTEE.............................. (the "Trustee").
CERTIFICATE RATING................... It is a condition of issuance that
the Certificates be rated in one of
the two highest rating categories of
a nationally recognized statistical
rating agency (the "Rating Agency").
ERISA CONSIDERATIONS................. See "ERISA Considerations" [in the
Prospectus] and herein.
LEGAL INVESTMENT..................... The Certificates constitute "mortgage
related securities" for purposes of
the Secondary Mortgage Market
Enhancement Act of 1984 (the
"Enhancement Act"), and, as such, are
legal investments for certain
entities to the extent provided in
the Enhancement Act. See "Legal
Investment" in the Prospectus.
TAX ASPECTS.......................... The Depositor [intends] [does not
intend] to make an election to treat
the Trust Fund as a Real Estate
Mortgage Investment Conduit (a
"REMIC"), pursuant to the Internal
Revenue Code of 1986, as amended.
See "Certain Federal Income Tax
Consequences" in the Prospectus.
S-6
<PAGE>
SPECIAL CONSIDERATIONS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of the Certificates:
1. General. An investment in the Certificates may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile, and historically
have affected the delinquency, loan loss and repossession experience of the
Contracts. To the extent that losses on the Contracts are not covered by
[the Limited Guarantee] [the Letter of Credit] [or] applicable insurance
policies, if any, Certificateholders will bear all risk of loss resulting
from default by Obligors and must rely on the value of the Manufactured Homes
for recovery of the outstanding principal and unpaid interest of the
defaulted Contracts. See "The Trust Fund--The Contracts" in the Prospectus.
2. Limited Obligations. The Certificates will not represent an interest
in or obligation of the Depositor. The Certificates will not be insured or
guaranteed by [any government agency or instrumentality,] CS First Boston
Corporation or any of its affiliates, including the Depositor, any Servicer
or the Master Servicer.
3. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates or, if it does develop, that it will
provide the holders of the Certificates with liquidity of investment or that
it will remain for the term of the Certificates.
[4. [Limited Guarantee] [Letter of Credit]. The Certificates will be
secured in part by the [Limited Guarantee] [Letter of Credit]. The
[Guarantee Amount] [Letter of Credit Percentage] will be an amount initially
equal to and will decline hereafter [by the amount of unreimbursed payments
thereunder]. The [Limited Guarantee] [Letter of Credit] will cover
delinquent payments by Obligors and losses on defaulted Contracts.
Delinquency on the Contracts may be affected by local, regional and economic
considerations. If delinquency levels are high and the [Guarantee Amount]
[Letter of Credit Percentage] is reduced to zero, the Certificateholders
will bear all losses on the Contracts. See ["The Limited Guarantee"]
["Letter of Credit"].
5. Prepayment Considerations. The prepayment experience on the Contracts
may affect the average life of the Certificates. Prepayments on the
Contracts may be influenced by a variety of economic, geographic, social and
other factors, including repossessions, aging, seasonality and interest rates
of the Contracts. Other factors affecting prepayment of Contracts include
changes in housing needs, job transfers, unemployment and servicing
decisions. See "Maturity and Prepayment Considerations" in the Prospectus.
6. Security Interests and Other Aspects of the Contracts. Each Contract
is secured by a security interest in a Manufactured Home. Perfection of
security interests in the Manufactured Homes and enforcement of rights to
realize upon the value of the Manufactured Homes as collateral for the
Contracts are subject to a number of federal and state laws, including the
Uniform Commercial Code as adopted in each state (except Louisiana) and each
state's certificate of title statutes, but generally not its real estate
laws. The steps necessary to perfect the security interest in a
Manufactured Home will vary from state to state. In addition, numerous
federal and state consumer protection laws impose requirements on lending
under conditional sales contracts and installment loan agreements such as
the Contracts, and the failure by the lender or seller of goods to comply
with such requirements could give rise to liabilities of assignees for
amounts due under such agreements and claims by such assignees may be
subject to set-off as a result of such lender's or seller's noncompliance.
These laws would apply to the Trustee as assignee of the Contracts.
Pursuant to the Pooling and Servicing Agreement, the seller will warrant
that each Contract complies with all requirements of law and will make
certain warranties relating to the validity, subsistence, perfection and
priority of the security interest in each Manufactured Home securing a
Contract. If the [Limited Guarantee or] [Letter of Credit Percentage]
insurance policies are exhausted and recovery of amounts due on the
Contracts is dependent on repossession and resale of Manufactured Homes
securing Contracts that are in default, certain other factors may limit the
ability of the Certificateholders to realize upon the Manufactured Homes or
may limit the amount realized to less than the amount due. See "Certain
Legal Aspects of the Mortgage Loans and Contracts--The Contracts" in the
Prospectus.
S-7
<PAGE>
DESCRIPTION OF THE CONTRACT POOL
The contract pool (the "Contract Pool") will consist of [conventional]
[FHA-insured] [VA-guaranteed] fixed rate manufactured housing conditional
sales contracts and installment loan agreements (collectively, the
"Contracts") having an [approximate] aggregate principal balance as of the
Cut-off Date of $ , secured by manufactured homes (the "Manufactured
Homes"). The Manufactured Homes will consist of manufactured homes within
the meaning of 42 United States Code, Section 5402(6), which defines a
"manufactured home" as "a structure, transportable in one or more sections,
which in the traveling mode, is eight body feet or more in width or forty
body feet or more in length, or, when erected on site, is three hundred
twenty or more square feet, and which is built on a permanent chassis and
designed to be used as a dwelling with or without a permanent foundation
when connected to the required utilities, and includes the plumbing,
heating, air-conditioning, and electrical systems contained therein; except
that such term shall include any structure which meets all the requirements
of this paragraph except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the Secretary of
Housing and Urban Development and complies with the standards established
under this chapter."
The weighted average annualized percentage rate (individually, an "APR") of
the Contracts as of the Cut-off Date will be at least % but no more
than %. All Contracts will have APRs of at least % but no more
than %. The weighted average maturity of the Contracts, as of the
Cut-off Date, will be at least years but no more than years.
All Contracts will have original maturities of at least years but no
more than years. None of the Contracts will have been originated prior
to or after , 19 . None of the Contracts will have a scheduled
maturity later than .
The Contracts will have the following characteristics as of the Cut-off
Date (expressed as a percentage of the outstanding aggregate principal
balances of the Contracts having such characteristics relative to the
outstanding aggregate principal balances of all Contracts):
Approximately % of the Contracts are secured by Manufactured Homes
which were new at the time the related Contract was originated and
approximately % of the Contracts are secured by Manufactured Homes which
were used at the time the related Contract was originated.
At least % of the Contracts will be Contracts each having
outstanding principal balances of less than $ .
No more than % of the Contracts will be Contracts each having
outstanding principal balances of more than $ .
No more than % of the Contracts will have had loan-to-value ratios
at origination (based on the retail sales prices of the unit or % of
the manufacturer's invoice price, if less, plus taxes, license fees and
insurance premiums in the case of a new Manufactured Home, or based on the
lesser of the total delivered sales price or the appraised value of the
unit, including taxes, fees and insurance, in the case of a used
Manufactured Home) in excess of %, and the Contracts have a weighted
average loan to value ratio as of the Cut-off Date of % .
The Contracts will be secured by Manufactured Homes located in the
states of . No more than [5]% of the Contracts will be secured by
Manufactured Homes located in any one five digit zip code.
[At the date of issuance of the Certificates, no Contract in the
Contract Pool was more than 30 days delinquent.]
[Description of the underwriting policies for conventional Contracts
to be provided.]
Specific information with respect to the Contracts will be available to
purchasers of the Certificates offered hereby at or before the time of
issuance of such Certificates. Such specific information will include the
precise amount of the aggregate principal balances of the Contracts
outstanding as of the Cut-off Date, and will also set forth tables
reflecting the following information regarding the Contracts: years of
origination, types of
S-8
<PAGE>
dwellings on the underlying properties, the sizes of Contracts and
distribution of Contracts by APR, and will be set forth in a Current Report
on Form 8-K that will be filed with the Securities and Exchange Commission by
the Depositor within 15 days after the issuance of the Certificates.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement, to be dated as of the Cut-off Date (the "Pooling and Servicing
Agreement") among the Depositor, , as master servicer (the "Master
Servicer"), and , as trustee (the "Trustee"), a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement forms a part. Reference is made to the accompanying Prospectus
for important additional information regarding the terms and conditions of
the Pooling and Servicing Agreement and the Certificates. Each of the
Certificates at the time of issuance will qualify as a "mortgage related
security" within the meaning of the Secondary Mortgage Market Enhancement
Act of 1984.
Distributions of principal and interest as set forth above will be made by
the Master Servicer by check mailed to each Certificateholder entitled
thereto at the address appearing in the Certificate Register to be
maintained with the Trustee or, if eligible for wire transfer as provided in
the Pooling and Servicing Agreement, by wire transfer to the account of such
Certificateholder, provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office specified in the notice to
Certificateholders of such final distribution.
The Certificates will be transferable and exchangeable on a Certificate
Register to be maintained by the Trustee at the office or agency of the
Master Servicer maintained for that purpose in New York, New York.
Certificates surrendered to the Trustee for registration of transfer or
exchange must be accompanied by a written instrument of transfer in form
satisfactory to the Trustee. No service charge will be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or other governmental charge may be required.
Such office or agency is currently located at , .
CONVEYANCE OF CONTRACTS
On the date of issuance of the Certificates, the Depositor will transfer,
assign, set over and otherwise convey to the Trustee all right, title and
interest of the Depositor in the Contracts, including all principal and
interest received on or with respect to the Contracts (other than receipts of
principal and interest due on the Contracts before the Cut-off Date), and all
rights under the hazard insurance policies on the related Manufactured Homes.
The Contracts will be described on a schedule attached to the Pooling and
Servicing Agreement (the "Contract Schedule"). The Contract Schedule will
include the amount of monthly payments due on each Contract as of the date of
issuance of the Certificates, the APR on each Contract and the maturity date
of each Contract. Prior to the conveyance of the Contracts to the Trustee,
the Depositor will cause to be reviewed all the Contract files, including
the certificates of title to, or other evidence of a perfected security
interest in, the Manufactured Homes, confirming the accuracy of the Contract
Schedule delivered to the Trustee.
[The Trustee, itself or through a custodian, will hold, on behalf of the
Certificateholders, the original Contracts and copies of documents and
instruments relating to each Contract and the security interest in the
Manufactured Home relating to each Contract.] In addition, in order to give
notice of the Trustee's right, title and interest in and to the Contracts,
[the Master Servicer, on behalf of] the Depositor, will deliver to the
Trustee a UCC-1 financing statement identifying the Trustee as the secured
party and identifying all the Contracts as collateral. The [Master
Servicer] will file such statement in the appropriate offices in the
appropriate states. [The Contracts will not be stamped or otherwise marked
to reflect their assignment from the Company to the Trustee. If a
subsequent purchaser were able to take physical possession of the Contracts
without notice of such assignment, the Trustee's interest in the Contracts
could be defeated.] See "Certain Legal Aspects of the Mortgage Loans and
Contracts--The Contracts" in the Prospectus.
TRUSTEE
The Trustee for the Certificates will be .
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<PAGE>
THE MASTER SERVICER
The Master Servicer is a corporation that commenced
operation in . The Master Servicer is [an FHA approved seller-
servicer] based in . As of ,
the Master Servicer serviced, for other investors and for its own account,
approximately mortgage loans with an aggregate principal
balance in excess of $ . The Master Servicer originated
approximately $ in mortgage loans in 19 . The Master Servicer's
consolidated stockholders' equity as of was approximately $ .
The information set forth above has been provided by the Master Servicer.
The Depositor makes no representation as to the accuracy or completeness of
such information.
[The Master Servicer shall obtain and maintain in effect a bond, corporate
guaranty or similar form of insurance coverage (the "Performance Bond"),
insuring against loss occasioned by the errors and omissions of the Master
Servicer's officers, employees and any other person acting on behalf of the
Master Servicer in its capacity as Master Servicer and guaranteeing the
performance, among other things, of the obligations of the Master Servicer
to purchase certain Contracts and to make advances, as described in the
Prospectus under "Description of the Certificates--Assignment of Contracts"
and "--Advances," in an amount acceptable to the nationally recognized
statistical rating organization or organizations rating the Certificates
(collectively, the "Rating Agency").
SERVICING COMPENSATION [, LIMITED GUARANTEE FEE] AND PAYMENT OF EXPENSES
The servicing compensation payable to the Master Servicer will be equal to
an amount, payable out of each interest payment on a Contract, equal to the
excess of each interest payment on a Contract over the Pass-Through Rate,
less [(a)] any servicing compensation payable to the Servicer of such
Contract under the terms of the agreement with the Master Servicer pursuant
to which such Contract is serviced (the "Servicing Agreement") (including
such compensation paid to the Master Servicer as the direct servicer of a
Contract for which there is no Servicer)[.] [, and (b) the amount payable to
the [Depositor,] [Master Servicer], as described below] [.] [, and (c) the
Limited Guarantee Fee.] [Pursuant to the Pooling and Servicing Agreement, on
each Distribution Date, the Master Servicer will remit to [the Depositor] in
respect of each interest payment on a Contract an amount equal to %
of the outstanding principal balance of such Contract before giving effect
to any payments due on the preceding Due Date.] [The Master Servicer will be
permitted to withdraw from the Certificate Account, in respect of each
interest payment on a Contract, an amount equal to % of the
outstanding principal balance of such Contract before giving effect to any
payments due on the preceding Due Date.] See "Description of the
Certificates--Servicing and Other Compensation and Payment of Expenses" in
the Prospectus for information regarding other possible compensation to the
Master Servicer and the Servicers. The Servicers and the Master Servicer
will pay all expenses incurred in connection with their responsibilities
under the Servicing Agreements and the Pooling and Servicing Agreement
(subject to limited reimbursement as described in the Prospectus),
including, without limitation, the various items of expense enumerated in
the Prospectus.
[Investors are advised to consult with their own tax advisors regarding the
likelihood that a portion of such servicing compensation might be
characterized as an ownership interest in the interest payments on the
Contracts ("Retained Yield") for federal income tax purposes, by reason of
the extent to which either the weighted average APR, or the stated interest
rates on the Contracts exceeds the Pass-Through Rate, and the tax
consequences to them of such a characterization. In this regard, there are
no authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable
in the context of this or similar transactions or whether the reasonableness
of servicing compensation should be determined on a weighted average or
contract by contract basis. [The Depositor intends to treat % of
such servicing compensation and % of the amount payable to it
described above as Retained Yield for federal income tax purposes in reports
to the Certificateholders and to the Internal Revenue Service.] See "Certain
Federal Income Tax Consequences--[ ] in the Prospectus for information
regarding the characterization of servicing compensation [and the amounts
payable to the Depositor].
S-10
<PAGE>
[TERMINATION; REPURCHASE OF CONTRACTS
The Pooling and Servicing Agreement provides that the [Depositor] [Master
Servicer] may purchase from the Trust all Contracts remaining in the Contract
Pool and thereby effect early retirement of the Certificates, provided that
the aggregate unpaid balances of the Contracts at the time of such repurchase
is less than [10%] of the aggregate principal balance of the Contracts on
the Cut-off Date. The purchase price for any such optional repurchases
shall be equal to the outstanding principal balance of such Contracts,
together with accrued interest at the Pass-Through Rate to the first day of
the month following such repurchase plus the appraised value of any acquired
property with respect to the Contracts. [Any such repurchase will be
effected in compliance with the requirements of Section 860F(a)(iv) of the
Code in order to constitute a "qualifying liquidation" thereunder.] In no
event will the Trust continue beyond the expiration of 21 years from the
death of the last survivor of the persons named in the Pooling and Servicing
Agreement.]
INSURANCE
[FHA Insurance and VA Guarantee
% and % of the Contracts, respectively (by aggregate
principal balance as of Cut-Off Date) are subject to FHA insurance and VA
guarantees. See "Description of Insurance" in the Prospectus.]
[Primary Credit Insurance Policies
To be provided.]
[Pool Insurance Policies
To be provided.]
Hazard Insurance Policies
The Master Servicer will cause to be maintained one or more standard hazard
insurance policies with respect to each Manufactured Home in an amount at
least equal to the lesser of its maximum insurable value or the principal
amount due from the Obligor under the related Contract. Such standard
hazard insurance policies, will, at a minimum, provide fire and extended
coverage on terms and conditions customary in manufactured housing hazard
insurance policies. If a Manufactured Home, at the origination of the
related Contract, was located within a federally designated flood area, the
Master Servicer also will cause flood insurance to be maintained in an
amount equal to the lesser of the amounts described above or the maximum
amount available for such Manufactured Home under the federal flood
insurance program.
All amounts collected by the Master Servicer under a standard hazard
insurance policy will be applied either to the restoration or repair of the
Manufactured Home or against the unpaid principal balance of the related
Contract upon foreclosure and repossession of the Manufactured Home, after
reimbursing the Master Servicer for amounts previously advanced by it for
such purposes. The Master Servicer may satisfy its obligation to cause the
maintenance of standard hazard and flood insurance policies by maintaining a
blanket policy insuring against hazard and flood losses on all the
Manufactured Homes. Such blanket policy may contain a deductible clause, in
which case the Master Servicer will be required to deposit in the
Certificate Account any amount deducted in connection with insurance claims
on repossessed Manufactured Homes.
[THE LIMITED GUARANTEE
General
If amounts available in the Certificate Account [(following any Advances by
the Master Servicer)] for distribution to the Certificateholders is less than
the amount due to them as a result of defaulted Contracts and delinquent
payments of
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<PAGE>
principal of and interest on the Contracts, the Limited Guarantee will be
available, to the extent of the Guarantee Amount, to fund such shortfall. The
Guarantee Amount on the first Distribution Date will equal $ . Thereafter,
the Guarantee Amount on any Distribution Date will equal [$ less amounts
previously paid with respect to the Limited Guarantee].
$ of the initial Guarantee Amount will be covered
by the general payment obligation of , which obligation will be
supported by the Standby Letter of Credit (described below). The balance of
the initial Guarantee Amount will be covered by the Direct Letter of Credit.
Amounts required to be paid under the Limited Guarantee will be paid first
by under its general payment obligation (or pursuant to the
Standby Letter of Credit) and after such obligation is exhausted, from the
Direct Letter of Credit. If the Guarantee Amount is reduced to zero, the
Certificateholders will bear all losses on the Contracts. As a result,
Certificateholders may be subject to delays in payments of monthly principal
and interest as a result of delinquent payments by Obligors. In the event
of a repossession and resale by the Master Servicer (as Servicer on behalf of
the Trustee) of a Manufactured Home securing a Contract in default, the
Trust Fund may not recover the entire amount of principal and interest due
on such Contract. See "The Trust Fund--The Contracts" and "Certain Legal
Aspects of the Mortgage Loans and Contracts" in the Prospectus.]
Standby Letter of Credit
The Standby Letter of Credit will be an irrevocable standby letter of
credit supporting the payment and repurchase obligations of
. The Standby Letter of Credit will be obtained initially from
, and will terminate on . will confirm the
Standby Letter of Credit issued by , meaning that if for
any reason does not honor a draw upon a Standby Letter
of Credit, will be obligated to honor such draw. The
amount of the Standby Letter of Credit on the Closing Date shall be $
. On each subsequent Distribution Date, the requisite amount of the renewed
Standby Letter of Credit or replacement Standby Letter of Credit shall be
the amount of 's obligation under the Limited Guarantee on the
immediately preceding Distribution Date.
Direct Letter of Credit
The Direct Letter of Credit will be an irrevocable direct pay letter of
credit obtained initially from and will be confirmed by
. The Direct Letter of Credit will terminate on .
The initial requisite amount of the Direct Letter of Credit shall be $
and subsequently, the requisite amount shall be
.
Maintenance of Letters of Credit
The Letters of Credit will provide that, if the institution issuing such
Letter of Credit (the "L/C Bank") does not intend to renew such Letter of
Credit, it must give notice thereof to the Master Servicer and the Trustee at
least 45 days prior to the expiration of such Letter of Credit. The Master
Servicer must then obtain a replacement Letter of Credit. If, immediately
prior to the expiration of the Letter of Credit, the Master Servicer has not
obtained a replacement Letter of Credit issued or confirmed by a L/C Bank
which is a qualified bank (an institution whose unsecured long-term debt
(or, in the case of the principal bank in a bank holding company system, the
unsecured long-term debt of such bank or the bank holding company) has a
rating satisfactory to the Rating Agency for the maintenance of the "
" rating of the Certificates, the Trustee shall draw under such expiring
Letter of Credit an amount equal to the 's obligation
under the Limited Guarantee, in the case of the Standby Letter of Credit, or
the difference between the Guarantee Amount and the 's
obligation under the Limited Guarantee, in the case of the Direct Letter of
Credit. The amounts so drawn will be deposited in a separate trust fund (the
"Limited Guarantee Fund") and will be available on each Distribution Date if
and to the extent that draws would have been required under the Standby
Letter of Credit or the Direct Letter of Credit, as the case may be. The
funds in the Limited Guarantee Fund remain the property of the issuer of
such Letter of Credit, subject to the right of the Master Servicer to make
withdrawals. Upon termination of the Pooling and Servicing Agreement, any
funds remaining in the Limited Guarantee Fund will be paid to the issuer of
such Letter of Credit. In addition, any recoveries of delinquent payments
previously advanced pursuant to the draws under a Letter of Credit, and any
recoveries in defaulted Contracts whose repurchase price was deposited in
the Certificate Account pursuant to a draw on a Letter of Credit, will be
repaid to the L/C Bank if the Letter of Credit will be reinstated by such
amount, or else will
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<PAGE>
be deposited in the Limited Guarantee Fund. In the event of insolvency of the
L/C Bank, the amount available to the Trust Fund under the Letter of Credit
or from the Limited Guarantee Fund, as the case may be, may be reduced.
In the event that the L/C Bank that issued or confirmed the Letter of
Credit ceases to be a qualified bank, the Master Servicer will use its best
efforts to obtain a substitute Letter of Credit issued or confirmed by a
qualified bank. If a substitute Letter of Credit issued or confirmed by a
qualified bank has not been obtained in 30 days, the Trustee will draw down
the requisite amount under such Letter of Credit and deposit such funds in
the Limited Guarantee Fund.]
[LETTER OF CREDIT
The maximum liability of [ ] under the Letter of Credit, net of
unreimbursed payments thereunder, for the Certificates will be no more than [
%] of the aggregate principal balance of the Contracts on the Cut-off Date.
The duration of coverage and the amount and frequency of any reduction in
coverage will be in compliance with the requirements established by the
Rating Agency rating the Certificates, in order to obtain a rating in one of
the two highest rating categories of the Rating Agency. The precise amount
of coverage under the Letter of Credit and the duration and frequency of
reduction of such coverage will be set forth in the Current Report on Form
8-K referred to above. See "Description of the Certificates--Credit Support--
The Letter of Credit" in the Prospectus.]
It is a condition to the issuance of the Certificates that they be rated in
one of the two highest categories of the Rating Agency prior to issuance.
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.
[ERISA CONSIDERATIONS
The acquisition of a Certificate by an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (a
"Plan") could result in prohibited transactions or other violations of the
fiduciary responsibility provisions of ERISA and section 4975 of the Internal
Revenue Code of 1986 (the "Code") if by virtue of such acquisition, assets
held by the Trust were deemed to be assets of the Plan. [The United States
Department of Labor ("DOL") published final regulations concerning whether or
not the assets of a Plan will be deemed to include any of the underlying
assets of an entity, for purposes of the fiduciary responsibility provisions
of ERISA, when a Plan acquires an equity interest in such entity. The final
regulations state that the assets of a Plan which acquires an equity
interest will not include any of the underlying assets of the entity if the
class of equity interests in question are (1) held by 100 or more investors
independent of the issuer and of each other, (2) freely transferable, and
(3) sold as part of an offering pursuant to an effective registration
statement under the Securities Act of 1933, and then timely registered under
section 12(b) or 12(g) of the Securities Exchange Act of 1934. It is
expected that the Certificates will meet the criteria of the regulations:
The Underwriter[s] expect[s] (although no assurances can be given) that the
Certificates will be held by at least 100 independent investors at the
conclusion of the offering made by this Prospectus; there are no
restrictions imposed on the transfer of the Certificates; and the seller
intends to cause the registration requirements to be satisfied.] In
addition, even if the Plan's assets are deemed to include the Contracts,
certain exemptions from the prohibited transaction rules could be applicable,
depending in part upon the type and circumstances of the Plan fiduciary
making the decision to acquire a Certificate. Included among these
exemptions are DOL Prohibited Transaction Exemptions 84-14 (Class Exemption
for Plan Asset Transaction Determined by Independent Qualified Professional
Asset Managers), 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds) and 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts).
Employee benefit plans which are governmental plans (as defined in section
3(32) of ERISA), and certain church plans (as defined in section 3(33) of
ERISA), are not subject to ERISA requirements.
Any Plan fiduciary considering the purchase of Certificates should consult
its tax and/or legal advisors regarding these and other issues and their
potential consequences.]
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<PAGE>
UNDERWRITING
The Depositor has entered into an Underwriting Agreement with [several
Underwriters, for whom] CS First Boston Corporation, an affiliate of the
Depositor[, is acting as Representative]. The Underwriter[s] [named below]
[has] [have severally] agreed to purchase from the Depositor [all] [the
following respective principal amounts] of the Certificates:
[UNDERWRITER
------------
CS First Boston................. $
---------
Total........................... $ ]
=========
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that
the Underwriter[s] will be obligated to purchase the entire principal amount
of the Certificates if any are purchased.
The Depositor has been advised [by the Representative] that the
Underwriter[s] propose[s] to offer the Certificates to the public initially
at the public offering prices set forth on the cover page of this Prospectus
Supplement, and [through the Representative,] to certain dealers at such
prices less the following concessions and that the Underwriter[s] and such
dealers may allow the following discounts on sales to certain other dealers:
CONCESSION (PERCENT OF DISCOUNT (PERCENT OF
PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
---------------------- ---------------------
% %
After the initial public offering, the public offering prices and the
concessions and discounts to dealers may be changed by [the Underwriter] [the
Representative].
The Depositor has agreed to indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
Certain legal matters with respect to the Certificates offered hereby will
be passed upon for the Depositor and for the Underwriter[s] by Sidley &
Austin, New York, New York.
USE OF PROCEEDS
The Depositor will apply all of the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Contracts underlying
the Certificates. Certain of the Contracts will be acquired in privately
negotiated transactions by the Depositor from one or more affiliates of the
Depositor, which will have acquired such Contracts from time to time in
privately negotiated transactions.
S-14
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
State.
SUBJECT TO COMPLETION, DATED DECEMBER , 1995
- --------------------------------------------------------------------------------
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated , 19 )
- --------------------------------------------------------------------------------
$ (Approximate)
Asset Backed Securities Corporation
Depositor
Conduit Mortgage Pass-Through Certificates, Series , [Class A]
Adjustable Pass-Through Rate
[ Master Servicer ]
---------------
The Conduit Mortgage Pass-Through Certificates, Series will be comprised
of Class A Certificates and [one] [two] subclass[es] [(not offered hereby)] of
Class B Certificates (collectively, the "Certificates"). The Certificates, will
represent interests in the Master Trust Fund which will hold an interest in a
pool (the "Mortgage Pool") of adjustable rate, [conventional] mortgage loans
secured by [first mortgages or deeds of trust] [liens] on [one-to-four-unit
residential properties] [cooperative loans evidenced by promissory notes secured
by a lien on shares in cooperative housing corporations and on the related
proprietary leases] (the "Mortgage Loans") [originated] [acquired] by ("Master
Servicer"), and certain other property held in trust for the benefit of the
Certificateholders. [ ] will act as Master Servicer.
The Class A Certificates will evidence an initial interest of approximately
% in the Mortgage Loans. The remaining interest in the Mortgage Loans will be
evidenced by the Class B Certificates, which are subordinate to the Certificates
to the extent described herein and in the Prospectus. See "Description of the
Certificates--Distributions" and "--Subordination of the Class B Certificates;
Shifting Interest Credit Enhancement" herein and "Credit Support--Subordinated
Certificates" in the Prospectus.
Principal and interest on the Certificates are distributable on the [25th]
day of each month commencing (each, a "Distribution Date"). After an
initial period, the Mortgage Rate on each Mortgage Loan will adjust [semi-
annually] to a rate equal to the Index (as defined below) plus the fixed
percentage applicable to such Mortgage Loan (the "Gross Margin"), subject to the
interest rate limitations applicable to the Mortgage Loans and the other
provisions set forth herein. The Class A Certificateholders will be entitled to
receive interest on the Class A Principal Balance (as defined herein) at the
Pass-Through Rate. The Pass-Through Rate will equal the weighted average of
the Subsidiary Pass-Through Rates. The initial Pass-Through Rate is
approximately %. The Subsidiary Pass-Through Rate with respect to each
Mortgage Loan prior to its first Adjustment Date (as defined herein) will
equal the Mortgage Rate less . On and after its first Adjustment Date, the
Subsidiary Pass-Through Rate with respect to each Mortgage Loan will equal the
[description of index, e.g. monthly weighted average cost of funds for member
institutions of the 11th District of the Federal Home Loan Bank System, as
published by the Federal Home Loan Bank of San Francisco] (the "Index") plus
basis points (the "Pass-Through Margin") but not more than the lesser
of the Periodic Mortgage Rate Cap (as defined herein) less the Servicing Fee
Rate, or the Maximum Subsidiary Pass-Through Rate (as defined herein).
There is currently no secondary market for the Class A Certificates. There
can be no assurance that a secondary market for the Class A Certificates will
develop or, if it does develop, that it will continue.
An election will be made to treat the assets of the Subsidiary Trust Fund (as
defined herein) as a real estate mortgage investment conduit ("REMIC") for
purposes of federal income taxation (the "Subsidiary REMIC"). An election will
also be made to treat the assets represented by the "regular interests" in the
Subsidiary REMIC constituting a separate trust fund (the "Master Trust Fund") as
a separate REMIC (the "Master REMIC"). See "Certain Federal Income Tax
Consequences" herein.
THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN ASSET
BACKED SECURITIES CORPORATION, [MASTER SERVICER[ OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[The Certificates will initially be delivered by the Depositor to
in exchange for the Mortgage Loans to be deposited by the Depositor into the
Subsidiary Trust Fund. The Class A Certificates may be sold or pledged by ,
directly or through one or more underwriters, from time to time at varying
prices to be determined at the time of such sale or pledge.] [The
Underwriter[s] propose[s] to offer the Class A Certificates from time to time
for sale in negotiated transactions or otherwise, at prices determined at the
time of sale.] See "Plan of Distribution" herein. Expenses attributable to
issuance of the Class A Certificates, estimated to be approximately $
will be paid by [the Master Servicer] [the Depositor]. [The Depositor] will be
paid a fee by of $ in connection with the transaction.
[The Class A Certificates are offered by the [several] Underwriter[s] when,
as and if issued and accepted by the Underwriter[s] and subject to [its] [their]
right to reject orders in whole or in part. It is expected that the Class A
Certificates, in definitive fully registered form, will be ready for delivery on
or about , 199 .]
The Certificates, when, as and if issued by the Depositor, are expected to be
available for delivery in New York, New York on or about , 199 .
CS First Boston
- --------------------------------------------------------------------------------
The Date of this Prospectus Supplement is , 19 .
<PAGE>
The Class A Certificates offered hereby constitute a separate series of
Conduit Mortgage and Manufactured Housing Contract Pass-Through Certificates
being offered by Asset Backed Securities Corporation from time to time pursuant
to its Prospectus dated . This Prospectus Supplement does not contain
complete information about the offering of the Class A Certificates. Additional
information is contained in the Prospectus, and purchasers are urged to read
both this Prospectus Supplement and the Prospectus in full. Sale of the Class A
Certificates may not be consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus.
[Until , no offerings of the Class A Certificates may be made by
except pursuant to this Prospectus Supplement and the Prospectus, as
supplemented as of the date of such offering. After such date, no offerings of
the Class A Certificates will be made pursuant to this Prospectus Supplement and
Prospectus.
[Until , all dealers effecting transactions in the Class A
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
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriter and with respect to their unsold allotments or
subscriptions.]
---------------
AVAILABLE INFORMATION
The Master Trust Fund will be subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, the Depositor, on behalf of the Master Trust Fund, will
file periodic reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports will not contain audited financial
information with respect to the Master Trust Fund. Such reports and other
information filed by the Depositor on behalf of the Master Trust Fund can be
inspected and copied at the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such materials can be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
S-2
<PAGE>
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Capitalized terms used in this Prospectus Supplement
and not defined shall have the meanings ascribed thereto in the Prospectus.
SECURITIES OFFERED... $ Conduit Mortgage Pass-Through Certificates,
Series , [Class A,] Adjustable Pass-Through Rate (the
"Class A Certificates").
DEPOSITOR ........... Asset Backed Securities Corporation
MASTER SERVICER .....
CUT-OFF DATE ........
DELIVERY DATE ....... On or about .
DESCRIPTION OF THE
CERTIFICATES ...... Two Classes of Certificates evidencing fractional
interests in a Trust Fund (the "Master Trust Fund")
consisting of the Subsidiary Regular Interests (as
defined herein) which in the aggregate generally
represent an interest in (i) all amounts distributable
with respect to the Mortgage Loans, (ii) amounts held
in the Certificate Account, (iii) any property which
secured a Mortgage Loan and is acquired by foreclosure
or deed in lieu of foreclosure, and (iv) certain other
related property, as more fully described herein and in
the Prospectus. The Class A Certificates initially
evidence in the aggregate an interest in the Mortgage
Loans (the "Class A Percentage") of approximately %.
The remaining interest in the Mortgage Loans will be
represented by the Class B Certificates, [which will
consist of two subclasses, Class B-1 (the "Class B-1
Certificates") and Class B-2 (the "Class B-2
Certificates") together,] the "Class B Certificates").
[The Class B-1 Certificates will initially evidence an
approximate % interest in the Mortgage Loans ("the
Class B-1 Percentage") and the Class B-2 Certificates
will initially evidence an approximate % interest in
the Mortgage Loans (the "Class B-2 Percentage")
(together,] [the "Subordinate Percentage"). The Class B
Certificates will be subordinated in certain respects
to the Class A Certificates, as more fully described
herein. The Class A Percentage, [and] the Class B[-1
Percentage and the Class B-2 Percentage] will vary, as
described herein.
The Class A Certificates and the Class B Certificates are
collectively referred to herein as the "Certificates".
The Class A Certificates represent the Senior
Certificates and the Class B Certificates represent the
Subordinate Certificates, both as described in the
accompanying Prospectus. Only the Class A Certificates
are being offered hereby.
THE INDEX ........... [Description e.g., the monthly weighted average cost of
funds for member institutions of the 11th District of
the Federal Home Loan Bank System as published by the
Federal Home Loan Bank of San Francisco. The Index
published in December, 1988 (reflecting the related
weighted average cost of funds for November 1988) was
%.]
S-3
<PAGE>
THE MORTGAGE LOANS .. The Mortgage Pool will consist of adjustable rate,
[conventional] mortgage loans [originated] [acquired]
by [the Master Servicer] and secured by first mortgages
deeds of trust on one-to four-family residential
properties. All Mortgage Loans will have maturities of
at least 15 but no more than 30 years and are secured
by properties located in . [All Mortgage Loans
with a Loan-to-Value Ratio greater than 80% will have
private mortgage insurance.] See "Description of the
Mortgage Pool and Underlying Mortgage Properties"
herein.
PRINCIPAL (INCLUDING
(PREPAYMENTS) ..... Passed through monthly on the Distribution Date
commencing . On each Distribution Date the
Class A Certificateholders are entitled to receive as
payments of principal, in addition to the Class A
Percentage of all scheduled payments on account of
principal, the Class A Prepayment Percentage of both
principal prepayments in part and principal prepayments
in full received by the Master Servicer with respect to
such Mortgage Loans during the preceding calendar month
("Principal Prepayments"). See "Description of the
Certificates--Subordination of the Class B
Certificates; Shifting Interest Credit Enhancement"
herein.
INTEREST ............ Interest accrued on each Mortgage Loan will be passed
through to Certificateholders on the Distribution Date
occurring in the month in which the Due Date (as
defined herein) occurs, commencing , at the Pass-
Through Rate. The Pass-Through Rate will equal the
weighted average of the Subsidiary Pass-Through Rates.
The initial Pass-Through Rate is equal to approximately
% per annum. Prior to the first Adjustment Date after
the Cut-off Date for a Mortgage Loan, the Subsidiary
Pass-Through Rate with respect to such Mortgage Loan
will equal the Mortgage Rate less . On and after
the first Adjustment Date for a Mortgage Loan, the
Subsidiary Pass-Through Rate with respect to each
Mortgage Loan will equal the Index applicable to such
Mortgage Loan plus basis points (the "Pass-Through
Margin"), subject to the limitation that the Subsidiary
Pass-Through Rate shall not exceed the lesser of the
Periodic Mortgage Rate Cap less the Servicing Fee Rate
or the Maximum Subsidiary Pass-Through Rate. The
Maximum Subsidiary Pass-Through Rates will range from
% to % per annum. The Maximum Subsidiary Pass-
Through Rate with respect to a particular Mortgage
Loan is equal to the Maximum Mortgage Rate for such
Mortgage Loan minus the Servicing Fee Rate. The
weighted average Maximum Subsidiary Pass-Through Rate
as of the Cut-off Date will be approximately % per
annum. Following an initial period of months, during
which the rate of interest on each Mortgage Loan (the
"Mortgage Rate") is fixed, the Mortgage Rate on each
Mortgage Loan will be adjusted [monthly] [semi-
annually] [annually] on the adjustment dates (each such
date, an "Adjustment Date") specified in the related
mortgage note (each such note, a "Mortgage Note") to
equal the sum of the Index and a fixed percentage
amount (a "Gross Margin") [, subject to a semi-annual
periodic mortgage rate cap (the "Periodic Mortgage Rate
Cap") and a maximum rate at which interest may accrue
(the "Maximum Mortgage Rate"), as described more fully
herein]. Each Mortgage Loan will have been originated
with an initial Mortgage Rate below the sum of the
applicable Index and Gross Margin for such Mortgage
Loan (the "Initial Mortgage Rate") and % of the
Mortgage Loans as of the Cut-off Date are expected to
be accruing interest at their Initial Mortgage Rates.]
As of the Cut-off Date, the Mortgage Loans will
S-4
<PAGE>
bear interest at Mortgage Rates which range from %
to % per annum. The Gross Margins for the Mortgage
Loans range as of the Cut-off Date from to basis
points. The weighted average Gross Margin for the
Mortgage Loans as of the Cut-off Date will be
approximately basis points. [The Periodic Mortgage
Rate Cap for each Mortgage Loan is the Mortgage Rate in
effect immediately prior to any Adjustment Date plus or
minus basis points. The Maximum Mortgage Rate will
range from % to % per annum.] The weighted
average Maximum Mortgage Rate as of the Cut-off Date
will be % per annum. See "Description of the Mortgage
Pool and the Underlying Mortgaged Properties" herein.
When a Mortgage Loan is prepaid, in whole or in part,
between scheduled payment dates, the Mortgagor pays
interest on the amount prepaid only to the date of
prepayment and not thereafter. This generally reduces
the aggregate amount of interest which would otherwise
be distributed to the Class A and Class B
Certificateholders. To mitigate any such reduction in
yield, [amounts otherwise payable as the Servicing Fee
(as defined herein) for the period during which any
such Principal Prepayment was made will be reduced by]
[to the extent funds that interest on the Mortgage
Loans exceeds the Subsidiary Pass-Through Rate less the
Servicing Fee Rate for the period during which any such
prepayment is made, the Pooling and Servicing Agreement
provides that] such amount, if any, as may be necessary
to assure that the distributions made to the Class A
and Class B Certificateholders on the related
Distribution Date include an amount equal to a full
month's interest with respect to each prepaid Mortgage
Loan at the applicable Subsidiary Pass-Through Rate
will be paid to the Master Trust Fund. See "Description
of the Certificates--Distributions" herein.
SUBORDINATION OF THE
CLASS B CERTIFICATES;
SHIFTING INTEREST
CREDIT ENHANCEMENT ..The rights of the Class B Certificateholders to receive
distributions with respect to the Mortgage Loans are
subordinated to such rights of the Class A
Certificateholders to the extent of the Subordinated
Amount described below. This subordination feature is
intended to enhance the likelihood of regular receipt
by the holders of the Class A Certificates of the full
amount of the scheduled monthly payments of principal
and interest due them with respect to the Mortgage
Loans and to protect the Class A Certificateholders
against losses.
As of each Determination Date, the Subordinated Amount
will equal the Class B Principal Balance (as defined
herein) on such date reduced by the excess of Aggregate
Losses (as defined herein) over cumulative Realized
Losses (as defined herein) borne by the Class B
Certificateholders as of such date, if any. This
subordination feature is intended to enhance the
likelihood of regular receipt by the holders of the
Class A Certificates of the full amount of the
scheduled monthly payments of principal and interest
due them with respect to the Mortgage Loans and to
protect the Class A Certificateholders against losses.
However, in certain circumstances, the Subordinated
Amount could be depleted and payment deficiencies could
result. If, on any Distribution Date when the
Subordinated Amount is greater than zero, the aggregate
amount of payments received from the Mortgagors on the
Mortgage Loans and any Advances (as defined herein) do
not provide sufficient funds to make full distributions
to the Class A Certificateholders, the amount of the
payment deficiency, plus interest
S-5
<PAGE>
thereon at the applicable Subsidiary Pass-Through Rate,
to the extent of the Subordinated Amount, will be added
to the amount such Class A Certificateholders are
entitled to receive on the next Distribution Date. The
extent to which the Class A Certificateholders and the
Class B Certificateholders bear Realized Losses, and,
in addition, Special Hazard Realized Losses, is
described herein. See "Description of the
Certificates--Subordination of the Class B
Certificates; Shifting Interest Credit Enhancement"
herein.
The protection afforded to the holders of the Class A
Certificates will be effected (i) by the preferential
right of such holders to receive the amounts of
principal and interest otherwise distributable to the
Class B Certificateholders on each Distribution Date
with respect to the Mortgage Loans out of available
funds on deposit on such date in the Certificate
Account, and (ii) by distributing to the Class A
Certificateholders a disproportionately greater
percentage (the "Class A Prepayment Percentage") of
Principal Prepayments (as hereinafter defined) and
other payments with respect to the Mortgage Loans. The
Class A Prepayment Percentage will decline from 100%
after provided certain criteria respecting the
Mortgage Pool are met. See "Description of the
Certificates--Subordination of the Class B
Certificates; Shifting Interest Credit Enhancement"
herein.
SERVICING FEE ...... will act as Master Servicer of the Mortgage
Loans [and will enter into a Servicing Agreement on the
Delivery Date pursuant to which will subservice the
Mortgage Loans]. will receive a servicing fee (the
"Servicing Fee") as compensation for its services which
is calculated monthly and equals a fixed percentage on
the principal balance of each Mortgage Loan (the
"Servicing Fee Rate"). The Servicing Fee Rate equals
basis points. See "Description of the Mortgage Pool and
Underlying Mortgaged Properties--Servicing and Sub-
Servicing" and "Description of the Certificates--
Servicing Compensation and Payment of Expenses" herein.
ADVANCES ............ The Master Servicer will be obligated to advance cash
(the "Advances") to the Subsidiary Trust Fund for
distribution in an amount equal to delinquent
installments of principal and interest to the extent
that the Master Servicer determines such Advances will
be recoverable from future payments and collections on
the Mortgage Loans or otherwise. See "Description of
the Certificates--Advances" in the Prospectus.
DENOMINATIONS ....... The minimum denomination of a Class A Certificate (a
"Single Certificate") will initially represent $
of the Cut-off Date Principal Balance, provided that
one Certificate may be issued in such lesser amount as
is required so that the Class A Certificateholders in
the aggregate equal the Class A Principal Balance (as
defined herein).
OPTIONAL
TERMINATION ........ The holder of the Subsidiary Residual Interest has the
option to purchase all of the Mortgage Loans in the
Subsidiary Trust Fund, and thereby effect termination
of the Subsidiary Trust Fund and the Master Trust Fund,
on any Distribution Date on which the aggregate
principal balance of the Mortgage Loans remaining in
the Subsidiary Trust Fund is less than % of the
Cut-off Date Principal Balance. Additionally, the
holder of the Class B[-2] Certificate has the option to
purchase all the Subsidiary Regular Interests (as
defined herein) in the Master
S-6
<PAGE>
Trust Fund. Either of the above purchases would effect
early retirement of the Class A and Class B
Certificates. See "Description of the Certificates--
Optional Termination" herein and "Description of the
Certificates--Termination" in the Prospectus.
TAX ASPECTS ......... An election will be made to treat the assets of the
Subsidiary Trust Fund as a REMIC (the "Subsidiary
REMIC") for federal income tax purposes. An
electionwill be made to treat the assets of the Master
Trust Fund as a REMIC (the "Master REMIC"). The Class A
Certificates [and Class B-1 Certificates] will be
regular interests in the Master REMIC. The Class B[-2]
Certificate will be the residual interest in the Master
REMIC.
For further information regarding the federal income tax
consequences of investing in the Certificates, see
"Certain Federal Income Tax Consequences" in the
Prospectus.
LEGAL INVESTMENT .... The Class A Certificates constitute "mortgage-related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 (the "Enhancement Act")
for so long as they are rated as described herein, and,
as such, are legal investments for certain entities to
the extent provided in the Enhancement Act. See "Legal
Investment" herein and in the Prospectus.
ERISA
CONSIDERATIONS .... See "ERISA Considerations" herein and in the Prospectus.
TRUSTEE .............
CERTIFICATE RATING .. It is a condition of issuance that the Class A
Certificates be rated at least" "by .
See "Rating" herein.
S-7
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
AND THE UNDERLYING MORTGAGED PROPERTIES(1)
GENERAL
The Mortgage Pool consists of all of the ownership interest held by
the Subsidiary Trust Fund in Mortgage Loans evidenced by
adjustable rate promissory notes (the "Mortgage Notes") having an aggregate
principal balance at the Cut-off Date of $ . The Mortgage Notes
are secured by first trust deeds or mortgages on properties consisting primarily
of detached single family residential properties with the remaining properties
consisting of units of FNMA or FHLMC eligible condominiums and units in planned
unit developments (the "Mortgaged Properties"). All of the Mortgage Loans were
originated by . All of the Mortgage Loans were originated under
one of two origination programs, one of which is a limited documentation program
that relies primarily upon appraisals and credit reports and the other of which
generally conform to FNMA and FHLMC underwriting guidelines. The Mortgage Loans
have the additional characteristics described below and in the Prospectus. See
"The Mortgage Pools" in the Prospectus.
The Depositor will purchase the Mortgage Loans from and will cause
such Mortgage Loans to be assigned to the Trustee. See "The Trust Fund--
Mortgage Loan Program" in the Prospectus. will act as the master
servicer (the "Master Servicer") for the Mortgage Loans pursuant to the Standard
Terms and Provisions of Pooling and Servicing and Reference Agreement, dated as
of (the "Pooling and Servicing Agreement"), among the Depositor,
the Master Servicer and , as trustee (the "Trustee"). The
Mortgage Loans will be serviced by the Servicer pursuant to a Servicing
Agreement with the Master Servicer, and the Servicer will receive a fee for such
services specified in such Servicing Agreement; provided, however, that the
Master Servicer will remain liable for its servicing obligations under the
Pooling and Servicing Agreement as if the Master Servicer alone were servicing
such Mortgage Loans. See "The Trust Fund--The Mortgage Pools" in the Prospectus
and "--Servicing and Sub-Servicing" herein.
Each Mortgage Loan has a Mortgage Rate subject to [monthly] [semi-
annual] [annual] adjustment on the first day of the month specified in the
related Mortgage Note and on the first day of every month thereafter (each such
date, an "Adjustment Date"), equal to the sum of (i) the Index as most recently
[made available by the Federal Home Loan Bank of San Francisco (the "FHLB")] on
the day days, as specified for the particular Mortgage Note, prior to the
Adjustment Date and (ii) the applicable Gross Margin[; provided, however, that
any increase or decrease on any Adjustment Date will be limited by the Periodic
Mortgage Rate Cap, and in no-event will the Mortgage Rate be greater than the
Maximum Mortgage Rate]. The Index applicable on a Rate Adjustment Date is the
Index available days prior to the Adjustment Date. Effective with the first
payment due on a Mortgage Loan after each related Adjustment Date, the monthly
payment will be adjusted to an amount which will fully amortize the outstanding
principal balance of the Mortgage Loan in substantially equal payments over its
remaining term, and pay interest at the Mortgage Rate as so adjusted. [All] of
the Mortgage Loans were originated with a Mortgage Rate below the sum of the
applicable Index and Gross Margin (the "Initial Mortgage Rate") applicable for
an initial period of months from the date of origination and % of the
Mortgage Loans as of the Cut-off Date will bear interest at their Initial
Mortgage Rates. The weighted average number of months from the Cut-off Date to
the first
- -----------------------
(1) The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as it was
constituted at the close of business on the Cut-off Date, after
deducting the scheduled principal payments due on or before such date.
Prior to the issuance of the Certificates, Mortgage Loans may be
removed from the Mortgage Pool if, as a result of delinquencies or
otherwise, the Depositor deems such removal necessary or desirable.
Other Mortgage Loans may be included in the Mortgage Pool in lieu of
the Mortgage Loans so replaced. In addition, under certain
circumstances the Depositor or the Master Servicer may substitute
Mortgage Loans for those in the Trust Fund. See "Description of the
Certificates--Substitution of Mortgage Loans" herein and "Description
of the Certificates-- Assignment of Mortgage Loans" in the Prospectus.
The Depositor believes that the information set forth herein with
respect to the Mortgage Pool is representative of the characteristics
of such Mortgage Pool as it will be constituted at the time the
Certificates are issued, although the range Mortgage Rates and
maturities and certain other characteristics of the Mortgage Loans in
the Mortgage Pool may vary in non-material respects from those set
forth herein as a result of such deletions, repurchases or
substitutions.
S-8
<PAGE>
Adjustment Date for the Mortgage Loans is approximately months.
[Due to the application of the Periodic Mortgage Rate Caps (even assuming no
increase in the applicable Index from the date of origination to the Adjustment
Date) or the Maximum Mortgage Rate, the Mortgage Rate on any Mortgage Loan, as
adjusted on any Adjustment Date, may be less than the sum of the then applicable
Index and Gross Margin, subject to rounding.] If the Index becomes unpublished
or is otherwise unavailable, the Master Servicer will select (or cause to be
selected) an alternative index for Mortgage Loans based upon comparable
information in compliance with applicable federal laws.
The Mortgage Loans were originated in . All of the
Mortgage Loans will have [monthly] payments due on [the first day of each month]
(each a "Due Date"). At origination, of the Mortgage Loans had terms to
stated maturity of 30 years. The latest date on which any Mortgage Loan will
mature is . All Mortgage Loans had Periodic Mortgage Rate
Caps equal to basis points. The Maximum Mortgage Rates range from % to
% and the weighted average Maximum Mortgage Rate is approximately % as of
the Cut-off Date.
[Mortgage Loans that are expected to constitute approximately % of
the Initial Principal Balance of the Mortgage Pool as of the Cut-off Date will
have Mortgage Rates that will be convertible from an adjustable to a fixed
Mortgage Rate at the option of the mortgagor upon certain conditions on the
[when convertible] after origination of the related Mortgage Loan. In
determining the fixed rate applicable to a Mortgage Loan eligible for
conversion, the Master Servicer, acting on behalf of the Trustee, will. To the
extent the applicable rate is not available, the Master Servicer will quote a
fixed rate based upon comparable information. In order to be eligible to
convert the applicable Mortgage Rate on such a Mortgage Loan from an adjustable
to a fixed Mortgage Rate, the mortgagor must complete and submit to the Master
Servicer certain conversion documents and a loan modification agreement, pay the
applicable conversion fee and not be in default under the Mortgage Note or the
security documents related to such Mortgage Loan. Upon conversion, the monthly
payments of principal and interest on such Mortgage Loan will be adjusted to
provide for fully amortizing, level monthly payments until maturity. [Should
interest rates decline so that the fixed Mortgage Rate applicable upon
conversion is significantly lower than the prevailing adjustable Mortgage Rate,
due to the application of Interest Rate Caps, or is significantly lower than the
applicable Maximum Mortgage Rate on such Mortgage Loan, mortgagors may have a
significant incentive to effect a conversion.] See "Description of the
Certificates--Purchase of Converted Mortgage Loans" herein.
The Mortgage Loans have the following characteristics (information provided
as of the Cut-off Date unless otherwise indicated):*
- ---------------------------------------
* The information presented in tabular form may be presented in paragraph
form, or ranges for such information may be provided.
S-9
<PAGE>
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% OF
MORTGAGE
NO. OF AGGREGATE POOL
PROPERTY TYPES LOANS BALANCES BALANCE
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
Single family detached .......... $ . %
Condominium .....................
Planned Unit Developments .......
------- --------- ------
Total ................... $ 100.00%
======= ========= ======
</TABLE>
CURRENT LOAN AMOUNTS(1)
<TABLE>
<CAPTION>
% OF
MORTGAGE
NO. OF AGGREGATE POOL
CURRENT LOAN AMOUNTS LOANS BALANCES BALANCE
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
Up to $100,000 ................ $ . %
$100,001-150,000 ..............
150,001-200,000 ...............
200,001-250,000 ...............
250,001-300,000 ...............
300,001-350,000 ...............
350,001-400,000 ...............
400,001-450,000 ...............
Over $450,001 .................
------- --------- ------
Total(2) $ 100.00%
======= ========= ======
</TABLE>
(1) The largest current loan amount is $ and the smallest
current loan amount is $ .
(2) The average outstanding principal balance is $ .
S-10
<PAGE>
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Loan-to-value Ratio Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
70.00% or less................. $ . %
70.01% to 75.00%...............
75.01% to 80.00%...............
80.01% to 85.00%...............
85.01% to 90.00%...............
------- --------- ------
Total(1)............... $ 100.00%
======= ========= ======
</TABLE>
- ------------
(1) The weighted average loan-to-value ratios of the Mortgage Loans, based on
the principal amount at origination and the principal amount as of the Cut-
off Date, respectively, and the lesser of the appraised value at
origination and the purchase price paid by the Mortgagor, was % and
%, respectively.
CURRENT MORTGAGE RATES
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Mortgage Rates(1) Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
. % or less.............. $ . %
. % or less..............
. % or less..............
. % or less..............
------- --------- ------
Total(2).................. 100.00%
======= ========= ======
</TABLE>
- ------------
(1) With respect to % of the Mortgage Pool Balance, the Mortgage Rate is
the original Mortgage Rate and does not reflect application of the Index.
(2) The weighted average Mortgage Rate is approximately % per annum.
S-11
<PAGE>
MORTGAGE LOAN GROSS MARGINS
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Gross Margins Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
% ............................. $ . %
.............................
.............................
.............................
.............................
------- --------- ------
Total(1)..................... $ 100.00%
======= ========= ======
</TABLE>
- ------------
(1) The weighted average Gross Margin is approximately per annum.
MONTH IN WHICH NEXT ADJUSTMENT DATE FALLS
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Month(1) Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
............................. $ . %
.............................
.............................
.............................
.............................
------- --------- ------
Total(2)..................... $ 100.00%
======= ========= ======
</TABLE>
- -----------
(1) The adjusted Mortgage Rate will be reflected in payments received by
Certificateholders on the 25th day of the month following the month in
which the Adjustment Date occurs.
(2) The weighted average number of months to the initial Adjustment Date is
months.
S-12
<PAGE>
LIFETIME MORTGAGE RATE CAPS
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Lifetime Mortgage Rate Cap Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
% ............................ $ . %
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
------- --------- ------
Total(1)..................... $ 100.00%
======= ========= ======
</TABLE>
YEARS OF ORIGINATION
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
Month(1) Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
% ............................ $ . %
.............................
.............................
.............................
.............................
------- --------- ------
Total........................ $ 100.00%
======= ========= ======
</TABLE>
S-13
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% of
Mortgage
No. of Aggregate Pool
States Loans Balances Balance
- -------------------------------- ------- --------- --------
<S> <C> <C> <C>
% ............................ $ . %
.............................
.............................
.............................
.............................
------- --------- ------
Total........................ $ 100.00%
======= ========= ======
</TABLE>
[Mortgage Loans for which the loan-to-value ratio at origination was
greater than 80% either (1) will be insured as to payment default for the amount
in excess of 75% of the principal balance by a Primary Mortgage Insurance
Policy until the principal balance of such Mortgage Loan is reduced below 80% of
the lesser of the appraised value at origination or the purchase price of the
Mortgaged Property, or (2) will be covered by a [DESCRIPTION OF ALTERNATIVE].]
Approximately % of the Mortgage Loans were made to refinance the
related Mortgaged Properties and approximately % of the Mortgage Loans have
been made to purchase the related Mortgaged Properties. Approximately % of
the Mortgage Loans will be secured by Mortgaged Properties represented to the
originator in the related loan application to be the primary residence of the
mortgagor at the time of origination. % of the Mortgage Loans are secured
by Mortgaged Properties which were second homes of the mortgagor at the time of
origination based on representations of the Mortgagor. % of the Mortgage
Loans were made to finance the purchase of homes represented by the mortgagor to
have been acquired for investment purposes.
At the date of issuance of the Certificates, no Mortgage Loan will be
delinquent in scheduled payments of principal and interest by more than 30 days
and no Mortgage Loan will have been, as of the Cut-off Date, more than 30 days
delinquent in scheduled payments of principal and interest more than once in the
previous year.
THE INDEX
[DESCRIPTION OF APPLICABLE INDEX, e.g., The Index is currently
published by the FHLB on or about the last working day of each month and is
designed to represent the monthly weighted average cost of funds for savings
institutions in the 11th District of the Federal Home Loan Bank System (Arizona,
California and Nevada) for the month prior to publication. The Index is
computed by the FHLB for each month by dividing the cost of funds (interest paid
during the month by 11th District savings institutions on savings, advances and
other borrowings) by the average of the total amount of those funds outstanding
at the end of the month and the prior month and annualizing and adjusting the
result to reflect the actual number of days in the particular month. If
necessary, before these calculations are made, the component figures are
adjusted by the FHLB to neutralize the effect of events such as member
institutions leaving the 11th District or acquiring institutions outside the
11th District. The Index has been reported each month since August 1981.]
[The Index reflects the interest costs paid on all types of funds held
by 11th District member institutions. The Index is weighted to reflect the
relative amount of each type of funds held at the end of the relevant month.
There are three major components of funds of 11th District institutions: (1)
savings deposits, (2) FHLB advances, and (3) all other borrowings, such as
reverse repurchase agreements and mortgage-backed bonds. Unlike most other
interest rate measures, the Index does not necessarily reflect current market
rates, since the component funds represent a variety of maturities whose costs
may react in different ways to changing conditions.]
S-14
<PAGE>
[A number of factors affect the performance of the Index which may
cause the Index to move in a manner different from indices tied to specific
interest rates, such as United States Treasury Bills or LIBOR. Because of the
various maturities of the liabilities upon which the Index is based, the Index
may not necessarily reflect the average prevailing market interest rates on new
liabilities of similar maturities. Additionally, the Index may not necessarily
move in the same direction as market interest rates at all times, since as
longer term deposits or borrowings mature and are renewed at prevailing market
interest rates, the Index is influenced by the differential between the prior
and the new rates on those deposits or borrowings. Moreover, as stated above,
the Index is designed to represent the average cost of funds for 11th District
savings institutions for the month prior to the month in which the Index is
published. In addition, such movement of the Index, as compared to other indices
tied to specific interest rates, may be affected by changes instituted by the
FHLB in the method used to calculate the Index. Information Bulletins announcing
the Index may be obtained by contacting the FHLB.]
[The following table sets forth the Index published in each month
(with respect to the 11th District cost of funds in the prior month) for the
four most recent calendar years and for 1988.
<TABLE>
<CAPTION>
19 19 19 19 19
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
January...................... % % % % %
February.....................
March........................
April........................
May..........................
June.........................
July.........................
August.......................
September....................
October......................
November.....................
December.....................
</TABLE>
[MASTER SERVICER]
is a , which was founded in . At
had consolidated assets of $ billion and regulatory capital of $
million. As of , had executive offices in and
savings branches located .
is subject to comprehensive regulation, examination and supervision by
the [FHLBB and the FSLIC,] which regulation is intended primarily for the
benefit of depositors. [Deposits at are insured by the FSLIC up
to $100,000 for each insured account holder, the maximum permitted by law.]
executive offices are located at
and its telephone number at that address is .
Loan Portfolio. [Description]
Loan Transactions. primary lending is [description].
has concentrated efforts on .
S-15
<PAGE>
The following table sets forth certain information with respect to
loan originations, loan purchases and sales, and repayment experience during the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------------
-------------- -------------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
Loans receivable at beginning of period...........
Loans originated..................................
Loans purchased...................................
Loans obtained in Equitable acquisition...........
Loans sold........................................
Loan repayments...................................
Other.............................................
-------------- -------------- --------------
Net loan activity.................................
-------------- -------------- --------------
Loan receivable at end of period..................
============== ============== ==============
</TABLE>
Loan Underwriting. has adopted written, nondiscriminatory underwriting
standards for use in originating and purchasing residential mortgage loans.
has represented to the Depositor that its underwriting standards are in
substantial conformity with standards set up by the FNMA and the FHLMC, which
conformity facilitates sales of such loans in the secondary market. A detailed
loan application is obtained or reviewed to determine the borrower's ability to
repay, and confirmation of the more significant information is obtained through
the use of credit reports, financial statements and verifications. An appraisal
of the property, conducted by an appraiser meeting the qualifications set forth
in FHLBB guidelines, is required to determine the adequacy of the collateral.
also requires that a survey be conducted and title insurance be obtained,
insuring the priority of its mortgage lien, and, for loans with a loan-to-value
ratio of 80% or more, that private mortgage insurance be obtained if available.
All loan applications must be reviewed by underwriters to ensure that
guidelines are met. Such guidelines are approved by
Board of Directors. has represented to the Depositor that each Mortgage
Loan meets the credit, appraisal and underwriting standards established by
and described above.
[Approximately % of the Mortgage Loans were originated under
the limited documentation program of . has represented that each of the
Mortgage Loans originated under a limited documentation program satisfies the
standards established and followed by for originating and acquiring
mortgage loans under its limited documentation program. Under the program,
does not evaluate the borrower's assets-to-liabilities ratio, but did verify the
borrower's income and availability of funds for down payment, and relies
primarily on a credit report on the borrower (which is required to be favorable)
and at least one appraisal as evidence of the value of the property securing the
loan. The limited documentation program was not available for loans
secured by condominiums and was available only for owner-occupied primary
residences. Under such program, loan-to-value ratios were limited to
% for loans under $ and to % for loans under $
, except that for loans in certain locations and having certain characteristics,
lower maximum loan-to-value ratios were established.
Loan Portfolio Qualify. In accordance with the requirements of the
Competitive Equality Banking Act of 1987 (the "CEBA"), the FHLBB in December
1987 adopted amendments to its classification of assets regulation. Prior to
December 1987, to monitor an insured institution's asset quality the FHLBB
defined certain assets of savings institutions as scheduled items and
established certain operating restrictions based upon ratios relating to such
assets. The regulation as amended eliminates entirely the "scheduled items"
classification, but retains the existing classification categories of
substandard, doubtful and loss, while altering the effects of the respective
classifications with respect to valuation allowance requirements and minimum
regulatory capital requirements. Specific loss reserves are no longer required
for assets
S-16
<PAGE>
classified as doubtful and institutions are required to charge off or
set aside loss reserves for 100% of the amount of any asset, or portion of an
asset, classified as a loss. The amended regulation requires institutions to
classify their own assets and to establish prudent general allowances for loan
losses, subject to examiner review. Greater examiner discretion, consistent with
the asset classification practices of the banking regulatory agencies, is
permitted by the amended regulation. The amended regulation also requires
institutions to establish loss reserves for off-balance-sheet items when loss
becomes probable and estimable.
One measure of an institution's asset quality is the level of non-
performing loans in its portfolio. Non-performing loans consist of (i) non-
accrual loans, (ii) loans that are 90 or more days contractually past due as to
interest or principal but that are well-secured and in the process of collection
or renewal in the normal course of business, and (iii) loans that have been
renegotiated to provide a deferral of interest or principal because of a
deterioration in the financial condition of the borrower ("restructured loans").
generally places conventional mortgage loans on non-accrual status when more
than 90 days past due. Where the underlying collateral is a "home" (as defined
in the Rules and Regulations for the Federal Home Loan Bank System), the loan is
placed on non-accrual status when the amount of interest receivable plus all
loan balances secured by the home exceeds 90% of the appraised value of the
security property, provided there is a reasonable expectation of interest
collection.
The following table sets forth information regarding the non-performing
loans as of the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------
19 19 19
-------------- -------------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
Non-accrual loans................................. $ $ $
Accruing loans 90 days or more past due...........
Restructured loans................................
</TABLE>
Loan Servicing. The following table sets forth the dollar amounts of
conventional mortgage loans serviced by for itself and other lenders at the
dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------
19 19 19
-------------- -------------- --------------
<S> <C> <C> <C>
(IN THOUSANDS)
Conventional mortgage loans........................
</TABLE>
Loss and Delinquency Experience. The following table sets forth the
delinquency and foreclosure experience of residential conventional mortgage
loans in the mortgage loan portfolio serviced by and other entities at
the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------------
19 19 19 19
------------------ ------------------ ------------------ ------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL
LOANS LOANS LOANS LOANS LOANS LOANS LOANS LOANS
------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Conventional mortgage loans
delinquent for:
60-89 days................... $ $ $ $
90 days and over.............
In foreclosure...............
Total.................. $ $ $ $
</TABLE>
S-17
<PAGE>
The allowance for loan losses is maintained at an amount management
deems adequate to cover estimated losses. In determining the level to be
maintained, management considers factors such as current economic trends in
specific geographic areas, historical loss experience, borrowers' ability to
repay and repayment performance and estimated collateral values, as well as
considerations such as the availability of indemnifications, mortgage insurance
and seller-provided recourse.
The statistics shown above represent the loss experience for the
total conventional mortgage loan portfolio (including residential and commercial
loans) for each of the periods presented, whereas the aggregate loss experience
on the Mortgage Loans will depend on the results obtained over the life of the
Mortgage Pool.
SERVICING [AND SUB-SERVICING]
The Mortgage Loans will be serviced in accordance with procedures as
described generally in the accompanying Prospectus under the heading
"Description of the Certificates--Servicing by Unaffiliated Sellers." [ , as
Master Servicer, will enter into a Servicing Agreement with (the "Servicer")
pursuant to which the Servicer will sub-service the Mortgage Loans.
acquired the Mortgage Loans from the Servicer. The Servicer has serviced the
Mortgage Loans since their origination. The Servicing Agreement can be
terminated without cause, but in such event or a successor master servicer
would be required to pay a fee to the Servicer or sell the Servicer's interest
in the Servicing Agreement in an auction proceeding upon termination. may
determine to terminate the Servicer and to service the Mortgage Loans itself or
through other sub-servicers who may be affiliates of .]
[The Servicing Agreement provides for servicing compensation equal to
a rate of basis points per annum on the outstanding principal balance of the
Mortgage Pool. In addition, the Servicer is entitled to retain certain late
payment fees, assumption fees and conversion fees related to the Mortgage Loans.
The Servicing Agreement does not require the Servicer to make Advances or to pay
any amount from its servicing compensation with respect to interest on Principal
Prepayments on Mortgage Loans.]
Except as described below, when any Mortgaged Property is conveyed by
the Mortgagor, the Master Servicer generally will enforce, and will cause any
Servicer to enforce, any due-on-sale clause contained in the Mortgage Loan, to
the extent permitted under applicable law and governmental regulations.
Acceleration of Mortgage Loans as a result of enforcement of such due-on-sale
provisions in connection with transfers of the related Mortgaged Properties will
affect the level of prepayments on the Mortgage Loans, thereby affecting the
weighted average life of the related Class A Certificates. See "Maturity and
Prepayment Considerations" in the Prospectus.
All of the Mortgage Loans include a rider to the Mortgage providing
that assumption of the remaining unpaid principal balance of the Mortgage Loan
will be permitted if the borrower provides information required to evaluate the
creditworthiness of the proposed transferee and the transferee is determined to
be creditworthy. In connection with such assumption, a reasonable fee may be
charged as a condition to the loan assumption and any such fee collected in
connection with a Mortgage Loan in the Subsidiary Trust Fund will be retained by
[or the Servicer]. The assumption of Mortgage Loans by buyers of the related
Mortgaged Properties may also affect the level of prepayments on the Mortgage
Loans, thereby affecting the weighted average life of the Class A Certificates.
INSURANCE
A Standard Hazard Insurance Policy will be maintained with respect to
each Mortgage Loan in an amount equal to the maximum insurable value of the
improvements securing such Mortgage Loan or the principal balance of such
Mortgage Loan, whichever is less. See "Description of Insurance--Standard
Hazard Insurance Policies" in the Prospectus. [No Mortgage Pool Insurance
Policy, Special Hazard Insurance Policy or Mortgagor Bankruptcy Insurance will
be maintained with respect to the Mortgage Pool, nor will any Mortgage Loan
included in the Mortgage Pool be subject to FHA Insurance or a VA Guaranty.]
S-18
<PAGE>
YIELD CONSIDERATIONS
The effective yield to holders of the Class A Certificates will depend
upon, among other things, the price at which the Class A Certificates are
purchased and the amount and rate at which principal, including both scheduled
and unscheduled payments thereof, is paid to Class A Certificateholders.
The rate of principal payments on the Class A Certificates, the
aggregate amount of each monthly interest payment on the Class A Certificates
and the yield to maturity of the Class A Certificates will be directly related
to the rate of payments of principal on the Mortgage Loans. Principal payments
on the Mortgage Loans may be in the form of scheduled principal payments or
prepayments (for this purpose, the term "prepayment" includes payments resulting
from optional prepayments by the Mortgagors, refinancings, liquidation of the
Mortgage Loans due to defaults, casualties, condemnations or the like and
repurchases by the Depositor or the Master Servicer, as the case may be). Any
such prepayments will result in distributions to Certificateholders of amounts
which would otherwise be distributed over the remaining term of the Mortgage
Loans. In general, the prepayment rate may be influenced by a number of
economic, geographic, social and other factors, including general economic
conditions and homeowner mobility. Other factors affecting prepayment of
mortgage loans include changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties and servicing
decisions.
The Mortgage Loans may be prepaid by the Mortgagors at any time
without payment of any prepayment fee or penalty. As described herein under
"Description of the Certificates--Subordination of the Class B Certificates;
Shifting Interest Credit Enhancement", all or a disproportionately large
percentage of principal prepayments on the Mortgage Loans will be distributed to
the holders of the Class A Certificates during at least the first fourteen years
after the Cut-off Date. In general, defaults on Mortgage Loans are expected to
occur with greater frequency in their early years, although little data is
available with respect to the rate of default on adjustable rate Mortgage loans.
Increases in the monthly payments on the Mortgage Loans in excess of those
assumed in underwriting such Mortgage Loans may result in a default rate higher
than that on conventional mortgage loans with fixed mortgage rates.
Prepayments, liquidations and purchases of the Mortgage Loans will result in
distributions to Certificateholders of amounts which would otherwise be
distributed over the remaining terms of the Mortgage Loans. Since the rate of
payment of principal on the Mortgage Loans will depend on future events and a
variety of factors (as described more fully herein and in the Prospectus under
"Yield Considerations" and "Maturity and Prepayment Considerations"), no
assurance can be given as to such rate or the rate of principal prepayments.
[Mortgage Loans that are expected to constitute approximately % of
the initial aggregate principal balance of the Mortgage Loans as of the Cut-off
Date will provide that the mortgagor may, during a specified period of time,
convert the adjustable rate of the related Mortgage Loan to a fixed rate. The
conversion option may be exercised during periods of rising interest rates as
mortgagors attempt to limit their risk of higher rates. If mortgagors were to
exercise their conversion rights in such an interest rate environment, a
purchase of the Mortgage Loan by the Master Servicer would have the same effect
on Certificateholders as a prepayment at a time when prepayments generally would
not be expected. The availability of fixed rate mortgage loans at competitive
interest rates during periods of falling interest rates may also encourage
mortgagors to exercise the conversion option. The convertible ARM loan is a
relatively new type of mortgage loan, so there can be no certainty as to the
rate at which conversions will take place or as to the rate of prepayments in
stable or changing interest rate environments. The Master Servicer is obligated
to purchase Converted Mortgage Loans. Consequently, the exercise of the
conversion option by mortgagors will generally result in prepayment of principal
with respect to the Mortgage Pool.]
[The rate at which mortgagors exercise their conversion rights and the
resulting purchase of Converted Mortgage Loans by the Master Servicer will
affect the rate of payment of principal, and hence the effective yield on the
Class A Certificates. The purchase price paid will be passed through to the
Certificateholders as principal in the month following the month of such
purchase. The effective yield on the Class A Certificates also will be affected
by the failure of the Master Servicer to purchase Converted Mortgage Loans and
the resulting retention of fixed rate Mortgage Loans in the Mortgage Pool. See
"Description of the Certificates--Purchase of Converted Mortgage Loans" herein.]
The timing of changes in the rate of prepayments on the Mortgage Loans
may significantly affect an investor's actual yield to maturity, even if the
average rate of principal payments experienced over time is consistent with an
investor's expectations. In general, the earlier a prepayment of principal on
the Mortgage Loans, the greater will be the effect on the
S-19
<PAGE>
investor's yield to maturity. As a result, 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 the period immediately following the issuance
of the Certificates would not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments.
All of the Mortgage Loans comprising the Mortgage Pool are adjustable
rate mortgage loans. The yield to maturity of the Class A Certificates will be
affected by the Mortgage Rates on the Mortgage Loans as they adjust from time to
time. The Depositor is not aware of any publicly available statistics relating
to the principal prepayment experience of adjustable rate mortgage loans over an
extended period of time, and the Depositor's experience with respect to
adjustable rate mortgage loans is insufficient to draw any conclusions with
respect to the expected prepayment rates on the Mortgage Loans comprising the
Mortgage Pool. The rate of payments (including prepayments) on adjustable rate
mortgage loans has fluctuated in recent years. As is the case with conventional
fixed-rate mortgage loans, adjustable rate mortgage loans may be subject to a
greater rate of principal prepayments in a declining interest rate environment.
For example, if prevailing mortgage rates fell significantly below the then
current Mortgage Rates on the Mortgage Loans or significantly below the Maximum
Mortgage Rates on the Mortgage Loans, the rate of prepayment would be expected
to increase due to the availability of fixed-rate mortgage loans at competitive
interest rates, which may encourage Mortgagors to refinance the Mortgage Loans
in order to obtain a lower fixed interest rate. Conversely, if prevailing
mortgage rates rose significantly above the then current Mortgage Rates on the
Mortgage Loans, the rate of prepayment on the Mortgage Loans would be expected
to decrease.
[The Mortgage Rates on the Mortgage Loans will adjust semi-annually
(although not on the same Adjustment Dates) and such semi-annual increases and
decreases in the Mortgage Rates on the Mortgage Loans will be limited by the
Periodic Mortgage Rate Cap and Maximum Mortgage Rates applicable to the Mortgage
Loans. In addition, such Mortgage Rates will be based on the Index (which may
not rise and fall consistently with interest rates on other types of adjustable
rate residential mortgage loans) plus the Gross Margin for the Mortgage Loans
(which may be different from then current margins on residential mortgage
loans). As a result, the Mortgage Rates on the Mortgage Loans at any time may
not equal the prevailing rates for similar adjustable rate mortgage loans, and
the rate of prepayment may be lower or higher than would otherwise be
anticipated. See "Yield Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.]
In addition, if on any Distribution Date, after taking into account
any Advances, amounts otherwise distributable to the Subsidiary Residual
Certificateholder and permitted withdrawals from the Certificate Account, there
are not sufficient funds to pay the principal and interest on the Class A
Certificates, the amount of the resulting shortfall, and in the case of interest
shortfalls, interest at the applicable Pass-Through Rate, will be added to the
amount the Class A Certificateholders are entitled to receive on the next
Distribution Date. See "Description of the Certificates--Distributions" herein.
If any shortfalls occur, the weighted average life of the Class A Certificates
will be increased over that which would result had such shortfalls not occurred.
The after-tax yield to Certificateholders may be affected by lags
between the time interest income accrues to the Certificateholders and the time
the related income is received. See "Certain Federal Income Tax Consequences"
herein and in the Prospectus.
The effective yield to the holders of Class A Certificates will be
lower than the yield otherwise produced by the Pass-Through Rate and purchase
price because monthly interest will not be payable to such holders until the
25th day (or if such day is not a Business Day, then on the next succeeding
Business Day) of the month following the month in which interest accrues on the
Mortgage Loans.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates offered hereby will be issued pursuant to the Pooling
and Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. Reference is made to the Prospectus for additional
information regarding the terms and conditions of the Pooling and Servicing
Agreement. The following summaries do not purport to
S-20
<PAGE>
be complete and are subject to, and are qualified in their entirety by reference
to, the provisions of the Pooling and Servicing Agreement. When particular
provisions or terms used in the Pooling and Servicing Agreement are referred to,
the actual provisions (including definitions of terms) are incorporated by
reference.
The Class A Certificates will be transferable and exchangeable at the
office of the Trustee located at . No service charge will be made for any
registration of transfer or exchange of the Class A Certificates on the
Certificate Register maintained by the Trustee, but the Trustee may require the
payment of a sum sufficient to cover any related tax or other governmental
charge. There is at present no market for the Class A Certificates and there
can be no assurance that a secondary market will develop or that if it does
develop, it will continue. Fluctuating market interest rates may affect the
market value of the Class A Certificates.
DISTRIBUTIONS
Distributions of principal and interest on the Certificates will be
made on the [25th] day of each month, or, if such day is not a Business Day, the
next succeeding Business Day (each a "Distribution Date"), beginning , to
the persons in whose names the Certificates are registered at the close of
business on the last day of the month preceding the month in which payment is
made (the "Record Date"). Certain calculations with respect to the Certificates
will be made on the [15th] day of each month, or if such day is not a Business
Day, the next succeeding Business Day (the "Determination Date").
Principal received on each Mortgage Loan will be passed through
monthly as described below on the Distribution Date occurring in the month in
which the Due Date occurs. Principal prepayments received during the period
from the first day of any month to the last day of such month (a "Prepayment
Period") will be passed through on the Distribution Date occurring in the month
following receipt. When a Mortgage Loan is prepaid, in whole or in part,
between scheduled payment dates, the Mortgagor pays interest on the amount
prepaid only to the date of prepayment and not thereafter. The Master Servicer
is not required to pay any part of its servicing compensation to assure that
distributions made to Certificateholders on the related Distribution Date
include an amount equal to one full month's interest at the applicable
Subsidiary Pass-Through Rate.
Interest received by the Subsidiary Trust Fund on each Mortgage Loan
will be passed through monthly on the Distribution Date occurring in the month
in which the Due Date occurs, at the Subsidiary Pass-Through Rate for such
Mortgage Loan. The Pass-Through Rate will equal the weighted average of the
Subsidiary Pass-Through Rates for the Mortgage Loans. Prior to the first
Adjustment Date with respect to each Mortgage Loan that occurs after the Cut-off
Date, the Subsidiary Pass-Through Rate for such Mortgage Loan will equal the
Initial Mortgage Rate less . Thereafter, the Subsidiary Pass-Through Rate
with respect to each Mortgage Loan will equal the Index applicable to each
Mortgage Loan plus basis points (the "Pass-Through Margin") subject to the
limitation that the Subsidiary Pass-Through Rate shall not exceed the lesser of
the Periodic Mortgage Rate Cap less the Servicing Fee Rate and the Maximum
Subsidiary Pass-Through Rate. The Maximum Subsidiary Pass-Through Rate with
respect to a Mortgage Loan shall equal the Maximum Mortgage Rate for such
Mortgage Loan minus the Servicing Fee Rate. The Master Servicer will receive a
servicing fee (the "Servicing Fee") as compensation for the servicing of each
Mortgage Loan which is calculated monthly and equals a fixed percentage of the
principal balance of the Mortgage Loan (the "Servicing Fee Rate"). [Prior to
the first Adjustment Date with respect to a Mortgage Loan that occurs after the
Cut-off Date, the Servicing Fee Rate will be basis points for such Mortgage
Loan. Subsequent to the first Adjustment Date with respect to a Mortgage Loan
that occurs after the Cut-off Date, the Servicing Fee Rate shall equal basis
points. See "Description of the Mortgage Pool and the Underlying Mortgaged
Properties" above and "Servicing Compensation and Payment of Expenses" below.
The amount of interest on each Mortgage Loan available to be distributed on each
Distribution Date may be expected to change, among other reasons, as the
Mortgage Rate and the Subsidiary Pass-Through Rate vary with the Index and as
the Mortgage Rate reaches the Periodic Mortgage Rate Cap and the Maximum
Mortgage Rate (which will not be the same for all Mortgage Loans).
The Master Servicer will deposit in the Certificate Account the
payments and collections described in "Description of the Certificates--Payments
on Mortgage Loans" in the Prospectus.
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<PAGE>
On each Distribution Date, the amount required to be distributed to
the Class A Certificateholders will equal the lesser of the Class A Distribution
Amount and the Master Trust Fund Aggregate Distribution.
The "Class A Distribution Amount" means generally, as of any
Distribution Date, an amount equal to the sum of: (a) one month's interest at
the Pass-Through Rate on the Class A Certificate Principal Balance as of such
Distribution Date; (b) the outstanding balance of all previously due and unpaid
Interest Shortfalls (as defined below) owed to the Class A Certificateholders
with accrued interest thereon at the Pass-Through Rate; (c) the outstanding
balance of all previously due and unpaid Principal Shortfalls (as defined below)
owed to the Class A Certificateholders; (d) the Class A Percentage of each
scheduled payment of principal due on the preceding Due Date on the Mortgage
Loans; (e) the Class A Prepayment Percentage of any Principal Prepayments
received during the related Prepayment Period on the Mortgage Loans; (f) with
respect to Mortgage Loans which became Liquidated Loans during the related
Prepayment Period, the Class A Percentage of the aggregate principal balance of
such Mortgage Loans, net of certain related unreimbursed advances with respect
thereto; (g) the Class A Percentage of any insurance proceeds received during
the related Prepayment Period, net of certain related unreimbursed advances with
respect thereto; and (h) with respect to Mortgage Loans purchased by the Master
Servicer pursuant to the Pooling and Servicing Agreement during the related
Prepayment Period, the Class A Percentage of the aggregate principal Balances of
such Mortgage Loans, net of certain related unreimbursed advances with respect
thereto.
At any time when the Subordinated Amount is equal to zero, the amount
calculated under clauses (a) through (h) above shall not include any amount in
respect of Monthly Payments due on Mortgage Loans which were not actually
received (but shall include payments from funds attributable to advances by the
Master Servicer).
The "Master Trust Fund Aggregate Distribution" shall mean, on any
Distribution Date, the sum of all amounts distributed with respect to the
Subsidiary Regular Interests, as described below.
On each Distribution Date the aggregate amount required to be
distributed to the holders of the Subsidiary Regular Interests is equal to the
lesser of (x) the Subsidiary Trust Fund Regular Distribution and (y) the sum of
(i) one month's interest at the Subsidiary Pass-Through Rate on the principal
balance of each Mortgage Loan, (ii) each payment of the principal due on the
related Due Date on each Mortgage Loan, (iii) any delinquent Mortgagor payment
of principal and interest on such Mortgage Loan received prior to the related
Determination Date, after adjustment of the interest portion of such payment to
the related Subsidiary Pass-Through Rate and deduction of unreimbursed advances
by the Master Servicer with respect to the preceding delinquent payment, (iv)
for each Mortgage Loan which was the subject of a Principal Prepayment during
the related Prepayment Period, the amount of such Principal Prepayment, (v) for
each Mortgage Loan which became a Liquidated Loan during the related Prepayment
Period, the principal balance of such Mortgage Loan, net of certain unreimbursed
advances by the Master Servicer, (vi) with respect to any Mortgage Loan
purchased by the Master Servicer pursuant to the Agreement, the principal
balance of such Mortgage Loan net of certain unreimbursed advances by the Master
Servicer, and (vii) amounts representing insurance proceeds with respect to a
Mortgage Loan.
The "Subsidiary Trust Fund Regular Distribution" means, generally, as
of any Distribution Date, an amount equal to the amount on deposit in the
Certificate Account as of the close of business on the related Determination
Date except: (a) amounts received on particular Mortgage Loans as late payments
or other recoveries of principal or interest (including Liquidation Proceeds,
insurance proceeds, and condemnation awards) and respecting which the Master
Servicer previously made an unreimbursed Advance of such amounts; (b) amounts
representing reimbursement for certain losses and expenses incurred by the
Master Servicer, as described in the Pooling and Servicing Agreement; (c) all
amounts representing scheduled monthly payments due after the immediately
preceding Due Date; (d) all Principal Prepayments (and interest thereon),
Liquidation Proceeds, insurance proceeds, condemnation awards and repurchase
proceeds received after the related Prepayment Period, including payments of
interest representing interest accrued after the last day of the related Due
Period; (e) all income from Eligible Investments held in the Certificate Account
for the account of the Master Servicer; and (f) certain amounts distributable to
the holder of the Subsidiary Residual Interest pursuant to the Pooling and
Servicing Agreement.
The "Class A Certificate Principal Balance" on any Distribution Date
will equal the portion of the unpaid principal balance of the Mortgage Loans
evidenced by the Class A Certificates as of the Cut-off Date (the "Initial Class
A Certificate Principal Balance") less the sum of payments or recoveries of, or
with respect to, principal of the Mortgage Loans previously
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<PAGE>
distributed to the Class A Certificateholders and any Realized Losses (as
defined below) including, subject to certain limitations, Special Hazard
Realized Losses (as defined below) previously allocated to the Class A
Certificates. The Initial Class A Certificate Principal Balance is expected to
be approximately $ . See "--Subordination of the Class B Certificates; Shifting
Interest Credit Enhancement" herein.
The "Class B Principal Balance" on any Distribution Date will equal
the Scheduled Principal Balance (as defined below) of the Mortgage Loans minus
the Class A Certificate Principal Balance.
The "Scheduled Principal Balance" of the Mortgage Loans as of the time
of any determination will equal the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, after application of any scheduled principal
payments due on or before the Cut-off Date, whether or not received, reduced by
the principal portion of all scheduled payments of principal and interest due on
or before the date of determination, whether or not received, and by all
Principal Prepayments distributed to Certificateholders on or before the date of
determination, and further reduced by Realized Losses (as defined below) with
respect to the Mortgage Loans that have been allocated to one or more classes of
Certificates on or before the date of determination.
The "Class A Percentage" shall mean, as to any Distribution Date, the
lesser of 100% and the percentage obtained by dividing the Class A Certificate
Principal Balance by the Scheduled Principal Balance. The "Class A Prepayment
Percentage" shall initially be 100% and shall decline thereafter as provided
under "Subordination of the Class B Certificates; Shifting Interest Credit
Enhancement".
"Interest Shortfall" shall mean, as to any Distribution Date, any
excess of the amount computed pursuant to clause (a) of the term "Class A
Distribution Amount" over the amount of interest distributed to the Class A
Certificateholders on such Distribution Date. "Principal Shortfall" shall mean,
as to any Distribution Date the excess of the sum of the amounts computed
pursuant to clauses (a) through (h) of the term "Class A Distribution Amount"
over the amounts distributed to the Class A Certificateholders (the
"Shortfall"), less the Interest Shortfall.
All distributions will be made by or on behalf of 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
shall be made either (i) by check mailed to the address of each
Certificateholder as it appears in the Certificate Register or (ii) to any
holder of Certificates having an initial principal balance in excess of
$5,000,000, by wire transfer in immediately available funds to the account of
such Certificateholder specified in writing to the Trustee.
[On the sixth day of any month or the next succeeding Business Day,
the Master Servicer or the Trustee will provide upon request the Class A
Certificate Principal Balance after giving effect to monthly payments due on the
immediately preceding Due Date.]
SUBORDINATION OF THE CLASS B CERTIFICATES;
SHIFTING INTEREST CREDIT ENHANCEMENT
The rights of the Class B Certificateholders to receive certain
distributions with respect to the Mortgage Loans are subordinate to such rights
of the Class A Certificateholders to the extent of the Subordinated Amount. As
of each Determination Date, the Subordinated Amount will equal the Class B
Principal Balance on such date, reduced by the excess, if any, of Aggregate
Losses over cumulative Realized Losses borne by the Class B Certificateholders.
Realized Losses shall not be allocated to the Class A Certificates
until after such time as the allocation of such Realized Losses to the Class B
Certificates has reduced the Class B Principal Balance to zero. At such time,
Realized Losses shall be allocated to the Class A Certificates, pro rata among
such Certificates in proportion to their outstanding Class A Certificate
Principal Balances immediately prior to the relevant Distribution Date.
[Notwithstanding the above, Special Hazard Realized Losses shall be allocated
first to the Class B Certificates only until such time as Special Hazard
Realized Losses equal the Special Hazard Subordination Amount, which will be %
of the Cut-off Date Principal Balance. Thereafter,
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<PAGE>
Special Hazard Realized Losses shall be allocated to the Class A Certificates
and the Class B Certificates, pro rata among such Certificates in proportion to
their outstanding Principal Balances immediately prior to the relevant
Distribution Date.] Any allocation of Realized Losses (or Special Hazard
Realized Losses) to a Class A Certificate or a Class B Certificate on a
Distribution Date shall be made by reducing the Principal Balance thereof by the
amount so allocated, which allocation shall be deemed to have occurred on such
Distribution Date. [Any allocation to the Class B Certificates of a Realized
Loss or a Special Hazard Realized Loss prior to reducing the Special Hazard
Subordination Amount to zero shall have the effect of increasing the Class A
Percentage of future payments of principal on the Mortgage Loans and thereby
decreasing the Subordinate Percentage of such payments of principal.]
"Realized Loss" is defined in the Pooling and Servicing Agreement (i)
with respect to any Liquidated Loan, as the excess of the outstanding principal
balance of such Liquidated Loan over the Liquidation Proceeds, if any, received
in connection with such Liquidated Loan, after application of all withdrawals
permitted to be made by the Master Servicer pursuant to the Pooling and
Servicing Agreement, (ii) with respect to any Mortgage Loan which has become
subject to a valuation by a court of competent jurisdiction of the Mortgaged
Property in an amount less than the then outstanding indebtedness under the
Mortgage Loan, which valuation results from a proceeding under the United States
Bankruptcy Code, as amended from time to time (11 U.S.C.) (a "Deficient
Valuation"), as the excess of the outstanding principal balance of such Mortgage
Loan over the principal amount as reduced in the Deficient Valuation, or (iii)
with respect to any Mortgage Loan purchased by the Master Servicer or the
Depositor pursuant to the Pooling and Servicing Agreement, as the excess,
if any, of 100% of the principal balance of such Mortgage Loan, together with
accrued and unpaid interest at the applicable Subsidiary Pass-Through Rate to
the first day of the month following the month of such purchase, giving effect
to the amount of any unreimbursed Advances made by the Master Servicer with
respect to such Mortgage Loan, over the purchase price for such Mortgage Loan as
the same may be reduced pursuant to an Opinion of Counsel to prevent such amount
from being taxed to the Trust Fund as a "prohibited transaction", as defined in
Section 860F(a)(2) of the Code. Realized losses may result from, among other
things, Special Hazard Realized Losses. ["Special Hazard Realized Loss" means
with respect to any Mortgage Loan finally liquidated in connection with any
physical damage not covered under a Standard Hazard Insurance Policy or a flood
insurance policy, other than normal wear and tear or other circumstances set
forth in the Pooling and Servicing Agreement an amount equal to the unpaid
principal balance of the Mortgage Loan as of the date of such liquidation,
together with interest at the applicable Mortgage Rate, less the applicable
Servicing Fee, from the Due Date as to which interest was last paid to the Due
Date next succeeding such liquidation, less the proceeds, if any, received in
connection with such liquidation after application of all withdrawals from the
Certificate Account by the Master Servicer permitted pursuant to the Pooling and
Servicing Agreement.]
"Liquidated Loan" means a Mortgage Loan which, as of the close of
business on the Business Day next preceding the Due Date, has been liquidated
through deed in lieu of foreclosure, sale in foreclosure, trustee's sale or
other realization as provided by applicable law of real property subject to the
related Mortgage and any security agreements or with respect to which payment
under related private mortgage insurance or hazard insurance and/or from any
public or governmental authority on account of a taking or condemnation of any
such property has been received.
The protection afforded to the Class A Certificateholders will be
effected by the preferential right of the Class A Certificateholders to receive
the amount of principal and interest otherwise available for distribution to the
Class B Certificateholders on each Distribution Date out of available funds on
deposit in the distribution account for the Master Trust Fund and by
distributing to the Class A Certificateholders a disproportionately greater
percentage of Principal Prepayments received by the Master Trust Fund from the
Certificate Account, to the extent described herein (the "Class A Prepayment
Percentage"). This disproportionate distribution will have the effect of
accelerating the amortization of the Class A Certificates while increasing the
respective interest in the Mortgage Loan evidenced by the Class B Certificates.
Increasing the respective interest of the Class B Certificates relative to that
of the Class A Certificates is intended to preserve the availability of the
subordination provided by the Class B Certificates.
The Class A Prepayment Percentage for any Distribution Date occurring
before or in will, except as provided below, equal 100%. The Class A
Prepayment Percentage for any Distribution Date occurring subsequent to will be
determined as follows: (a) for any Distribution Date occurring subsequent to
and before or in , the Class A Prepayment Percentage will equal the Class A
Percentage plus % of the Subordinate Percentage for such
Distribution Date, except that prior to the Distribution Date next succeeding
the first Distribution Date, if any, after . , as of which the
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Step-down Criteria are satisfied, the Class A Prepayment Percentage will be
100%; (b) for any Distribution Date occurring subsequent to and before or in
, the Class A Prepayment Percentage will equal the Class A Percentage plus
% of the Subordinate Percentage for such Distribution Date, except that prior to
the Distribution Date next succeeding the first Distribution Date, if any, after
as of which the Step-down Criteria are satisfied, the Class A Prepayment
Percentage will be the Class A Prepayment Percentage in effect in ; (c) for
any Distribution Date occurring subsequent to and before or in , the Class A
Prepayment Percentage will equal the Class A Percentage plus % of the
Subordinate Percentage for such Distribution Date, except that prior to the
Distribution Date next succeeding the first Distribution Date, if any, after
as of which the Step-down Criteria are satisfied, the Class A Prepayment
Percentage will be the Class A Prepayment Percentage in effect in ; (d) for
any Distribution Date occurring subsequent to and before or in , the
Class A Prepayment Percentage will equal the Class A Percentage plus % of the
Subordinated Percentage for such Distribution Date, except that prior to the
Distribution Date next succeeding the first Distribution Date, if any, after
as of which the Step-down Criteria are satisfied, the Class A Prepayment
Percentage will be the Class A Prepayment Percentage in effect in ; and (e)
for any Distribution Date occurring subsequent to , the Class A Prepayment
Percentage will equal the Class A Percentage as of such Distribution Date except
that prior to the Distribution Date next succeeding the first Distribution Date,
if any, after as of which the Step-down Criteria are satisfied, the Class A
Prepayment Percentage will be the Class A Prepayment Percentage in effect in
. The foregoing is subject to the following: (i) if on any Distribution Date
the distribution of all Principal Prepayments received in the prior month to the
holders of the Class A Certificates would reduce the outstanding Class A
Certificate Principal Balance below zero, the Class A Prepayment Percentage for
such Distribution Date will be limited to the percentage necessary to reduce the
Class A Principal Certificate Balance to zero and thereafter the Class A
Percentage shall be zero; and (ii) if the Class A Percentage on any Distribution
Date is greater than the initial Class A Percentage, the Class A Prepayment
Percentage for such Distribution Date shall be 100%.
The Step-down Criteria shall be met as of any Distribution Date in the
12 months commencing subsequent to February of the year specified in the table
below provided that as of such Distribution Date (a) no more than one time
during the preceding months have the principal balances of outstanding Mortgage
Loans days or more delinquent (including loans in foreclosure and the book
value of owned real estate) exceeded % of the Scheduled Principal Balance
at such time, and (b) cumulative Advances deemed to be nonrecoverable as a
percentage of the principal amount of the Class B Certificates as of the Cut-off
Date (the "Subordinated Amount") do not exceed the amounts in the following
table:
<TABLE>
<CAPTION>
CUMULATIVE
NON-RECOVERABLE
ADVANCES AS A
PERCENTAGE OF THE
YEAR SUBORDINATED AMOUNT
- ------------------------------------- -------------------
<S> <C>
.................................
.................................
.................................
.................................
.................................
or thereafter.......................
</TABLE>
The definition of "Step-down Criteria" may be amended by the Depositor
and the Trustee, with prior written notice of such amendment to the Rating
Agency, in a manner that will not result in the lowering or withdrawal of the
then current rating of the Class A Certificates. Such amendment shall not
require the consent of any Certificateholder.
[PURCHASE OF CONVERTED MORTGAGE LOANS
The Pooling and Servicing Agreement provides that is obligated to
purchase from the Subsidiary Trust Fund any Converted Mortgage Loan in the month
following the month in which the related mortgagor exercises the conversion
option, for a price equal to the lesser of (a) 100% of the unpaid principal
balance of such Mortgage Loan, and (b) the Subsidiary Trust Fund's adjusted
federal income tax basis on the date such Mortgage Loan is to be purchased, in
each case plus accrued interest, if any, at the applicable Subsidiary Pass-
Through Rate in effect immediately prior to such conversion
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<PAGE>
to the last day of the month in which such Mortgage Loan became a Converted
Mortgage Loan, net of the applicable amounts due to the Master Servicer with
respect to that Mortgage Loan. will be obligated to deposit the amount
of the purchase price in the Certificate Account for distribution on the
Distribution Date in the month following the month of such conversion.
In the event defaults upon its obligation to repurchase any
Converted Mortgage Loan, the Trustee may attempt to sell the Mortgage Loan for
the price which was to be paid by the Master Servicer. A Converted Mortgage
Loan will remain in the Trust as a Mortgage Loan with a fixed Mortgage Rate
unless and until purchased by the Master Servicer or otherwise sold in
accordance with the Pooling and Servicing Agreement. So long as serves as
Master Servicer, the failure of the Master Servicer to repurchase a Converted
Mortgage Loan, after notice, is an Event of Default under the Pooling and
Servicing Agreement. The Trustee and a successor master servicer under the
Pooling and Servicing Agreement will not have any obligation to purchase any
Converted Mortgage Loan.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee payable to the Master Servicer will be payable out
of each interest payment on a Mortgage Loan and will be an adjustable amount
equal to one month's interest (or in the case of any payment of interest which
accompanies a Principal Prepayment made by the Mortgagor, interest for the
number of days covered by such payment of interest) at the applicable Servicing
Fee Rate on the principal balance of such Mortgage Loan. The Servicing Fee Rate
is not the same for each Mortgage Loan. The Servicing Fee Rate is basis
points. The Master Servicer will be permitted to retain or withdraw from the
Certificate Account, in respect of each interest payment received on a Mortgage
Loan, the Servicing Fee with respect to such Mortgage Loan, calculated on the
basis of the same principal amount and period respecting which the interest
payment is computed. In addition, , as holder of the Subsidiary Residual
Interest Certificate, will receive an amount equal to (i) with respect to each
Mortgage Loan, the principal balance of such Mortgage Loan times the difference,
if any, between the Mortgage Rate (net of the Servicing Fee) and the Subsidiary
Pass-Through Rate, [less such amount as may be necessary to assure that the
distributions made to the Subsidiary Regular Certificateholder on the related
Distribution Date include an amount equal to one full month's interest at the
applicable Subsidiary Pass-Through Rate], and (ii) gains, if any, arising from
sale of Mortgaged Property acquired as a result of foreclosure in respect of a
Mortgage Loan or arising from a repurchase pursuant to an optional termination.
See "Certain Federal Income Tax Consequences" in the Prospectus. See
"Description of the Certificates--Servicing Compensation and Payment of
Expenses" in the Prospectus for information regarding other possible
compensation to the Master Servicer.
The Master Servicer will pay all expenses incurred in connection with
its responsibilities under the Pooling and Servicing Agreement (subject to
limited reimbursement as described in the Prospectus), including, without
limitation, any amounts payable to the Servicer or any other sub-servicer, the
fees and expenses of the Trustee and the other various items of expense
enumerated in the Prospectus.
[ADJUSTMENT TO SERVICING FEE IN CONNECTION WITH PREPAID MORTGAGE LOANS
When a Mortgage Loan is prepaid, in whole or in part, between schedule
payment dates, the Mortgagor pays interest on the amount prepaid only to the
date of prepayment and not thereafter. As a result, the aggregate amount of
interest which would otherwise be distributed to Certificateholders may be
reduced. To mitigate this reduction in yield, the Pooling and Servicing
Agreement provides that with respect to any such Principal Prepayment, the
Servicing Fee otherwise payable to the Master Servicer will be reduced in such
amount, if any, as may be necessary to assure that the distributions made to
Certificateholders on the related Distribution Date include an amount equal to
one full month's interest at the applicable Subsidiary Pass-Through Rate for
such Mortgage Loan. Thus, so long as there are sufficient funds otherwise
payable from the Servicing Fee on each Distribution Date, Certificateholders
will always receive a full month's interest with respect to any such principal
prepayments. See "Distributions" above.]
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<PAGE>
THE TRUSTEE
, a banking association, will act as Trustee for the Certificates
pursuant to the Pooling and Servicing Agreement. The Trustee's principal
executive offices are located at , and its telephone number is ( ) .
REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS
Under certain circumstances, the Master Servicer may be required to
repurchase one or more Mortgage Loans from the Subsidiary Trust Fund.
Generally, the repurchase obligation arises when the documentation with respect
to a Mortgage Loan is discovered to be materially defective or when a breach of
a representation or warranty is discovered, which breach materially and
adversely affects the interests of Certificateholders. See "Description of the
Certificates-Assignment of Mortgage Loans" in the Prospectus.
In the event of a repurchase of a Mortgage Loan, the repurchase price
would be equal to the sum of the outstanding principal balance of such Mortgage
Loan on the date of repurchase plus interest accrued thereon at the Subsidiary
Pass-Through Rate to the first day of the month following the month in which
such repurchase is effected; provided, however, that if such repurchase at the
price so determined would result in net income to the Subsidiary Trust Fund that
would be subject to tax as income derived from a "prohibited transaction," as
defined in Section 860F(a)(2) of the Code, or would otherwise subject the
Subsidiary Trust Fund to tax, then, notwithstanding the foregoing, the
repurchase price for such Mortgage Loan shall be the maximum amount such that
the repurchase would not result in such tax, as evidenced by an Opinion of
Counsel, in form and substance satisfactory to the Trustee, which shall be
delivered in the event of any such reduction.
Within a period of three months, or in the case of a "defective
obligation" within the meaning of Section 860(G)(a)(4)(B) of the Code, within
two years from the Delivery Date of the Certificates, the Depositor or the
Master Servicer may, instead of repurchasing a Mortgage Loan required to be
repurchased pursuant to the Pooling and Servicing Agreement, deliver a mortgage
loan (a "Replacement Mortgage Loan") in substitution for any Mortgage Loan that
would otherwise have been repurchased (a "Deleted Mortgage Loan"). Generally,
the repurchase obligation arises when the documentation with respect to a
Mortgage Loan is discovered to be materially defective or when a breach of a
representation or warranty is discovered, which breach materially and adversely
affects the interests of Certificateholders. See "Description of the
Certificates--Assignment of Mortgage Loans" in the Prospectus.
To the extent that the Depositor or the Master Servicer, as the case
may be, elects to deliver a Replacement Mortgage Loan for a Mortgage Loan it
would otherwise be obligated to repurchase, such Replacement Mortgage Loan must,
on the date of such substitution: (a) have an outstanding principal balance,
after deduction of payments due in the month of substitution, not in excess of
the principal balance of the Deleted Mortgage Loan; (b) have a Maximum Mortgage
Rate no lower than (and not more than 1% per annum higher than) the Maximum
Mortgage Rate of the Deleted Mortgage Loan; (c) have the same Index, Gross
Margin, Periodic Mortgage Rate Cap and frequency of Adjustment Dates as those of
the Deleted Mortgage Loan; (d) be accruing interest at a rate no lower than and
have the same Payment Adjustment Date as the Payment Adjustment Date of the
Deleted Mortgage Loan; (e) have a Loan-to-Value Ratio no higher than that of the
Deleted Mortgage Loan; (f) have a term to maturity no greater than (and not more
than one year less than) that of the Deleted Mortgage Loan; and (g) comply with
each representation and warranty with respect to Mortgage Loans in the Pooling
and Servicing Agreement. Upon any such substitution, the Depositor or the
Master Servicer, as the case may be, will deliver the Mortgage File relating to
the Replacement Mortgage Loan to the Trustee and the Trustee will release the
Deleted Mortgage Loan (or any property acquired in respect thereof) from the
Subsidiary Trust Fund.
For any month in which a Replacement Mortgage Loan is substituted for
any Deleted Mortgage Loan, the Master Servicer will determine the amount, if
any, by which the aggregate principal balance of all such Replacement Mortgage
Loans as of the date of substitution is less than the aggregate principal
balance of all such Deleted Mortgage Loans (after application of the scheduled
principal portion of the monthly payments due in such month). The amount of any
such shortage shall be deposited by the Depositor or the Master Servicer, as the
case may be, from its own funds into the Certificate Account in the month of
substitution, without any reimbursement therefor, and will be distributed to
Certificateholders on
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<PAGE>
the Distribution Date in the month following such substitution. See "Description
of the Certificates--Distributions on Certificates" in the Prospectus.
VOTING RIGHTS
At any time that any Class A Certificates or Class B Certificates are
outstanding, the voting rights of a Class A Certificate or Class B Certificate
are obtained by dividing the then outstanding principal balance of such
Certificate by the aggregate principal balances at such time of all the Class A
Certificates and Class B Certificates.
[OPTIONAL TERMINATION
The Pooling and Servicing Agreement provides that the holder of the
Subsidiary Residual Interest Certificate, at its option, may purchase from the
Subsidiary Trust Fund all Mortgage Loans remaining in the Mortgage Pool and all
property acquired in respect of a Mortgage Loan, provided that the aggregate
unpaid balance of the Mortgage Loans at the time of any such repurchase is less
than % of the Cut-off Date Principal Balance. Additionally, the holder
of the Class B[-2] Certificate, at its option, may purchase from the Master
Trust Fund all Subsidiary Regular Interests remaining in the Master Trust Fund
and all other property in such Trust Fund, provided that the Subsidiary Regular
Interests at the time of any such repurchase represent interests in less than %
of the Cut-off Date Principal Balance of the Mortgage Loans. The purchase price
for any such repurchase will be 100% of the unpaid principal balance of each
Mortgage Loan or Subsidiary Regular Interest, as the case may be, together with
accrued and unpaid interest with respect to each Mortgage Loan through the last
day of the month of such repurchase. Any property acquired in respect of a
Mortgage Loan and remaining in the applicable Trust Fund at the time such
optional termination is effected will be purchased at its appraised value.
Either of the above purchases would thereby effect early retirement of the Class
A Certificates.]
LEGAL INVESTMENT
The Class A Certificates will constitute, for so long as they are
rated as described below, "mortgage-related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984 (the "Enhancement Act"), and,
as such, will be legal investments for certain entities to the extent provided
in the Enhancement Act. Such investments, however, will be subject to general
regulatory considerations governing investment practices under state and federal
law. 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 mortgage-related securities. Investors should
consult their own legal advisors to determine whether, and to what extent, the
Class A Certificates may be purchased by such investors. See "Legal Investment"
in the Prospectus.
RATING
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated at least " " by . (" "). Securities rated " " by
are " ".
[The ratings of Moody's on mortgage pass-through Certificates address
the likelihood of the receipt by certificateholders of all distributions on the
underlying mortgage loans. Moody's rating opinions address the structural,
legal, issuer and tax-related aspects associated with the Certificates,
including the nature of the underlying mortgage loans. Moody's ratings on pass-
through Certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors (including, in the case of the Class A
Certificates, prepayments resulting from the repurchase of Converted Mortgage
Loans) or of the degree to which such payments might differ from that originally
anticipated. Moody's rating of the Class A Certificates will not represent any
assessment of the Master Servicer's ability to repurchase Converted Mortgage
Loans. The rating does not address the possibility that Certificateholders
might suffer a lower than anticipated yield.]
S-28
<PAGE>
ERISA CONSIDERATIONS
[A fiduciary of any employee benefit plan and certain other retirement
plans and arrangements (including individual retirement accounts, and annuities,
Keogh plans, and collective investment funds in which such funds, accounts,
annuities or arrangements are invested) that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code should
carefully review with legal advisors whether the purchase or holding of
Certificates could give rise to a transaction that is prohibited or not
otherwise permissible either under ERISA or the Code. See "ERISA
Considerations" in the Prospectus.]
PLAN OF DISTRIBUTION
[The Master Servicer has agreed, pursuant to the Purchase Agreement
dated (the "Purchase Agreement"), to pay the Depositor a fee of $ in
connection with the exchange of the Certificates and the residual interest in
the Subsidiary REMIC for the Mortgage Loans. The Depositor will sell the
Certificates and such residual interest to the Master Servicer in exchange for
the Mortgage Loans subject to the terms and conditions set forth in the Purchase
Agreement. Pursuant to the Purchase Agreement, the Depositor or its affiliates
have certain preferential rights in connection with resales of the Class A
Certificates.]
[ may be deemed, by virtue of the exchange, to be an "Underwriter"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act") in connection with reoffers and sales by of the Class A Certificates.
Until , such reoffers and sales by Master Servicer will be made pursuant to
this Prospectus Supplement and the Prospectus, as amended and supplemented as of
the date of such reoffering. After such date, this Prospectus Supplement and
Prospectus may not be used in connection with such reoffers and sales. The
Depositor has been advised by that such reoffers and sales may
be made by from time to time in negotiated transactions or
otherwise at varying prices determined at the time of sale, and may be made to
or through one or more Underwriters, agents or dealers, including, without
limitation, the Depositor or one of its affiliates, who may receive compensation
in the form of underwriting discounts, concessions or commissions.]
[The Purchase Agreement provides that will indemnify the
Depositor and its affiliates against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Depositor and its
affiliates, as the case may be required to make in respect thereof.]
[The Depositor has entered into an Underwriting Agreement with
[several Underwriters, for whom] CS First Boston Corporation, an affiliate of
the Depositor[, is acting as Representative.] The [Underwriter[s] named below[
[has] [have severally] agreed to purchase from the Depositor the [entire]
[following respective] principal amounts[s] of the Class A Certificates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
UNDERWRITER CERTIFICATES CERTIFICATES TOTAL
- ---------------------------- ------------ ------------ -----
<S> <C> <C> <C>
CS First Boston Corporation. $ $ $
Total.................... $ $ $ ]
</TABLE>
[The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that the
Underwriter[s] will be obligated to purchase the entire principal amount of the
Class A Certificates if any are purchased.]
The Underwriter[s] [[has] [have] advised the Depositor that the
Underwriter[s] propose[s] to offer the Class A Certificates from time to time
for sale in one or more negotiated transactions or otherwise at prices to be
determined at the time of sale. The Underwriter[s] may effect such transactions
by selling the Class A Certificates to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter[s] and any purchasers of the Class A
Certificates for whom they may act as agent.
S-29
<PAGE>
The Underwriter[s] and any dealers that participate with the
Underwriter[s] in the distribution of the Certificates may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of Class A Certificates by them may be deemed to be underwriting
discounts or commissions, under the Securities Act.
[The Depositor has agreed to indemnify the Underwriter[s] against
certain liabilities, including liabilities under the Securities Act or to
contribute to payments the Underwriter[s] may be required to make in respect
thereof.]
LEGAL MATTERS
The legality of the Certificates will be passed upon for the Depositor
and for the Underwriter[s] by Sidley & Austin. The material federal income tax
consequences of the Class A Certificates will be passed upon for the Depositor
by Sidley & Austin.
USE OF PROCEEDS
[The Certificates are being initially sold and delivered by the
Depositor to in exchange for the Mortgage Loans to be deposited
by the Depositor in the Subsidiary Trust Fund. Other than its fee in
connection with such exchange the Depositor will receive no other proceeds from
the sale of the Certificates. may subsequently sell the Certificates in
one or more transactions. It is expected that will use the proceeds of
such sale for general corporate purposes. See "Plan of Distribution" herein.]
[The Depositor will apply the net proceeds of the offering of the
Class A Certificates towards the simultaneous purchase of the Mortgage Loans
underlying the Certificates. Certain of the Mortgage Loans will be acquired
in privately negotiated transactions by the Depositor from one or more
affiliates.]
S-30
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME A FINAL
PROSPECTUS IS DELIVERED. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DECEMBER __, 1995
PROSPECTUS SUPPLEMENT
(To Prospectus Dated , 19 )
$ (Approximate)
Asset Backed Securities Corporation
Depositor
[Adjustable Rate] Conduit Mortgage Pass-Through Certificates, Series
Class A-1 Certificates
The [Adjustable Rate] Conduit Mortgage Pass-Through Certificates, Series (the
"Certificates") will be comprised of [three] classes of certificates:
[Class A-1,] [Class IO] [and] [Class R.] Only the Class A-1 Certificates are
offered hereby. The Certificates evidence 100% of the beneficial ownership
interest in a trust fund (the "Trust Fund") to be created by Asset Backed
Securities Corporation (the "Depositor"), the assets of which will consist
primarily of [(a) classes (or portions of classes) of mortgage pass-through
certificates (the "Mortgage Certificates"), each of which is part of one of
series of mortgage pass-through certificates initially sold by
and acquired by the Depositor in the secondary market,] [(b) a Reserve Fund]
[and] [(c) a Yield Support Agreement] provided by .] The
Certificates will be issued pursuant to a [Pooling Trust Agreement (the
"Pooling Agreement") among the Depositor, ,
as Certificate Administrator and ., as Trustee.
See "Description of the Certificates".
As more fully described herein, commencing with a rate of % per annum,
interest will accrue, to the extent of funds available therefor, on the Class
A-1 Certificates at a per annum rate of % in excess of the [specify
index], determined as set forth herein. The amount of interest accrued on the
Class A-1 Certificates will be reduced by the amount of certain prepayment
interest shortfalls and deferred interest as described herein under
"Description of Certificates-Distributions-Interest Distributions". Interest
generally will be paid , to the extent funds are available therefor as
described herein on the day of each or,
if any such day is not a business day on the following business day, beginning
in . Each such day is referred to as a "Distribution Date". See
"Summary of Terms-Distribution Date" and "Description of the Certificates"
herein.
Principal payments on the Class A-1 Certificates will be made on each
Distribution Date to the extent funds are available therefor, as described
herein, until the principal balance of the Class A-1 Certificates has been
reduced to zero. See "Description of the Certificates-Distributions-Principal
Distributions".
Prospective investors in the Certificates should consider the factors discussed
under "Risk Factors" in this Prospectus Supplement on Page S- .
(cover continued on next page)
THE CLASS A-1 CERTIFICATES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF ASSET
BACKED SECURITIES CORPORATION , THE TRUSTEE, THE CERTIFICATE ADMINISTRATOR OR
ANY OF THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE
LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR
BY ANY OTHER PARTY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Class A-1 Certificates will be offered by CS First Boston Corporation
("First Boston") from time to time to the public in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. Proceeds to
the Depositor from the sale of the Class A-1 Certificates are anticipated to be
approximately $ , plus accrued interest thereon at the Certificate Rate from
, but before deducting expenses payable by the Depositor, estimated to
be $ .
The Class A-1 Certificates are offered by First Boston when, as and if
delivered to and accepted by First Boston, subject to prior sale, withdrawal or
modification of the offer without notice, the approval of counsel and other
conditions. It is expected that the Class A-1 Certificates will be delivered
[only through the same day funds settlement system of the Depository Trust
Company] on or about .
CS FIRST BOSTON
The date of this Prospectus Supplement is , 19
<PAGE>
Prospective investors should consider:
[. The yield on the Class A-1 Certificates will be sensitive to, among
things, the rate and timing of principal payments on the Mortgage
Certificates (which likely will be different for different Mortgage
Certificates) and the level of [specify index.]]
[. As described under "Risk Factors-Basis Risk" and "Yield and Prepayment
Considerations-Basis Risk; [specify index]" herein, under some
prepayment and interest rate scenarios, an investor may not receive all
interest accrued at the Class A-1 Pass-Through Rate on the Class A-1
Certificates with respect to one or more Distribution Dates on such
Distribution Dates, or in certain cases, prior to the retirement of the
Class A-1 Certificates.]
The description of the Mortgage Certificates and the Mortgage Loans
contained in this Prospectus Supplement is qualified in its entirety by
reference to the actual terms and provisions of the Prospectuses and Prospectus
Supplements related to each of the Mortgage Certificates (collectively, the
"Underlying Disclosure Documents") and the Pooling and Servicing Agreements
relating to each of the Mortgage Certificates (collectively, the "Underlying
Pooling Agreements"). Copies of the Underlying Disclosure Documents and the
Underlying Pooling Agreements are available from First Boston by calling
at . Investors are urged to obtain copies of
such documents and read this Prospectus Supplement in conjunction therewith.
[The Class A-1 Certificates will be issued only in book-entry form, and the
purchasers thereof will not be entitled to receive definitive certificates
except in the limited circumstances set forth herein. The Class A-1 Certificates
will be registered in the name of Cede & Co., as nominee of The Depository Trust
Company, which will be the "holder" or "Certificateholder" of such Certificates,
as such terms are used herein. See "Description of the Certificates" herein.]
The Class A-1 Certificates may not be an appropriate investment for
individual investors. There is currently no secondary market for the Class A-1
Certificates and there can be no assurance that a secondary market will develop
or, if it does develop, that it will provide Certificateholders with liquidity
of investment at any particular time or for the life of the Class A-1
Certificates. First Boston intends to act as a market maker in the Class A-1
Certificates, subject to applicable provisions of federal and state securities
laws and other regulatory requirements, but is under no obligation to do so and
any such market making may be discontinued at any time. There can be no
assurance that any investor will be able to sell a Class A-1 Certificate at a
price which is equal to or greater than the price at which such Certificate was
purchased.
[An election will be made to treat the portion of the Trust Fund consisting
of the Mortgage Certificates as a real estate mortgage investment conduit (the
"REMIC") for federal income tax purposes. As described more fully herein and in
the Prospectus, the payments on the Class A-1 Certificates which are derived
from the Mortgage Certificates and the Class IO Certificates will constitute
"regular interests" in the REMIC and the Class R Certificate will constitute the
"residual interest" in the REMIC. See "Summary Information-Federal Income Tax
Status" and "Certain Federal Income Tax Consequences" herein and "Certain
Federal Income Tax Consequences" in the Prospectus.]
The Class A-1 Certificates represent one Class of a separate Series of
Certificates, which Class is being offered by the Depositor pursuant to the
Prospectus dated accompanying this Prospectus Supplement. The
Prospectus shall not be considered complete without this Prospectus Supplement
and any prospective investor shall not purchase any Certificate offered hereby
unless it shall have received both the Prospectus and 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.
UNTIL ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A-1
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus. Capitalized terms used herein and not defined shall have the
meaning given in the Prospectus.
Securities Offered... $ initial Principal Balance
of [Adjustable Rate] Conduit Mortgage Pass-Through
Certificates, Series , Class A-1, [evidencing a class
of "regular interests" in the REMIC] [and the rights to
certain amounts from the Reserve Fund.]
Other Securities..... [Adjustable Rate] Conduit Mortgage Pass-Through
Certificates, Series , Class IO, [evidencing a
class of "regular interests" in the REMIC], [and] the
Class R Certificate, [evidencing the "residual
interest" in the REMIC]. The Class IO Certificates and
the Class R Certificate are not offered hereby.
The Class A-1, Class IO and Class R Certificates are
referred to collectively herein as the "Certificates".
Forms of Certificates;
Denominations...... [The Class A-1 Certificates will be issued as book-entry
certificates, through the facilities of The Depository
Trust Company. See "Description of the Certificates-
Book-Entry Form" herein. The Class A-1 Certificates
will be issued, maintained and transferred in book-
entry form only in minimum denominations of $1,000
initial principal balance and integral multiples of
$1,000 initial principal balance in excess thereof.]
Depositor............ Asset Backed Securities Corporation
Certificate
Administrator...... Certain administrative functions with respect to the
Certificates will be performed by .
Trustee..............
Cut-off Date.........
Closing Date......... On or about
Final Scheduled
Distribution Date..
The Trust Fund....... The Class A-1 Certificates evidence interests in a trust
fund (the "Trust Fund"), the assets of which will
consist primarily of [(a) classes (or portions of
classes) of mortgage pass-through certificates (the
"Mortgage Certificates"), each of which is part of one
of series of mortgage pass-through certificates
initially sold by and which were
acquired by the Depositor in the secondary market,
[(b) a Reserve Fund] [and] [(c) a Yield Support
Agreement provided by .] [See "-The
Reserve Fund" and "-The Yield Support Agreement"
below.] The Trust Fund will be established and the
Certificates will be issued pursuant to a [Pooling
Trust Agreement] (the "Pooling
S-3
<PAGE>
Agreement"), dated as of . See
"Description of the Class A-1 Certificates-General"
herein.
Distribution Date.... Distributions on the Certificates will be made
on the th day of each, beginning in ,
or, if any such day is not a business day, the
following business day. Each such day on which
distributions are made, a "Distribution Date".
Record Date.......... The "Record Date" for each Distribution Date will be the
close of business on the last day of the calendar month
preceding the month in which such Distribution Date
occurs or, if such last day is not a business day, the
preceding business day.
Distributions on
Certificates....... Interest Distributions on the Class A-1 Certificates.
The amount of interest payable on the Class A-1
Certificates on each Distribution Date will be equal to
the sum of (x) the lesser of the Interest Accrual
Amount (as defined below) of the Class A-1 Certificates
for such Distribution Date and Interest Available Funds
(as defined herein under "Description of the
Certificates-Distributions-Interest Distributions") for
such Distribution Date and (y) the lesser of the
Interest Shortfall Amount (as defined below) of the
Class A-1 Certificates and the excess, if any, of the
Interest Available Funds for such Distribution Date
over the Interest Accrual Amount of the Class A-1
Certificates for such Distribution Date. The "Interest
Accrual Amount" for the Class A-1 Certificates on each
Distribution Date will equal the product of (i)
of the Class A-1 Pass-Through Rate for such
Distribution Date and (ii) the outstanding Principal
Balance thereof (subject to reduction in respect of
Deferred Interest and Prepayment Interest Shortfalls
incurred with respect to the Mortgage Loans underlying
the Mortgage Certificates). The "Interest Shortfall
Amount" of the Class A-1 Certificates is equal to the
sum of the amounts for all previous Distribution Dates
by which the Interest Accrual Amount of the Class A-1
Certificates exceeded the Interest Available Funds for
such Distribution Dates (to the extent such amounts
have not been paid on subsequent Distribution Dates),
together with interest accrued thereon at the Class A-1
Pass-Through Rate in effect from time to time. See
"Description of the Certificates-Distributions".
The "Class A-1 Pass-Through Rate" during the initial
Interest Accrual Period will be % per annum. During
each succeeding Interest Accrual Period, the Class A-1
Pass-Through Rate will be % in excess of [specify
index] on the day prior to the first day of such
Interest Accrual Period, or, if such [second day] is
not a business day, the preceding business day (each, a
"Reset Date"), determined as described herein under
"Description of the Class A Certificates-Determination
of [specify index]". The "Interest Accrual Period" with
respect to each Distribution Date is the period from
the th day of the [ month] preceding the month in
which such Distribution Date occurs through the th day
of the month in which such Distribution Date occurs.
Interest on the Certificates will be calculated on the
basis of [specify interest calculation convention].
S-4
<PAGE>
See "Description of the Certificates-Distributions".
[DUE TO THE FACTORS DISCUSSED UNDER "RISK FACTORS-BASIS
RISK", INTEREST AVAILABLE FUNDS MAY NOT ALWAYS BE
SUFFICIENT TO PAY THE FULL INTEREST ACCRUAL AMOUNT WITH
RESPECT TO THE CLASS A-1 CERTIFICATES ON EACH
DISTRIBUTION DATE.]
Principal Distributions on the Class A-1 Certificates.
Distributions in respect of principal on the Class A-1
Certificates will be made on each Distribution Date in
an amount equal to the sum of all amounts distributed
in respect of principal on the Mortgage Certificates
during the Collection Period ending on such
Distribution Date.
Interest Distributions on the Class IO Certificates. The
Interest Accrual Amount for the Class IO Certificates
on each Distribution Date will equal the product of (i)
of the Class IO Pass-Through Rate for
such Distribution Date and (ii) the outstanding
Principal Balance of the Class A-1 Certificates,
subject to reduction in respect of Deferred Interest
and Prepayment Interest Shortfalls.
During each Interest Accrual Period the "Class IO Pass-
Through Rate" will be equal to the excess, if any, of
(X) the weighted average of the Weighted Average
Mortgage Certificate Pass-Through Rate for each of the
Underlying Series Distribution Dates that occurs in the
Collection Period related to such Interest Accrual
Period (determined as described herein) (such weighted
average, the "Mortgage Certificate Pass-Through Rate")
over (Y) the Class A-1 Pass-Through Rate for such
Interest Accrual Period. The "Weighted Average Mortgage
Certificate Pass-Through Rate" with respect to any
Underlying Series Distribution Date will be equal to
the weighted average of the pass-through rates of the
Mortgage Certificates applicable to such Underlying
Series Distribution Date, weighted on the basis of the
outstanding principal balances thereof prior to
distributions on such Underlying Series Distribution
Date. The Weighted Average Mortgage Certificate Pass-
Through Rate with respect to the Underlying Series
Distribution Date in is approximately %. The
"Collection Period" with respect to each Distribution
Date is the period commencing on the day after the
previous Distribution Date (or, in the case of the
first Collection Period, on ) and ending on such
Distribution Date. See "Description of the Certificates
-Distributions".
[Reserve Fund........ On the Closing Date, the Depositor will deposit or cause
to be deposited into an account (the "Reserve Fund")
maintained by the Certificate Administrator [(i) cash
in the amount of $ [and] [(ii) the Class IO
Certificates]. All distributions on the Class IO
Certificates will be made to the Certificate
Administrator for deposit into the Reserve Fund.
Amounts on deposit in the Reserve Fund from time to
time will be available on each Distribution Date to be
paid to holders of the Class A-1 Certificates to the
extent that distributions on account of interest
received on the Mortgage Certificates in the related
Collection Period are insufficient to pay such holders'
Interest Accrual Amount for such date together with any
overdue interest. NO ASSURANCE CAN BE GIVEN THAT
AMOUNTS ON DEPOSIT IN THE RESERVE FUND FROM TIME TO
TIME WILL,
S-5
<PAGE>
TOGETHER WITH THE BALANCE OF INTEREST AVAILABLE FUNDS
ON ANY DISTRIBUTION DATE, BE SUFFICIENT TO ALLOW THE
DISTRIBUTION OF THE FULL INTEREST ACCRUAL AMOUNT WITH
RESPECT TO THE CLASS A-1 CERTIFICATES ON ANY SUCH
DISTRIBUTION DATE. The Reserve Fund will be an asset of
the Trust Fund, but will not be an asset of the REMIC.
See "Description of the Certificates-Reserve Fund"
herein.]
[The Yield Support
Agreement.......... On the Closing Date, the Trustee will enter into a yield
support agreement (the "Yield Support Agreement") with
, a (the "Yield Support
Counterparty").
Pursuant to the terms of the Yield Support Agreement,
in the event that [specify index] on any Reset Date
(determined as described herein under "Description of
the Certificates-Determination of [specify index]")
exceeds % (which rate is equal to [specify index] as
set with respect to the first Interest Accrual Period
plus %) (the "Strike Rate"), the Yield Support
Counterparty will be obligated to pay to the
Certificate Administrator, for the benefit of the
holders of the Class A-1 Certificates, on the
Distribution Date related to the Interest Accrual
Period following such Reset Date, an amount equal to
of the product of (x) the difference between
[specify index] at such Reset Date (determined as
described above) and the Strike Rate and (y) the
Principal Balance of the Class A-1 Certificates
outstanding prior to distributions on such Distribution
Date. Amounts paid by the Yield Support Counterparty on
any Distribution Date will be paid to the Certificate
Administrator for deposit into the Reserve Fund. NO
ASSURANCE CAN BE GIVEN THAT AMOUNTS PAID BY THE YIELD
SUPPORT COUNTERPARTY ON ANY DISTRIBUTION DATE WILL,
TOGETHER WITH THE BALANCE OF THE INTEREST AVAILABLE
FUNDS FOR SUCH DISTRIBUTION DATE, BE SUFFICIENT TO
ALLOW FULL DISTRIBUTIONS IN RESPECT OF INTEREST ON THE
CLASS A-1 CERTIFICATES ON SUCH DISTRIBUTION DATE OR ON
ANY FUTURE DISTRIBUTION DATES.
The Yield Support Agreement will terminate upon the
reduction of the Principal Balance of the Class A-1
Certificates to zero. The Yield Support Agreement may
also be terminated by the Trustee under the
circumstances described herein under "Description of
the Certificates-The Yield Support Agreement-
Termination".]
[Optional Repurchase
of the Mortgage
Certificates....... The beneficial owner of the Class IO Certificates will
have the option to purchase the Mortgage Certificates
from the Trust Fund on any Distribution Date on which
the Mortgage Certificate Balance is equal to % or less
of the Mortgage Certificate Balance as of the Cut-off
Date. See "Description of the Certificates-Optional
Repurchase of the Mortgage Certificates" herein.]
Ratings.............. It is a condition of the issuance of the Certificates
that the Class A-1 Certificates be rated " "
by [and] " " by
(" " and, collectively with , the "Rating
Agencies").
S-6
<PAGE>
The ratings of and on mortgage securities
address the likelihood of the receipt by the holders
thereof of all distributions of principal and interest
to which such holders are entitled. THE RATING AGENCIES
NOTE THAT THE ENTITLEMENT OF THE CLASS A-1 CERTIFICATES
TO INTEREST AT A RATE IN EXCESS OF THE MORTGAGE
CERTIFICATE PASS-THROUGH RATE IS SUBJECT TO THE
AVAILABILITY OF INTEREST AVAILABLE FUNDS. There is no
assurance that such ratings will continue for any
period of time or that they will not be revised or
withdrawn entirely by such rating agency if, in its
judgment, circumstances so warrant. A revision or
withdrawal of such ratings may have an adverse effect
on the market price of the Class A-1 Certificates. A
security rating is not a recommendation to buy, sell or
hold securities.
The Depositor has not requested a rating on the Class A-1
Certificates from any other rating agency, although
data with respect to the Mortgage Loans and Mortgage
Certificates may have been provided to other agencies
solely for their informational purposes. There can be
no assurance that if a rating is assigned to the Class
A-1 Certificates by any other rating agency, such
rating will be as high as that assigned by and
. See "Ratings".
Mortgage
Certificates....... [The assets of the REMIC will consist primarily of
classes (or a portion of such classes) of senior
mortgage pass-through certificates (the "Mortgage
Certificates"), each of which is a part of one of
separate series of mortgage pass-through certificates
sold by (each an "Underlying
Series"), identified in the following table.
========================================================
UNDERLYING SERIES
Series Designation Class of Mortgage Certificates
------------------ ------------------------------
=========================================================
[Each of the Mortgage Certificates evidences a senior
interest in a mortgage pool (each, an "Underlying
Mortgage Pool") previously formed by . Payments
on each Class of Mortgage Certificates will be made on
the 25th day of each month (or if such day is not a
business day, the succeeding business day) (each, an
"Underlying Series Distribution Date") primarily from
amounts received in respect of the mortgage loans that
constitute the corpus of the related Underlying
Mortgage Pool (in the aggregate, the "Mortgage Loans").
Such amounts, together with any payments under the
Yield Support Agreement and payments from the Reserve
Fund, are the sole source of funds for payments on the
Class A-1 Certificates. As of the Underlying Series
Distribution Date occurring in , after giving
effect to distributions and principal balance
reductions on such date, the Mortgage Certificates had
approximately the characteristics set forth under "The
Mortgage Certificates".]
S-7
<PAGE>
The Mortgage Loans... [The Mortgage Loans are contained in separate pools
of adjustable interest rate, conventional, residential
first mortgage loans having approximately the
characteristics set forth in the table entitled
"Selected Mortgage Loan Data" under "Description of the
Mortgage Loans". The interest rate on each Mortgage
Loan is subject to adjustment periodically (as
specified in the related mortgage note) to a rate equal
to the sum (subject to rounding) of (i) a specified
index and (ii) an individual gross margin, subject to
certain limitations.
The Mortgage Loans are subject to overall maximum
interest rates. Some of the Mortgage Loans are also
subject to a minimum interest rate. Some of the
Mortgage Loans are subject to negative amortization.
Some of the Mortgage Loans have mortgage interest rates
that may be converted to fixed interest rates at the
option of the mortgagor. Upon conversion to a fixed
rate, such Mortgage Loans generally are required to be
purchased by the servicer of the related Underlying
Mortgage Pool. See "Description of the Mortgage Loans"
and "Yield and Prepayment Considerations". ]
[Optional Repurchase of Mortgage Loans. The Underlying
Mortgage Pool with respect to each Mortgage Certificate
is subject to special termination (a "Special
Termination") at such time as the aggregate outstanding
principal balance of all the mortgage loans underlying
all the mortgage certificates of the related Underlying
Series is equal to or less than % of the initial
aggregate principal balance of such mortgage loans. See
"The Mortgage Certificates-Special Termination" herein.
In addition, the Mortgage Loan Servicer with respect to
each Underlying Series has the option to repurchase the
Mortgage Loans from the related Underlying Mortgage
Pool at such time as the aggregate scheduled principal
balance thereof is reduced to less than % of the
original aggregate principal balance thereof. See "The
Mortgage Certificates-Optional Termination" herein. Any
such repurchase may accelerate the rate at which
principal payments are made on the Class A-1
Certificates.]
Certain Prepayment
and Yield
Considerations..... NO INVESTMENT SHOULD BE MADE IN THE CLASS A-1
CERTIFICATES UNLESS AN INVESTOR HAS CONSIDERED
CAREFULLY THE ASSOCIATED RISKS OF INVESTING IN SUCH
CLASS A-1 CERTIFICATES AS DISCUSSED BELOW AND UNDER
"RISK FACTORS" AND "YIELD AND PREPAYMENT
CONSIDERATIONS" HEREIN.
Prepayments. The rate of principal payments on the Class
A-1 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 condemnation, insurance
or foreclosure). If a Class A-1 Certificate is
purchased at a discount from its initial principal
balance by a purchaser that calculates its anticipated
yield to maturity based on an assumed rate of payment
of principal that is faster than that actually
experienced on the Mortgage Loans, the actual yield to
maturity will be lower than that so calculated.
Furthermore, if a Certificate is purchased at a premium
by a purchaser that calculates its anticipated yield to
maturity
S-8
<PAGE>
based on an assumed rate of payment of principal that
is slower than that actually experienced on the
Mortgage Loans, the actual yield to maturity will be
lower than that so calculated.
Timing of Payments. The timing and amount of payments,
including prepayments, on the Mortgage Loans may
significantly affect an investor's yield. In general,
the earlier a prepayment of principal on the Mortgage
Loans, the greater will be the effect on an investor's
yield to maturity. As a result, the effect on an
investor's yield of principal prepayments occurring at
a rate higher (or lower) than the rate anticipated by
the investor during the period immediately following
the issuance of the Class A-1 Certificates will not be
offset by a subsequent like reduction (or increase) in
the rate of principal prepayments.
[Basis Risk; [specify index]. The interest rate payable
to the Holders of the Class A-1 Certificates is based
on [specify index]. However, the Mortgage Certificates
bear interest at adjustable rates based on COFI, CMT
and CBE (the "Indices"). [Specify index] and such
Indices may respond to different economic and market
factors, and there is no necessary correspondence
between them. NO ASSURANCE CAN BE GIVEN THAT AMOUNTS ON
DEPOSIT IN THE RESERVE FUND FROM TIME TO TIME OR
PAYMENTS UNDER THE YIELD SUPPORT AGREEMENT WILL BE
SUFFICIENT TO MAKE UP ANY AMOUNT BY WHICH THE INTEREST
COLLECTED ON THE MORTGAGE CERTIFICATES IS LESS THAN THE
INTEREST ACCRUAL AMOUNT OF THE CLASS A-1 CERTIFICATES.]
See "Risk Factors" and "Yield and Prepayment
Considerations" herein for a fuller discussion of the
factors affecting the yield to maturity of the Class
A-1 Certificates.
Liquidity............ There is currently no secondary market for the Class A-1
Certificates and there can be no assurance that a
secondary market will develop or, if it does develop,
that it will provide Certificateholders with liquidity
of investment at any particular time or for the life of
the Class A-1 Certificates. There is no assurance that
any such market, if established, will continue. Each
Certificateholder will receive monthly reports
pertaining to the Class A-1 Certificates and the
Mortgage Certificates. There are a limited number of
sources which provide certain information about
mortgage-backed securities in the secondary market;
however, there can be no assurance that any of these
sources will provide information about the Class A-1
Certificates or the Mortgage Certificates. Investors
should consider the effect of limited information on
the liquidity of the Class A-1 Certificates.
Federal Income Tax
Status............. An election will be made to treat [the portion of] the
Trust Fund [consisting of the Mortgage Certificates] as
a REMIC for federal income tax purposes. The [payments
on the] Class A-1 Certificates [which are derived from
the Mortgage Certificates,] and the Class IO
Certificates, will be designated as regular interests
in the REMIC, and the Class R Certificate will be
designated as the residual interest in the REMIC.
S-9
<PAGE>
The arrangement under which the Reserve Fund is held
should not be treated as an association taxable as a
corporation. An investor in the Class A-1 Certificates
will be treated for federal income tax purposes as
purchasing a REMIC regular interest and a contractual
right to receive amounts from the Reserve Fund.] See
"Certain Federal Income Tax Consequences" [herein] and
in the Prospectus.*
ERISA
Considerations..... A fiduciary of any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), or a
governmental plan subject to any federal, state or
local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA or
the Code (collectively, a "Plan"), should carefully
review with its legal advisors whether the purchase or
holding of Class A-1 Certificates could give rise to a
transaction prohibited or not otherwise permissible
under ERISA, the Code or Similar Law. See "ERISA
Considerations" in this Prospectus Supplement and in
the Prospectus.
Legal Investment..... The Class A-1 Certificates will constitute "mortgage
related securities" for purposes 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
statistical rating organization. As such, the Class A-1
Certificates are legal investments for certain entities
to the extent provided in SMMEA. However, there are
regulatory requirements and considerations applicable
to regulated financial institutions and restrictions on
the ability of such institutions to invest in certain
types of mortgage related securities. Prospective
purchasers of the Class A-1 Certificates should consult
their own legal, tax and accounting advisors in
determining the suitability of and consequences to them
of the purchase, ownership and disposition of the Class
A-1 Certificates. See "Legal Investment Considerations"
in this Prospectus Supplement and "Legal Investment" in
the Prospectus.
________________
* Depending on the terms of the A-1 Certificates and the arrangement under
which the Reserve Fund is held, the discussion of federal income tax
consequences contained in "Summary of Terms-Federal Income Tax Status" and in
"Certain Federal Income Tax Consequences" in this Prospectus Supplement may be
revised appropriately to reflect such terms.
S-10
<PAGE>
SPECIAL CONSIDERATIONS
Prospective investors should consider the following factors in connection
with a purchase of the Class A-1 Certificates.
1. General. An investment in certificates (such as the Class A-1
Certificates) evidencing interests in mortgage loans may be affected, among
other things, by a decline in real estate values or a decline in mortgage market
rates. Recently such declines in real estate values have been experienced in
several significant market areas within the United States. If relevant
residential real estate markets should experience an overall decline in property
values such that the outstanding balances of the Mortgage Loans in a particular
Underlying Mortgage Pool become equal to or greater than the value of the
related mortgaged properties, the actual rates of delinquencies, foreclosures
and losses could be higher than those now generally experienced in the mortgage
lending industry. To the extent that such losses are not covered by the classes
of certificates which are subordinate to the Mortgage Certificates from that
pool and the cash available in the related Underlying Reserve Funds, holders of
the Class A-1 Certificates will bear all risk of loss resulting from default by
mortgagors and will have to depend primarily on the value of the mortgaged
properties for recovery of the outstanding principal and unpaid interest of the
defaulted Mortgage Loans.
2. Limited Obligations. The Certificates will not represent an interest in
or obligation of the Depositor, the Trustee, the Certificate Administrator, or
any of the Depository Institutions. The Certificates will not be insured or
guaranteed by any government agency or instrumentality.
[3. Basis Risk. The interest rate payable to the holders of the Class A-1
Certificates is based on [specify index]. However, the underlying Mortgage Loans
bear interest based on the Indices calculated at various frequencies. [Specify
index] and the Indices respond to different economic and market factors, and
there is not necessarily a correlation between them. Thus, it is possible, for
example, that [specify index] may rise during periods in which the Indices are
stable or are falling or that, even if both [specify index] and the Indices rise
during the same period, [specify index] may rise much more sharply than the
Indices. NO ASSURANCE CAN BE GIVEN THAT AMOUNTS ON DEPOSIT IN THE RESERVE FUND
FROM TIME TO TIME OR PAYMENTS UNDER THE YIELD SUPPORT AGREEMENT WILL BE
SUFFICIENT TO MAKE UP ANY AMOUNT BY WHICH THE INTEREST COLLECTED ON THE MORTGAGE
CERTIFICATES IS LESS THAN THE INTEREST ACCRUAL AMOUNT OF THE CLASS A-1
CERTIFICATES.]
4. Limited Liquidity. There is currently no secondary market for the Class
A-1 Certificates and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Certificateholders with
liquidity of investment at any particular time or for the life of the Class A-1
Certificates. First Boston intends to act as a market maker in the Class A-1
Certificates, subject to applicable provisions of federal and state securities
laws and other regulatory requirements, but is under no obligation to do so and
any such market making may be discontinued at any time. There can be no
assurance that any investor will be able to sell a Class A-1 Certificate at a
price which is equal to or greater than the price at which such Certificate was
purchased.
5. Prepayment and Yield Considerations. The prepayment experience on the
Mortgage Loans will affect the average life of the Class A-1 Certificates.
Prepayments on the Mortgage Loans may be influenced by a variety of economic,
geographic, social and other factors, including the difference between the
interest rates on the Mortgage Loans and prevailing mortgage interest rates.
Other factors affecting prepayment of Mortgage Loans include changes in housing
needs, job transfers, unemployment and servicing decisions. See "Yield and
Prepayment Considerations." In addition, the yield on the Class A-1 Certificates
will be sensitive to, among other things, the level of [specify index].
[Add additional Risk Factors, including one or more relating to
Mortgage Certificates and/or underlying Mortgage Loans]
The following table sets forth the Concentrations by state for each of the
Underlying Mortgage Pools that exceed % of the original aggregate principal
balance thereof as of the Underlying Series Cut-off Date. Such information was
derived from the Underlying Disclosure Documents and the Depositor cannot
provide any assurances as to the accuracy or completeness of such information.
S-11
<PAGE>
GEOGRAPHIC CONCENTRATION
(GREATER THAN % OF PRINCIPAL BALANCE)
<TABLE>
<CAPTION>
Percentage Percentage
as of as of
Underlying Underlying
Series Series
Cut-off Series Cut-off
Series Designation State Date Designation State Date
- ------------------ ----- ---------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The [Adjustable Rate] Conduit Mortgage Pass-Through Certificates, Series
will include the following [three] classes: the [Class A-1] Certificates, the
[Class IO] Certificates and the [Class R] Certificates (collectively, the
"Certificates"). Only the Class A-1 Certificates are offered hereby.
The Certificates evidence 100% of the beneficial ownership interest in a
trust fund (the "Trust Fund"), the assets of which will consist primarily of
[(a) classes (or portions of classes) of mortgage pass-through certificates
(the "Mortgage Certificates"), each of which is part of one of series of
mortgage pass-through certificates initially sold by and
acquired by the Depositor in the secondary market,] [(b) a Reserve Fund] [and]
[(c) a Yield Support Agreement provided by .] [See "-The
Reserve Fund" and "-The Yield Support Agreement" below.] The Trust Fund will be
established and the Certificates will be issued pursuant to a [Pooling Trust
Agreement] (the "Pooling Agreement"), dated as of among
the Depositor, the Certificate Administrator and the Trustee.
[The Class A-1 Certificates will be issued as book-entry certificates (the
"Book-Entry Certificates") through the facilities of The Depository Trust
Company. See "-Book-Entry Form" below. The Class A-1 Certificates will be
issued, maintained and transferred only in minimum denominations of $1,000
initial principal balance and integral multiples of $1,000 initial principal
balance in excess thereof. The "Record Date" for distributions on the Class A-1
Certificates is , with respect to the initial Distribution Date, and with
respect to each subsequent Distribution Date, the last day of the calendar
month immediately preceding the month in which the applicable Distribution Date
occurs or, if such last day is not a business day, the preceding business day.
The undivided percentage interest (the "Percentage Interest") represented by
any Class A-1 Certificate will be equal to the percentage obtained by dividing
the initial Principal Balance of such Class A-1 Certificate by the aggregate
initial Principal Balance of all Class A-1 Certificates.]
DISTRIBUTIONS
Distributions on the Certificates will be made on the th day of
each , beginning in or, if any such day is
not a business day, the following business day (each such day on which
distributions are made, a "Distribution Date"). Distributions to a holder of a
Class A-1 Certificate will be made on each Distribution Date in an amount equal
to such holder's Percentage Interest multiplied by the amount, if any, to be
distributed to the Class A-1 Certificates. Distributions will be made on each
Distribution Date to holders of record on the related Record Date, [which,
S-12
<PAGE>
unless Definitive Certificates are issued under the circumstances described
below under "-Book Entry Form", will be Cede & Co. as nominee for DTC.]
Interest Distributions. Distributions in respect of interest on each Class
of Certificates (other than the Class R Certificates) on each Distribution Date
will be made only up to the amount of the Interest Available Funds for such
Distribution Date. The amount of interest payable on the Class A-1 Certificates
on each Distribution Date will be equal to the sum of (x) the lesser of the
Interest Accrual Amount of the Class A-1 Certificates for such Distribution Date
and Interest Available Funds for such Distribution Date and (y) the lesser of
the Interest Shortfall Amount of the Class A-1 Certificates and the excess, if
any, of the Interest Available Funds for such Distribution Date over the
Interest Accrual Amount of the Class A-1 Certificates for such Distribution
Date.
The "Interest Accrual Period" with respect to each Distribution Date is
the period commencing on the th day of the [ month] preceding the month
in which such Distribution Date occurs and ending on the th day of the month
in which such Distribution Date occurs.
The "Interest Accrual Amount" for the Class A-1 Certificates on each
Distribution Date will equal the product of (i) of the Class A-1
Pass-Through Rate for such Distribution Date and (ii) the outstanding Principal
Balance thereof, subject to reduction in respect of Deferred Interest and
Prepayment Interest Shortfalls incurred with respect to the Mortgage Loans
underlying the Mortgage Certificates. The "Class A-1 Pass-Through Rate" during
the initial Interest Accrual Period will be % per annum. During each
succeeding Interest Accrual Period, the Class A-1 Pass-Through Rate will be
% in excess of [specify index] determined (as described below under
"-Determination of [specify index]") ("[specify index]") on the [ day
prior to the first day] of such Interest Accrual Period or, if such day
is not a business day, the preceding business day (each, a "Reset Date"). The
"Interest Shortfall Amount" of the Class A-1 Certificates is equal to the sum
of the amounts for all previous Distribution Dates by which the Interest
Accrual Amount of the Class A-1 Certificates exceeded the Interest Available
Funds for such Distribution Dates (to the extent such amounts have not been
paid on subsequent Distribution Dates), together with interest accrued thereon
at the Class A-1 Pass-Through Rate in effect from time to time.
"Interest Available Funds" with respect to any Distribution Date will be
equal to the sum of (a) all payments in respect of interest received by the
Certificate Administrator on the Mortgage Certificates during the related
Collection Period, (b) interest earned on amounts invested in the Certificate
Account [and] [(c) all amounts on deposit in the Reserve Fund (including any
payments made by the Yield Support Counterparty on such Distribution Date under
the Yield Support Agreement) (up to the excess of the Interest Accrual Amount
and the Interest Shortfall Amount of the Class A-1 Certificates over the amount
described in clauses (a) and (b) above)]. Interest Available Funds will be
distributed on each Distribution Date first to pay the Interest Accrual Amount
of the Class A-1 Certificates and next to pay the Interest Shortfall Amount of
the Class A-1 Certificates. Any Interest Available Funds remaining after such
distributions will be deposited in the Reserve Fund.
DUE TO THE FACTORS DISCUSSED UNDER "RISK FACTORS-BASIS RISK", INTEREST
AVAILABLE FUNDS MAY NOT ALWAYS BE SUFFICIENT TO PAY THE FULL INTEREST ACCRUAL
AMOUNT WITH RESPECT TO CLASS A-1 CERTIFICATES ON EACH DISTRIBUTION DATE.
The Interest Accrual Amount for the Class IO Certificates on each
Distribution Date will equal the product of (i) of the Class IO Pass-Through
Rate for such Distribution Date and (ii) the outstanding Principal Balance of
the Class A-1 Certificates, subject to reduction in respect of Deferred
Interest and Prepayment Interest Shortfalls. The Class R Certificates are not
entitled to distributions in respect of interest and, therefore, have no
Interest Accrual Amount. During each Interest Accrual Period the "Class IO
Pass-Through Rate" will be equal to the excess, if any, of (X) the weighted
average of the Weighted Average Mortgage Certificate Pass-Through Rate for each
of the Underlying Series Distribution Dates that occurs during the Collection
Period related to such Interest Accrual Period (determined as described herein)
(such weighted average, the "Quarterly Mortgage Certificate Pass-Through Rate")
over (Y) the Class A-1 Pass-Through Rate for such Interest Accrual Period. The
"Weighted Average Mortgage Certificate Pass-Through Rate" with respect to any
Underlying Series Distribution Date will be equal to the weighted average of
the pass-through rates of the Mortgage Certificates applicable to such
Underlying Series Distribution Date, weighted on the basis of the outstanding
principal balances of such classes prior to distributions on such Underlying
Series Distribution Date. The Weighted Average Mortgage
S-13
<PAGE>
Certificate Pass-Through Rate with respect to the Underlying Series
Distribution Date in is approximately %. The "Collection
Period" with respect to a Distribution Date is the period commencing on the day
after the preceding Distribution Date (or, in the case of the first Collection
Period, on ) and ending on such Distribution Date.
Interest on the Certificates will be calculated on the basis of [specify
interest calculation convention].
Deferred Interest allocated to the Mortgage Certificates on each Underlying
Series Distribution Date occurring during the Collection Period related to any
Distribution Date (as reported on the remittance reports relating to such
Mortgage Certificates) will be allocated between the Class A-1 Certificates and
the Class IO Certificates on the related Distribution Date, pro rata, based on
the Interest Accrual Amounts of each thereof (before reduction for such Deferred
Interest). See "Description of the Underlying Mortgage Loans" and "The Mortgage
Certificates-Distributions on the Mortgage Certificates." The amount of Deferred
Interest allocated in reduction of the Interest Accrual Amount of the Class A-1
Certificates will be added to the Principal Balance of such Class as of such
Distribution Date.
Prepayment Interest Shortfalls allocated to the Mortgage Certificates on
each Underlying Series Distribution Date occurring during the Collection Period
related to any Distribution Date (as reported on the remittance reports relating
to such Mortgage Certificates) will be allocated between the Class A-1
Certificates and the Class IO Certificates on the related Distribution Date, pro
rata, based on the Interest Accrual Amounts thereof (before reduction for such
interest shortfall on such Distribution Date). See "The Mortgage Certificates-
Distributions on the Mortgage Certificates" herein.
The "Principal Balance" of the Class A-1 Certificates as of any
Distribution Date will be equal to the Mortgage Certificate Balance as of the
preceding Distribution Date. The "Mortgage Certificate Balance" as of any
Distribution Date will be equal to the sum of the Mortgage Certificate Balances
(after giving effect to all distributions and other principal balance reductions
on the Mortgage Certificates and any Deferred Interest added to the principal
balance thereof during the Collection Period ending on such Distribution Date).
Neither the Class IO Certificates nor the Class R Certificate have any Principal
Balance and, therefore, neither is entitled to distributions in respect of
principal.
Determination Of [specify index]. [describe procedures for determining
index]
Historical [specify index]. Listed below are historical values of [specify
index] since:
[SPECIFY INDEX]
MONTHLY AVERAGES
<TABLE>
<CAPTION>
YEAR
-------------------------------------------
MONTH(1) 199 199 199 199 199
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
Principal Distributions. Distributions in respect of principal on the Class
A-1 Certificates will be made on each Distribution Date in an amount equal to
the sum of all amounts distributed in respect of principal on the Mortgage
Certificates during the Collection Period ending on such Distribution Date.
Principal payments on the Class A-1 Certificates will be made on each
Distribution Date to the extent funds are available therefor until the Principal
Balance of the Class A-1 Certificates has been reduced to zero.
[RESERVE FUND
The Pooling Agreement will require the Certificate Administrator to
establish a separate trust account, which it will hold for the benefit of the
Trustee on behalf of the holders of the Class A-1 Certificates (the "Reserve
Fund").
S-14
<PAGE>
On the Closing Date, the Depositor will deposit or cause to be deposited
into the Reserve Fund, [(i) cash in the amount of $ [and] [(ii) the Class
IO Certificates]. All distributions on the Class IO Certificates will be made
to the Certificate Administrator for deposit into the Reserve Fund. In
addition, all payments by the Yield Support Counterparty pursuant to the Yield
Support Agreement will be deposited in the Reserve Fund. Amounts on deposit in
the Reserve Fund from time to time will be available on each Distribution Date
to be paid to holders of the Class A-1 Certificates to the extent that amounts
described in clauses (a) and (b) of the definition of Interest Available Funds
are insufficient to pay the Interest Accrual Amount and Interest Shortfall
Amount of the Class A-1 Certificates for such Distribution Date. The Reserve
Fund will be an asset of the Trust Fund, but will not be an asset of the REMIC.
Amounts in the Reserve Fund will be invested in "eligible assets," as defined
in the Pooling Agreement, at the discretion of the Certificate Administrator,
provided each such investment matures no later than the succeeding Distribution
Date.
The Depositor will not have any obligation to deposit additional monies in
the Reserve Fund after the Closing Date.
NO ASSURANCE CAN BE GIVEN THAT AMOUNTS ON DEPOSIT IN THE RESERVE FUND FROM
TIME TO TIME WILL, TOGETHER WITH THE BALANCE OF INTEREST AVAILABLE FUNDS ON ANY
DISTRIBUTION DATE, BE SUFFICIENT TO ALLOW THE DISTRIBUTION OF THE FULL INTEREST
ACCRUAL AMOUNT WITH RESPECT TO THE CLASS A-1 CERTIFICATES ON ANY SUCH
DISTRIBUTION DATE.
Due to the factors described under "Special Considerations-Basis Risk" and
"Yield and Prepayment Considerations-Basis Risk; [specify index]," changes in
the levels of COFI, CMT and CBE may not necessarily correlate with changes in
[specify index]. Accordingly, the Class IO Certificates (payments on which,
together with payments under the Yield Support Agreement, are the sole source
of payments into the Reserve Fund after the Closing Date) will not be entitled
to any payments under certain interest rate scenarios. See "-Distributions"
above. In addition, the Yield Support Counterparty will not be obligated to
make any payments under the Yield Support Agreement unless [specify index]
exceeds the Strike Rate. See "-The Yield Support Agreement" below. The
following table, which was prepared on the basis of the Modeling Assumptions,
illustrates the balances that would be available in the Reserve Fund on the
date indicated under the interest rate scenarios (the "Rate Scenarios")
described in the following paragraph and at the various percentages of CPR
indicated. Each of the Rate Scenarios set forth below assumes [describe
assumptions].
"Rate Scenario I" [describe assumptions].
"Rate Scenario II" [describe assumptions].
"Rate Scenario III" [describe assumptions].
PROJECTED BALANCE AVAILABLE AT
<TABLE>
<CAPTION>
PERCENT OF CPR
---------------------------------------
% % %
----------- ----------- -----------
<S> <C> <C> <C>
Rate Scenario I............
Rate Scenario II...........
Rate Scenario III..........
</TABLE>
[THE YIELD SUPPORT AGREEMENT]
The following is a summary of certain features of the Yield Support
Agreement (as defined below).
General. On the Closing Date, the Trustee, acting on behalf of the holders
of the Class A-1 Certificates, will enter into a yield support agreement
(the "Yield Support Agreement") with , a
S-15
<PAGE>
(the "Yield Support Counterparty"). The Yield Support Agreement will be
governed by and construed in accordance with the laws of .
Payment Terms. Pursuant to the terms of the Yield Support Agreement, in
the event that [specify index] on any Reset Date (determined as described below
under "-Determination of [specify index]") exceeds % (which rate is equal
to [specify index] as set with respect to the first Interest Accrual Period
plus %) (the "Strike Rate"), the Yield Support Counterparty will be
obligated to pay to the Certificate Administrator, for the benefit of the
holders of the Class A-1 Certificates, on the Distribution Date related to the
Interest Accrual Period following such Reset Date, an amount equal to
one-fourth of the product of (x) the difference between [specify index] at such
Reset Date (determined as described above) and the Strike Rate and (y) the
Principal Balance of the Class A-1 Certificates outstanding prior to
distributions on such Distribution Date. Amounts paid by the Yield Support
Counterparty on any Distribution Date will be paid to the Certificate
Administrator for deposit into the Reserve Fund.
NO ASSURANCE CAN BE GIVEN THAT AMOUNTS PAID BY THE YIELD SUPPORT
COUNTERPARTY ON ANY DISTRIBUTION DATE WILL, TOGETHER WITH THE BALANCE OF THE
INTEREST AVAILABLE FUNDS FOR SUCH DISTRIBUTION DATE, BE SUFFICIENT TO ALLOW FULL
DISTRIBUTIONS IN RESPECT OF INTEREST ON THE CLASS A-1 CERTIFICATES ON SUCH
DISTRIBUTION DATE OR ON ANY FUTURE DISTRIBUTION DATES. THE OBLIGATIONS OF THE
YIELD SUPPORT COUNTERPARTY WITH RESPECT TO THE SECURITIES OFFERED HEREBY ARE
LIMITED TO THOSE SPECIFICALLY SET FORTH IN THE YIELD SUPPORT AGREEMENT AND ARE
SUBJECT TO CERTAIN CONDITIONS AS DESCRIBED IN THE YIELD SUPPORT AGREEMENT.
Termination. Unless earlier terminated as described below, the Yield
Support Agreement will terminate upon the reduction of the Principal Balance of
the Class A-1 Certificates to zero.
Pursuant to the Yield Support Agreement, certain events may occur in
respect of the Yield Support Counterparty that will give the Trustee the right
to terminate the Yield Support Agreement subject to the terms and provisions
thereof. The Trustee will have the right to terminate the Yield Support
Agreement if any of the following events occur:
(i) the Yield Support Counterparty fails to make any payment due
under the Yield Support Agreement and such nonpayment continues for three
business days after notice from the Trustee;
(ii) the Yield Support Counterparty fails to perform or observe
its obligations under such Yield Support Agreement (other than its
obligation to make any payment due under such Yield Support Agreement) and
such failure continues for a period of 30 days after notice from the
Trustee;
(iii) any representation made by the Yield Support Counterparty
under such Yield Support Agreement proves to have been incorrect or
misleading in any material respect as of the time it was made;
(iv) certain events of bankruptcy or insolvency occur with respect
to the Yield Support Counterparty;
(v) the Yield Support Counterparty undertakes certain mergers,
consolidations or transfers of its assets or is dissolved;
(vi) a withholding tax is imposed on payments by the Yield Support
Counterparty under such Yield Support Agreement; or
(vii) a change in law occurs after the Closing Date which makes it
unlawful for the Yield Support Counterparty to perform its obligations in
respect of the Yield Support Agreement.
Breakage Fee. If the Yield Support Agreement is terminated by the Trustee,
the market value of the Yield Support Agreement will be established by the
Trustee on the basis of market quotations of the cost to the Trust Fund of
entering into a replacement yield support agreement, in accordance with the
procedures set forth in the Yield Support Agreement (such amount, the "Breakage
Fee"). The Yield Support Counterparty will be required to pay the Trustee, for
the benefit of the holders of the Class A-1 Certificates the amount of any
Breakage Fee. Upon any such termination of the Yield Support
S-16
<PAGE>
Agreement, the Trustee will apply any Breakage Fee paid by the Yield Support
Counterparty to the purchase of a similar yield support agreement from another
counterparty.
The Yield Support Counterparty.
As of , the end of its most recent fiscal year, the Yield
Support Counterparty and its subsidiaries had, on a consolidated basis, total
assets of approximately $ , total liabilities of approximately $ ,
and stockholders' equity of approximately $ .
The Yield Support Counterparty's outstanding senior unsecured indebtedness
has been rated by , by , and by .
Copies of the Yield Support Counterparty's annual reports are available
from by contacting , at .
The above information was provided by the Yield Support Counterparty. No
other information contained herein (including but not limited to the statements
concerning the Yield Support Agreement and the rights under the Yield Support
Agreement of the holders of the securities offered hereby) has been provided by
the Yield Support Counterparty.]
[OPTIONAL REPURCHASE OF THE MORTGAGE CERTIFICATES
The beneficial owner of the Class IO Certificates will have the option, but
not the obligation, to purchase the Mortgage Certificates from the Trust Fund on
any Distribution Date on which the Mortgage Certificate Balance is equal to % or
less of the Mortgage Certificate Balance as of the Cut-off Date at a price equal
to the outstanding Principal Balance of the Class A-1 Certificates together with
accrued interest thereon at the then-applicable Class A-1 Pass-Through Rate
through the following Distribution Date.]
DENOMINATIONS
The Class A-1 Certificates will be issued in minimum denominations of
$[1,000] initial principal balance and integral multiples of $1,000 initial
principal balance in excess thereof.
[BOOK-ENTRY FORM
The Class A-1 Certificates initially will be represented by one physical
certificate registered in the name of Cede & Co. ("Cede"), as nominee of DTC,
which will be the "holder" or "Certificateholder" of such Certificates, as such
terms are used herein. No person acquiring an interest in the Class A-1
Certificates (a "Beneficial Owner") will be entitled to receive a Class A-1
Certificate in certificated form (a "Definitive Certificate") representing such
person's interest in the Class A-1 Certificates, except as set forth below.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions taken by
Certificateholders or holders shall refer to actions taken by DTC upon
instructions from its DTC Participants (as defined below), and all references
herein to distributions, notices, reports and statements to Certificateholders
or holders shall refer to distributions, notices, reports and statements to DTC
or Cede, as the registered holder of the Class A-1 Certificates, as the case
may be, for distribution to Beneficial Owners in accordance with DTC
procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York 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 participating organizations
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions among DTC Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. DTC
Participants include securities brokers and dealers (including First Boston),
banks, trust companies and clearing corporations. Indirect access to the DTC
system also is available to banks, brokers, dealers, trust companies and other
S-17
<PAGE>
institutions that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("Indirect DTC Participants").
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make Class A-1 transfers of
Class A-1 Certificates among DTC Participants on whose behalf it acts with
respect to the Class A-1 Certificates and to receive and transmit distributions
of principal of and interest on the Class A-1 Certificates. DTC Participants and
Indirect DTC Participants with which Beneficial Owners have accounts with
respect to the Class A-1 Certificates similarly are required to make Class A-1
transfers and receive and transmit such payments on behalf of their respective
Beneficial Owners.
Beneficial Owners that are not DTC Participants or Indirect DTC
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Class A-1 Certificates may do so only through DTC
Participants and Indirect DTC Participants. In addition, Beneficial Owners will
receive all distributions of principal and interest from the Certificate
Administrator, or a paying agent on behalf of the Certificate Administrator,
through DTC Participants. DTC will forward such distributions to its DTC
Participants, which thereafter will forward them to Indirect DTC Participants or
Beneficial Owners. Beneficial Owners will not be recognized by the Trustee, the
Certificate Administrator or any paying agent as Certificateholders, as such
term is used in the Pooling and Servicing Agreement, and Beneficial Owners will
be permitted to exercise the rights of Certificateholders only indirectly
through DTC and its DTC Participants.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect DTC Participants and certain banks, the ability of a
Beneficial Owner to pledge Class A-1 Certificates to persons or entities that
do not participate in the DTC system, or to otherwise act with respect to such
Class A-1 Certificates, may be limited due to the lack of a physical
certificate for such Class A-1 Certificates. In addition, under a Class A-1
format, Beneficial Owners may experience delays in their receipt of payments,
since distributions will be made by the Certificate Administrator, or a paying
agent on behalf of the Certificate Administrator, to Cede, as nominee for DTC.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under the Pooling Agreement only at the direction
of one or more DTC Participants to whose accounts with DTC the Class A-1
Certificates are credited. Additionally, DTC has advised the Depositor that it
will take such actions with respect to specified voting interests only at the
direction of and on behalf of DTC Participants whose holdings of Class A-1
Certificates evidence such specified voting interests. DTC may take conflicting
actions with respect to voting interests to the extent that DTC Participants
whose holdings of Class A-1 Certificates evidence such voting interests
authorize divergent action.
Neither the Depositor, the Certificate Administrator nor the Trustee will
have any responsibility for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the Class A-1 Certificates
held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. In the event of the
insolvency of DTC, a DTC Participant or an indirect DTC Participant in whose
name Class A-1 Certificates are registered, the ability of the Beneficial Owners
of such Class A-1 Certificates to obtain timely payment and, if the limits of
applicable insurance coverage by the Securities Investor Protection Corporation
are exceeded or if such coverage is otherwise unavailable, ultimate payment, of
amounts distributable with respect to such Class A-1 Certificates may be
impaired.
The Class A-1 Certificates will be converted to Definitive Certificates and
re-issued to Beneficial Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Certificate Administrator is advised that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to the Class A-1 Certificates and the Certificate Administrator is
unable to locate a qualified successor, (ii) the Certificate Administrator, at
its option, elects to terminate the book-entry system through DTC or (iii)after
the occurrence of a dismissal or resignation of the Certificate Administrator
under the Pooling Agreement, Beneficial Owners representing not less than 51%
of the voting interests of the outstanding Class A-1 Certificates advise the
Trustee through DTC, in writing, that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the Beneficial Owners'
best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Certificate Administrator (or, if the Certificate Administrator
has been dismissed, the Trustee) will be required to notify all Beneficial
Owners through
S-18
<PAGE>
DTC Participants of the availability of Definitive Certificates. Upon
surrender by DTC of the physical certificates representing the Class A-1
Certificates and receipt of instructions for re-registration, the Certificate
Administrator will reissue the Class A-1 Certificates as Definitive
Certificates to Beneficial Owners. ]
TERMINATION
The Trust Fund will terminate upon the earlier of (a) the distribution to
holders of the Certificates of all amounts required to be distributed to them
pursuant to the Pooling Agreement and (b) the termination of the Pooling
Agreement.
CERTIFICATE ACCOUNT
All payments and collections in respect of the Mortgage Certificates will
be deposited in an account maintained by the Certificate Administrator (the
"Certificate Account") in the name of the Trustee with a depository institution
(which may be the Certificate Administrator) and in a manner acceptable to each
Rating Agency. See "Description of the Certificates -Payments on the Mortgage
Loans" and "-Collection of Payments on Mortgage Certificates" in the Prospectus.
Any earnings on investment of amounts in the Certificate Account will be
available for distribution to the holders of the Certificates as Interest
Available Funds. The rate at which such funds are invested from time to time is
referred to herein as the "Reinvestment Rate".
ACTIONS IN RESPECT OF THE MORTGAGE CERTIFICATES
If at any time the Trustee, as the Mortgage Certificateholder, is requested
in such capacity to take any action or to give any consent, approval or waiver,
including without limitation in connection with an amendment of an Underlying
Pooling Agreement or if an event of default occurs under an Underlying Pooling
Agreement with respect to the Mortgage Loan Servicer or the Mortgage Loan
Trustee thereunder, the Pooling Agreement provides that the Trustee, in its
capacity as certificateholder, may take action in connection with the
enforcement of any rights and remedies available to it in such capacity with
respect thereto, will promptly notify all of the holders of the Certificates and
will act only in accordance with written directions of holders of the
Certificates evidencing in excess of 50% of the Voting Rights.
VOTING RIGHTS
Certain actions specified in the Prospectus that may be taken by holders
of the Certificates evidencing a specified percentage of all undivided interest
in the Trust Fund may be taken by holders of the Certificates entitled in the
aggregate to such percentage of the Voting Rights. At any time that any
certificates are outstanding, the "Voting Rights" under the Pooling Agreement
will be allocated [ %] to the Class R Certificate, % to the Class IO
Certificate and the remainder to the Class A-1 Certificate.
CERTIFICATE ADMINISTRATOR
will act as Certificate Administrator. [Describe business of Certificate
Administrator]
TRUSTEE
will act as the Trustee. [Describe business of Trustee]
S-19
<PAGE>
THE MORTGAGE CERTIFICATES
GENERAL
The description of the Mortgage Certificates contained in this Prospectus
Supplement is a general summary of certain characteristics of the Mortgage
Certificates and does not purport to be complete. Such description is subject
to, and is qualified in its entirety by reference to, the actual terms and
provisions of the Prospectuses and Prospectus Supplements related to each of
the Mortgage Certificates (collectively, the "Underlying Disclosure Documents")
and the Pooling and Servicing Agreements relating to each of the Mortgage
Certificates (collectively, the "Underlying Pooling Agreements"). Copies of the
Underlying Disclosure Documents and the Underlying Pooling Agreements are
available from First Boston by calling at .
Investors are urged to obtain copies of such documents and read this Prospectus
Supplement in conjunction therewith.
The assets of the REMIC will consist primarily of classes (or portions
of classes) of senior mortgage pass-through certificates (the "Mortgage
Certificates"), each of which is a part of one of separate series of
mortgage pass-through certificates (each an "Underlying Series").
[Each of the Mortgage Certificates was issued pursuant to a separate
Underlying Pooling Agreement, generally dated as of the first day of the month
of initial issuance of the related Underlying Series (as to each, the
"Underlying Series Cut-off Date"), generally among , the servicer or
master servicer of the related Mortgage Loans (each, a "Mortgage Loan Servicer")
and the trustee of the related Mortgage Certificates (each, a "Mortgage Loan
Trustee").]
Certain characteristics of the Mortgage Certificates are described below.
Certain of the information with respect to the Mortgage Certificates has been
derived from the original offering documents relating to such Mortgage
Certificates and from publicly available data and other data available to the
Depositor with respect thereto. IT SHOULD BE NOTED THAT THERE MAY HAVE BEEN
MATERIAL CHANGES IN FACTS AND CIRCUMSTANCES SINCE THE DATES SUCH DOCUMENTS WERE
PREPARED, INCLUDING, BUT NOT LIMITED TO, CHANGES IN PREPAYMENT SPEEDS AND
PREVAILING INTEREST RATES AND OTHER ECONOMIC FACTORS, WHICH MAY LIMIT THE
USEFULNESS OF, AND BE DIRECTLY CONTRARY TO THE ASSUMPTIONS USED IN PREPARING,
THE INFORMATION SET FORTH IN SUCH DOCUMENTS.
The Mortgage Certificates were each issued on the dates set forth in the
following table for each such Mortgage Certificate, each in an offering
registered by under the Securities Act of 1933, as amended (the
"Securities Act").
MORTGAGE CERTIFICATES DATE OF ISSUANCE
--------------------- ----------------
[Each Underlying Series consists of multiple classes of mortgage pass-
through certificates representing interests in separate trusts (each, an
"Underlying Trust Fund"), previously formed by , each such Underlying
Trust Fund consisting, in part, of [a] [multiple] mortgage pools. Each of the
Mortgage Certificates evidences a senior interest in a separate mortgage pool
(each, an "Underlying Mortgage Pool"), which is part of one of the Underlying
Trust Funds, consisting primarily of adjustable interest rate, conventional,
one- to four-family, residential first mortgage loans (the "Mortgage Loans"),
sold by to the related Mortgage Loan Trustee for the benefit of holders
of the certificates of the related Underlying Series. Except as set forth in the
following sentence, the Underlying Series relating to each class of Mortgage
Certificates includes at least one class of certificates (as to each Underlying
Series, the "Related Subordinated Certificates") which represents an interest in
the same Underlying Mortgage Pool as such class of Mortgage Certificates and
which is subordinated to such class of Mortgage Certificates.]
S-20
<PAGE>
Each of the Mortgage Certificates has been assigned the ratings set forth
in the following table by the rating agencies identified therein:
The following table sets forth expected approximate characteristics of the
Mortgage Certificates based on remittance reports received with respect to the
Underlying Series Distribution Dates occurring in .
SUMMARY DESCRIPTION OF THE MORTGAGE CERTIFICATES
(BASED ON THE REMITTANCE REPORTS)
<TABLE>
<CAPTION>
Mortgage
Certificate
Pass-
Percentage Through
Interest of Class Current Rate
Represented by Current Mortgage as of the
Mortgage Underlying Certificate Cut-off
Original Class Certificate in Mortgage Current Balance in Predominant Date
Underlying Series Class Balance Trust Fund Pool Balance Class Balance Trust Fund Index %
- ----------------- ----- -------------- ----------------- ------------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ % $ $ $
</TABLE>
On the Closing Date, the Principal Balance of the Class A-1 Certificates
will equal the aggregate principal balance of the Mortgage Certificates. In the
event that any of the actual characteristics as of the Cut-off Date of the
Mortgage Certificates varies materially from those described herein, revised
information regarding the Mortgage Certificates will be made available to
purchasers of the Class A-1 Certificates on or before the Closing Date.
[DISTRIBUTIONS ON THE MORTGAGE CERTIFICATES
The following is a discussion of the characteristics of the Mortgage
Certificates in general. The precise characteristics of specific Mortgage
Certificates may vary from the general descriptions set forth below. There are
substantial variations among the Underlying Pooling Agreements for the various
Underlying Series. The following discussion does not purport to describe with
specificity the terms of any specific Underlying Pooling Agreement, but is
instead a general description of the major economic terms of the Mortgage
Certificates, with certain major variations from the general descriptions with
respect to certain Mortgage Certificates or groups of Mortgage Certificates
noted. Investors are urged to obtain the Underlying Pooling Agreements and the
Underlying Disclosure Documents from First Boston and read such agreements in
conjunction with this Prospectus Supplement.
[Describe distributions on Mortgage Certificates]
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
[As of the Cut-off Date, the Mortgage Certificates represented
approximately $ of the beneficial interest in separate Underlying
Mortgage Pools which, in turn, were comprised of mortgage loans having an
aggregate principal balance as of such date of approximately $ .
[Describe terms of underlying Mortgage Loans]
S-21
<PAGE>
[YIELD AND PREPAYMENT CONSIDERATIONS
Prepayments and Excess Cash. The rate of principal payments on the Class
A-1 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 condemnation, insurance or foreclosure).
Principal prepayments may be influenced by a variety of economic,
geographic, demographic, social, tax, legal and other factors. In general, if
prevailing interest rates fall significantly below the interest rates on the
Mortgage Loans, the Mortgage Loans are likely to be subject to higher
prepayments than if prevailing rates remain at or above the interest rates on
such Mortgage Loans. Conversely, if prevailing interest rates rise above the
interest rates on such Mortgage Loans, the rate of prepayments would be expected
to decrease. Other factors affecting prepayment of the Mortgage Loans include
changes in borrowers' housing needs, job transfers, unemployment, borrowers' net
equity in the mortgaged properties and servicing decisions.
All of the Mortgage Loans are adjustable rate mortgage loans ("ARMs"). The
Depositor is not aware of any publicly available statistics that set forth
principal prepayment experience or prepayment forecasts of ARMs over an extended
period of time. The prepayment experience of the Mortgage Certificates is
insufficient to draw any conclusions with respect to the expected prepayment
rates of the Mortgage Loans. The rate of principal prepayments with respect to
ARMs has fluctuated in recent years. As is the case with conventional fixed rate
mortgage loans, ARMs may be subject to a greater rate of principal prepayments
in a declining interest rate environment. For example, if prevailing interest
rates fall significantly, ARMs could be subject to higher prepayment rates than
if prevailing interest rates remain constant because the availability of fixed
rate mortgage loans at competitive interest rates may encourage mortgagors to
refinance their ARMs to "lock in" a lower fixed interest rate. No assurances can
be given as to the rate of prepayments on the Mortgage Loans in stable or
changing interest rate environments.
Excess Cash related to each of the Underlying Mortgage Pools (and other
mortgage pools that are part of the Underlying Trust Funds) will be allocated in
reduction of the Mortgage Certificate Principal Balances of the Certificates in
various ways. See "The Mortgage Certificates-Principal Distributions".
If a Class A-1 Certificate is purchased at a discount from its initial
principal amount by a purchaser that calculates its anticipated yield to
maturity based on an assumed rate of payment of principal that is faster than
that actually experienced on the Mortgage Loans, the actual yield to maturity
will be lower than that so calculated. Similarly, if a Certificate is purchased
at a premium by a purchaser that calculates its anticipated yield to maturity
based on an assumed rate of payment of principal that is slower than that
actually experienced on the Mortgage Loans, the actual yield to maturity will
be lower than that so calculated.
Timing of Payments. The timing of changes in the rate of prepayments on the
Mortgage Loans may significantly affect an investor's actual yield to maturity,
even if the average rate of principal payments is consistent with an investor's
expectations. In general, the earlier a prepayment of principal of the Mortgage
Loans, the greater the effect on an 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 the period immediately
following the issuance of the Certificates may not be offset by a subsequent
like decrease (or increase) in the rate of principal payments.
Basis Risk; [specify index]. The interest rate payable to the Holders of
the Class A-1 Certificates is based on [specify index]. However, the Mortgage
Loans bear interest at adjustable rates based on the Indices. [Specify index]
and the Indices may respond to different economic and market factors, and there
is not necessarily a correlation between them. Thus, it is possible, for
example, that [specify index] may rise during periods in which the Indices of
the Mortgage Loans are stable or are falling, or that even if both [specify
index] and the Indices rise during the same period [specify index] may rise much
more rapidly and sharply than the Indices. THERE CAN BE NO ASSURANCE THAT FUNDS
AVAILABLE IN THE RESERVE FUND PAYMENTS UNDER THE YIELD SUPPORT AGREEMENT WILL BE
SUFFICIENT TO MAKE UP ANY AMOUNT BY WHICH THE INTEREST COLLECTED ON THE MORTGAGE
CERTIFICATES IS LESS THAN THE INTEREST ACCRUAL AMOUNT OF THE CLASS A-1
CERTIFICATES.
S-22
<PAGE>
Mortgage Certificates. The Trust Fund contains Mortgage Certificates which
were issued at different times, are backed by different pools of Mortgage Loans,
have different allocations of principal and interest and payment priorities
among various classes, and may perform differently in various interest and
prepayment rate environments. The performance characteristics of the Class A-1
Certificates will reflect a combination of the performance characteristics of
the various Mortgage Certificates. As a result, it will be difficult to predict
the likely yield and payment experience of the Class A-1 Certificates.
Special Terminations. Each of the Underlying Mortgage Pools is subject to
termination as described under "Description of the Mortgage Certificates-Special
Termination". Any such termination may have the effect of decreasing the
weighted average life of the Class A-1 Certificates.
Convertible ARM Loans. As discussed above under "Description of the
Mortgage Loans," borrowers under certain of the Mortgage Loans have the option
to convert their Mortgage Loan to a fixed rate loan. As previously discussed,
the related Mortgage Loan Servicers are obligated to purchase any such converted
mortgage loans. Unless and until such a purchase is effected, a converted
mortgage loan will stay in the Underlying Mortgage Pool and the Mortgage
Interest Rate will be fixed rather than based on an Index. The yield on the
Class A-1 Certificates may thus be adversely affected. In addition, the purchase
of a Converted Mortgage Loan may affect the rate of principal payments on the
Class A-1 Certificates and, as a result, the yield on such Certificates.
WEIGHTED AVERAGE LIVES
The weighted average life of a security refers to the average amount of
time that will elapse from the date of its issuance until each dollar of
principal of such security will be distributed to the investor. The weighted
average life of a Class A-1 Certificate is determined by (a) multiplying the
amount of the reduction, if any, of the principal balance of such Certificate
from one Distribution Date (or, in the case of the first distribution, from
) to the next Distribution Date by the number of years from the date
of issuance to the second such Distribution Date, (b) summing the results and
(c) dividing the sum by the aggregate amount of the reductions in the principal
balance of such Certificate referred to in clause (a). The weighted average
lives of the Class A-1 Certificates will be influenced by, among other factors,
the rate at which principal is paid on the Mortgage Loans.
CPR MODEL
Prepayments on mortgage loans are commonly measured relative to a
prepayment or model. The model used in this Prospectus Supplement, known as a
conditional or a constant prepayment rate ("CPR"), represents a rate of payment
of unscheduled principal on the Mortgage Loans expressed as an annualized
percentage of the outstanding principal balance of the Mortgage Loans at the
beginning of each period. CPR does not purport 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.
WEIGHTED AVERAGE LIFE AND PRE-TAX YIELD TABLES
For each of the following tables it was assumed (the "Modeling
Assumptions") that (i) the Mortgage Loans underlying each of the Mortgage
Certificates have, on a weighted average basis, the characteristics set forth in
the following table following this paragraph; (ii) each Mortgage Loan underlying
a Mortgage Certificate has a Mortgage Interest Rate as of the Cut-off Date,
remaining term to maturity and loan age equivalent to the weighted average
mortgage interest rate of such Mortgage Loans, the weighted average remaining
term to maturity and the weighted average loan age of such Mortgage Loans as of
the Cut-off Date, as reported, respectively, in the applicable Remittance
Reports prepared by the Mortgage Loan Servicers; (iii) scheduled monthly
payments of principal and interest on the Mortgage Loans will be timely received
on the first day of each month (with no defaults); (iv) principal prepayments on
the Mortgage Loans will be received on the last day
S-23
<PAGE>
of each month at the percentages of CPR indicated; (v) all amounts due with
respect to the Mortgage Loans are applied to the payment of the Mortgage
Certificates on the 25th of the month as described in the applicable Underlying
Disclosure Documents; (vi) no Deferred Interest accrues with respect to any
Mortgage Loan; (vii) for the first Interest Accrual Period, the Class A-1
Pass-Through Rate is %; (viii) the Closing Date is ; (ix)
each distribution on the Class A-1 Certificates is made on the th
day of the relevant month, commencing on ; and (x) the Class
A-1 Certificates are purchased at par.]
S-24
<PAGE>
ASSUMED MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
Weighted Mortgage
Average Certificate Months Months
Mortgage Mortgage Pass Until Next Until Next
Cert- Interest Servicing Periodic Through Remaining Gross Net Rate Payment
ificates INDEX Rate Fee Cap NetCap Seasoning Rate Term Margin Margin Adjustment Adjustment
- -------- ----- -------- --------- -------- ------ --------- ----------- --------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
S-25
<PAGE>
Based on the Modeling Assumptions and the further assumptions that (i)
[specify index] with respect to each Interest Accrual Period is equal to %,
(ii) CMT with respect to each Interest Accrual Period is equal to %,
(iii) COFI with respect to each Interest Accrual Period is equal to % and
(iv) the Reinvestment Rate with respect to each Interest Accrual Period is
equal to , the following table indicates the percentages of the initial
Principal Balance of the Class A-1 Certificates that would be outstanding after
each of the dates shown at various constant percentages of CPR. Such tables
also indicate, based on such assumptions, the weighted average life of the
Class A-1 Certificates under each of the following four scenarios (the
"Termination Scenarios") concerning the Auction and Special Terminations of the
Underlying Series. See "Description of the Certificates-Mandatory Auction" and
"The Mortgage Certificates-Special Termination".
"Termination Scenario I" [specify assumptions].
"Termination Scenario Ii" [specify assumptions].
"Termination Scenario Iii" [specify assumptions].
"Termination Scenario Iv" [specify assumptions].
PERCENT OF ORIGINAL PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
CLASS A-1
CPR PREPAYMENT ASSUMPTION
------------------------------------------------------
DISTRIBUTION DATE
- ----------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Weighted Average Life (1)
Termination Scenario I
Terminiation Scenario II
Termination Scenario III
Termination Scenario IV
- -------------
(1) The weighted average life of a Class A-1 Certificate is determined by (i)
multiplying the principal payment on the Class A-1 Certificates by the
number of years from the date of issuance of the Class A-1 Certificate to
the related Distribution Date, (ii) adding the results and (iii) dividing
the sum by the aggregate principal payments on the Class A-1 Certificates.
S-26
<PAGE>
The following tables set forth, based upon the Modeling Assumptions, and
assuming the constant rate of CPR indicated in the heading for each table, the
projected yield to maturity, on a corporate bond equivalent basis, and the
projected Principal Balance of the Class A-1 Certificates as of .
PROJECTED YIELD TO MATURITY AND
OUTSTANDING PRINCIPAL BALANCE UNDER RATE SCENARIO I
<TABLE>
<CAPTION>
PERCENT OF CPR
--------------------------------------
% % %
------------ ----------- -----------
<S> <C> <C> <C>
Yield to Maturity............... % % %
Outstanding Principal Balance
as of......................... $ $ $
</TABLE>
PROJECTED YIELD TO MATURITY AND
OUTSTANDING PRINCIPAL BALANCE UNDER RATE SCENARIO II
<TABLE>
<CAPTION>
PERCENT OF CPR
--------------------------------------
% % %
------------ ----------- -----------
<S> <C> <C> <C>
Yield to Maturity............... % % %
Outstanding Principal Balance
as of......................... $ $ $
</TABLE>
PROJECTED YIELD TO MATURITY AND
OUTSTANDING PRINCIPAL BALANCE UNDER RATE SCENARIO III
<TABLE>
<CAPTION>
PERCENT OF CPR
--------------------------------------
% % %
------------ ----------- -----------
<S> <C> <C> <C>
Yield to Maturity............... % % %
Outstanding Principal Balance
as of......................... $ $ $
</TABLE>
Each of the Rate Scenarios assumes that the levels of [specify index], COFI
and CMT rise significantly above current levels. The actual yield to an investor
will significantly lower if the actual levels of such indices fall, remain
constant, or rise less than the amounts assumed in the Rate Scenarios. No
prediction can be made as to the actual level of any such index at any future
date.
The yields set forth in the above table were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on the Class A-1 Certificates, would cause the discounted present
value of such assumed stream of cash flows to equal the assumed purchase price
of the Class A-1 Certificates indicated in the Modeling Assumption above and
converting such monthly rates to corporate bond equivalent rates. Such
calculation does not take into account variations that may occur in the
interest rates at which investors may be able to reinvest funds received by
them as payments of principal of and interest on the Class A-1 Certificates and
consequently does not purport to reflect the return of any investment in the
Class A-1 Certificates when such reinvestment rates are considered.
S-27
<PAGE>
ACTUAL EXPERIENCE WILL VARY FROM ASSUMPTIONS
Discrepancies will exist between the characteristics of the actual Mortgage
Certificates and the underlying Mortgage Loans and the characteristics assumed
therefor in preparing the tables contained herein. To the extent that the
Mortgage Certificates and Mortgage Loans have characteristics which differ from
those assumed in preparing the tables, the Class A-1 Certificates may mature
earlier or later than indicated by the tables and the weighted average lives and
pre-tax yields may also differ. In addition, it is unlikely that the Mortgage
Loans will prepay at any constant rate or at the same rate, or that [specify
index] will remain constant at any level. The timing of changes in the rate of
prepayment and level of [specify index] may significantly affect the yield
realized by a holder of the Class A-1 Certificates.
THE MORTGAGE LOAN SERVICERS
The names of the Mortgage Loan Servicers related to each of the Mortgage
Certificates are set forth in the following table:
MORTGAGE LOAN SERVICERS
MORTGAGE CERTIFICATES SERVICER
--------------------- --------
The preceding information with respect to the Mortgage Loan Servicers was
derived by the Depositor from publicly available information which the
Depositor believes to be reliable. However, the Depositor makes no
representations with respect thereto and assumes no responsibility for the
accuracy or completeness thereof.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. An election will be made to treat the portion of the Trust Fund
consisting of the Mortgage Certificates as a REMIC for federal income tax
purposes. The [payments on the] Class A-1 Certificates [which are derived from
the Mortgage Certificates], and the Class IO Certificates will be designated as
regular interests in the REMIC, and the Class R Certificate will be designated
as the residual interest in the REMIC.
[A purchaser of the Class A-1 Certificates will be treated for tax purposes
as purchasing a REMIC regular interest and a contractual right to receive
amounts from the Reserve Fund. Under general tax principles, a purchaser of more
than one asset must allocate its purchase price between the assets based on
their relative fair market values on the date of purchase. An investor that
disposes of its Class A-1 Certificates must make a similar allocation of its
amount realized.
The Certificate Administrator intends to treat the value of the contractual
right to receive payments from the Reserve Fund as de minimis. Consequently, the
Certificate Administrator intends to report assuming that the entire purchase
price for the Class A-1 Certificates is allocated to the REMIC regular interest.
Based on this assumption, it is anticipated that the REMIC regular interest will
be issued [at a premium] [with de minimis original issue discount] for federal
income tax purposes. An investor in the Class A-1 Certificates that accounts for
its investment using this method of allocation would report amounts with respect
to the Reserve Fund and Yield Support Agreement as income when received or
accrued, in accordance with such investor's regular method of tax accounting.
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<PAGE>
The Internal Revenue Service may contend, however, that a portion of the
purchase price paid by an investor in the Class A-1 Certificates should be
allocated to the investor's rights with respect to the Reserve Fund. Under this
approach, the investor would allocate a lesser amount of its purchase price to
the REMIC regular interest than described in the preceding paragraph, which may
result in the creation of, or a greater amount of, original issue discount or
market discount with respect to the REMIC regular interest. The proper method
of recovery of the investor's purchase price allocated to its contractual
rights with respect to the Reserve Fund is not clear. Although not free from
doubt, the contractual arrangement relating to the Reserve Fund should
constitute a "notional principal contract" for federal income tax purposes.
Investors should consult their own tax advisors regarding an investment in the
Class A-1 Certificates, in particular with respect to the recovery of any
purchase price allocated to such notional principal contract.
Status of Class A-1 Certificates. The investment status of that portion of
the Class A-1 Certificates that constitutes a REMIC regular interest is
described in the Prospectus under "Certain Federal Income Tax Consequences-REMIC
Trust Funds-Characterization of Investments in REMIC Certificates." The interest
of an investor in the Class A-1 Certificates relating to the Reserve Fund would
not constitute:
. a "real estate asset" under Section 856(c)(5)(A) of the Internal Revenue
Code (the "Code") if held by a real estate investment trust;
. a "qualified mortgage" under Code Section 860G(a)(3) or a "permitted
investment" under Code Section 860G(a)(5) if held by a REMIC; or
. an asset described in Code Section 7701(a)(19)(C) if held by a thrift.
Income received from the Reserve Fund will not constitute income described in
Code Section 856(c)(3)(B) for a real estate investment trust.
Taxation of REMIC Regular Interest. The portion of the Class A-1
Certificates which constitutes a REMIC regular interest generally will be
treated as a newly originated debt instrument for federal income tax purposes.
Beneficial Owners of the Class A-1 Certificates will be required to report
income with respect to such REMIC regular interest in accordance with the
accrual method of accounting. The Prepayment Assumption (as defined in the
Prospectus) that the Certificate Administrator intends to use in determining the
rate of accrual of original issue discount or premium is 18% CPR. No
representation is made as to the actual rate at which prepayments will occur.
Taxation of Foreign Investors. To the extent the contractual arrangement
relating to the Reserve Fund constitutes a notional principal contract, income
or gain thereon will not be subject to U.S. withholding tax.]
See "Certain Federal Income Tax Consequences-General" and "-REMIC Trust
Funds" in the Prospectus.]
[ERISA CONSIDERATIONS
The Department of Labor has granted to First Boston an individual
administrative exemption Prohibited Transaction Exemption 89-90, 54 Fed. Reg.
42597 (Oct. 17, 1989) (the "Exemption"), from certain of the prohibited
transaction rules of ERISA and certain related excise taxes imposed by the Code
with regard to the initial purchase, the holding and the subsequent resale by
ERISA Plans of certificates in pass-through trusts that meet the conditions and
requirements of the Exemption. The Exemption should apply to the liquidation,
holding, and resale of the Class A-1 Certificates by an ERISA Plan, provided
that specified conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the acquisition by an ERISA Plan of the Class A-1 Certificates are the
following: (1) the acquisition of the Certificates by an ERISA Plan is on terms
(including the price for such Certificates) that are at least as favorable to
the ERISA Plan as they would be in an arm's-length transaction with an unrelated
party; (2) the rights and interests evidenced by the Certificates acquired by
the ERISA Plan are not subordinated to the
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<PAGE>
rights and interests evidenced by other certificates of the Trust; (3) the
Certificates acquired by the ERISA Plan have received a rating at the time of
such acquisition that is in one of the three highest generic rating categories
from any of S&P, Fitch, Duff & Phelps Credit Rating Co. or Moody's; (4) the sum
of all payments made to First Boston in connection with the distribution of the
Class A-1 Certificates represents not more than reasonable compensation for
underwriting such Certificates; and (5) the sum of all payments made to and
retained by the Certificate Administrator represents not more than reasonable
compensation for the Certificate Administrator's services under the Pooling
Agreement and reimbursement of the Certificate Administrator's reasonable
expenses in connection therewith.
In addition, it is a condition that the ERISA Plan investing in the Class
A-1 Certificates be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act.
The Exemption does not apply to the acquisition and holding of Class A-1
Certificates by ERISA Plans sponsored by the Issuer, First Boston, the Trustee,
the Certificate Administrator, or any affiliate of such parties. Moreover, the
Exception provides relief from certain self-dealing/conflict of interest
prohibited transactions, only if, among other requirements (i) an ERISA Plan's
investment in the Class A-1 Certificates does not exceed 25% of all of that
Class outstanding at the time of the acquisition and (ii) immediately after the
acquisition, no more than 25% of the assets of an ERISA Plan with respect to
which the person who has discretionary authority or renders advice are invested
in certificates representing an interest in a trust containing assets sold or
serviced by the same person.]
USE OF PROCEEDS
The proceeds from the sale of the Class A-1 Certificates (net of expenses
incurred in connection with the issuance of the Class A-1 Certificates) will be
used by the Depositor to purchase the Mortgage Certificates.
[LEGAL INVESTMENT CONSIDERATIONS
The Class A-1 Certificates will constitute "mortgage related securities"
for purposes 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 statistical rating organization. As such, the
Class A-1 Certificates will constitute legal investments for certain entities to
the extent provided in SMMEA. However, institutions subject to the jurisdiction
of the Office of the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, the National Credit Union Administration or other federal or
state banking, insurance or other regulatory authorities should review
applicable rules, policies and guidelines of such authorities before purchasing
any of the Class A-1 Certificates, as such Certificates may be deemed to be
unsuitable investments, or may otherwise be restricted, under one or more of
these rules, policies and guidelines (in certain cases irrespective of SMMEA).
It should also be noted that certain states have enacted legislation limiting to
varying extent the ability of certain entities (in particular insurance
companies) to invest in "mortgage related securities." The appropriate
characterization of the Class A-1 Certificates under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase Class A-1 Certificates, may be subject to significant interpretive
uncertainties. Investors should consult with their own legal advisors in
determining whether and to what extent the Class A-1 Certificates constitute
legal investments for such investors. See "Legal Investment" in the Prospectus.]
METHOD OF DISTRIBUTION
First Boston proposes to place the Class A-1 Certificates from time to time
in one or more negotiated transactions, or otherwise, at varying prices to be
determined in each case, at the time of sale. The Class A-1 Certificates are
offered subject to prior sale and acceptance and to certain other conditions.
S-30
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and First
Boston by Sidley & Austin, New York, New York.
RATINGS
It is a condition to the issuance of the Class A-1 Certificates that such
Certificates be rated " " by and " " by .
The ratings of and on mortgage pass-through certificates
address the likelihood of the receipt by holders hereof of all distributions of
principal and interest to which such holders are entitled. THE RATING
AGENCIES NOTE THAT THE ENTITLEMENT OF THE CLASS A-1 CERTIFICATES TO INTEREST AT
A RATE IN EXCESS OF THE MORTGAGE CERTIFICATE PASS-THROUGH RATE IS SUBJECT TO
THE AVAILABILITY OF INTEREST AVAILABLE FUNDS. There is no assurance that
such ratings will continue for any period of time or that they will not be
revised or withdrawn entirely by such rating agency if, in its judgment,
circumstances so warrant. A revision or withdrawal of such ratings may have an
adverse effect on the market price of the Class A-1 Certificates. A security
rating is not a recommendation to buy, sell or hold securities.
and rating opinions address the structural, legal and issuer
aspects associated with the certificates, including the nature of the
underlying mortgage assets and the credit quality of the credit support
provider, if any. and ratings on pass-through certificates do not
represent any assessment of the likelihood that principal prepayments may
differ from those originally anticipated and consequently the timing of such
prepayments may adversely affect an investor's anticipated yield.
The Depositor has not requested a rating on the Certificates from any
other rating agency, although data with respect to the Mortgage Loans or the
Mortgage Certificates may have been provided to other agencies solely for their
informational purposes. There can be no assurance that if a rating is assigned
to the Class A-1 Certificates by any other rating agency, such rating will be
as high as that assigned by or .
S-31
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 6, 1995
P R O S P E C T U S
Asset Backed Securities Corporation
Depositor
Conduit Mortgage and Manufactured Housing Contract
Pass-Through Certificates
(Issuable in Series)
---------------
The Conduit Mortgage and Manufactured Housing Contract Pass-Through Certificates
(the "Certificates") offered hereby and by the related Prospectus Supplements
will be offered from time to time in series (each, a "Series") in one or more
separate classes (each, a "Class"), which may be divided into one or more
subclasses(each, a "Subclass"), that represent interests in specified
percentages of principal and interest (a "Percentage Interest") with respect to
the related Mortgage Pool or the Contract Pool (each, as defined below), or that
have been assigned a Stated Principal Balance and an Interest Rate (as such
terms are defined herein), as more fully set forth herein, and will evidence the
undivided interest or beneficial interest specified in the related Prospectus
Supplement in one of a number of trusts, each to be created by Asset Backed
Securities Corporation (the "Depositor") from time to time. The trust property
of each trust (the "Trust Fund") will consist of a pool containing one- to four-
family residential mortgage loans, mortgage loans secured by multifamily
residential rental properties consisting of five or more dwelling units or
apartment buildings owned by cooperative housing corporations, loans made to
finance the purchase of certain rights relating to cooperatively owned
properties secured by a pledge of shares of a cooperative corporation and an
assignment of a proprietary lease or occupancy agreement on a cooperative
dwelling, mortgage participation certificates evidencing participation interests
in such loans that are acceptable to the nationally recognized statistical
rating agency or agencies rating the related Series of Certificates
(collectively, the "Rating Agency") for a rating in one of the four highest
rating categories of such. Rating Agency (such loans and participation
certificates being referred to collectively hereinafter as the "Mortgage
Loans"), or certain conventional mortgage pass-through certificates (the
"Mortgage Certificates") and related property (the "Mortgage Pool") or a pool of
manufactured housing conditional sales contracts and installment loan agreements
(the "Contracts") or participation certificates representing participation
interests in such Contracts and related property (the "Contract Pool") conveyed
to such trust by the Depositor. The Mortgage Loans may be conventional mortgage
loans, conventional cooperative loans, mortgage loans insured by the Federal
Housing Administration (the "FHA"), or mortgage loans partially guaranteed by
the Veterans Administration (the "VA"), or any combination of the foregoing,
bearing fixed or variable rates of interest. The Contracts may be conventional
contracts, contracts insured by the FHA or partially guaranteed by the VA, or
any combination of the foregoing, bearing fixed or variable rates of interest,
as specified in the related Prospectus Supplement. If so specified in the
related Prospectus Supplement, the rights of the holders of the Certificates of
one or more Classes or Subclasses of a Series to receive distributions with
respect to the related Mortgage Pool or Contract Pool may be subordinated to
such rights of the holders of the Certificates of one or more Classes or
Subclasses of such Series to the extent described herein and in such Prospectus
Supplement. As provided in the applicable Prospectus Supplement, the timing of
payments, whether of principal or of interest, to any one or more of such
Classes or Subclasses may be on a sequential or a pro rata basis. The Prospectus
Supplement with respect to each Series will also set forth specific information
relating to the Trust Fund with respect to the Series in respect of which the
Prospectus is being delivered, together with specific information regarding the
Certificates of such Series.
The Certificates do not represent an obligation of or interest in the Depositor
or any affiliate thereof. Neither the Certificates, the Mortgage Loans, the
Contracts nor the Mortgage Certificates are insured or guaranteed by any
governmental agency or instrumentality, except to the extent provided herein.
Offers of the Certificates may be made through one or more different methods,
including offerings through underwriters, which may include CS First Boston
Corporation, an affiliate of the Depositor, as more fully described under "Plan
of Distribution" and in the related Prospectus Supplement. Certain offerings of
the Certificates, as specified in the related Prospectus Supplement, may be made
in one or more transactions exempt from the registration requirements of the
Securities Act of 1933. Such offerings are not being made pursuant to the
Registration Statement of which this Prospectus forms a part.
There will have been no public market for the Certificates of any Series prior
to the offering thereof. No assurance can be given that such a market will
develop as a result of such offering or, if it does develop, that it will
continue.
The Depositor, as specified in the applicable Prospectus Supplement, may elect
to treat the Trust Fund with respect to certain Series of Certificates as one or
more Real Estate Mortgage Investment Conduits (each, a "REMIC"). See "Certain
Federal Income Tax Consequences".
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Certificates of such Series may be subject to early
termination and may receive Special Distributions (as defined herein) in
reduction of Stated Principal Balance (as defined herein) under the
circumstances described herein and in such Prospectus Supplement.
This Prospectus may not be used to consummate sales of the Certificates offered
hereby unless accompanied by a Prospectus Supplement.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CS First Boston
The date of this Prospectus is , 199 .
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement with respect to each Series of Certificates
will, among other things, set forth with respect to such Series of Certificates:
(i) the identity of each Class or Subclass within such Series; (ii) the
undivided interest, Percentage Interest, Stated Principal Balance or notional
amount of each Class or Subclass of Certificates; (iii) the Pass-Through Rate,
Interest Rate or Annual Rate borne by each Class or Subclass within such Series;
(iv) certain information concerning the Mortgage Loans, the Mortgage
Certificates, the Contracts, if any, and the other assets comprising the Trust
Fund for such Series; (v) the final Distribution Date of each Class or Subclass
of Certificates within such Series; (vi) the identity of each Class or Subclass
of Compound Interest Certificates, if any, within such Series; (vii) the method
used to calculate the amount to be distributed with respect to each Class or
Subclass of Certificates; (viii) the order of application of distributions to
each of the Classes or Subclasses within such Series, whether sequential, pro
rata, or otherwise; (ix) the Distribution Dates with respect to such Series; (x)
information with respect to the terms of the Residual Certificates or
Subordinated Certificates offered hereby, if any are offered; (xi) information
with respect to the method of credit support, if any, with respect to such
Series; and (xii) additional information with respect to the plan of
distribution of such Series of Certificates.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each
Series of Certificates will contain, a summary of the material terms of the
documents referred to herein and therein, but neither contains nor will contain
all of the information set forth in the Registration Statement of which this
Prospectus and the related Prospectus Supplement is a part. For further
information, reference is made to such Registration Statement and the exhibits
thereto which the Depositor has filed with the Securities and Exchange
Commission (the "Commission"), under the Securities Act of 1933, as amended (the
"Securities Act"). Statements contained in this Prospectus and any Prospectus
Supplement as to the contents of any contract or other document referred to are
summaries and in each instance reference is made to the copy of the contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement may be obtained from the Commission, upon payment of the
prescribed charges, or may be examined free of charge at the Commission's
offices. Reports and other information filed with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission at 75 Park Plaza, Room 1102, New York, New
York 10007; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Copies of the Pooling and Servicing Agreement
pursuant to which a Series of Certificates is issued will be provided to each
person to whom a Prospectus and the related Prospectus Supplement are delivered,
upon written or oral request directed to: Secretary, Asset Backed Securities
Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055,
(212) 909-2000.
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 Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the termination of the offering
of Certificates offered hereby. 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 Certificates, upon
request, a copy of any or all such 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 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 to: Secretary,
Asset Backed Securities Corporation, Park Avenue Plaza, 55 East 52nd Street, New
York, New York 10055, telephone number (212) 909-2000.
2
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus, and by reference to the
information with respect to each Series of Certificates contained in the related
Prospectus Supplement. Certain capitalized terms used and not otherwise defined
herein shall have the meanings given elsewhere in this Prospectus.
SECURITIES OFFERED...Conduit Mortgage and Manufactured Housing Contract Pass-
Through Certificates (the "Certificates"), issuable in
series (each, a "Series"). The Certificates may be issued
in one or more classes (each, a "Class") and such Classes
may be divided into one or more subclasses (each, a
"Subclass"). One or more of such Classes or Subclasses of
a Series may be subordinated to one or more Classes or
Subclasses of such Series, as specified in the related
Prospectus Supplement (any such Class or Subclass to
which another Class or Subclass is subordinated being
hereinafter referred to as a "Senior Class" or a "Senior
Subclass", respectively, and any such subordinated Class
or Subclass being hereinafter referred to as a
"Subordinated Class" or "Subordinated Subclass",
respectively). One or more of such Classes or Subclasses
of Certificates of a Series (the "Residual Certificates")
may evidence a residual interest in the related Trust
Fund (as defined below). If so specified in the related
Prospectus Supplement, one or more Classes or Subclasses
of Certificates within a Series (the "Multi-Class
Certificates") may be assigned a principal balance (a
"Stated Principal Balance" or a "Certificate Principal
Balance") based on the cash flow from the Mortgage Loans
(as hereinafter defined), Mortgage Certificates (as
hereinafter defined), the Contracts (as hereinafter
defined) and/or the other assets in the Trust Fund if
specified as such in the related Prospectus Supplement
and a stated annual interest rate, determined in the
manner set forth in such Prospectus Supplement, which may
be fixed or variable (an "Interest Rate"). If so
specified in the related Prospectus Supplement, one or
more such Classes or Subclasses may receive unequal
amounts of the distributions of principal and interest on
the Mortgage Loans, the Contracts and the Mortgage
Certificates included in the related Trust Fund, as
specified in such Prospectus Supplement (any such Class
or Subclass receiving the higher proportion of principal
distributions being referred to hereinafter as a
"Principal Weighted Class" or "Principal Weighted
Subclass, "respectively, and any such Class or Subclass
receiving the higher proportion of interest distributions
being referred to hereinafter as an "Interest Weighted
Class" or an "Interest Weighted Subclass", respectively).
If so specified in the related Prospectus Supplement, the
allocation of the principal and interest distributions
may involve as much as 100% of each distribution of
principal or interest being allocated to one or more
Classes or Subclasses and 0% to another. If so specified
in the related Prospectus Supplement, one or more Classes
or Subclasses may receive disproportionate amounts of
certain distributions of principal, which proportions may
change over time subject to certain conditions. Payments
may be applied to any one or more Class or Subclass on a
sequential or pro rata basis, or otherwise, as specified
in the related Prospectus Supplement. Each Certificate
will represent the undivided interest, beneficial
interest or percentage interest specified in the related
Prospectus Supplement in one of a number of trusts to be
created by the Depositor from time to time. The trust
property of each trust (the "Trust Fund") will consist of
(a) one or more mortgage pools (each, a "Mortgage Pool")
containing (i) conventional one-to four-family
residential, mortgage loans, (ii) loans (the "Cooperative
Loans") made to finance
3
<PAGE>
the purchase of certain rights relating to cooperatively
owned properties secured by the pledge of shares issued
by a cooperative corporation (the "Cooperative") and the
assignment of a proprietary lease or occupancy agreement
providing the exclusive right to occupy a particular
dwelling unit (a "Cooperative Dwelling" and, together
with one- to four-family residential properties, "Single
Family Property"), (iii) mortgage loans secured by
multifamily residential rental properties consisting of
five or more dwelling units or apartment buildings owned
by cooperative housing corporations ("Multifamily
Property"), purchased by the Depositor either directly or
through one or more affiliates from an affiliate or from
unaffiliated sellers, (iv) mortgage participation
certificates evidencing participation interests in such
loans that are acceptable to the nationally recognized
rating agency or agencies identified in the related
Prospectus Supplement (collectively, the "Rating Agency")
rating the Certificates of such Series for a rating in
one of the four highest rating categories of such Rating
Agency (such loans and mortgage participation
certificates being referred to collectively hereinafter
as the "Mortgage Loans"), or (v) certain conventional
mortgage pass-through certificates (the "Mortgage
Certificates") issued by one or more trusts established
by one or more private entities or (b) one or more
contract pools (each, a "Contract Pool") containing
manufactured housing conditional sales contracts and
installment loan agreements (the "Contracts") or
participation certificates representing participation
interests in such Contracts (such Contracts, together
with the Mortgage Loans and the Mortgage Certificates,
being referred to collectively hereinafter as the "Trust
Assets") purchased by the Depositor either directly or
through one or more affiliates or Unaffiliated Sellers,
and related property conveyed to such trust by the
Depositor.
Unless otherwise specified in the related Prospectus
Supplement, each Series of Certificates will be offered
in fully registered form only, in one or more Classes,
which may be divided into one or more Subclasses
evidencing the right to receive a share of principal
payments and the percentages of interest payments on the
underlying Mortgage Loans, Mortgage Certificates or
Contracts at the Pass-Through Rate for the related
Mortgage Pool or Contract Pool. If so specified in the
related Prospectus Supplement, Multi-Class Certificates
of a Series may be issued with the Stated Principal
Balances and the Interest Rates therein specified. At the
time of issuance, each Certificate offered by means of
this Prospectus and the related Prospectus Supplements
will be rated in one of the four highest rating
categories by at least one Rating Agency. The minimum
undivided interest, percentage interest or beneficial
interest in a Mortgage Pool or Contract Pool, the minimum
notional amount to be evidenced by a Certificate of a
Class or Subclass, or the minimum denomination in which a
Certificate of a Class or Subclass is to be issued will
be set forth in the related Prospectus Supplement.
DEPOSITOR............Asset Backed Securities Corporation, a Delaware
corporation.
MASTER SERVICER......The entity, if any, named as Master Servicer in the
applicable Prospectus Supplement, which may be an
affiliate of the Depositor. See "Description of the
Certificates".
INTEREST.............Interest will be distributed on the days specified in the
Prospectus Supplement with respect to a Series, or if any
such day is not a business day, the next succeeding
business day (the "Distribution Date"), at the rate, or
pursuant to the method of determining such rate,
specified in the related Prospectus Supplement for each
Class
4
<PAGE>
or Subclass within such Series, commencing on the day
specified in such Prospectus Supplement, in the manner
specified in such Prospectus Supplement. See "Yield
Considerations" and "Description of the Certificates-
Payments on Mortgage Loans" and "-Payments on Contracts".
PRINCIPAL (INCLUDING
PREPAYMENTS).........Unless otherwise specified in the related Prospectus
Supplement, principal on each Trust Asset underlying a
Series of Certificates will be distributed on each
Distribution Date, commencing on the date specified in
the related Prospectus Supplement in the priority and
manner specified in such Prospectus Supplement. If so
specified in the Prospectus Supplement with respect to a
Series that includes Multi-Class Certificates,
distributions on such Multi-Class Certificates may be
made in reduction of the Stated Principal Balance, in an
amount equal to the Stated Principal Distribution Amount.
Unless otherwise specified in the related Prospectus
Supplement, the Stated Principal Distribution Amount will
equal the amount by which the Stated Principal Balance of
such Class of Multi-Class Certificates (before taking
into account the amount of interest accrued and added to
the Stated Principal Balance of any Class or of Compound
Interest Certificates) exceeds the Asset Value (as
defined herein) of the Trust Assets and other property in
the related Trust Fund as of the Business Day prior to
the related Distribution Date. See "Maturity and
Prepayment Considerations" and "Description of the
Certificates-Payments on Mortgage Loans" and "-Payments
on Contracts". If so specified in the Prospectus
Supplement relating to a Series, the Multi-Class
Certificates of such Series which have other than monthly
Distribution Dates may receive special distributions in
reduction of the Stated Principal Balance ("Special
Distributions") in any month, other than a month in which
a Distribution Date occurs, if, as a result of principal
prepayments on the Trust Assets included in the related
Trust Fund and/or low reinvestment yields, the Trustee
determines, based on assumptions specified in the related
Pooling and Servicing Agreement, that the amount of cash
anticipated to be on deposit in the Certificate Account
for such Series on the next Distribution Date may be less
than the sum of the interest distributions and the amount
of distributions in reduction of Stated Principal Balance
to be made on such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, Special
Distributions will be made on such Certificates in the
same priority and manner as distributions in reduction of
Stated Principal Balance would be made on the next
Distribution Date for such Certificates. See "Description
of the Certificates-Special Distributions".
THE MORTGAGE POOLS...If so specified in the related Prospectus Supplement, the
Certificates of a Series will represent the interest
specified in such Prospectus Supplement in the Mortgage
Pool or Pools included in the Trust Fund for such Series.
Unless otherwise specified in the applicable Prospectus
Supplement, the original principal amount of each
Mortgage Loan in a Mortgage Pool will not be more than
95% (such ratio, the "Loan-to-Value Ratio") of the value
of the property securing such Mortgage Loan (the
"Mortgaged Property"), based upon an appraisal of the
Mortgaged Property considered acceptable to the
originator of such Mortgage Loan or the sales price,
whichever is less (the "Original Value"). Unless
otherwise specified in the applicable Prospectus
Supplement, Mortgage Loans secured by Single Family
Property having an original principal amount exceeding
80% of the Original Value will be covered by a policy of
private mortgage insurance until the outstanding
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principal amount is reduced to the percentage of the
Original Value set forth in the related Prospectus
Supplement as a result of principal payments by the
borrower (the "Mortgagor").
Unless otherwise specified in the applicable Prospectus
Supplement, the principal balance at origination of each
Mortgage Loan that is secured by Single Family Property
will not exceed $500,000. Mortgage Loans in a Mortgage
Pool will all have original maturities of 10 to 40 years,
unless otherwise specified in the applicable Prospectus
Supplement. Mortgage Pools may be formed from time to
time in varying sizes.
FIXED PASS-THROUGH
RATE MORTGAGE POOLS..Unless otherwise specified in the related Prospectus
Supplement, with respect to each Mortgage Pool included
in the Trust Fund with respect to a Series bearing a
fixed Pass-Through Rate, the Depositor will be obligated
to deliver Mortgage Loans that (i) have interest rates
(the "Mortgage Rates") at least 3/8 of 1% over the
interest rate (the "Pass-Through Rate") for such Series,
(ii) conform to the eligibility requirements for such
Series set forth in the related Prospectus Supplement,
and (iii) have an aggregate principal balance equal to
the amount specified in such Prospectus Supplement,
subject to a permitted variance of up to 10%.
VARIABLE PASS-
THROUGH RATE
MORTGAGE POOLS.......If so specified in the related Prospectus Supplement, the
Depositor may establish one or more Mortgage Pools, each
of which will have a variable as opposed to a fixed Pass-
Through Rate. Unless otherwise provided in the applicable
Prospectus Supplement, the variable Pass-Through Rate
will equal the weighted average of the Mortgage Rates of
all of the Mortgage Loans in the Mortgage Pool minus the
fixed percentage servicing fee for each Mortgage Loan set
forth in the related Prospectus Supplement or in a
Current Report on Form 8-K. A Mortgage Pool with a
variable Pass-Through Rate may be composed of Mortgage
Loans that have fluctuating Mortgage Rates. The
characteristics of a variable Pass-Through Rate and its
effect on the yield to Certificateholders as well as the
servicing compensation payable to the related Servicer
and the Master Servicer and the amounts, if any, with
respect to such Mortgage Loans payable to the Depositor
or to the person or entity specified in the related
Prospectus Supplement will be more fully described in
such Prospectus Supplement.
MORTGAGE
CERTIFICATES.........If so specified in the related Prospectus Supplement, the
Trust Fund for a Series of Certificates may include
Mortgage Certificates issued by one or more trusts
established by one or more private entities, with the
respective aggregate principal balances and the
characteristics described in such Prospectus Supplement.
Each Mortgage Certificate included in a Trust Fund will
evidence an interest of the type specified in the related
Prospectus Supplement in a pool of mortgage loans of the
type described in such Prospectus Supplement, secured
principally by mortgages on one- to four-family
residences, mortgages on multi-family residential rental
properties or apartment buildings owned by cooperative
housing corporations or by pledges of shares of
cooperative corporations and assignments of proprietary
leases or occupancy agreements on cooperative dwellings,
unless otherwise specified in such Prospectus Supplement.
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THE CONTRACT POOLS...If so specified in the related Prospectus Supplement, the
Certificates of a Series will represent the interest
specified in such Prospectus Supplement in the Contract
Pool or Pools included in the Trust Fund for such Series.
Unless otherwise specified in the applicable Prospectus
Supplement, the Contracts will be fixed rate Contracts.
Such Contracts, as specified in the related Prospectus
Supplement, will consist of manufactured housing
conditional sales contracts and installment loan
agreements and will be conventional Contracts or
Contracts insured by the FHA or partially guaranteed by
the VA. Each Contract may be secured by a new or used
unit of manufactured housing (a "Manufactured Home").
The related Prospectus Supplement will specify the range of
terms to maturity of the Contracts at origination and the
maximum Loan-to-Value Ratio at origination (the "Contract
Loan-to-Value Ratio"). Because manufactured homes, unlike
site-built homes, generally depreciate in value, the
Loan-to-Value Ratios of some of the Contracts may be
higher at the Cut-off Date than at origination and may
increase over time. Unless otherwise specified in the
related Prospectus Supplement, Contracts that are
conventional Contracts will not be covered by primary
mortgage insurance policies or primary credit insurance
policies. Each Manufactured Home which secures a Contract
will be covered by a standard hazard insurance policy
(which may be a blanket policy) to the extent described
herein or in the related Prospectus Supplement insuring
against hazard losses due to various causes, including
fire, lightning and windstorm. A Manufactured Home
located in a federally designated flood area will be
required to be covered by flood insurance. Contract Pools
may be formed from time to time in varying sizes.
None of the Contracts will have been originated by the
Depositor or any of its affiliates.
YIELD
CONSIDERATIONS.......If so specified in the applicable Prospectus Supplement, an
assumed rate of prepayment will be used to calculate the
expected yield to maturity on each Class of the
Certificates of a Series. The yield on any Class of
Certificates, the purchase price of which is greater than
the aggregate amount of the Principal Distributions to be
made to such Class (a "Premium Certificate"), is likely
to be adversely affected by a higher than anticipated
level of principal prepayments on the Trust Assets
included in related Trust Fund. This effect on yield will
intensify with any increase in the amount by which the
purchase price of such Certificate exceeds the aggregate
amount of such Principal Distributions. If the
differential is particularly wide and a high level of
prepayments occurs, it is possible for Holders of Premium
Certificates not only to suffer a lower than anticipated
yield but, in extreme cases, to fail to recoup fully
their initial investment. Conversely, a lower than
anticipated level of principal prepayments (which can be
anticipated to increase the expected yield to Holders of
Certificates that are Premium Certificates) will likely
result in a lower than anticipated yield to Holders of
Certificates of a Class the purchase price of which is
less than the aggregate amount of the Principal
Distributions to be made to such Class (a "Discount
Certificate"). The Prospectus Supplement for each Series
of Certificates that includes an Interest Weighted or a
Principal Weighted Class will set forth certain yield
calculations on each such Class based upon a range of
specified prepayment assumptions on the Trust Assets
included in the related Trust Fund.
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The yield to Certificateholders will also be adversely
affected because interest will accrue on the Mortgage
Loans, the Contracts or the mortgage loans underlying the
Mortgage Certificates included in a Trust Fund, from the
first day of the month preceding the month in which a
Distribution Date occurs, but the distribution of such
interest will be made no earlier than the 25th day of the
succeeding month unless otherwise provided in the
applicable Prospectus Supplement. The adverse effect on
yield of this delay will intensify with any increase in
the period of time by which the Distribution Date for a
Series of Certificates succeeds the date on which
distributions on the Mortgage Loans, the Contracts, or
the Mortgage Certificates are received by the Master
Servicer or the Trustee. See "Yield Considerations".
CREDIT SUPPORT.......Neither the Certificates nor the Trust Assets are insured
or guaranteed by any guarantee. Credit support will be
provided on the Mortgage Pools or Contract Pools by one
or more irrevocable letters of credit (the "Letter of
Credit"), a policy of mortgage pool insurance (the "Pool
Insurance Policy"), a bond or similar form of insurance
coverage against certain losses in the event of the
bankruptcy of a Mortgagor (the "Mortgagor Bankruptcy
Bond") or any combination of the foregoing specified in
the applicable Prospectus Supplement. In lieu or in
addition to the foregoing credit support arrangements if
so specified in the related Prospectus Supplement, the
Certificates of a Series may be issued in one or more
Classes or Subclasses. Payments on the Certificates of
one or more Classes or Subclasses (the "Senior
Certificates") may be supported by a prior right to
receive distributions attributable or otherwise payable
to another Class or Subclass (the "Subordinated
Certificates") to the extent specified in the related
Prospectus Supplement (the "Subordinated Amount"). In
addition, if so specified in the related Prospectus
Supplement, one or more Classes or Subclasses of
Subordinated Certificates may be subordinated to another
Class or Subclass of Subordinated Certificates and may be
entitled to receive disproportionate amounts of
distributions of principal. If so specified in the
related Prospectus Supplement, a reserve (the "Reserve
Fund") and certain other accounts or funds may be
established to support payments on the Certificates. A
Prospectus Supplement with respect to a Series may also
provide for additional or alternative forms of credit
support, including a guarantee or surety bond, acceptable
to the Rating Agency ("Alternative Credit Support").
A. LETTER OF CREDIT..If so specified in the applicable Prospectus Supplement,
the issuer of one or more Letters of Credit (the "L/C
Bank") will deliver to the Trustee the Letters of Credit
for the Mortgage Pool or Contract Pool. Unless otherwise
specified in the related Prospectus Supplement, to the
extent described herein, the L/C Bank will honor the
Trustee's demands with respect to such Letter of Credit,
to the extent of the amount available thereunder, to make
payments to the Certificate Account on each Distribution
Date in an amount equal to the amount sufficient to
repurchase each Liquidating Loan that has not been
purchased by the related Servicer or the Master Servicer
pursuant to the terms of the applicable Servicing
Agreement or Pooling and Servicing Agreement referred to
herein. Unless otherwise provided in the related
Prospectus Supplement, the term "Liquidating Loan" means:
(a) each Mortgage Loan with respect to which foreclosure
proceedings have been commenced (and the Mortgagor's
right of reinstatement has expired), (b) each Mortgage
Loan with respect to which the Servicer or the Master
Servicer has agreed to accept a deed to the property in
lieu of foreclosure, (c) each Cooperative Loan as to
which the shares of the related Cooperative and the
related proprietary lease or occupancy agreement have
been sold or offered for sale or (d) each Contract with
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respect to which repossession proceedings have been
commenced. The liability of the L/C Bank under the Letter
of Credit will be reduced by the amount of unreimbursed
payments thereunder. In the event that at any time there
remains no amount available under the Letter of Credit
for a specific Mortgage Pool or Contract Pool, and
coverage under another form of credit support, if any, is
exhausted, any losses will be borne by the holder of
Certificates of the Series evidencing interests in such
Mortgage Pool or Contract Pool, as specified in the
related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, the maximum liability of the L/C Bank under
the Letter of Credit for a Mortgage Pool or Contract Pool
will be an amount equal to a percentage (not greater than
10% of the initial aggregate principal balance of the
Mortgage Loans in such Mortgage Pool or Contracts in such
Contract Pool) (the "L/C Percentage"), set forth in the
Prospectus Supplement, relating to such Mortgage Pool or
Contract Pool. The maximum amount available at any time
to be paid under the Letter of Credit will be determined
in accordance with the provisions of the applicable
Pooling and Servicing Agreement referred to herein. The
duration of coverage and the amount and frequency of any
reduction in coverage provided by the Letter of Credit
with respect to a Series of Certificates will be in
compliance with requirements established by the Rating
Agency rating such Series and will be set forth in the
related Prospectus Supplement. If so specified in the
related Prospectus Supplement, the Letter of Credit with
respect to a Series of Certificates may, in addition to
or in lieu of the foregoing, provide coverage with
respect to the unpaid principal or notional amount of the
Certificates of a Class or Classes within such Series.
See "Credit Support-Letter of Credit".
B. POOL INSURANCE....If so specified in the applicable Prospectus Supplement,
the Master Servicer will obtain a Pool Insurance Policy
to cover any loss (subject to the limitations described
below) by reason of default by the Mortgagors on the
related Mortgage Loans to the extent not covered by any
policy of primary mortgage insurance (a "Primary Mortgage
Insurance Policy"). The amount of coverage provided by
the Pool Insurance Policy for a Mortgage Pool will be
specified in the related Prospectus Supplement. A Pool
Insurance Policy for a Mortgage Pool, however, will not
be a blanket policy against loss, because claims
thereunder may only be made for particular defaulted
Mortgage Loans and only upon satisfaction of certain
conditions precedent. See "Description of Insurance-Pool
Insurance Policies".
The Master Servicer, if any, or the Depositor or the
applicable Servicer will be required to use its best
reasonable efforts to maintain the Pool Insurance Policy
for each such Mortgage Pool and to present claims
thereunder to the issuer of such Pool Insurance Policy
(the "Pool Insurer") on behalf of the Trustee and the
Certificateholders. See "Description of the Certificates-
Presentation of Claims".
C. MORTGAGOR
BANKRUPTCY
BOND..............If so specified in the related Prospectus Supplement, the
Master Servicer, if any, or the Depositor or the
applicable Servicer will obtain and use its best
reasonable efforts to maintain a Mortgagor Bankruptcy
Bond for such Series covering certain losses resulting
from action that may be taken by a bankruptcy court in
connection with the bankruptcy of a Mortgagor. The level
of coverage provided by such
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Mortgagor Bankruptcy Bond will be specified in the
applicable Prospectus Supplement. See "Description of
Insurance-Mortgagor Bankruptcy Bond".
D. SUBORDINATED
CERTIFICATES.........If so specified in the related Prospectus Supplement, the
rights of holders of the Certificates of one or more
Subordinated Classes or Subclasses of a Series to receive
distributions with respect to the Mortgage Loans in the
Mortgage Pool or Contracts in the Contract Pool for such
Series, or with respect to a Subordinated Pool (as
defined herein), will be subordinated to the rights of
the holders of the Certificates of one or more Classes or
Subclasses of such Series to receive such distributions
to the extent described in the related Prospectus
Supplement, and limited to the Subordinated Amount set
forth in the related Prospectus Supplement. This
subordination will be intended to enhance the likelihood
of regular receipt by holders of the Senior Certificates
of the full amount of scheduled payments of principal and
interest due them and to reduce the likelihood that the
holders of such Senior Certificates will experience
losses. See "Credit Support-Subordinated Certificates".
E. SHIFTING
INTEREST..........If so specified in the applicable Prospectus Supplement,
the protection afforded to holders of Senior Certificates
of a Series by the subordination of certain rights of
holders of Subordinated Certificates of such Series to
distributions on the related Mortgage Loans or Contracts
may be effected by the preferential right of the holders
of the Senior Certificates to receive, prior to any
distribution being made in respect of the holders of the
related Subordinated Certificates, current distributions
on the related. Mortgage Loans or Contracts of principal
and interest due them on each Distribution Date out of
funds available for distribution on such date in the
related Certificate Account and by the distribution to
the holders of the Senior Certificates on each
Distribution Date of a greater than pro rata percentage
of certain principal prepayments or other recoveries of
principal specified in the related Prospectus Supplement
on a Mortgage Loan or Contract that are received in
advance of their scheduled Due Dates and are not
accompanied by an amount as to interest representing
scheduled interest due on any date or dates in any month
or months subsequent to the month of prepayment (the
"Principal Prepayments"). The allocation of a greater
than pro rata share of such amounts to the Senior
Certificates will have the effect of accelerating the
amortization of the Senior Certificates while increasing
the respective interest in the Trust Fund evidenced by
the Subordinated Certificates. Increasing the respective
interest of the Subordinated Certificates relative to
that of the Senior Certificates is intended to preserve
the availability of the benefits of the subordination
provided by the Subordinated Certificates. See
"Description of the Certificates-Distributions of
Principal and Interest" and "- Distributions on
Certificates" and "Credit Support-Shifting Interest".
F. RESERVE FUND......If so specified in the related Prospectus Supplement, a
Reserve Fund may be established for such Series. Unless
otherwise specified in such Prospectus Supplement, such
Reserve Fund will not be included in the corpus of the
Trust Fund for such Series. If so specified in the
related Prospectus Supplement, such Reserve Fund may be
created by the deposit, in escrow, by the Depositor, of a
separate pool of mortgage loans, cooperative loans or
manufactured housing conditional sales contracts and
installment loan agreements (the "Subordinated Pool"),
with the aggregate principal balance specified in the
related Prospectus Supplement, or by the deposit of cash
in the amount specified in the related Prospectus
Supplement (the "Initial Deposit"). The Reserve Fund will
be funded by the retention of
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specified distributions on the Trust Assets of the
related Mortgage Pool or Contract Pool, and/or on the
mortgage loans, cooperative loans or manufactured housing
conditional sales contracts and installment loan
agreements in the Subordinated Pool, until the Reserve
Fund (without taking into account the amount of any
Initial Deposit) reaches an amount (the "Required
Reserve") set forth in the related Prospectus Supplement.
Thereafter, specified distributions on the Trust Assets
of the related Mortgage Pool or Contract Pool, and/or on
the mortgage loans, cooperative loans or manufactured
housing conditional sales contracts and installment loan
agreements in the Subordinated Pool, will be retained to
the extent necessary to maintain such Reserve Fund
(without taking into account the amount of the Initial
Deposit, if any) at the related Required Reserve. In no
event will the Required Reserve for any Series ever be
required to exceed the lesser of the Subordinated Amount
for such Series or the outstanding aggregate principal
amount of Certificates of the Subordinated Classes or
Subclasses of such Series specified in the related
Prospectus Supplement. If so specified in the related
Prospectus Supplement, the Reserve Fund with respect to
such Series may be funded at a lesser amount or in
another manner acceptable to the Rating Agency rating
such Series. See "Credit Support-Subordinated
Certificates" and "-Reserve Fund".
G. OTHER FUNDS.......Assets consisting of cash, certificates of deposit or
letters of credit, or any combination thereof, in the
aggregate amount specified in the related Prospectus
Supplement, will be deposited by the Depositor in one or
more accounts to be established with respect to a Series
of Certificates by the Depositor with the Trustee on the
related Delivery Date if such assets are required to make
timely distributions in respect of principal of, and
interest on, the Certificates of such Series, are
otherwise required as a condition to the rating of such
Certificates in the rating category specified in the
Prospectus Supplement, or are required in order to
provide for certain contingencies or in order to make
certain distributions regarding Certificates which
represent interests in GPM Loans (a "GPM Fund") or Buy-
Down Loans (a "Buy-Down Fund"). Following each
Distribution Date, amounts may be withdrawn from any such
fund and used and/or distributed in accordance with the
Pooling and Servicing Agreement under the conditions and
to the extent specified in the related Prospectus
Supplement.
H. SWAP AGREEMENT....If so specified in the Prospectus Supplement relating to a
Series of Certificates, the Trust will enter into or
obtain an assignment of a swap agreement or similar
agreement pursuant to which the Trust will have the right
to receive certain payments of interest (or other
payments) as set forth or determined as described
therein. See "Credit Support-Swap Agreement".
HAZARD INSURANCE
AND SPECIAL
HAZARD INSURANCE
POLICIES.............Unless otherwise specified in the applicable Prospectus
Supplement, all of the Mortgage Loans (except for the
Cooperative Loans) and the Contracts will be covered by
standard hazard insurance policies insuring against
losses due to various causes, including fire, lightning
and windstorm. In addition, the Depositor will, if so
specified in the applicable Prospectus Supplement, obtain
an insurance policy (the "Special Hazard Insurance
Policy") covering losses that result from certain other
physical risks that are not otherwise insured against
(including earthquakes and mudflows). The Special Hazard
Insurance Policy will belimited in scope and will cover
losses in an amount specified in the applicable
Prospectus Supplement. Any hazard losses not covered by
either standard hazard policies or the Special
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Hazard Insurance Policy will not be insured against and
to the extent that the amount available under any other
method of credit support available for such Series is
exhausted, will be borne by Certificateholders of such
Series. The hazard insurance policies and the Special
Hazard Insurance Policy will be subject to the
limitations described under "Description of Insurance-
Standard Hazard Insurance Policies on Mortgage Loans", "-
Standard Hazard Insurance Policies on the Manufactured
Homes" and"-Special Hazard Insurance Policies".
SUBSTITUTION OF
TRUST ASSETS.........If so specified in the Prospectus Supplement relating to a
Series of Certificates, within the period following the
date of issuance of such Certificates specified in such
Prospectus Supplement, the Depositor or one or more
Servicers will deliver to the Trustee with respect to
such Series' Trust Assets in substitution for any one or
more of the Trust Assets included in the Trust Fund
relating to such Series which do not conform in one or
more material respects to the representations and
warranties in the related Pooling and Servicing
Agreement. See "Description of the Certificates-
Assignment of Mortgage Loans", "-Assignment of Contracts"
and"-Assignment of Mortgage Certificates".
ADVANCES.............The Servicers of the Mortgage Loans and Contracts (and the
Master Servicer, if any, with respect to each Mortgage
Loan and Contract that it services directly, and
otherwise to the extent the related Servicer does not do
so) will be obligated to advance delinquent installments
of principal and interest on the Mortgage Loans and
Contracts (the "Advances") under certain circumstances.
See "Description of the Certificates-Advances".
OPTIONAL
TERMINATION..........If so specified in the Prospectus Supplement with respect
to a Series, the Depositor or such other persons as may
be specified in a Prospectus Supplement may purchase the
Trust Assets in the related Trust Fund and any property
acquired in respect thereof at the time, in the manner
and at the price specified in such Prospectus Supplement.
In the event that the Depositor elects to treat the
related Trust Fund as a Real Estate Mortgage Investment
Conduit (a "REMIC") under the Internal Revenue Code of
1986, as amended (the "Code"), any such repurchase will
be effected only in compliance with the requirements of
Section 860F(a)(4) of the Code, so as to constitute a
"qualified liquidation" thereunder. The exercise of the
right of repurchase will effect early retirement of the
Certificates of that Series. See "Maturity and Prepayment
Considerations" and "Description of the Certificates-
Termination".
ERISA LIMITATIONS....A fiduciary of any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code should
carefully review with its own legal advisers whether the
purchase or holding of Certificates could give rise to a
transaction prohibited or otherwise impermissible under
ERISA or Section 4975 of the Code. See "ERISA
Considerations".
TAX STATUS...........See "Certain Federal Income Tax Consequences".
LEGAL INVESTMENT.....If so specified in the related Prospectus Supplement
relating to a Series of Certificates, a Class or Subclass
of such certificates will constitute a "mortgage related
security" under the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") if and for so long as it is rated
in one of the two highest rating categories by at least
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one nationally recognized statistical rating
organization. Such Classes or Subclasses, if any, will be
legal investments for certain types of institutional
investors to the extent provided in SMMEA, subject, in
any case, to any other regulations which may govern
investments by such institutional investors. See "Legal
Investment".
USE OF PROCEEDS......The Depositor will use the net proceeds from the sale of
each Series for one or more of the following purposes:
(i) to purchase the related Trust Assets, (ii) to repay
indebtedness which has been incurred to obtain funds to
acquire such Trust Assets, (iii) to establish any reserve
funds described in the related Prospectus Supplement and
(iv) to pay costs of structuring, guaranteeing and
issuing such Certificates. If so specified in the related
Prospectus Supplement, the purchase of the Trust Assets
for a Series may be effected by an exchange of
Certificates by the Depositor with the seller of such
Trust Assets. See "Use of Proceeds".
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THE TRUST FUND
Ownership of the Mortgage or Contract Pool or Pools included in the Trust
Fund (as hereinafter defined) for a Series of Certificates may be evidenced by
one or more Classes of Certificates, which may consist of one or more
Subclasses, as specified in the Prospectus Supplement for such Series. Each
Certificate will evidence the undivided interest, beneficial interest or
notional amount specified in the related Prospectus Supplement in one or more
Mortgage Pools containing one or more Mortgage Loans or Contract Pools
containing Contracts, having an aggregate principal balance of not less than
approximately$50,000,000 as of the first day of the month of its creation (the
"Cut-off Date"), unless otherwise specified in the applicable Prospectus
Supplement. If so specified in the related Prospectus Supplement, each Class or
Subclass of the Certificates of a Series will evidence the percentage interest
specified in such Prospectus Supplement in the payments of principal and
interest on the Mortgage Loans in the related Mortgage Pool or Pools or on the
Contracts in the related Contract Pool or Pools (a "Percentage Interest"). To
the extent specified in the related Prospectus Supplement, each Mortgage Pool or
Contract Pool with respect to a Series will be covered by a Letter of Credit, a
Pool Insurance Policy, a Special Hazard Insurance Policy, a Mortgagor Bankruptcy
Bond, by the subordination of the rights of the holders of the Subordinated
Certificates of a Series to the rights of the holders of the Senior
Certificates, which, if so specified in the related Prospectus Supplement, may
include Certificates of a Subordinated Class or Subclass and the establishment
of a Reserve, by the right of one or more Classes or Subclasses of Certificates
to receive a disproportionate amount of certain distributions of principal or
another form or forms of Alternative Credit Support acceptable to the Rating
Agency rating the Certificates of such Series or by any combination of the
foregoing. See "Description of Insurance" and "Credit Support".
THE MORTGAGE POOLS
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include (a) one or more Mortgage Pools containing
(i) conventional one- to four-family residential, first and/or second mortgage
loans, (ii) Cooperative Loans made to finance the purchase of certain rights
relating to cooperatively owned properties secured by the pledge of shares
issued by a Cooperative and the assignment of a proprietary lease or occupancy
agreement providing the exclusive right to occupy a particular Cooperative
Dwelling, (iii) mortgage loans secured by Multifamily Property,(iv) mortgage
participation certificates evidencing participation interests in such loans that
are acceptable to the Rating Agency rating the Certificates of such Series for a
rating in one of the four highest rating categories of such Rating Agency, or
(v) certain conventional Mortgage Certificates issued by one or more trusts
established by one or more private entities or (b) one or more Contract Pools
containing manufactured housing conditional sales contracts and installment loan
agreements or participation certificates representing participation interests in
such Contracts purchased by the Depositor either directly or through one or more
affiliates or Unaffiliated Sellers, and related property conveyed to such trust
by the Depositor.
A Mortgage Pool may include Mortgage Loans insured by the FHA ("FHA
Loans")and/or Mortgage Loans partially guaranteed by the Veterans Administration
(the"VA" and such mortgage loans are referred to as "VA Loans"). All Mortgage
Loans will be evidenced by promissory notes (the "Mortgage Notes") secured by
first mortgages or first or second deeds of trust or other similar security
instruments creating a first lien, as applicable, on the Mortgaged Properties(as
defined below). Single Family Property and Multifamily Property will consist of
single family detached homes, attached homes (single family units having a
common wall), individual units located in condominiums, multifamily residential
rental properties, apartment buildings owned by cooperative housing corporations
and such other type of homes or units as are set forth in the related Prospectus
Supplement. Each such detached or attached home or multifamily property will be
constructed on land owned in fee simple by the Mortgagor or on land leased by
the Mortgagor for a term at least two years greater than the term of the
applicable Mortgage Loan. Attached homes may consist of duplexes, triplexes and
fourplexes (multifamily structures where each Mortgagor owns the land upon which
the unit is built with the remaining adjacent land owned in common). Multifamily
Property may include mixed commercial and residential buildings. The Mortgaged
Properties may include investment properties and vacation and second homes.
Mortgage Loans secured by Multifamily Property may also be secured by an
assignment of leases and rents and operating or other cash flow guarantees
relating to the Mortgaged Properties to the extent specified in the related
Prospectus Supplement.
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Unless otherwise specified below or in the applicable Prospectus
Supplement, each Mortgage Loan in a Mortgage Pool will (i) have an individual
principal balance at origination of not less than $25,000 nor more than
$500,000, (ii)have monthly payments due on the first day of each month (the "Due
Date"),(iii) be secured by Mortgaged Properties or relate to Cooperative Loans
located in any of the 50 states or the District of Columbia, and (iv) consist of
fully-amortizing Mortgage Loans, each with a 10 to 40 year term at origination,
a fixed or variable rate of interest and level or variable monthly payments over
the term of the Mortgage Loan. Unless otherwise specified in the related
Prospectus Supplement, the Loan-to-Value Ratio (as hereinafter described) of
such Mortgage Loans at origination will not exceed 95% on any Mortgage Loan with
an original principal balance of $150,000 or less, 90% on any Mortgage Loan with
an original principal balance in excess of $150,000 through $200,000,85% on any
Mortgage Loan with an original principal balance in excess of$200,000 through
$300,000 and 80% on any Mortgage Loan with an original principal balance
exceeding $300,000. If so specified in the related Prospectus Supplement, a
Mortgage Pool may also include fully amortizing, adjustable rate Mortgage Loans
("ARM Loans") with (unless otherwise specified in the applicable Prospectus
Supplement) a 30-year term at origination and a mortgage interest rate adjusted
periodically (with corresponding adjustments in the amount of monthly payments)
to equal the sum (which may be rounded) of a fixed margin and an index described
in such Prospectus Supplement, subject to any applicable restrictions on such
adjustments. The Mortgage Pools may also include other types of Mortgage Loans
to the extent set forth in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, no
Mortgage Loan will have a Loan-to-Value Ratio at origination in excess of
95%,regardless of its original principal balance. The Loan-to-Value Ratio is the
ratio, expressed as a percentage, of the principal amount of the Mortgage Loan
at the date of determination to the lesser of (a) the appraised value determined
in an appraisal obtained by the originator and (b) the sales price for such
property (the "Original Value"). Unless otherwise specified in the related
Prospectus Supplement, with respect to a Mortgage Loan secured by a mortgage on
a vacation or second home or an investment property (other than Multifamily
Property), no income derived from the property will be considered for
underwriting purposes, the Loan-to-Value Ratio (taking into account any
secondary financing) of such Mortgage Loan may not exceed 80% and the original
principal balance of the Mortgage Loan may not exceed $250,000.
If so specified in the related Prospectus Supplement, a Mortgage Pool may
contain Mortgage Loans with fluctuating Mortgage Rates. Any such Mortgage Loan
may provide that on the day on which the Mortgage Rate adjusts, the amount of
the monthly payments on the Mortgage Loan will be adjusted to provide for the
payment of the remaining principal amount of the Mortgage Loan with level
monthly payments of principal and interest at the new Mortgage Rate to the
maturity date of the Mortgage Loan. Alternatively, the Mortgage Loan may provide
that the Mortgage Rate adjusts more frequently than the monthly payment. As a
result, a greater or lesser portion of the monthly payment will be applied to
the payment of principal on the Mortgage Loan, thus increasing or decreasing the
rate at which the Mortgage Loan is repaid. See "Yield Considerations". In the
event that an adjustment to the Mortgage Rate causes the amount of interest
accrued in any month to exceed the amount of the monthly payment on such
Mortgage Loan, the excess (the "Deferred Interest") will be added to the
principal balance of the Mortgage Loan (unless otherwise paid by the Mortgagor),
and will bear interest at the Mortgage Rate in effect from time to time. The
amount by which the Mortgage Rate or monthly payment may increase or decrease
and the aggregate amount of Deferred Interest on any Mortgage Loan may be
subject to certain limitations, as described in the related Prospectus
Supplement.
If so specified in the Prospectus Supplement for the related Series, the
Mortgage Rate on certain ARM Loans will be convertible from an adjustable rate
to a fixed rate, at the option of the Mortgagor under certain circumstances.
Unless otherwise specified in the related Prospectus Supplement, the Pooling and
Servicing Agreement will provide that the Unaffiliated Seller from which such
convertible ARM Loans were acquired will be obligated to repurchase from the
Trust Fund any such ARM Loan as to which the conversion option has been
exercised (a "Converted Mortgage Loan"), at a purchase price set forth in the
related Prospectus Supplement. The amount of such purchase price will be
required to be deposited in the Certificate Account and will be distributed to
the Certificateholders on the Distribution Date in the month following the month
of the exercise of the conversion option. The obligation of the Unaffiliated
Seller to repurchase Converted Mortgage Loans may or may not be supported by
cash, letters of credit, third party guarantees or other similar arrangements.
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If provided for in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans pursuant to which the monthly payments made by the
Mortgagor during the early years of the Mortgage Loan will be less than the
scheduled monthly payments on the Mortgage Loan ("Buy-Down Loans"). The
resulting difference in payment shall be compensated for from an amount
contributed by the Depositor, the seller of the related Mortgaged Property, the
Servicer or another source and placed in a custodial account (the "Buy-Down
Fund") by the Servicer, or if so specified in the related Prospectus Supplement,
with the Trustee. In lieu of a cash deposit, if so specified in the related
Prospectus Supplement, a letter of credit or guaranteed investment contract may
be delivered to the Trustee to fund the Buy-Down Fund. See"Description of the
Certificates-Payments on Mortgage Loans". Buy-Down Loans included in a Mortgage
Pool will provide for a reduction in monthly interest payments by the Mortgagor
for a period of up to the first four years of the term of such Mortgage Loans.
If provided for in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans pursuant to which the monthly payments by the
Mortgagor during the early years of the related Mortgage Note are less than the
amount of interest that would otherwise be payable thereon, with the interest
not so paid added to the outstanding principal balance of such Mortgage Loan
("GPM Loans").If so specified in the related Prospectus Supplement, the
resulting difference in payment shall be compensated for from an amount
contributed by the Depositor or another source and delivered to the Trustee (the
"GPM Fund"). In lieu of cash deposit, the Depositor may deliver to the Trustee a
letter of credit, guaranteed investment contract or another instrument
acceptable to the Rating Agency rating the related Series to fund the GPM Fund.
FHA Loans will be insured by the Federal Housing Administration (the
"FHA")as authorized under the National Housing Act, as amended, and the United
States Housing Act of 1937, as amended. Such FHA loans will be insured under
various FHA programs including the standard FHA 203-b programs to finance the
acquisition of one- to four-family housing units, the FHA 245 graduated payment
mortgage program and the FHA 221 and 223 programs to finance certain multifamily
residential rental properties. FHA Loans generally require a minimum down
payment of approximately 5% of the original principal amount of the FHA Loan. No
FHA Loan may have an interest rate or original principal amount exceeding the
applicable FHA limits at the time of origination of such FHA Loan.
VA Loans will be partially guaranteed by the VA under the Servicemen's
Readjustment Act of 1944, as amended (the "Servicemen's Readjustment Act"). The
Servicemen's Readjustment Act permits a veteran (or in certain instances the
spouse of a veteran) to obtain a mortgage loan guarantee by the VA covering
mortgage financing of the purchase of a one- to four-family dwelling unit at
interest rates permitted by the VA. The program has no mortgage loan limits,
requires no down payment from the purchasers and permits the guarantee of
mortgage loans of up to 30 years' duration. However, no VA Loan will have an
original principal amount greater than five times the partial VA guarantee for
such VA Loan. The maximum guarantee that may be issued by VA under this program
is 50% of the principal amount of the Mortgage Loan if the principal amount of
the Mortgage Loan is $45,000 or less, the lesser of $36,000 and 40% of the
principal amount of the Mortgage Loan if the principal amount of the Mortgage
Loan is greater than $45,000 but less than or equal to $144,000, and the lesser
of $46,000 and 25% of the principal amount of the Mortgage Loan if the principal
amount of the Mortgage Loan is greater than $144,000.
The Prospectus Supplement (or, if such information is not available in
advance of the date of such Prospectus Supplement, a Current Report on Form 8-K
to be filed with the Commission) for each Series of Certificates the Trust Fund
with respect to which contains Mortgage Loans will contain information as to the
type of Mortgage Loans that will comprise the related Mortgage Pool or Pools and
information as to (i) the aggregate principal balance of the Mortgage Loans as
of the applicable Cut-off Date, (ii)the type of Mortgaged Properties securing
the Mortgage Loans, (iii) the original terms to maturity of the Mortgage Loans,
(iv) the largest in principal balance of the Mortgage Loans, (v) the earliest
origination date and latest maturity date of the Mortgage Loans, (vi) the
aggregate principal balance of mortgage Loans having Loan-to-Value Ratios at
origination exceeding 80%, (vii)the interest rate or range of interest rates
borne by the Mortgage Loans,(viii) the average outstanding principal balance of
the Mortgage Loans, (ix)the geographical distribution of the Mortgage Loans, (x)
the number and aggregate principal balance of Buy-Down Loans or GPM Loans, if
applicable, (xi)with respect to ARM Loans, the adjustment dates, the highest,
lowest and weighted average margin, and the maximum Mortgage Rate variation at
the time of any periodic adjustment and over the life of such ARM Loans, and
(xii) with respect to Mortgage Loans secured by Multifamily Property or such
other Mortgage Loans as are specified in the Prospectus Supplement, whether the
Mortgage
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Loan provides for an interest only period and whether the principal amount of
such Mortgage Loan is amortized on the basis of a period of time that extends
beyond the maturity date of the Mortgage Loan.
No assurance can be given that values of the Mortgaged Properties in a
Mortgage Pool have remained or will remain at their levels on the dates of
origination of the related Mortgage Loans. If the real estate market should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans and any secondary financing on the Mortgaged
Properties in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. In addition, the value of property securing
Cooperative Loans and the delinquency rate with respect to Cooperative Loans
could be adversely affected if the current favorable tax treatment of
cooperative stockholders were to become less favorable. See "Certain Legal
Aspects of the Mortgage Loans and Contracts-The Mortgage Loans". To the extent
that such losses are not covered by the methods of credit support or the
insurance policies described herein or by Alternative Credit Support, they will
be borne by holders of the Certificates of the Series evidencing interests in
the Mortgage Pool.
Multifamily lending is generally viewed as exposing the lender to a greater
risk of loss than one- to four-family residential lending. Multifamily lending
typically involve larger loans to single borrowers or groups of related
borrowers than residential one- to four-family mortgage loans. Furthermore, the
repayment of loans secured by income producing properties is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed), the borrower's ability to repay the loan may be impaired. Multifamily
real estate can be affected significantly by supply and demand in the market for
the type of property securing the loan and, therefore, may be subject to adverse
economic conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender, such as
rent control laws, which impact the future cash flow of the property.
Corresponding to the greater lending risk is a generally higher interest rate
applicable to multifamily mortgage lending.
The Depositor will cause the Mortgage Loans constituting each Mortgage Pool
to be assigned to the Trustee named in the applicable Prospectus Supplement, for
the benefit of the holders of the Certificates of such Series (the
"Certificateholders"). The Master Servicer, if any, named in the related
Prospectus Supplement will service the Mortgage Loans, either by itself or
through other mortgage servicing institutions, if any (each, a "Servicer"),
pursuant to a Pooling and Servicing Agreement, as described herein, among the
Master Servicer, if any, the Depositor and the Trustee (the "Pooling and
Servicing Agreement") and will receive a fee for such services. See "-Mortgage
Loan Program" and "Description of the Certificates". With respect to those
Mortgage Loans serviced by a Servicer, such Servicer will be required to service
the related Mortgage Loans in accordance with the Seller's Warranty and
Servicing Agreement between the Servicer and the Depositor (a "Servicing
Agreement") and will receive the fee for such services specified in such
Servicing Agreement; however, any Master Servicer will remain liable for its
servicing obligations under the Pooling and Servicing Agreement as if the Master
Servicer alone were servicing such Mortgage Loans.
The Depositor will make certain representations and warranties regarding
the Mortgage Loans, but its assignment of the Mortgage Loans to the Trustee will
be without recourse. See "Description of the Certificates Assignment of Mortgage
Loans". The Master Servicer's obligations with respect to the Mortgage Loans
will consist principally of its contractual servicing obligations under the
Pooling and Servicing Agreement (including its obligation to enforce certain
purchase and other obligations of Servicers and/or Unaffiliated Sellers, as more
fully described herein under "-Mortgage Loan Program-Representations by
Unaffiliated Sellers; Repurchases" and "Description of the Certificates-
Assignment of Mortgage Loans" and "-Servicing by Unaffiliated Sellers") and its
obligations to make Advances in the event of delinquencies in payments on or
with respect to the Mortgage Loans or in connection with prepayments and
liquidations of such Mortgage Loans, in amounts described herein under
"Description of the Certificates-Advances". Unless otherwise specified in the
related Prospectus Supplement, such Advances with respect to delinquencies will
be limited to amounts that the Master Servicer believes ultimately would be
reimbursable under any applicable Letter of Credit, Pool Insurance Policy,
Special Hazard Insurance Policy, Mortgagor Bankruptcy Bond or other policy of
insurance, from amounts in the Reserve Fund, under any Alternative Credit
Support or out of the proceeds of liquidation of the Mortgage Loans, cash in the
Certificate Account or otherwise. See "Description of the Certificates-
Advances", "Credit Support" and "Description of Insurance".
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Unless otherwise specified in the applicable Prospectus Supplement, each
Mortgage Pool included in the related Trust Fund will be composed of Mortgage
Loans evidencing interests in Mortgage Loans that bear interest at annual rates
that will exceed by at least 3/8 of 1% the fixed or variable Pass-Through Rate
established for the Mortgage Pool. To the extent and in the manner specified in
the related Prospectus Supplement, Certificateholders of a Series will be
entitled to receive distributions based on the payments of principal on the
underlying Mortgage Loans, plus interest on the principal balance thereof at the
Pass-Through Rate. The difference between a Mortgage Rate and the related Pass-
Through Rate (less any servicing compensation payable to the Servicers of such
Mortgage Loans and the amount, if any, payable to the Depositor or the person or
entity specified in the applicable Prospectus Supplement) may be retained by the
Master Servicer as servicing compensation to it. See"Description of the
Certificates-Servicing Compensation and Payment of Expenses".
MORTGAGE LOAN PROGRAM
The Mortgage Loans will have been purchased by the Depositor either
directly or through affiliates, from one or more affiliates or from sellers
unaffiliated with the Depositor ("Unaffiliated Sellers"). Mortgage Loans
acquired by the Depositor will have been originated in accordance with the
underwriting criteria specified below under "Underwriting Standards" or as
otherwise described in a related Prospectus Supplement.
Underwriting Standards
Except in the case of certain Mortgage Loans originated by Unaffiliated
Sellers in accordance with their own underwriting criteria ("Closed Loans") or
such other standards as may be described in the applicable Prospectus
Supplement, all prospective Mortgage Loans will be subject to the underwriting
standards adopted by the Depositor. See "Closed Loan Program" below for a
description of underwriting standards applicable to Closed Loans. Unaffiliated
Sellers will represent and warrant that Mortgage Loans originated by them and
purchased by the Depositor have been originated in accordance with the
applicable underwriting standards established by the Depositor or such other
standards as may be described in the applicable Prospectus Supplement. The
following discussion describes the underwriting standards of the Depositor with
respect to any Mortgage Loan that it purchases.
The mortgage credit approval process for one- to four-family residential
loans follows a standard procedure that generally complies with FHLMC and FNMA
regulations and guidelines (except that certain Mortgage Loans may have higher
loan amount and qualifying ratios) and applicable federal and state laws and
regulations. The credit approval process for Cooperative Loans follows a
procedure that generally complies with applicable FNMA regulations and
guidelines (except for the loan amounts and qualifying ratios) and applicable
federal and state laws and regulations. The originator of a Mortgage Loan (the
"Originator") generally will review a detailed credit application by the
prospective mortgagor designed to provide pertinent credit information,
including a current balance sheet describing assets and liabilities and a
statement of income and expenses, as well as an authorization to apply for a
credit report that summarizes the prospective mortgagor's credit history with
local merchants and lenders and any record of bankruptcy. In addition, an
employment verification is obtained from the prospective mortgagor's employer
wherein the employer reports the length of employment with that organization,
the current salary, and gives an indication as to whether it is expected that
the prospective mortgagor will continue such employment in the future. If the
prospective mortgagor is self-employed, he or she is required to submit copies
of signed tax returns. The prospective mortgagor may also be required to
authorize verification of deposits at financial institutions. In certain
circumstances, other credit considerations may cause the Originator or Depositor
not to require some of the above documents, statements or proofs in connection
with the origination or purchase of certain Mortgage Loans.
An appraisal generally will be required to be made on each residence to be
financed. Such appraisal generally will be made by an appraiser who meets FNMA
requirements as an appraiser of one- to four-family residential properties. The
appraiser is required to inspect the property and verify that it is in good
condition and that, if new, construction has been completed. The appraisal
generally will be based on the appraiser's judgment of value, giving appropriate
weight to both the market value of comparable homes and the cost of replacing
the residence. These underwriting standards also require a search of the public
records relating to a mortgaged property for liens and judgments against such
mortgaged property.
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Based on the data provided, certain verifications and the appraisal, a
determination is made by the Originator as to whether the prospective mortgagor
has sufficient monthly income available to meet the prospective mortgagor's
monthly obligations on the proposed loan and other expenses related to the
residence (such as property taxes, hazard and primary mortgage insurance and, if
applicable, maintenance) and other financial obligations and monthly living
expenses. Each Originator's lending guidelines for conventional mortgage loans
generally will specify that mortgage payments plus taxes and insurance and all
monthly payments extending beyond one year (including those mentioned above and
other fixed obligations, such as car payments) would equal no more than
specified percentages of the prospective mortgagor's gross income. These
guidelines will be applied only to the payments to be made during the first year
of the loan. For FHA and VA Loans, the Originator's lending guidelines will
follow HUD and VA guidelines, respectively. Other credit considerations may
cause an Originator to depart from these guidelines. For example, when two
individuals co-sign the loan documents, the incomes and expenses of both
individuals may be included in the computation.
The Mortgaged Properties may be located in states where, in general, a
lender providing credit on a single-family property may not seek a deficiency
judgment against the Mortgagor but rather must look solely to the property for
repayment in the event of foreclosure. The Depositor's underwriting standards
applicable to all states (including anti-deficiency states) require that the
value of the property being financed, as indicated by the appraisal, currently
supports and is anticipated to support in the future the outstanding loan
balance.
Certain of the types of Mortgage Loans that may be included in the Mortgage
Pools or Subsidiary Trust Funds may involve additional uncertainties not present
in traditional types of loans. For example, Buy-Down Loans and GPM Loans provide
for escalating or variable payments by the Mortgagor. These types of Mortgage
Loans are underwritten on the basis of a judgment that the Mortgagor will have
the ability to make larger monthly payments in subsequent years. In some
instances the Mortgagor's income may not be sufficient to enable it to continue
to make scheduled loan payments as such payments increase.
To the extent specified in the related Prospectus Supplement, the Depositor
may purchase Mortgage Loans for inclusion in a Trust Fund that are underwritten
under standards and procedures which vary from and are less stringent than those
described herein. For instance, Mortgage Loans may be underwritten under a
"limited documentation" program if so specified in the related Prospectus
Supplement. With respect to such Mortgage Loans, minimal investigation into the
borrowers' credit history and income profile is undertaken by the Originator and
such Mortgage Loans may be underwritten primarily on the basis of an appraisal
of the Mortgaged Property or Cooperative Dwelling and the Loan-to-Value Ratio at
origination. Thus, if the Loan-to-Value Ratio is less than a percentage
specified in the related Prospectus Supplement, the originator may forego
certain aspects of the review relating to monthly income, and traditional ratios
of monthly or total expenses to gross income may not be considered.
The underwriting standards for Mortgage Loans secured by Multifamily
Property will be described in the related Prospectus Supplement.
Qualifications of Unaffiliated Sellers
Unless otherwise specified in the applicable Prospectus Supplement with
respect to an Unaffiliated Seller of Closed Loans secured by residential
properties, each Unaffiliated Seller must be an institution experienced in
originating conventional mortgage loans and/or FHA Loans or VA Loans in
accordance with accepted practices and prudent guidelines, and must maintain
satisfactory facilities to originate those loans. In addition, except as
otherwise specified, the Depositor requires adequate financial stability and
adequate servicing experience, where appropriate, as well as satisfaction of
certain other criteria.
Representations by Unaffiliated Sellers; Repurchases
Unless otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller (or the Master Servicer, if the Unaffiliated Seller is also
the Master Servicer under the Pooling and Servicing Agreement) will have made
representations and warranties in respect of the Mortgage Loans sold by such
Unaffiliated Seller to the Depositor. Such representations and warranties will
generally include, among other things: (i) with respect to each Mortgaged
Property, that
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title insurance (or in the case of Mortgaged Properties located in areas where
such policies are generally not available, an attorney's certificate of title)
and any required hazard and primary mortgage insurance was effective at the
origination of each Mortgage Loan, and that each policy (or certificate of
title) remained in effect on the date of purchase of the Mortgage Loan from the
Unaffiliated Seller; (ii) that the Unaffiliated Seller had good and marketable
title to each such Mortgage Loan; (iii) with respect to each Mortgaged Property,
that each mortgage constituted a valid first lien on the Mortgaged Property
(subject only to permissible title insurance exceptions); (iv) that there were
no delinquent tax or assessment liens against the Mortgaged Property; and (v)
that each Mortgage Loan was current as to all required payments (unless
otherwise specified in the related Prospectus Supplement). With respect to a
Cooperative Loan, the Unaffiliated Seller will represent and warrant that (a)
the security interest created by the cooperative security agreements constituted
a valid first lien on the collateral securing the Cooperative Loan (subject to
the right of the related Cooperative to cancel shares and terminate the
proprietary lease for unpaid assessments and to the lien of the related
Cooperative for unpaid assessments representing the Mortgagor's pro rata share
of the Cooperative's payments for its mortgage, current and future real property
taxes, maintenance charges and other assessments to which like collateral is
commonly subject) and (b) the related cooperative apartment was free from damage
and was in good repair.
All of the representations and warranties of an Unaffiliated Seller in
respect of a Mortgage Loan will have been made as of the date on which such
Unaffiliated Seller sold the Mortgage Loan to the Depositor or its affiliate. A
substantial period of time may have elapsed between such date and the date of
initial issuance of the Series of Certificates evidencing an interest in such
Mortgage Loan. Since the representations and warranties of an Unaffiliated
Seller do not address events that may occur following the sale of a Mortgage
Loan by an Unaffiliated Seller, the repurchase obligation described below will
not arise if, during the period commencing on the date of sale of a Mortgage
Loan by the Unaffiliated Seller to or on behalf of the Depositor, the relevant
event occurs that would have given rise to such an obligation had the event
occurred prior to sale of the affected Mortgage Loan. However, the Depositor
will not include any Mortgage Loan in the Trust Fund for any Series of
Certificates if anything has come to the Depositor's attention that would cause
it to believe that the representations and warranties of an Unaffiliated Seller
will not be accurate and complete in all material respects in respect of such
Mortgage Loan as of the related Cut-off Date.
The only representations and warranties to be made for the benefit of
holders of Certificates of a Series in respect of any Mortgage Loan relating to
the period commencing on the date of sale of such Mortgage Loan to the Depositor
or its affiliates will be certain limited representations of the Depositor and
of the Master Servicer described below under "Description of the Certificates-
Assignment of Mortgage Loans". If the Master Servicer is also an Unaffiliated
Seller of Mortgage Loans with respect to a particular Series, such
representations will be in addition to the representations and warranties made
in its capacity as an Unaffiliated Seller.
Upon the discovery of the breach of any representation or warranty made by
an Unaffiliated Seller in respect of a Mortgage Loan that materially and
adversely affects the interests of the Certificateholders of the related Series,
such Unaffiliated Seller or the Servicer of such Mortgage Loan will be obligated
to repurchase such Mortgage Loan at a purchase price equal to 100% of the unpaid
principal balance thereof at the date of repurchase or, in the case of a Series
of Certificates as to which the Depositor has elected to treat the related Trust
Fund as a REMIC, as defined in the Code, at such other price as may be necessary
to avoid a tax on a prohibited transaction, as described in Section 860F(a) of
the Code, in each case together with accrued interest at the Pass-Through Rate
for the related Mortgage Pool, to the first day of the month following such
repurchase and the amount of any unreimbursed Advances made by the Master
Servicer or the Servicer, as applicable, in respect of such Mortgage Loan. The
Master Servicer will be required to enforce this obligation for the benefit of
the Trustee and the Certificateholders, following the practices it would employ
in its good faith business judgment were it the owner of such Mortgage Loan.
Unless otherwise specified in the applicable Prospectus Supplement, and subject
to the ability of the Depositor, the Unaffiliated Seller or the Servicer to
substitute for certain Mortgage Loans as described below, this repurchase
obligation constitutes the sole remedy available to the Certificateholders of
such Series for a breach of representation or warranty by an Unaffiliated Seller
The obligation of the Master Servicer to purchase a Mortgage Loan if an
Unaffiliated Seller or a Servicer defaults on its obligation to do so is subject
to limitations, and no assurance can be given that Unaffiliated Sellers will
carry out their respective repurchase obligations with respect to Mortgage
Loans. However, to the extent that a breach of the representations and
warranties of an Unaffiliated Seller may also constitute a breach of the
representations and warranties made by the
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Depositor or by the Master Servicer with respect to the insurability of the
Mortgage Loans, the Depositor may have a repurchase obligation, and the Master
Servicer may have the limited purchase obligation, in each case as described
below under "Description of the Certificates-Assignment of Mortgage Loans".
Closed Loan Program
The Depositor may also acquire Closed Loans that have been originated by
Unaffiliated Sellers in accordance with underwriting standards acceptable to the
Depositor. Unless otherwise specified in the applicable Prospectus Supplement,
Closed Loans for which 11 or fewer monthly payments have been received will be
further subject to the Depositor's customary underwriting standards. Unless
otherwise specified in the applicable Prospectus Supplement, Closed Loans for
which 12 to 60 monthly payments have been received will be subject to a review
of payment history and will conform to the Depositor's guidelines for the
related mortgage program. In the event one or two payments were over 30 days
delinquent, a letter explaining the delinquencies will be required of the
Mortgagor. Unless otherwise specified in the applicable Prospectus Supplement,
the Depositor will not purchase for inclusion in a Mortgage Pool a Closed Loan
for which (i) more than two monthly payments were over 30 days delinquent, (ii)
one payment was over 60 days delinquent, or (iii) more than 60 monthly payments
were received.
MORTGAGE CERTIFICATES
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include certain conventional mortgage pass-
through certificates (the "Mortgage Certificates") issued by one or more trusts
established by one or more private entities and evidencing, unless otherwise
specified in such Prospectus Supplement, the entire interest in a pool of
mortgage loans. A description of the mortgage loans underlying the Mortgage
Certificates, the related pooling and servicing arrangements and the insurance
arrangements in respect of such mortgage loans will be set forth in the
applicable Prospectus Supplement or in the Current Report on Form 8-K referred
to below. Such Prospectus Supplement (or, if such information is not available
in advance of the date of such Prospectus Supplement, a Current Report on Form
8-K to be filed by the Depositor with the Commission within 15 days of the
issuance of the Certificates of such Series) will also set forth information
with respect to the entity or entities forming the related mortgage pool, the
issuer of any credit support with respect to such Mortgage Certificates, the
aggregate outstanding principal balance and the pass-through rate borne by each
Mortgage Certificate included in the Trust Fund, together with certain
additional information with respect to such Mortgage Certificates. The inclusion
of Mortgage Certificates in a Trust Fund with respect to a Series of
Certificates is conditioned upon their characteristics being in form and
substance satisfactory to the Rating Agency rating the related Series of
Certificates. Mortgage Certificates, together with the Mortgage Loans and
Contracts, are referred to herein as the "Trust Assets".
THE CONTRACT POOLS
If so specified in the Prospectus Supplement with respect to a Series, the
Trust Fund for such Series may include a Contract Pool evidencing interests in
manufactured housing conditional sales contracts and installment loan agreements
(the "Contracts") originated by a manufactured housing dealer in the ordinary
course of business and purchased by the Depositor. The Contracts may be
conventional manufactured housing contracts or contracts insured by the FHA or
partially guaranteed by the VA. Each Contract will be secured by a Manufactured
Home, as defined below. Unless otherwise specified in the related Prospectus
Supplement, the Contracts will be fully amortizing and will bear interest at a
fixed annual percentage rate ("APR")
The Manufactured Homes securing the Contracts consist of manufactured homes
within the meaning of 42 United States Code, Section 5402(6), which defines a
"manufactured home" as "a structure, transportable in one or more sections,
which in the traveling mode, is eight body feet or more in width or forty body
feet or more in length, or, when erected on site, is three hundred twenty or
more square feet, and which is built on a permanent chassis and designed to be
used as a dwelling with or without a permanent foundation when connected to the
required utilities, and includes the plumbing, heating, air conditioning, and
electrical systems contained therein; except that such term shall include any
structure which meets all the
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requirements of [this] paragraph except the size requirements and with respect
to which the manufacturer voluntarily files a certification required by the
Secretary of Housing and Urban Development and complies with the standards
established under [this] chapter".
The Depositor will cause the Contracts constituting each Contract Pool to
be assigned to the Trustee named in the related Prospectus Supplement for the
benefit of the related Certificateholder. The Master Servicer specified in the
related Prospectus Supplement will service the Contracts, either by itself or
through other Servicers, pursuant to the Pooling and Servicing Agreement. See
"Description of the Certificates-Servicing by Unaffiliated Sellers". With
respect to those Contracts serviced by the Master Servicer through a Servicer,
the Master Servicer will remain liable for its servicing obligations under the
Agreement as if the Master Servicer alone were servicing such Contracts. The
Contract documents, if so specified in the related Prospectus Supplement, may be
held for the benefit of the Trustee by a Custodian (the "Custodian") appointed
pursuant to a Custodial Agreement (the "Custodial Agreement") among the
Depositor, the Trustee and the Custodian.
Unless otherwise specified in the related Prospectus Supplement, each
Contract Pool will be composed of Contracts bearing interest at the annual fixed
APRs specified in the Prospectus Supplement. Each registered holder of a
Certificate will be entitled to receive periodic distributions, which will be
monthly unless otherwise specified in the related Prospectus Supplement, of all
or a portion of principal on the underlying Contracts or interest on the
principal balance thereof at the Pass-Through Rate, or both. Unless otherwise
stated in the related Prospectus Supplement, the difference between the APR on a
Contract and the related Pass-Through Rate (less sub-servicing compensation),
will be retained by the Master Servicer as servicing compensation to it. See
"Description of the Certificates-Payments on Contracts".
The related Prospectus Supplement (or, if such information is not available
in advance of the date of such Prospectus Supplement, a Current Report on Form
8-K to be filed with the Commission) will specify, for the Contracts contained
in the related Contract Pool, among other things: (a) the dates of origination
of the Contracts; (b) the weighted average APR on the Contracts; (c) the range
of outstanding principal balances as of the Cut-off Date; (d) the average
outstanding principal balance of the Contracts as of the Cut-off Date; (e) the
weighted average term to maturity as of the Cut-off Date; and (f) the range of
original maturities of the Contracts.
With respect to the Contracts included in the Contract Pool, the Depositor,
the Master Servicer or such other party, as specified in the related Prospectus
Supplement, will make or cause to be made representations and warranties as to
the types and geographical distribution of such Contracts and as to the accuracy
in all material respects of certain information furnished to the Trustee in
respect of each such Contract. In addition, the Master Servicer or the
Unaffiliated Seller of the Contracts will represent and warrant that, as of the
Cut-off Date, unless otherwise specified in the Prospectus Supplement no
Contract was more than 30 days delinquent as to payment of principal and
interest. Upon a breach of any representation that materially and adversely
affects the interest of the Certificateholder in a Contract, the Master
Servicer, the Unaffiliated Seller or such other party, as appropriate, will be
obligated either to cure the breach in all material respects or to purchase the
Contract or, if so specified in the related Prospectus Supplement, to substitute
another Contract as described below. This repurchase or substitution obligation
constitutes the sole remedy available to the Certificateholders or the Trustee
for a breach of representation by the Master Servicer, the Unaffiliated Seller
or such other party.
If so specified in the related Prospectus Supplement, in addition to making
certain representations and warranties regarding its authority to enter into,
and its ability to perform its obligations under, the Agreement, the Master
Servicer will make certain representations and warranties, except to the extent
that another party specified in the Prospectus Supplement makes any such
representations, to the Trustee with respect to the enforceability of coverage
under any applicable insurance policy or hazard insurance policy. See
"Description of Insurance" for information regarding the extent of coverage
under certain of such insurance policies. Upon a breach of the insurability
representation that materially and adversely affects the interests of the
Certificateholders in a Contract, the Master Servicer, the Unaffiliated Seller
or such other party, as appropriate, will be obligated either to cure the breach
in all material respects or, unless otherwise specified in the related
Prospectus Supplement, to purchase such Contract at a price equal to the
principal balance thereof as of the date of purchase plus accrued interest at
the related Pass-Through-Rate to the first day of the month following the month
of purchase. The Master Servicer, if required by the Rating Agency rating the
Certificates, will procure a surety bond, guaranty, letter of credit or other
instrument (the "Performance Bond") acceptable to such Rating Agency to support
this purchase obligation. See
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"Credit Support-Performance Bond". The purchase obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for a breach of the
Master Servicer's or seller's insurability representation.
Unless otherwise provided in the related Prospectus Supplement, if the
Depositor discovers or receives notice of any breach of its representations and
warranties relating to a Contract within two years or such other period as may
be specified in the related Prospectus Supplement of the date of the initial
issuance of the Certificates, the Depositor may remove such Contract from the
Trust Fund ("Deleted Contract"), rather than repurchase the Contract as provided
above, and substitute in its place another Contract ("Substitute Contract"). Any
Substitute Contract, on the date of substitution, will (i) have an outstanding
principal balance, after deduction of all scheduled payments due in the month of
substitution, not in excess of the outstanding principal balance of the Deleted
Contract (the amount of any shortfall to be distributed to Certificateholders in
the month of substitution), (ii) have an APR not less than (and not more than 1%
greater than) the APR of the Deleted Contract, (iii) have a Pass-Through Rate
equal to the Pass-Through Rate of the Deleted Contract, (iv) have a remaining
term to maturity not greater than (and not more than one year less than) that of
the Deleted Contract and (v) comply with all the representations and warranties
set forth in the Pooling and Servicing Agreement as of the date of substitution.
This repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for any such breach.
Underwriting Policies
Conventional Contracts will comply with the underwriting policies of the
Originator or Unaffiliated Seller of the Contracts described in the related
Prospectus Supplement. Except as described below or in the related Prospectus
Supplement, the Depositor believes that these policies were consistent with
those utilized by mortgage lenders or manufactured home lenders generally during
the period of origination.
With respect to a Contract made in connection with the Obligor's purchase
of a Manufactured Home, the "appraised value" is the amount determined by a
professional appraiser. The appraiser must personally inspect the Manufactured
Home and prepare a report which includes market data based on recent sales of
comparable Manufactured Homes and, when deemed applicable, a replacement cost
analysis based on the current cost of a similar Manufactured Home. Unless
otherwise specified in the related Prospectus Supplement, the Contract Loan-to-
Value Ratio is equal to the original principal amount of the Contract divided by
the lesser of the "appraised value" or the sales price for the Manufactured
Home.
THE DEPOSITOR
The Depositor is a special purpose Delaware corporation organized for the
purpose of causing the issuance of Certificates and other securities issued
under the Registration Statement backed by receivables or underlying securities
of various types and acting as settlor or depositor with respect to trusts,
custody accounts or similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not expected that the Depositor
will have any significant assets. The Depositor is an indirect, wholly owned
finance subsidiary of Collateralized Mortgage Securities Corporation, which is a
wholly owned subsidiary of CS First Boston Securities Corporation, which is a
wholly owned subsidiary of CS First Boston, Inc. Neither CS First Boston
Securities Corporation, nor CS First Boston, Inc., nor any of their affiliates,
has guaranteed, will guarantee or is or will be otherwise obligated with respect
to any Series of Certificates. The Depositor's principal executive office is
located at Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055, and
its telephone number is (212) 909-2000.
Trust Assets will be acquired by the Depositor directly or through one or
more affiliates.
USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each Series offered hereby and by the related Prospectus Supplement
to purchase the Trust Assets, to repay indebtedness which has been incurred to
obtain funds to acquire the Trust Assets, to establish the Reserve Funds, if
any, for the Series and to pay costs of structuring and
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issuing the Certificates. If so specified in the related Prospectus Supplement,
Certificates may be exchanged by the Depositor for Trust Assets. Unless
otherwise specified in the related Prospectus Supplement, the Trust Assets for
each Series of Certificates will be acquired by the Depositor either directly,
or through one or more affiliates which will have acquired such Trust Assets
from time to time either in the open market or in privately negotiated
transactions.
YIELD CONSIDERATIONS
Each monthly payment on a Mortgage Loan is calculated as one-twelfth of the
applicable Mortgage Rate multiplied by the unpaid principal balance of such
Mortgage Loan. Unless otherwise specified in the related Prospectus Supplement,
the amount of such interest payment distributed monthly to Certificateholders
with respect to each Mortgage Loan will be similarly calculated based on the
applicable Pass-Through Rate for the related Mortgage Pool. The Pass-Through
Rate for a Mortgage Pool will be either fixed or variable, as specified in the
related Prospectus Supplement.
Each monthly accrual of interest on a Contract is calculated as one-twelfth
of the product of the APR and the principal balance outstanding on the scheduled
payment date for such Contract in the preceding month. Unless otherwise
specified in the related Prospectus Supplement, the Pass-Through Rate with
respect to each Contract will be calculated on a Contract-by-Contract basis and
the Servicing Fee applicable to each Contract from the applicable APR.
With respect to a Mortgage Pool or a Contract Pool bearing a fixed Pass-
Through Rate, each Mortgage Loan or Contract will have a Mortgage Rate or APR
that exceeds the Pass-Through Rate by at least 3/8 of 1% unless otherwise
specified in the related Prospectus Supplement. The difference between a
Mortgage Rate or APR and the related fixed Pass-Through Rate for the Mortgage
Pool or Contract Pool (less any servicing compensation payable to the related
Servicers and the amounts, if any, payable to the Depositor or the person or
entity specified in the related Prospectus Supplement) will be retained by the
Master Servicer as servicing compensation to it. See "Description of the
Certificates-Servicing Compensation and Payment of Expenses". Although Mortgage
Rates and APRs in a fixed Pass-Through Rate Mortgage Pool or Contract Pool,
respectively, may vary, unless otherwise specified in the related Prospectus
Supplement, disproportionate principal prepayments among Mortgage Loans bearing
different Mortgage Rates or APRs will not affect the return to
Certificateholders since, as set forth above, the Pass-Through Rate may not
exceed any Mortgage Rate or APR.
With respect to Mortgage Pools having a variable Pass-Through Rate, the
Pass-Through Rate will equal the weighted average of the Mortgage Rates on all
the Mortgage Loans in the Mortgage Pool, minus the servicing compensation
payable to the Master Servicer and the Servicer of such Mortgage Loans and the
amounts, if any, retained by the Depositor or an Unaffiliated Seller or paid to
the person or entity specified in the related Prospectus Supplement. The
servicing fee and such other amounts will be fixed as to each Mortgage Loan at a
rate per annum, and may vary among Mortgage Loans. Because the Mortgage Rates in
such a Mortgage Pool will differ and the aggregate servicing compensation and
such other amounts to be retained or distributed with respect to each Mortgage
Loan will be fixed, it is likely that the weighted average of the Mortgage
Rates, and the corresponding variable Pass-Through Rate, will change as the
Mortgage Loans amortize and as a result of prepayments.
If so specified in the related Prospectus Supplement, a Mortgage Pool may
contain Mortgage Loans with fluctuating Mortgage Rates that adjust more
frequently than the monthly payment with respect to such Mortgage Loans. As a
result, the portion of each monthly payment allocated to principal may vary from
month to month. Negative amortization with respect to a Mortgage Loan will occur
if an adjustment to the Mortgage Rate causes the amount of interest accrued in
any month, calculated at the new Mortgage Rate for such period, to exceed the
amount of the monthly payment or if the allowable increase in any monthly
payment is limited to an amount that is less than the amount of interest accrued
in any month. The amount of any resulting Deferred Interest will be added to the
principal balance of the Mortgage Loan and will bear interest at the Mortgage
Rate in effect from time to time. To the extent that, as a result of the
addition of any Deferred Interest, the Mortgage Loan negatively amortizes over
its term, the weighted average life of the certificates of the related Series
will be greater than would otherwise be the case. As a result, the yield on any
such Mortgage Loan at any time may be less than the yields on similar adjustable
rate mortgage loans, and the rate of prepayment may be lower or higher than
would otherwise be anticipated.
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Generally, when a full prepayment is made on a Mortgage Loan or Contract,
the Mortgagor or the borrower under a Contract (the "Obligor"), is charged
interest for the number of days actually elapsed from the due date of the
preceding monthly payment up to the date of such prepayment, at a daily interest
rate determined by dividing the Mortgage Rate or APR by 365. Full prepayments
will reduce the amount of interest paid by the Mortgagor or the Obligor because
interest on the principal amount of any Mortgage Loan or Contract so prepaid
will be paid only to the date of prepayment instead of for a full month;
however, unless otherwise provided in the applicable Prospectus Supplement, the
Master Servicer with respect to a Series will be required to advance from its
own funds the portion of any interest at the related Pass-Through Rate that is
not so received. Partial prepayments generally are applied on the first day of
the month following receipt, with no resulting reduction in interest payable for
the period in which the partial prepayment is made. Unless otherwise specified
in the related Prospectus Supplement, full and partial prepayments, together
with interest on such full and partial prepayments at the Pass-Through Rate for
the related Mortgage Pool or Contract Pool to the last day of the month in which
such prepayments occur, will be deposited in the Certificate Account and will be
available for distribution to Certificateholders on the next succeeding
Distribution Date in the manner specified in the related Prospectus Supplement.
See "Maturity and Prepayment Considerations".
Generally, the effective yield to holders of Certificates having a monthly
Distribution Date will be lower than the yield otherwise produced by the Pass-
Through Rate with respect to a Mortgage Pool or Contract Pool or the pass-
through rate borne by a Mortgage Certificate because, while interest will accrue
on each Mortgage Loan or Contract, or mortgage loan underlying a Mortgage
Certificate, to the first day of the month, the distribution of such interest to
holders of such Certificates will be made no earlier than the 25th day of the
month following the month of the accrual (unless otherwise provided in the
applicable Prospectus Supplement). The adverse effect on yield will intensify
with any increase in the period of time by which the Distribution Date with
respect to a Series of Certificates succeeds such 25th day. With respect to the
Multi-Class Certificates of a Series having other than monthly Distribution
Dates, the yield to holders of such Certificates will also be adversely affected
by any increase in the period of time from the date to which interest accrues on
such Certificate to the Distribution Date on which such interest is distributed.
In the event that the Certificates of a Series are divided into two or more
Classes or Subclasses and that a Class or Subclass is an Interest Weighted
Class, in the event that such Series includes a Class of Residual Certificates,
or as otherwise may be appropriate, the Prospectus Supplement for such Series
will indicate the manner in which the yield to Certificateholders will be
affected by different rates of prepayments on the Mortgage Loans, on the
Contracts or on the mortgage loans underlying the Mortgage Certificates. In
general, the yield on Certificates that are offered at a premium to their
principal or notional amount ("Premium Certificates") is likely to be adversely
affected by a higher than anticipated level of principal prepayments on the
Mortgage Loans, on the Contracts or on the mortgage loans underlying the
Mortgage Certificates. This relationship will become more sensitive as the
amount by which the Percentage Interest of such Class in each Interest
Distribution is greater than the corresponding Percentage Interest of such Class
in each Principal Distribution. If the differential is particularly wide (e.g.,
the Interest Distribution is allocated primarily or exclusively to one Class or
Subclass and the Principal Distribution primarily or exclusively to another) and
a high level of prepayments occurs, there is a possibility that
Certificateholders of Premium Certificates will not only suffer a lower than
anticipated yield but, in extreme cases, will fail to recoup fully their initial
investment. Conversely, a lower than anticipated level of principal prepayments
(which can be anticipated to increase the expected yield to holders of
Certificates that are Premium Certificates) will likely result in a lower than
anticipated yield to holders of Certificates that are offered at a discount to
their principal amount ("Discount Certificates"). If so specified in the
applicable Prospectus Supplement, a disproportionately large amount of Principal
Prepayments may be distributed to the holders of the Senior Certificates at the
times and under the circumstances described therein.
In the event that the Certificates of a Series include one or more Classes
or Subclasses of Multi-Class Certificates, the Prospectus Supplement for such
Series will set forth information, measured relative to a prepayment standard or
model specified in such Prospectus Supplement, with respect to the projected
weighted average life of each such Class or Subclass and the percentage of the
initial Stated Principal Balance of each such Subclass that would be outstanding
on special Distribution Dates for such Series based on the assumptions stated in
such Prospectus Supplement, including assumptions that prepayments on the
Mortgage Loans or Contracts or on the mortgage loans underlying the Mortgage
Certificates in the related Trust Fund are made at rates corresponding to the
various percentages of such prepayment standard or model.
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MATURITY AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, the
scheduled maturities of all of the Mortgage Loans (or the mortgage loans
underlying the Mortgage Certificates) at origination will not be less than
approximately 10 years or exceed 40 years and all the Contracts will have
maturities at origination of not more than 20 years, but such Mortgage Loans (or
such underlying mortgage loans) or Contracts may be prepaid in full or in part
at any time. Unless otherwise specified in the applicable Prospectus Supplement,
no such Mortgage Loan (or mortgage loan) or Contract will provide for a
prepayment penalty and each will contain (except in the case of FHA and VA
Loans) due-on-sale clauses permitting the mortgagee or obligee to accelerate the
maturity thereof upon conveyance of the Mortgaged Property, Cooperative Dwelling
or Manufactured Home.
The FHA has compiled statistics relating to one- to four-family, level
payment mortgage loans insured by the FHA under the National Housing Act of
1934, as amended, at various interest rates, all of which permit assumption by
the new buyer if the home is sold. Such statistics indicate that while some of
such mortgage loans remain outstanding until their scheduled maturities, a
substantial number are paid prior to their respective stated maturities. The
Actuarial Division of HUD has prepared tables which, assuming full mortgage
prepayments at the rates experienced by FHA, set forth the percentages of the
original number of FHA Loans in pools of level payment mortgage loans of varying
maturities that will remain outstanding on each anniversary of the original date
of such mortgage loans (assuming they all have the same origination date) ("FHA
Experience"). Published information with respect to conventional residential
mortgage loans indicates that such mortgage loans have historically been prepaid
at higher rates than government insured loans because, unlike government insured
mortgage loans, conventional mortgage loans may contain due-on-sale clauses that
allow the holder thereof to demand payment in full of the remaining principal
balance of such mortgage loans upon sales or certain transfers of the mortgaged
property. There are no similar statistics with respect to the prepayment rates
of cooperative loans or loans secured by multifamily properties.
It is customary in the residential mortgage industry in quoting yields (a)
on a pool of 30-year fixed-rate, level payment mortgages, to compute the yield
as if the pool were a single loan that is amortized according to a 30-year
schedule and is then prepaid in full at the end of the twelfth year and (b) on a
pool of 15-year fixed-rate, level payment mortgages, to compute the yield as if
the pool were a single loan that is amortized according to a 15-year schedule
and then is prepaid in full at the end of the seventh year.
Prepayments on residential mortgage loans are also commonly measured
relative to a prepayment standard or model. If so specified in the Prospectus
Supplement relating to a Series of Certificates, the model used in a Prospectus
Supplement will be the Standard Prepayment Assumption ("SPA"). SPA represents an
assumed rate of prepayment relative to the then outstanding principal balance of
a pool of mortgages. A prepayment assumption of 100% of SPA assumes prepayment
rates of 0.2% per annum of the then outstanding principal balance of such
mortgages in the first month of the life of the mortgages and an additional 0.2%
per annum in each month thereafter until the thirtieth month and in each month
thereafter during the life of the mortgages, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Information regarding FHA Experience, other published information, SPA or
any other rate of assumed prepayment, as applicable, will be set forth in the
Prospectus Supplement with respect to a Series of Certificates. There is,
however, no assurance that prepayment of the Mortgage Loans underlying a Series
of Certificates will conform to FHA Experience, mortgage industry custom, any
level of SPA, or any other rate specified in the related Prospectus Supplement.
A number of factors, including homeowner mobility, economic conditions,
enforceability of due-on-sale clauses, mortgage market interest rates, mortgage
recording taxes and the availability of mortgage funds, may affect prepayment
experience on residential mortgage loans.
The terms of the Pooling and Servicing Agreement will require the Servicer
or the Master Servicer to enforce any due-on-sale clause to the extent it has
knowledge of the conveyance or the proposed conveyance of the underlying
Mortgaged Property or Cooperative Dwelling; provided, however, that any
enforcement action that would impair or threaten to impair any recovery under
any related Insurance Policy will not be required or permitted. See "Description
of the Certificates-Enforcement of "Due-On-Sale" Clauses; Realization Upon
Defaulted Mortgage Loans" and "Certain Legal Aspects of the Mortgage Loans And
Contracts-The Mortgage Loans-"Due-On-Sale" Clauses" for a description of certain
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provisions of each Pooling and Servicing Agreement and certain legal
developments that may affect the prepayment experience on the Mortgage Loans.
At the request of the Mortgagor, the Servicer may refinance the Mortgage
Loans in any Mortgage Pool by accepting prepayments thereon and making new loans
secured by a mortgage on the same property. Upon such refinancing, the new loans
will not be included in the Mortgage Pool and the related Servicer will be
required to repurchase the affected Mortgage Loan. A Mortgagor may be legally
entitled to require the Servicer to allow such a refinancing. Any such
repurchase will have the same effect as a prepayment in full of the related
Mortgage Loan.
There are no uniform statistics compiled for prepayments of contracts
relating to Manufactured Homes. Prepayments on the Contracts may be influenced
by a variety of economic, geographic, social and other facts, including
repossessions, aging, seasonality and interest rate fluctuations. Other factors
affecting prepayment of mortgage loans or Contracts include changes in housing
needs, job transfers, unemployment and servicing decisions. An investment in
Certificates evidencing interests in Contracts may be affected by, among other
things, a downturn in regional or local economic conditions. These regional or
local economic conditions are often volatile, and historically have affected the
delinquency, loan loss and repossession experience of the Contracts. To the
extent that losses on the Contracts are not covered by the Subordination Amount,
if any, Letters of Credit, applicable Insurance Policies, if any, or by any
Alternative Credit Support, holders of the Certificates of a Series evidencing
interests in such Contracts will bear all risk of loss resulting from default by
Obligors and will have to look primarily to the value of the Manufactured Homes,
which generally depreciate in value, for recovery of the outstanding principal
and unpaid interest of the defaulted Contracts. See "The Trust Fund-The Contract
Pools".
While most Contracts will contain "due-on-sale" provisions permitting the
holder of the Contract to accelerate the maturity of the Contract upon
conveyance by the borrower, the Master Servicer may permit proposed assumptions
of Contracts where the proposed buyer meets the underwriting standards described
above. Such assumption would have the effect of extending the average life of
the Contract. FHA Mortgage Loans and Contracts and VA Mortgage Loans and
Contracts are not permitted to contain "due on sale" clauses, and are freely
assumable.
Mortgage Loans made with respect to Multifamily Properties may have
provisions that prevent prepayment for a number of years and may provide for
payments of interest only during a certain period followed by amortization of
principal on the basis of a schedule extending beyond the maturity of the
related Mortgage Loan. Prepayments of Mortgage Loans secured by Multifamily
Property may be affected by these and other factors, including changes in
interest rates and the relative tax benefits associated with ownership of
Multifamily Property.
If set forth in the applicable Prospectus Supplement, the Depositor or
other specified entity will have the option to repurchase the Trust Assets
included in the related Trust Fund under the conditions stated in such
Prospectus Supplement. For any Series of Certificates for which the Depositor
has elected to treat the Trust as a REMIC pursuant to the provisions or the
Code, any such repurchase will be effected in compliance with the requirements
of Section 860F(a)(4) of the Code so as to constitute a "qualifying liquidation"
thereunder. In addition, the Depositor will be obligated, under certain
circumstances, to repurchase certain of the Trust Assets. The Master Servicer
and Unaffiliated Sellers will also have certain repurchase obligations, as more
fully described herein. In addition, the mortgage loans underlying the Mortgage
Certificates may be subject to repurchase under circumstances similar to those
described above. Such repurchases will have the same effect as prepayments in
full. See "The Trust Fund-Mortgage Loan Program-Representations by Unaffiliated
Sellers; Repurchases", "Description of the Certificates-Assignment of Mortgage
Loans", "-Assignment of Mortgage Certificates", "-Assignment of Contracts" and
"-Termination".
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to an agreement
consisting of either (a) a Pooling and Servicing Agreement or (b) a Reference
Agreement (the "Reference Agreement") and the Standard Terms and Provisions of
Pooling and Servicing Agreement (such Standard Terms, the "Standard Terms"),
either the Standard Terms together with the Reference Agreement or the Pooling
and Servicing Agreement referred to as the "Pooling and Servicing Agreement")
among
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the Depositor, the Master Servicer, if any, and the Trustee named in the
applicable Prospectus Supplement or a deposit trust agreement between the
Depositor and the Trustee (the "Deposit Trust Agreement", together with the
Pooling and Servicing Agreement, the "Agreement"). Forms of the Pooling and
Servicing Agreement and the Deposit Trust Agreement have been filed as exhibits
to the Registration Statement of which this Prospectus is a part. The following
summaries describe certain provisions common to each Pooling and Servicing
Agreement and Deposit Trust Agreement. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Pooling and Servicing Agreement or Deposit
Trust Agreement for the applicable Series and the related Prospectus Supplement.
Wherever defined terms of the Pooling and Servicing Agreement or Deposit Trust
Agreement are referred to, such defined terms are thereby incorporated herein by
reference.
GENERAL
Unless otherwise specified in the Prospectus Supplement with respect to a
Series, each Certificate offered hereby and by means of the related Prospectus
Supplement will be issued in fully registered form and will represent the
undivided interest or beneficial interest attributable to such Class or Subclass
in the Trust Fund. The Trust Fund with respect to a Series will consist of: (i)
such Mortgage Loans, Contracts, and Mortgage Certificates and distributions
thereon as from time to time are subject to the applicable Agreement; (ii) such
assets as from time to time are identified as deposited in the Certificate
Account referred to below; (iii) property acquired by foreclosure of Mortgage
Loans or deed in lieu of foreclosure, or Manufactured Homes acquired by
repossession; (iv) the Letter of Credit, if any, with respect to such Series;
(v) the Pool Insurance Policy, if any, with respect to such Series (described
below under "Description of Insurance"); (vi) the Special Hazard Insurance
Policy, if any, with respect to such Series (described below under "Description
of Insurance"); (vii) the Mortgagor Bankruptcy Bond and proceeds thereof, if
any, with respect to such Series (as described below under "Description of
Insurance"); (viii) the Performance Bond and proceeds thereof, if any, with
respect to such Series; (ix) the Primary Mortgage Insurance Policies, if any,
with respect to such Series (as described below under "Description of
Insurance"); (x) the Depositor's rights under the Warranty and Servicing
Agreement with respect to the Mortgage Loans or Contracts, if any, with respect
to such Series; and (xi) the GPM and Buy-Down Funds, if any, with respect to
such Series; or, in lieu of some or all of the foregoing, such Alternative
Credit Support as shall be described in the applicable Prospectus Supplement.
Upon the original issuance of a Series of Certificates, Certificates
representing the minimum undivided interest or beneficial ownership interest in
the related Trust Fund or the minimum notional amount allocable to each Class
will evidence the undivided interest, beneficial ownership interest or
percentage ownership interest specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, one or more Servicers
or the Depositor may directly perform some or all of the duties of a Master
Servicer with respect to a Series.
If so specified in the Prospectus Supplement for a Series with respect to
which the Depositor has elected to treat the Trust Fund as a REMIC under the
Code, ownership of the Trust Fund for such Series may be evidenced by Multi-
Class Certificates and Residual Certificates. Distributions of principal and
interest with respect to Multi-Class Certificates may be made on a sequential or
concurrent basis, as specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, one or more of such Classes or
Subclasses may be Compound Interest Certificates.
The Residual Certificates, if any, included in a Series will be designated
by the Depositor as the "residual interest" in the related REMIC for purposes of
Section 860G(a)(2) of the Code, and will represent the right to receive
distributions as specified in the Prospectus Supplement for such Series. All
other Classes of Certificates of such Series will constitute "regular interests"
in the related REMIC, as defined in the Code. If so specified in the related
Prospectus Supplement, such Residual Certificates may be offered hereby and by
means of such Prospectus Supplement. See "Certain Federal Income Tax
Consequences".
If so specified in the Prospectus Supplement for a Series which includes
Multi-Class Certificates, each Trust Asset in the related Trust Fund will be
assigned an initial "Asset Value". Unless otherwise specified in the related
Prospectus Supplement, the Asset Value of each Trust Asset in the related Trust
Fund will be the Stated Principal Balance of each Class or Classes of
Certificates of such Series that, based upon certain assumptions, can be
supported by distributions on such
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Trust Assets allocable to such Class or Subclass, together with reinvestment
income thereon, to the extent specified in the related Prospectus Supplement,
and amounts available to be withdrawn from any Buy-Down, GPM Fund or Reserve
Fund for such Series. The method of determining the Asset Value of the Trust
Assets in the Trust Fund for such a Series that includes Multi-Class
Certificates will be specified in the related Prospectus Supplement.
If so specified in the Prospectus Supplement with respect to a Series,
ownership of the Trust Fund for such Series may be evidenced by one or more
Classes or Subclasses of Certificates that are Senior Certificates and
Subordinated Certificates, each representing the undivided interests in the
Trust Fund specified in such Prospectus Supplement. If so specified in the
related Prospectus Supplement, one or more Classes or Subclasses or Subordinated
Certificates of a Series may be subordinated to the right of the holders of
Certificates of one or more Classes or Subclasses within such Series to receive
distributions with respect to the Mortgage Loans or Contracts in the related
Trust Fund, in the manner and to the extent specified in such Prospectus
Supplement. If so specified in the related Prospectus Supplement, the holders of
each Subclass of Senior Certificates will be entitled to the Percentage
Interests in the principal and/or interest payments on the underlying Mortgage
Loans or Contracts specified in such Prospectus Supplement. If so specified in
the related Prospectus Supplement, the Subordinated Certificates of a Series
will evidence the right to receive distributions with respect to a specific pool
of Mortgage Loans or Contracts, which right will be subordinated to the right of
the holders of the Senior Certificates of such Series to receive distributions
with respect to such specific pool of Mortgage Loans or Contracts, as more fully
set forth in such Prospectus Supplement. If so specified in the related
Prospectus Supplement, the holders of the Senior Certificates may have the right
to receive a greater than pro rata percentage of Principal Prepayments in the
manner and under the circumstances described in the Prospectus Supplement.
If so specified in the related Prospectus Supplement, the Depositor may
sell certain Classes or Subclasses of the Certificates of a Series, including
one or more Classes or Subclasses of Subordinated or Residual Certificates, in
privately negotiated transactions exempt from registration under the Securities
Act. Such Certificates will be transferable only pursuant to an effective
registration statement or an applicable exemption under the Securities Act and
pursuant to any applicable state law. Alternatively, if so specified in the
related Prospectus Supplement, the Depositor may offer one or more Classes or
Subclasses of the Subordinated or Residual Certificates of a Series by means of
this Prospectus and such Prospectus Supplement.
The Certificates of a Series offered hereby and by means of the related
Prospectus Supplements will be transferable and exchangeable at the office or
agency maintained by the Trustee for such purpose set forth in the related
Prospectus Supplement, unless such Prospectus Supplement provides otherwise. No
service charge will be made for any transfer or exchange of Certificates, but
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge in connection with such transfer or exchange.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
Beginning on the date specified in the related Prospectus Supplement,
distributions of principal and interest on the Certificates of a Series will be
made by the Master Servicer or Trustee, if so specified in the Prospectus
Supplement, on each Distribution Date to persons in whose name the Certificates
are registered at the close of business on the day specified in such Prospectus
Supplement (the "Record Date"). Such distributions of interest will be made
periodically at the intervals, in the manner and at the per annum rate specified
in the related Prospectus Supplement, which rate may be fixed or variable.
Interest on the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months, unless otherwise specified in the related
Prospectus Supplement. Distributions of principal on the Certificates will be
made in the priority and manner and in the amounts specified in the related
Prospectus Supplement.
If so specified in the Prospectus Supplement with respect to a Series of
Certificates, distributions of interest and principal to a Certificateholder
will be equal to the product of the undivided interest evidenced by such
Certificate and the payments of principal and interest (adjusted to the related
Pass-Through Rate) on or with respect to the Mortgage Loans or Contracts
(including any Advances thereof) or the Mortgage Certificates included in the
Trust Fund with respect to such Series.
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If so specified in the related Prospectus Supplement, distributions on a
Class or Subclass of Certificates of a Series may be based on the Percentage
Interest evidenced by a Certificate of such Class or Subclass in the
distributions (including any Advances thereof) of principal (the "Principal
Distribution") and interest (adjusted to the Pass-Through Rate for the related
Mortgage Pool or Contract Pool) (the "Interest Distribution") on or with respect
to the Mortgage Loans, the Contracts or the Mortgage Certificates in the related
Trust Fund. Unless otherwise specified in the related Prospectus Supplement, on
each Distribution Date, the Trustee will distribute to each holder of a
Certificate of such Class or Subclass an amount equal to the product of the
Percentage Interest evidenced by such Certificate and the interest of such Class
or Subclass in the Principal Distribution and the Interest Distribution. A
Certificate of such a Class or Subclass may represent a right to receive a
percentage of both the Principal Distribution and the Interest Distribution or a
percentage of either the Principal Distribution or the Interest Distribution, as
specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, the holders of the
Senior Certificates may have the right to receive a percentage of Principal
Prepayments that is greater than the percentage of regularly scheduled payment
of principal such holder is entitled to receive. Such percentages may vary from
time to time, subject to the terms and conditions specified in the Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates that includes Multi-Class Certificates, distributions of
interest on each such Class or Subclass will be made on the Distribution Dates,
and at the Interest Rates, specified in such Prospectus Supplement. Unless
otherwise specified in the Prospectus Supplement relating to such a Series of
Certificates, distributions of interest on each Class or Subclass of Compound
Interest Certificates of such Series will be made on each Distribution Date
after the Stated Principal Balance of all Certificates of such Series having a
Final Scheduled Distribution Date prior to that of such Class or Subclass of
Compound Interest Certificates has been reduced to zero. Prior to such time,
interest on such Class or Subclass of Compound Interest Certificates will be
added to the Stated Principal Balance thereof on each Distribution Date for such
Series.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates that includes Multi-Class Certificates, distributions in
reduction of the Stated Principal Balance of such Certificates will be made as
described herein. Distributions in reduction of the Stated Principal Balance of
such Certificates will be made on each Distribution Date for such Series to the
holders of the Certificates of the Class or Subclass then entitled to receive
such distributions until the aggregate amount of such distributions have reduced
the Stated Principal Balance of such Certificates to zero. Allocation of
distributions in reduction of Stated Principal Balance will be made to each
Class or Subclass of such Certificates in the order specified in the related
Prospectus Supplement, which, if so specified in such Prospectus Supplement, may
be concurrently. Unless otherwise specified in the related Prospectus
Supplement, distributions in reduction of the Stated Principal Balance of each
Certificate of a Class or Subclass then entitled to receive such distributions
will be made pro rata among the Certificates of such Class or Subclass.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates that includes Multi-Class Certificates, the maximum
amount which will be distributed in reduction of Stated Principal Balance to
holders of Certificates of a Class or Subclass then entitled thereto on any
Distribution Date will equal, to the extent funds are available in the
Certificate Account, the sum of (i) the amount of the interest, if any, that has
accrued but is not yet payable on the Compound Interest Certificates of such
Series since the prior Distribution Date (or since the date specified in the
related Prospectus Supplement in the case of the first Distribution Date) (the
"Accrual Distribution Amount"); (ii) the Stated Principal Distribution Amount;
and (iii) to the extent specified in the related Prospectus Supplement, the
applicable percentage of the Excess Cash Flow specified in such Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates that includes Multi-Class Certificates, the "Stated
Principal Distribution Amount" with respect to a Distribution Date will equal
the sum of the Accrual Distribution Amount, if any, and the amount, if any, by
which the then outstanding Stated Principal Balance of the Multi-Class
Certificates of such Series (before taking into account the amount of interest
accrued on any Class of Compound Interest Certificates of such Series to be
added to the Stated Principal Balance thereof on such Distribution Date) exceeds
the Asset Value of the Trust Assets in the Trust Fund underlying such Series as
of the end of a period (a "Due Period") specified in the related Prospectus
Supplement. For purposes of determining the Stated Principal Distribution Amount
with respect to a Distribution Date, the Asset Value of the Trust Assets will be
reduced to take into account the
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interest evidenced by such Classes or Subclasses of Certificates in the
principal distributions on or with respect of such Trust Assets received by the
Trustee during the preceding Due Period.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates that includes Multi-Class Certificates, Excess Cash Flow
represents the excess of (i) the interest evidenced by such Multi-Class
Certificates in the distributions received on the Mortgage Loans or Contracts
underlying such Series in the Due Period preceding a Distribution Date for such
Series (and, in the case of the first Due Period, the amount deposited in the
Certificate Account on the closing day for the sale of such Certificates),
together with income from the reinvestment thereof, and, to the extent specified
in such Prospectus Supplement, the amount of cash withdrawn from any Reserve,
GPM or Buy-Down Fund for such Series in the Due Period preceding such
Distribution Date, over (ii) the sum of all interest accrued, whether or not
then distributable, on the Multi-Class Certificates since the preceding
Distribution Date (or since the date specified in the related Prospectus
Supplement in the case of the first Distribution Date), the Stated Principal
Distribution Amount for the then current Distribution Date and, if applicable,
any payments made on any Certificates of such Class or Subclass pursuant to any
special distributions in reduction of Stated Principal Balance during such Due
Period.
The Stated Principal Balance of a Multi-Class Certificate of a Series at
any time represents the maximum specified dollar amount (exclusive of interest
at the related Interest Rate) to which the holder thereof is entitled from the
cash flow on the Trust Assets in the Trust Fund for such Series, and will
decline to the extent distributions in reduction of Stated Principal Balance are
received by such holder. The Initial Stated Principal Balance of each Class or
Subclass within a Series that has been assigned a Stated Principal Balance will
be specified in the related Prospectus Supplement.
Distributions (other than the final distribution in retirement of the
Certificates) will be made by check mailed to the address of the person entitled
thereto as it appears on the Certificate Register, except that, with respect to
any holder of a Certificate meeting the requirements specified in the applicable
Prospectus Supplement, distributions shall be made by wire transfer in
immediately available funds, provided that the Trustee shall have been furnished
with appropriate wiring instructions not less than two Business Days prior to
the related Distribution Date. The final distribution in retirement of
Certificates will be made only upon presentation and surrender of the
Certificates at the office or agency designated by the Master Servicer for such
purpose, as specified in the final distribution notice to Certificateholders.
ASSIGNMENT OF MORTGAGE CERTIFICATES
Pursuant to the applicable Agreement for a Series of Certificates that
includes Mortgage Certificates in the related Trust Fund, the Depositor will
cause such Mortgage Certificates to be transferred to the Trustee together with
all principal and interest distributed on such Mortgage Certificates after the
Cut-off Date. Each Certificate included in a Trust Fund will be identified in a
schedule appearing as an exhibit to the applicable Agreement. Such schedule will
include information as to the principal balance of each Mortgage Certificate as
of the date of issuance of the Certificates and its coupon rate, maturity and
original principal balance. In addition, such steps will be taken by the
Depositor as are necessary to cause the Trustee to become the registered owner
of each Mortgage Certificate which is included in a Trust Fund and to provide
for all distributions on each such Mortgage Certificate to be made directly to
the Trustee.
In connection with such assignment, the Depositor will make certain
representations and warranties in the Agreement as to, among other things, its
ownership of the Mortgage Certificates. In the event that these representations
and warranties are breached, and such breach or breaches adversely affect the
interests of the Certificateholders in the Mortgage Certificates, the Depositor
will be required to repurchase the affected Mortgage Certificates at a price
equal to the principal balance thereof as of the date of purchase together with
accrued and unpaid interest thereon at the related pass-through rate to the
distribution date for such Mortgage Certificates or, in the case of a Series in
which an election has been made to treat the related Trust Fund as a REMIC, at
the lesser of the price set forth above, or the adjusted tax basis, as defined
in the Code, of such Mortgage Certificates. The Mortgage Certificates with
respect to a Series may also be subject to repurchase, in whole but not in part,
under the circumstances and in the manner described in the related Prospectus
Supplement. Any amounts received in respect of such repurchases will be
distributed to Certificateholders on the immediately succeeding Distribution
Date.
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If so specified in the related Prospectus Supplement, within the specified
period following the date of issuance of a Series of Certificates, the Depositor
may, in lieu of the repurchase obligation set forth above, and in certain other
circumstances, deliver to the Trustee Mortgage Certificates ("Substitute
Mortgage Certificates") in substitution for any one or more of the Mortgage
Certificates ("Deleted Mortgage Certificates") initially included in the Trust
Fund. The required characteristics or any such Substitute Mortgage Certificates
and any additional restrictions relating to the substitution of Mortgage
Certificates will be set forth in the related Prospectus Supplement.
ASSIGNMENT OF MORTGAGE LOANS
The Depositor will cause the Mortgage Loans constituting a Mortgage Pool to
be assigned to the Trustee, together with all principal and interest received on
or with respect to such Mortgage Loans after the Cut-off Date, but not including
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to the Depositor in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the related Pooling and Servicing Agreement.
Such schedule will include information as to the adjusted principal balance of
each Mortgage Loan as of the Cut-off Date, as well as information respecting the
Mortgage Rate, the currently scheduled monthly payment of principal and
interest, the maturity of the Mortgage Note and the Loan-to-Value Ratio at
origination.
In addition, the Depositor will, as to each Mortgage Loan that is not a
Cooperative Loan, deliver or cause to be delivered to the Trustee (or to the
custodian hereinafter referred to) the Mortgage Note endorsed to the order of
the Trustee, the Mortgage with evidence of recording indicated thereon (except
for any Mortgage not returned from the public recording office, in which case
the Depositor will deliver a copy of such Mortgage together with its certificate
that the original of such Mortgage was delivered to such recording office) and
an assignment of the Mortgage in recordable form. Assignments of the Mortgage
Loans to the Trustee will 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 Mortgage Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor or the Originator of such Mortgage
Loan.
The Depositor will cause to be delivered to the Trustee, its agent, or a
custodian, with respect to any Cooperative Loan, the related original security
agreement, the proprietary lease or occupancy agreement, the recognition
agreement, an executed financing statement and the relevant stock certificate
and related blank stock powers. The Master Servicer will file in the appropriate
office a financing statement evidencing the Trustee's security interest in each
Cooperative Loan.
The Trustee (or the custodian hereinafter referred to) will, generally
within 60 days after receipt thereof, review and hold such documents in trust
for the benefit of the Certificateholders. Unless otherwise specified in the
applicable Prospectus Supplement, if any such document is found to be defective
in any material respect, the Trustee will promptly notify the Master Servicer
and the Depositor, and the Master Servicer will notify the related Servicer. If
the Servicer cannot cure the defect within 60 days after notice is given to the
Master Servicer, the Servicer will be obligated either to substitute for the
related Mortgage Loan a Replacement Mortgage Loan or Loans, or to purchase
within 90 days of such notice the related Mortgage Loan from the Trustee at a
price equal to the principal balance thereof as of the date of purchase or, in
the case of a Series as to which an election has been made to treat the related
Trust Fund as a REMIC, at such other price as may be necessary to avoid a tax on
a prohibited transaction, as described in Section 860F(a) of the Code, in each
case together with accrued interest at the applicable Pass-Through Rate, to the
first day of the month following such repurchase, plus the amount of any
unreimbursed Advances made by the Master Servicer or the Servicer, as
applicable, in respect of such Mortgage Loan. The Master Servicer is obligated
to enforce the repurchase obligation of the Servicer, to the extent described
above under "The Trust Fund-Mortgage Loan Program-Representations by
Unaffiliated Sellers; Repurchases". Unless otherwise specified in the applicable
Prospectus Supplement, this purchase obligation constitutes the sole remedy
available to the Certificateholders or the Trustee for a material defect in a
constituent document.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to the Mortgage Loans in a Mortgage Pool, the Depositor will make
representations and warranties as to the types and geographical distribution of
such Mortgage Loans and as to the accuracy in all material respects of certain
information furnished to the Trustee in respect of
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each such Mortgage Loan. In addition, unless otherwise specified in the related
Prospectus Supplement, the Depositor will represent and warrant that, as of the
Cut-off Date for the related Series of Certificates, no Mortgage Loan is more
than 30 days delinquent as to payment of principal and interest. Upon a breach
of any representation or warranty by the Depositor that materially and adversely
affects the interest of the Certificateholders, the Depositor will be obligated
either to cure the breach in all material respects or to purchase the Mortgage
Loan at the purchase price set forth above. Unless otherwise specified in the
applicable Prospectus Supplement and subject to the ability of the Depositor, if
so specified in the applicable Prospectus Supplement, to substitute for certain
Mortgage Loans as described below, this repurchase obligation constitutes the
sole remedy available to the Certificateholders or the Trustee for a breach of
representation or warranty by the Depositor.
Within the period specified in the related Prospectus Supplement, following
the date of issuance of a Series of Certificates, the Depositor, the Master
Servicer or the related Servicer, as the case may be, may deliver to the Trustee
Mortgage Loans ("Substitute Mortgage Loans") in substitution for any one or more
of the Mortgage Loans ("Deleted Mortgage Loans") initially included in the Trust
Fund but which do not conform in one or more respects to the description thereof
contained in the related Prospectus Supplement, or as to which a breach of a
representation or warranty is discovered, which breach materially and adversely
affects the interests of the Certificateholders. The required characteristics of
any such Substitute Mortgage Loan and any additional restrictions relating to
the substitution of Mortgage Loans will generally be as described under "The
Trust Fund-The Mortgage Pools" with respect to the substitution of Mortgage
Loans.
In addition to making certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under the
Pooling and Servicing Agreement relating to a Series of Certificates, the Master
Servicer may make certain representations and warranties to the Trustee in such
Pooling and Servicing Agreement with respect to the enforceability of coverage
under any applicable Primary Insurance Policy, Pool Insurance Policy, Special
Hazard Insurance Policy or Mortgagor Bankruptcy Bond. See "Description of
Insurance" for information regarding the extent of coverage under certain of the
aforementioned insurance policies. Upon a breach of any such representation or
warranty that materially and adversely affects the interests of the
Certificateholders of such Series in a Mortgage Loan, the Master Servicer will
be obligated either to cure the breach in all material respects or to purchase
such Mortgage Loan at the price calculated as set forth above
To the extent described in the related Prospectus Supplement, the Master
Servicer will procure a surety bond, corporate guaranty or another similar form
of insurance coverage acceptable to the Rating Agency rating the related Series
of Certificates to support, among other things, this purchase obligation. Unless
otherwise stated in the applicable Prospectus Supplement, the aforementioned
purchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for a breach of the Master Servicer's
insurability representation. The Master Servicer's obligation to purchase
Mortgage Loans upon such a breach is subject to limitations.
The Trustee will be authorized, with the consent of the Depositor and the
Master Servicer, to appoint a custodian pursuant to a custodial agreement to
maintain possession of documents relating to the Mortgage Loans as the agent of
the Trustee.
Pursuant to each Pooling and Servicing Agreement, the Master Servicer,
either directly or through Servicers, will service and administer the Mortgage
Loans assigned to the Trustee as more fully set forth below.
ASSIGNMENT OF CONTRACTS
The Depositor will cause the Contracts constituting the Contract Pool to be
assigned to the Trustee, together with principal and interest due on or with
respect to the Contracts after the Cut-off Date, but not including principal and
interest due on or before the Cut-off Date. If the Depositor is unable to obtain
a perfected security interest in a Contract prior to transfer and assignment to
the Trustee, the Unaffiliated Seller will be obligated to repurchase such
Contract. The Trustee, concurrently with such assignment, will authenticate and
deliver the Certificates. Each Contract will be identified in a schedule
appearing as an exhibit to the Agreement (the "Contract Schedule"). Unless
otherwise specified in the related Prospectus Supplement, the Contract Schedule
will specify, with respect to each Contract, among other things: the original
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principal amount and the adjusted principal balance as of the close of business
on the Cut-off Date; the APR; the current scheduled monthly level payment of
principal and interest; and the maturity of the Contract.
In addition, the Depositor, as to each Contract, will deliver or cause to
be delivered to the Trustee, or, as specified in the related Prospectus
Supplement, the Custodian, the original Contract and copies of documents and
instruments related to each Contract and the security interest in the
Manufactured Home securing each Contract. In order to give notice of the right,
title and interest of the Certificateholders to the Contracts, the Depositor
will cause a UCC-1 financing statement to be executed by the Depositor
identifying the Trustee as the secured party and identifying all Contracts as
collateral. Unless otherwise specified in the related Prospectus Supplement, the
Contracts will not be stamped or otherwise marked to reflect their assignment
from the Depositor to the Trust Fund. Therefore, if a subsequent purchaser were
able to take physical possession of the Contracts without notice of such
assignment, the interest of the Certificateholders in the Contracts could be
defeated. See "Certain Legal Aspects of Mortgage Loans and Contracts-The
Contracts".
The Trustee (or the Custodian) will review and hold such documents in trust
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, if any such document is found to be defective in
any material respect, the Unaffiliated Seller must cure such defect within 60
days, or within such other period specified in the related Prospectus Supplement
the Unaffiliated Seller, not later than 90 days or within such other period
specified in the related Prospectus Supplement, after the Trustee's notice to
the Unaffiliated Seller of the defect. If the defect is not cured, the
Unaffiliated Seller will repurchase the related Contract or any property
acquired in respect thereof from the Trustee at a price equal to the remaining
unpaid principal balance of such Contract (or, in the case of a repossessed
Manufactured Home, the unpaid principal balance of such Contract immediately
prior to the repossession) or, in the case of a Series as to which an election
has been made to treat the related Trust Fund as a REMIC, at such other price as
may be necessary to avoid a tax on a prohibited transaction, as described in
Section 860F(a) of the Code, in each case together with accrued but unpaid
interest to the first day of the month following repurchase at the related Pass-
Through Rate, plus any unreimbursed Advances respecting such Contract. Unless
otherwise specified in the related Prospectus Supplement, the repurchase
obligation constitutes the sole remedy available to the Certificateholders or
the Trustee for a material defect in a Contract document.
Unless otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller of Contracts will have represented, among other things, that
(i) immediately prior to the transfer and assignment of the Contracts, the
Unaffiliated Seller had good title to, and was the sole owner of each Contract
and there had been no other sale or assignment thereof, (ii) as of the date of
such transfer, the Contracts are subject to no offsets, defenses or
counterclaims, (iii) each Contract at the time it was made complied in all
material respects with applicable state and federal laws, including usury, equal
credit opportunity and disclosure laws, (iv) as of the date of such transfer,
each Contract is a valid first lien on the related Manufactured Home and such
Manufactured Home is free of material damage and is in good repair, (v) as of
the date of such transfer, no Contract is more than 30 days delinquent in
payment and there are no delinquent tax or assessment liens against the related
Manufactured Home and (vi) with respect to each Contract, the Manufactured Home
securing the Contract is covered by a Standard Hazard Insurance Policy in the
amount required in the Pooling and Servicing Agreement and that all premiums now
due on such insurance have been paid in full.
All of the representations and warranties of a seller in respect of a
Contract will have been made as of the date on which such seller sold the
Contract to the Depositor or its affiliate; the date such representations and
warranties were made may be a date prior to the date of initial issuance of the
related series of Certificates. A substantial period of time may have elapsed
between the date as of which the representations and warranties were made and
the later date of initial issuance of the related Series of Certificates. Since
the representations and warranties referred to in the preceding paragraph are
the only representations and warranties that will be made by a seller, the
seller's repurchase obligation described below will not arise if, during the
period commencing on the date of sale of a Contract by the seller to the
Depositor or its affiliate, the relevant event occurs that would have given rise
to such an obligation had the event occurred prior to sale of the affected
Contract. Nothing, however, has come to the Depositor's attention that would
cause it to believe that the representations and warranties referred to in the
preceding paragraph will not be accurate and complete in all material respects
in respect of Contracts as of the date of initial issuance of the related series
of Certificates.
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The only representations and warranties to be made for the benefit of
Certificateholders in respect of any Contract relating to the period commencing
on the date of sale of such Contract to the Depositor or its affiliate will be
certain limited representations of the Depositor and of the Master Servicer
described above under "The Trust Fund-The Contract Pools".
If an Unaffiliated Seller cannot cure a breach of any representation or
warranty made by it in respect of a Contract that materially and adversely
affects the interest of the Certificateholders in such Contract within 90 days
(or such other period specified in the related Prospectus Supplement) after
notice from the Master Servicer, such Unaffiliated Seller will be obligated to
repurchase such Contract at a price equal to, unless otherwise specified in the
related Prospectus Supplement, the principal balance thereof as of the date of
the repurchase or, in the case of a Series as to which an election has been made
to treat the related Trust Fund as a REMIC, at such other price as may be
necessary to avoid a tax on a prohibited transaction, as described in Section
860F(a) of the Code, in each case together with accrued and unpaid interest to
the first day of the month following repurchase at the related Pass-Through
Rate, plus the amount of any unreimbursed Advances in respect of such Contract
(the "Purchase Price"). The Master Servicer will be required under the
applicable Pooling and Servicing Agreement to enforce this obligation for the
benefit of the Trustee and the Certificateholders, following the practices it
would employ in its good faith business judgment were it the owner of such
Contract. Except as otherwise set forth in the related Prospectus Supplement,
this repurchase obligation will constitute the sole remedy available to
Certificateholders or the Trustee for a breach of representation by an
Unaffiliated Seller.
Neither the Depositor nor the Master Servicer will be obligated to purchase
a Contract if an Unaffiliated Seller defaults on its obligation to do so, and no
assurance can be given that sellers will carry out their respective repurchase
obligations with respect to Contracts. However, to the extent that a breach of
the representations and warranties of an Unaffiliated Seller may also constitute
a breach of a representation made by the Depositor or the Master Servicer, the
Depositor or the Master Servicer may have a purchase obligation as described
above under "The Trust Fund-The Contract Pools".
SERVICING BY UNAFFILIATED SELLERS
Each Unaffiliated Seller of a Mortgage Loan or a Contract may have the
option to act as the Servicer (or Master Servicer) for such Mortgage Loan or
Contract pursuant to a Servicing Agreement. A representative form of Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following description does not purport to be
complete and is qualified in its entirety by reference to the form of Servicing
Agreement and by the discretion of the Master Servicer or Depositor to modify
the Servicing Agreement and to enter into different Servicing Agreements. The
Pooling and Servicing Agreement provides that, if for any reason the Master
Servicer for such Series of Certificates is no longer the Master Servicer of the
related Mortgage Loans or Contracts, the Trustee or any successor master
servicer must recognize the Servicer's rights and obligations under such
Servicing Agreement.
A Servicer may delegate its servicing obligations to third-party servicers,
but continue to act as Servicer under the related Servicing Agreement. The
Servicer will be required to perform the customary functions of a servicer,
including collection of payments from Mortgagors and Obligors and remittance of
such collections to the Master Servicer, maintenance of primary mortgage, hazard
insurance, FHA insurance and VA guarantees and filing and settlement of claims
thereunder, subject in certain cases to (a) the right of the Master Servicer to
approve in advance any such settlement; (b) maintenance of escrow accounts of
Mortgagors and Obligors for payment of taxes, insurance, and other items
required to be paid by the Mortgagor pursuant to terms of the related Mortgage
Loan or the Obligor pursuant to the related Contract; (c) processing of
assumptions or substitutions; (d) attempting to cure delinquencies; (e)
supervising foreclosures or repossessions; (f) inspection and management of
Mortgaged Properties, Cooperative Dwellings or Manufactured Homes under certain
circumstances; and (g) maintaining accounting records relating to the Mortgage
Loans and Contracts. A Servicer will also be obligated to make Advances in
respect of delinquent installments of principal and interest on Mortgage Loans
and Contracts (as described more fully below under "-Payments on Mortgage Loans"
and "-Payments on Contracts"), and in respect of certain taxes and insurance
premiums not paid on a timely basis by Mortgagors and Obligors.
As compensation for its servicing duties, a Servicer will be entitled to
amounts from payments with respect to the Mortgage Loans and Contracts serviced
by it. The Servicer will also be entitled to collect and retain, as part of its
servicing
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compensation, certain fees and late charges provided in the Mortgage Note or
related instruments. The Servicer will be reimbursed by the Master Servicer for
certain expenditures that it makes, generally to the same extent that the Master
Servicer would be reimbursed under the applicable Pooling and Servicing
Agreement.
Each Servicer will be required to agree to indemnify the Master Servicer
for any liability or obligation sustained by the Master Servicer in connection
with any act or failure to act by the Servicer in its servicing capacity.
Each Servicer will be required to service each Mortgage Loan or Contract
pursuant to the terms of the Servicing Agreement for the entire term of such
Mortgage Loan or Contract, unless the Servicing Agreement is earlier terminated
by the Master Servicer or unless servicing is released to the Master Servicer.
Unless otherwise set forth in the Prospectus Supplement, the Master Servicer may
terminate a Servicing Agreement upon 30 days' written notice to the Servicer,
without cause, upon payment of an amount equal to the fair market value of the
right to service the Mortgage Loans or Contracts serviced by any such Servicer
under such Servicing Agreement, or if such fair market value cannot be
determined, a specified percentage of the aggregate outstanding principal
balance of all such Mortgage Loans or Contracts, or immediately upon the giving
of notice upon certain stated events, including the violation of such Servicing
Agreement by the Servicer.
The Master Servicer may agree with a Servicer to amend a Servicing
Agreement. The Master Servicer may also, at any time and from time to time,
release servicing to third-party servicers, but continue to act as Master
Servicer under the related Pooling and Servicing Agreement. Upon termination of
a Servicing Agreement, the Master Servicer may act as servicer of the related
Mortgage Loans or Contracts or enter into one or more new Servicing Agreements.
If the Master Servicer acts as servicer, it will not assume liability for the
representations and warranties of the Servicer that it replaces. If the Master
Servicer enters into a new Servicing Agreement, each new Servicer must be an
Unaffiliated Seller or meet the standards for becoming an Unaffiliated Seller or
have such servicing experience that is otherwise satisfactory to the Master
Servicer. The Master Servicer will make reasonable efforts to have the new
Servicer assume liability for the representations and warranties of the
terminated Servicer, but no assurance can be given that such an assumption will
occur. In the event of such an assumption, the Master Servicer may, in the
exercise of its business judgment, release the terminated Servicer from
liability in respect of such representations and warranties. Any amendments to a
Servicing Agreement or new Servicing Agreements may contain provisions different
from those described above that are in effect in the original Servicing
Agreements. However, the Pooling and Servicing Agreement with respect to a
Series will provide that any such amendment or new agreement may not be
inconsistent with or violate such Pooling and Servicing Agreement.
PAYMENTS ON MORTGAGE LOANS
The Master Servicer will, unless otherwise specified in the Prospectus
Supplement with respect to a Series of Certificates, establish and maintain a
separate account or accounts in the name of the Trustee (the "Certificate
Account"), which must be maintained with a depository institution and in a
manner acceptable to the Rating Agency rating the Certificates of a Series.
If so specified in the applicable Prospectus Supplement, the Master
Servicer, in lieu of establishing a Certificate Account, may establish a
separate account or accounts in the name of the Trustee (the "Custodial
Account") meeting the requirements set forth herein for the Certificate Account.
In such a case, amounts in such Custodial Account, after making the required
deposits and withdrawals specified below, shall be remitted to the Certificate
Account maintained by the Trustee for distribution to Certificateholders in the
manner set forth herein and in such Prospectus Supplement.
In those cases where a Servicer is servicing a Mortgage Loan pursuant to a
Servicing Agreement, the Servicer will establish and maintain an account (the
"Servicing Account") that will comply with either the standards set forth above
or, subject to the conditions set forth in the Servicing Agreement, be
maintained with a depository, meeting the requirements of the Rating Agency
rating the Certificates of the related Series, and that is otherwise acceptable
to the Master Servicer. The Servicer will be required to deposit into the
Servicing Account on a daily basis all amounts enumerated in the following
paragraph in respect of the Mortgage Loans received by the Servicer, less its
servicing compensation. On the date specified in the Servicing Agreement, the
Servicer shall remit to the Master Servicer all funds held in the Servicing
Account with respect to each Mortgage Loan. The Servicer will also be required
to advance any monthly installment of principal and
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interest that was not timely received, less its servicing fee, provided that,
unless otherwise specified in the related Prospectus Supplement, such
requirement shall only apply to the extent such Servicer determines in good
faith any such advance will be recoverable out of Insurance Proceeds, proceeds
of the liquidation of the related Mortgage Loans or otherwise.
The Certificate Account may be maintained with a depository institution
that is an affiliate of the Master Servicer. The Master Servicer will deposit in
the Certificate Account for each Series of Certificates on a daily basis the
following payments and collections received or made by it subsequent to the Cut-
off Date (other than payments due on or before the Cut-off Date) in the manner
set forth in the related Prospectus Supplement:
(i) all payments on account of principal, including principal prepayments,
on the Mortgage Loans, net of any portion of such payments that represent
unreimbursed or unrecoverable Advances made by the related Servicer;
(ii) all payments on account of interest on the Mortgage Loans, net of any
portion thereof retained by the Servicer, if any, as its servicing fee;
(iii) all proceeds of (A) any Special Hazard Insurance Policy, Primary
Mortgage Insurance Policy, FHA Insurance, VA Guarantee, Mortgagor Bankruptcy
Bond or Pool Insurance Policy with respect to such Series of Certificates and
any title, hazard or other insurance policy covering any of the Mortgage
Loans included in the related Mortgage Pool (to the extent such proceeds are
not applied to the restoration of the related property or released to the
Mortgagor in accordance with customary servicing procedures) (collectively,
"Insurance Proceeds") or any Alternative Credit Support established in lieu
of any such insurance and described in the applicable Prospectus Supplement;
and (B) all other cash amounts received and retained in connection with the
liquidation of defaulted Mortgage Loans, by foreclosure or otherwise, other
than Insurance Proceeds, payments under the Letter of Credit or proceeds of
any Alternative Credit Support, if any, with respect to such Series
("Liquidation Proceeds"), net of expenses of liquidation, unpaid servicing
compensation with respect to such Mortgage Loans and unreimbursed or
unrecoverable Advances made by the Servicers of the related Mortgage Loans;
(iv) all payments under the Letter of Credit, if any, with respect to
such Series;
(v) all amounts required to be deposited therein from the Reserve Fund,
if any, for such Series;
(vi) any Advances made by a Servicer or the Master Servicer (as
described herein under "-Advances");
(vii) any Buy-Down Funds (and, if applicable, investment earnings thereon)
required to be deposited in the Certificate Account, as described below; and
(viii) all proceeds of any Mortgage Loan repurchased by the Master
Servicer, the Depositor, any Servicer or any Unaffiliated Seller (as
described under "The Trust Fund-Mortgage Loan Program-Representations by
Unaffiliated Sellers; Repurchases" or "-Assignment of Mortgage Loans" above
or repurchased by the Depositor as described under "-Termination" below)
With respect to each Buy-Down Loan, if so specified in the related
Prospectus Supplement, the Master Servicer or the related Servicer will deposit
the Buy-Down Funds with respect thereto in a custodial account complying with
the requirements set forth above for the Certificate Account, which, unless
otherwise specified in the related Prospectus Supplement, may be an interest-
bearing account. The amount of such required deposits, together with investment
earnings thereon at the rate specified in the applicable Prospectus Supplement,
will provide sufficient funds to support the full monthly payments due on such
Buy-Down Loan on a level debt service basis. Neither the Master Servicer nor the
Depositor will be obligated to add to the Buy-Down Fund should investment
earnings prove insufficient to maintain the scheduled level of payments on the
Buy-Down Loans. To the extent that any such insufficiency is not recoverable
from the Mortgagor under the terms of the related Mortgage Note, distributions
to Certificateholders will be affected. With respect to each Buy-Down Loan, the
Master Servicer will withdraw from the Buy-Down Fund and deposit in the
Certificate Account on or before each Distribution Date the amount, if any, for
each Buy-Down Loan that, when added to the amount due on that date from the
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Mortgagor on such Buy-Down Loan, equals the full monthly payment that would be
due on the Buy-Down Loan if it were not subject to the buy-down plan.
If the Mortgagor on a Buy-Down Loan prepays such loan in its entirety, or
defaults on such loan and the Mortgaged Property is sold in liquidation thereof,
during the period when the Mortgagor is not obligated, on account of the buy-
down plan, to pay the full monthly payment otherwise due on such loan, the
related Servicer will withdraw from the Buy-Down Fund and deposit in the
Certificate Account the amounts remaining in the Buy-Down Fund with respect to
such Buy-Down Loan. In the event of a default with respect to which a claim,
including accrued interest supplemented by amounts in the Buy-Down Fund with
respect to the related Buy-Down Loan, has been made, the Master Servicer or the
related Servicer will pay an amount equal to the remaining amounts in the Buy-
Down Fund with respect to the related Buy-Down Loan, to the extent the claim
includes accrued interest supplemented by amounts in the Buy-Down Fund, to the
related Pool Insurer or the insurer under the related Primary Insurance Policy
(the "Primary Insurer") if the Mortgaged Property is transferred to the Pool
Insurer or the Primary Insurer, as the case may be, which pays 100% of the
related claim (including accrued interest and expenses) in respect of such
default, to the L/C Bank in consideration of such payment under the related
Letter of Credit, or to the guarantor or other person which pays the same
pursuant to Alternative Credit Support described in the applicable Prospectus
Supplement. In the case of any such prepaid or defaulted Buy-Down Loan the
amounts in the Buy-Down Fund in respect of which were supplemented by investment
earnings, the Master Servicer will withdraw from the Buy-Down Fund and remit to
the Depositor or the Mortgagor, depending on the terms of the related buy-down
plan, any investment earnings remaining in the related Buy-Down Fund.
If so specified in the Prospectus Supplement with respect to a Series, in
lieu of, or in addition to the foregoing, the Depositor may deliver cash, a
letter of credit or a guaranteed investment contract to the Trustee to fund the
Buy-Down Fund for such Series, which shall be drawn upon by the Trustee in the
manner and at the times specified in such Prospectus Supplement.
PAYMENTS ON CONTRACTS
A Certificate Account meeting the requirements set forth under "Description
of the Certificates-Payments on Mortgage Loans" will be established in the name
of the Trustee.
There will be deposited in the Certificate Account on a daily basis the
following payments and collections received or made by it subsequent to the Cut-
off Date (including scheduled payments of principal and interest due after the
Cut-off Date but received by the Master Servicer on or before the Cut-off Date):
(i) all Obligor payments on account of principal, including principal
prepayments, on the Contracts;
(ii) all Obligor payments on account of interest on the Contracts,
adjusted to the Pass-Through Rate;
(iii) all Liquidation Proceeds received with respect to Contracts or
property acquired in respect thereof by foreclosure or otherwise;
(iv) all Insurance Proceeds received with respect to any Contract, other
than proceeds to be applied to the restoration or repair of the Manufactured
Home or released to the Obligor;
(v) any Advances made as described under "-Advances" and certain other
amounts required under the Pooling and Servicing Agreement to be deposited in
the Certificate Account;
(vi) all amounts received from Credit Support provided with respect to a
Series of Certificates;
(vii) all proceeds of any Contract or property acquired in respect thereof
repurchased by the Master Servicer, the Depositor or otherwise as described
above or under "-Termination" below; and
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(viii) all amounts, if any, required to be transferred to the Certificate
Account from the Reserve Fund.
COLLECTION OF PAYMENTS ON MORTGAGE CERTIFICATES
The Mortgage Certificates included in the Trust Fund with respect to a
Series of Certificates will be registered in the name of the Trustee so that all
distributions thereon will be made directly to the Trustee. The Pooling and
Servicing Agreement will require the Trustee, if it has not received a
distribution with respect to any Mortgage Certificate by the second business day
after the date on which such distribution was due and payable pursuant to the
terms of such Mortgage Certificate, to request the issuer or guarantor, if any,
of such Mortgage Certificate to make such payment as promptly as possible and
legally permitted and to take such legal action against such issuer or guarantor
as the Trustee deems appropriate under the circumstances, including the
prosecution of any claims in connection therewith. The reasonable legal fees and
expenses incurred by the Trustee in connection with the prosecution of any such
legal action will be reimbursable to the Trustee out of the proceeds of any such
action and will be retained by the Trustee prior to the deposit of any remaining
proceeds in the Certificate Account pending distribution thereof to
Certificateholders of the affected Series. In the event that the Trustee has
reason to believe that the proceeds of any such legal action may be insufficient
to reimburse it for its projected legal fees and expenses, the Trustee will
notify such Certificateholders that it is not obligated to pursue any such
available remedies unless adequate indemnity for its legal fees and expenses is
provided by such Certificateholders.
DISTRIBUTIONS ON CERTIFICATES
On each Distribution Date with respect to a Series of Certificates as to
which credit support is provided by means other than the creation of a
Subordinated Class or Subclasses and the establishment of a Reserve Fund, the
Master Servicer will withdraw from the applicable Certificate Account funds on
deposit therein and distribute, or, if so specified in the applicable Prospectus
Supplement, will withdraw from the Custodial Account funds on deposit therein
and remit to the Trustee, who will distribute, such funds to Certificateholders
of record on the applicable Record Date. Such distributions shall occur in the
manner described herein under "Description of the Certificates-Distributions of
Principal and Interest" and in the related Prospectus Supplement. If so
specified in the applicable Prospectus Supplement, the Master Servicer will
withdraw from the applicable Certificate Account funds on deposit therein and
distribute them to the Trustee. Such funds shall consist of the aggregate of all
previously undistributed payments on account of principal (including principal
prepayments, if any) and interest received after the Cut-off Date and on or
prior to the 20th day (or if such day is not a business day, the next preceding
business day) of the month of such distribution or such other day as may be
specified in the related Prospectus Supplement (in either case the
"Determination Date"), except:
(i) all payments that were due on or before the Cut-off Date;
(ii) all principal prepayments received during the month of distribution
and all payments of interest representing interest for the month of
distribution or any portion thereof;
(iii) all payments which represent early receipt (other than prepayments)
of scheduled payments of principal and interest due on a date or dates
subsequent to the first day of the month of distribution;
(iv) amounts received on particular Mortgage Loans or Contracts as late
payments of principal or interest and respecting which the Master Servicer
has made an unreimbursed Advance;
(v) amounts representing reimbursement for other Advances which the Master
Servicer has determined to be otherwise nonrecoverable and amounts
representing reimbursement for certain losses and expenses incurred or
Advances made by the Master Servicer and discussed below; and
(vi) that portion of each collection of interest on a particular Mortgage
Loan in such Mortgage Pool or on a particular Contract in such Contract Pool
that represents (A) servicing compensation to the Master Servicer, (B)
amounts payable to the entity or entities specified in the applicable
Prospectus Supplement or permitted
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withdrawals from the Certificate Account out of payments under the Letter of
Credit, if any, with respect to the Series, (C) related Insurance Proceeds or
Liquidation Proceeds, (D) amounts in the Reserve Fund, if any, with respect
to the Series or (E) proceeds of any Alternative Credit Support, each
deposited in the Certificate Account to the extent described under
"Description of the Certificates-Maintenance of Insurance Policies", "-
Presentation of Claims", "-Enforcement of Due-on-Sale Clauses; Realization
Upon Defaulted Mortgage Loans" and "-Enforcement of Due-on-Sale Clauses;
Realization Upon Defaulted Contracts" or in the applicable Prospectus
Supplement.
Except as otherwise specified in the related Prospectus Supplement, no
later than the Business Day immediately preceding the Distribution Date for a
Series of Certificates, the Master Servicer will furnish a statement to the
Trustee setting forth the amount to be distributed on the next succeeding
Distribution Date on account of principal and interest on the Mortgage Loans or
Contracts, stated separately or the information enabling the Trustee to
determine the amount of distribution to be made on the Certificates and a
statement setting forth certain information with respect to the Mortgage Loans
or Contracts.
If so specified in the applicable Prospectus Supplement, the Trustee will
establish and maintain the Certificate Account for the benefit of the holders of
the Certificates of the related Series in which the Trustee shall deposit, as
soon as practicable after receipt, each distribution made to the Trustee by the
Master Servicer, as set forth above, with respect to the Mortgage Loans or
Contracts, any distribution received by the Trustee with respect to the Mortgage
Certificates, if any, included in the Trust Fund and deposits from any Reserve
Fund or GPM Fund. If so specified in the applicable Prospectus Supplement, prior
to making any distributions to Certificateholders, any portion of the
distribution on the Mortgage Certificates that represents servicing
compensation, if any, payable to the Trustee shall be deducted and paid to the
Trustee.
Funds on deposit in the Certificate Account may be invested in Eligible
Investments maturing in general not later than the Business Day preceding the
next Distribution Date. Unless otherwise provided in the Prospectus Supplement,
all income and gain realized from any such investment will be for the benefit of
the Master Servicer. The Master Servicer will be required to deposit the amount
of any losses incurred with respect to such investments out of its own funds,
when realized. The Certificate Account established pursuant to the Deposit Trust
Agreement shall be a non-interest bearing account or accounts.
The timing and method of distribution of funds in the Certificate Account
to Classes or Subclasses of Certificates having differing terms, whether
subordinated or not, to the extent not described herein, shall be set forth in
the related Prospectus Supplement.
SPECIAL DISTRIBUTIONS
To the extent specified in the Prospectus Supplement relating to a Series
of Certificates, one or more Classes of Multi-Class Certificates that do not
provide for monthly Distribution Dates may receive Special Distributions in
reduction of Stated Principal Balance ("Special Distributions") in any month,
other than a month in which a Distribution Date occurs, if, as a result of
principal prepayments on the Trust Assets in the related Trust Fund and/or low
reinvestment yields, the Trustee determines, based on assumptions specified in
the related Pooling and Servicing Agreement, that the amount of cash anticipated
to be on deposit in the Certificate Account on the next Distribution Date for
such Series and available to be distributed to the holders of the Certificates
of such Classes or Subclasses may be less than the sum of (i) the interest
scheduled to be distributed to holders of the Certificates of such Classes or
Subclasses and (ii) the amount to be distributed in reduction of Stated
Principal Balance or such Certificates on such Distribution Date. Any such
Special Distributions will be made in the same priority and manner as
distributions in reduction of Stated Principal Balance would be made on the next
Distribution Date.
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REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified or modified in the related Prospectus Supplement
for each Series, the Master Servicer or the Trustee will include with each
distribution to Certificateholders of record of such Series, or within a
reasonable time thereafter, a statement generally setting forth, among other
things, the following information, if applicable (per each Certificate, as to
(i) through (iii) or (iv) through (vi) below, as applicable):
(i) to each holder of a Certificate, other than a Multi-Class Certificate
or Residual Certificate, the amount of such distribution allocable to
principal of the Trust Assets, separately identifying the aggregate amount of
any Principal Prepayments included therein, and the portion, if any, advanced
by a Servicer or the Master Servicer;
(ii) to each holder of a Certificate, other than a Multi-Class Certificate
or Residual Certificate, the amount of such distribution allocable to
interest on the related Trust Assets and the portion, if any, advanced by a
Servicer or the Master Servicer;
(iii) to each holder of a Certificate, the amount of servicing
compensation with respect to the related Trust Assets and such other
customary information as the Master Servicer deems necessary or desirable to
enable Certificateholders to prepare their tax returns;
(iv) to each holder of a Multi-Class Certificate on which an interest
distribution and a distribution in reduction of Stated Principal Balance are
then being made, the amount of such interest distribution and distribution in
reduction of Stated Principal Balance, and the Stated Principal Balance of
each Class after giving effect to the distribution in reduction of Stated
Principal Balance made on such Distribution Date or on any Special
Distribution Date occurring subsequent to the last report;
(v) to each holder of a Multi-Class Certificate on which a distribution of
interest only is then being made, the aggregate Stated Principal Balance of
Certificates outstanding of each Class or Subclass after giving effect to the
distribution in reduction of Stated Principal Balance made on such
Distribution Date and on any Special Distribution Date occurring subsequent
to the last such report and after including in the aggregate Stated Principal
Balance the Stated Principal Balance of the Compound Interest Certificates,
if any, outstanding and the amount of any accrued interest added to the
Compound Value of such Compound Interest Certificates on such Distribution
Date;
(vi) to each holder of a Compound Interest Certificate (but only if such
holder shall not have received a distribution of interest on such
Distribution Date equal to the entire amount of interest accrued on such
Certificate with respect to such Distribution Date):
(a) the information contained in the report delivered pursuant to
clause (v) above;
(b) the interest accrued on such Class or Subclass of Compound Interest
Certificates with respect to such Distribution Date and added to the Compound
Value of such Compound Interest Certificate; and
(c) the Stated Principal Balance of such Class or Subclass of Compound
Interest Certificates after giving effect to the addition thereto of all
interest accrued thereon;
(vii) in the case of a series of Certificates with a variable Pass-Through
Rate, the weighted average Pass-Through Rate applicable to the distribution
in question;
(viii) the amount or the remaining obligations of an L/C Bank with respect
to a Letter of Credit, after giving effect to the declining amount available
and any payments thereunder and other amounts charged thereto on the
applicable Distribution Date, expressed as a percentage of the amount
reported pursuant to (x) below, and the amount of coverage remaining under
the Pool Insurance Policy, Special Hazard Insurance Policy, Mortgagor
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Bankruptcy Bond, or Reserve Fund as applicable, in each case, as of the
applicable Determination Date, after giving effect to any amounts with
respect thereto distributed to Certificateholders on the Distribution Date;
(ix) in the case of a Series of Certificates benefiting from the
Alternative Credit Support described in the related Prospectus Supplement,
the amount of coverage under such Alternative Credit Support as of the close
of business on the applicable Determination Date, after giving effect to any
amounts with respect thereto distributed to Certificateholders on the
Distribution Date;
(x) the aggregate scheduled principal balance of the Trust Assets as of a
date not earlier than such Distribution Date after giving effect to payments
of principal distributed to Certificateholders on the Distribution Date;
(xi) the book value of any collateral acquired by the Mortgage Pool or
Contract Pool through foreclosure, repossession or otherwise; and
(xii) the number and aggregate principal amount of Mortgage Loans or
Contracts one month and two months delinquent.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer, or the Trustee, if specified in the
applicable Prospectus Supplement, will cause to be furnished to each
Certificateholder of record at any time during such calendar year a report as to
the aggregate of amounts reported pursuant to (i) through (iii) or (iv) through
(vi) above and such other information as in the judgment of the Master Servicer
or the Trustee, as the case may be, is needed for the Certificateholder to
prepare its tax return, as applicable, for such calendar year or, in the event
such person was a Certificateholder of record during a portion of such calendar
year, for the applicable portion of such year.
ADVANCES
Unless otherwise stated in the related Prospectus Supplement, each Servicer
and the Master Servicer (with respect to Mortgage Loans or Contracts serviced by
it and with respect to Advances required to be made by the Servicers that were
not so made) will be obligated to advance funds in an amount equal to the
aggregate scheduled installments of payments of principal and interest (adjusted
to the applicable Pass-Through Rate) that were due on the Due Date with respect
to a Mortgage Loan or Contract and that were delinquent (including any payments
that have been deferred by the Servicer or the Master Servicer) as of the close
of business on the date specified in the Pooling and Servicing Agreement, to be
remitted no later than the close of business on the business day immediately
preceding the Distribution Date, subject to (unless otherwise provided in the
applicable Prospectus Supplement) their respective determinations that such
advances are reimbursable under any Letter of Credit, Pool Insurance Policy,
Primary Mortgage Insurance Policy, Mortgagor Bankruptcy Bond, from the proceeds
of Alternative Credit Support, from cash in the Reserve Fund, the Servicing or
Certificate Accounts or otherwise. In making such advances, the Servicers and
Master Servicer will endeavor to maintain a regular flow of scheduled interest
and principal payments to the Certificateholders, rather than to guarantee or
insure against losses. Any such Advances are reimbursable to the Servicer or
Master Servicer out of related recoveries on the Mortgage Loans respecting which
such amounts were advanced. In addition, such Advances are reimbursable from
cash in the Reserve Fund, the Servicing or Certificate Accounts to the extent
that the Servicer or the Master Servicer, as the case may be, shall determine
that any such Advances previously made are not ultimately recoverable. The
Servicers and the Master Servicer generally will also be obligated to make
advances in respect of certain taxes and insurance premiums not paid by
Mortgagors or Obligors on a timely basis and, to the extent deemed recoverable,
foreclosure costs, including reasonable attorney's fees. Funds so advanced are
reimbursable out of recoveries on the related Mortgage Loans. This right of
reimbursement for any Advance will be prior to the rights of the
Certificateholders to receive any amounts recovered with respect to such
Mortgage Loans or Contracts. Unless otherwise provided in the applicable
Prospectus Supplement, the Servicers and the Master Servicer will also be
required to advance an amount necessary to provide a full month's interest
(adjusted to the applicable Pass-Through Rate) in connection with full or
partial prepayments, liquidations, defaults and repurchases of the Mortgage
Loans or Contracts. Any such Advances will not be reimbursable to the Servicers
or the Master Servicer.
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COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through the Servicers, as the case may be,
will make reasonable efforts to collect all payments called for under the
Mortgage Loans or Contracts and will, consistent with the applicable Pooling and
Servicing Agreement and any applicable Letter of Credit, Pool Insurance Policy,
Special Hazard Insurance Policy, Primary Mortgage Insurance Policy, Mortgagor
Bankruptcy Bond, or Alternative Credit Support, follow such collection
procedures as it follows with respect to mortgage loans or contracts serviced by
it that are comparable to the Mortgage Loans or Contracts, except when, in the
case of FHA or VA Loans, applicable regulations require otherwise. Consistent
with the above, the Master Servicer may, in its discretion, waive any late
payment charge or any prepayment charge or penalty interest in connection with
the prepayment of a Mortgage Loan or Contract or extend the due dates for
payments due on a Mortgage Note or Contract for a period of not greater than 270
days, provided that the insurance coverage for such Mortgage Loan or Contract or
the coverage provided by any Letter of Credit or any Alternative Credit Support,
will not be adversely affected.
Under the Pooling and Servicing Agreement, the Master Servicer, either
directly or through Servicers, to the extent permitted by law, may establish and
maintain an escrow account (the "Escrow Account") in which Mortgages or Obligors
will be required to deposit amounts sufficient to pay taxes, assessments,
mortgage and hazard insurance premiums and other comparable items. This
obligation may be satisfied by the provision of insurance coverage against loss
occasioned by the failure to escrow insurance premiums rather than causing such
escrows to be made. Withdrawals from the Escrow Account may be made to effect
timely payment of taxes, assessments, mortgage and hazard insurance, to refund
to Mortgagors or Obligors amounts determined to be overages, to pay interest to
Mortgagors or Obligors on balances in the Escrow Account, if required, and to
clear and terminate such account. The Master Servicer will be responsible for
the administration of each Escrow Account and will be obliged to make advances
to such accounts when a deficiency exists therein. Alternatively, in lieu of
establishing an Escrow Account, the Servicer may procure a performance bond or
other form of insurance coverage, in an amount acceptable to the Rating Agency
rating the related Series of Certificates, covering loss occasioned by the
failure to escrow such amounts.
MAINTENANCE OF INSURANCE POLICIES
To the extent that the applicable Prospectus Supplement does not expressly
provide for a method of credit support described below under "Credit Support" or
for Alternative Credit Support in lieu of some or all of the insurance coverage
set forth below, the following paragraphs on insurance shall apply.
STANDARD HAZARD INSURANCE
To the extent specified in a related Prospectus Supplement, the terms of
each Servicing Agreement will require the Servicer to cause to be maintained for
each Mortgage Loan or Contract that it services (and the Master Servicer will be
required to maintain for each Mortgage Loan or Contract serviced by it directly)
a policy of standard hazard insurance (a "Standard Hazard Insurance Policy")
covering the Mortgaged Property underlying such Mortgage Loan or Manufactured
Home underlying such Contract in an amount at least equal to the maximum
insurable value or the improvements securing such Mortgage Loan or Contract or
the principal balance of such Mortgage Loan or Contract, whichever is less. Each
Servicer or the Master Servicer, as the case may be, shall also maintain on
property acquired upon foreclosure, or deed in lieu of foreclosure, of any
Mortgage Loan or Contract, a Standard Hazard Insurance Policy in an amount that
is at least equal to the maximum insurable value of the improvements that are a
part of the Mortgaged Property or Manufactured Home. Any amounts collected by
the Servicer or the Master Servicer under any such policies (other than amounts
to be applied to the restoration or repair of the Mortgaged Property or
Manufactured Home or released to the borrower in accordance with normal
servicing procedures) shall be deposited in the related Servicing Account for
deposit in the Certificate Account or, in the case of the Master Servicer, shall
be deposited directly into the Certificate Account. Any cost incurred in
maintaining any such insurance shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
Mortgage Loan or Contract, notwithstanding that the terms of the Mortgage Loan
or Contract may so permit. Such cost shall be recoverable by the Servicer only
by withdrawal of funds from the Servicing Account or by the Master Servicer only
by withdrawal from the Certificate Account, as described in the Pooling and
Servicing Agreement. No
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earthquake or other additional insurance is to be required of any borrower or
maintained on property acquired in respect of a Mortgage Loan or Contract, other
than pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. When the Mortgaged
Property or Manufactured Home is located at the time of origination of the
Mortgage Loan or Contract in a federally designated flood area, the related
Servicer (or the Master Servicer, in the case of each Mortgage Loan or Contract
serviced by it directly) will cause flood insurance to be maintained, to the
extent available, in those areas where flood insurance is required under the
National Flood Insurance Act of 1968, as amended.
The Depositor will not require that a standard hazard or flood insurance
policy be maintained on the Cooperative Dwelling relating to any Cooperative
Loan. Generally, the cooperative corporation itself is responsible for
maintenance of hazard insurance for the property owned by the cooperative and
the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's Cooperative Dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
The Pooling and Servicing Agreement will require the Master Servicer to
perform the aforementioned obligations of the Servicer in the event the Servicer
fails to do so. In the event that the Master Servicer obtains and maintains a
blanket policy insuring against hazard losses on all of the related Mortgage
Loans or Contracts, it will conclusively be deemed to have satisfied its
obligations to cause to be maintained a Standard Hazard Insurance Policy for
each Mortgage Loan or Contract that it services. This blanket policy may contain
a deductible clause, in which case the Master Servicer will, in the event that
there has been a loss that would have been covered by such policy absent such
deductible, deposit in the Certificate Account the amount not otherwise payable
under the blanket policy because of the application of such deductible clause.
Since the amount of hazard insurance to be maintained on the improvements
securing the Mortgage Loans or Contracts may decline as the principal balances
owing thereon decrease, and since residential properties have historically
appreciated in value over time, in the event of partial loss, hazard insurance
proceeds may be insufficient to fully restore the damaged Mortgaged Property or
Manufactured Home. See "Description of Insurance-Special Hazard Insurance
Policies" for a description of the limited protection afforded by a Special
Hazard Insurance Policy against losses occasioned by certain hazards that are
otherwise uninsured against as well as against losses caused by the application
of the coinsurance provisions contained in the Standard Hazard Insurance
Policies.
SPECIAL HAZARD INSURANCE
If so specified in the related Prospectus Supplement, the Master Servicer
will be required to exercise its best reasonable efforts to maintain the Special
Hazard Insurance Policy, if any, with respect to a Series of Certificates in
full force and effect, unless coverage thereunder has been exhausted through
payment of claims, and will pay the premium for the Special Hazard Insurance
Policy on a timely basis; provided, however, that the Master Servicer shall be
under no such obligation if coverage under the Pool Insurance Policy with
respect to such Series has been exhausted. In the event that the Special Hazard
Insurance Policy is cancelled 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 Special Hazard Insurance Policy with a total coverage that is
equal to the then existing coverage of the Special Hazard Insurance Policy;
provided that if the cost of any such replacement policy is greater than the
cost of the terminated Special Hazard Insurance Policy, the amount of coverage
under the replacement Special Hazard Insurance Policy may be reduced to a level
such that the applicable premium will not exceed the cost of the Special Hazard
Insurance Policy that was replaced. Certain characteristics of the Special
Hazard Insurance Policy are described under "Description of Insurance-Special
Hazard Insurance Policies".
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POOL INSURANCE
To the extent specified in a related Prospectus Supplement, the Master
Servicer will exercise its best reasonable efforts to maintain a Pool Insurance
Policy with respect to a Series of Certificates in effect throughout the term of
the Pooling and Servicing Agreement, unless coverage thereunder has been
exhausted through payment of claims, and will pay the premiums for such Pool
Insurance Policy on a timely basis. In the event that the Pool Insurer ceases to
be a qualified insurer because it is not qualified to transact a mortgage
guaranty insurance business under the laws of the state of its principal place
of business or any other state which has jurisdiction over the Pool Insurer in
connection with the Pool Insurance Policy, or if the Pool Insurance Policy is
cancelled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer will exercise its best reasonable efforts
to obtain a replacement policy of pool insurance comparable to the Pool
Insurance Policy and may obtain, under the circumstances described above with
respect to the Special Hazard Insurance Policy, a replacement policy with
reduced coverage. In the event the Pool Insurer ceases to be a qualified insurer
because it is not approved as an insurer by FHLMC, FNMA or any successors
thereto, the Master Servicer will agree to review, not less often than monthly,
the financial condition of the Pool Insurer with a view towards determining
whether recoveries under the Pool Insurance Policy are jeopardized and, if so,
will exercise its best reasonable efforts to obtain from another qualified
insurer a replacement insurance policy under the above-stated limitations.
Certain characteristics of the Pool Insurance Policy are described under
"Description of Insurance-Pool Insurance Policies".
PRIMARY MORTGAGE INSURANCE
To the extent specified in the related Prospectus Supplement, the Master
Servicer will be required to keep in force and effect for each Mortgage Loan
secured by Single Family Property serviced by it directly, and each Servicer of
a Mortgage Loan secured by Single Family Property will be required to keep in
full force and effect with respect to each such Mortgage Loan serviced by it, in
each case to the extent required by the underwriting standards of the Depositor,
a Primary Mortgage Insurance Policy issued by a qualified insurer (the "Primary
Mortgage Insurer") with regard to each Mortgage Loan for which such coverage is
required pursuant to the applicable Servicing Agreement and the Pooling and
Servicing Agreement and to act on behalf of the Trustee (the "Insured") under
each such Primary Mortgage Insurance Policy. Neither the Servicer nor the Master
Servicer will cancel or refuse to renew any such Primary Mortgage Insurance
Policy in effect at the date of the initial issuance of a Series of Certificates
that is required to be kept in force under the Pooling and Servicing Agreement
or applicable Servicing Agreement unless the replacement Primary Mortgage
Insurance Policy for such cancelled or non- renewed policy is maintained with an
insurer whose claims-paying ability is acceptable to the Rating Agency rating
the Certificates. See "Description of Insurance-Primary Mortgage Insurance
Policies."
MORTGAGOR BANKRUPTCY BOND
If so specified in the related Prospectus Supplement, the Master Servicer
will exercise its best reasonable efforts to maintain a Mortgagor Bankruptcy
Bond for a Series of Certificates in full force and effect throughout the term
of the Pooling and Servicing Agreement, unless coverage thereunder has been
exhausted through payment of claims, and will pay the premiums for such
Mortgagor Bankruptcy Bond on a timely basis. At the request of the Depositor,
coverage under a Mortgagor Bankruptcy Bond will be cancelled or reduced by the
Master Servicer to the extent permitted by the Rating Agency rating the related
Series of Certificates, provided that such cancellation or reduction does not
adversely affect the then current rating of such Series. See "Description of
Insurance-Mortgagor Bankruptcy Bond".
PRESENTATION OF CLAIMS
The Master Servicer, on behalf of itself, the Trustee and the
Certificateholders, will present claims to HUD, the VA, the Pool Insurer, the
Special Hazard Insurer, the issuer of the Mortgagor Bankruptcy Bond, and each
Primary Mortgage Insurer, as applicable, and take such reasonable steps as are
necessary to permit recovery under such insurance policies or Mortgagor
Bankruptcy Bond, if any, with respect to a Series concerning defaulted Mortgage
Loans or Contracts or Mortgage Loans or Contracts that are the subject of a
bankruptcy proceeding. All collections by the Master Servicer under any FHA
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insurance or VA guarantee, any Pool Insurance Policy, any Primary Mortgage
Insurance Policy or any Mortgagor Bankruptcy Bond and, where the related
property has not been restored, any Special Hazard Insurance Policy, are to be
deposited in the Certificate Account, subject to withdrawal as heretofore
described. In those cases in which a Mortgage Loan or Contract is serviced by a
Servicer, the Servicer, on behalf of itself, the Trustee and the
Certificateholders, will present claims to the applicable Primary Mortgage
Insurer and to the FHA and the VA, as applicable, and all collections thereunder
shall be deposited in the Servicing Account, subject to withdrawal, as set forth
above, for deposit in the Certificate Account
If any property securing a defaulted Mortgage Loan or Contract is damaged
and proceeds, if any, from the related Standard Hazard Insurance Policy or the
applicable Special Hazard Insurance Policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under any Pool
Insurance Policy or any Primary Mortgage Insurance Policy, neither the related
Servicer nor the Master Servicer, as the case may be, will be required to expend
its own funds to restore the damaged property unless it determines, and, in the
case of a determination by a Servicer, the Master Servicer agrees, (i) that such
restoration will increase the proceeds to Certificateholders on liquidation of
the Mortgage Loan or Contract after reimbursement of the expenses incurred by
the Servicer or the Master Servicer, as the case may be, and (ii) that such
expenses will be recoverable through proceeds of the sale of the Mortgaged
Property or proceeds of any related Pool Insurance Policy, any related Primary
Mortgage Insurance Policy or otherwise.
If recovery under a Pool Insurance Policy or any related Primary Mortgage
Insurance Policy is not available because the related Servicer or the Master
Servicer has been unable to make the above determinations or otherwise, the
Servicer or the Master Servicer is nevertheless obligated to follow such normal
practices and procedures as are deemed necessary or advisable to realize upon
the defaulted Mortgage Loan. If the proceeds of any liquidation of the Mortgaged
Property or Manufactured Home are less than the principal balance of the
defaulted Mortgage Loan or Contract, respectively, plus interest accrued thereon
at the Pass-Through Rate, and if coverage under any other method of credit
support with respect to such Series is exhausted, the related Trust Fund will
realize a loss in the amount of such difference plus the aggregate of expenses
incurred by the Servicer or the Master Servicer in connection with such
proceedings and which are reimbursable under the related Servicing Agreement or
the Pooling and Servicing Agreement. In the event that any such proceedings
result in a total recovery that is, after reimbursement to the Servicer or the
Master Servicer of its expenses, in excess of the principal balance of the
related Mortgage Loan or Contract, together with accrued and unpaid interest
thereon at the applicable Pass-Through Rates, the Servicer and the Master
Servicer will be entitled to withdraw amounts representing normal servicing
compensation on such Mortgage Loan or Contract from the Servicing Account or the
Certificate Account, as the case may be.
ENFORCEMENT OF DUE-ON-SALE CLAUSES; REALIZATION UPON DEFAULTED MORTGAGE LOANS
Each Servicing Agreement and the Pooling and Servicing Agreement with
respect to Certificates representing interests in a Mortgage Pool will provide
that, when any Mortgaged Property has been conveyed by the borrower, such
Servicer or the Master Servicer, as the case may be, will, to the extent it has
knowledge of such conveyance, exercise its rights to accelerate the maturity of
such Mortgage Loan under any "due-on-sale" clause applicable thereto, if any,
unless it reasonably believes that such enforcement is not exercisable under
applicable law or regulations or if such exercise would result in loss of
insurance coverage with respect to such Mortgage Loan. In either case, where the
due-on-sale clause will not be exercised, the Servicer or the Master Servicer is
authorized to take or enter into an assumption and modification agreement from
or with the person to whom such Mortgaged Property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Mortgage Loan will continue to be covered by any Pool
Insurance Policy and any related Primary Mortgage Insurance Policy. In the case
of an FHA Loan, such an assumption can occur only with HUD approval of the
substitute Mortgagor. Each Servicer and the Master Servicer will also be
authorized, with the prior approval of the Insurer under any required insurance
policies, to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Under the Servicing Agreements and the Pooling and Servicing Agreement, the
Servicer or the Master Servicer, as the case may be, will foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
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related Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Servicer or the Master
Servicer will follow such practices and procedures as are deemed necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and in accordance with FNMA guidelines, except when, in the case of
FHA or VA Loans, applicable regulations require otherwise. However, neither the
Servicer nor the Master Servicer will be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it determines and, in the case of a determination by a Servicer, the
Master Servicer agrees (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the related Mortgage Loan to
Certificateholders after reimbursement to itself for such expenses and (ii) that
such expenses will be recoverable to it either through Liquidation Proceeds,
Insurance Proceeds, payments under the Letter of Credit, or amounts in the
Reserve Fund, if any, with respect to the related Series, or otherwise.
Any prospective purchaser of a Cooperative Dwelling will generally be
required to obtain the approval of the board of directors of the related
Cooperative before purchasing the shares and acquiring rights under the
proprietary lease or occupancy agreement securing the Cooperative Loan. See
"Certain Legal Aspects of the Mortgage Loans and Contracts-The Mortgage Loans-
Foreclosure" herein. This approval is usually based on the purchaser's income
and net worth and numerous other factors. Although the Cooperative's approval is
unlikely to be unreasonably withheld or delayed, the necessity of acquiring such
approval could limit the number of potential purchasers for those shares and
otherwise limit the Trust Fund's ability to sell and realize the value of those
shares.
The market value of any Multifamily Property obtained in foreclosure or by
deed in lieu of foreclosure will be based substantially on the operating income
obtained from renting the dwelling units. Since a default on a Mortgage Loan
secured by Multifamily Property is likely to have occurred because operating
income, net of expenses, is insufficient to make debt service payments on the
related Mortgage Loan, it can be anticipated that the market value of such
property will be less than was anticipated when such Mortgage Loan was
originated. To the extent that the equity in the property does not absorb the
loss in market value and such loss is not covered by other credit support, a
loss may be experienced by the related Trust Fund. With respect to Multifamily
Property consisting of an apartment building owned by a Cooperative, the
Cooperative's ability to meet debt service obligations on the Mortgage Loan, as
well as all other operating expenses, will be dependent in large part on the
receipt of maintenance payments from the tenant-stockholders, as well as any
rental income from units or commercial areas the Cooperative might control.
Unanticipated expenditures may in some cases have to be paid by special
assessments of the tenant-stockholders. The Cooperative's ability to pay the
principal amount of the Mortgage Loan at maturity may depend on its ability to
refinance the Mortgage Loan. The Depositor, the Unaffiliated Seller and the
Master Servicer will have no obligation to provide refinancing for any such
Mortgage Loan.
ENFORCEMENT OF "DUE-ON-SALE" CLAUSES; REALIZATION UPON DEFAULTED CONTRACTS
Each Servicing Agreement and Pooling and Servicing Agreement with respect
to Certificates representing interests in a Contract Pool will provide that,
when any Manufactured Home securing a Contract is about to be conveyed by the
Obligor, the Master Servicer, to the extent it has knowledge of such prospective
conveyance and prior to the time of the consummation of such conveyance, may
exercise its rights to accelerate the maturity of such Contract under the
applicable "due-on-sale" clause, if any, unless it is not exercisable under
applicable law. In such case, the Master Servicer is authorized to take or enter
into an assumption agreement from or with the person to whom such Manufactured
Home has been or is about to be conveyed, pursuant to which such person becomes
liable under the Contract and, unless determined to be materially adverse to the
interests of Certificateholders, with the prior approval of the Pool Insurer, if
any, to enter into a substitution of liability agreement with such person,
pursuant to which the original Obligor is released from liability and such
person is substituted as Obligor and becomes liable under the Contract. Where
authorized by the Contract, the APR may be increased, upon assumption, to the
then-prevailing market rate, but shall not be decreased.
Under the Servicing Agreement or the Pooling and Servicing Agreement, the
Master Servicer will repossess or otherwise comparably convert the ownership of
properties securing such of the related Manufactured Homes as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments. In connection with such repossession or other
conversion, the Servicer or Master Servicer will follow such practices and
procedures as it shall deem necessary or advisable and as shall be normal and
usual in its general Contract servicing
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activities. The Servicer or Master Servicer, however, will not be required to
expend its own funds in connection with any repossession or towards the
restoration of any property unless it determines (i) that such restoration or
repossession will increase the proceeds of liquidation of the related Contract
to the Certificateholders after reimbursement to itself for such expenses and
(ii) that such expenses will be recoverable to it either through liquidation
proceeds or through insurance proceeds.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Under the Pooling and Servicing Agreement for a Series of Certificates, the
Depositor or the person or entity specified in the related Prospectus Supplement
and any Master Servicer will be entitled to receive an amount described in such
Prospectus Supplement. The Master Servicer's primary compensation generally will
be equal to the difference, with respect to each interest payment on a Mortgage
Loan, between the Mortgage Rate and the Pass-Through Rate for the related
Mortgage Pool and with respect to each interest payment on a Contract, between
the APR and the Pass-Through Rate for the related Contract (less any servicing
compensation payable to the Servicer of the related Mortgage Loan or Contract,
if any, as set forth below, and the amount, if any, payable to the Depositor or
to the person or entity specified in the applicable Prospectus Supplement). As
compensation for its servicing duties, a Servicer will be entitled to receive a
monthly servicing fee in the amount specified in the related Servicing
Agreement. Such servicing compensation shall be payable by withdrawal from the
related Servicing Account prior to deposit in the Certificate Account. Each
Servicer (with respect to the Mortgage Loans or Contracts serviced by it) and
the Master Servicer will be entitled to servicing compensation out of Insurance
Proceeds, Liquidation Proceeds, or Letter of Credit payments. Additional
servicing compensation in the form of prepayment charges, assumption fees, late
payment charges or otherwise shall be retained by the Servicers and the Master
Servicer to the extent not required to be deposited in the Certificate Account.
The Servicers and the Master Servicer, unless otherwise specified in the
related Prospectus Supplement, will pay from their servicing compensation
certain expenses incurred in connection with the servicing of the Mortgage Loans
or Contracts, including, without limitation, payment of the Insurance Policy
premiums and, in the case of the Master Servicer, fees or other amounts payable
for any Alternative Credit Support, payment of the fees and disbursements of the
Trustee (and any custodian selected by the Trustee), the Certificate Register
and independent accountants and payment of expenses incurred in enforcing the
obligations of Servicers and Unaffiliated Sellers. Certain of these expenses may
be reimbursable by the Depositor pursuant to the terms of the Pooling and
Servicing Agreement. In addition, the Master Servicer will be entitled to
reimbursement of expenses incurred in enforcing the obligations of Servicers and
Unaffiliated Sellers under certain limited circumstances.
As set forth in the preceding section, the Servicers and the Master
Servicer will be entitled to reimbursement for certain expenses incurred by them
in connection with the liquidation of defaulted Mortgage Loans or Contracts. The
related Trust Fund will suffer no loss by reason of such expenses to the extent
claims are fully paid under the Letter of Credit, if any, the related insurance
policies, from amounts in the Reserve Fund or under any applicable Alternative
Credit Support described in a Prospectus Supplement. In the event, however, that
claims are either not made or fully paid under such Letter of Credit, Insurance
Policies or Alternative Credit Support, or if coverage thereunder has ceased, or
if amounts in the Reserve Fund are not sufficient to fully pay such losses, the
related Trust Fund will suffer a loss to the extent that the proceeds of the
liquidation proceedings, after reimbursement of the expenses of the Servicers or
the Master Servicer, as the case may be, are less than the principal balance of
the related Mortgage Loan or Contract. In addition, the Servicers and the Master
Servicer will be entitled to reimbursement of expenditures incurred by them in
connection with the restoration of a Mortgaged Property, Cooperative Dwelling or
Manufactured Home, such right of reimbursement being prior to the rights of the
Certificateholders to receive any payments under the Letter of Credit, or from
any related Insurance Proceeds, Liquidation Proceeds, amounts in the Reserve
Fund or any proceeds of Alternative Credit Support.
Under the Deposit Trust Agreement, the Trustee will be entitled to deduct,
from distributions of interest with respect to the Mortgage Certificates, a
specified percentage of the unpaid principal balance of each Mortgage
Certificate as servicing compensation. The Trustee shall be required to pay all
expenses, except as expressly provided in the Deposit Trust Agreement, subject
to limited reimbursement as provided therein.
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EVIDENCE AS TO COMPLIANCE
The Master Servicer will deliver to the Depositor and the Trustee, on or
before the date specified in the Pooling and Servicing Agreement, an Officer's
Certificate stating that (i) a review of the activities of the Master Servicer
and the Servicers during the preceding calendar year and of its performance
under the Pooling and Servicing Agreement has been made under the supervision of
such officer, and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer and each Servicer has fulfilled all its obligations
under the Pooling and Servicing Agreement and the applicable Servicing Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Such Officer's Certificate shall be accompanied by a
statement of a firm of independent public accountants to the effect that, on the
basis of an examination of certain documents and records relating to servicing
of the Mortgage Loans or Contracts, conducted in accordance with generally
accepted accounting principles in the mortgage banking industry, the servicing
of the Mortgage Loans or Contracts was conducted in compliance with the
provisions of the Pooling and Servicing Agreement and the Servicing Agreements,
except for such exceptions as such firm believes it is required to report.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE DEPOSITOR AND THE TRUSTEE
The Master Servicer under each Pooling and Servicing Agreement will be
named in the applicable Prospectus Supplement. The entity acting as Master
Servicer may be an Unaffiliated Seller and have other normal business
relationships with the Depositor and/or affiliates of the Depositor and may be
an affiliate of the Depositor. In the event there is no Master Servicer under a
Pooling and Servicing Agreement, all servicing of Mortgage Loans or Contracts
will be performed by a Servicer pursuant to a Servicing Agreement.
The Master Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement except upon a determination that its duties
thereunder are no longer permissible under applicable law. No such resignation
will become effective until the Trustee or a successor servicer has assumed the
Master Servicer's obligations and duties under the Pooling and Servicing
Agreement.
The Trustee under each Pooling and Servicing Agreement or Deposit Trust
Agreement will be named in the applicable Prospectus Supplement. The commercial
bank or trust company serving as Trustee may have normal banking relationships
with the Depositor and/or its affiliates and with the Master Servicer and/or its
affiliates.
The Trustee may resign from its obligations under the Pooling and Servicing
Agreement at any time, in which event a successor trustee will be appointed. In
addition, the Depositor may remove the Trustee if the Trustee ceases to be
eligible to act as Trustee under the Pooling and Servicing Agreement or if the
Trustee becomes insolvent, at which time the Depositor will become obligated to
appoint a successor Trustee. The Trustee may also be removed at any time by the
holders of Certificates evidencing voting rights aggregating not less than 50%
of the voting rights evidenced by the Certificates of such Series. Any
resignation and removal of the Trustee, and the appointment of a successor
trustee, will not become effective until acceptance of such appointment by the
successor Trustee.
The Trustee may resign at any time from its obligations and duties under
the Deposit Trust Agreement by executing an instrument in writing resigning as
Trustee, filing the same with the Depositor, mailing a copy of a notice of
resignation to all Certificateholders then of record, and appointing a qualified
successor trustee. No such resignation will become effective until the successor
trustee has assumed the Trustee's obligations and duties under the Deposit Trust
Agreement.
Each Pooling and Servicing Agreement and Deposit Trust Agreement will also
provide that neither the Depositor nor the Master Servicer nor any director,
officer, employee or agent of the Depositor or the Master Servicer or the
Trustee, or any responsible officers of the Trustee will be under any liability
to the Certificateholders, for the taking of any action or for refraining from
the taking of any action in good faith pursuant to the Pooling and Servicing
Agreement, or for errors in judgment; provided, however, that none of the
Depositor, the Master Servicer or the Trustee nor any such person will be
protected against, in the case of the Master Servicer and the Depositor, any
breach of representations or warranties made by them, and in the case of the
Master Servicer, the Depositor and the Trustee, against any liability that would
otherwise be
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imposed by reason of willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties thereunder. Each Pooling and Servicing Agreement and Deposit Trust
Agreement will further provide that the Depositor, the Master Servicer and the
Trustee and any director, officer and employee or agent of the Depositor, the
Master Servicer or the Trustee shall be entitled to indemnification, by the
Trust Fund in the case of the Depositor and Master Servicer and by the Master
Servicer in the case of the Trustee and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the applicable Agreement or the Certificates and in the case of the Trustee,
resulting from any error in any tax or information return prepared by the Master
Servicer or from the exercise of any power of attorney granted pursuant to the
Pooling and Servicing Agreement, other than any loss, liability or expense
related to any specific Mortgage Loan, Contract or Mortgage Certificate (except
any such loss, liability or expense otherwise reimbursable pursuant to the
applicable Agreement) and any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of their duties
thereunder or by reason of reckless disregard of their obligations and duties
thereunder. In addition, each Agreement will provide that neither the Depositor
nor the Master Servicer, as the case may be, will be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
duties under the Agreement and that in its opinion may involve it in any expense
or liability. The Depositor or the Master Servicer may, however, in their
discretion, undertake any such action deemed by them necessary or desirable with
respect to the applicable 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 Trust Fund, and the
Master Servicer or the Depositor, as the case may be, will be entitled to be
reimbursed therefor out of the Certificate Account.
DEFICIENCY EVENT
To the extent a deficiency event is specified in the related Prospectus
Supplement, a deficiency event (a "Deficiency Event") with respect to the
Certificates of each Series may be defined in the Pooling and Servicing
Agreement as being the inability of the Trustee to distribute to holders of one
or more Classes of Certificates of such Series, in accordance with the terms
thereof and the Pooling and Servicing Agreement, any distribution of principal
or interest thereon when and as distributable, in each case because of the
insufficiency for such purpose of the funds then held in the related Trust Fund.
To the extent a deficiency event is specified in the related Prospectus
Supplement, upon the occurrence of a Deficiency Event, the Trustee is required
to determine whether or not the application on a monthly basis (regardless of
the frequency of regular Distribution Dates) of all future scheduled payments on
the Mortgage Loans, Contracts and Mortgage Certificates included in the related
Trust Fund and other amount receivable with respect to such Trust Fund towards
payments on such Certificates in accordance with the priorities as to
distributions of principal and interest set forth in such Certificates will be
sufficient to make distributions of interest at the applicable Interest Rates
and to distribute in full the principal balance of each such Certificate on or
before the latest Final Distribution Date of any outstanding Certificates of
such Series.
To the extent a deficiency event is specified in the related Prospectus
Supplement, the Trustee will obtain and rely upon an opinion or report of a firm
of independent accountants of recognized national reputation as to the
sufficiency of the amounts receivable with respect to such Trust Fund to make
such distributions on the Certificates, which opinion or report will be
conclusive evidence as to such sufficiency. Pending the making of any such
determination, distributions on the Certificates shall continue to be made in
accordance with their terms.
To the extent a deficiency event is specified in the related Prospectus
Supplement, in the event that the Trustee makes a positive determination, the
Trustee will apply all amounts received in respect of the related Trust Fund
(after payment of fees and expenses of the Trustee and accountants for the Trust
Fund) to distributions on the Certificates of such Series in accordance with
their terms, except that such distributions shall be made monthly and without
regard to the amount of principal that would otherwise be distributable on any
Distribution Date. Under certain circumstances following such positive
determination, the Trustee may resume making distributions on such Certificates
expressly in accordance with their terms.
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To the extent a deficiency event is specified in the related Prospectus
Supplement, if the Trustee is unable to make the positive determination
described above, the Trustee will apply all amounts received in respect of the
related Trust Fund (after payment of Trustee and accountants' fees and expenses)
to monthly distributions on the Certificates of such series pro rata, without
regard to the priorities as to distribution of principal set forth in such
Certificates, and such Certificates will, to the extent permitted by applicable
law, accrue interest at the highest Interest Rate borne by any Certificate of
such Series, or in the event any Class of such Series shall accrue interest at a
floating rate, at the weighted average Interest Rate, calculated on the basis of
the maximum interest rate applicable to the Class having such floating interest
rate and on the original principal amount of the Certificates of that Class. In
such event, the holders of a majority in outstanding principal balance of such
Certificates may direct the Trustee to sell the related Trust Fund, any such
direction being irrevocable and binding upon the holders of all Certificates of
such Series and upon the owners of the residual interests in such Trust Fund. In
the absence of such a direction, the Trustee may not sell all or any portion of
such Trust Fund.
EVENTS OF DEFAULT
Events of Default under each Pooling and Servicing Agreement will consist
of: (i) any failure to make a specified payment which continues unremedied, in
most cases, for five business days after the giving of written notice; (ii) any
failure by the Trustee, the Servicer or the Master Servicer, as applicable, duly
to observe or perform in any material respect any other of its covenants or
agreements in the Pooling and Servicing Agreement which failure shall continue
for 60 days (15 days in the case of a failure to pay the premium for any
insurance policy) or any breach of any representation and warranty made by the
Master Servicer or the Servicer, if applicable, which continues unremedied for
120 days after the giving of written notice of such failure or breach; (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings regarding the Master Servicer or a Servicer,
as applicable; and (iv) any lowering, withdrawal or notice of an intended or
potential lowering, of the outstanding rating of the Certificates by the Rating
Agency rating such Certificates because the existing or prospective financial
condition or mortgage loan servicing capability of the Master Servicer is
insufficient to maintain such rating.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default with respect to a Series of Certificates
remains unremedied, the Depositor, the Trustee or the holders of Certificates
evidencing not less than 25% of the voting rights evidenced by the Certificates
of such Series may terminate all of the rights and obligations of the Master
Servicer under the Pooling and Servicing Agreement and in and to the Mortgage
Loans and Contracts and the proceeds thereof, whereupon (subject to applicable
law regarding the Trustee's ability to make advances) the Trustee or, if the
Depositor so notifies the Trustee and the Master Servicer, the Depositor or its
designee, will succeed to all the responsibilities, duties and liabilities of
the Master Servicer under such Pooling and Servicing Agreement and will be
entitled to similar compensation arrangements. In the event that the Trustee
would be obligated to succeed the Master Servicer but is unwilling or unable so
to act, it may appoint, or petition to a court of competent jurisdiction for the
appointment of, a successor master servicer. Pending such appointment, the
Trustee (unless prohibited by law from so acting) shall be obligated to act in
such capacity. The Trustee and such successor master servicer may agree upon the
servicing compensation to be paid to such successor, which in no event may be
greater than the compensation to the Master Servicer under the Pooling and
Servicing Agreement.
AMENDMENT
Each Pooling and Servicing Agreement may be amended by the Depositor, the
Master Servicer and the Trustee, without the consent of the Certificateholders,
(i) to cure any ambiguity, (ii) to correct or supplement any provision therein
that may be inconsistent with any other provision therein, or (iii) to make any
other provisions with respect to matters or questions arising under such Pooling
and Servicing Agreement that are not inconsistent with the provisions thereof,
provided that such action will not adversely affect in any material respect the
interests of any Certificateholder of the related Series. The Pooling and
Servicing Agreement may also be amended by the Depositor, the Master Servicer
and the Trustee with the consent of holders of Certificates evidencing not less
than 66 2/3% of the voting rights evidenced by the Certificates, for the
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purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Pooling and Servicing Agreement or of modifying in any
manner the rights of the Certificateholders; provided, however, that no such
amendment may (i) reduce in any manner the amount of, delay the timing of or
change the manner in which payments received on or with respect to Mortgage
Loans and Contracts are required to be distributed with respect to any
Certificate without the consent of the holder of such Certificate, (ii)
adversely affect in any material respect the interests of the holders of a Class
or Subclass of the Senior Certificates, if any, of a Series in a manner other
than that set forth in (i) above without the consent of the holders of the
Senior Certificates of such Subclass evidencing not less than 662/3% of such
Class or Subclass, (iii) adversely affect in any material respect the interests
of the holders of the Subordinated Certificates of a Series in a manner other
than that set forth in (i) above without the consent of the holders of
Subordinated Certificates evidencing not less than 662/3% of such Class or
Subclass, or (iv) reduce the aforesaid percentage of the Certificates, the
holders of which are required to consent to such amendment, without the consent
of the holders of the Class affected thereby.
The Deposit Trust Agreement for a Series may be amended by the Trustee and
the Depositor without Certificateholder consent, to cure any ambiguity, to
correct or supplement any provision therein that may be inconsistent with any
other provision therein, or to make any other provisions with respect to matters
or questions arising thereunder that are not inconsistent with any other
provisions thereof, provided that such action will not, as evidenced by an
opinion of counsel, adversely affect the interests of any Certificateholders of
that Series in any material respect. The Deposit Trust Agreement for each Series
may also be amended by the Trustee and the Depositor with the consent of the
Holders of Certificates evidencing Percentage Interests aggregating not less
than 662/3% of each Class of the Certificates of such Series affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Agreement or modifying in any manner
the rights of Certificateholders of that Series; provided, however, that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of, or
change the manner in which payments received on Mortgage Certificates are
required to be distributed in respect of any Certificate, without the consent of
the Holder of such Certificate or (ii) reduce the aforesaid percentage of
Certificates the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all Certificates of such Series then
outstanding.
TERMINATION
The obligations created by the Pooling and Servicing Agreement for a Series
of Certificates will terminate upon the earlier of (a) the repurchase of all
Mortgage Loans or Contracts and all property acquired by foreclosure of any such
Mortgage Loan or Contract and (b) the later of (i) the maturity or other
liquidation of the last Mortgage Loan or Contract subject thereto and the
disposition of all property acquired upon foreclosure of any such Mortgage Loan
or Contract and (ii) the payment to the Certificateholders of all amounts held
by the Master Servicer and required to be paid to them pursuant to such Pooling
and Servicing Agreement. The obligations created by the Deposit Trust Agreement
for a Series of Certificates will terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
such Deposit Trust Agreement. In no event, however, will the trust created by
either such Agreement continue beyond the expiration of 21 years from the death
of the last survivor of certain persons identified therein. For each Series of
Certificates, the Master Servicer will give written notice of termination of the
applicable Agreement of each Certificateholder, and the final distribution will
be made only upon surrender and cancellation of the Certificates at an office or
agency specified in the notice of termination.
If so provided in the related Prospectus Supplement, the Pooling and
Servicing Agreement for each Series of Certificates will permit, but not
require, the Depositor or such other person as may be specified in the
Prospectus Supplement to repurchase from the Trust Fund for such Series all
remaining Mortgage Loans or Contracts subject to the Pooling and Servicing
Agreement at a price specified in such Prospectus Supplement. In the event that
the Depositor elects to treat the related Trust Fund as a REMIC under the Code,
any such repurchase will be effected in compliance with the requirements of
Section 860F(a)(4) of the Code, in order to constitute a "qualifying
liquidation" thereunder. The exercise of any such right will effect early
retirement of the Certificates of that Series, but the right so to repurchase
may be effected only on or after the aggregate principal balance of the Mortgage
Loans or Contracts for such Series at the time of repurchase is less than a
specified percentage of the aggregate principal balance at the Cut-off Date for
the Series, or on or after the date set forth in the related Prospectus
Supplement.
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CREDIT SUPPORT
Credit support for a Series of Certificates may be provided by one or more
Letters of Credit, the issuance of Subordinated Classes or Subclasses of
Certificates (which may, if so specified in the related Prospectus Supplement,
be issued in notional amounts) the provision for shifting interest credit
enhancement, the establishment of a Reserve Fund, the method of Alternative
Credit Support specified in the applicable Prospectus Supplement, or any
combination of the foregoing, in addition to, or in lieu of, the insurance
arrangements set forth below under Description of Insurance. The amount and
method of credit support will be set forth in the Prospectus Supplement with
respect to a Series of Certificates.
LETTERS OF CREDIT
The Letters of Credit, if any, with respect to a Series of Certificates will be
issued by the bank or financial institution specified in the related Prospectus
Supplement (the "L/C Bank"). The maximum obligation of the L/C Bank under the
Letter of Credit will be to honor requests for payment thereunder in an
aggregate fixed dollar amount, net of unreimbursed payments thereunder, equal to
the percentage of the aggregate principal balance on the related Cut-off Date of
the Mortgage Loans or Contracts evidenced by each Series (the "L/C Percentage")
specified in the Prospectus Supplement for such Series. The duration of coverage
and the amount and frequency of any reduction in coverage provided by the Letter
of Credit with respect to a Series of Certificates will be in compliance with
the requirements established by the Rating Agency rating such Series and will be
set forth in the Prospectus Supplement relating to such Series of Certificates.
The amount available under the Letter of Credit in all cases shall be reduced to
the extent of the unreimbursed payments thereunder. The obligations of the L/C
Bank under the Letter of Credit for each Series of Certificates will expire 30
days after the latest of the scheduled final maturity dates of the Mortgage
Loans or Contracts in the related Mortgage Pool or Contract Pool or the
repurchase of all Mortgage Loans or Contracts in the Mortgage Pool or Contract
Pool in the circumstances specified above. See "Description of the Certificates-
Termination".
Unless otherwise specified in the applicable Prospectus Supplement, under
the Pooling and Servicing Agreement, the Master Servicer will be required not
later than three business days prior to each Distribution Date to determine
whether a payment under the Letter of Credit will be necessary on the
Distribution Date and will, no later than the third business day prior to such
Distribution Date, advise the L/C Bank and the Trustee of its determination,
setting forth the amount of any required payment. On the Distribution Date, the
L/C Bank will be required to honor the Trustee's request for payment thereunder
in an amount equal to the lesser of (A) the remaining amount available under the
Letter of Credit and (B) the outstanding principal balances of any Liquidating
Loans to be assigned on such Distribution Date (together with accrued and unpaid
interest thereon at the related Mortgage Rate or APR to the related Due Date).
The proceeds of such payments under the Letter of Credit will be deposited into
the Certificate Account and will be distributed to Certificateholders, in the
manner specified in the related Prospectus Supplement, on such Distribution
Date, except to the extent of any unreimbursed Advances, servicing compensation
due to the Servicers and the Master Servicer and other amounts payable to the
Depositor or the person or entity named in the applicable Prospectus Supplement
therefrom.
If at any time the L/C Bank makes a payment in the amount of the full
outstanding principal balance and accrued interest on a Liquidating Loan, it
will be entitled to receive an assignment by the Trustee of such Liquidating
Loan, and the L/C Bank will thereafter own such Liquidating Loan free of any
further obligation to the Trustee or the Certificateholders with respect
thereto. Payments made to the Certificate Account by the L/C Bank under the
Letter of Credit with respect to such a Liquidating Loan will be reimbursed to
the L/C Bank only from the proceeds (net of liquidation costs) of such
Liquidating Loan. The amount available under the Letter of Credit will be
increased to the extent it is reimbursed for such payments.
To the extent the proceeds of liquidation of a Liquidating Loan acquired by
the L/C Bank in the manner described in the preceding paragraph exceed the
amount of payments made with respect thereto, the L/C Bank will be entitled to
retain such proceeds as additional compensation for issuance of the Letter of
Credit.
Prospective purchasers of Certificates of a Series with respect to which
credit support is provided by a Letter of Credit must look to the credit of the
L/C Bank, to the extent of its obligations under the Letter of Credit, in the
event of default
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by Mortgagors or Obligors. If the amount available under the Letter of Credit is
exhausted, or the L/C Bank becomes insolvent, and amounts in the Reserve Fund,
if any, with respect to such Series are insufficient to pay the entire amount of
the loss and still be maintained at the level specified in the related
Prospectus Supplement (the "Required Reserve"), the Certificateholders (in the
priority specified in the related Prospectus Supplement) will thereafter bear
all risks of loss resulting from default by Mortgagors or Obligors (including
losses not covered by insurance or Alternative Credit Support), and must look
primarily to the value of the properties securing defaulted Mortgage Loans or
Contracts for recovery of the outstanding principal and unpaid interest.
In the event that a Subordinated Class or Subclass of a Series of
Certificates is issued with a notional amount, the coverage provided by the
Letter of Credit with respect to such Series, and the terms and conditions of
such coverage, will be set forth in the related Prospectus Supplement.
SUBORDINATED CERTIFICATES
To the extent specified in the Prospectus Supplement with respect to a
Series of Certificates, credit support may be provided by the subordination of
the rights of the holders of one or more Classes or Subclasses of Certificates
to receive distributions with respect to the Mortgage Loans in the Mortgage Pool
or Contracts in the Contract Pool underlying such Series, or with respect to a
Subordinated Pool of mortgage loans or manufactured housing conditional sales
contracts and installment loan agreements, to the rights of the Senior
Certificateholders or holders of one or more Classes or Subclasses of
Subordinated Certificates of such Series to receive such distributions, to the
extent of the applicable Subordinated Amount. In such a case, credit support may
also be provided by the establishment of a Reserve Fund, as described below. The
Subordinated Amount, as described below, will be reduced by an amount equal to
Aggregate Losses. Aggregate Losses are defined in the related Pooling and
Servicing Agreement for any given period as the aggregate amount of
delinquencies, losses and other deficiencies in the amounts due to the holders
of the Certificates of one or more classes or Subclasses of such Series paid or
borne by the holders of one or more Classes or Subclasses of Subordinated
Certificates of such Series ("payment deficiencies"), but excluding any payments
of interest on any amounts originally due to the holders of the Certificates of
a Class or Subclass to which the applicable Class or Subclass of Subordinated
Certificates are subordinated on a previous Distribution Date, but not paid as
due, whether by way of withdrawal from the Reserve Fund (including, prior to the
time that the Subordinated Amount is reduced to zero, any such withdrawal of
amounts attributable to the Initial Deposit, if any), reduction in amounts
otherwise distributable to the Subordinated Certificateholders on any
Distribution Date or otherwise, less the aggregate amount of previous payment
deficiencies recovered by the related Trust Fund during such period in respect
of the Mortgage Loans or Contracts giving rise to such previous payment
deficiencies, including, without limitation, such recoveries resulting from the
receipt of delinquent principal and/or interest payments, Liquidation Proceeds
or Insurance Proceeds (net, in each case, of servicing compensation, foreclosure
costs and other servicing costs, expenses and unreimbursed Advances relating to
such Mortgage Loans or Contracts). The Prospectus Supplement for each Series of
Certificates with respect to which credit support will be provided by one or
more Classes or Subclasses of Subordinated Certificates will set forth the
Subordinated Amount for such Series. If specified in the related Prospectus
Supplement, the Subordinated Amount will decline over time in accordance with a
schedule which will also be set forth in the related Prospectus Supplement.
SHIFTING INTEREST
If specified in the Prospectus Supplement for a Series of Certificates for
which credit enhancement is provided by shifting interest as described herein,
the rights of the holders of the Subordinated Certificates of a Series to
receive distributions with respect to the Mortgage Loans or Contracts in the
related Trust Fund or Subsidiary Trust will be subordinated to such right of the
holders of the Senior Certificates of the same Series to the extent described in
such Prospectus Supplement. This subordination feature is intended to enhance
the likelihood of regular receipt by holders of Senior Certificates of the full
amount of scheduled monthly payments of principal and interest due them and to
provide limited protection to the holders of the Senior Certificates against
losses due to mortgagor defaults.
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The protection afforded to the holders of Senior Certificates of a Series
by the shifting interest subordination feature will be effected by distributing
to the holders of the Senior Certificates a disproportionately greater
percentage (the "Senior Prepayment Percentage") of Principal Prepayments. The
initial Senior Prepayment Percentage will be the percentage specified in the
related Prospectus Supplement and will decrease in accordance with the schedule
and subject to the conditions set forth in the Prospectus Supplement. This
disproportionate distribution of Principal Prepayments will have the effect of
accelerating the amortization of the Senior Certificates while increasing the
respective interest of the Subordinated Certificates in the Mortgage Pool or
Contract Pool. Increasing the respective interest of the Subordinated
Certificates relative to that of the Senior Certificates is intended to preserve
the availability of the benefits of the subordination provided by the
Subordinated Certificates.
SWAP AGREEMENT
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Trust will enter into or obtain an assignment of a swap
agreement or other similar agreement pursuant to which the Trust will have the
right to receive certain payments of interest (or other payments) as set forth
or determined as described therein. The Prospectus Supplement relating to a
Series of Certificates having the benefit of an interest rate swap agreement
will describe the material terms of such agreement and the particular risks
associated with the interest rate swap feature, including market and credit
risk, the effect of counterparty defaults and other risks, if any, addressed by
the rating. The Prospectus Supplement relating to such Series of Certificates
also will set forth certain information relating to the corporate status,
ownership and credit quality of the counterparty or counterparties to such swap
agreement.
RESERVE FUND
If so specified in the related Prospectus Supplement, credit support with
respect to a Series of Certificates may be provided by the establishment and
maintenance with the Trustee for such Series of Certificates, in trust, of a
Reserve Fund for such Series. Unless otherwise specified in the applicable
Prospectus Supplement, the Reserve Fund for a Series will not be included in the
Trust Fund for such Series. The Reserve Fund for each Series will be created by
the Depositor and shall be funded by the retention by the Master Servicer of
certain payments on the Mortgage Loans or Contracts, by the deposit with the
Trustee, in escrow, by the Depositor of a Subordinated Pool of mortgage loans or
manufactured housing conditional sales contracts and installment loan agreements
with the aggregate principal balance, as of the related Cut-off Date, set forth
in the related Prospectus Supplement, by any combination of the foregoing, or in
another manner specified in the related Prospectus Supplement. Following the
initial issuance of the Certificates of a Series and until the balance of the
Reserve Fund first equals or exceeds the Required Reserve, the Master Servicer
will retain specified distributions on the Mortgage Loans or Contracts and/or on
the mortgage loans or manufactured housing conditional sales contracts and
installment loan agreements in the Subordinated Pool otherwise distributable to
the holders of Subordinated Certificates and deposit such amounts in the Reserve
Fund. After the amounts in the Reserve Fund for a Series first equal or exceed
the applicable Required Reserve, the Master Servicer will retain such
distributions and deposit so much of such amounts in the Reserve Fund as may be
necessary, after the application of such distributions to amounts due and unpaid
on the Certificates or on the Certificates of such Series to which the
applicable Class or Subclass of Subordinated Certificates are subordinated and
the reimbursement of unreimbursed Advances and liquidation expenses, to maintain
the Reserve Fund at the Required Reserve. The balance in the Reserve Fund in
excess of the Required Reserve shall be paid to the applicable Class or Subclass
of Subordinated Certificates, or to another specified person or entity, as set
forth in the related Prospectus Supplement, and shall be unavailable thereafter
for future distribution to Certificateholders of either Class. The Prospectus
Supplement for each Series will set forth the amount of the Required Reserve
applicable from time to time. The Required Reserve may decline over time in
accordance with a schedule which will also be set forth in the related
Prospectus Supplement.
Amounts held in the Reserve Fund for a Series from time to time will
continue to be the property of the Subordinated Certificateholders of the
Classes or Subclasses specified in the related Prospectus Supplement until
withdrawn from the Reserve Fund and transferred to the Certificate Account as
described below. If on any Distribution Date the amount in the Certificate
Account available to be applied to distributions on the Senior Certificates of
such Series, after giving effect to any Advances made by the Servicers or the
Master Servicer on such Distribution Date, is less than the amount required
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to be distributed to such Senior Certificateholders (the "Required
Distribution") on such Distribution Date, the Master Servicer will withdraw from
the Reserve Fund and deposit into the Certificate Account the lesser of (i) the
entire amount on deposit in the Reserve Fund available for distribution to the
Senior Certificateholders (which amount will not in any event exceed the
Required Reserve) or (ii) the amount necessary to increase the funds in the
Certificate Account eligible for distribution to the Senior Certificateholders
on such Distribution Date to the Required Distribution; provided, however, that
in no event will any amount representing investment earnings on amounts held in
the Reserve Fund be transferred into the Certificate Account or otherwise used
in any manner for the benefit of the Senior Certificateholders. If so specified
in the applicable Prospectus Supplement, the balance, if any, in the Reserve
Fund in excess of the Required Reserve shall be released, to the Subordinated
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, whenever the Reserve Fund is less than the Required Reserve, holders
of the Subordinated Certificates of the applicable Class or Subclass will not
receive any distributions with respect to the Mortgage Loans or Contracts other
than amounts attributable to interest on the Mortgage Loans or Contracts after
the initial Required Reserve has been attained and amounts attributable to any
income resulting from investment of the Reserve Fund as described below. Whether
or not the amount of the Reserve Fund exceeds the Required Reserve on any
Distribution Date, the holders of the Subordinated Certificates of the
applicable Class or Subclass are entitled to receive from the Certificate
Account their share of the proceeds of any Mortgage Loan or Contract, or any
property acquired in respect thereof, repurchased by reason of defective
documentation or the breach of a representation or warranty pursuant to the
Pooling and Servicing Agreement. Amounts in the Reserve Fund shall be applied in
the following order:
(i) to the reimbursement of Advances determined by the Master Servicer and
the Servicers to be otherwise unrecoverable, other than Advances of interest in
connection with prepayments in full, repurchases and liquidations, and the
reimbursement of liquidation expenses incurred by the Servicers and the Master
Servicer if sufficient funds for such reimbursement are not otherwise available
in the related Servicing Accounts and Certificate Account;
(ii) to the payment to the holders of the Senior Certificates of such
Series of amounts distributable to them on the related Distribution Date in
respect of scheduled payments of principal and interest due on the related Due
Date to the extent that sufficient funds in the Certificate Account are not
available therefor; and
(iii) to the payment to the holders of the Senior Certificates of such
Series of the principal balance or purchase price, as applicable, of Mortgage
Loans or Contracts repurchased, liquidated or foreclosed during the period
ending on the day prior to the Due Date to which such distribution relates and
interest thereon at the related Pass-Through Rate, to the extent that sufficient
funds in the Certificate Account are not available therefor.
Amounts in the Reserve Fund in excess of the Required Reserve, including
any investment income on amounts therein, as set forth below, shall then be
released to the holders of the Subordinated Certificates, or to such other
person as is specified in the applicable Prospectus Supplement, as set forth
above.
Funds in the Reserve Fund for a Series shall be invested as provided in the
related Pooling and Servicing Agreement in certain types of eligible
investments. The earnings on such investments will be withdrawn and paid to the
holders of the applicable Class or Subclass of Subordinated Certificates in
accordance with their respective interests in the Reserve Fund in the priority
specified in the related Prospectus Supplement. Investment income in the Reserve
Fund is not available for distribution to the holders of the Senior Certificates
of such Series or otherwise subject to any claims or rights of the holders of
the applicable Class or Subclass of Senior Certificates. Eligible investments
for monies deposited in the Reserve Fund will be specified in the Pooling and
Servicing Agreement for a Series of Certificates for which a Reserve Fund is
established and in some instances will be limited to investments acceptable to
the Rating Agency rating the Certificates of such Series from time to time as
being consistent with its outstanding rating of such Certificates. Such eligible
investments will be limited, however, to obligations or securities that mature
at various time periods up to 30 days according to a schedule in the Pooling and
Servicing Agreement based on the current balance of the Reserve Fund at the time
of such investment or the contractual commitment providing for such investment.
The time necessary for the Reserve Fund of a Series to reach and maintain
the applicable Required Reserve at any time after the initial issuance of the
Certificates of such Series and the availability of amounts in the Reserve Fund
for
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distributions on such Certificates will be affected by the delinquency,
foreclosure and prepayment experience of the Mortgage Loans or Contracts in the
related Trust Fund and/or in the Subordinated Pool and therefore cannot be
accurately predicted.
PERFORMANCE BOND
If so specified in the related Prospectus Supplement, the Master Servicer
may be required to obtain a Performance Bond that would provide a guarantee of
the performance by the Master Servicer of one or more of its obligations under
the Agreement, including its obligation to advance delinquent installments of
principal and interest on Mortgage Loans or Contracts and its obligation to
repurchase Mortgage Loans or Contracts in the event of a breach by the Master
Servicer of a representation or warranty contained in the Agreement. In the
event that the outstanding credit rating of the obligor of the Performance Bond
is lowered by the Rating Agency, with the result that the outstanding rating on
the Certificates would be reduced by such Rating Agency, the Master Servicer
will be required to secure a substitute Performance Bond issued by an entity
with a rating sufficient to maintain the outstanding rating on the Certificates
or to deposit and maintain with the Trustee cash in the amount specified in the
applicable Prospectus Supplement.
DESCRIPTION OF INSURANCE
To the extent that the applicable Prospectus Supplement does not expressly
provide for a form of credit support specified above or for Alternative Credit
Support in lieu of some or all of the insurance mentioned below, the following
paragraphs on insurance shall apply with respect to the Mortgage Loans included
in the related Trust Fund. Unless otherwise specified in the related Prospectus
Supplement, each Manufactured Home that secures a Contract will be covered by a
standard hazard insurance policy and other insurance policies to the extent
described in the related Prospectus Supplement. Any material changes in such
insurance from the description that follows or the description of any
Alternative Credit Support will be set forth in the applicable Prospectus
Supplement.
PRIMARY MORTGAGE INSURANCE POLICIES
To the extent specified in the related Prospectus Supplement, each
Servicing Agreement will require the Servicer to cause a Primary Mortgage
Insurance Policy to be maintained in full force and effect with respect to each
Mortgage Loan that is secured by a Single Family Property covered by the
Servicing Agreement requiring such insurance and to act on behalf of the Insured
with respect to all actions required to be taken by the Insured under each such
Primary Mortgage Insurance Policy. Any primary mortgage insurance or primary
credit insurance policies relating to the Contracts underlying a Series of
Certificates will be described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the amount
of a claim for benefits under a Primary Mortgage Insurance Policy covering a
Mortgage Loan in the related Mortgage Pool (herein referred to as the "Loss")
will consist of the insured portion of the unpaid principal amount of the
covered Mortgage Loan (as described herein) and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the Insured (other than the proceeds of hazard
insurance) that are derived from or in any way related to such Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore such Mortgaged Property and which have not been applied to the payment
of such Mortgage Loan, (iii) amounts expended but not approved by the Primary
Mortgage Insurer, (iv) claim payments previously made by the Primary Mortgage
Insurer, and (v) unpaid premiums.
Unless otherwise specified in the related Prospectus Supplement, as
conditions precedent to the filing of or payment of a claim under a Primary
Mortgage Insurance Policy covering a Mortgage Loan in the related Mortgage Pool,
the Insured will be required to, in the event of default by the Mortgagor: (i)
advance or discharge (A) all hazard insurance premiums and (B) as necessary and
approved in advance by the Primary Mortgage Insurer, (1) real estate property
taxes, (2) all expenses required to preserve, repair and prevent waste to the
Mortgaged Property so as to maintain such Mortgaged Property in at least as good
a condition as existed at the effective date of such Primary Mortgage Insurance
Policy, ordinary wear and tear excepted, (3) property sales expenses, (4) any
outstanding liens (as defined in such Primary Mortgage
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Insurance Policy) on the Mortgaged Property and (5) foreclosure costs, including
court costs and reasonable attorneys' fees; (ii) in the event of a physical loss
or damage to the Mortgaged Property, have restored and repaired the Mortgaged
Property to at least as good a condition as existed at the effective date of
such Primary Mortgage Insurance Policy, ordinary wear and tear excepted; and
(iii) tender to the Primary Mortgage Insurer good and merchantable title to and
possession of the mortgaged property.
Unless otherwise specified in the related Prospectus Supplement, other
provisions and conditions of each Primary Mortgage Insurance Policy covering a
Mortgage Loan in the related Mortgage Pool generally will provide that: (a) no
change may be made in the terms of such Mortgage Loan without the consent of the
Primary Mortgage Insurer; (b) written notice must be given to the Primary
Mortgage Insurer within 10 days after the Insured becomes aware that a Mortgagor
is delinquent in the payment of a sum equal to the aggregate of two scheduled
monthly payments due under such Mortgage Loan or that any proceedings affecting
the Mortgagor's interest in the Mortgaged Property securing such Mortgage Loan
have commenced, and thereafter the Insured must report monthly to the Primary
Mortgage Insurer the status of any such Mortgage Loan until such Mortgage Loan
is brought current, such proceedings are terminated or a claim is filed; (c) the
Primary Mortgage Insurer will have the right to purchase such Mortgage Loan, at
any time subsequent to the 10 days' notice described in (b) above and prior to
the commencement of foreclosure proceedings, at a price equal to the unpaid
principal amount of the Mortgage Loan, plus accrued and unpaid interest thereon
and reimbursable amounts expended by the Insured for the real estate taxes and
fire and extended coverage insurance on the Mortgaged Property for a period not
exceeding 12 months, and less the sum of any claim previously paid under the
Primary Mortgage Insurance Policy and any due and unpaid premiums with respect
to such policy; (d) the Insured must commence proceedings at certain times
specified in the Primary Mortgage Insurance Policy and diligently proceed to
obtain good and merchantable title to and possession of the Mortgaged Property;
(e) the Insured must notify the Primary Mortgage Insurer of the price specified
in (c) above at least 15 days prior to the sale of the Mortgaged Property by
foreclosure, and bid such amount unless the Mortgage Insurer specifies a lower
or higher amount; and (f) the Insured may accept a conveyance of the Mortgaged
Property in lieu of foreclosure with written approval of the Mortgage Insurer
provided the ability of the Insured to assign specified rights to the Primary
Mortgage Insurer are not thereby impaired or the specified rights of the Primary
Mortgage Insurer are not thereby adversely affected.
Unless otherwise specified in the related Prospectus Supplement, the
Primary Mortgage Insurer will be required to pay to the Insured either: (1) the
insured percentage of the Loss; or (2) at its option under certain of the
Primary Mortgage Insurance Policies, the sum of the delinquent monthly payments
plus any advances made by the Insured, both to the date of the claim payment,
and thereafter, monthly payments in the amount that would have become due under
the Mortgage Loan if it had not been discharged plus any advances made by the
Insured until the earlier of (A) the date the Mortgage Loan would have been
discharged in full if the default had not occurred or (B) an approved sale. Any
rents or other payments collected or received by the Insured which are derived
from or are in any way related to the Mortgaged Property will be deducted from
any claim payment.
FHA INSURANCE AND VA GUARANTEES
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act, as
amended, and the United States Housing Act of 1937, as amended. Any FHA
Insurance or VA Guarantees relating to Contracts underlying a Series of
Certificates will be described in the related Prospectus Supplement.
The insurance premiums for FHA Loans are collected by HUD approved lenders
or by the Servicers of such FHA Loans and are paid to the FHA. The regulations
governing FHA single-family mortgage insurance programs provide that insurance
benefits are payable either upon foreclosure (or other acquisition of
possession) and conveyance of the mortgaged premises to HUD or upon assignment
of the defaulted FHA Loan to HUD. With respect to a defaulted FHA Loan, the
Servicer of such FHA Loan will be limited in its ability to initiate foreclosure
proceedings. When it is determined, either by the Servicer or HUD, that default
was caused by circumstances beyond the Mortgagor's control, the Servicer will be
expected to make an effort to avoid foreclosure by entering, if feasible, into
one of a number of available forms of forbearance plans with the Mortgagor. Such
plans may involve the reduction or suspension of scheduled mortgage payments for
a specified period, with such payments to be made upon or before the maturity
date of the mortgage, or the recasting of payments due
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under the mortgage up to or beyond the scheduled maturity date. In addition,
when a default caused by such circumstances is accompanied by certain other
criteria, HUD may provide relief by making payments to the Servicer of such
Mortgage Loan in partial or full satisfaction of amounts due thereunder (which
payments are to be repaid by the Mortgagor to HUD) or by accepting assignment of
the Mortgage Loan from the Servicer. With certain exceptions, at least three
full monthly installments must be due and unpaid under the Mortgage Loan, and
HUD must have rejected any request for relief from the Mortgagor before the
Servicer may initiate foreclosure proceedings.
HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Presently, claims are being paid in cash, and claims
have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debenture interest rate. The Servicer of each FHA Loan in a Mortgage Pool will
be obligated to purchase any such debenture issued in satisfaction of a
defaulted FHA Loan serviced by it for an amount equal to the principal amount of
the FHA Loan.
The amount of insurance benefits generally paid by the FHA is equal to the
entire unpaid principal balance of the defaulted FHA Loan, adjusted to reimburse
the Servicer of such FHA Loan for certain costs and expenses and to deduct
certain amounts received or retained by such Servicer after default. When
entitlement to insurance benefits results from foreclosure (or other acquisition
of possession) and conveyance to HUD, the Servicer is compensated for no more
than two-thirds of its foreclosure costs, and is compensated for interest
accrued and unpaid prior to such date in general only to the extent it was
allowed pursuant to a forbearance plan approved by HUD. When entitlement to
insurance benefits results from assignment of the FHA Loan to HUD, the insurance
payment includes full compensation for interest accrued and unpaid to the
assignment date. The insurance payment itself, upon foreclosure of an FHA Loan,
bears interest from a date 30 days after the mortgagor's first uncorrected
failure to perform any obligation or make any payment due under the Mortgage
Loan and, upon assignment, from the date of assignment, to the date of payment
of the claim, in each case at the same interest rate as the applicable HUD
debenture interest rate as described above.
The maximum guarantee that may be issued by the VA under a VA Loan is 50%
of the principal amount of the VA Loan if the principal amount of the Mortgage
Loan is $45,000 or less, the lesser of $36,000 and 40% if the principal amount
of the VA Loan if the principal amount of such VA Loan is greater than $45,000
but less than or equal to $144,000, and the lesser of $46,000 and 25% of the
principal amount of the Mortgage Loan if the principal amount of the Mortgage
Loan is greater than $144,000. The liability on the guarantee is reduced or
increased pro rata with any reduction or increase in the amount of indebtedness,
but in no event will the amount payable on the guarantee exceed the amount of
the original guarantee. The VA may, at its option and without regard to the
guarantee, make full payment to a mortgage holder of unsatisfied indebtedness on
a Mortgage upon its assignment to the VA.
With respect to a defaulted VA Loan, the Servicer is, absent exceptional
circumstances, authorized to announce its intention to foreclose only when the
default has continued for three months. Generally, a claim for the guarantee is
submitted after liquidation of the Mortgaged Property.
The amount payable under the guarantee will be the percentage of the VA
Loan originally guaranteed applied to indebtedness outstanding as of the
applicable date of computation specified in the VA regulations. Payments under
the guarantee will be equal to the unpaid principal amount of the VA Loan,
interest accrued on the unpaid balance of the VA Loan to the appropriate date of
computation and limited expenses of the mortgagee, but in each case only to the
extent that such amounts have not been recovered through liquidation of the
Mortgaged Property. The amount payable under the guarantee may in no event
exceed the amount of the original guarantee.
STANDARD HAZARD INSURANCE POLICIES ON MORTGAGE LOANS
The Standard Hazard Insurance Policies covering the Mortgage Loans in a
Mortgage Pool will provide for coverage at least equal to the applicable state
standard form of fire insurance policy with extended coverage. In general, the
standard form of fire and extended coverage policy will cover physical damage
to, or destruction of, the improvements on the Mortgaged Property caused by
fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Because the Standard Hazard Insurance Policies relating to
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such Mortgage Loans will be underwritten by different insurers and will cover
Mortgaged Properties located in various states, such policies will not contain
identical terms and conditions. The most significant terms thereof, however,
generally will be determined by state law and generally will be similar. Most
such policies typically will not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mudflows), nuclear
reaction, wet or dry rot, vermin, rodents, insects or domestic animals, theft
and, in certain cases, vandalism. The foregoing list is merely indicative of
certain kinds of uninsured risks and is not intended to be all-inclusive.
The Standard Hazard Insurance Policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which,
in effect, will require the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of the
dwellings, structures and other improvements on the Mortgaged Property in order
to recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clause will provide that the insurer's
liability in the event of partial loss will not exceed the greater of (i) the
actual cash value (the replacement cost less physical depreciation) of the
dwellings, structures and other improvements damaged or destroyed or (ii) such
proportion of the loss, without deduction for depreciation, as the amount of
insurance carried bears to the specified percentage of the full replacement cost
of such dwellings, structures and other improvements.
The Depositor will not require that a standard hazard or flood insurance
policy be maintained on the Cooperative Dwelling relating to any Cooperative
Loan. Generally, the cooperative corporation itself is responsible for
maintenance of hazard insurance for the property owned by the cooperative and
the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's Cooperative Dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
Any losses incurred with respect to Mortgage Loans due to uninsured risks
(including earthquakes, mudflows and, with respect to Mortgaged Properties
located other than in HUD designated flood areas, floods) or insufficient hazard
insurance proceeds and any hazard losses incurred with respect to Cooperative
Loans could affect distributions to the Certificateholders.
With respect to Mortgage Loans secured by Multifamily Property, certain
additional insurance policies may be required with respect to the Multifamily
Property; for example, general liability insurance for bodily injury and
property damage, steam boiler coverage where a steam boiler or other pressure
vessel is in operation, and rent loss insurance to cover income losses following
damage or destruction of the Mortgaged Property. The related Prospectus
Supplement will specify the required types and amounts of additional insurance
that may be required in connection with Mortgage Loans secured by Multifamily
Property and will describe the general terms of such insurance and conditions to
payment thereunder.
STANDARD HAZARD INSURANCE POLICIES ON THE MANUFACTURED HOMES
The terms of the Pooling and Servicing Agreement will require the Master
Servicer to cause to be maintained with respect to each Contract one or more
Standard Hazard Insurance Policies which provide, at a minimum, the same
coverage as a standard form fire and extended coverage insurance policy that is
customary for manufactured housing, issued by a company authorized to issue such
policies in the state in which the Manufactured Home is located, and in an
amount which is not less than the maximum insurable value of such Manufactured
Home or the principal balance due from the Obligor on the related Contract,
whichever is less; provided, however, that the amount of coverage provided by
each Standard Hazard Insurance Policy shall be sufficient to avoid the
application of any co-insurance clause contained therein. When a Manufactured
Home's location was, at the time of origination of the related Contract, within
a federally designated flood area, the Master Servicer also shall cause such
flood insurance to be maintained, which coverage shall be at least equal to the
minimum amount specified in the preceding sentence or such lesser amount as may
be available under the federal flood insurance program. Each Standard Hazard
Insurance Policy caused to be maintained by the Master Servicer shall contain
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a standard loss payee clause in favor of the Master Servicer and its successors
and assigns. If any Obligor is in default in the payment of premiums on its
Standard Hazard Insurance Policy or Policies, the Master Servicer shall pay such
premiums out of its own funds, and may add separately such premium to the
Obligor's obligation as provided by the Contract, but may not add such premium
to the remaining principal balance of the Contract.
The Master Servicer may maintain, in lieu of causing individual Standard
Hazard Insurance Policies to be maintained with respect to each Manufactured
Home, and shall maintain, to the extent that the related Contract does not
require the Obligor to maintain a Standard Hazard Insurance Policy with respect
to the related Manufactured Home, one or more blanket insurance policies
covering losses on the Obligor's interest in the Contracts resulting from the
absence or insufficiency of individual Standard Hazard Insurance Policies. Any
such blanket policy shall be substantially in the form and in the amount carried
by the Master Servicer as of the date of the Pooling and Servicing Agreement.
The Master Servicer shall pay the premium for such policy on the basis described
therein and shall pay any deductible amount with respect to claims under such
policy relating to the Contracts. If the insurer thereunder shall cease to be
acceptable to the Master Servicer, the Master Servicer shall exercise its best
reasonable efforts to obtain from another insurer a replacement policy
comparable to such policy.
If the Master Servicer shall have repossessed a Manufactured Home on behalf
of the Trustee, the Master Servicer shall either (i) maintain at its expense
hazard insurance with respect to such Manufactured Home or (ii) indemnify the
Trustee against any damage to such Manufactured Home prior to resale or other
disposition.
POOL INSURANCE POLICIES
If so specified in the related Prospectus Supplement, the Master Servicer
will obtain a Pool Insurance Policy for a Mortgage Pool underlying Certificates
of such Series. Such Pool Insurance Policy will be issued by the Pool Insurer
named in the applicable Prospectus Supplement. Any Pool Insurance Policy for a
Contract Pool underlying a Series of Certificates will be described in the
related Prospectus Supplement. Each Pool Insurance Policy will cover any loss
(subject to the limitations described below) by reason of default to the extent
the related Mortgage Loan is not covered by any Primary Mortgage Insurance
Policy, FHA insurance or VA guarantee. The amount of the Pool Insurance Policy,
if any, with respect to a Series will be specified in the related Prospectus
Supplement. A Pool Insurance Policy, however, will not be a blanket policy
against loss, because claims thereunder may only be made for particular
defaulted Mortgage Loans and only upon satisfaction of certain conditions
precedent described below. Any Pool Insurance Policies relating to the Contracts
will be described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the Pool
Insurance Policy will provide that as a condition precedent to the payment of
any claim the Insured will be required (i) to advance hazard insurance premiums
on the Mortgaged Property securing the defaulted Mortgage Loan; (ii) to advance,
as necessary and approved in advance by the Pool Insurer, (a) real estate
property taxes, (b) all expenses required to preserve and repair the Mortgaged
Property, to protect the Mortgaged Property from waste, so that the Mortgaged
Property is in at least as good a condition as existed on the date upon which
coverage under the Pool Insurance Policy with respect to such Mortgaged Property
first became effective (ordinary wear and tear excepted), (c) property sales
expenses, (d) any outstanding liens on the Mortgaged Property and (e)
foreclosure costs including court costs and reasonable attorneys' fees; and
(iii) if there has been physical loss or damage to the Mortgaged Property, to
restore the Mortgaged Property to its condition (reasonable wear and tear
excepted) as of the issue date of the Pool Insurance Policy. It also will be a
condition precedent to the payment of any claim under the Pool Insurance Policy
that the Insured maintain a Primary Mortgage Insurance Policy that is acceptable
to the Pool Insurer on all Mortgage Loans that have Loan-to-Value Ratios at the
time of origination in excess of 80%. FHA insurance and VA guarantees will be
deemed to be an acceptable Primary Mortgage Insurance Policy under the Pool
Insurance Policy. Assuming satisfaction of these conditions, the Pool Insurer
will pay to the Insured the amount of loss, determined as follows: (i) the
amount of the unpaid principal balance of the Mortgage Loan immediately prior to
the Approved Sale (as described below) of the Mortgaged Property, (ii) the
amount of the accumulated unpaid interest on such Mortgage Loan to the date of
claim settlement at the applicable Mortgage Rate and (iii) advances as described
above, less (a) all rents or other payments (excluding proceeds of fire and
extended coverage insurance) collected or received by the Insured, which are
derived from or in any way related to the Mortgaged Property, (b) amounts paid
under applicable fire and extended coverage policies
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which are in excess of the cost of restoring and repairing the Mortgaged
Property and which have not been applied to the payment of the Mortgage Loan,
(c) any claims payments previously made by the Pool Insurer on the Mortgage
Loan, (d) due and unpaid premiums payable with respect to the Pool Insurance
Policy and (e) all claim payments received by the Insured pursuant to any
Primary Mortgage Insurance Policy. An "Approved Sale" is (1) a sale of the
Mortgaged Property acquired because of a default by the Mortgagor to which the
Pool Insurer has given prior approval, (2) a foreclosure or trustee's sale of
the Mortgaged Property at a price exceeding the maximum amount specified by the
Pool Insurer, (3) the acquisition of the Mortgaged Property under the Primary
Insurance Policy by the Primary Mortgage Insurer or (4) the acquisition of the
Mortgaged Property by the Pool Insurer. The Pool Insurer must be provided with
good and merchantable title to the Mortgaged Property as a condition precedent
to the payment of any Loss. If any Mortgaged Property securing a defaulted
Mortgage Loan is damaged and the proceeds, if any, from the related Standard
Hazard Insurance Policy or the applicable Special Hazard Insurance Policy are
insufficient to restore the Mortgaged Property to a condition sufficient to
permit recovery under the Pool Insurance Policy, the Master Servicer or the
Servicer of the related Mortgage Loan will not be required to expend its own
funds to restore the damaged Mortgaged Property unless it is determined (A) that
such restoration will increase the proceeds to the Certificateholders of the
related Series on liquidation of the Mortgage Loan, after reimbursement of the
expenses of the Master Servicer or the Servicer, as the case may be, and (B)
that such expenses will be recoverable by it through payments under the Letter
of Credit, if any, with respect to such Series, Liquidation Proceeds, Insurance
Proceeds, amounts in the Reserve Fund, if any, or payments under any Alternative
Credit Support, if any, with respect to such Series.
No Pool Insurance Policy will insure (and many Primary Mortgage Insurance
Policies may not insure) against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the Mortgagor, the
Unaffiliated Seller, the Originator or other persons involved in the origination
thereof, (ii) the exercise by the Insured of its right to call the Mortgage
Loan, or the term of the Mortgage Loan is shorter than the amortization period
and the defaulted payment is for an amount more than twice the regular periodic
payments of principal and interest for such Mortgage Loan, or (iii) the exercise
by the Insured of a "due-on-sale" clause or other similar provision in the
Mortgage Loan; provided, in either case (ii) or (iii), such exclusion shall not
apply if the Insured offers a renewal or extension of the Mortgage Loan or a new
Mortgage Loan at the market rate in an amount not less than the then outstanding
principal balance with no decrease in the amortization period. A failure of
coverage attributable to one of the foregoing events might result in a breach of
the Master Servicer's insurability representation described under "Description
of the Certificates-Assignment of Mortgage Loans" above, and in such event,
subject to the limitations described therein, might give rise to an obligation
on the part of the Master Servicer to purchase the defaulted Mortgage Loan if
the breach materially and adversely affects the interests of the
Certificateholders of the related Series and cannot be cured by the Master
Servicer. Depending upon the nature of the event, a breach of representation
made by the Depositor or an Unaffiliated Seller may also have occurred. Such a
breach, if it materially and adversely affects the interests of the
Certificateholders of such Series and cannot be cured, would give rise to a
repurchase obligation on the part of the Unaffiliated Seller as more fully
described under "The Trust Fund-Mortgage Loan Program-Representations by
Unaffiliated Sellers; Repurchases" and "Description of the Certificates-
Assignment of Mortgage Loans."
The original amount of coverage under the Pool Insurance Policy will be
reduced over the life of the Certificates of the related Series by the aggregate
dollar amount of claims paid less the aggregate of the net amounts realized by
the Pool Insurer upon disposition of all foreclosed Mortgaged Properties covered
thereby. The amount of claims paid will include certain expenses incurred by the
Master Servicer or by the Servicer of the defaulted Mortgage Loan as well as
accrued interest on delinquent Mortgage Loans to the date of payment of the
claim. Accordingly, if aggregate net claims paid under a Pool Insurance Policy
reach the original policy limit, coverage under the Pool Insurance Policy will
lapse and any further losses will be borne by the holders of the Certificates of
such Series. In addition, unless the Master Servicer or the related Servicer
could determine that an Advance in respect of a delinquent Mortgage Loan would
be recoverable to it from the proceeds of the liquidation of such Mortgage Loan
or otherwise, neither such Servicer nor the Master Servicer would be obligated
to make an Advance respecting any such delinquency, since the Advance would not
be ultimately recoverable to it from either the Pool Insurance Policy or from
any other related source. See "Description of the Certificates-Advances".
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SPECIAL HAZARD INSURANCE POLICIES
If so specified in the related Prospectus Supplement, the Master Servicer
shall obtain a Special Hazard Insurance Policy for the Mortgage Pool underlying
a Series of Certificates. Any Special Hazard Insurance Policies for a Contract
Pool underlying a Series of Certificates will be described in the related
Prospectus Supplement. The Special Hazard Insurance Policy for the Mortgage Pool
underlying the Certificates of a Series will be issued by the Special Hazard
Insurer named in the applicable Prospectus Supplement. Each Special Hazard
Insurance Policy will, subject to the limitations described below, protect
against loss by reason of damage to Mortgaged Properties caused by certain
hazards (including vandalism and earthquakes and, except where the Mortgagor is
required to obtain flood insurance, floods and mudflows) not insured against
under the standard form of hazard insurance policy for the respective states in
which the Mortgaged Properties are located. See "Description of the
Certificates-Maintenance of Insurance Policies" and "-Standard Hazard
Insurance". The Special Hazard Insurance Policy will not cover losses occasioned
by war, certain governmental actions, nuclear reaction and certain other perils.
Coverage under a Special Hazard Insurance Policy will be at least equal to the
amount set forth in the related Prospectus Supplement.
Subject to the foregoing limitations, each Special Hazard Insurance Policy
will provide that, when there has been damage to the Mortgaged Property securing
a defaulted Mortgage Loan and to the extent such damage is not covered by the
Standard Hazard Insurance Policy, if any, maintained by the Mortgagor, the
Master Servicer or the Servicer, the Special Hazard Insurer will pay the lesser
of (i) the cost of repair or replacement of such Mortgaged Property or (ii) upon
transfer of such Mortgaged Property to the Special Hazard Insurer, the unpaid
balance of such Mortgage Loan at the time of acquisition of such Mortgaged
Property by foreclosure or deed in lieu of foreclosure, plus accrued interest to
the date of claim settlement (excluding late charges and penalty interest) and
certain expenses incurred in respect of such Mortgaged Property. No claim may be
validly presented under a Special Hazard Insurance Policy unless (i) hazard
insurance on the Mortgaged Property has been kept in force and other
reimbursable protection, preservation and foreclosure expenses have been paid
(all of which must be approved in advance as necessary by the insurer) and (ii)
the insured has acquired title to the Mortgaged Property as a result of default
by the Mortgagor. If the sum of the unpaid principal balance plus accrued
interest and certain expenses is paid by the Special Hazard Insurer, the amount
of further coverage under the related Special Hazard Insurance Policy will be
reduced by such amount less any net proceeds from the sale of the Mortgaged
Property. Any amount paid as the cost of repair of the Mortgaged Property will
further reduce coverage by such amount.
The terms of the Pooling and Servicing Agreement will require the Master
Servicer to maintain the Special Hazard Insurance Policy in full force and
effect throughout the term of the Pooling and Servicing Agreement. If a Pool
Insurance Policy is required to be maintained pursuant to the Pooling and
Servicing Agreement, the Special Hazard Insurance Policy will be designed to
permit full recoveries under the Pool Insurance Policy in circumstances where
such recoveries would otherwise be unavailable because Mortgaged Property has
been damaged by a cause not insured against by a Standard Hazard Insurance
Policy. In such event the Pooling and Servicing Agreement will provide that, if
the related Pool Insurance Policy shall have terminated or been exhausted
through payment of claims, the Master Servicer will be under no further
obligation to maintain such Special Hazard Insurance Policy.
MORTGAGOR BANKRUPTCY BOND
In the event of a personal bankruptcy of a Mortgagor, a bankruptcy court
may establish the value of the related Mortgaged Property or Cooperative
Dwelling at an amount less than the then outstanding principal balance of the
related Mortgage Loan. The amount of the secured debt could be reduced to such
value, and the holder of such Mortgage Loan thus would become an unsecured
creditor to the extent the outstanding principal balance of such Mortgage Loan
exceeds the value so assigned to the Mortgaged Property or Cooperative Dwelling
by the bankruptcy court. In addition, certain other modifications of the terms
of a Mortgage Loan can result from a bankruptcy proceeding. If so specified in
the related Prospectus Supplement, losses resulting from a bankruptcy proceeding
affecting the Mortgage Loans in a Mortgage Pool with respect to a Series of
Certificates will be covered under a Mortgagor Bankruptcy Bond (or any other
instrument that will not result in a downgrading of the rating of the
Certificates of a Series by the Rating Agency that rated such Series). Any
Mortgagor Bankruptcy Bond will provide for coverage in an amount acceptable to
the Rating Agency rating the Certificates of the related Series, which will be
set forth in the related Prospectus Supplement. Subject to the terms of the
Mortgagor
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Bankruptcy Bond, the issuer thereof may have the right to purchase any Mortgage
Loan with respect to which a payment or drawing has been made or may be made for
an amount equal to the outstanding principal amount of such Mortgage Loan plus
accrued and unpaid interest thereon. The coverage of the Mortgagor Bankruptcy
Bond with respect to a Series of Certificates may be reduced as long as any such
reduction will not result in a reduction of the outstanding rating of the
Certificates of such Series by the Rating Agency rating such Series.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND CONTRACTS
The following discussion contains summaries of certain legal aspects of
mortgage loans and manufactured housing conditional sales contracts and
installment loan agreements which 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 or Contracts is situated. The summaries are
qualified in their entirety by reference to the applicable federal and state
laws governing the Mortgage Loans and Contracts.
THE MORTGAGE LOANS
General
The Mortgage Loans (other than the Cooperative Loans) comprising or underlying
the Trust Assets for a Series will be secured by either first mortgages or deeds
of trust, depending upon the prevailing practice in the state in which the
underlying property is located. The filing of a mortgage, deed of trust or deed
to secure debt creates a lien or title interest upon the real property covered
by such instrument and represents the security for the repayment of an
obligation that is customarily evidenced by a promissory note. It is not prior
to the lien for real estate taxes and assessments or other charges imposed under
governmental police powers. Priority with respect to such instruments depends on
their terms, the knowledge of the parties to the mortgage and generally on the
order of recording with the applicable state, county or municipal office. There
are two parties to a mortgage: the mortgagor, who is the borrower and homeowner,
and the mortgagee, who is the lender. In a mortgage state, the mortgagor
delivers to the mortgagee a note or bond evidencing the loan and the mortgage.
Although a deed of trust is similar to a mortgage, a deed of trust has three
parties: the borrower-homeowner called the trustor (similar to a mortgagor) a
lender called the beneficiary (similar to a mortgagee) and a third-party grantee
called the trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale, to
the trustee to secure payment of the loan. The trustee's authority under a deed
of trust and the mortgagee's authority under a mortgage are governed by the
express provisions of the deed of trust or mortgage, applicable law and, in some
cases, with respect to the deed of trust, the directions of the beneficiary.
Foreclosure
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure occasionally may result from difficulties in locating
necessary parties defendant. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be time-
consuming. After the completion of a judicial foreclosure proceeding, the court
may issue a judgment of foreclosure and appoint a receiver or other officer to
conduct the sale of the property. In some states, mortgages may also be
foreclosed by advertisement, pursuant to a power of sale provided in the
mortgage. Foreclosure of a mortgage by advertisement is essentially similar to
foreclosure of a deed of trust by non-judicial power of sale.
Though a deed of trust may also be foreclosed by judicial action,
foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property upon a default by the borrower under the terms
of the note or deed of trust. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee must provide notice in some states to any other individual
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having an interest in the real property, including any junior lienholders. If
the loan is not reinstated within any applicable cure period, 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. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest of record in the property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In general,
the borrower, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Certain state laws control the amount of foreclosure expenses and
costs, including attorneys' fees, which may be recovered by a lender.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the receiver or other designated officer, or by the trustee, is a public
sale. However, because of a number of factors, including the difficulty a
potential buyer at the sale would have in determining the exact status of title
and the fact that the physical condition of the property may have deteriorated
during the foreclosure proceedings, it is uncommon for a third party to purchase
the property at the foreclosure sale. Rather, it is common for the lender to
purchase the property from the trustee or receiver for a credit bid less than or
equal to the unpaid principal amount of the note, accrued and unpaid interest
and the expenses of foreclosure. Thereafter, subject to the right of the
borrower in some states to remain in possession during the redemption period,
the lender will assume the burdens of ownership, including obtaining hazard
insurance and making such repairs at its own expense as are necessary to render
the property suitable for sale. The lender commonly will obtain the services of
a real estate broker and pay the broker a 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. Any
loss may be reduced by the receipt of mortgage insurance proceeds.
Cooperative Loans
If specified in the Prospectus Supplement relating to a Series of
Certificates, the Mortgage Loans may also contain Cooperative Loans evidenced by
promissory notes secured by security interests in shares issued by private
corporations which are entitled to be treated as housing cooperatives under the
Code and in the related proprietary leases or occupancy agreements granting
exclusive rights to occupy specific dwelling units in the corporations'
buildings. The security agreement will create a lien upon, or grant a title
interest in, the property that 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.
A corporation that is entitled to be treated as a housing cooperative under
the Code owns all the real property or some interest therein sufficient to
permit it to own 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 and hazard and liability insurance. If there is a
blanket mortgage or mortgages on the cooperative apartment building and/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, is
also responsible for meeting these mortgage or rental obligations. The interest
of the occupancy 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
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 agreements. A foreclosure by
the holder of a blanket mortgage could eliminate or significantly diminish the
value of any collateral held by the lender who financed an individual tenant-
stockholder of cooperative shares including, in the case of
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the Cooperative Loans, the collateral securing the Cooperative Loans. Similarly,
the termination of the land lease by its holder could eliminate or significantly
diminish the value of any collateral held by the lender who financed an
individual tenant-stockholder of the cooperative shares or, in the case of the
Cooperative Loans, the collateral securing the Cooperative Loans.
Each cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary leases 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 a
security interest in the occupancy agreement or proprietary lease and in the
related cooperative shares. The lender takes possession of the share certificate
and a counterpart of the proprietary lease or occupancy agreement, and a
financing statement covering the proprietary lease or occupancy agreement and
the cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares. See "-Realizing upon Cooperative Loan Security" below.
Tax Aspects of Cooperative Loans
In general, a "tenant-stockholder" (as defined in Section 216(b)(2) of the
Code) of a corporation that qualifies as a "cooperative housing corporation"
within the meaning of Section 216(b)(1) of the Code is allowed a deduction for
amounts paid or accrued within his taxable year to the corporation representing
his proportionate share of certain interest expenses and certain real estate
taxes allowable as a deduction under Section 216(a) of the Code to the
corporation under Sections 163 and 164 of the Code. In order for a corporation
to qualify under Section 216(b)(1) of the Code for its taxable year in which
such items are allowable as a deduction to the corporation, such section
requires, among other things, that at least 80% of the gross income of the
corporation be derived from its tenant-stockholder. By virtue of this
requirement the status of a corporation for purposes of Section 216(b)(1) of the
Code must be determined on a year-to-year basis. Consequently, there can be no
assurance that cooperatives relating to the Cooperative Loans will qualify under
such section for any particular year. In the event that such a cooperative fails
to qualify for one or more years, the value of the collateral securing any
related Cooperative Loans could be significantly impaired because no deduction
would be allowable to tenant-stockholders under Section 216(a) of the Code with
respect to those years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Section 216(b)(1) of
the Code, the likelihood that such a failure would be permitted to continue over
a period of years appears remote.
Realizing upon Cooperative Loan Security
The cooperative shares and proprietary lease or occupancy agreement 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 in the proprietary lease or
occupancy agreement. The proprietary lease or occupancy agreement, even while
pledged, 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. Commonly, rent and other
obligations and charges arising under a proprietary lease or occupancy agreement
which are owed to the cooperative are made liens upon the shares to which the
proprietary lease or occupancy agreement relates. In addition, the proprietary
lease or occupancy agreement generally permits the cooperative to terminate such
lease or agreement in the event the borrower defaults in the performance of
covenants thereunder. The lender and the cooperative will typically enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. 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.
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The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment subject,
however, to the cooperative's right to sums due under such proprietary lease or
occupancy agreement or that have become liens on the shares relating to the
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 the lender succeeds
to the tenant- shareholder's shares and proprietary lease or occupancy agreement
as the result of realizing upon the collateral for 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. Such approval or consent is usually based on the prospective
purchaser's income and net worth, among other factors, and may significantly
reduce the number of potential purchasers, which could limit the ability of the
lender to sell and realize upon the value of the collateral. Generally, the
lender is not limited in any rights it may have to dispossess the tenant-
shareholders.
The terms of the Cooperative Loans do not require either the Mortgagor or
the Cooperative to obtain title insurance of any type. Consequently, the
existence of any prior liens or other imperfections of title also may adversely
affect the marketability of the Cooperative Dwelling in the event of
foreclosure.
In New York, lenders generally realize upon the pledged shares and
proprietary lease or occupancy agreement given to secure a cooperative loan by
public sale in accordance with the provisions of Article 9 of the Uniform
Commercial Code (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 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 sale. 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 cooperative corporation 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. See "Anti-Deficiency Legislation and
Other Limitations on Lenders" below.
In the case of foreclosure on a Multifamily Property that was converted
from a rental building to a building owned by a cooperative housing corporation
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 but not to
purchase shares in the cooperative when the building was so converted. Any such
restrictions could adversely affect the number of potential purchasers for and
the value of such property.
Rights of Redemption
In some states, after a sale pursuant to a deed of trust or foreclosure of
a mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
certain other states, this right of redemption applies only to a sale following
judicial foreclosure, and not a sale pursuant to a non-judicial power of sale.
In most states where the right of redemption is available, statutory redemption
may occur upon payment of the foreclosure purchase price, accrued interest and
taxes. In some states, the right to redeem is an equitable right. 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 the lender subsequent to foreclosure or sale
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under a deed of trust. Consequently, the practical effect of the redemption
right is to force the lender to retain the property and pay the expenses of
ownership until the redemption period has run.
Anti-Deficiency Legislation and Other Limitations on Lenders
Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or a non-judicial
sale under a deed of trust. A deficiency judgment is a personal judgment against
the former borrower equal in most cases to the difference between the amount due
to the lender and the net amount realized upon the foreclosure sale. Other
statutes prohibit a deficiency judgment where the loan proceeds were used to
purchase a dwelling occupied by the borrower.
Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an attempt
to satisfy the full debt before bringing a personal action against the borrower.
In certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security. Consequently, the
practical effect of the election requirement, when applicable, is that lenders
will usually proceed first against the security rather than bringing a personal
action against the borrower.
Other statutory provisions may limit any deficiency judgment against the
former borrower following a foreclosure sale to the excess of the outstanding
debt over the fair market value of the property at the time of such sale. The
purpose of these statutes is to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result of
low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, in the event of waste of the
property.
In the case of cooperative loans, lenders generally realize on cooperative
shares and the accompanying proprietary lease or occupancy agreement given to
secure a cooperative loan under Article 9 of the UCC. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security. For example, in a Chapter
13 proceeding under the federal Bankruptcy Code, when a court determines that
the value of a home is less than the principal balance of the loan, the court
may prevent a lender from foreclosing on the home, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the value
of the home as it exists at the time of the proceeding, leaving the lender as a
general unsecured creditor for the difference between that value and the amount
of outstanding indebtedness. A bankruptcy court may grant the debtor a
reasonable time to cure a payment default, and in the case of a mortgage loan
not secured by the debtor's principal residence, also may reduce the monthly
payments due under such mortgage loan, change the rate of interest and alter the
mortgage loan repayment schedule. Certain court decisions have applied such
relief to claims secured by the debtor's principal residence.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien of the mortgage or deed of trust. Numerous federal and
some state consumer protection laws impose substantive requirements upon
mortgage lenders in connection with the origination, servicing and the
enforcement of mortgage loans. These laws include the federal Truth in Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act, and related statutes and
regulations.
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These federal laws and state laws impose specific statutory liabilities upon
lenders who originate or service mortgage loans and who fail to comply with the
provisions of the law. In some cases, this liability may affect assignees of the
mortgage loans.
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Loan secured by Multifamily Property will be a non-recourse loan to the
Mortgagor. As a result, the Mortgagor's obligation to repay the Mortgage Loan
can be enforced only against the Mortgaged Property regardless of whether the
Mortgagor has other assets from which it could repay the loan.
Unless otherwise specified in the related Prospectus Supplement, the
mortgage securing each Mortgage Loan relating to Multifamily Property will
contain an assignment of rents and an assignment of leases, pursuant to which
the borrower assigns its right, title and interest as landlord under each lease
and the income derived therefrom to the Depositor, while retaining a license to
collect the rents so long as there is no default. In the event the borrower
defaults, the license terminates and the Trustee (as the assignee of such
assignment) is entitled to collect the rents. The Trustee may enforce its right
to such rents by seeking the appointment of a receiver to collect the rents
immediately after giving notice to the borrower of the default.
"Due-on-Sale" Clauses
The forms of note, mortgage and deed of trust relating to conventional
Mortgage Loans may contain a "due-on-sale" clause permitting acceleration of the
maturity of a loan if the borrower transfers its interest in the property. The
enforceability of these clauses has been subject of legislation or litigation in
many states, and in some cases the enforceability of these clauses was limited
or denied. However, the Garn-St Germain Depository Institutions Act of 1982 (the
"Garn-St Germain Act") preempts state constitutional, statutory and case law
that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms, subject to certain limited
exceptions. The Garn-St Germain Act does "encourage" lenders to permit
assumption of loans at the original rate of interest or at some other rate less
than the average of the original rate and the market rate.
The Garn-St Germain Act also sets forth nine specific instances in which a
mortgage lender covered by the Garn-St Germain Act may not exercise a due-on-
sale clause, notwithstanding the fact that a transfer of the property may have
occurred. These include intra-family transfers, certain transfers by operation
of law, leases of fewer than three years and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St Germain Act also prohibit
the imposition of prepayment penalty upon the acceleration of a loan pursuant to
a due-on-sale clause.
The inability to enforce a due-on-sale clause may result in a mortgage loan
bearing an interest rate below the current market rate being assumed by a new
home buyer rather than being paid off, which may have an impact upon the average
life of the Mortgage Loans and the number of Mortgage Loans which may be
outstanding until maturity.
Enforceability of Certain Provisions
Standard forms of note, mortgage and deed of trust generally contain
provisions obligating the borrower to pay a late charge if payments are not
timely made and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon late charges which a lender may collect
from a borrower for delinquent payments. State and federal statutes or
regulations may also limit a lender's right to collect a prepayment penalty when
the prepayment is caused by the lender's acceleration of the loan pursuant to a
due-on-sale clause. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. Under
the Servicing Agreements and the Pooling and Servicing Agreement, late charges
and prepayment fees (to the extent permitted by law and not waived by the
Servicers) will be retained by the Servicers or Master Servicer as additional
servicing compensation.
Courts have imposed general equitable principles upon foreclosure. These
equitable principles are generally designed to relieve the borrower from the
legal effect of defaults under the loan documents. Examples of judicial remedies
that may be fashioned include judicial requirements that the lender undertake
affirmative and sometimes expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In
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some cases, courts have substituted their judgment for the lender's judgment and
have required lenders to reinstate loans or recast payment schedules to
accommodate borrowers who are suffering from temporary financial disability. In
some cases, courts have limited the right of lenders to foreclose if the default
under the mortgage instrument is not monetary, such as the borrower failing to
adequately maintain or insure the property or the borrower executing a second
mortgage or deed of trust affecting the property. In other cases, some courts
have been faced with the issue whether federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under the deeds of trust receive notices in addition to the
statutorily-prescribed minimum requirements. For the most part, these cases have
upheld the notice provisions as being reasonable or have found that the sale by
a trustee under a deed of trust or under a mortgage having a power of sale does
not involve sufficient state action to afford constitutional protections to the
borrower.
Environmental Considerations
Under the federal Comprehensive Environmental Response Compensation and
Liability Act, as amended, and similar state laws, a secured party which takes a
deed in lieu of foreclosure or purchases a mortgaged property at a foreclosure
sale may become liable in certain circumstances for the costs of environmental
investigation and remedial action ("Cleanup Costs") if hazardous wastes or
hazardous substances have been released or disposed of on the property. Such
Cleanup Costs may be substantial. It is possible that such costs could become a
liability of the Trust Fund and reduce the amounts otherwise distributable to
the Certificateholders if a Mortgaged Property securing a Mortgage Loan became
the property of the Trust Fund in certain circumstances and if such Cleanup
Costs were incurred.
Except as otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller will represent, as of the date of delivery of the related
Series of Certificates, that to the best of its knowledge no Mortgaged Property
secured by Multifamily Property is subject to an environmental hazard that would
have to be eliminated under applicable law before the sale of, or which could
otherwise affect the marketability of, such Mortgaged Property or which would
subject the owner or operator of such Mortgaged Property or a lender secured by
such Mortgaged Property to liability under law, and that there are no liens
which relate to the existence of any clean-up of a hazardous substance (and to
the best of its knowledge no circumstances are existing that under law would
give rise to any such lien) affecting the Mortgaged Property which are or may be
liens prior to or on a parity with the lien of the related mortgage. The
Agreement will further provide that the Master Servicer, acting on behalf of the
Trust Fund, may not acquire title to a Mortgaged Property or take over its
operation unless the Master Servicer has received a report from a qualified
independent person selected by the Master Servicer setting forth whether such
Mortgaged Property is subject to or presents any toxic wastes or environmental
hazards and an estimate of the cost of curing or cleaning up such hazard.
THE CONTRACTS
General
As a result of the Depositor's assignment of the Contract to the Trustee,
the Certificateholders will succeed collectively to all of the rights (including
the right to receive payment on the Contracts) and will assume certain
obligations of the Depositor. Each Contract evidences both (a) the obligation of
the Obligor to repay the loan evidenced thereby and (b) the grant of a security
interest in the Manufactured Home to secure repayment of such loan. Certain
aspects of both features of the Contracts are described more fully below.
The Contracts generally are "chattel paper" as defined in the Uniform
Commercial Code in effect in the states in which the Manufactured Homes
initially were registered. Pursuant to the UCC, the sale of chattel paper is
treated in a manner similar to perfection of a security interest in chattel
paper. Under the Pooling and Servicing Agreement, the Master Servicer or the
Depositor, as the case may be, will transfer physical possession of the
Contracts to the Trustee or its custodian. In addition, the Master Servicer will
make an appropriate filing of a UCC-1 financing statement in the appropriate
states to give notice of the Trustee's ownership of the Contracts. Unless
otherwise specified in the related Prospectus Supplement, the Contracts will not
be stamped or marked otherwise to reflect their assignment from the Depositor to
the Trustee. Therefore, if a subsequent purchaser were able to take physical
possession of the Contracts without notice of such assignment, the Trustee's
interest in the Contracts could be defeated.
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Security Interests in the Manufactured Homes
The law governing perfection of a security interest in a Manufactured Home
varies from state to state. Security interests in manufactured homes may be
perfected either by notation of the secured party's lien on the certificate of
title or by delivery of the required documents and payment of a fee to the state
motor vehicle authority, depending on state law. In some nontitle states,
perfection pursuant to the provisions of the UCC is required. The lender or
Master Servicer may effect such notation or delivery of the required documents
and fees, and obtain possession of the certificate of title, as appropriate
under the laws of the state in which any manufactured home securing a
manufactured housing conditional sales contract is registered. In the event the
Master Servicer or the lender fails, due to clerical errors, to effect such
notation or delivery, or files the security interest under the wrong law (for
example, under a motor vehicle title statute rather than under the UCC, in a few
states), the Certificateholders may not have a first priority security interest
in the Manufactured Home securing a Contract. As manufactured homes have become
larger and often have been attached their sites without any apparent intention
to move them, courts in many states have held that manufactured homes, under
certain circumstances, may become subject to real estate title and recording
laws. As a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the home
under applicable state real estate law. In order to perfect a security interest
in a manufactured home under real estate laws, the holder of the security
interest must file either a "fixture filing" under the provisions of the UCC or
a real estate mortgage under the real estate laws of the state where the
manufactured home is located. These filings must be made in the real estate
records office of the county where the manufactured home is located.
Substantially all of the Contracts will contain provisions prohibiting the
borrower from permanently attaching the Manufactured Home to its site. So long
as the Obligor does not violate this agreement, a security interest in the
Manufactured Home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or the
filing of a UCC financing statement will be effective to maintain the priority
of the seller's security interest in the Manufactured Home. If, however, a
Manufactured Home is permanently attached to its site, other parties could
obtain an interest in the Manufactured Home which is prior to the security
interest originally retained by the Unaffiliated Seller and transferred to the
Depositor. With respect to a Series of Certificates and as described in the
related Prospectus Supplement, the Master Servicer may be required to perfect a
security interest in the Manufactured Home under applicable real estate laws. If
such real estate filings are not required and if any of the foregoing events
were to occur, the only recourse of the Certificateholders would be against the
Unaffiliated Seller pursuant to its repurchase obligation for breach of
warranties. Based on the representations of the Unaffiliated Seller, the
Depositor, however, believes that it has obtained a perfected first priority
security interest by proper notation or delivery of the required documents and
fees with respect to substantially all of the Manufactured Homes securing the
Contracts.
The Depositor will assign its security interests in the Manufactured Homes
to the Trustee on behalf of the Certificateholders. Unless otherwise specified
in the related Prospectus Supplement, neither the Depositor nor the Trustee will
amend the certificates of title to identify the Trustee as the new secured
party. Accordingly, the Depositor or such other entity as may be specified in
the Prospectus Supplement will continue to be named as the secured party on the
certificates of title relating to the Manufactured Homes. In most states, such
assignment is an effective conveyance of such security interest without
amendment of any lien noted on the related certificate of title and the new
secured party succeeds to the assignor's rights as the secured party. However,
in some states there exists a risk that, in the absence of an amendment to the
certificate of title, such assignment of the security interest might not be held
effective against creditors of the assignor.
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the Depositor on
the certificate of title or delivery of the required documents and fees will be
sufficient to protect the Certificateholders against the rights of subsequent
purchasers of a Manufactured Home or subsequent lenders who take a security
interest in the Manufactured Home. If there are any Manufactured Homes as to
which the security interest assigned to the Depositor and the Certificateholders
is not perfected, such security interest would be subordinate to, among others,
subsequent purchasers for value of Manufactured Homes and holders of perfected
security interests. There also exists a risk in not identifying the
Certificateholders as the new secured party on the certificate of title that,
through fraud or negligence, the security interest of the Certificateholders
could be released.
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In the event that the owner of a Manufactured Home moves it to a state
other than the state in which such Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after such relocation and
thereafter only if and after the owner re-registers the Manufactured Home in
such state. If the owner were to relocate a Manufactured Home to another state
and not re-register the Manufactured Home in such state, and if steps are not
taken to re-perfect the Trustee's security interest in such state, the security
interest in the Manufactured Home would cease to be perfected. A majority of
states generally require surrender of a certificate of title to re-register a
Manufactured Home; accordingly, the Trustee, or the Master Servicer as custodian
for the Trustee, must surrender possession if it holds the certificate of title
to such Manufactured Home or, in the case of Manufactured Homes registered in
states which provide for notation of lien, the Trustee would receive notice of
surrender if the security interest in the Manufactured Home is noted on the
certificate of title. Accordingly, the Trustee would have the opportunity to re-
perfect its security interest in the Manufactured Home in the state of
relocation. In states which do not require a certificate of title for
registration of a Manufactured Home, re-registration could defeat perfection. In
the ordinary course of servicing manufactured housing conditional sales
contracts and installment loan agreements, the Master Servicer takes steps to
effect such re-perfection upon receipt of notice of re-registration or
information from the Obligor as to relocation. Similarly, when an Obligor under
a manufactured housing conditional sales contract or installment loan agreement
sells a Manufactured Home, the Trustee, or the Master Servicer as custodian for
the Trustee, must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related manufactured housing
conditional sales contract or installment loan agreement before release of the
lien. Under the Pooling and Servicing Agreement, the Master Servicer, on behalf
of the Depositor, is obligated to take such steps, at the Master Servicer's
expense, as are necessary to maintain perfection of security interests in the
Manufactured Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
Depositor will represent in the Pooling and Servicing Agreement that it has no
knowledge of any such liens with respect to any Manufactured Home securing
payment on any Contract. However, such liens could arise at any time during the
term of a Contract. No notice will be given to the Trustee or Certificateholders
in the event such a lien arises and such lien would not give rise to a
repurchase obligation on the part of the party specified in the Pooling and
Servicing Agreement.
Enforcement of Security Interests in Manufactured Homes
The Master Servicer on behalf of the Trustee, to the extent required by the
related Pooling and Servicing Agreement, may take action to enforce the
Trustee's security interest with respect to Contracts in default by repossession
and resale of the Manufactured Homes securing such Defaulted Contracts. Except
in Louisiana, so long as the Manufactured Home has not become subject to the
real estate law, a creditor can repossess a Manufactured Home securing a
Contract by voluntary surrender, by "self-help" repossession that is "peaceful"
(i.e., without breach of the peace) or, in the absence of voluntary surrender
and the ability to repossess without breach of the peace, by judicial process.
The holder of a Contract must give the debtor a number of days notice, which
varies from 10 to 30 days depending on the state, prior to commencement of any
repossession. The UCC and consumer protection laws in most states place
restrictions on repossession sales, including requiring prior notice to the
debtor and commercial reasonableness in effecting such a sale. The law in most
states also requires that the debtor be given notice of any sale prior to resale
of the unit so that the debtor may redeem at or before such resale. In the event
of such repossession and resale of a Manufactured Home, the Trustee would be
entitled to be paid out of the sale proceeds before such proceeds could be
applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the Manufactured Home securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
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Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission
is intended to defeat the ability of the transferor of a consumer credit
contract which is the seller of goods which gave rise to the transaction (and
certain related lenders and assignees) to transfer such contract free of notice
of claims by the debtor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the debtor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under a Contract; however, the Obligor also may be able to assert
the rule to set off remaining amounts due as a defense against a claim brought
against such Obligor. Numerous other federal and state consumer protection laws
impose requirements applicable to the origination and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with their
provisions may affect the enforceability of the related Contract.
Transfers of Manufactured Homes, Enforceability of "Due-on-Sale" Clauses
The Contracts, in general, prohibit the sale or transfer of the related
Manufactured Homes without the consent of the Depositor or the Master Servicer
and permit the acceleration of the maturity of the Contracts by the Depositor or
the Master Servicer upon any such sale or transfer that is not consented to.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
or the Master Servicer expects that it will permit most transfers of
Manufactured Homes and not accelerate the maturity of the related Contracts. In
certain cases, the transfer may be made by a delinquent Obligor in order to
avoid a repossession proceeding with respect to a Manufactured Home.
In the case of a transfer of a Manufactured Home after which the Depositor
desires to accelerate the maturity of the related Contract, the Depositor's
ability to do so will depend on the enforceability under state law of the "due-
on-sale" clause. The Garn-St Germain Act preempts, subject to certain exceptions
and conditions, state laws prohibiting enforcement of "due-on-sale" clauses
applicable to the Manufactured Homes. In some states the Depositor or the Master
Servicer may be prohibited from enforcing a "due-on-sale" clause in respect of
certain Manufactured Homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan that is secured
by a first lien on certain kinds of manufactured housing. The Contracts would be
covered if they satisfy certain conditions, among other things, governing the
terms of any prepayments, late charges and deferral fees and requiring a 30-day
notice period prior to instituting any action leading to repossession of or
foreclosure with respect to the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision that expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
In any state in which application of Title V was expressly rejected or a
provision limiting discount points or other charges has been adopted, no
Contract which imposes finance charges or provides for discount points or
charges in excess of permitted levels has been included in the Trust Assets or
Fund. The Depositor, or the party specified in the related Pooling and Servicing
Agreement will represent that all of the Contracts comply with applicable usury
laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
I. GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Certificates. As used hereinafter in "Certain Federal Income Tax Consequences",
"Mortgage Loans" shall include Mortgage Certificates and Contracts and "Mortgage
Pool" shall include "Contract Pool". The following
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discussion does not purport to discuss all federal income tax consequences that
may be applicable to particular categories of investors, some of which may be
subject to special rules. Further, the authorities on which this discussion are
based are subject to change or differing interpretation, which change or
differing interpretation could apply retroactively. This discussion does not
address the state or local tax consequences of the purchase, ownership and
disposition of such Certificates. Investors should consult their own tax
advisers in determining the federal, state, local, or other tax consequences to
them of the purchase, ownership and disposition of the Certificates offered
hereunder, particularly with respect to the federal income tax changes effected
by the Tax Reform Act of 1986 (the "1986 Act") as explained by the Conference
Committee Report (the "Committee Report") accompanying such 1986 Act.
The following discussion addresses securities of two general types: (i)
certificates ("REMIC Certificates") representing interests in a Mortgage Pool
("REMIC Mortgage Pool") which the Master Servicer elects to have treated as a
real estate mortgage investment conduit ("REMIC") under Code Sections 860A
through 860G ("REMIC Provisions") and (ii) certificates ("Trust Certificates")
representing certain interests in a Mortgage Pool which the Master Servicer does
not elect to have treated as a REMIC. REMIC Certificates and Trust Certificates
will be referred to collectively as "Certificates".
Under the REMIC Provisions, REMICs may issue one or more classes of
"regular" interests and must issue one and only one class of "residual"
interests. A REMIC Certificate representing a regular interest in a REMIC
Mortgage Pool will be referred to as a "REMIC Regular Certificate" and a REMIC
Certificate representing a residual interest in a REMIC Mortgage Pool will be
referred to as a "REMIC Residual Certificate".
A Trust Certificate representing an undivided equitable ownership interest
in the principal of the Mortgage Loans constituting the related Mortgage Pool,
together with interest thereon at a remittance rate (which may be less than,
greater than, or equal to the pass-through rate), will be referred to as a
"Trust Fractional Certificate" and a Trust Certificate representing an equitable
ownership of all or a portion of the interest paid on each Mortgage Loan
constituting the related Mortgage Pool (net of normal servicing fees) will be
referred to as a "Trust Interest Certificate."
The following discussion is based in part upon the rules governing original
issue discount that are set forth in Code Sections 1271 through 1273 and 1275
and in Treasury regulations issued under the original issue discount provisions
of the Code (the "OID Regulations"), and the Treasury regulations issued under
the provisions of the Code relating to REMICs (the "REMIC Regulations"). The OID
Regulations generally are effective with respect to debt instruments issued on
or after April 4, 1994.
II. REMIC TRUST FUNDS
A. Classification of REMIC Trust Funds
With respect to each series of REMIC Certificates relating to a REMIC
Mortgage Pool, Sidley & Austin, New York, New York, will deliver their opinion
generally to the effect that, assuming that (i) a REMIC election is made timely
in the required form, (ii) there is ongoing compliance with all provisions of
the related Pooling and Servicing Agreement, (iii) certain representations set
forth in the Pooling and Servicing Agreement are true and (iv) there is
continued compliance with applicable provisions of the Code, as it may be
amended from time to time, and applicable Treasury regulations issued
thereunder, such REMIC Mortgage Pool will qualify as a REMIC and the classes of
interests offered will be considered to be "regular interests" or "residual
interests" in that REMIC Mortgage Pool within the meaning of the REMIC
Provisions.
Holders of REMIC Certificates ("REMIC Certificateholders") should be aware
that, if an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for REMIC status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In such event, an entity electing to be treated as a REMIC
may be taxable as a separate corporation under Treasury regulations, and the
REMIC Certificates issued by such entity may not be accorded the status
described below under the heading "Characterization of Investments in REMIC
Certificates". In the case of an inadvertent termination of REMIC status, the
Code provides the Treasury Department with authority to issue regulations
providing relief. Any such relief, however, may
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be accompanied by sanctions, such as the imposition of a corporate tax on all or
a portion of the REMIC's income for the period of time in which the requirements
for REMIC status are not satisfied.
Among the ongoing requirements in order to qualify for REMIC treatment is
that substantially all of the assets of the Trust Fund (as of the close of the
third calendar month beginning after the creation of the REMIC and continually
thereafter) must consist of only "qualified mortgages" and "permitted
investments". In order to be a "qualified mortgage", or to support treatment of
a certificate of participation therein as a "qualified mortgage" an obligation
must be principally secured by an interest in real property. The REMIC
Regulations treat an obligation secured by manufactured housing qualifying as a
single family residence under Code Section 25(e)(10) as an obligation secured by
real property, without regard to the treatment of the obligation or the property
under state law. Under Code Section 25(e)(10), a single family residence
includes any manufactured home that has a minimum of 400 square feet of living
space and a minimum width in excess of 102 inches and that is of a kind
customarily used at a fixed location.
B. Characterization of Investments in REMIC Certificates
In general, REMIC Certificates are not treated for federal income tax
purposes as ownership interests in the assets of a REMIC Mortgage Pool. However,
(i) REMIC Certificates held by a mutual savings bank or a domestic building and
loan association will constitute "qualifying real property loans" within the
meaning of Code Section 593(d) in the same proportion that the assets of the
REMIC Mortgage Pool underlying such Certificates ("Assets") would be so treated;
(ii) REMIC Certificates held by a domestic building and loan association will
constitute a "regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi) in the same proportion that the Assets would be
treated as "loans secured by an interest in real property" within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C)(i) through (x); and (iii) REMIC Certificates held by a real
estate investment trust will constitute "real estate assets" within the meaning
of Code Section 856(c)(5)(A), and any amount includible in gross income on the
REMIC Certificates will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Code Section 856(c)(3)(B) in the same proportion that, the Assets and income
of the REMIC would be treated as "interests in real property" as defined in Code
Section 856(c)(6)(C) (or, as provided in the Committee Report, as "real estate
assets" as defined in Code Section 856(c)(6)(B)) and as "interest on obligations
secured by mortgages on real property or on interests in real property",
respectively. See, in this regard, "Characterization of Investments in Trust
Certificates-Buydown Mortgage Loans", below. Moreover, if 95% or more of the
Assets qualify for any of the foregoing treatments, the REMIC Certificates (and
income thereon) will qualify for the corresponding status in their entirety.
Investors should be aware that the investment of amounts in any Reserve Fund or
GPM Fund in non-qualifying assets would, and, holding property acquired by
foreclosure pending sale might, reduce the amount of the REMIC Certificates that
would qualify for the foregoing treatment. The REMIC Regulations provide that
payments on Mortgage Loans held pending distribution are considered part of the
Mortgage Loans for purposes of Code Sections 593(d) and 856(c)(5)(A); it is
unclear whether such collected payments would be so treated for purposes of Code
Section 7701(a)(19)(C)(v), but there appears to be no reason why analogous
treatment should not be given to such collected payments under that provision.
The determination as to the percentage of the REMIC's assets (or income) that
will constitute assets (or income) described in the foregoing sections of the
Code will be made with respect to each calendar quarter based on the average
adjusted basis (or average amount of income) of each category of the assets held
(or income accrued) by the REMIC during such calendar quarter. The REMIC will
report those determinations to Certificateholders in the manner and at the times
required by applicable Treasury regulations. The Prospectus Supplement or the
related Current Report on Form 8-K for each Series of REMIC Certificates will
describe the Assets as of the Cut-off Date. REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within the
meaning of Code Section 582(c)(1); in addition, regular interests in any other
REMIC acquired by a REMIC in accordance with the requirements of Section
860G(a)(3)(A)(i) and (ii) or Section 860G(a)(4)(B) of the Code will be treated
as "qualified mortgages" within the meaning of Code Section 860D(a)(4).
For purposes of characterizing an investment in REMIC Certificates, a
Contract secured by a Manufactured Home qualifying as a "single family
residence" under section 25(e)(10) will constitute (i) a "qualifying real
property loan" within the meaning of Code Section 593(d), (ii) a "real estate
asset" within the meaning of Code Section 856, and (iii) an asset described in
Code section 7701(a)(19)(C). With respect to the Contracts included in a Trust
Fund that makes an election
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to be treated as a REMIC, each Unaffiliated Seller will represent and warrant
that each of the Manufactured Homes securing such Contracts meets definition of
a "single family residence".
C. 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 ("Tiered
REMICs") for federal income tax purposes. Upon the issuance of any such series
of Certificates, Sidley & Austin, counsel to the Depositor, will deliver their
opinion generally to the effect that, assuming compliance with all provisions of
the related Pooling and Servicing Agreement, the Tiered REMICs will each qualify
as a REMIC and the REMIC Certificates issued by the Tiered REMICs, respectively,
will be considered to evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in the related REMIC within the meaning of the REMIC
Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"qualifying real property loans" under Section 593(d) of the Code, "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code, and assets
described in Section 7701(a)(19)(C) of the Code, and whether the income on such
Certificates is interest described in Section 856(c)(3)(B) of the Code, the
Tiered REMICs will be treated as one REMIC.
D. Taxation of Owners of REMIC Regular Certificates
Except as otherwise stated in this discussion, the REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC Mortgage Pool and not as ownership interests in the REMIC
Mortgage Pool or its Assets. In general, interest, original issue discount and
market discount paid or accrued on a REMIC Regular Certificate will be treated
as ordinary income to the holder of such REMIC Regular Certificate.
Distributions in reduction of the stated redemption price at maturity of the
REMIC Regular Certificate will be treated as a return of capital to the extent
of such holder's basis in such REMIC Regular Certificate. 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.
1. Original Issue Discount
Certain REMIC Regular Certificates may be issued with "original issue
discount" within the meaning of Code Section 1273(a). Any holders of REMIC
Regular Certificates issued with original issue discount generally will be
required to include original issue discount in income as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of the receipt of the cash attributable to
such income. The Master Servicer will report annually (or more frequently if
required) to the Internal Revenue Service ("IRS") and to Certificateholders such
information with respect to the original issue discount accruing on the REMIC
Regular Certificates as may be required under Code Section 6049 and the
regulations thereunder. See "Reporting and Other Administrative Matters of
REMICs" below.
Rules governing original issue discount are set forth in Code Sections 1271
through 1273 and 1275 and in the OID Regulations. Code Section 1272(a)(6)
provides special original issue discount rules applicable to REMIC Regular
Certificates. Regulations have not yet been proposed or adopted interpreting
Code Section 1272(a)(6).
Code Section 1272(a)(6) requires that a mortgage prepayment assumption
("Prepayment Assumption") be used in computing the accrual of original issue
discount on REMIC Regular Certificates, and for certain other federal income tax
purposes. The Prepayment Assumption is to be determined in the manner prescribed
in Treasury regulations. To date, no such regulations have been promulgated. The
Committee Report indicates that the regulations will provide that the Prepayment
Assumption, if any, used with respect to a particular transaction must be the
same as that used by the parties in pricing the transaction. The Master Servicer
will use a Prepayment Assumption in reporting original issue discount that is
consistent with this standard. However, neither the Depositor nor the Master
Servicer makes any representation that the Mortgage Loans will in fact prepay at
the rate reflected in the Prepayment Assumption or at any other rate. Each
investor must make its own decision as to the appropriate prepayment assumption
to be used in deciding whether or not to purchase
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any of the REMIC Regular Certificates. The Prospectus Supplement with respect to
a series of REMIC Certificates will disclose the Prepayment Assumption to be
used in reporting original issue discount, if any, and for certain other federal
income tax purposes.
The total amount of original issue discount on a REMIC Regular Certificate
is the excess of the "stated redemption price at maturity" of the REMIC Regular
Certificate over its "issue price". Except as discussed in the following two
paragraphs, in general, the issue price of a particular class of REMIC Regular
Certificates offered hereunder will be the price at which a substantial amount
of REMIC Regular Certificates of that class are first sold to the public
(excluding bond houses and brokers), and the stated redemption price at maturity
of a REMIC Regular Certificate will be its Stated Principal Balance.
If a REMIC Regular Certificate is sold with accrued interest that relates
to a period prior to the issue date of such REMIC Regular Certificate, the
amount paid for the accrued interest will be treated instead as increasing the
issue price of the REMIC Regular Certificate. In addition, that portion of the
first interest payment in excess of interest accrued from the date of initial
issuance of the Certificates (the "Closing Date") to the first Distribution Date
will be treated for federal income tax reporting purposes as includible in the
stated redemption price at maturity of the REMIC Regular Certificates, and as
excludible from income when received as a payment of interest on the first
Distribution Date (except to the extent of any market discount accrued as of
that date). The OID Regulations suggest, however, that some or all of this pre-
issuance accrued interest "may" be treated as a separate asset (and hence not
includible in a REMIC Regular Certificate's issue price or stated redemption
price at maturity), whose cost is recovered entirely out of interest paid on the
first Distribution Date.
The stated redemption price at maturity of a REMIC Regular Certificate is
equal to the total of all payments to be made on such Certificate other than
"qualified stated interest". Under the OID Regulations, "qualified stated
interest" is interest that is unconditionally payable at least annually during
the entire term of the Certificate at either (i) a single fixed rate that
appropriately takes into account the length of the interval between payments or
(ii) a current value of a single "qualified floating rate" or "objective rate"
(each, a "Single Variable Rate"). A "current value" is the value of a variable
rate on any day that is no earlier than three months prior to the first day on
which that value is in effect and no later than one year following that day. A
"qualified floating rate" is a rate whose variations can reasonably be expected
to measure contemporaneous variations in the cost of newly borrowed funds in the
currency in which the Certificate is denominated. Such a rate remains qualified
even though it is multiplied by a fixed, positive multiple not exceeding 1.35,
increased or decreased by a fixed rate, or both. Certain combinations of rates
constitute a single qualified floating rate, including (i) interest stated at a
fixed rate for an initial period of less than one year followed by a qualified
floating rate if the value of the floating rate at the Closing Date is intended
to approximate the fixed rate, and (ii) two or more qualified floating rates
that can reasonably be expected to have approximately the same values throughout
the term of the Certificate. A combination of such rates is conclusively
presumed to be a single floating rate if the values of all rates on the Closing
Date are within 0.25 percentage points of each other. A variable rate that is
subject to an interest rate cap, floor, "governor" or similar restriction on
rate adjustment may be a qualified floating rate only if such restriction is
fixed throughout the term of the instrument, or is not reasonably expected as of
the Closing Date to cause the yield on the debt instrument to differ
significantly from the expected yield absent the restriction. An "objective
rate" is a rate (other than a qualified floating rate) determined using a single
formula fixed for the life of the Certificate, which is based on (i) one or more
qualified floating rates (including a multiple or inverse of a qualified
floating rate), (ii) one or more rates each of which would be a qualified
floating rate for a debt instrument denominated in a foreign currency, (iii) the
yield or changes in price of one or more items of "actively traded" personal
property, (iv) a combination of the foregoing objective rates, or (v) a rate
designated by the IRS. However, a variable rate is not an objective rate if it
is reasonably expected that the average value of the rate during the first half
of the Certificate's term will differ significantly from the average value of
such rate during the final half of its term. Proposed regulations issued on
December 16, 1994, which are not yet effective, would expand the definition of
an objective rate. A combination of interest stated at a fixed rate for an
initial period of less than one year followed by an objective rate is treated as
a single objective rate if the value of the objective rate at the Closing Date
is intended to approximate the fixed rate; such a combination of rates is
conclusively presumed to be a single objective rate if the objective rate on the
Closing Date does not differ from the fixed rate by more than 0.25 percentage
points. The qualified stated interest payable with respect to certain variable
rate debt instruments not bearing stated interest at a Single Variable Rate is
discussed below under "Variable Rate Certificates". Under the foregoing rules,
some of the payments of interest on a Certificate bearing a fixed rate of
interest for an initial period followed by a qualified floating rate of interest
in subsequent periods could be treated as included in the
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stated redemption price at maturity if the initial fixed rate were to differ
sufficiently from the rate that would have been set using the formula applicable
to subsequent periods. See "Variable Rate Certificates". REMIC Regular
Certificates offered hereby other than such Certificates providing for variable
rates of interest are not anticipated to have stated interest other than
"qualified stated interest", but if any such REMIC Regular Certificates are so
offered, appropriate disclosures will be made in the Prospectus Supplement. Some
or all of the payments on REMIC Regular Certificates providing for the accretion
of interest will be included in the stated redemption price at maturity of such
Certificates. Further, because interest is payable to Certificateholders only to
the extent that amounts are received with respect to the Mortgage Loans, such
interest may not be considered "unconditionally payable" and hence may not be
considered qualified stated interest; however, the Master Servicer will not
adopt such treatment for purposes of information reporting.
Under a de minimis rule in the Code, as interpreted in the OID Regulations,
original issue discount on a REMIC Regular Certificate will be considered to be
zero if such original issue discount is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average life of the REMIC Regular Certificate. For this purpose, the weighted
average life of the REMIC Regular Certificate is computed as the sum of the
amounts determined by multiplying the amount of each payment under the
instrument (other than a payment of qualified stated interest) by a fraction,
whose numerator is the number of complete years from the issue date until such
payment is made and whose denominator is the stated redemption price at maturity
of such REMIC Regular Certificate. The IRS may take the position that this rule
should be applied taking into account the Prepayment Assumption and the effect
of any anticipated investment income. Under the OID Regulations, REMIC Regular
Certificates bearing only qualified stated interest except for any "teaser"
rate, interest holiday or similar provision would be treated as subject to the
de minimis rule if the greater of the foregone interest or any excess of the
Certificates' stated principal amount over their issue price is less than such
de minimis amount.
The OID Regulations generally would treat de minimis original issue
discount as includible in income as each principal payment is made, based on the
product of the total amount of such de minimis original issue discount and a
fraction, whose numerator is the amount of such principal payment and whose
denominator is the outstanding principal balance of the REMIC Regular
Certificate. The OID Regulations also would permit a Certificateholder to elect
to accrue de minimis original issue discount (together with stated interest,
market discount and original issue discount) into income currently based on a
constant yield method. See "Taxation of Owners of REMIC Regular Certificates-
Market Discount and Premium.
Each holder of a REMIC Regular Certificate must include in gross income the
sum of the "daily portions" of original issue discount on its REMIC Regular
Certificate for each day during its taxable year on which it held such REMIC
Regular Certificate. For this purpose, in the case of an original holder of a
REMIC Regular Certificate, the daily portions of original issue discount will be
determined as follows. A calculation will first be made of the portion of the
original issue discount that accrued during each accrual period, that is (unless
otherwise stated in the applicable Prospectus Supplement) each period that ends
on a date that corresponds to a Distribution Date on the REMIC Regular
Certificate and begins on the first day following the immediately preceding
accrual period (or in the case of the first such period, begins on the Closing
Date). For any accrual period such portion will equal the excess, if any, of (i)
the sum of (A) the present value of all of the distributions remaining to be
made on the REMIC Regular Certificate, if any, as of the end of the accrual
period and (B) distributions made on such REMIC Regular Certificate during the
accrual period of amounts included in the stated redemption price at maturity,
over (ii) the adjusted issue price of such REMIC Regular Certificate at the
beginning of the accrual period. The present value of the remaining payments
referred to in the preceding sentence will be calculated based on (i) the yield
to maturity of the REMIC Regular Certificate, calculated as of the settlement
date, giving effect to the Prepayment Assumption, (ii) events (including actual
prepayments) that have occurred prior to the end of the accrual period and (iii)
the Prepayment Assumption. The adjusted issue price of a REMIC Regular
Certificate at the beginning of any accrual period will equal the issue price of
such Certificate, increased by the aggregate amount of original issue discount
with respect to such REMIC Regular Certificate that accrued in prior accrual
periods, and reduced by the amount of any distributions made on such REMIC
Regular Certificate in prior accrual periods of amounts included in the stated
redemption price at maturity. The original issue discount accruing during any
accrual period will then be allocated ratably to each day during the period to
determine the daily portion of original issue discount for each day. With
respect to an accrual period between the settlement date and the first
Distribution Date on the REMIC Regular Certificate that is shorter than a full
accrual period, the OID Regulations permit the daily portions of original issue
discount to be determined according to any reasonable method.
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A subsequent purchaser of a REMIC Regular Certificate that purchases such
REMIC Regular Certificate at a cost (not including payment for accrued qualified
stated interest) less than its remaining stated redemption price at maturity
will also be required to include in gross income, for each day on which it holds
such REMIC Regular Certificate, the daily portions of original issue discount
with respect to such REMIC Regular Certificate, but reduced, if such cost
exceeds the "adjusted issue price", by an amount equal to the product of (i)
such daily portions and (ii) a constant fraction, whose numerator is such excess
and whose denominator is the sum of the daily portions of original issue
discount on such REMIC Regular Certificate for all days on or after the day of
purchase. The adjusted issued price of a REMIC Regular Certificate on any given
day is equal to the sum of the adjusted issue price (or, in the case of the
first accrual, the issue price) of the REMIC Regular Certificate at the
beginning of the accrual period during which such day occurs and the daily
portions of original issue discount for all days during such accrual period
prior to such day, reduced by the aggregate amount of distributions made during
such accrual period prior to such day other than distributions of qualified
stated interest.
Variable Rate Certificates. REMIC Regular Certificates bearing interest at
one or more variable rates are subject to certain special rules. The qualified
stated interest payable with respect to certain variable rate debt instruments
not bearing interest at a Single Variable Rate generally is determined under the
OID Regulations by converting such instruments into fixed rate debt instruments.
Instruments qualifying for such treatment generally include those providing for
stated interest at (i) more than one qualified floating rate, or (ii) a single
fixed rate and (a) one or more qualified floating rates or (b) a single
"qualified inverse floating rate" (each, a "Multiple Variable Rate"). A
qualified inverse floating rate is an objective rate equal to a fixed rate
reduced by a qualified floating rate, the variations in which can reasonably be
expected to inversely reflect contemporaneous variations in the cost of newly
borrowed funds (disregarding permissible rate caps, floors, governors and
similar restrictions such as are described above).
Purchasers of REMIC Regular Certificates bearing a variable rate of
interest should be aware that there is uncertainty concerning the application of
Section 1272(a)(6) of the Code and the OID Regulations to such Certificates. In
the absence of other authority, the Master Servicer intends to be guided by the
provisions of the OID Regulations governing variable rate debt instruments in
adapting the provisions of Section 1272(a)(6) of the Code to such Certificates
for the purpose of preparing reports furnished to Certificateholders. The effect
of the application of such provisions generally will be to cause
Certificateholders holding Certificates bearing interest at a Single Variable
Rate to take into account for each period an amount corresponding approximately
to the sum of (i) the qualified stated interest accruing on the outstanding face
amount of the REMIC Regular Certificate as the stated interest rate for that
Certificate varies from time to time and (ii) the amount of original issue
discount that would have been attributable to that period on the basis of a
constant yield to maturity for a bond issued at the same time and issue price as
the REMIC Regular Certificate, having the same face amount and schedule of
payments of principal as such Certificate, subject to the same Prepayment
Assumption, and bearing interest at a fixed rate equal to the value of the
applicable qualified floating rate or qualified inverse floating rate in the
case of a Certificate providing for either such rate, or equal to the fixed rate
that reflects the reasonably expected yield on the Certificate in the case of a
Certificate providing for an objective rate other than an inverse floating rate,
in each case as of the issue date. Certificateholders holding REMIC Regular
Certificates bearing interest at a Multiple Variable Rate generally will take
into account interest and original issue discount under a similar methodology,
except that the amounts of qualified stated interest and original issue discount
attributable to such a Certificate first will be determined for an "equivalent"
debt instrument bearing fixed rates, the assumed fixed rates for which are (a)
for each qualified floating rate, the value of each such rate as of the Closing
Date (with appropriate adjustment for any differences in intervals between
interest adjustment dates), (b) for a qualified inverse floating rate, the value
of the rate as of the Closing Date, and (c) for any other objective rate, the
fixed rate that reflects the yield that is reasonably expected for the
Certificate. If the interest paid or accrued with respect to a Multiple Variable
Rate Certificate during an accrual period differs from the assumed fixed
interest rate, such difference will be an adjustment (to interest or original
issue discount, as applicable) to the Certificateholder's taxable income for the
taxable period or periods to which such difference relates.
In the case of a Certificate that provides for stated interest at a fixed
rate in one or more accrual periods and either one or more qualified floating
rates or a qualified inverse floating rate in other accrual periods, the fixed
rate is first converted into an assumed variable rate. The assumed variable rate
will be a qualified floating rate or a qualified inverse floating rate according
to the type of actual variable rates provided by the Certificate, and must be
such that the fair market value of the REMIC Regular Certificate as of issuance
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for the assumed variable rate in lieu of the fixed
rate. The REMIC Regular Certificate is then subject
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to the determination of the amount and accrual of original issue discount as
described above, by reference to the hypothetical variable rate instrument.
Purchasers of variable rate REMIC Regular Certificates further should be
aware that the provisions of the OID Regulations applicable to variable rate
debt instruments have been limited and may not apply to some REMIC Regular
Certificates having variable rates. If such a Certificate is not governed by the
provisions of the OID Regulations applicable to variable rate debt instruments,
it may be subject to provisions of proposed Treasury regulations applicable to
instruments having contingent payments. The application of those provisions to
instruments such as variable rate REMIC Regular Certificates is subject to
differing interpretations. Prospective purchasers of variable rate REMIC Regular
Certificates are advised to consult their tax advisers concerning the tax
treatment of such Certificates.
2. Market Discount and Premium
A Certificateholder that purchases a REMIC Regular Certificate at a market
discount, that is, at a purchase price less than the REMIC Regular Certificate's
stated redemption price at maturity, or, in the case of a REMIC Regular
Certificate issued with original issued discount, the REMIC Regular
Certificate's adjusted issue price (as defined under "Taxation of Owners of
REMIC Regular Certificates-Original Issue Discount"), will recognize market
discount upon receipt of each payment of principal. In particular, such a holder
will generally be required to allocate each payment of principal on a REMIC
Regular Certificate first to accrued market discount, and to recognize ordinary
income, to the extent such principal payment does not exceed the aggregate
amount of accrued market discount on such REMIC Regular Certificate not
previously included in income. Such market discount must be included in income
in addition to any original issue discount includible in income with respect to
such REMIC Regular Certificate.
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. In addition, the OID
Regulations permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were made for
a REMIC Regular Certificate with market discount, the Certificateholder would be
deemed to have made an election to currently include market discount in income
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 is deemed to have made an election to amortize bond
premium, as described below, with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Certificate is irrevocable without the consent of the IRS.
Under a statutory de minimis exception, market discount with respect to a
REMIC Regular Certificate will be considered to be zero for purposes of Code
Sections 1276 through 1278 if such market discount is less than 0.25% of the
stated redemption price at maturity of such REMIC Regular Certificate multiplied
by the number of complete years to maturity remaining after the date of its
purchase. In interpreting a similar de minimis rule with respect to original
issue discount on obligations payable in installments, the OID Regulations refer
to the weighted average maturity of obligations, and it is likely that the same
rule will be applied in determining whether market discount is de minimis. It
appears that de minimis market discount on a REMIC Regular Certificate would be
treated in a manner similar to original issue discount of a de minimis amount.
See "Taxation of Holders of REMIC Regular Certificates-Original Issue Discount".
Such treatment would result in discount being included in income at a slower
rate than discount would be required to be included using the method described
above. However, Treasury regulations implementing the market discount de minimis
exception have not been issued in proposed, temporary or final form, and the
precise treatment of de minimis market discount on obligations payable in more
than one installment therefore remains uncertain.
The 1986 Act grants authority to the Treasury Department to issue
regulations providing for the method for accruing market discount of more than a
de minimis amount on debt instruments, the principal of which is payable in more
than one installment. Until such time as regulations are issued by the Treasury
Department, certain rules described in the Committee Report will apply. Under
those rules, the holder of a bond purchased with more than de minimis market
discount
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may elect to accrue such market discount either on the basis of a constant yield
method or on the basis of the appropriate proportionate method described below.
Under the proportionate method for obligations issued with original issue
discount, the amount of market discount that accrues during a period is equal to
the product of (i) the total remaining market discount, multiplied by (ii) a
fraction, the numerator of which is the original issue discount accruing during
the period and the denominator of which is the total remaining original issue
discount at the beginning of the period. Under the proportionate method for
obligations issued without original issue discount, the amount of market
discount that accrues during a period is equal to the product of (i) the total
remaining market discount, multiplied by (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 period. The Prepayment Assumption, if any, used in
calculating the accrual of original issue discount is to be used in calculating
the accrual of market discount under any of the above methods. Because the
regulations referred to in this paragraph have not been issued, it is not
possible to predict what effect such regulations might have on the tax treatment
of a REMIC Regular Certificate purchased at a discount in the secondary market.
Further, a purchaser generally will be required to treat a portion of any
gain on sale or exchange of a REMIC Regular Certificate as ordinary income to
the extent of the market discount accrued to the date of disposition under one
of the foregoing methods, less any accrued market discount previously reported
as ordinary income. Such purchaser also may be required to defer a portion of
its interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such REMIC Regular Certificate. Any
such deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized. 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.
A REMIC Regular Certificate purchased at a cost (not including payment for
accrued qualified stated interest) greater than its remaining stated redemption
price at maturity will be considered to be purchased at a premium. The holder of
such a REMIC Regular Certificate may elect to amortize such premium under the
constant yield method. The OID Regulations also permit Certificateholders to
elect to include all interest, discount and premium in income based on a
constant yield method, further treating the Certificateholder as having made the
election to amortize premium generally, as described above. The Committee Report
indicates a Congressional intent that the same rules that will apply to accrual
of market discount on installment obligations will also apply in amortizing bond
premium under Code Section 171 on installment obligations such as the REMIC
Regular Certificates.
3. Treatment of Subordinated Certificates
As described above under "Credit Support-Subordinated Certificates",
certain Series of Certificates may contain one or more Classes or Subclasses of
Subordinated Certificates. Holders of Subordinated Certificates will be required
to report income with respect to such Certificates on the accrual method without
giving effect to delays and reductions in distributions attributable to defaults
or delinquencies on any Mortgage Loans, except possibly, in the case of income
that constitutes qualified stated interest, to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Certificateholder of a Subordinated Certificate in any
period could significantly exceed the amount of cash distributed to such
Certificateholder in that period.
Although not entirely clear, it appears that a corporate holder or a holder
who holds a Regular Certificate in the course of a trade or business generally
should be allowed to deduct as an ordinary loss any loss sustained on account of
partial or complete worthlessness of a Subordinated Certificate. Although
similarly unclear, a noncorporate holder who does not hold such Regular
Certificate in the course of a trade or business generally should be allowed to
deduct as a short-term capital loss any loss sustained on account of complete
worthlessness of a Subordinated Certificate. Special rules are applicable to
banks and thrift institutions, including rules regarding reserves for bad debts.
Holders of Subordinated Certificates should consult their own tax advisers
regarding the appropriate timing, character and amount of any loss sustained
with respect to Subordinated Certificates.
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E. Taxation of Owners of REMIC Residual Certificates
1. General
An owner of a REMIC Residual Certificate ("Residual Owner") generally will
be required to report its daily portion of the taxable income or, subject to the
limitation described below in "Taxation of Owners of REMIC Residual
Certificates-Basis Rules and Distributions", the net loss of the REMIC Mortgage
Pool for each day during a calendar quarter that the Residual Owner owned such
REMIC Residual Certificate. For this purpose, the daily portion will be
determined by allocating to each day in the calendar quarter, using a 30 days
per month/90 days per quarter/360 days per year counting convention (unless
otherwise disclosed in the applicable Prospectus Supplement), its ratable
portion of the taxable income or net loss of the REMIC Mortgage Pool for such
quarter, and by allocating the daily portions among the Residual Owners (on such
day) in accordance with their percentage of ownership interests on such day. Any
amount included in the gross income of, or allowed as a loss to, any Residual
Owner by virtue of the rule referred to in this paragraph will be treated as
ordinary income or loss. Purchasers of REMIC Residual Certificates should be
aware that taxable income from such Certificates may exceed cash distributions
with respect thereto in any taxable year. For example, if the Mortgage Loans are
acquired by a REMIC at a discount, then the holder of a residual interest may
recognize income without corresponding cash distributions. This result could
occur because a payment produces recognition by the REMIC of discount on the
Mortgage Loan while all or a portion of such payment could be used in whole or
in part to make principal payments on REMIC Regular Certificates issued without
substantial discount. Taxable income may also be greater in earlier years as a
result of the fact that interest expense deductions, expressed as a percentage
of the outstanding principal amount of the REMIC Regular Certificates, will
increase over time as the lower yielding sequences of Certificates are paid,
whereas interest income with respect to any given Mortgage Loan will remain
constant over time as a percentage of the outstanding principal amount of that
loan.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such Certificate will be taken into account
in determining the income of such holder for federal income tax purposes.
Although it appears likely that any such payment would be includible in income
immediately upon its receipt, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or according
to some other method. Because of the uncertainty concerning the treatment of
such payments, holders of REMIC Residual Certificates should consult their tax
advisers concerning the treatment of such payments for income tax purposes.
2. Taxable Income or Net Loss of the REMIC Trust Fund
The taxable income or net loss of the REMIC Mortgage Pool will reflect a
netting of income from the Mortgage Loans, any cancellation of indebtedness
income due to the allocation of Realized Losses to REMIC Regular Certificates,
and the deductions and losses allowed to the REMIC Mortgage Pool. Such taxable
income or net loss for a given calendar quarter will be determined in the same
manner as for an individual having the calendar year as his taxable year and
using the accrual method of accounting, with certain modifications. The first
modification is that a deduction will be allowed for accruals of interest
(including original issue discount) on the REMIC Regular Certificates. Second,
market discount equal to the excess of any Mortgage Loan's adjusted issue price
(as determined under "Taxation of Owners of REMIC Regular Certificates-Market
Discount and Premium") over its fair market value at the time of its transfer to
the REMIC Mortgage Pool generally will be included in income as it accrues,
based on a constant yield method and on the Prepayment Assumption. For this
purpose, the Master Servicer intends to treat the fair market value of the
Mortgage Loans as being equal to the aggregate issue prices of the REMIC Regular
Certificates and REMIC Residual Certificates; if one or more classes of REMIC
Regular Certificates or REMIC Residual Certificates are retained by the
Depositor, the Master Servicer will estimate the value of such retained
interests in order to determine the fair market value of the Mortgage Loans for
this purpose. Third, no item of income, gain, loss or deduction allocable to a
prohibited transaction (see "Prohibited Transactions and Other Possible REMIC
Taxes", below) will be taken into account. Fourth, the REMIC Mortgage Pool
generally may not deduct any item that would not be allowed in calculating the
taxable income of a partnership by virtue of Code Section 703(a)(2). Fifth, the
REMIC Regulations provide that the limitation on miscellaneous itemized
deductions imposed on individuals by Code Section 67 will not be applied at the
Mortgage Pool level to the servicing fees paid to the Master Servicer or sub-
servicers if any. (See, however, "Pass-Through of Servicing Fees", below.) If
the deductions allowed to the REMIC
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Mortgage Pool exceed its gross income for a calendar quarter, such excess will
be the net loss for the REMIC Mortgage Pool for that calendar quarter.
3. Basis Rules and Distributions
Any distribution by a REMIC Mortgage Pool to a Residual Owner will not be
included in the gross income of such Residual Owner to the extent it does not
exceed the adjusted basis of such Residual Owner's interest in a REMIC Residual
Certificate. Such distribution will reduce the adjusted basis of such interest,
but not below zero. To the extent a distribution exceeds the adjusted basis of
the REMIC Residual Certificate, it will be treated as gain from the sale of the
REMIC Residual Certificate. (See "Sales of REMIC Certificates", below.) The
adjusted basis of a REMIC Residual Certificate is equal to the amount paid for
such REMIC Residual Certificate, increased by amounts included in the income of
the Residual Owner (see "Taxation of Owners of REMIC Residual Certificates-Daily
Portions" above), and decreased by distributions and by net losses taken into
account with respect to such interest.
A Residual Owner is not allowed to take into account any net loss for any
calendar quarter to the extent such net loss exceeds such Residual Owner's
adjusted basis in its REMIC Residual Certificate as of the close of such
calendar quarter (determined without regard to such net loss). Any loss
disallowed by reason of this limitation may be carried forward indefinitely to
future calendar quarters and, subject to the same limitation, may be used only
to offset income from the REMIC Residual Certificate.
The effect of these basis and distribution rules is that a Residual Owner
may not amortize its basis in a REMIC Residual Certificate, but may only recover
its basis through distributions, through the deduction of any net losses of the
REMIC Mortgage Pool or upon the sale of its REMIC Residual Certificate. See
"Sales of REMIC Certificates", below. The Residual Owner does, however, receive
reduced taxable income over the life of the REMIC because the REMIC's basis in
the underlying REMIC Mortgage Pool includes the fair market value of the REMIC
Regular Certificates and REMIC Residual Certificates.
4. Excess Inclusions
Any "excess inclusions" with respect to a REMIC Residual Certificate are
subject to certain special tax rules. With respect to a Residual Owner, the
excess inclusion for any calendar quarter is defined as the excess (if any) of
the daily portions of taxable income over the sum of the "daily accruals" for
each day during such quarter that such REMIC Residual Certificate was held by
such Residual Owner. The daily accruals are determined by allocating to each day
during a calendar quarter its ratable portion of the product of the "adjusted
issue price" of the REMIC Residual Certificate at the beginning of the calendar
quarter and 120 percent of the long-term "applicable federal rate" (generally,
an average of current yields on Treasury securities of comparable maturity, and
hereafter the "AFR") in effect at the time of issuance of the REMIC Residual
Certificate. For this purpose, the adjusted issue price of a REMIC Residual
Certificate as of the beginning of any calendar quarter is the issue price of
the REMIC Residual Certificate, increased by the amount of daily accruals for
all prior quarters and decreased by any distributions made with respect to such
REMIC Residual Certificate before the beginning of such quarter. The issue price
of a REMIC Residual Certificate is the initial offering price to the public
(excluding bond houses and brokers) at which a substantial amount of the REMIC
Residual Certificates were sold.
For Residual Owners, other than thrift institutions described in Code
Section 593, an excess inclusion cannot be offset by deductions, losses or loss
carryovers from other activities. For Residual Owners that are subject to tax on
unrelated business taxable income (as defined in Code Section 511), an excess
inclusion is treated as unrelated business taxable income. For Residual Owners
that are nonresident alien individuals or foreign corporations generally subject
to United States 30% withholding tax, even if interest paid to such Residual
Owners is generally eligible for exemptions from such tax, an excess inclusion
will be subject to such tax and no tax treaty rate reduction or exemption may be
claimed with respect thereto. See "Foreign Investors in REMIC Certificates."
Provisions enacted by the "Technical and Miscellaneous Revenue Act of 1988"
(the "1988 Act") cause the above-described exception for thrift institutions
generally to apply only to those residual interests held and deductions, losses
and loss carryovers incurred directly by such institutions (and not by other
members of an affiliated group of corporations filing
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a consolidated income tax return) or certain wholly owned direct subsidiaries of
such institutions formed and operated exclusively in connection with the
organization and operation of one or more REMICs. The REMIC Regulations further
limit this exception to residual interests having "significant value". In order
to have significant value, the REMIC Residual Certificates must have an
aggregate issue price, at issuance, at least equal to two percent of the
aggregate issue prices of all of the related REMIC Regular and Residual
Certificates. In addition, the anticipated weighted average life of the REMIC
Residual Certificates must equal or exceed 20 percent of the anticipated
weighted average life of the REMIC, based on the Prepayment Assumption and on
any required or permitted clean up calls or required liquidation provided for in
the REMIC's organizational documents. Although it has not done so, the Treasury
also has authority to issue regulations that, if REMIC Residual Certificates are
found in the aggregate not to have "significant value", would treat as excess
inclusions with respect to any REMIC Residual Certificate the entire daily
portion of taxable income for such REMIC Residual Certificate. Each Prospectus
Supplement pursuant to which REMIC Residual Certificates are offered will state
whether such REMIC Residual Certificates will have, or may be regarded as
having, significant value under the REMIC Regulations; provided, however, that
any disclosure that a REMIC Residual Certificate will have "significant value"
will be based upon certain assumptions, and the Depositor will make no
representation that a REMIC Residual Certificate will have "significant value"
for purposes of the above described rules or that a REMIC Residual Owner will
receive distributions of amounts calculated pursuant to those assumptions.
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.
5. Noneconomic REMIC Residual Certificates
Under the REMIC Regulations, transfers of "noneconomic" REMIC Residual
Certificates will be disregarded for all federal income tax purposes if "a
significant purpose of the transfer was to enable the transferor to impede the
assessment or collection of tax". If such transfer is disregarded, the purported
transferor will continue to remain liable for any taxes due with respect to the
income on such "noneconomic" REMIC Residual Certificate. The REMIC Regulations
provide that a REMIC Residual Certificate is noneconomic unless, at the time of
its transfer and based on the Prepayment Assumption and any required or
permitted clean-up calls or required liquidation provided for in the REMIC's
organizational documents, (1) the present value of the expected future
distributions (discounted using the AFR) on the REMIC Residual Certificate
equals at least the product of the present value of the anticipated excess
inclusions and the highest tax rate applicable to corporations for the year of
the transfer, and (2) the transferor reasonably expects that the transferee will
receive distributions with respect to the REMIC Residual Certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. Accordingly, all transfers of REMIC
Residual Certificates that may constitute noneconomic residual interests will be
subject to certain restrictions under the terms of the related Pooling and
Servicing Agreement that are intended to reduce the possibility of any such
transfer being disregarded. Such restrictions will require each party to a
transfer to provide an affidavit that no purpose of such transfer is to impede
the assessment or collection of tax, including certain representations as to the
financial condition of the prospective transferee. Prior to purchasing a REMIC
Residual Certificate, prospective purchasers should consider the possibility
that a purported transfer of such REMIC Residual Certificate by such a purchaser
to another purchaser at some future date may be disregarded in accordance with
the above-described rules, which would result in the retention of tax liability
by such purchaser. The applicable Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered "noneconomic" residual
interests under the REMIC Regulations; provided, however, that any disclosure
that a REMIC Residual Certificate will or will not be considered "noneconomic"
will be based upon certain assumptions, and the Depositor will make no
representation that a REMIC Residual Certificate will not be considered
"noneconomic" for purposes of the above-described rules or that a REMIC Residual
Owner will receive distributions calculated pursuant to such assumptions. See
"Foreign Investors in REMIC Certificates" below for additional restrictions
applicable to transfers of certain REMIC Residual Certificates to foreign
persons
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6. Tax-Exempt Investors
Tax-exempt organizations (including employee benefit plans) that are
subject to tax on unrelated business taxable income (as defined in Code Section
511) will be subject to tax on any excess inclusions attributed to them as
owners of Residual Certificates. Excess inclusion income associated with a
Residual Certificate may significantly exceed cash distributions with respect
thereto. See "Excess Inclusions".
Generally, tax-exempt organizations that are not subject to federal income
taxation on "unrelated business taxable income" pursuant to Code Section 511 are
treated as "disqualified organizations" under provisions of the 1988 Act. Under
provisions of the Pooling and Servicing Agreement, such organizations generally
are prohibited from owning Residual Certificates. See "Sales of REMIC
Certificates".
7. Real Estate Investment Trusts
If the applicable Prospectus Supplement so provides, a Mortgage Pool may
hold Mortgage Loans bearing interest based wholly or partially on Mortgagor
profits, Mortgaged Property appreciation, or similar contingencies. Such
interest, if earned directly by a real estate investment trust ("REIT"), would
be subject to the limitations of Code sections 856(f) and 856(j). Treasury
Regulations treat a REIT holding a REMIC Residual Certificate for a principal
purpose of avoiding such Code provisions as receiving directly the income of the
REMIC Mortgage Pool, hence potentially jeopardizing its qualification for
taxation as a REIT and exposing such income to taxation as a prohibited
transaction at a 100 percent rate.
8. Mark-to-Market Rules
Code Section 475 generally requires that securities dealers include
securities in inventory at their fair market value, recognizing gain or loss as
if the securities were sold at the end of each tax year. Prospective purchasers
of the REMIC Residual Certificates should be aware that on January 3, 1995, the
Internal Revenue Service released proposed regulations (the "Proposed Mark to
Market Regulations") under Code Section 475 relating to the requirement that a
securities dealer mark to market securities held for sale to customers. This
mark-to-market requirement applies to all securities of a dealer, except to the
extent that the dealer has specifically identified a security as held for
investment. The Proposed Mark to Market Regulations provide that, for purposes
of this mark-to-market requirement, a REMIC Residual Certificate is not treated
as a security and thus may not be marked to market. The Proposed Mark to Market
Regulations would apply to all REMIC Residual Certificates acquired on or after
January 4, 1995.
F. Sales of REMIC Certificates
If a REMIC Certificate is sold, the seller will recognize gain or loss
equal to the difference between the amount realized on the sale and its adjusted
basis in the REMIC Certificate. The adjusted basis of a REMIC Regular
Certificate generally will equal the cost of such REMIC Regular Certificate to
the seller, increased by any original issue discount or market discount included
in the seller's gross income with respect to such REMIC Regular Certificate and
reduced by premium amortization deductions and distributions previously received
by the seller of amounts included in the stated redemption price at maturity of
such REMIC Regular Certificate. The adjusted basis of a REMIC Residual
Certificate will be determined as described under "Taxation of Owners of REMIC
Residual Certificates-Basis Rules and Distributions". Gain from the disposition
of a REMIC Regular Certificate that might otherwise be treated as a capital gain
will be treated as ordinary income to the extent that such gain does not exceed
the excess, if any, of (i) the amount that would have been includible in such
holder's income had income accrued at a rate equal to 110% of the AFR as of the
date of purchase over (ii) the amount actually includible in such holder's
income. Except as otherwise provided under "Taxation of Owners of REMIC Regular
Certificates-Market Discount and Premium" and under Code Section 582(c), any
additional gain or any loss on the sale or exchange of a REMIC Certificate will
be capital gain or loss, provided such REMIC Certificate is held as a capital
asset (generally, property held for investment) within the meaning of Code
Section 1221. The Code currently provides for a top marginal tax rate of 39.6%
for individuals while maintaining a maximum marginal rate for the long-term
capital gains of individuals at 28%. There is no such rate differential for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes, including
limitations on the use of capital losses to offset ordinary income.
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All or a portion of any gain from the sale of a REMIC Certificate that
might otherwise be capital gain may be treated as ordinary income (i) if such
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
holder's net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction reduced by any amount treated as ordinary
income with respect to any prior disposition or other termination of a position
that was held as part of such transaction, or (ii) in the case of a noncorporate
taxpayer that has made an election under Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary income rates.
If a Residual Owner sells a REMIC Residual Certificate at a loss, the loss
will not be recognized if, within six months before or after the sale of the
REMIC Residual Certificate, such Residual Owner purchases another residual in
any REMIC or any interest in a taxable mortgage pool (as defined in Code Section
7701(i)) comparable to a residual interest in a REMIC. Such disallowed loss will
be allowed upon the sale of the other residual interest (or comparable interest)
if the rule referred to in the preceding sentence does not apply to that sale.
While the Committee Report states that this rule may be modified by Treasury
regulations, the REMIC Regulations do not address this issue and it is not clear
whether any such modification will in fact be implemented or, if implemented,
what its precise nature or effective date would be.
The 1988 Act makes transfers of a residual interest to certain
"disqualified organizations" subject to an additional tax on the transferor in
an amount equal to the maximum corporate tax rate applied to the present value
(using a discount rate equal to the AFR) of the total anticipated excess
inclusions with respect to such residual interest for the periods after the
transfer. For this purpose, "disqualified organizations" includes the United
States, any state or political subdivision of a state, any foreign government or
international organization or any agency or instrumentality of any of the
foregoing; any tax-exempt entity (other than a Code Section 521 cooperative)
which is not subject to the tax on unrelated business income; and any rural
electrical or telephone cooperative. The anticipated excess inclusions must be
determined as of the date that the REMIC Residual Certificate is transferred and
must be based on events that have occurred up to the time of such transfer, the
Prepayment Assumption, and any required or permitted clean-up calls or required
liquidation provided for in the REMIC's organizational documents. The tax
generally is imposed on the transferor of the REMIC Residual Certificate, except
that it is imposed on an agent for a disqualified organization if the transfer
occurs through such agent. The Pooling and Servicing Agreement requires, as a
prerequisite to any transfer of a Residual Certificate, the delivery to the
Trustee of an affidavit of the transferee to the effect that it is not a
disqualified organization and contains other provisions designed to render any
attempted transfer of a Residual Certificate to a disqualified organization
void.
In addition, if a "pass-through entity" includes in income excess
inclusions with respect to a REMIC Residual Certificate, and a disqualified
organization is the record holder of an interest in such entity at any time
during any taxable year of such entity, then a tax will be imposed on such
entity equal to the product of (i) the amount of excess inclusions on the REMIC
Residual Certificate for such taxable year that are allocable to the interest in
the pass-through entity held by such disqualified organization and (ii) the
highest marginal federal income tax rate imposed on corporations. A pass-through
entity will not be subject to this tax for any period, however, if the record
holder of an interest in such entity furnishes to such entity (i) such holder's
social security number and a statement under penalties of perjury that such
social security number is that of the record holder or (ii) a statement under
penalties of perjury that such record holder is not a disqualified organization.
For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
shall, with respect to such interest, be treated as a pass-through entity.
Legislation presently pending before the United States Congress would apply this
tax on an annual basis to "large partnerships". Generally, such legislation
would treat partnerships that have, or have had, 100 or more partners as large
partnerships for this purpose. Such legislation would not limit application of
tax to excess inclusions allocable to disqualified organizations, and in fact
would apply the tax to large partnerships having no disqualified organizations
as partners. No prediction can be made whether such legislation will be enacted
in its current or modified form.
G. Pass-Through of Servicing Fees
The general rule is that Residual Certificateholders take into account
taxable income or net loss of the related REMIC Mortgage Pool. Under that rule,
servicing compensation of the Master Servicer and the subservicers (if any)
would be allocated to the holders of the REMIC Residual Certificates, and
therefore would not affect the income or deductions of
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holders of REMIC Regular Certificates. However, in the case of a "single-class
REMIC", such expenses and an equivalent amount of additional gross income will
be allocated among all holders of REMIC Regular Certificates and REMIC Residual
Certificates for purposes of the limitations on the deductibility of certain
miscellaneous itemized deductions by individuals contained in Code Sections
56(b)(1) and 67. Generally, any holder of a REMIC Residual Certificate and any
holder of a REMIC Certificate issued by a "single-class REMIC" who is an
individual, estate or trust (including such a person that holds an interest in a
pass-through entity holding such a REMIC Certificate) will be able to deduct
such expenses in determining regular taxable income only to the extent that such
expenses together with certain other miscellaneous itemized deductions of such
individual, estate or trust exceed 2% of adjusted gross income; such a holder
may not deduct such expenses to any extent in determining liability for
alternative minimum tax. Accordingly, REMIC Residual Certificates, and REMIC
Regular Certificates receiving an allocation of servicing compensation, may not
be appropriate investments for individuals, estates or trusts, and such persons
should carefully consult with their own tax advisers regarding the advisability
of an investment in such Certificates.
A "single-class REMIC" is a REMIC that either (i) would be treated as an
investment trust under the provisions of Treasury Regulation Section 301.7701-
4(c) in the absence of a REMIC election, or (ii) is substantially similar to
such an investment trust and is structured with the principal purpose of
avoiding the allocation of investment expenses to holders of REMIC Regular
Certificates. Unless otherwise stated in the related Prospectus Supplement, the
Depositor intends to treat a REMIC Mortgage Pool as other than a "single-class
REMIC", consequently allocating servicing compensation expenses and related
income amounts entirely to REMIC Residual Certificates and in no part to REMIC
Regular Certificates.
H. Prohibited Transactions and Other Possible REMIC Taxes
The Code imposes a tax on REMIC Mortgage Pools equal to 100 percent of the
net income derived from "prohibited transactions". In general, a prohibited
transaction means the disposition of a Mortgage Loan other than pursuant to
certain specified exceptions, the receipt of income from a source other than a
Mortgage Loan 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 Loans for temporary investment pending
distribution on the REMIC Certificates. The Code also imposes a 100 percent tax
on the value of any contribution of assets to the REMIC after the "start-up day"
(the day on which the regular and residual interests are issued), other than
pursuant to specified exceptions, and subjects "net income from foreclosure
property" to tax at the highest corporate rate. It is not anticipated that a
REMIC Mortgage Pool will engage in any such transactions or receive any such
income.
I. Termination of a REMIC Trust Fund
In general, no special tax consequences will apply to a holder of a REMIC
Regular Certificate upon the termination of the REMIC Mortgage Pool by virtue of
the final payment or liquidation of the last Mortgage Loan remaining in the
REMIC Mortgage Pool. If a Residual Owner's adjusted basis in its REMIC Residual
Certificate at the time such termination occurs exceeds the amount of cash
distributed to such Residual Owner in liquidation of its interest, then,
although the matter is not entirely free from doubt, it appears that the
Residual Owner would be entitled to a loss (which could be a capital loss) equal
to the amount of such excess.
J. Reporting and Other Administrative Matters of REMICs
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. Certain holders of REMIC Regular
Certificates who are generally exempt from information reporting on debt
instruments, such as corporations, banks, registered securities or commodities
brokers, real estate investment trusts, registered investment companies, common
trust funds, charitable remainder annuity trusts and unitrusts, will be provided
interest and original issue discount income information and the information set
forth in the following paragraph upon request in accordance with the
requirements of the Treasury regulations. The information must be provided by
the later of 30 days after the end of the quarter for which the information was
requested, or two weeks after the receipt of the request. The REMIC Mortgage
Pool must also comply with rules requiring the face of a REMIC Certificate
issued at more than a de minimis discount to disclose the amount of original
issue discount and the issue date and requiring such information to be reported
to the Treasury Department.
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The REMIC Regular Certificate information reports must include a statement
of the "adjusted issue price" of the REMIC Regular Certificate at the beginning
of each accrual period. In addition, the reports must 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 Mortgage
Pool may not have, it appears that this provision will only require information
pertaining to the appropriate proportionate method of accruing market discount.
The responsibility for complying with the foregoing reporting rules will be
borne by the Master Servicer.
For purposes of the administrative provisions of the Code, REMIC Pools will
be treated as partnerships and the holders of Residual Certificates will be
treated as partners. The Master Servicer will file federal income tax
information returns on behalf of the related REMIC Pool, and will be designated
as agent for and will act on behalf of the "tax matters person" with respect to
the REMIC Pool in all respects.
As agent for the tax matters person, the Master Servicer will, subject to
certain notice requirements and various restrictions and limitations, generally
have the authority to act on behalf of the REMIC and the Residual Owners in
connection with the administrative and judicial review of items of income,
deduction, gain or loss of the REMIC Mortgage Pool, as well as the REMIC
Mortgage Pool's classification. Residual Owners will generally be required to
report such REMIC Mortgage Pool items consistently with their treatment on the
REMIC Mortgage Pool's federal income tax information return and may in some
circumstances be bound by a settlement agreement between the Master Servicer, as
agent for the tax matters person, and the IRS concerning any such REMIC Mortgage
Pool item. Adjustments made to the REMIC Mortgage Pool tax return may require a
Residual Owner to make corresponding adjustments on its return, and an audit of
the REMIC Mortgage Pool's tax return, or the adjustments resulting from such an
audit, could result in an audit of a Residual Owner's return.
K. Backup Withholding with Respect to REMIC Certificates
Payments of interest and principal on REMIC Regular Certificates, as well
as payment of proceeds from the sale of REMIC Certificates, may be subject to
the "backup withholding tax" under Section 3406 of the Code at a rate of 31
percent if recipients of such payments fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed by
the IRS on a recipient of payments that is required to supply information but
that does not do so in the manner required.
L. Foreign Investors in REMIC Certificates
1. REMIC Regular Certificates
Except as qualified below, payments made on a REMIC Regular Certificate to
a REMIC Regular Certificateholder that is not a U.S. Person, as hereinafter
defined (a "non-U.S. Person"), or to a person acting on behalf of such a
Certificateholder, generally will be exempt from U.S. federal income and
withholding taxes, provided that (a) the holder of the Certificate is not
subject to U.S. tax as a result of a connection to the United States other than
ownership of such Certificate, (b) the holder of such Certificate signs a
statement under penalties of perjury that certifies that such holder is a Non-
U.S. Person, and provides the name and address of such holder, and (c) the last
U.S. Person in the chain of payment to the holder received such statement from
such holder or a financial institution holding on its behalf and does not have
actual knowledge that such statement is false. If the holder does not qualify
for exemption, distributions of interest, including distributions in respect of
accrued original issue discount, to such holder may be subject to a withholding
tax rate of 30 percent, subject to reduction under any applicable tax treaty.
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to U.S. federal income tax regardless of the source of its
income.
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Holders of REMIC Regular Certificates should be aware that the IRS may take
the position that exemption from U.S. withholding taxes does not apply to such a
holder that also directly or indirectly owns 10 percent or more of the REMIC
Residual Certificates. Further, the foregoing rules will not apply to exempt a
"United States shareholder" (as such term is defined in Code Section 951) of a
controlled foreign corporation from taxation on such United States shareholder's
allocable portion of the interest or original issue discount income earned by
such controlled foreign corporation.
2. REMIC Residual Certificates
Amounts paid to a Residual Owner that is a Non-U.S. Person generally will
be treated as interest for purposes of applying the withholding tax on Non-U.S.
Persons with respect to income on its REMIC Residual Certificate. However, it is
unclear whether distributions on REMIC Residual Certificates will be eligible
for the general exemption from withholding tax that applies to REMIC Regular
Certificates as described above. Treasury Regulations provide that, for purposes
of the portfolio interest exception, payments to the foreign owner of a REMIC
Residual Certificate are to be considered paid on the obligations held by the
REMIC, rather than on the Certificate itself. Such payments would thus only
qualify for the portfolio interest exception if the underlying obligations held
by the REMIC would so qualify. Such withholding tax generally would be imposed
at a rate of 30 percent but would be subject to reduction under any tax treaty
applicable to the Residual Owner. However, there is no exemption from
withholding tax nor may the rate of such tax be reduced, under a tax treaty or
otherwise, with respect to any distribution of income that is an excess
inclusion. Although no regulations have been proposed or adopted addressing
withholding on residual interests held by non-U.S. Persons, the provisions of
the REMIC Regulations, described below, relating to the transfer of residual
interests to non-U.S. Persons can be read as implying that withholding with
respect to excess inclusion income is to be determined by reference to the
amount of the accrued excess inclusion income rather than to the amount of cash
distributions. If the IRS were successfully to assert such a position, cash
distributions on Residual Certificates held by non-U.S. Persons could be subject
to withholding at rates as high as 100 percent, depending on the relationship of
accrued excess inclusion income to cash distributions with respect to such
Residual Certificates. See "Taxation of Owners of REMIC Residual Certificates-
Excess Inclusions".
Certain restrictions relating to transfers of REMIC Residual Certificates
to and by investors who are not "U.S. Persons" (as defined above) ("non-U.S.
Persons") are also imposed by the REMIC Regulations. First, transfers of REMIC
Residual Certificates to a non-U.S. Person that have "tax avoidance potential"
are disregarded for all federal income tax purposes. If such transfer is
disregarded, the purported transferor of such a REMIC Residual Certificate to a
non-U.S. Person would continue to remain liable for any taxes due with respect
to the income on such REMIC Residual Certificate. A transfer of a REMIC Residual
Certificate has tax avoidance potential unless, at the time of the transfer, the
transferor reasonably expects (1) that the REMIC will distribute to the
transferee Residual Certificateholder amounts that will equal at least 30
percent of each excess inclusion, and (2) that such amounts will be distributed
at or after the time at which the excess inclusion accrues and not later than
the close of the calendar year following the calendar year of accrual. This rule
does not apply to transfers if the income from the REMIC Residual Certificate is
taxed in the hands of the transferee as income effectively connected with the
conduct of a U.S. trade or business. Second, if a non-U.S. Person transfers a
REMIC Residual Certificate to a U.S. Person (or to a non-U.S. Person in whose
hands income from the REMIC Residual Certificate would be effectively
connected), and the transfer has the effect of allowing the transferor to avoid
tax on accrued excess inclusions, that transfer is disregarded for all federal
income tax purposes and the purported non-U.S. Person transferor continues to be
treated as the owner of the REMIC Residual Certificate. Thus, the REMIC's
liability to withhold 30 percent of the accrued excess inclusions is not
terminated even though the REMIC Residual Certificate is no longer held by a
non-U.S. Person.
M. State and Local Taxation
Many states do not automatically conform to changes in the federal income
tax laws. Consequently, a REMIC Mortgage Pool that would not qualify as a fixed
investment trust for federal income tax purposes may be characterized as a
corporation, a partnership, or some other entity for purposes of state income
tax law. Such characterization could result in entity level income or franchise
taxation of the REMIC Mortgage Pool formed in, owning mortgages or property in,
or having servicing activity performed in a state without conforming REMIC
provisions in its income or franchise tax law. Further, REMIC Regular
Certificateholders resident in non-conforming states may have their ownership of
REMIC Regular Certificates characterized as an interest other than debt of the
REMIC such as stock or a partnership interest. Investors are
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advised to consult their tax advisers concerning the state and local income tax
consequences of their purchase and ownership of REMIC Regular Certificates.
III. MORTGAGE POOLS
A. Classification of Mortgage Pools
With respect to each series of Trust Certificates for which they are
identified as counsel to the Depositor in the applicable Prospectus Supplement,
Sidley & Austin will deliver their opinion to the effect that the arrangements
pursuant to which such Mortgage Pool will be administered and such Trust
Certificates will be issued will not be classified as an association taxable as
a corporation and that each such Mortgage Pool will be classified as a trust
whose taxation will be governed by the provisions of subpart E, Part I of
subchapter J of the Code.
B. Characterization of Investments in Trust Certificates
1. Trust Fractional Certificates
In the case of Trust Fractional Certificates, counsel to the Depositor will
deliver an opinion that, in general (and subject to the discussion below of
Contracts and under "Buydown Mortgage Loans"), (i) Trust Fractional Certificates
held by a thrift institution taxed as a "mutual savings bank" or "domestic
building and loan association" will represent interests in "qualifying real
property loans" within the meaning of Code Section 593(d); (ii) Trust Fractional
Certificates held by a thrift institution taxed as a "domestic building and loan
association" will represent "loans . . . secured by an interest in real
property" within the meaning of Code Section 7701 (a)(19)(C)(v); (iii) Trust
Fractional Certificates held by a real estate investment trust will represent
"real estate assets" within the meaning of Code Section 856(c)(5)(A) and
interest on Trust Fractional Certificates will be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Code Section 856(c)(5)(B); and (iv) Trust
Fractional Certificates acquired by a REMIC in accordance with the requirements
of Section 860G(a)(3)(A)(i) and (ii) or Section 860G(a)(4)(B) of the Code will
be treated as "qualified mortgages" within the meaning of Code Section
860D(a)(4). In the case of a Trust Fractional Certificate evidencing interests
in Contracts, such Certificates will qualify for the treatment described in (i)
through (iv) of the preceding sentence only to the extent of the fraction of
such Certificate corresponding to the fraction of the Contract Pool that
consists of Contracts that would receive such treatment if held directly by the
Trust Fractional Certificateholder.
2. Trust Interest Certificates
With respect to each Series of Certificates for which they are identified
as counsel to the Depositor in the applicable Prospectus Supplement, Sidley &
Austin will advise the Depositor that in their opinion, based on the legislative
history, a REMIC that acquires a Trust Interest Certificate in accordance with
the requirements of Section 860G(a)(3)(A)(i) and (ii) or Section 860G(a)(4)(B)
of the Code will be treated as owning a "Qualified Mortgage" within the meaning
of Section 860(G)(a)(3) of the Code.
Although there appears to be no policy reason not to accord to Trust
Interest Certificates the treatment described above for Trust Fractional
Certificates, there is no authority addressing such characterization for
instruments similar to Trust Interest Certificates. Consequently, it is unclear
to what extent, if any, (1) a Trust Interest Certificate owned by a "domestic
building and loan association" within the meaning of Code Section 7701 (a)(19)
will be considered to represent "loans . . . secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v); (2) a Trust
Interest Certificate owned by a financial institution described in Code Section
593(a) will be considered to represent "qualifying real property loans" within
the meaning of Code Section 593(d); or (3) a real estate investment trust which
owns a Trust Interest Certificate will be considered to own "real estate assets"
within the meaning of Code Section 856(c)(5)(A), and interest income thereon
will be considered "interest on obligations secured by mortgages on real
property" within the meaning of Code Section 856(c)(3)(B). Prospective
purchasers to which such characterization of an investment in Trust Interest
Certificates is material should consult their own tax advisers regarding whether
the Trust Interest Certificates, and the income therefrom, will be so
characterized.
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3. Buydown Mortgage Loans
It is contemplated that the assets of certain Mortgage Pools may include
Buydown Mortgage Loans. The characterization of an investment in Buydown
Mortgage Loans will depend upon the precise terms of the related Buydown
Agreement. There are no directly applicable precedents with respect to the
federal income tax treatment or the characterization of investments in Buydown
Mortgage Loans. Accordingly, holders of Trust Certificates should consult their
own tax advisers with respect to characterization of investments in Mortgage
Pools that include Buydown Mortgage Loans.
Although the matter is not entirely free from doubt, the portion of a Trust
Certificate representing an interest in Buydown Mortgage Loans may be considered
to represent an investment in "loans . . . secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v) and "qualifying
real property loans" within the meaning of Code Section 593(d) to the extent the
outstanding principal balance of the Buydown Mortgage Loans exceeds the amount
held from time to time in the Buydown Fund. It is also possible that the entire
interest in Buydown Mortgage Loans may be so considered, because the fair market
value of the real property securing each Buydown Mortgage Loan will exceed the
amount of such loan at the time it is made. Purchasers and their tax advisers
are advised to review Section 1.593-11(d)(2) of the Treasury Regulations, which
suggests that this latter treatment may be available, and to compare Revenue
Ruling 81-203, 1981-2 C.B. 137, which may be read to imply that apportionment is
generally required whenever more than a minimal amount of assets other than real
property may be available to satisfy purchasers' claims.
For similar reasons, the portion of such Trust Certificate representing an
interest in Buydown Mortgage Loans may be considered to represent "real estate
assets" within the meaning of Code Section 856(c)(5)(A). Purchasers and their
tax advisers are advised to review Section 1.856-5(c)(1)(i) of the Treasury
Regulations, which specifies that if a mortgage loan is secured by both real
property and by other property and the value of the real property alone equals
or exceeds the amount of the loan, then all interest income will be treated as
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B).
C. Taxation of Owners of Trust Fractional Certificates
Each holder of a Trust Fractional Certificate (a "Trust Fractional
Certificateholder") will be treated as the owner of an undivided percentage
interest in the principal of, and possibly a different undivided percentage
interest in the interest portion of, each of the Mortgage Loans included in a
Mortgage Pool. Accordingly, each Trust Fractional Certificateholder must report
on its federal income tax return its allocable share of income from its
interests, as described below, at the same time and in the same manner as if it
had held directly interests in the Mortgage Loans and received directly its
share of the payments on such Mortgage Loans. Because those interests represent
interests in "stripped bonds" or "stripped coupons" within the meaning of Code
Section 1286, such interests may be considered to be newly issued debt
instruments, and thus to have no market discount or premium, and the amount of
original issue discount may differ from the amount of original issue discount on
the Mortgage Loans and the amount includible in income on account of a Trust
Fractional Certificate may differ significantly from the amount payable thereon
from payments of interest on the Mortgage Loans. Each Trust Fractional
Certificateholder may report and deduct its allocable share of the servicing and
related fees and expenses paid to or retained by the Company at the same time,
to the same extent, and in the same manner as such items would have been
reported and deducted had it held directly interests in the Mortgage Loans and
paid directly its share of the servicing and related fees and expenses. A holder
of a Trust Fractional Certificate who is an individual, estate or trust will be
allowed a deduction for servicing fees in determining its regular tax liability
only to the extent that the aggregate of such holder's miscellaneous itemized
deductions exceeds two percent of adjusted gross income, and will be allowed no
deduction for such fees in determining its liability for alternative minimum
tax. Amounts received by Trust Fractional Certificateholders in lieu of amounts
due with respect to any Mortgage Loan but not received by the Depositor from the
Mortgagor will be treated for federal income tax purposes as having the same
character as the payments which they replace.
Purchasers of Trust Fractional Certificates identified in the applicable
Prospectus Supplement as representing interests in Stripped Mortgage Loans
should read the material under the headings "Application of Stripped Bond
Rules", "Market Discount and Premium" and "Allocation of Purchase Price" for a
discussion of particular rules applicable to their Certificates.
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Purchasers of Trust Fractional Certificates identified in the applicable
Prospectus Supplement as representing interests in Unstripped Mortgage Loans
should read the material under the headings "Treatment of Unstripped
Certificates", "Market Discount and Premium", and "Allocation of Purchase Price"
for a discussion of particular rules applicable to their Certificates. However,
the IRS has indicated that under some circumstances it will view a portion of
servicing and related fees and expenses paid to or retained by the Master
Servicer or sub-servicers as an interest in the Mortgage Loans, essentially
equivalent to that portion of interest payable with respect to each Mortgage
Loan that is retained by the Depositor ("Retained Yield"). If such a view were
sustained with respect to a particular Mortgage Pool, such purchasers would be
subject to the rules set forth under "Application of Stripped Bond Rules" rather
than those under "Treatment of Unstripped Certificates". Unless otherwise stated
in the related Prospectus Supplement, the Depositor does not expect any
Servicing Fee or Master Servicing Fee to constitute a retained interest in the
Mortgage Loans; nevertheless, any such expectation generally will be a matter of
uncertainty, and prospective purchasers are advised to consult their own tax
advisers with respect to the existence of a retained interest and any effects on
investment in Trust Fractional Certificates.
1. Application of Stripped Bond Rules
Each Mortgage Pool will consist of an interest in each of the Mortgage
Loans relating thereto, exclusive of the Depositor's Retained Yield, if any.
With respect to each Series of Certificates for which they are identified as
counsel to the Depositor in the applicable Prospectus Supplement, Sidley &
Austin will advise the Depositor that, in their opinion, any Retained Yield will
be treated for federal income tax purposes as an ownership interest retained by
the Depositor in a portion of each interest payment on the underlying Mortgage
Loans. Unless otherwise stated in the Prospectus Supplement, the sale of the
Trust Certificates associated with any Mortgage Pool for which there is a class
of Trust Interest Certificates or two or more Classes of Trust Fractional
Certificates bearing different interest rates or of Trust Certificates
identified in the Prospectus Supplement as representing interests in "Stripped
Mortgage Loans" will be treated for federal income tax purposes as having
effected a separation in ownership between the principal of each Mortgage Loan
and some or all of the interest payable thereon. As a consequence, each Stripped
Mortgage Loan (generally, a Mortgage Loan having Retained Yield or included in a
Mortgage Pool having either Trust Interest Certificates or more than one class
of Trust Fractional Certificates or identified in the Prospectus Supplement as
related to a Class of Trust Certificates identified as representing interests in
Stripped Mortgage Loans) will become subject to the "stripped bond" rules of the
Code (the "Stripped Bond Rules"). The effect of applying those rules will
generally be to require each Trust Fractional Certificateholder to accrue and
report income attributable to its share of the principal and interest on each of
the Stripped Mortgage Loans as original issue discount on the basis of the yield
to maturity of such Stripped Mortgage Loans, as determined in accordance with
the provisions of the Code dealing with original issue discount. For a
description of the general method of calculating original issue discount, see
"REMIC Trust Funds-Taxation of Owners of REMIC Regular Certificates-Original
Issue Discount". The yield to maturity of a Trust Fractional Certificateholder's
interest in the Stripped Mortgage Loans will be calculated taking account of the
price at which the holder purchased the Certificate and the holder's share of
the payments of principal and interest to be made thereon. Although the
provisions of the Code and the OID Regulations do not directly address the
treatment of instruments similar to Trust Fractional Certificates, in reporting
to Trust Fractional Certificateholders the Trustee intends to treat such
Certificates as a single obligation with payments corresponding to the aggregate
of the payments allocable thereto from each of the Mortgage Loans, and to
determine the amount of original issue discount on such certificates
accordingly. See "Aggregate Reporting".
Under Treasury regulations, original issue discount so determined with
respect to a particular Stripped Mortgage Loan may be considered to be zero
under the de minimis rule described above, in which case it is treated as market
discount. See "REMIC Trust Funds-Taxation of Owners of REMIC Regular
Certificates-Original Issue Discount". Those regulations also provide that
original issue discount so determined with respect to a particular Stripped
Mortgage Loan will be treated as market discount if the rate of interest on the
Stripped Mortgage Loan, including a reasonable Servicing Fee, is no more than
one percentage point less than the unstripped rate of interest. See "-Market
Discount and Premium". The Trustee intends to apply the foregoing de minimis and
market discount rules on an aggregate poolwide basis, although it is possible
that investors may be required to apply them on a loan by loan basis. The loan
by loan information required for such application of those rules may not be
available. See "Aggregate Reporting".
Subsequent purchasers of the Certificates may be required to include
"original issue discount" in income in an amount computed using the price at
which such subsequent purchaser purchased the Certificate. Further, such
purchasers
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may be required to determine if the above described de minimis and market
discount rules apply at the time a Trust Fractional Certificate is acquired,
based on the characteristics of the Mortgage Loans at that time.
Variable Rate Certificates. Purchasers of Trust Fractional Certificates
bearing a variable rate of interest should be aware that there is considerable
uncertainty concerning the application of the OID Regulations to Mortgage Loans
bearing a variable rate of interest. Although such regulations are subject to a
different interpretation, as discussed below, in the absence of other contrary
authority in preparing reports furnished to Certificateholders the Trustee
intends to treat Stripped Mortgage Loans bearing a variable rate of interest
(other than those treated as having market discount pursuant to the regulations
described above) as subject to the provisions therein governing variable rate
debt instruments. The effect of the application of such provisions generally
will be to cause Certificateholders holding Trust Fractional Certificates
bearing interest at a Single Variable Rate or at a Multiple Variable Rate (as
defined above under "REMIC Trust Funds-Taxation of Owners of REMIC Regular
Certificates-Original Issue Discount") to accrue original issue discount and
interest as though the value of each variable rate were a fixed rate, which is
(a) for each qualified floating rate, the value of each such rate as of the
Closing Date (with appropriate adjustment for any differences in intervals
between interest adjustment dates), (b) for a qualified inverse floating rate,
the value of the rate as of Closing Date, and (c) for any other objective rate,
the fixed rate that reflects the yield that is reasonably expected for the Trust
Fractional Certificate. If the interest paid or accrued with respect to such
Variable Rate Trust Fractional Certificate during an accrual period differs from
the assumed fixed interest rate, such difference will be an adjustment (to
interest or original issue discount, as applicable) to the Certificateholder's
taxable income for the taxable period or periods to which such difference
relates.
Prospective purchasers of Trust Fractional Certificates bearing a variable
rate of interest should be aware that the provisions in the OID Regulations
applicable to variable rate debt instruments may not apply to certain adjustable
and variable rate mortgage loans, possibly including the Mortgage Loans, or to
stripped certificates representing interests in such Mortgage Loans. If variable
rate Trust Fractional Certificates are not governed by the provisions of the OID
Regulations applicable to variable rate debt instruments, such Certificates may
be subject to the provisions of proposed Treasury regulations applicable to
instruments having contingent payments. The application of those provisions to
instruments such as the Trust Fractional Certificates is subject to differing
interpretations. Prospective purchasers of variable rate Trust Fractional
Certificates are advised to consult their tax advisers concerning the tax
treatment of such Certificates.
Aggregate Reporting. The Trustee intends in reporting information relating
to original issue discount to Certificateholders to provide such information on
an aggregate poolwide basis. Applicable law is unclear, however, and it is
possible that investors may be required to compute original issue discount on a
mortgage loan by mortgage loan (or the rights to individual payments) basis
taking account of an allocation of their basis in the Certificates among the
interests in the various mortgage loans represented by such Certificates
according to their respective fair market values. Investors should be aware that
it may not be possible to reconstruct after the fact sufficient mortgage by
mortgage information should a computation on that basis be required by the IRS.
Because the treatment of the Certificates under the OID Regulations is both
complicated and uncertain, Certificateholders should consult their tax advisers
to determine the proper method of reporting amounts received or accrued on
Certificates.
2. Treatment of Unstripped Certificates.
Mortgage Loans in a Mortgage Pool for which there is neither any Class of
Trust Interest Certificates, nor more than one Class of Trust Fractional
Certificates, nor any Retained Yield otherwise identified in the Prospectus
Supplement as being Unstripped Mortgage Loans ("Unstripped Mortgage Loans") will
be treated as wholly owned by the Trust Fractional Certificateholders of a
Mortgage Pool. Trust Fractional Certificateholders using the cash method of
accounting must take into account their pro rata shares of original issue
discount qualified stated interest (as described in "REMIC Trust Funds--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount") from
Unstripped Mortgage Loans as and when collected by the Trustee. Trust Fractional
Certificateholders using an accrual method of accounting must take into account
their pro rata shares of qualified stated interest from Unstripped Mortgage
Loans as it accrues or is received
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by the Trustee, whichever is earlier, and Trust Fractional Certificateholders
using the cash method of accounting must take into account their pro rata shares
of such interest as it is received by the Trustee.
Code Sections 1272 through 1275 provide rules for the current inclusion in
income of original issue discount on obligations issued by natural persons on or
after March 2, 1984. Generally those sections provide that original issue
discount should be included on the basis of a constant yield to maturity.
However, the application of the original issue discount rules to mortgages is
unclear in certain respects. The Treasury Department has issued the OID
Regulations relating to original issue discount, which generally address the
treatment of mortgages issued on or after April 4, 1994. The OID Regulations
provide a new de minimis rule for determining whether certain self-amortizing
installment obligations, such as the Mortgage Loans, are to be treated as having
original issue discount. Such obligations would have original issue discount if
the points charged at origination (or other loan discount) exceeded the greater
of one-sixth of one percent times the number of full years to final maturity or
one-fourth of one percent times weighted average maturity. The OID Regulations
treat certain variable rate mortgage loans as having original issue discount
because of an initial rate of interest that differs from that determined by the
mechanism for setting the interest rate during the remainder of the loan, or
because of the use of an index that does not vary in a manner approved the OID
Regulations. For a description of the general method of calculating the amount
of original issue discount see "REMIC Trust Funds-Taxation of Owners of REMIC
Regular Certificates-Original Issue Discount" and "Application of Stripped Bond
Rules-Variable Rate Certificates".
A subsequent purchaser of a Trust Fractional Certificate that purchases
such Certificate at a cost (not including payment for accrued qualified stated
interest) less than its allocable portion of the aggregate of the remaining
stated redemption prices at maturity of the Unstripped Mortgage Loans will also
be required to include in gross income, for each day on which it holds such
Trust Fractional Certificate, its allocable share of the daily portion of
original issue discount with respect to each Unstripped Mortgage Loan, but
reduced, if the cost of such subsequent purchaser's interest in such Unstripped
Mortgage Loan exceeds its "adjusted issue price", by an amount equal to the
product of (i) such daily portion and (ii) a constant fraction, whose numerator
is such excess and whose denominator is the sum of the daily portions of
original issue discount allocable to such subsequent purchaser's interest for
all days on or after the day of purchase. The adjusted issue price of an
Unstripped Mortgage Loan on any given day is equal to the sum of the adjusted
issue price (or, in the case of the first accrual period, the issue price) of
such Unstripped Mortgage Loan at the beginning of the accrual period during
which such day occurs and the daily portions of original issue discount for all
days during such accrual period prior to such day, reduced by the aggregate
amount of payments made during such accrual period prior to such day other than
payments of qualified stated interest.
3. Market Discount and Premium
In general, if the Stripped Bond Rules do not apply to a Trust Fractional
Certificate, a purchaser of a Trust Fractional Certificate will be treated as
acquiring market discount bonds to the extent that the share of such purchaser's
purchase price allocable to any Unstripped Mortgage Loan is less than its
allocable share of the "adjusted issue price" of such Mortgage Loan. See
"Treatment of Unstripped Certificates" and "Application of Stripped Bond Rules".
Thus, with respect to such Mortgage Loans, a holder will be required, under Code
Section 1276, to include as ordinary income the previously unrecognized accrued
market discount in an amount not exceeding each principal payment on any such
Mortgage Loans at the time each principal payment is received or due, in
accordance with the purchaser's method of accounting, or upon a sale or other
disposition of the Certificate. In general, the amount of market discount that
has accrued is determined on a ratable basis. A Trust Fractional
Certificateholder may, however, elect to determine the amount of accrued market
discount on a constant yield to maturity basis. This election is made on a
bond-by-bond basis and is irrevocable. In addition, the description of the
market discount rules in "Taxation of Owners of REMIC Regular Certificates-
Market Discount and Premium" with respect to (i) conversion to ordinary income
of a portion of any gain recognized on sale or exchange of a market discount
bond, (ii) deferral of interest expense deductions, (iii) the de minimis
exception from the market discount rules and (iv) the elections to include in
income either market discount or all interest, discount and premium as they
accrue, is also generally applicable to Trust Fractional Certificates. Treasury
regulations implementing the market discount rules, including the 1986 Act
amendments thereto, have not yet been issued and investors therefore should
consult their own tax advisers regarding the application of these rules.
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If a Trust Fractional Certificate is purchased at a premium, under existing
law such premium must be allocated to each of the Mortgage Loans (on the basis
of its relative fair market value). The portion of any premium allocated to
Unstripped Mortgage Loans originated after September 27, 1985 can be amortized
and deducted under the provisions of the Code relating to amortizable bond
premium. The portion of such premium allocated to Unstripped Mortgage Loans
originated on or before September 27, 1985 may only be deducted upon the sale or
final distribution in respect of any such Mortgage Loan, as the special rules of
the Code that permit the amortization of such premium apply in the case of debt
instruments other than corporate and governmental obligations, only to
obligations issued after that date. Upon such a sale or final distribution in
respect of such a Mortgage Loan, the premium, if any, allocable thereto would be
recognized as a short-term or long-term capital loss by a Certificateholder
holding the interests in Mortgage Loans represented by such Certificate as
capital assets, depending on how long the Certificate had been held.
The application of the Stripped Bond Rules to Stripped Mortgage Loans will
generally cause any premium allocable to Stripped Mortgage Loans to be amortized
automatically by adjusting the rate of accrual of interest and discount to take
account of the allocable portion of the actual purchase price of the
Certificate. In that event, no additional deduction for the amortization of
premium would be allowed. It is possible that the IRS may take the position that
the application of the Stripped Bond Rules to the Stripped Mortgage Loans should
be adjusted so as not to take account of any premium allocable to a Stripped
Mortgage Loan originated on or before September 27, 1985. Any such premium would
then be subject to the provisions of the Code relating to the amortization of
bond premium, including the limitations described in the preceding paragraph on
the amortization of premium allocable to Mortgage Loans originated on or before
September 27, 1985.
4. Allocation of Purchase Price
As noted above, it is anticipated that a purchaser of a Trust Fractional
Certificate relating to Unstripped Mortgage Loans will be required to allocate
the purchase price thereof to the undivided interest it acquires in each of the
Mortgage Loans, in proportion to the respective fair market values of the
portions of such Mortgage Loans included in the Mortgage Pool at the time the
Certificate is purchased. The Depositor believes that it may be reasonable to
make such allocation in proportion to the respective principal balances of the
Mortgage Loans, where the interests in the Mortgage Loans represented by a Trust
Fractional Certificate have a common remittance rate and other common
characteristics, and otherwise so as to produce a common yield for each interest
in a Mortgage Loan, provided the Mortgage Loans are not so diverse as to evoke
differing prepayment expectations. However, if there is any significant
variation in interest rates among the Mortgage Loans, a disproportionate
allocation of the purchase price taking account of prepayment expectations may
be required
D. Taxation of Owners of Trust Interest Certificates
With respect to each Series of Certificates for which they are identified
as counsel to the Depositor in the applicable Prospectus Supplement, Sidley &
Austin will advise the Depositor that, in their opinion, each holder of a Trust
Interest Certificate (a "Trust Interest Certificateholder") will be treated as
the owner of an undivided interest in the interest portion ("Interest Coupon")
of each of the Mortgage Loans. Accordingly, and subject to the discussion under
"Application of Stripped Bond Rules" below, each Trust Interest
Certificateholder is treated as owning its allocable share of the entire
Interest Coupon from the Mortgage Loans, will report income as described below,
and may deduct its allocable share of the servicing and related fees and
expenses paid to or retained by the Depositor at the same time and in the same
manner as such items would have been reported under the Trust Interest
Certificateholder's tax accounting method had it held directly an interest in
the Interest Coupon from the Mortgage Loans, received directly its share of the
amounts received with respect to the Mortgage Loans and paid directly its share
of the servicing and related fees and expenses. An individual, estate or trust
holder of a Trust Interest Certificate will be allowed a deduction for servicing
fees in determining its regular tax liability only to the extent that the
aggregate of such holder's miscellaneous itemized deductions exceeds two percent
of adjusted gross income, and will be allowed no deduction for such fees in
determining its liability for alternative minimum tax. Amounts, if any, received
by Trust Interest Certificateholders in lieu of amounts due with respect to any
Mortgage Loan but not received by the Master Servicer from the Mortgagor will be
treated for federal income tax purposes as having the same character as the
payment which they replace.
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1. Application of Stripped Bond Rules
A Trust Interest Certificate will consist of an undivided interest in the
Interest Coupon of each of the Mortgage Loans. With respect to each Series of
Certificates for which they are identified as counsel to the Depositor in the
applicable Prospectus Supplement, Sidley & Austin will advise the Depositor
that, in their opinion a Trust Interest Certificate will be treated for federal
income tax purposes as comprised of an ownership interest in a portion of the
Interest Coupon of each of the Mortgage Loans (a "Stripped Interest") separated
by the Depositor from the right to receive principal payments and the remainder,
if any, of each interest payment on the underlying Mortgage Loan. As a
consequence, the Trust Interest Certificates will become subject to the Stripped
Bond Rules. Each Trust Interest Certificateholder will be required to apply the
Stripped Bond Rules to its interest in the Interest Coupon under the method
prescribed by the Code, taking account of the price at which the holder
purchased the Trust Interest Certificate and the Trust Interest
Certificateholder's share of the scheduled payments to be made thereon. The
Stripped Bond Rules generally require a holder of Stripped Coupons to accrue and
report income from such Stripped Coupons daily on the basis of the yield to
maturity of such stripped bonds or coupons, as determined in accordance with the
provisions of the Code dealing with original issue discount. For a discussion of
the general method of calculating the amount of original issue discount, see
"REMIC Trust Funds-Taxation of Owners of REMIC Regular Certificates-Original
Issue Discount". The provisions of the Code and the OID Regulations do not
directly address the treatment of instruments similar to Trust Interest
Certificates. In reporting to Trust Interest Certificateholders such
Certificates will be treated as a single obligation with payments corresponding
to the aggregate of the payments allocable thereto from each of the Mortgage
Loans. See "Aggregate Reporting". Alternatively, Trust Interest
Certificateholders may be required by the IRS to treat their interests in each
scheduled payment on each Stripped Interest (or their interests in all scheduled
payments from each of the Stripped Interests) as a separate obligation for
purposes of allocating purchase price and computing original issue discount.
Because prepayment of a Mortgage Loan will eliminate part or all of any
subsequent payments in the related Stripped Interest, and because each Mortgage
Loan may prepay at any time, yield to maturity for a Trust Interest Certificate
cannot be unambiguously computed pursuant to the provisions of the Code
governing original issue discount, and Trust Interest Certificates may be viewed
as representing interests in contingent principal debt instruments. Based on
the Trustee's intent to report on an aggregate poolwide basis, each of the Trust
Interest Certificates would be treated as a single installment obligation every
payment of which was contingent in amount. Such an installment obligation may
then be subject to the rules contained in the proposed Treasury regulations
issued on December 16, 1994 relating to contingent principal debt instruments.
Aggregate Reporting. The Trustee intends in reporting information relating
to original issue discount to Certificateholders to provide such information on
an aggregate poolwide basis. Applicable law is unclear, however, and it is
possible that investors may be required to compute original issue discount
either on a mortgage loan by mortgage loan basis or on a payment by payment
basis taking account of an allocation of their basis in the Certificates among
the interests in the various mortgage loans represented by such Certificates
according to their respective fair market values. The effect of an aggregate
computation for the inclusion of original issue discount in income is to defer
the recognition of losses due to early prepayments relative to a computation on
a mortgage by mortgage basis. Investors should be aware that it may not be
possible to reconstruct after the fact sufficient mortgage by mortgage
information should a computation on that basis be required by the IRS.
Because the treatment of the Trust Interest Certificates under current law,
and the application of the proposed regulations relating to contingent principal
debt instrument are both complicated and uncertain, Trust Interest
Certificateholders should consult their tax advisers to determine the proper
method of reporting amounts received or accrued on Trust Interest Certificates.
E. Prepayments
The 1986 Act contains a provision requiring original issue discount on
certain obligations issued after December 31, 1986 to be calculated taking into
account a prepayment assumption and requiring such discount to be taken into
income on the basis of a constant yield to assumed maturity taking account of
actual prepayments. The proper treatment of interests, such as the Trust
Fractional Certificates and the Trust Interest Certificates, in debt instruments
that are subject to prepayment
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is unclear. Trust Fractional Certificateholders and Trust Interest
Certificateholders should consult their tax advisors as to the proper reporting
of income from Trust Fractional Certificates and Trust Interest Certificates, as
the case may be, in light of the possibility of prepayment and, with respect to
the Trust Interest Certificates, as to the possible application of the rules
relating to contingent principal debt instruments.
F. Sales of Trust Certificates
If a Certificate is sold, gain or loss will be recognized by the holder
thereof in an amount equal to the difference between the amount realized on the
sale and the Certificateholder's adjusted tax basis in the Certificate. Such tax
basis will equal the Certificateholder's cost for the Certificate, increased by
any original issue or market discount with respect to the interest in the
Mortgage Loans represented by such Certificate previously included in income,
and decreased by any deduction previously allowed for premium and by the amount
of payments, other than payments of qualified stated interest, previously
received with respect to such Certificate. The portion of any such gain
attributable to accrued market discount not previously included in income will
be ordinary income, as will gain attributable to a Certificate which is part of
a "conversion transaction" or which the holder elects to treat as ordinary. See
"REMIC Trust Funds-Sales of REMIC Certificates" above. Any remaining gain or any
loss will be capital gain or loss if the Certificate was held as a capital asset
except to the extent that section 582(c) of the Code applies to such gain or
loss.
G. Trust Reporting
The Master Servicer will furnish to each holder of a Trust Fractional
Certificate with each distribution a statement setting forth the amount of such
distribution allocable to principal on the underlying Mortgage Loans and to
interest thereon at the Pass-Through Rate. In addition, the Master Servicer will
furnish, within a reasonable time after the end of each calendar year, to each
holder of a Trust Certificate who was such a holder at any time during such
year, information regarding the amount of servicing compensation received by the
Master Servicer and sub-servicer (if any) and such other customary factual
information as the Master Servicer deems necessary or desirable to enable
holders of Trust Certificates to prepare their tax returns.
H. Back-up Withholding
In general, the rules described in "REMIC Trust Funds-Back-up Withholding"
will also apply to Trust Certificates.
I. Foreign Certificateholders
Payments in respect of interest or original issue discount (including
amounts attributable to servicing fees) on the Mortgage Loans to
Certificateholders who are not citizens or residents of the United States,
corporations or other entities organized in or under the laws of the United
States or of any State thereof, or United States estates or trusts, will
generally be subject to 30% United States withholding tax, unless such
Certificateholders have provided required certification as to their non-United
States status under penalty of perjury and then will be free of such tax only to
the extent that the underlying Mortgages were issued after July 18, 1984. This
withholding tax may be reduced or eliminated by an applicable tax treaty.
Notwithstanding the foregoing, if any such payments are effectively connected
with a United States trade or business conducted by the Certificateholder, they
will be subject to regular United States income tax, but will ordinarily be
exempt from United States withholding tax.
J. State and Local Taxation
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences", potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
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 advisers with respect to the various state tax
consequences of an investment in the Certificates.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans subject to ERISA ("ERISA
Plans") and on those persons who are ERISA fiduciaries with respect to the
assets of such ERISA Plans. In accordance with the general fiduciary standards
of ERISA, an ERISA Plan fiduciary should consider whether an investment in the
Certificates is permitted by the documents and instruments governing the Plan,
consistent with the Plan's overall investment policy and appropriate in view of
the composition of its investment portfolio.
Employee benefit plans which are governmental plans and certain church
plans (if no election has been made under Section 410(d) of the Code) are not
subject to ERISA requirements. Accordingly, assets of such plans may be invested
in the Certificates subject to the provisions of applicable federal and state
law and, in the case of any such plan which is qualified under Section 401(a) of
the Code and exempt from taxation under Section 501(a) of the Code, the
restrictions imposed under Section 503 of the Code.
In addition to imposing general fiduciary standards, ERISA and section 4975
of the Code prohibit a broad range of transactions involving assets of ERISA
Plans and other plans subject to Section 4975 of the Code (together with ERISA
Plans, "Plans") and certain persons ("Parties in Interest") who have certain
specified relationships to the Plans and taxes and/or imposes other penalties on
any such transaction under ERISA and/or Section 4975 of the Code, unless an
exemption applies. If the assets of a Trust Fund are treated for ERISA purposes
as the assets of the Plans that purchase or hold Certificates of the applicable
Series, an investment in Certificates of that Series by or with "plan assets" of
a Plan might constitute or give rise to a prohibited transaction under ERISA or
Section 4975 of the Code, unless a statutory or administrative exemption
applies. Violation of the prohibited transaction rules could result in the
imposition of excise taxes and/or other penalties under ERISA and/or Section
4975 of the Code.
FINAL PLAN ASSETS REGULATION
The United States Department of Labor ("DOL") has issued a final regulation
(the "Final Regulation") under which assets of an entity in which a Plan makes
an equity investment will be treated as assets of the investing Plan in certain
circumstances. Unless the Final Regulation provides an exemption from this "plan
asset" treatment, and if such an exemption is not otherwise available under
ERISA, an undivided portion of the assets of a Trust Fund will be treated, for
purposes of applying the fiduciary standards and prohibited transaction rules of
ERISA and Section 4975 of the Code, as an asset of each Plan which becomes a
Certificateholder of the applicable Series.
The Final Regulation provides an exemption from "plan asset" treatment for
securities issued by an entity if, immediately after the most recent acquisition
of any equity interest in the entity, less than 25% of the value of each class
of equity interests in the entity, excluding interests held by a person who has
discretionary authority or control with respect to the assets of the entity (or
any affiliate of such a person), are held by "benefit plan investors" (e.g.,
Plans, governmental and other benefit plans not subject to ERISA and entities
holding assets deemed to be "plan assets"). Because the availability of this
exemption to any Trust Fund depends upon the identity of the Certificateholders
of the applicable Series at any time, there can be no assurance that any Series
or Class of Certificates will qualify for this exemption.
PROHIBITED TRANSACTION CLASS EXEMPTIONS
Prohibited Transaction Class Exemption 83-1 (Class Exemption for Certain
Transactions Involving Mortgage Pool Investment Trusts) ("PTCE 83-1") permits,
subject to certain conditions, certain transactions involving the creation,
maintenance and termination of certain residential mortgage pools and the
acquisition and holding of certain residential mortgage pool pass-through
certificates by Plans, regardless of whether (a) the mortgage pool is exempt
from "plan asset" treatment or (b) the transactions would otherwise be
prohibited under ERISA or Section 4975 of the Code. A Series of Certificates
will be an "Exempt Series" if the general conditions (described below) of PTCE
83-1 are satisfied, and if the applicable Series of Certificates evidences
ownership interests in Trust Assets which do not include Mortgage Certificates,
Cooperative Loans, Mortgage Loans secured by cooperative buildings, Mortgage
Loans secured by Multifamily Property,
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or Contracts (collectively "Nonexempt Assets"). An investment by a Plan in
Certificates of an Exempt Series (1) will be exempt from the prohibitions of
Section 406(a) of ERISA (relating generally to Plan transactions involving
Parties in Interest who are not fiduciaries) if the Plan purchases the
Certificates at no more than fair market value, and (2) will be exempt from the
prohibitions of Sections 406(b) (1) and (2) of ERISA (relating generally to Plan
transactions with fiduciaries) if, in addition, (i) the purchase is approved by
an independent fiduciary, (ii) the Plan pays no more for the Certificates than
would be paid in an arm's length transaction with an unrelated party, (iii) no
sales commission or other fee is paid to the Depositor as Mortgage Pool sponsor,
(iv) the Plan does not purchase more than 25% of the Certificates of that Series
and (v) at least 50% of the Certificates of that Series is purchased by persons
independent of the Depositor, the Trustee and the Insurer, as applicable. It
does not appear that PTCE 83-1 applies to a Series of Certificates with respect
to which the Trust Assets include Nonexempt Assets (a "Nonexempt Series"). See
"The Trust Fund-The Mortgage Pools" and "-The Contract Pools". Accordingly, it
appears that PTCE 83-1 will not exempt Plans that acquire Certificates of a
Nonexempt Series from the prohibited transaction rules of ERISA and Section 4975
of the Code. The applicable Prospectus Supplement will state whether a Series of
Certificates is an Exempt Series or a Nonexempt Series.
PTCE 83-1 sets forth three general conditions that must be satisfied for
any transaction to be eligible for exemption: (1) the existence of a pool
trustee who is not an affiliate of the pool sponsor; (2) the maintenance of a
system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payment due to property damage or defaults in loan
payments; and (3) a limitation on the amount of the payment retained by the pool
sponsor, together with other benefits inuring to it, to not more than adequate
consideration for selling the mortgage loans and reasonable compensation for
services provided by the pool sponsor to the mortgage pool.
The Trustee for all Series will be unaffiliated with the Depositor, and,
accordingly, the first general condition will be satisfied. With respect to the
second general condition of PTCE 83-1, the credit support method represented by
the issuance of a Subordinated Class or Subclasses of Certificates and/or the
establishment of a Reserve Fund, with respect to any Exempt Series for which
such a method of Credit Support is provided (see "Credit Support-Subordinated
Certificates" and "-Reserve Fund"), is substantially similar to a system for
protecting Certificateholders against reductions in pass-through payments which
has been reviewed and accepted by the DOL as an alternative to pool insurance or
a letter of credit indemnification system. This may support a Plan fiduciary's
conclusion that the second general condition is satisfied with respect to any
such Exempt Series although, in the absence of a ruling to this effect, there
can be no assurance that these features will be so viewed by the DOL. In
addition, the Depositor intends to use its best efforts to establish, for each
Exempt Series for which credit support is provided by a Letter of Credit (see
"Credit Support-Letters of Credit") and/or the insurance arrangements set forth
above under "Description of Insurance" (an "Insured Series"), a system that will
adequately protect the Mortgage Pools and indemnity Certificateholders of the
applicable Series against pass-through payment reductions resulting from
property damage or defaults in loan payments. With respect to the third general
condition of PTCE 83-1, the Depositor intends to use its best efforts to
establish a compensation system which will produce for the Depositor total
compensation that will not exceed adequate consideration for forming the
Mortgage Pool and selling the Certificates. However, the Depositor does not
guarantee that its systems will be sufficient to meet the second and third
general conditions (described above) with respect to any Exempt Series.
If an Exempt Series of Certificates is subdivided into two or more Classes
or Subclasses which are entitled to disproportionate allocations of the
principal and interest payments on the Mortgage Loans held by the applicable
Trust Fund, the availability of the exemption afforded by PTCE 83-1 may be
adversely affected, as described in the applicable Prospectus Supplement.
Moreover, if the Certificateholders of any Class or Subclass of Certificates are
entitled to pass-through payment of principal (but no or only nominal interest)
or interest (but no or only nominal principal), it appears that PTCE 83-1 will
not exempt Plans which acquire Certificates of that Class or Subclass from the
prohibited transaction rules of ERISA and Section 4975 of the Code.
If an Exempt Series of Certificates includes a Class of Subordinated
Certificates, PTCE 83-1 will not provide an exemption from the prohibited
transaction rules of ERISA for Plans that acquire such Subordinated
Certificates.
If for any reason PTCE 83-1 does not provide an exemption for a particular
Plan Certificateholder, one of three other prohibited transaction class
exemptions issued by the DOL might apply, i.e., PTCE 91-38 (formerly PTCE 80-51)
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(Class Exemption for Certain Transactions Involving Bank Collective Investment
Funds), PTCE 90-1 (formerly PTCE 78-19) (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts) or PTCE 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers). There can be no assurance that any of these class
exemptions will apply with respect to any particular Plan Certificateholder or,
even if it were to apply, that the exemption would apply to all transactions
involving the applicable Trust Fund. Any person who is a fiduciary by reason of
his or her authority to invest "plan assets" of any Plan (a "Plan investor") and
who is considering the use of "plan assets" of any Plan to purchase the offered
Certificates should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investments, and should determine on
its own whether PTCE 83-1 or another exemption would be applicable (and whether
all conditions have been satisfied with respect to any such exemptions), and
whether the offered Certificates are an appropriate investment for a Plan.
Moreover, each Plan fiduciary should determine whether, under the general
fiduciary standards of investment prudence and diversification, an investment in
the offered Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
UNDERWRITER'S PTE
CS First Boston Corporation ("First Boston") is the recipient of a final
prohibited transaction exemption, 54 Fed. Reg. 42597 (Oct. 17, 1989) (the
"Underwriter's PTE" or "CS First Boston Corporation's PTE" if specified in the
applicable Prospectus Supplement), which may accord protection from violations
under Sections 406 and 407 of ERISA and Section 4975 of the Code for Plans that
acquire Certificates. The Underwriter's PTE applies to certificates (a) which
represent (1) a beneficial ownership interest in the assets of a trust and
entitle the holder to pass-through payments of principal, interest and/or other
payments made with respect to the assets of the trust, or (2) an interest in a
REMIC if the certificates are issued by and are obligations of a trust; and (b)
with respect to which First Boston or any of its affiliates is either the sole
underwriter, the manager or co-manager of the underwriting syndicate or a
selling or placement agent. The corpus of a trust to which the Underwriter's PTE
applies may consist of (i) obligations which bear interest or are purchased at a
discount and which are secured by (A) single-family residential, multifamily
residential or commercial real property (including obligations secured by
leasehold interests on commercial real property) or (B) shares issued by a
cooperative housing association; and (ii) "guaranteed governmental mortgage pool
certificates" (as defined in the Final Regulation).
Plans acquiring Certificates may be eligible for protection under the
Underwriter's PTE if:
(a) assets of the type included as Trust Assets have been included in other
investment pools ("Other Pools");
(b) certificates evidencing interests in Other Pools have been both (1)
rated in one of the three highest generic rating categories by Standard & Poor's
Corporation, Moody's Investors Service, Inc., Duff & Phelps Inc. or Fitch
Investors Service, Inc., and (2) purchased by investors other than Plans, for at
least one year prior to a Plan's acquisition of Certificates in reliance upon
the Underwriter's PTE;
(c) at the time of such acquisition, the Class of Certificates acquired by
the Plan has received a rating in one of the rating categories referred to in
condition (b) above;
(d) the Trustee is not an affiliate of any member of the Restricted Group
(as defined below);
(e) the applicable Series of Certificates evidences ownership in Trust
Assets which may include non Subordinated Mortgage Certificates (whether or not
interest and principal payable with respect to the Mortgage Certificates are
guaranteed by the GNMA, FHLMC or FNMA);
(f) the Class of Certificates acquired by the Plan are not subordinated to
other Classes of Certificates of that Series with respect to the right to
receive payment in the event of defaults or delinquencies on the underlying
Trust Assets;
(g) the Plan is an "accredited investor" (as defined in Rule 501(a)(1) of
Regulation D under the Securities Act);
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(h) the acquisition of the Certificates by a Plan is on terms (including
the price for the Certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party; and
(i) the sum of all payments made to and retained by the Underwriter or
members of any underwriting syndicate in connection with the distribution of the
Certificates represents not more than reasonable compensation for underwriting
the Certificates; the sum of all payments made to and retained by the Seller
pursuant to the sale of the Trust Assets to the Trust represents not more than
the fair market value of such Trust Assets; and the sum of all payments made to
and retained by the Master Servicer and all Servicers represents not more than
reasonable compensation for such Servicers' services under the Pooling and
Servicing Agreement and reimbursement of such Servicers' reasonable expenses in
connection herewith.
In addition, the Underwriter's PTE will not apply to a Plan's investment in
Certificates if the Plan fiduciary responsible for the decision to invest in a
Class of Certificates is a Mortgagor or Obligor with respect to more than 5% of
the fair market value of the obligations constituting the Trust Assets or an
affiliate of such person, unless:
(1) in the case of an acquisition in connection with the initial issuance
of any Series of Certificates, at least 50% of each Class of Certificates in
which Plans have invested is acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group;
(2) the Plan's investment in any Class of Certificates does not exceed 25%
of the outstanding Certificates of that Class at the time of acquisition;
(3) immediately after such acquisition, no more than 25% of the Plan assets
with respect to which the investing fiduciary has discretionary authority or
renders investment advice are invested in certificates evidencing interest in
trusts sponsored or containing assets sold or serviced by the same entity; and
(4) the Plan is not sponsored by the Depositor, any Underwriter, the
Trustee, any Servicer, any Pool, Special Hazard or Primary Mortgage Insurer or
the obligor under any other credit support mechanism, a Mortgagor or Obligor
with respect to obligations constituting more than 5% of the aggregate
unamortized principal balance of the Trust Assets on the date of the initial
issuance of Certificates, or any of their affiliates (the "Restricted Group").
Each Series of Certificates generally is expected to satisfy condition (a)
unless otherwise specified in the applicable Prospectus Supplement. If a Series
includes a Class of Subordinated Certificates, that Class will not satisfy
condition (f). Additionally, the Prospectus permits the issuance of Certificates
rated in one of the four highest rating categories, so a particular Class of a
Series may not satisfy condition (c).
Whether the other conditions in the Underwriter's PTE will be satisfied as
to Certificates or any particular Class will depend upon the relevant facts and
circumstances existing at the time the Plan acquires Certificates of that Class.
Any Plan investor who proposes to use "plan assets" of a Plan to acquire
Certificates in reliance upon the Underwriter's PTE should determine whether the
Plan satisfies all of the applicable conditions and consult with its counsel
regarding other factors that may affect the applicability of the Underwriter's
PTE.
GENERAL CONSIDERATIONS
Any member of the Restricted Group, a Mortgagor or Obligor, or any of their
affiliates might be considered or might become a Party in Interest with respect
to a Plan. In that event, the acquisition or holding of Certificates of the
applicable Series or Class by, on behalf of or with "plan assets" of such Plan
might be viewed as giving rise to a prohibited transaction under ERISA and
Section 4975 of the Code, unless PTCE 83-1, the Underwriter's PTE or another
exemption is available. Accordingly, before a Plan investor makes the investment
decision to purchase, to commit to purchase or to hold Certificates of any
Series or Class, the Plan investor should determine (a) whether the second and
third general conditions and the specific conditions (described briefly above)
of PTCE 83-1 have been satisfied; (b) whether the Underwriter's PTE is
applicable; (c) whether any other prohibited transaction exemption (if required)
is available under ERISA and Section 4975 of the Code; or (d) whether an
exemption from "plan asset" treatment is available to the applicable Trust Fund.
The
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<PAGE>
Plan investor should also consult the ERISA discussion, if any, in the
applicable Prospectus Supplement for further information regarding the
application of ERISA to any Series or Class of Certificates.
Subordinated Certificates are not available for purchase by or with "plan
assets" of any Plan, other than a governmental or church plan which is not
subject to ERISA or Section 4975 of the Code (as described above), and any
acquisition of Subordinated Certificates by, on behalf of or with "plan assets"
of any such Plan will be treated as null and void for all purposes.
ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE
CERTIFICATES OF ANY SERIES OR CLASS SHOULD CONSULT WITH ITS COUNSEL WITH RESPECT
TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE
ACQUISITION AND OWNERSHIP OF SUCH CERTIFICATES.
LEGAL INVESTMENT
The applicable Prospectus Supplement for a Series of Certificates will
specify whether a Class or Subclass of such Certificates, as long as it is rated
in one of the two highest rating categories by one or more nationally recognized
statistical rating organizations, will constitute a "mortgage related security"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
Such Class or Subclass, if any, constituting a "mortgage related security" will
be a legal investment for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, insurance companies, 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.
Pursuant to SMMEA, a number of states enacted legislation, on or prior to
the October 3, 1991 cutoff 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. Accordingly, the
investors affected by such legislation will be authorized to invest in
Certificates qualifying as "mortgage related securities" only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage related
securities without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
regulatory authority may prescribe. In this connection, federal credit unions
should review NCUA Letter to Credit Unions No. 96, as modified by Letter to
Credit Unions No. 108, which includes guidelines to assist federal credit unions
in making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain Series, Classes or Subclasses of
Certificates), except under limited circumstances.
All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Securities Activities" dated
January 28, 1992, as revised April 15, 1994 (the "Policy Statement") of the
Federal Financial Institutions Examination Council.
The Policy Statement which has been adopted by the Board of Governors of
the Federal Reserve System, the Office of the Comptroller of the Currency, the
FDIC and the Office of Thrift Supervision and by the NCUA (with certain
modifications), prohibits depository institutions from investing in certain
"high-risk mortgage securities" (including securities such as certain Series,
Classes or Subclasses of the Certificates), except under limited circumstances,
and sets forth certain investment practices deemed to be unsuitable for
regulated institutions.
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Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain Series, Classes or Subclasses may be deemed unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying", and, with regard to any Certificates issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Classes of Certificates as "mortgage
related securities", no representation is made as to the proper characterization
of the Certificates for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase 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.
Investors should consult their own legal advisers in determining whether
and to what extent such Certificates constitute legal investments for such
investors.
PLAN OF DISTRIBUTION
Each Series of Certificates offered hereby and by means of the related
Prospectus Supplements may be sold directly by the Depositor or may be offered
through CS First Boston Corporation, an affiliate of the Depositor, or
underwriting syndicates represented by CS First Boston Corporation (the
"Underwriters"). The Prospectus Supplement with respect to each such Series of
Certificates will set forth the terms of the offering of such Series or
Certificates and each Subclass within such Series, including the name or names
of the Underwriters, the proceeds to the Depositor, and either the initial
public offering price, the discounts and commissions to the Underwriters and any
discounts or concessions allowed or reallowed to certain dealers, or the method
by which the price at which the Underwriters will sell such Certificates will be
determined.
Unless otherwise specified in the Prospectus Supplement, the Underwriters
will be obligated to purchase all of the Certificates of a Series described in
the Prospectus Supplement with respect to such Series if any such Certificates
are purchased. The Certificates may 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 a fixed public offering price or at
varying prices determined at the time of sale.
If so indicated in the Prospectus Supplement, the Depositor will authorize
Underwriters or other persons acting as the Depositor's agents to solicit offers
by certain institutions to purchase the Certificates from the Depositor pursuant
to contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Depositor. The obligation of any purchaser under any such
contract will be subject to the condition that the purchase of the offered
Certificates shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The Underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
The Depositor may also sell the Certificates offered hereby and by means of
the related Prospectus Supplements from time to time in negotiated transactions
or otherwise, at prices determined at the time of sale. The Depositor may effect
such transactions by selling Certificates to or through dealers, and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Depositor and any purchasers of Certificates
for whom they may act as agents.
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The place and time of delivery for each Series of Certificates offered
hereby and by means of the related Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such Series.
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered hereby
will be passed upon for the Depositor and for the Underwriters by Sidley &
Austin, New York, New York.
104
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INDEX OF TERMS
Page on which
Term is defined
Term in the Prospectus
- ---- -----------------
Accrual Distribution Amount.................................... 30
Advances....................................................... 12
AFR............................................................ 83
Agreement...................................................... 28
Approved Sale.................................................. 61
APR............................................................ 21
ARM Loans...................................................... 15
Asset Value.................................................... 29
Assets......................................................... 79
Certificate Account............................................ 39
Certificate Principal Balance.................................. 3
Certificateholders............................................. 17
Certificates................................................... 1
Class.......................................................... 1
Cleanup Costs.................................................. 69
Closed Loans................................................... 18
Closing Date................................................... 76
Code........................................................... 12
Committee Report............................................... 73
Contract Pool.................................................. 1
Contract Schedule.............................................. 34
Contracts...................................................... 1
Converted Mortgage Loan........................................ 15
Cooperative.................................................... 3
Cooperative Dwelling...............................................
Cooperative Loans..................................................
Custodial Account.............................................. 36
Custodial Agreement............................................ 22
Custodian...................................................... 22
Deferred Interest.............................................. 15
Deficiency Event............................................... 50
Deleted Contract............................................... 23
Deleted Mortgage Certificates.................................. 32
Deleted Mortgage Loans......................................... 33
Deposit Trust Agreement........................................ 28
Depositor...................................................... 1
Determination Date............................................. 39
Discount Certificate........................................... 7
Distribution Date.............................................. 4
DOL............................................................ 98
Due Date....................................................... 15
Due Period..................................................... 31
ERISA.......................................................... 12
ERISA Plans.................................................... 98
Escrow Account................................................. 42
Exempt Series.................................................. 99
FHA............................................................ 1
105
<PAGE>
FHA Experience................................................. 26
FHA Loans...................................................... 14
Final Regulation............................................... 98
First Boston................................................... 100
GPM Fund....................................................... 11
GPM Loans...................................................... 16
Initial Deposit................................................ 10
Insurance Proceeds............................................. 37
Insured Series................................................. 99
Interest Coupon................................................ 95
Interest Distribution.......................................... 30
Interest Rate.................................................. 3
Interest Weighted Class........................................ 3
Interest Weighted Subclass..................................... 3
IRS............................................................ 76
L/C Bank....................................................... 8
L/C Percentage................................................. 9
Letter of Credit............................................... 8
Liquidating Loan............................................... 8
Liquidation Proceeds........................................... 37
Loss........................................................... 57
Manufactured Home.............................................. 7
Master Servicer................................................ 4
Mortgage Certificates.......................................... 1
Mortgage Loans................................................. 1
Mortgage Notes................................................. 14
Mortgage Pool.................................................. 1
Mortgage Rates................................................. 6
Mortgaged Property............................................. 5
Mortgagor...................................................... 5
Mortgagor Bankruptcy Bond...................................... 8
Multifamily Property........................................... 14
Multiple Variable Rate......................................... 78
Nonexempt Assets............................................... 99
Nonexempt Series............................................... 99
non-U.S. Person................................................ 89
Obligo......................................................... 25
OID Regulations................................................ 74
Original Value................................................. 5
Originator..................................................... 18
Other Pools.................................................... 100
Parties in Interest............................................ 98
Percentage Interest............................................ 1
Performance Bond............................................... 22
Plans.......................................................... 98
Policy Statement............................................... 103
Pool Insurance Policy.......................................... 8
Pool Insurer................................................... 9
Premium Certificate............................................ 7
Prepayment Assumption.......................................... 76
Primary Insurer................................................ 38
Primary Mortgage Insurance Policy.............................. 9
Primary Mortgage Insurer....................................... 45
106
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Principal Distribution......................................... 30
Principal Prepayments.......................................... 10
Principal Weighted Class....................................... 3
Purchase Price................................................. 35
Rating Agency.................................................. 1
Record Date.................................................... 29
Reference Agreement............................................ 8
REIT........................................................... 4
REMIC.......................................................... 1
REMIC Certificateholders....................................... 74
REMIC Certificates............................................. 73
REMIC Mortgage Pool............................................ 73
REMIC Provisions............................................... 73
REMIC Regular Certificate...................................... 73
REMIC Regulations.............................................. 74
REMIC Residual Certificate..................................... 73
Required Distribution.......................................... 55
Required Reserve............................................... 11
Reserve Fund................................................... 8
Residual Certificates.......................................... 3
Residual Owner................................................. 81
Restricted Group............................................... 101
Retained Yield................................................. 92
Securities Act................................................. 2
Senior Certificates............................................ 8
Senior Class................................................... 3
Senior Prepayment Percentage................................... 54
Senior Subclass................................................ 3
Series......................................................... 1
Servicer....................................................... 17
Servicing Account.............................................. 36
Servicing Agreement............................................ 17
Single Family Property......................................... 5
Single Variable Rate........................................... 76
Single-Class REMIC............................................. 86
SMMEA.......................................................... 12
SPA............................................................ 26
Special Distributions.......................................... 5
Special Hazard Insurance Policy................................ 11
Standard Hazard Insurance Policy............................... 43
Standard Terms................................................. 28
Stated Principal Balance....................................... 1
Stated Principal Distribution Amount........................... 30
Stripped Bond Rules............................................ 92
Stripped Interest.............................................. 96
Stripped Mortgage Loan......................................... 92
Subclass....................................................... 1
Subordinated Amount............................................ 8
Subordinated Certificates...................................... 8
Subordinated Class............................................. 3
Subordinated Pool.............................................. 10
Subordinated Subclass.......................................... 3
Substitute Contract............................................ 23
107
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Substitute Mortgage Certificates............................... 32
Substitute Mortgage Loans...................................... 33
Tiered REMICS.................................................. 75
Title V........................................................ 73
Trust Assets................................................... 4
Trust Certificates............................................. 73
Trust Fractional Certificate................................... 73
Trust Fractional Certificateholder............................. 91
Trust Fund..................................................... 1
Trust Interest Certificate..................................... 90
Trust Interest Certificateholder...................................
U.S. Person.................................................... 88
UCC............................................................ 66
Unaffiliated Sellers........................................... 18
Underwriters................................................... 103
Unstripped Mortgage Loans...................................... 94
VA............................................................. 1
VA Loans....................................................... 14
108
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
--------------------------------
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<S> <C>
Prospectus Supplement................................................. 2
Additional Information................................................ 2
Incorporation of Certain Information by Reference..................... 2
Summary of Terms...................................................... 3
The Trust Fund........................................................ 14
The Depositor......................................................... 23
Use of Proceeds....................................................... 23
Yield Considerations.................................................. 24
Maturity and Prepayment Consideration................................. 26
Description of the Certificates....................................... 27
Credit Support........................................................ 53
Description of Insurance.............................................. 57
Certain Legal Aspects of the Mortgage
Loans and Contracts................................................. 64
Certain Federal Income Tax Consequences............................... 73
ERISA Considerations.................................................. 98
Legal Investment...................................................... 102
Plan of Distribution.................................................. 103
Legal Matters......................................................... 104
Index of Terms........................................................ 105
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Asset Backed
Securities Corporation
Depositor
$
_________ Conduit Mortgage
Pass-Through Certificates,
Series 199 -___
PROSPECTUS
CS FIRST BOSTON
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated [ ], 199[ ]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 199[ ]
CSFB CARD ACCOUNT MASTER TRUST, 1995-[ ]
$[ ] [(Approximate)] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
[Class A] Asset Backed [Senior/Subordinate] Certificates, Series 199[ ]-[ ]
[$[ ] [(Approximate)] [ %] [Floating Rate] [Adjustable Rate] [Variable
Rate] [Class B] Asset Backed [Senior/Subordinate] Certificates,
Series 199[ ]-[ ]]
ASSET BACKED SECURITIES CORPORATION, DEPOSITOR
Seller [and Servicer] Name], as Seller [and Servicer] of the Receivables
[Servicer Name, as Servicer]
The [ %] [Floating Rate][Adjustable Rate] [Variable Rate] [Class A]
Asset Backed Certificates, Series 199[ ]-[ ] (the "[Class A] Certificates")
[and the] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] [Class B]
Asset Backed Certificates, Series 199[ ]-[ ] (the "[Class B] Certificates,"
and together with the Class [A] Certificates, the "Certificates")] offered
hereby represent fractional undivided interests in the CSFB Card Account Master
Trust (the "Trust") formed pursuant to a [Master] Pooling and Servicing
Agreement among [Servicer Name,] [(the "Servicer"),] [Seller [and Servicer]
Name], (the "Seller"), Asset Backed Securities Corporation, (the "Depositor")
and [Trustee Name], as trustee (the "Trustee") (the "Agreement"). The property
of the Trust includes, among other assets, a portfolio of [consumer] [corporate]
[revolving] [credit card] [charge card] [debit card] receivables
([collectively,] the "Receivables") generated or to be generated from time to
time in a portfolio of [consumer] [corporate] [revolving] [credit card] [charge
card] [debit card] accounts [owned
(Continued on the following page)
----------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF THE DEPOSITOR, THE SELLER, THE TRUSTEE, OR ANY AFFILIATE
THEREOF, EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN. A CERTIFICATE IS NOT
A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("THE FDIC"). THE RECEIVABLES ARE NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
====================================================================================================
Price to Public Underwriting Discount Proceeds to the Seller (1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per [Class A] Certificate
- ----------------------------------------------------------------------------------------------------
[Per [Class B] Certificate]
- ----------------------------------------------------------------------------------------------------
Total
====================================================================================================
</TABLE>
(1) Before deduction of expenses payable by the Seller, estimated to be $[ ].
----------
The Certificates are offered by the Underwriters when, as and if
issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Certificates will be [delivered in book-entry form] [available for delivery]
on or about [ ] through the facilities of [The Depository Trust Company]
[CEDEL S.A.] [or] [Euroclear System]] [(at the offices of[ ]]. [The
Certificates will be offered in Europe and the United States of America.]
----------
Underwriters of the Certificates
[LOGO] CS First Boston
The date of this Prospectus Supplement is [ ], 199[ ]
<PAGE>
by the Seller] (the "Accounts"), all monies due in payment of the Receivables,
collections thereon and certain other property, as described more fully herein.
The [Seller] [Depositor] will own the remaining undivided interest in the Trust
not represented by the Certificates and the other certificates or interests
issued by the Trust. [The Trust will also issue the Collateral Interest (as
defined herein), [an uncertificated] undivided interest in certain assets of the
Trust and certain other property described herein, which will be subordinated to
the Certificates as described herein and will be issued in the initial amount of
$[ ].] [The fractional undivided interest in the Trust represented by the
Class B Certificates will be subordinated to fund payments with respect to the
Class A Certificates to the extent described herein. No principal payments will
be made in respect of the Class B Certificates until the final principal payment
has been made in respect of the Class A Certificates.] The Depositor [has
offered] [from time to time may offer] other series of certificates that
evidence undivided interests in the Trust which may have terms significantly
different from the Certificates. The issuance of additional series of
certificates may impact the timing or amount of payments received by the holders
of the Certificates.
[Only the [Class A] Certificates [and the [Class B] Certificates] are being
offered hereby.]
Interest will accrue on the [Class A] Certificates at the rate of [[ ]%
per annum] [insert Class A Certificate Rate formula] (the "[Class A] Certificate
Rate"). [Interest will accrue on the [Class B] Certificates at the rate of
[[ ]% per annum] [insert [Class B] Certificate Rate formula] (the "[Class B]
Certificate Rate").] Interest with respect to the Certificates will be
distributed on the [ ] day of each [month] [quarter] [semi-annual period] (an
"Interest Period") (or if such a day is not a business day, the next succeeding
business day) commencing on the [ ], 199[ ] Distribution Date.
Principal with respect to the [Class A] Certificates is scheduled to be
paid on the [ ], 199[ ] Distribution Date, but may be paid earlier or later
under certain circumstances described herein. [Principal with respect to the
[Class B] Certificates is scheduled to be paid on the [ ], 199[ ]
Distribution Date, but may be paid earlier or later under circumstances
described herein.] See "MATURITY CONSIDERATIONS" and "SERIES PROVISIONS -- Pay
Out Events" herein. [Principal payments will not be made in respect of the
[Class B] Certificates until the final principal payment has been paid in
respect of the [Class A] Certificates.] See -- "DESCRIPTION OF THE CERTIFICATES
- -- Principal Payments" herein.
The Termination Date for the Certificates is the [ ], 199[ ]
Distribution Date. The first Distribution Date with respect to the Certificates
is the [ ], 199[ ] Distribution Date.
The Certificates initially will be represented by certificates which will
be [registered in the name of the Cede & Co., the nominee of The Depository
Trust Company] [definitive certificates]. The interests of holders of
beneficial interests in the Certificates will be [represented by book-entries on
the records of The Depository Trust Company and participating members thereof]
[registered on the Certificates]. [Definitive Certificates will be available to
Certificate Owners only under the limited circumstances described in the
Prospectus. See "DESCRIPTION OF THE CERTIFICATES -- Definite Certificates" in
the Prospectus.]
There currently is no secondary market for the Certificates, and there can
be no assurance that one will develop. The Underwriters expect, but are not
obligated, to make a market in the Certificates. There is no assurance that any
such market will develop or continue. Potential investors should consider,
among other things, the information set forth in "SPECIAL CONSIDERATIONS" herein
and in the Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until 90 days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and
Prospectus. This is in addition to the obligation of dealers acting as
underwriters to deliver a Prospectus Supplement and Prospectus with respect to
their unsold allotments and subscriptions.
--------------------
The Certificates offered hereby constitute a separate series of Asset
Backed Certificates being offered by Asset Backed Securities Corporation from
time to time pursuant to its Prospectus dated [ ], 199[ ]. This Prospectus
Supplement does not contain complete information about the offering of the
Certificates. Additional information is contained in the Prospectus and
investors are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Certificates may not be consummated unless the purchaser
has received both this Prospectus Supplement and the Prospectus.
S-2
<PAGE>
SUMMARY
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement or in the Glossary of Terms in
the Prospectus.
<TABLE>
<S> <C>
Trust CSFB Card Account Master Trust (the
"Trust").
Title of Securities.................... $[ ] [ %][Floating
Rate][Adjustable Rate] [Variable
Rate] [Class A] Asset Backed
Certificates, Series 199[ ]-[ ] (the
"[Class A] Certificates") [;and
$[ ] [ %][Floating Rate]
[Adjustable Rate] [Variable Rate]
Class B Asset Backed Certificates,
Series 199[ ]-[ ] (the "[Class B]
Certificates," and together with
[Class A] Certificates, the
"Certificates")].
Initial Invested Amount................ $[ ] (the "Initial Invested
Amount").
[[Class A] Initial Invested Amount..... $[ ] (the "[Class A] Initial
Invested Amount").]
[[Class B] Initial Invested Amount..... $[ ] (the "[Class B] Initial
Invested Amount").]
[Collateral Initial Invested Amount.... $[ ] ("the Collateral Initial
Invested Amount").]
[Initial Cash Collateral Amount........ $[ ] ("the Initial Cash
Collateral Amount").]
[Required Seller's Amount.............. For any date [ ]% of the Invested
Amount ("Required Seller's Amount").]
[Class A] Certificate Rate............. The [Class A] Certificate Rate for an
Interest Period will be a rate per
annum equal to [insert Class A
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Certificate Rate formula] for a
period of [one] [three] [six] months
[(or following a Pay Out Event, for
a period of one month)].
[[Class B] Certificate Rate............ The [Class B] Certificate Rate for an
Interest Period will be a rate per
annum equal to [insert Class B
Certificate Rate formula] for a
period of [one] [three] [six] months
[(or following a Pay Out Event, for
a period of one month)].]
Interest Payment Dates................. The [ ] day of each [month]
[quarter] [semi-annual period] (an
"Interest Period") (or if any such
day is not a business day, the next
succeeding business day), commencing
on the [ ], 199[ ] Distribution
Date.
[Class A] [Controlled Amortization
Amount] [Controlled Accumulation
Amount]................................ For each Distribution Date with
respect to the [Class A] [Controlled
Amortization] [Accumulation] Period,
$[ ][; except that if the
commencement of the [Class A] Controlled
Accumulation Period is delayed as
described herein under "SERIES
PROVISIONS -- Principal Payments," the
[Class A] Controlled Accumulation Amount
for each Distribution Date with respect
to the [Class A] Accumulation Period
will be determined as described under
"DESCRIPTION OF THE CERTIFICATES --
Application of Collections -- Payments
of Principal."]
In general, on each Distribution Date
during the [Class A] [Accumulation
Period] [Controlled Amortization
Period], collections of Principal
Receivables and certain other amounts
allocable to the [Class A]
Certificateholders' Interest will be
[deposited in the Principal Funding
Account] [distributed to the [Class A]
Certificateholders as repayment of
principal
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
with respect to the [Class A]
Certificates], in an amount equal to the
[Controlled Accumulation Amount]
[Controlled Amortization Amount] and any
[Controlled Accumulation Amount]
[Controlled Amortization Amount]
previously due but not [paid to
Certificateholders] [deposited in the
Principal Funding Account] on a prior
Distribution Date.
[On each Distribution Date with respect
to the [Class B] [Controlled
Amortization Period] [Accumulation
Period] [which shall commence after the
principal amount of the [Class A]
Certificates has been paid in full]
collections of Principal Receivables and
certain other amounts allocable to the
[Class B] Certificateholders' Interest
will be [deposited in the Principal
Funding Account] [distributed to the
[Class B] Certificateholders as a
repayment of principal with respect to
the [Class B] Certificates], in an
amount equal to the [Controlled
Amortization Amount] [Controlled
Accumulation Amount] and any [Controlled
Amortization Amount] [Controlled
Accumulation Amount] previously due but
not [paid to [Class B]
Certificateholders] [deposited in the
Principal Funding Account] on a prior
Distribution Date. ]
[On the earlier to occur of a Pay Out
Event or the Expected Final Payment
Date, amounts on deposit in the
Principal Funding Account will be
distributed to Certificateholders as a
repayment of principal in respect of the
Certificates.]
[Class A] Expected Final Payment Date.. The [ ], 199[ ] Distribution Date.
[Class B Expected Final Payment Date... The [ ], 199[ ] Distribution Date.]
Cut-Off Date........................... [ ], 199[ ].
Issuance Date.......................... [ ], 199[ ].
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
The Certificates; the Collateral
Interest............................... Each of the Certificates offered hereby
represents an undivided interest in the
Trust. [The portion of the Trust assets
allocated to the Certificates will be
further allocated among] [the interests
of the holders of the Class A
Certificates (the "Class A
Certificateholders' Interest"), and the
interests of the holders of the Class B
Certificates (the "Class B
Certificateholders' Interest")] [and the
interest of the holders of the
[Seller's] Certificate (the "[Seller's]
Interest"), as described below]. [The
Class A Certificateholders' Interest and
the Class B Certificateholders' Interest
are sometimes collectively referred to
herein as the Certificateholders'
Interest.]
[In addition, an undivided interest in
the Trust (the "Collateral Interest") in
the initial amount of $[ ] (an amount
that represents [ ]% of the sum of the
Initial Invested Amount and the Initial
Collateral Invested Amount) constitutes
the Credit Enhancement for the
Certificates. The provider of such
Credit Enhancement is the "Collateral
Interest Holder."]
The principal amount of the [Class A]
Certificateholders' Interest [and the
Class B Certificateholders' Interest]
will remain fixed at the aggregate
initial principal amount of the [Class
A] Certificates [and the Class B
Certificates, respectively,] except as
otherwise provided herein. [The Class B
Certificateholders' Interest will
decline in certain circumstances as a
result of (a) the allocation to the
Class B Certificateholders' Interest of
Defaulted Amounts otherwise allocable to
the Class A Certificateholders' Interest
and (b) the reallocation of collections
of Principal Receivables otherwise
allocable to the Class B
Certificateholders' Interest to fund
certain payments in respect of the Class
A Certificates. Any such reductions in
the Class B Certificateholders' Interest
may be reimbursed out of Excess Spread,
if any, [and]
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Excess Finance Charges allocable to
Series 199[ ]-[ ] [, and certain amounts
withdrawn from the Cash Collateral
Account as described herein].]
[During the Accumulation Period, for the
sole purpose of allocating collections
of Finance Charge Receivables and the
Defaulted Amount with respect to each
Monthly Period, the [Class A]
Certificateholders' Interest [and (after
the Class B Principal Commencement Date)
the Class B Certificateholders'
Interest] will be further reduced by the
amount [on deposit in the Principal
Funding Account] (as so reduced, [the
"Class A Adjusted Invested Amount" and
the "Class B Adjusted Invested Amount,"
respectively, and collectively,] the
"Adjusted Invested Amount").]
[During the Controlled Amortization
Period, for the sole purpose of
allocating collections of Finance Charge
Receivables and the Defaulted Amount
with respect to each Monthly Period, the
[Class A] Certificateholders' Interest
[and (after the Class B Principal
Commencement Date) the Class B
Certificateholders' Interest] will be
further reduced as principal is paid to
the Certificateholders (as so reduced,
[the "Class A Adjusted Invested Amount"
and the "Class B Adjusted Invested
Amount," respectively, and
collectively,] the "Adjusted Invested
Amount").]
The Certificateholders' Interest [and
the Collateral Interest] will include
the right to receive (but only to the
extent needed to make required payments
under the Agreement and the Series
Supplement and subject to any
reallocation of such amounts as
described herein) varying percentages of
the collections of Finance Charge
Receivables and Principal Receivables
and will be allocated a varying
percentage of the Defaulted Amount with
respect to each Monthly Period. Finance
Charge Receivables collections and the
Defaulted Amount will be
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
allocated to the Certificates based on
the Floating Allocation Percentage.
[Such amounts will be further allocated
to the Class A Certificates and the
Class B Certificates based on the Class
A Floating Percentage and the Class B
Floating Percentage, respectively.]
Collections of Principal Receivables
will be allocated to the Certificates
based on the Principal Allocation
Percentage. Such percentage will vary
depending on whether the Certificates
are in their Revolving Period,
[Accumulation Period] [Controlled
Amortization Period] or Rapid
Amortization Period. See also
"DESCRIPTION OF THE CERTIFICATES --
Allocation Percentages" herein. [Such
amounts will be further allocated to the
Class A Certificates and the Class B
Certificates as described herein. See
"DESCRIPTION OF THE CERTIFICATES --
Allocation Percentages" herein.]
[Following the occurrence of a Pay Out
Event and a withdrawal of funds from the
Cash Collateral Account, a portion of
the Certificateholders' Interest
(corresponding to the aggregate amount
of such withdrawal) will be allocated to
the Cash Collateral Depositor.]
[Issuance of Additional Certificates..] [After the completion of the offering made hereby, the
Depositor may cause the Trustee to issue
additional Certificates of Series
199[ ]-[ ] ("Additional Certificates")
from time to time during the Revolving
Period, provided that certain conditions
described herein under "DESCRIPTION OF
THE CERTIFICATES -- Issuance of
Additional Certificates" are met. In
connection with each Issuance of
Additional Certificates, the outstanding
principal amounts of the [Class A]
Certificates [and the Class B
Certificates] [and the aggregate amount
of the Collateral Interest] will be
increased pro rata. When issued, the
Additional Certificates [of a class]
will be identical in all respects to the
other outstanding Certificates [of that
class]. See
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
"DESCRIPTION OF THE CERTIFICATES --
Issuance of Additional Receivables
Certificates" herein.]
Receivables............................ The Receivables arise in Accounts that
have been selected from the Seller's
portfolio based on selection criteria
provided in the Agreement as applied on
[ ], 199[ ] (the "Initial Cut-Off
Date"). The aggregate amount of
Receivables in the Accounts as of the
Initial Cut-Off Date was $[ ], comprised
of $[ ] of Principal Receivables and
$[ ] of Finance Charge Receivables.
The aggregate undivided interest in the
Principal Receivables evidenced by the
Certificates will never exceed the
Investor Amount, regardless of the total
amount of Principal Receivables at any
time in the Trust.
[On [ ], 199[ ] (the "Closing
Date"), the Depositor will purchase
Receivables (the "[Initial]
Receivables") having an aggregate
principal balance of approximately
$[ ] as of [ ], 199[ ] (the
"[Initial] Cut-Off Date"), from
the Seller pursuant to an Agreement to
be dated as of [ ], 199[ ].]
[On and following the Closing Date,
pursuant to the Agreement, the Depositor
will be obligated, subject only to the
availability thereof, to purchase from
the Seller and sell to the Trust, and
the Trust will be obligated to purchase,
subject to the satisfaction of certain
conditions set forth therein, additional
Receivables generated from Subsequent
Accounts (the "Subsequent Receivables")
from time to time during the Funding
Period having an aggregate principal
balance equal to approximately $[ ]
(such amount being equal to an amount on
deposit in the Pre-Funding Account (the
"Pre-Funding Amount") on the Closing
Date). The Depositor will designate as a
cut-off date (each a "Subsequent Cut-off
Date") the date as of which particular
Subsequent Receivables are conveyed to
the Trust. It is expected
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
that certain of the Subsequent
Receivables arising between the Initial
Cut-off Date and the Closing Date will
be conveyed to the Trust on the Closing
Date and that other Subsequent
Receivables will be conveyed to the
Trust as frequently as daily thereafter
on dates specified by the [Depositor]
[Seller] (each date on which Subsequent
Receivables are conveyed to the Trust
being referred to as a "Subsequent
Transfer Date") occurring during the
Funding Period. ]
[The [Initial] Receivables will be
selected[, and the Subsequent
Receivables will be selected,] from the
Receivables owned by the Seller based on
the criteria specified in the Agreement
and described herein.]
Subsequent Receivables may be originated
at a later date using credit criteria
different from those which were applied
to the [Initial] Receivables and may be
of a different credit quality and
seasoning. In addition, following the
transfer of Subsequent Receivables to
the Trust, the characteristics of the
entire pool of Receivables included in
the Trust may vary significantly from
those of the Initial Receivables.
Denominations.......................... The Certificates will be offered for
purchase in denominations of [$1,000]
and integral multiples thereof,
[except that one Certificate may be
issued in a denomination that is not
an integral multiple of $1,000].
[Except in certain limited
circumstances as described in the
Prospectus under "DESCRIPTION OF THE
CERTIFICATES -- Definitive
Certificates," the Certificates will
[only] be available in [book-entry]
[or] [definitive] form.]
[Registration of Certificates.......... The Certificates initially will be
issued in book-entry form. Persons
acquiring beneficial ownership
interests in the Certificates
("Certificate Owners") may elect to
hold their Certificate interests
through
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
[The Depository Trust Company ("DTC"),
in the United States,] [or Centrale de
Livraison de Valeurs Mobilieres S.A.
("CEDEL")] [or the Euroclear System
("Euroclear")] in Europe]. Transfers
within [DTC], [CEDEL] [or] [Euroclear],
[as the case may be,] will be in
accordance with the usual rules and
operating procedures of the relevant
system. The Certificates will be
evidenced by one or more Certificates
registered in the name of [Cede & Co.
("Cede"), as the nominee of DTC] [or]
[one of the relevant depositaries
(collectively, the "European
Depositaries")]. [Cross-market transfers
between persons holding directly or
indirectly through DTC, on the one hand,
and counterparties holding directly or
indirectly through CEDEL or Euroclear,
on the other, will be effected in DTC
through [Citibank N.A. ("Citibank")] or
[Morgan Guaranty Trust Company of New
York ("Morgan")], the relevant
depositaries of [CEDEL] [or]
[Euroclear,] [respectively,] and each a
participating member of DTC.] [The
Certificates will be registered in the
name of Cede & Co.] [The interests of
the Certificateholders will be
represented by book-entries on the
records of DTC and participating members
thereof.] No Certificate Owner will be
entitled to receive a definitive
certificate representing such person's
interest, except in the event that
Definitive Certificates (as defined
herein) are issued under the limited
circumstances described herein.]
[All references in this Prospectus
Supplement to any Certificates reflect
the rights of Certificate Owners only as
such rights may be exercised through DTC
and its participating organizations for
so long as such Certificates are held by
DTC. See "SPECIAL CONSIDERATIONS-- Book-
Entry Certificates" in the Prospectus.]
Depositor.............................. Asset Backed Securities Corporation.
[Seller................................ Insert information regarding Seller.]
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
[Servicer.............................. Insert information regarding
Servicer, if different from the
Seller.]
Servicing Fee.......................... The Servicing Fee Rate for the
Certificates [shall be [ %] per
annum] [shall be, with respect to
any Distribution Date, equal to
one-twelfth of the product of [ %]
and [the sum of] the Adjusted Invested
Amount [and the [Collateral] Invested
Amount], as of the last day of the
Monthly Period preceding such
Distribution Date]. The [Class A]
Servicing Fee, [and] [the Class B
Servicing fee] [and] [the [Collateral]
Interest Servicing Fee] will be paid on
each Distribution Date.
Revolving Period and [Controlled
Amortization Period] [Accumulation
Period]................................ The "Revolving Period" with respect to
the Certificates means the period from
and including the [Initial] Cut-Off
Date, to, but not including, the earlier
of (a) the day on which the [Controlled
Amortization Period] [Accumulation
Period] commences, and (b) in the event
that a Pay Out Event shall occur, the
day on which the Rapid Amortization
Period commences.
[Unless a Pay Out Event occurs and the
Rapid Amortization Period commences, the
Certificates will have an accumulation
period (the "Accumulation Period"),
which will commence at the close of
business on [ ], 199[ ]; provided, that
subject to the conditions set forth
herein, the day on which the Revolving
Period ends and the Accumulation Period
begins may be delayed to no later than
the close of business on [ ], 199[ ].
The Accumulation Period will end on the
earliest of (a) the commencement of a
the Rapid Amortization Period, (b)
payment in full of the Invested Amount
of the Certificates and (c) the
Termination Date.]
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
[During the Accumulation Period, until
the Certificates are paid in full,
collections of Principal Receivables and
certain other amounts allocable to the
Certificateholders' Interest will be
deposited on each Distribution Date in a
trust account (the "Principal Funding
Account") and used to make principal
distributions to the Certificateholders
when due.]
[The controlled amortization period with
respect to the Certificates (the
"Controlled Amortization Period"), is
scheduled to commence at the close of
business on the last day of the [ ].
The Controlled Amortization Period will
end on the earliest of (a) the
commencement of the Rapid Amortization
Period, (b) the payment in full of the
Invested Amount or (c) the Termination
Date. In general, on each Distribution
Date during the Controlled Amortization
Period, collections of Principal
Receivables and certain other amounts
allocable to the Certificateholders'
Interest will be distributed to the
Certificateholders as a repayment of
principal with respect to the
Certificates, in a amount equal to the
Controlled Amortization Amount and any
Controlled Amortization Amount
previously due but not paid to
Certificateholders on a prior
Distribution Date.]
During the Revolving Period, no
principal will be payable with respect
to the Certificates; rather, collections
of Principal Receivables and certain
other amounts (other than Reallocated
Principal Receivables) otherwise
allocable to the Certificateholders
[will] [may], subject to certain
limitations, be treated as Shared
Principal Collections and applied to
cover principal due to or for the
benefit of the certificateholders of
other Series, or be paid from the Trust
to the holder of the [Seller's]
Certificate to maintain the
Certificateholders' Interest in the
Trust.
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
[No principal will be payable to the
[Class A] Certificateholders until the
[ ], 199[ ] Distribution Date (the
"Expected Final Payment Date"), or after
the occurrence of a Pay Out Event and
the commencement of the Rapid
Amortization Period, the first
Distribution Date with respect to the
Rapid Amortization Period[. No principal
will be payable to the [Class B]
Certificateholders until the Class A
Invested Amount has been paid in full.]
[No principal will be payable to the
[Collateral] Interest Holder until the
[Class B] Invested Amount has been paid
in full]; provided that during the
Revolving Period or the [Controlled
Amortization Period] [Accumulation
Period], certain collections of
Principal Receivables allocable to the
Certificateholders' Interest will be
paid to the [Collateral] Interest Holder
to the extent the [Collateral] Invested
Amount exceeds the Required [Collateral]
Invested Amount.]
[Funds on deposit in any Principal
Funding Account may be invested in
permitted investments or subject to a
guaranteed rate or investment contract
or other arrangement intended to assure
a minimum return on the investment of
such funds. Investment earnings on such
funds may be applied to pay interest on
the Certificates.]
Additional Amounts
Available to Certificate
holders................................ The [Class A] Required Amount means,
with respect to any Distribution
Date, the amount, if any, by which
the sum of (i) current and overdue
[Class A] Monthly Interest, (ii)
current and overdue [Class A]
Additional Interest, (iii) current
and overdue [Class A] Servicing Fee
and (iv) the [Class A] Default
Amount with respect to the related
Distribution Date exceeds [Class A]
Available Funds. If the [Class A]
Required Amount is greater than
zero, then Excess Spread and Excess
Finance Charges allocable to Series
199[ ]-[ ] will be applied to fund
the
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
deficiency. [If Excess Spread and
Excess Finance Charges allocable to
Series 199[ ]-[ ] with respect to
such Distribution Date are
insufficient to fund the [Class A]
Required Amount, then amounts, if
any, on deposit in the Cash
Collateral Account and available to
make payments with respect to the
[Class A] Certificates with respect
to such Distribution Date will then
be used to fund the remaining
[Class A] Required Amount.] [If [such
amounts, if any, on deposit in the
Cash Collateral Account and
available to make payments with
respect to the [Class A]
Certificates with respect to such
Distribution Date (together with]
Excess Spread and Excess Finance
Charges with respect to such
Distribution Date[)] are
insufficient to fund the remaining
[Class A] Required Amount, then
Principal Receivables allocable to
the [Class B] Invested Amount with
respect to the related Monthly
Period will be used to fund the
remaining [Class A] Required Amount
("Reallocated Principal
Receivables"). If such Reallocated
Principal Receivables with respect
to such Monthly Period (together
with Excess Spread and Excess
Finance Charges [, and amounts, if
any, on deposit in the Cash
Collateral Account] available to
make payments with respect to the
[Class A] Certificates) are
insufficient to fund the remaining
[Class A] Required Amount for the
related Distribution Date, then a
portion of the [Collateral] Invested
Amount, if any, will be reduced by
the amount of such deficiency (but
not more than the [Class A] Default
Amount for such Monthly Period). [If
such reduction would cause the
[Collateral] Invested Amount to be
reduced below zero, then the
[Collateral] Invested Amount will be
reduced to zero and the [Class B]
Invested amount, if any, will be
reduced by the amount by which the
[Collateral] Invested Amount would
have been reduced below zero (but
not by more than the excess of the
[Class A] Default Amount for such
Monthly Period over the amount of
such reduction in the Collateral
Invested Amount) to avoid a
charge-off with respect to the
[Class A] Certificates. If the
</TABLE>
S-15
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<S> <C>
[Collateral] Invested Amount is
reduced to zero and the [Class B]
Invested Amount would be reduced to
a negative number, then the [Class A]
Invested amount will be reduced
(but not by more than the excess, if
any, of the [Class A] Default Amount
for such Monthly Period over the
amount of such reductions in the
[Collateral] Invested Amount [and
the [Class B] Invested Amount] with
respect to such Monthly Period)
(such reduction, a "[Class A]
Charge-Off"). If the [Collateral]
Invested Amount and the [Class B]
Invested Amount are reduced to zero,
then the [Class A]
Certificateholders will bear
directly the credit and other risks
associated with their undivided
interest in the Trust. See
"DESCRIPTION OF THE CERTIFICATES
--Reallocation of Cash Flows; [Class B]
Invested Amount".
[The [Class B] Required Amount means,
with respect to any Distribution
Date, the amount, if any, by which
the sum of (i) current and overdue
[Class B] Monthly Interest, (ii)
current and overdue [Class B]
Additional Interest, (iii) current
and overdue [Class B] Servicing Fee
and (iv) the [Class B] Default
Amount, exceeds [Class B] Available
Funds (the [Class B] Required Amount
together with the [Class A] Required
Amount being the "Required Amount").
If the [Class B] Required Amount is
greater than zero, then Excess
Spread and Excess Finance Charges
allocable to the Series 199[ ]-[ ]
(and not required to pay the [Class
A] Required Amount or reimburse
[Class A] Charge-Offs) will be
applied to fund the deficiency. [If
Excess Spread and Excess Finance
Charges allocable to Series 199[ ]-[
] with respect to such Distribution
Date and not required to pay the
[Class A] Required Amount are less
than the [Class B] Required Amount,
then the amounts, if any, on deposit
in the Cash Collateral Account and
available to make payments with
respect to the [Class B]
Certificates with respect to such
Distribution Date will be withdrawn
and applied to
</TABLE>
S-16
<PAGE>
<TABLE>
<S> <C>
fund the [Class B] Required Amount.] If
[amounts, if any, in deposit in the Cash
Collateral Account and available to make
payments with respect to the [Class B]
Certificates with respect to such
Distribution Date (together with] Excess
Spread and Excess Finance Charges with
respect to such Distribution Date[ )]
are insufficient to fund the remaining
[Class B] Required Amount, then the
[Collateral] Invested Amount, if any,
will be reduced by the amount of such
deficiency (but not more than the [Class
B] Default Amount for such Monthly
Period). If such reduction would cause
the [Collateral] Invested Amount to be
reduced below zero, then the [Class B]
Invested amount will be reduced by the
amount by which the [Collateral]
Invested Amount would have been reduced
below zero (but not by more than the
excess of the [Class B] Default Amount
for such Monthly Period over the
reduction in the [Collateral] Invested
Amount with respect to such Monthly
Period) (such reduction, a "[Class B]
Charge-Off"). In the event of a
reduction of the [Class B] Invested
Amount, the amount of principal and
interest available fund payments with
respect to the [Class B] Certificates
will be decreased.]
[Subordination of the [Class B]
Certificates.......................... The fractional undivided interest in
the Trust represented by the [Class B]
Certificates [and the [Collateral]
Interest] will be subordinated to the
extent necessary to fund payments
with respect to the [Class A]
Certificateholders' Interests until
the final payment of principal is
made in respect of the [Class A]
Certificates. In addition, as more
fully described herein, the [Class B]
Certificateholders' Interest may be
reduced, thereby reducing the amount
of principal and interest payable to
the [Class B] Certificateholders, if
the portion of the Defaulted Amount
allocable to the [Class A]
Certificateholders' Interest with
respect to any Distribution Date
exceeds the amount of Collections of
Finance Charge
</TABLE>
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<TABLE>
<S> <C>
Receivables and amounts available to
be withdrawn from the Cash
Collateral Account, in respect of
the [Class A] Certificates on such
Distribution Date and applied to
reimburse such Defaulted
Receivables. Furthermore,
collections of Principal Receivables
allocable to the [Class B]
Certificateholders' Interest
("Reallocated Principal
Receivables") with respect to any
Distribution Date may be applied to
cover shortfalls in amounts
available to pay interest due to the
[Class A] Certificateholders, the
[Class A] Servicing Fee and the
portion of the Defaulted Amount
allocable to the [Class A]
Certificateholders' Interest with
respect such Distribution Date. In
the event such Reallocated Principal
Receivables are reallocated to the
[Class A] Certificates, the [Class B]
Invested Amount may be reduced,
thereby reducing the amount of
principal and interest payable to
the [Class B] Certificateholders.]
[Cash Collateral Account............... A cash collateral account (the "Cash
Collateral Account") will be established
in the name of the Trustee for the
benefit of the Certificateholders. The
Cash Collateral Account will be funded
on the Issuance Date in the amount of at
least $[ ] or such higher amount as
is specified by each Rating Agency (the
"Initial Cash Collateral Amount"), [of
which not less than $[ ] the
("Initial Shared Collateral Amount")
will be for the benefit of both the
[Class A] Certificates and the [Class B]
Certificates and the remaining $[ ]
(the "Initial [Class B] Collateral
Amount") will be for the exclusive
benefit of the [Class B] Certificates.]
The Cash Collateral Account will serve
as [additional] Credit Enhancement with
respect the Series 199[ ]-[ ]
Certificates.]
[On each Distribution Date, the
Available Shared Collateral Amount will
be applied to fund the following amounts
in the following priority: [(a)] with
respect the [Class A] Certificates, the
excess,
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
if any, of the [Class A] Required Amount
with respect to such Distribution Date
over the amount of Excess Spread and
Excess Finance Charges allocated to the
Series 199[ ]-[ ] and available to fund
such [Class A] Required amount [and (b)
with respect to the [Class B]
Certificates, the excess, if any, of the
[Class B] Required Amount with respect
to the related Monthly Period over the
amount of Excess Spread and Excess
Finance Charges allocated to Series
199[ ]-[ ] and available to fund such
[Class B] Required Amount].]
[On each Distribution Date, Excess
Spread and Excess Finance Charges
available to Series 199[ ]-[ ] will be
applied to increase the amount on
deposit in the Cash Collateral Account
(to the extent such amount is less than
the Required Cash Collateral Amount). In
addition, if on any Distribution Date
the amount on deposit in the Cash
Collateral Account exceeds the Required
Cash Collateral Amount such excess will
be withdrawn and paid to the Cash
Collateral Depositor for application in
accordance with the [Collateral Loan]
Agreement.]
[On the first Special Payment Date
following an Pay Out Event, the
Available Shared Collateral Amount
(after giving effect to other
withdrawals from the Cash Collateral
Account on such Distribution Date) will
be applied to pay principal of the
[[Class A]] Certificates [and the
remainder of the Available Cash
Collateral Amount will be applied to pay
principal of the [Class B]
Certificates]. Following such
withdrawals from the Cash Collateral
Account on such Special Payment Date,
the Cash Collateral Account will be
terminated and no further deposits to,
or withdrawals from, the Cash Collateral
Account will be made for the benefit of
the Certificate holders.]
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S-19
<PAGE>
<TABLE>
<S> <C>
[The Required Cash Collateral Amount may
be reduced without the consent of the
Certificate holders, if the [Seller]
[Depositor] shall have received written
notice from each Rating Agency that such
reduction will not have a Ratings Effect
and the [Seller] [Depositor] shall have
delivered to the Trustee a certificate
of an authorized officer to the effect
that, based on the facts known to such
officer at such time, in the reasonable
belief of the [Seller] [Depositor], such
reduction will not cause a Pay Out Event
or an event that, after the giving of
notice or the lapse of time, would
constitute a Pay Out Event, to occur
with respect to Series 199[ ]-[ ].]
[Excess Finance Charges................ The Certificates will be included in
a group of Series ("Group [ ]")
which [have been and] will be issued
by the Trust from time to time.
Subject to certain limitations,
Excess Finance Charges, if any, with
respect to a Series included in
Group [ ] will be applied to
cover any shortfalls with respect to
amounts payable from collections of
Finance Charge Receivables allocable
to any other Series in Group [ ].]
[Shared Principal Collections.......... Collections of Principal Receivables
and certain other amounts otherwise
allocable to other Series, to the
extent such collections are not
needed to make payments to or
deposits for the benefit of the
certificateholders of such other
Series, [will] [may] be applied to
cover principal payments due to or
for the benefit of the holders of
the Certificates.]
Rapid Amortization Period;
Principal Payments..................... During the period beginning with the
occurrence of any Pay Out Event and
ending on the earlier of (i) the day
after the Payment Date on which the
Invested Amount has been paid in
full and (ii) the Termination Date
(the "Rapid Amortization
Period"),
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S-20
<PAGE>
<TABLE>
<S> <C>
collections of Principal
Receivables allocable to the
Invested Amount will no longer be
paid from the Trust to the
Collateral Interest Holder or to
Shared Series as described above but
instead will be distributed on each
Payment Date to the
Certificateholders beginning with
the Payment Date following the
commencement of the Rapid
Amortization Period.
[Minimum [Seller's] Percentage......... The Minimum [Seller's] Percentage
applicable to the Certificates is
[ %].]
Record Date............................ The last day of the month preceding
any Distribution Date.
Optional Repurchase.................... The Invested Amount will be subject
to optional purchase by the
[Depositor] [Seller] on any
Distribution Date after the Adjusted
Invested Amount is less than or equal
to [ ]% of the Initial Invested
Amount, unless certain events as
specified in the Agreement have
occurred. The purchase price on the
Distribution Date on which such
purchase occurs will be equal to the
Adjusted Invested Amount plus accrued
and unpaid interest on the
Certificates as described herein.
[Mandatory Prepayment.................. The Certificates will be prepaid, in
part, pro rata on the basis of their
initial principal amounts, on the
Distribution Date on or immediately
following the last day of the Funding
Period in the event that any amount
remains on deposit in the Pre-Funding
Account after giving effect to the
purchase of all Subsequent
Receivables, including any such
purchase on such date (a "Mandatory
Prepayment"). The aggregate
principal amount of Certificates to
be prepaid will be an amount equal to
the Certificates' Pre-Funded
Percentage of the amount then on
deposit in the Pre-Funding Account.]
[Pre-Funding Account................... During the period (the "Funding
Period") from and
</TABLE>
S-21
<PAGE>
<TABLE>
<S> <C>
including the Closing Date until the
earlier of (i) the date on which (a)
the amount on deposit in the
Pre-Funding Account is less that
$[ ], (b) a Payout Event occurs or
(c) certain events of insolvency occur
with respect to the [Depositor] [or]
[Seller] [or] [the Servicer] or (ii)
the close of business on the [ ],
199[ ] Payment Date, the Pre-Funded
Amount will be maintained as an
account in the name of the Trustee
(the "Pre-Funding Account"). The
Pre-Funded Amount will initially
equal approximately $[ ], and
during the Funding Period, will be
reduced by the amount thereof used
to purchase Subsequent Receivables
in accordance with the Agreement and
the amount thereof deposited in the
Reserve Account in connection with
the purchase of such Subsequent
Receivables. The Depositor expects
that the Pre-Funded Amount will be
reduced to less than $[ ] by the
[ ], 199[ ] Distribution Date. Any
Pre-Funded Amount remaining at the
end of the Funding Period will be
payable to the Certificateholders
[pro rata] in proportion to the
respective Pre-Funded Percentage of
each class of the Certificates.]
Final Payment of Principal and
Interest; Termination of Trust......... The interest of the Certificateholders
in the Trust will terminate following
the earlier of (i) the day after the
Payment Date on which the Investor
Amount is paid in full and (ii) [ ],
(the "Expected Termination Date"). All
principal and interest will be due and
payable no later than the Expected ]
Termination Date.
Trustee................................ [Insert information regarding Trustee.]
Tax Considerations..................... In the opinion of Sidley & Austin
("Federal Tax Counsel"), although no
transaction closely comparable to
that contemplated herein has been
the subject of any Treasury
regulation, revenue ruling or
judicial decision, based upon its
analysis of the factors discussed
below, the Seller is properly
treated
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S-22
<PAGE>
<TABLE>
<S> <C>
as the owner of the Receivables
for federal income tax purposes
and accordingly, the
Certificates, when issued, will be
properly characterized for federal
income tax purposes as indebtedness
of the Seller that is secured by the
Receivables. The Seller, by
entering into the Agreement, each
Certificateholder, by the acceptance
of a Certificate, and each
Certificate Owner, by virtue of
accepting a beneficial interest in a
Certificate, will agree to treat the
Certificates (or the beneficial
interests therein) as indebtedness
of the Seller secured by the
Receivables for federal, state and
local income and franchise tax
purposes and for the purposes of any
other tax imposed on or measured by
income. See "Certain Federal Income
Tax Consequences" in the Prospectus
for additional information
concerning the application of
federal income tax laws to the Trust.
ERISA Considerations................... Under the regulations issued by the
Department of Labor, the Trust's
assets would not be deemed "plan
assets" of any employee benefit plan
holding interests in the Certificates
if certain conditions are met, such
that the Certificates would
constitute "publicly-offered
securities," including that interests
in the Certificates be held by at
least 100 persons independent of the
Depositor and each other upon
completion of the public offering
being made hereby. [The Underwriters
expect, although no assurance can be
given, that interests in the
Certificates will be held by at least
100 such persons, and it is
anticipated that the other conditions
of the "publicly-offered security"
exception contained in the
regulations will be met.] If the
Trust's assets were deemed to be
"plan assets" of such a plan, there
is uncertainty as to whether existing
exemptions from the "prohibited
transaction" rules of the Employee
Retirement Income Security Act of
1974, as amended ("ERISA") would
apply to all transactions involving
the Trust's assets. [Accordingly,] [A
fiduciary of] any employee benefit
plan [subject to ERISA or the CODE]
contemplating purchasing interests in
</TABLE>
S-23
<PAGE>
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<S> <C>
Certificates should consult their
counsel before making a purchase.
See "ERISA Considerations" in the
Prospectus.
Certificate Rating...................... It is a condition to the issuance of
the [Class A] Certificates that they
be rated [in the highest rating
category] by a Rating Agency, as
defined herein. [It is a condition
to issuance of the [Class B]
Certificates that they be rated in
[one of the three highest rating
categories] by a Rating Agency as
defined herein.] There is no
assurance that such rating will
continue for any period of time or
that it will not be revised or
withdrawn entirely by such rating
agency, if, in its judgment,
circumstances so warrant. A
revision or withdrawal of such
rating may have an adverse effect on
the market price of the Securities.
A security rating is not a
recommendation to buy, sell or hold
securities.
</TABLE>
S-24
<PAGE>
SPECIAL CONSIDERATIONS
[Limited Liquidity. There is currently no market for the
Certificates. The Underwriters expect to make a market in the Certificates, but
are not obligated to do so. There can be no assurance that a secondary market
will develop or, if it does develop, that such market will provide
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates.]
[The Receivables and the Pre-Funding Account. On the Closing Date,
the Depositor will transfer to the Trust the approximately $[ ] of Initial
Receivables and the approximately $[ ] Pre-Funded Amount on deposit in the
Pre-Funding Account. If the principal amount of eligible Receivables originated
by [Seller] during the Funding Period is less than the Pre-Funded Amount, the
Depositor will have insufficient Receivables to sell to the Trust on the
Subsequent Transfer Dates, thereby resulting in a prepayment of principal to the
Certificateholders as described in the following paragraph. See "Social,
Economic and Other Factors" below. In addition, any conveyance of Subsequent
Receivables is subject to the satisfaction, on or before the related Subsequent
Transfer Date, of certain selection criteria.
[To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the conveyance of Subsequent Receivables to the Trust
by the end of the Funding Period, the Certificateholders will receive, on the
Distribution Date on or immediately following the last day of the Funding
Period, a prepayment of principal in an amount equal to the applicable Pre-
Funded Percentage, in respect of [a class of] the Certificates, of the Pre-
Funded Amount remaining in the Pre-Funding Account following the purchase of any
Subsequent Receivables on such Payment Date. It is anticipated that the
principal amount of Subsequent Receivables sold to the Trust will not be exactly
equal to the amount on deposit in the Pre-Funding Account and that therefore
there will be at least a nominal amount of principal prepaid to the
Certificateholders.]
[Each Subsequent Receivable must satisfy the eligibility criteria
specified in the Sale and Servicing Agreement at the time of its addition.
However, Subsequent Receivables may have been originated by the Seller at a
later date using credit criteria different from those which were applied to the
Initial Receivables and may be of a different credit quality and seasoning.
Therefore, following the transfer of Subsequent Receivables to the Trust, the
characteristics of the entire Receivables Pool included in the Trust may vary
significantly from those of the Initial Receivables. See "The Receivables"
herein.]
[Social, Economic and Other Factors. The ability of the Trust to
purchase Subsequent Receivables is largely dependent upon a variety of social
and economic factors. Economic factors include interest rates, unemployment
levels, the rate of inflation and consumer perceptions of economic conditions
generally. However, the Depositor is unable to determine and has no basis to
predict whether or to which extent economic or social factors will affect the
availability of Subsequent Receivables.]
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<PAGE>
[Rating of the Certificates. It is a condition to issuance of the
[Class A] Certificates that they be rated in the highest rating category by one
of Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc. ("S&P") (each of S&P and Moody's being
hereinafter referred to as a "Rating Agency"). [It is a condition to the
issuance of the [Class B] Certificates that they be rated [in one of the three
highest rating categories] by at least one Rating Agency.] The rating of the
Certificates is based primarily on the value of the Receivables and the
availability of the Enhancement as support for the Certificates. The ratings of
the Certificates are not a recommendation to purchase, hold or sell
Certificates, and such ratings do not comment as to the marketability of the
Certificates, any market price or suitability for a particular investor. There
is no assurance that any rating will remain in effect for any given period of
time or that any rating will not be lowered or withdrawn entirely by a Rating
Agency, as the case may be, if in its judgment circumstances so warrant.]
[Limited Amounts of Credit Enhancement. Although Credit Enhancement
with respect to the [Class A] Certificates will be provided by the Cash
Collateral Account (up to the Required Shared Collateral Amount) [and, with
respect to the [Class B] Certificates, will be provided by the Cash Collateral
Account,] [and by the subordination in respect of certain payments of the
Collateral Interest to the [Class A] Certificates [and the [Class B]
Certificates]] the amount available thereunder is limited and will be reduced by
payments made pursuant thereto. If the amount available under [the Cash
Collateral Account has been reduced to zero,] [and the] Collateral Invested
Amount has been reduced to zero], then the [Class A] Certificateholders [and
[Class B] Certificateholders] will [each] bear directly the credit and other
risks associated with their respective undivided interests in the Trust.]
[Effect of Subordination of [Class B] Certificates; Principal
Payments. The [Class B]Certificates are subordinated in right of payment of
principal to the [Class A] Certificates. Payments of principal in respect of
the [Class B] Certificates will not commence until after the final principal
payment with respect to the [Class A] Certificates has been made as described
herein. Moreover, the [Class B] Invested Amount may be reduced if the [Class A]
Required Amount for any Monthly Period is greater than zero and is not funded
from Excess Spread and Excess Finance Charges allocated to Series 199[ ]-[ ],
[and] from amounts, if any, on deposit in the Cash Collateral Account, [and]
from reductions in the [Collateral] Invested Amount, if any. To the extent the
[Class B] Invested Amount is reduced, the percentage of collections of Finance
Charge Receivables allocable to the [Class B] Certificateholders' Interest in
future Monthly Periods will be reduced. Moreover, to the extent the amount of
such reduction in the [Class B] Invested Amount is not reimbursed, the amount of
principal and interest distributable to the [Class B] Certificateholders will be
reduced. See "DESCRIPTION OF THE CERTIFICATES -- Allocation Percentages" and
"-- Reallocation of Cash Flows; [Class B] Invested Amount" herein. If the
[Class B] Invested Amount is reduced to zero, then the [Class A]
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust.]
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<PAGE>
[Discount Option. Pursuant to the Agreement, the Depositor has the
option to designate a fixed percentage of Receivables that otherwise would be
treated as Principal Receivables to be treated as Finance Charge Receivables.
Any such designation would result in an increase in the amount of Finance Charge
Receivables and a slower rate of payment of collections in respect of Principal
Receivables than otherwise would occur. Pursuant to the Agreement, the
Depositor can make such a designation without notice to, or the consent of, the
Certificateholders. The Depositor must provide [ ] days' prior written notice
to [the Servicer,] [the Seller,] [the Trustee], [any provider of Enhancement]
and each Rating Agency of any such designation, and such designation will become
effective only if (i) in the reasonable belief of the Depositor such designation
would not cause a Series 199[ ]-[ ] Pay Out Event to occur or an event which
with notice or the lapse of time or both would constitute a Series 199[ ]-[ ]
Pay Out Event and (ii) each Rating Agency confirms in writing its then current
rating on any outstanding Series.
[Book-Entry Registration. The Certificates initially will be
represented by certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificate Owners or their
nominees. As a result, unless and until Definitive Certificates are issued,
Certificate Owners will not be recognized by the Trustee as Certificateholders,
as that term is used in the Agreement. Until such time, Certificate Owners will
only be able to exercise the rights of Certificateholders indirectly through
[DTC] [CEDEL] [or] [Euroclear] and [its] [their respective] participating
members.]
MATURITY CONSIDERATIONS
The Agreement and the Series Supplement provide that [Class A]
Certificateholders will not receive payments of principal until the [first
Distribution Date with respect to the Controlled Amortization Period, which is
the [ ] Distribution Date] [[Class A] Expected Final Payment Date,] unless a
Pay Out Event shall occur. [Class A] Certificateholders will receive payments of
principal on each Distribution Date following the Monthly Period in which a Pay
Out Event occurs (each such Distribution Date, a "Special Payment Date") until
the [Class A] Invested Amount has been paid in full or the Termination Date has
occurred. [The [Class B] Certificateholders will not begin to receive payments
of principal until the final principal payment on the [Class A] Certificates has
been made.]
[On each Distribution Date with respect to the [Class A] Accumulation
Period, amounts equal to the lesser of (a) Available Principal Collections for
the related Monthly Period on deposit in the Collection Account, (b) the sum of
the applicable Controlled Accumulation Amount for such Monthly Period and any
applicable Deficit Controlled Accumulation Amount (the "Controlled Deposit
Amount") and (c) the [Class A] Adjusted Invested Amount will be deposited in
the Principal Funding Account until the Principal Funding Account Balance is
equal to the [Class A] Invested Amount. [After the Class A Invested Amount has
been paid in full, on
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<PAGE>
each Distribution Date with respect to the [Class B] Accumulation Period,
amounts equal to the lesser of (a) Available Principal Collections for the
related Monthly Period on deposit in the Collection Account, (b) the applicable
Controlled Deposit Amount and (c) the [Class B] Adjusted Invested Amount will be
deposited in the Principal Funding Account until the Principal Funding Account
Balance equals the [Class B] Invested Amount.] See "DESCRIPTION OF THE
CERTIFICATES -- Principal Payments" for a discussion of circumstances under
which the commencement of the Accumulation Period may be delayed.]
[On each Distribution Date during the Controlled Amortization Period,
the Certificateholders will be entitled to receive monthly payments of
principal, until the Certificates have been paid in full, in an amount equal to
the lesser of (a) Available Principal Collections for the related Monthly Period
on deposit in the Collection Account, (b) the Controlled Distribution Amount,
which is equal to the sum of the Controlled Amortization Amount and any existing
Deficit Controlled Amortization Amount and (c) the Invested Amount.]
[The [Depositor] [Seller] may, at or after the time at which the
[Controlled Amortization Period] [Accumulation Period] commences for Series
199[ ]-[ ], cause the Trust to issue another Series (or some portion thereof,
to the extent that the full principal amount of such other Series is not
otherwise outstanding at such time) as a Paired Series with respect to Series
199[ ]-[ ] to be used to finance the increase in the Seller's Interest caused
by the accumulation of principal in the Principal Funding Account with respect
to Series 199[ ]-[ ]. No assurances can be given as to whether such other
Series will be issued and, if issued, the terms thereof. Because the terms of
the Certificates may vary from the terms of such other series, the Pay Out
Events with respect to such other series may vary from the Pay Out Events with
respect to Series 199[ ]-[ ] and may include Pay Out Events which are unrelated
to the status of [the Seller,] [or] [the Servicer] [or] the Receivables, such as
Pay Out Events related to the continued availability and rating of certain
providers of Enhancement to such other Series. If a Pay Out Event does occur
with respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Certificateholders may be
delayed.]
Should a Pay Out Event occur with respect to the Certificates and the
Rapid Amortization Period commence, (a) [any amount on deposit in the Principal
Funding Account will be paid to the Certificateholders on the first Special
Payment Date, and] the Certificateholders will be entitled to receive Available
Principal Collections on each Distribution Date with respect to such Rapid
Amortization Period [or following the Expected Final Payment Date, as the case
may be,] as described herein until the [Class A] Invested Amount [and [Class B]
Invested Amount] [is] [are] paid in full or until the Termination Date occurs
and (b) any amount on deposit in the Excess Funding Account will be released and
treated as Shared Principal Collections to the extent needed to cover principal
payments due to or for the benefit of any Series entitled to the benefits of
Shared Principal Collections. In addition, on the first Special Payment Date
following the occurrence of an Pay Out Event, after giving effect to any payment
of principal on such date, (a) an amount equal to the lesser of (i) the
Available Shared Collateral Amount (after giving effect
S-28
<PAGE>
to any withdrawal from the Cash Collateral Account on such date of amounts to
fund the [Class A] Required Amount [and the [Class B] Required Amount]) and (ii)
the unpaid principal amount of the [Class A] Certificates (less the Principal
Funding Account Balance allocable to the [Class A] Certificates), will be
withdrawn from the Cash Collateral Account and distributed to the [Class A]
Certificateholders as a payment of principal of the [Class A] Certificates, and
(b) an amount equal to the lesser of (i) the remainder of the Available Cash
Collateral Amount and (ii) the unpaid principal amount of the [Class B]
Certificates [(less the Principal Funding Account Balance, if any, allocable to
the [Class B] Certificates),] will be withdrawn from the Cash Collateral Account
and distributed to the [Class B] Certificateholders as a payment of principal of
the [Class B] Certificates.
The ability of Certificateholders to receive payments of principal [on
the applicable Expected Final Payment Date] [on each Distribution Date during
the Controlled Amortization Period] depends on the payment rates on the
Receivables, the amount of outstanding Receivables, delinquencies, charge-offs
and new borrowings on the Accounts, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. The
amount of outstanding Receivables and the delinquencies, charge-offs and new
borrowings on the Accounts may vary from month to month due to seasonal
variations, the availability of other sources of credit, legal factors, general
economic conditions and spending and borrowing habits of individual
accountholders. Monthly payment rates on the Receivables may vary because,
among other things, accountholders may fail to make a required minimum payment,
may only make payments as low as the minimum required amount or may make
payments as high as the entire outstanding balance. Monthly payment rates may
also vary due to seasonal purchasing and payment habits of accountholders and to
changes in any terms of rebate programs in which accountholders participate.
The Depositor cannot predict, and no assurance can be given, as to the
accountholder monthly payment rates that will actually occur in any future
period, as to the actual rate of payment of principal of the Certificates or
whether the terms of any previously or subsequently issued Series might have an
impact on the amount or timing of any such payment of principal. [The foregoing
factors will affect both the Class A Certificates and the [Class B]
Certificates.]
There can be no assurance that collections of Principal Receivables
with respect to the Trust Portfolio, and thus the rate at which
Certificateholders could expect to receive payments of principal on the
Certificates during the Rapid Amortization Period [or the rate at which the
Principal Funding Account could be funded during the Accumulation Period,] [or
the rate at which payments of principal will be made during the Controlled
Amortization Period,] will be similar to the historical experience set forth in
the "Accountholder Monthly Payment Rates for the Identified Pool" table under
"The Identified Pool" herein. [The Depositor may shorten the [Class A]
Accumulation Period and, in such event, there can be no assurance that there
will be sufficient time to accumulate all amounts necessary to pay the [Class A]
Invested Amount on the [Class A] Expected Final Payment Date.]
S-29
<PAGE>
The Trust, as a master trust, may issue additional Series from time to
time, and there can be no assurance that the terms of any such Series might not
have an impact on the timing or amount of payments received by
Certificateholders. Further, if a Pay Out Event occurs, the average life and
maturity of the [Class A] Certificates [and [Class B] Certificates,
respectively,] could be significantly reduced.
Due to the reasons set forth above, there can be no assurance [that
deposits in the Principal Funding Account will be made in accordance with the
applicable Controlled Accumulation Amount] [that payments of principal will be
made in accordance with the applicable Controlled Amortization Amount] or that
the actual number of months elapsed from the date of issuance of the [Class A]
Certificates [and the [Class B] Certificates] to their respective final
Distribution Dates will equal the expected number of months.
MASTER TRUST CONSIDERATIONS
Impact of Additional Series. The Trust, as a master trust, may issue
additional Series from time to time. While the terms of any Series will be
specified in a Supplement, the provisions of a Supplement and, therefore, the
terms of any additional Series, will not be subject to the prior review by, or
consent of, holders of the Certificates of any previously issued Series. Such
terms may include methods for determining applicable investor percentages and
allocating collections, provisions creating different or additional security or
other Series Enhancements, provisions subordinating such Series to another
Series or other Series (if the Supplement relating to such Series so permits) to
such Series, and any other amendment or supplement to the Pooling Agreement
which is made applicable only to such Series. The obligation of the Trustee to
issue any new Series is subject to the following conditions, among others: (a)
the [Seller] [Depositor] shall have received written notice that such issue will
not result in any Rating Agency's reducing or withdrawing its rating of the
Certificates of any outstanding Series (any such reduction or withdrawal is
referred to herein as a "Ratings Effect") and (b) the [Seller] [Depositor] shall
have delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer to the effect that, based on the facts
known to such officer at the time, in the reasonable belief of the [Seller]
[Depositor], such issuance will not at the time of its occurrence cause a Pay
Out Event or an event that, after the giving of notice or the lapse of time,
would constitute a Pay Out Event, to occur with respect to any Series. There
can be no assurance, however, that the terms of any other Series, including any
Series issued from time to time hereafter, might not have an impact on the
timing or amount of payments received by a Certificateholder.
Impact of Discount Option. Pursuant to the Pooling Agreement, the
[Seller] [Depositor] has the option from time to time to designate a fixed or
variable percentage of Receivables that otherwise would be treated as Principal
Receivables to be treated as Finance Charge Receivables. Any such designation
would result in an increase in the amount of Finance Charge Receivables and a
slower payment rate of collections in respect of Principal Receivables
S-30
<PAGE>
than otherwise would occur. Pursuant to the Pooling Agreement, the [Seller]
[Depositor] can make such a designation without notice to or the consent of
Certificateholders. Thereafter, pursuant to the Pooling Agreement, the [Seller]
[Depositor] may, without notice to or the consent of Certificateholders, reduce
or eliminate the percentage of Receivables subject to such a designation. The
[Seller] [Depositor] must provide 30 days prior written notice to the Servicer,
the Trustee, any provider of Series Enhancement and each Rating Agency of any
such designation or reduction of Principal receivables to be treated as Finance
Charge Receivables, and such designation or reduction will become effective only
if (i) the [Seller] [Depositor] shall have delivered to the Trustee and certain
providers of Series Enhancement a certificate of an authorized officer to the
effect that, based on the facts known to such officer at the time, in the
reasonable belief of the [Seller] [Depositor], such designation or reduction
would not at the time of its occurrence cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time would constitute a Pay Out
Event, to occur with respect to any Series and (ii) the [Seller] [Depositor]
shall have received written notice from each Rating Agency that such designation
or reduction will not have a Ratings Effect and (iii) in the case of a reduction
or withdrawal, the [Seller] [Depositor] shall have delivered to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the [Seller] [Depositor], such reduction or withdrawal shall not have
adverse regulatory implications for the [Seller] [Depositor].
Impact of Addition of Trust Assets. The [Seller] [Depositor] expects,
and in some cases will be obligated, to designate Additional Accounts, the
Receivables in which will be conveyed to the Trust. Such Additional Accounts
may include accounts originated using criteria different from those which were
applied to the Accounts previously included in the Trust because such Additional
Accounts were originated at a different date or were part of a portfolio of
accounts which were not part of the Bank One portfolio at the time Accounts were
previously conveyed to the Trust or which were acquired from other institutions.
Moreover, Additional Accounts may or may not be accounts of the same type as
those previously included in the Trust. Consequently, there can be no assurance
that such Additional Accounts will be of the same credit quality as the Accounts
previously included in the Trust. In addition, such Additional Accounts may
consist of accounts which have characteristics different from the
characteristics of Accounts previously included in the Trust, including lower
periodic rate finance charges and other fees and charges, which may have the
effect of reducing the average yield on the portfolio of Accounts included in
the Trust, different payment rates and higher loss or delinquency experience,
which may have the effect of reducing the average yield on the portfolio of
accounts included in the Trust. The designation of Additional Accounts will be
subject to the satisfaction of certain conditions, including that (a) the
[Seller] [Depositor] shall have received written notice from each Rating Agency
that such addition will not have a Ratings Effect and (b) the [Seller]
[Depositor] shall have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer to the effect that, based on
the facts known to such officer at the time, in the reasonable belief of the
[Seller] [Depositor], such addition will not at the time of its occurrence cause
a Pay Out Event or an event that, after the giving of notice or the lapse of
time, would
S-31
<PAGE>
constitute a Pay Out Event, to occur with respect to any Series. Although the
addition of Participations will require an amendment to the Pooling Agreement,
no consent of Certificateholders will be required for any such amendment.
THE IDENTIFIED POOL
GENERAL
A pool of [consumer] [corporate] [revolving] [credit] [charge] [debit]
card accounts owned by the Seller was identified (the "Identified Pool"), from
which the Accounts included in the Trust as of the Cut-Off Date (the "Trust
Portfolio") were selected based on the eligibility criteria specified in the
Agreement. Set forth below is certain information with respect to the
Identified Pool. There can be no assurance that the yield, loss and delinquency
experience with respect to the Receivables will be comparable to that set forth
below with respect to the entire Identified Pool.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for
the Identified Pool for each of the periods shown. Because the Trust Portfolio
is only a portion of the Identified Pool, actual delinquency and loss experience
with respect to the Receivables is expected to be different from that set forth
below for the Identified Pool.
DELINQUENCY AS PERCENTAGE OF THE IDENTIFIED POOL
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------
At Month End
[ ] 31, 199[ ] 199[ ] 199[ ] 199[ ]
------------------
Number of
Days
Delinquent Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 to 59
Days........
60 to 89
Days........
90 Days or
Greater.....
Totals
</TABLE>
S-32
<PAGE>
LOSS EXPERIENCE FOR THE IDENTIFIED POOL
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Three
Months Months Year Ended
Ended Ended ----------------------
[ ], 199[ ] [ ], 199[ ] 199[ ] 199[ ] 199[ ]
-------------- -------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding...
Gross Losses......................
Gross Losses as a Percentage of
Average Receivables Outstanding...
Recoveries........................
Net Losses........................
Net Losses as a Percentage of
Average Receivables Outstanding...
</TABLE>
REVENUE EXPERIENCE
The following table sets forth the revenues from the Finance Charges
and Fees billed and Interchange received with respect to the Identified Pool for
each of the periods shown.
REVENUE EXPERIENCE FOR THE IDENTIFIED POOL
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------
Three Months
Ended
[ ], 199[ ] 199[ ] 199[ ] 199[ ]
-------------- ------ ------ ------
<S> <C> <C> <C> <C>
Average Receivables Outstanding....
Finance Charges and Fees...........
Yield from Finance Charges and Fees
Interchange........................
Yield from Interchange.............
Yield from Finance Charges,
Fees and Interchange...............
</TABLE>
There can be no assurance that the yield experience with respect to
the Receivables will be comparable to that set forth above for the Identified
Pool. In addition, revenue from the Receivables will depend on the types of
fees and charges assessed on the Accounts, and could be
S-33
<PAGE>
adversely affected by future changes made by the Seller in such fees and charges
or by other factors.
PAYMENT RATES
The following table sets forth the highest and lowest accountholder
monthly payment rates for the Identified Pool during any single month in each of
the periods shown and the average accountholder monthly payment rates for all
months during each of the periods shown, in each case calculated as a percentage
of average monthly account balances during the periods shown. Monthly payment
rates shown in the table are based on amounts which would be payments of
Principal Receivables and Finance Charge Receivables with respect to the
Accounts.
ACCOUNTHOLDER MONTHLY PAYMENT RATES
FOR THE IDENTIFIED POOL
<TABLE>
<CAPTION>
Year Ended
----------------------
Three Months
Ended
[ ], 199[ ] 199[ ] 199[ ] 199[ ]
-------------- ------ ------ ------
<S> <C> <C> <C> <C>
Lowest........
Highest.......
Average.......
</TABLE>
THE RECEIVABLES
The aggregate amount of Receivables in the Accounts, as of [ ],
19[ ] was $[ ] consisting of $[ ] of Principal Receivables and $[ ] of
Finance Charge Receivables. The Accounts had an average balance of $[ ] and
an average credit limit of $[ ]. The percentage of the aggregate total
Receivables balance to the aggregate total credit limit was [ ]%. As of
[ ], 19[ ] all of the Accounts in the Trust Portfolio were [VISA/1/]
[MasterCard/1/] [private label] [other] credit card accounts, of which [ ]%
were standard accounts and [ ]% were premium accounts.
- ---------------
/1/ VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
S-34
<PAGE>
The following tables summarize the Trust Portfolio by various criteria
as of [ ], 19[ ]. References to "Receivables Outstanding" in the following
tables include both Finance Charge Receivables and Principal Receivables.
Because the future composition of the Trust Portfolio may change over time,
these tables are not necessarily indicative of the composition of the Trust
Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
(as of [ ], 19[ ])
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage
Percentage of of Total
Number of Total Number of Receivables Receivables
Account Balance Range Accounts Accounts Outstanding Outstanding
--------------------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance..................................
No Balance......................................
More than $0 and less than or equal to $1,500...
$1500.01 -- $5,000..............................
$5,000 -- $10,000...............................
Over $10,000....................................
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
(as of [ ], 19[ ])
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage
Percentage of of Total
Number of Total Number of Receivables Receivables
Credit Limit Range Accounts Accounts Outstanding Outstanding
------------------ --------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Less than or equal to $1,500.00.................
$1,500.01 -- $5,000.00..........................
$5,000.01 -- $10,000.00.........................
Over $10,000.00.................................
Total........................................
</TABLE>
S-35
<PAGE>
COMPOSITION BY PAYMENT STATUS
TRUST PORTFOLIO
(as of [ ], 19[ ])
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage
Percentage of of Total
Number of Total Number of Receivables Receivables
Payment Status Accounts Accounts Outstanding Outstanding
-------------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Current to 29 days..............................
Past due 30 - 59 days...........................
Past due 60 - 89 days...........................
Past due 90+ days...............................
Total........................................
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
(as of [ ], 19[ ])
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage
Percentage of of Total
Number of Total Number of Receivables Receivables
Account Age Accounts Accounts Outstanding Outstanding
----------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Not more than 6 months..........................
Over 6 months to 12 months......................
Over 1 year to 2 years..........................
Over 2 years to 3 years.........................
Over 3 years to 4 years.........................
Over 4 years....................................
Total
</TABLE>
S-36
<PAGE>
COMPOSITION OF ACCOUNTS BY ACCOUNTHOLDER BILLING ADDRESS
TRUST PORTFOLIO
(as of [ ], 19[ ])
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage
Percentage of of Total
Number of Total Number of Receivables Receivables
Location Accounts Accounts Outstanding Outstanding
-------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Alaska.........................................
Arizona........................................
Arkansas.......................................
California.....................................
Colorado.......................................
Connecticut....................................
Delaware.......................................
District of Columbia...........................
Florida........................................
Georgia........................................
Hawaii.........................................
Idaho..........................................
Illinois.......................................
Indiana........................................
Iowa...........................................
Kansas.........................................
Kentucky.......................................
Louisiana......................................
Maine..........................................
Maryland.......................................
Massachusetts..................................
Michigan.......................................
Minnesota......................................
Mississippi....................................
Missouri.......................................
Montana........................................
Nebraska.......................................
Nevada.........................................
New Hampshire..................................
New Jersey.....................................
New Mexico.....................................
New York.......................................
North Carolina.................................
North Dakota...................................
Ohio...........................................
Oklahoma.......................................
Oregon.........................................
Pennsylvania...................................
Rhode Island...................................
South Carolina.................................
South Dakota...................................
Tennessee......................................
Texas..........................................
Utah...........................................
Vermont........................................
Virginia.......................................
Washington.....................................
West Virginia..................................
Alabama........................................
Wyoming........................................
Other..........................................
</TABLE>
S-37
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Depositor. The Depositor will use such proceeds to pay the Seller the purchase
price of the Receivables [and the Seller will use such proceeds for general
corporate purposes].
THE SELLER
[Insert description of the Seller.]
[THE SERVICER]
[Insert description of the Servicer, if different from the Seller.]
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the
Series Supplement. The following summary describes certain terms applicable to
the Certificates. Reference should be made to the Prospectus for additional
information concerning the Certificates and the Agreement.
INTEREST PAYMENTS
Interest on the [Class A] Certificates [and the [Class B] Certificates]
will accrue from the [Issuance Date] [Closing Date] on the [Class A] Invested
Amount [and [Class B] Invested Amount, respectively,] at the [Class A]
Certificate Rate [and [Class B] Certificate Rate, respectively]. Interest
will be distributed on [ ] [and on the [ ] day of each Interest Period]
[and on each Interest Payment Date thereafter] (or if any such day is not a
business day, the next succeeding business day), commencing on the [ ],
19[ ] Distribution Date, to Certificateholders in whose names the
Certificates were registered at the close of business on the last day of the
calandar month preceding the date of such payment (a "Record Date"). Interest
for any Interest Payment Date or Special Payment Date will accrue from and
including the preceding Interest Payment Date or Special Payment Date (or in the
case of the first Interest Payment Date, from and including the [Issuance Date]
[Closing Date]) to but excluding such Interest Payment Date or Special Payment
Date.
Interest payments or deposits with respect to the [Class A]
Certificates for each Distribution Date will be calculated on the [Class A]
Invested Amount as of the preceding Record
S-38
<PAGE>
Date (or in the case of the initial Distribution Date, on the initial [Class A]
Invested Amount) based upon the [Class A] Certificate Rate. Interest payments
or deposits with respect to each Distribution Date will be calculated on the
basis of [the actual number of days in the period from and including the
preceding Distribution Date (or in the case of the initial Distribution Date the
Closing Date) to but excluding such Distribution Date and a 360-day year] [a
360-day year of twelve 30-day months]. On each Distribution Date, [Class A]
Monthly Interest and [Class A] Monthly Interest previously due but not deposited
in the Interest Funding Account (as defined below) or distributed in respect of
[Class A] Certificates will be (i) paid to [Class A] Certificateholders from
[Class A] Available Funds if such Distribution Date is an Interest Payment Date
or Special Payment Date, or (ii) deposited in an Eligible Deposit Account in the
name of the Trustee and for the benefit of the Certificateholders (the "Interest
Funding Account"), if such Distribution Date is not an Interest Payment Date or
Special Payment Date. To the extent [Class A] Available Funds allocated to the
[Class A] Certificateholders' Interest for such Monthly Period are insufficient
to pay such interest, Excess Spread and Excess Finance Charges allocated to
Series 199[ ]-[ ], amounts, if any, on deposit in the Cash Collateral Account up
to the Available Shared Collateral Amount and Reallocated Principal Receivables
will be used to make such payments.
"[Class A] Available Funds" means, with respect to any Monthly Period,
an amount equal to the sum of (i) the [Class A] Floating Percentage of
collections of Finance Charge Receivables allocated to the Certificates with
respect to such Monthly Period (including any investment earnings and certain
other amounts that are to be treated as collections of Finance Charge
Receivables in accordance with the Agreement and the Series Supplement, but
excluding the portion of collections of Finance Charge Receivables attributable
to Interchange that is allocable to Servicer Interchange); (ii) [if such Monthly
Period relates to a Distribution Date that occurs prior to the [Class B]
Principal Commencement Date,] the Principal Funding Investment Proceeds, if any,
with respect to the related Distribution Date; [and] (iii) amounts, if any, to
be withdrawn from the Reserve Account which are required to be included in
[Class A] Available Funds pursuant to the Series Supplement with respect to such
Distribution Date; [and (iv) Excess Spread, if any, for such Monthly Period].
[Interest payments on the [Class B] Certificates for each Payment Date
will be calculated on the [Class B] Invested Amount as of the preceding Record
Date (or in the case of the initial Interest Payment Date, on the initial
[Class B] Invested Amount) based upon the [Class B] Certificate Rate.
Interest will be calculated on the basis of [the actual number of days in the
period from and including the preceding Distribution Date (or in the case of the
initial Distribution Date the Closing Date) to but excluding such Distribution
Date and a 360-day year] [a 360-day year of twelve 30-day months]. On each
Distribution Date, [Class B] Monthly Interest and [Class B] Monthly Interest
previously due but not distributed to [Class B] Certificateholders will be paid
from [Class B] Available Funds for such Distribution Date and, if necessary,
from Excess Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] and
amounts, if any, on deposit in the Cash Collateral Account up to the Available
Cash Collateral Amount.
S-39
<PAGE>
["[Class B] Available Funds" means, with respect to any Monthly
Period, an amount equal to the sum of (i) the [Class B] Floating Percentage of
collections of Finance Charge Receivables allocated to the Certificates with
respect to such Monthly Period (including any investment earnings and certain
other amounts that are to be treated as collections of Finance Charge
Receivables in accordance with the Agreement, but excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that is
allocable to Servicer Interchange); (ii) if such Monthly Period relates to a
Distribution Date that occurs on or after the [Class B] Principal Commencement
Date, the Principal Funding Investment Proceeds, if any, with respect to the
related Distribution Date; and (iii) amounts, if any, to be withdrawn from the
Reserve Account which are required to be included in [Class B] Available Funds
pursuant to the Series Supplement with respect to such Distribution Date; [and
(iv) Excess Spread, if any, for such Monthly Period].]
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Cut-Off Date and ends
on the day before the commencement of the [Controlled Amortization Period]
[Accumulation Period] or, if earlier, the Rapid Amortization Period), no
principal payments will be made to Certificateholders.
[On each Distribution Date during the Revolving Period, unless a
reduction in the Required Collateral Amount has occurred, collections of
Principal Receivables allocable to the Certificateholders' Interest and the
Collateral Indebtedness Interest will, subject to certain limitations, including
the allocation of any Reallocated Principal Collections with respect to the
related Monthly Period to pay the Required Amount, be paid to the Seller to
purchase additional Receivables in order to maintain the Invested Amount, and if
necessary, be treated as Shared Principal Collections. If a reduction in the
Required Collateral Amount has occurred, collections of Principal Receivables
allocable to the Collateral Indebtedness Amount will be applied in accordance
with the Collateral Agreement to reduce the Collateral Indebtedness Amount to
the Required Collateral Amount.]
[During the Accumulation Period (on or prior to the respective
Expected Final Payment Dates), principal will be deposited in the Principal
Funding Account as described below and on the [Class A] Expected Final Payment
Date will be distributed to [Class A] Certificateholders up to the [Class A]
Invested Amount [and then to [Class B] Certificateholders on the [Class B]
Expected Final Payment Date up to the [Class B] Invested Amount]. During the
Rapid Amortization Period, which will begin upon the occurrence of a Pay Out
Event, and until the Termination Date occurs, principal will be paid [first] to
the [Class A] Certificateholders until the [Class A] Invested Amount has been
paid in full[, and then to the [Class B] Certificateholders until the [Class B]
Invested Amount has been paid in full].]
S-40
<PAGE>
[During the Controlled Amortization Period, which is scheduled to
begin on [ ], 199[ ], and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event, and until the Termination Date,
principal will be paid to the Certificateholders on each Distribution Date until
the Invested Amount has been paid in full.]
[On each Distribution Date during the Controlled Amortization Period
unless an Rapid Amortization Period commences, the Certificateholders will be
entitled to receive [for each related Monthly Period since the previous Interest
Payment Date] the lesser of (a) collections of Principal Receivables received
during each such Period allocated to the Series 199[ ]-[ ] Certificates [Shares
Principal Collections allocated Series 199[ ]-[ ]] [and] [Miscellaneous Payments
allocated to Series 199[ ]-[ ]] [other amounts].]
[On each Distribution Date with respect to the [Class A] Accumulation
Period, amounts equal to the least of (a) Available Investor Principal
Collections for the related Distribution Date on deposit in the Collection
Account, (b) the applicable Controlled Deposit Amount for such Distribution Date
and (c) the [Class A] Adjusted Invested Amount, will be deposited in the
Principal Funding Account until the Principal Funding Account Balance is equal
to the [Class A] Invested Amount. Amounts on deposit in the Principal Funding
Account will be paid to the [Class A] Certificateholders on the [Class A]
Expected Final Payment Date. [After the Class A Invested Amount has been paid in
full, on each Distribution Date with respect to the [Class B] Accumulation
Period, an amount equal to the least of (a) Available Investor Principal
Collections for the related Distribution Date on deposit in the Collection
Account (minus the portion of such Available Investor Principal Collections
applied to Class A Monthly Principal on such Distribution Date), (b) the
applicable Controlled Deposit Amount for such Monthly Period and (c) the [Class
B] Adjusted Invested Amount will be deposited in the Principal Funding Account
until the Principal Funding Account Balance equals the [Class B] Invested
Amount. Amounts on deposit in the Principal Funding Account in respect of the
[Class B] Certificates will be paid to the [Class B] Certificateholders on the
[Class B] Expected Final Payment Date.]
[If a Pay Out Event occurs with respect to Series 199[ ]-[ ] during
the Accumulation Period, the Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be paid [first] to the
[Class A] Certificateholders on the first Special Payment Date [and then, to the
extent the Class A Invested Amount is paid in full, to the [Class B]
Certificateholders]. If, on an Expected Final Payment Date, monies on deposit
in the Principal Funding Account are insufficient to pay the scheduled principal
amount, a Pay Out Event will occur and the Rapid Amortization Period will
commence. [After payment in full of the Class A Invested Amount, the [Class B]
Certificateholders will be entitled to receive an amount equal to the [Class B]
Invested Amount.]
"Available Principal Collections" means, with respect to any Period,
an amount equal to the [sum of (a) (i)] an amount equal to the Principal
Allocation Percentage of all collections of Principal Receivables received
during such Monthly Period (minus the amount of
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Reallocated Principal Collections with respect to such Monthly Period used to
fund the [Class A] Required Amount) [plus (b) the amount of Miscellaneous
Payments, if any, for such Monthly Period allocated to Series 199[ ]-[ ],] [plus
(c) any Shared Principal Collections with respect to other Series that are
allocated to Series 199[ ]-[ ],] [plus (d) any other amounts which pursuant to
the Series Supplement are to be treated as Available Investor Principal
Collections with respect to the related Distribution Date].
[The Accumulation Period is scheduled to commence at the close of
business on [ ]; however, the [Depositor] [Seller] may, upon notice to [the
Trustee,] [the Seller,] [the Servicer,] [the Depositor,] [each Rating Agency]
[and the Cash Collateral Holder] elect to postpone the commencement of the
Accumulation Period, and extend the length of the Revolving Period. The
Depositor may make such election only if the Accumulation Period Length
(determined as described below) is less than [ ] [twelve months]. On each
Determination Date until the Accumulation Period begins, the [Depositor]
[Seller] [Servicer] will determine the "Accumulation Period Length", which is
the number of months expected to be required to fully fund the Principal Funding
Account no later than the Expected Final Payment Date, based on (i) the expected
Monthly Period collections of Principal Receivables expected to be distributable
to the Certificateholders of all Series (excluding certain other Series),
assuming a principal payment rate no greater than the lowest Monthly Principal
payment rate on the Receivables for the preceding twelve months and (ii) the
amount of principal expected to be distributable to Certificateholders of all
Series (excluding certain other Series) which are not expected to be in their
revolving period during the Accumulation Period. If the Accumulation Period
Length is less than [ ] [twelve] months, the [Depositor] [Seller] may, at its
option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on the
invested amounts of certain other Series which are expected to be in their
revolving periods during the Accumulation Period or on increases in the
principal payment rate occurring after the Series Issuance Date. The
[Depositor] [Seller] may not postpone or further postpone the commencement date
of the Accumulation Period after a Pay Out Event (as defined with respect to
each other outstanding Series) shall have occurred and is continuing with
respect to any other outstanding Series. The length of the Accumulation Period
will not be less than one month. If the commencement of the Accumulation Period
is delayed in accordance with the foregoing, and if a Pay Out Event occurs after
the date originally scheduled as the commencement of the Accumulation Period,
then it is probable that the Certificateholders would receive some of their
principal later than if the Accumulation Period had not been delayed.]
On each Distribution Date with respect to the Rapid Amortization
Period until the [Class A] Invested Amount has been paid in full or the
Termination Date occurs, the [Class A] Certificateholders will be entitled to
receive Available Investor Principal Collections in an amount up to the [Class
A] Invested Amount. [After payment in full of the Class A Invested Amount, the
[Class B] Certificateholders will be entitled to receive on each Distribution
Date, Available
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Principal Collections until the earlier of the date on which the [Class B]
Invested Amount is paid in full or the Termination Date.] In addition, on the
first Special Payment Date following the occurrence of a Pay Out Event, after
giving effect to any payment of principal on such date, principal payments will
be made to the [Class A] Certificateholders [and the [Class B]
Certificateholders] from amounts on deposit in the Cash Collateral Account.
[On each Distribution Date commencing with the [Class B] Principal
Commencement Date, unless a Pay Out Event has occurred, a withdrawal will be
made from the Cash Collateral Account to pay principal with respect to the
[Class B] Certificates to the extent that the [Class B] Initial Invested Amount
minus the sum of the aggregate amount of principal payments previously
distributed to [Class B] Certificateholders or deposited in the Principal
Funding Account in respect of the [Class B] Certificates exceeds the [Class B]
Invested Amount on the last day of the related Monthly Period (determined after
giving effect to any change made to the [Class B] Invested Amount as a result of
unreimbursed charge-offs on the following Distribution Date).]
[During the Rapid Amortization Period, collections of Principal
Receivables allocable to the Collateral Indebtedness will be deposited in the
Cash Collateral Account. Amounts will be retained in the Cash Collateral Account
at its required level and be made available to cover shortfalls with respect to
the Certificates. [In addition, on the first Special Payment Date following the
occurrence of an Pay Out Event, after giving effect to any payment of principal
on such date as described under "Application of Collection Payments of
Principal," principal payments will be made to the Certificateholders from
amounts or deposit in the Cash Collateral Account as described under "Cash
Collateral Account" below.]]
[SUBORDINATION OF THE [CLASS B] CERTIFICATES]
[The [Class B] Certificateholders' Interest will be subordinated
(other than with respect to the Initial [Class B] Collateral Amount) to the
extent necessary to fund certain payments with respect to the Class A
Certificates. Certain principal payments otherwise allocable to the [Class B]
Certificateholders may be reallocated to the Class A Certificateholders and the
[Class B] Invested Amount may be decreased. To the extent the [Class B]
Invested Amount is reduced, the percentage of collections of Finance Charge
Receivables allocated to the [Class B] Certificateholders in subsequent Monthly
Periods will be reduced. Moreover, to the extent the amount of such reduction
in the [Class B] Invested Amount is not reimbursed, the amount of principal and
interest distributable to the [Class B] Certificateholders will be reduced.]
ALLOCATION PERCENTAGES
Pursuant to the Agreement, the [Seller] [Servicer] will allocate among
the Certificateholders' Interest, the certificateholders' interest for all other
Series of certificates issued and outstanding and the Seller's Interest [and the
Collateral Interest], all collections of Finance
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Charge Receivables and Principal Receivables and the Defaulted Amount with
respect to each Monthly Period.
Collection of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 199[ ]-[ ] based on
the Floating Allocation Percentage. The "Floating Allocation Percentage" means,
with respect to any Monthly Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the sum of the
Adjusted Invested Amount and the Collateral Invested Amount, if any, as of the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, the Initial Invested Amount as of the Issuance Date) and the denominator
of which is the sum of the total amount of the Principal Receivables in the
Trust as of such day (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust on the Cut-Off Date) and the
principal amount on deposit in the Excess Funding Account as of such day. [Such
amounts so allocated will be further allocated between the [Class A]
Certificateholders and the [Class B] Certificateholders in accordance with the
[Class A] Floating Percentage and the [Class B] Floating Percentage,
respectively. The "[Class A] Floating Percentage" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is equal to the [Class A] Adjusted
Investment Amount as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Issuance
Date) and the denominator of which is equal to the Adjusted Invested Amount as
of the close of business on such day (or with respect to the first Monthly
Period, the Initial Invested Amount). The "[Class B] Floating Percentage"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the [Class B] Adjusted Invested Amount as of the close of business on
such day (or with respect to the first Monthly Period, the Initial Invested
Amount).]
Collections of Principal Receivables will be allocated to Series
199[ ]-[ ] based on the Principal Allocation Percentage. The "Principal
Allocation Percentage" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is (a) during the Revolving Period, the Invested Amount as of
the last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period the Issuance Date) and (b) during the [Controlled
Amortization Period] [Accumulation Period] or the Rapid Amortization Period, the
Invested Amount as of the last day of the Revolving Period, and the denominator
of which is the greater of (i) the sum of the total amount of Principal
Receivables in the Trust as of the last day of the immediately preceding Monthly
Period and the principal amount on deposit in the Excess Funding Account as of
such last day (or, in the case of the first Monthly Period, the Cut-Off Date)
and (ii) the sum of the numerators used to calculate the principal allocation
percentages for all Series outstanding as of the date as to which such
determination is being made; provided, however, that because the Certificates
offered hereby are subject to being paired with a future Series, if a Pay Out
Event occurs with respect to such a paired Series during the [Controlled
Amortization Period] [Accumulation Period] with respect to
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Series 199[ ]-[ ], [the Depositor] [the Seller] [the Servicer] may, by written
notice delivered to the [the Trustee] [and] [the Seller] [and] [the Servicer],
designate a different numerator for the foregoing fraction, provided that such
numerator is not less than the Adjusted Invested Amount as of the last day of
the revolving period for such paired Series and [the Depositor] [the Seller]
[the Servicer] shall have received written notice from each Rating Agency that
such designation will not have a Ratings Effect, and [the Depositor] [the
Seller] [the Servicer] shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at the time, in the reasonable belief of [the Depositor] [the Seller] [the
Servicer], such designation will not cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time, would constitute a Pay Out
Event, to occur with respect to Series 199[ ]-[ ].
[Such amounts so allocated to the Certificateholders will be further
allocated between the [Class A] Certificateholders and the [Class B]
Certificateholders based on the [Class A] Principal Percentage and the [Class B]
Principal Percentage, respectively. The "[Class A] Principal Percentage" means,
with respect to any Monthly Period (a) during the Revolving Period, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is equal to the [Class A] Invested Amount as of the last day
of the immediately preceding Monthly Period (or, in the case of the first
Monthly Period, the [Class A] Initial Invested Amount), and the denominator of
which is equal to the Invested Amount as of such day, (or, in the case of the
first Monthly Period, the Initial Invested Amount) and (b) during the
[Controlled Amortization Period] [Accumulation Period] or the Rapid Amortization
Period, the percentage equivalent (which shall never exceed 100%) of a fraction,
the numerator of which is the [Class A] Invested Amount as of the last day of
the Revolving Period, and the denominator of which is the Invested Amount as of
such last day. The "[Class B] Principal Percentage" means, with respect to any
Monthly Period, (i) during the Revolving Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the [Class B] Invested Amount as of the last day of the immediately preceding
Monthly Period (or, in the case of the first Monthly Period, the [Class B]
Initial Invested Amount) and the denominator of which is the Invested Amount as
of such day (or, in the case of the first Monthly Period, the Initial Invested
Amount) and (ii) during the [Controlled Amortization Period] [Accumulation
Period] or the Rapid Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
[Class B] Invested Amount as of the last day of the Revolving Period, and the
denominator of which is the Invested Amount as of such last day.]
As used herein, the following terms have the meanings indicated:
"[Class A] Invested Amount" for any date means an amount equal to (i)
the [Class A] Initial Invested Amount, minus (ii) the aggregate amount of
-----
principal payments made to the [Class A] Certificateholders on or prior to such
date and minus (iii) the excess, if any, of the aggregate amount of [Class A]
-----
Investor Charge-Offs for all prior Distribution Dates over the
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<PAGE>
aggregate amount of any reimbursements of [Class A] Investor Charge-Offs for all
Distribution Dates prior to such date.
["[Class B] Invested Amount" for any date means an amount equal to (i)
the Initial [Class B] Invested Amount, minus (ii) the aggregate amount of
-----
principal payments made to [Class B] Certificateholders on or prior to such date
(other than principal payments made from the proceeds of amounts received from
the Cash Collateral Account for the purpose of reimbursing previous reductions
in the [Class B] Invested Amount), minus (iii) the excess, if any, of the
-----
aggregate amount of [Class B] Investor Charge-Offs for all prior Distribution
Dates over the aggregate amount of any reimbursement of [Class B] Investor
Charge-Offs for all Distribution Dates preceding such date, minus (iv) the
-----
amount of Reallocated Principal Receivables for all prior Distribution Dates
which have been used to fund the [Class A] Required Amount with respect to such
Distribution Dates (excluding any Reallocated Principal Receivables that have
resulted in a reduction of the Collateral Invested Amount), minus (v) an amount
-----
equal to the amount by which the [Class B] Invested Amount has been reduced to
fund the [Class A] Default Amount on all prior Distribution Dates as described
under "[Class A] Investor Charge-Offs" and plus (vi) the amount of Excess Spread
----
and Excess Finance Charges allocated to Series 199[ ]-[ ] and available on all
prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (iii), (iv) and (v).]
"[Class A] Adjusted Invested Amount", for any date of determination,
means an amount equal to the then current [Class A] Invested Amount, minus the
-----
funds on deposit in the Principal Funding Account of such date.
["[Class B] Adjusted Invested Amount", for any date of determination,
means (a) if such date occurs prior to the [Class B] Principal Commencement
Date, an amount equal to the [Class B] Invested Amount and (b) if such date
occurs on or after the [Class B] Principal Commencement Date, an amount equal to
the [Class B] Invested Amount minus the funds on deposit in the Principal
-----
Funding Account on such date.]
["Collateral Indebtedness Amount" means an amount equal to (a) the
initial Collateral Indebtedness Amount, minus (b) the aggregate amount of
deposits made to the Cash Collateral Account from Principal Collections, minus
(c) the aggregate amount of Reallocated Principal Collections allocable to the
Collateral Indebtedness Amount for all prior Distribution Dates which have been
used to fund the Required Amount, minus (d) an amount equal to the aggregate
amount by which the Collateral Indebtedness Amount has been reduced to fund the
Investor Default Amount on all prior Distribution Dates as described under "--
Defaulted Receivables; Investor Charge-Offs", minus (e) an amount equal to the
product of the Collateral Floating Percentage and the Investor Default Amount
(the "Collateral Defaulted Amount") with respect to any Distribution Date that
is not funded out of Available Funds [and Excess Finance Charges allocated to
Series 199[ ]-[ ] and available for such purpose on such Distribution
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<PAGE>
Date], and plus (f) the aggregate amount of Available Funds [and Excess Finance
Charges] allocated and available to reimburse amounts deducted pursuant to the
foregoing clauses (c), (d) and (e) provided, however, that the Collateral
Indebtedness Amount may not be reduced below zero.]
["Collateral Invested Amount" means for any date, an amount equal to
(a) the amount withdrawn from the Cash Collateral Account and applied to the
payment of principal of the Certificates on the first Special Payment Date
following an Pay Out Event, minus (b) the aggregate amount of principal payments
made to the Collateral Interest Holder prior to such date minus (c) the amount
by which the Collateral Invested Amount has been reduced to fund the [Class A]
Default Amount [and the [Class B] Default Amount] on all prior Distribution
Dates as described below, minus (d) the amount by which the Collateral Invested
Amount has been reduced by Reallocated Principal Receivables applied to
reimburse the Required Amount and plus (e) the aggregate amount of Excess Spread
and Excess Finance Charges allocated to Series 199[ ]-[ ] and available on all
prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d). In the absence of the occurrence
of a Pay Out Event and a related withdrawal from the Cash Collateral Account to
pay principal of the Certificates, the Collateral Invested Amount will be zero.]
["Invested Amount", for any date, means an amount equal to the sum of
the [Class A] Invested Amount and the [Class B] Invested Amount] [and the
Collateral Invested Amount].]
[PRINCIPAL FUNDING ACCOUNT]
[The [Seller] [Servicer] [Depositor] will establish and maintain in
the name of the Trustee, on behalf of the Trust, the Principal Funding Account,
as an Eligible Account held for the benefit of the Certificateholders. During
the Accumulation Period, the Servicer will transfer collections in respect of
Principal Receivables, Shared Principal Collections allocated to Series 199[ ]-
[ ], [Miscellaneous Payments allocated to Series 199[ ]-[ ]] and other amounts
described herein to be treated in the same manner as collections of Principal
Receivables from the Collection Account to the Principal Funding Account.
[Unless a Pay Out Event has occurred with respect to the Certificates,
all amounts on deposit in the Principal Funding Account (the "Principal Funding
Account Balance") on any Distribution Date (after giving effect to any deposits
to, or withdrawals from the Principal Funding Account to be made on such
Distribution Date) will be invested until the following Distribution Date by the
Trustee at the direction of [the Seller] [the Servicer] [the Depositor] in
Eligible Investments. On each Distribution Date with respect to the
Accumulation Period [(on or prior to the [Class B] Expected Final Payment Date)]
the interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Principal Funding Investment Proceeds") will be
withdrawn from the Principal Funding Account and will be treated as a portion of
[Class A] Available Funds, [prior to the [Class B] Principal Commencement Date
and,
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<PAGE>
thereafter, [Class B] Available Funds]. If such investments with respect to any
such Distribution Date yield less than the applicable Certificate Rate, the
Principal Funding Investment Proceeds with respect to such Distribution Date
will be less than the Covered Amount for such following Distribution Date. It
is intended that any such shortfall will be funded from [Class A] Available
Funds [or [Class B] Available Funds, as the case may be] (including a withdrawal
from the Reserve Account, if necessary) [or a withdrawal from the Cash
Collateral Account] [other sources]. The Available Reserve Account Amount at
any time will be limited and there can be no assurance that sufficient funds
will be available to fund any such shortfall.
The "Covered Amount" shall mean [(a)] for any Distribution Date with
respect to the [Class A] Accumulation Period or the first Special Payment Date,
[if such Special Payment Date occurs prior to the [Class B] Principal
Commencement Date,] an amount equal to one [twelfth] [quarter] [half] of the
product of (i) the [Class A] Certificate Rate and (ii) the Principal Funding
Account Balance, if any, as of the preceding Distribution Date [and (b) for any
Distribution Date with respect to the [Class B] Accumulation Period or the first
Special Payment Date, if such Special Payment Date occurs on or after the
[Class B] Principal Commencement Date, an amount equal to one [twelfth]
[quarter] [half] of the product of (i) the [Class B] Certificate Rate and (ii)
the Principal Funding Account Balance, if any, as of the preceding Distribution
Date].
[RESERVE ACCOUNT]
The [Seller] [Servicer] [Depositor] will establish and maintain in the
name of the Trustee, on behalf of the Trust, an Eligible Deposit Account for the
benefit of the Certificateholders (the "Reserve Account"). The Reserve Account
is established to assure the subsequent distribution of interest on the
Certificates as provided in this Prospectus Supplement during the Accumulation
Period. On each Distribution Date from and after the Reserve Account Funding
Date, but prior to the termination of the Reserve Account, the Trustee, acting
pursuant to the [Servicer's] [Seller's] [Depositor's] instructions, will apply
Excess Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] (to the
extent described below under "Application of Collections--Payment of Interest,
Fees and Other Items") to increase the amount on deposit in the Reserve Account
(to the extent such amount is less than the Required Reserve Account Amount).
[In addition, on each Distribution Date, the [Seller] [Depositor] will have the
option, but will not be required, to make a deposit in the Reserve Account (to
the extent that the amount on deposit in the Reserve Account is less than the
Required Reserve Account Amount).]
[The "Reserve Account Funding Date" will be the Distribution Date with
respect to the Monthly Period which commences no later than three months prior
to the Distribution Date with respect to the Monthly Period which commences the
[Class A] Accumulation Period or such earlier date as the Servicer may
designate. The "Required Reserve Account Amount" for any Distribution Date on
or after the Reserve Account Funding Date will be equal to the product of [ %]
of the [Class A] Invested Amount as of the preceding Distribution Date and the
Reserve
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Account Factor as of such Distribution Date, or such lower amount approved by
each Rating Agency. On each Distribution Date, after giving effect to any
deposit to be made to, and any withdrawal to be made from, the Reserve Account
on such Distribution Date, the Trustee will withdraw from the Reserve Account an
amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and shall distribute such
excess to, or at the direction of, [the Seller] [the Depositor]. The "Reserve
Account Factor" for any Distribution Date will be equal to the percentage (not
to exceed 100%) equivalent of a fraction, the numerator of which is the number
of Monthly Periods scheduled to be included in the Accumulation Period (as such
may have been postponed at the option of the [Seller] [Depositor] [Servicer]) as
of such Distribution Date and the denominator of which is [ ].]
[Provided that the Reserve Account has not terminated as described
below, all amounts on deposit in the Reserve Account on any Distribution Date
(after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested until the
following Distribution Date by the Trustee at the direction of the [Seller]
[Servicer] [Depositor] in Eligible Investments. The interest and other
investment income (net of investment expenses and losses) earned on such
investments will be retained in the Reserve Account (to the extent the amount on
deposit therein is less than the Required Reserve Account Amount) or deposited
in the Collection Account and treated as collections of Finance Charge
Receivables.]
[On or before each Distribution Date with respect to the Accumulation
Period (on or prior to the [Class A] Expected Final Payment Date) and on the
first Special Payment Date, a withdrawal will be made from the Reserve Account,
and the amount of such withdrawal will be deposited in the Collection Account
and included in [Class A] Available Funds, [prior to the [Class B] Principal
Commencement Date, and, thereafter, in [Class B] Available Funds,] in an amount
equal to the lesser of (a) the Available Reserve Account Amount with respect to
such Distribution Date or Special Payment Date and (b) the excess, if any, of
the Covered Amount with respect to such Distribution Date or Special Payment
Date over the Principal Funding Investment Proceeds with respect to such
Distribution Date or Special Payment Date; provided that the amount of such
withdrawal shall be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Distribution Date or
Special Payment Date. On each Distribution Date, the amount available to be
withdrawn from the Reserve Account (the "Available Reserve Account Amount") will
be equal to the lesser of the amount on deposit in the Reserve Account (before
giving effect to any deposit to be made to the Reserve Account on such
Distribution Date) and the Required Reserve Account Amount for such Distribution
Date.]
[The Reserve Account will be terminated following the earlier to occur
of (a) the termination of the Trust pursuant to the Agreement, (b) the date on
which the Certificates are paid in full and (c) if the Accumulation Period has
not commenced, the occurrence of a Pay Out Event with respect to Series 199[ ]-
[ ] or, if the Accumulation Period has commenced, the earlier of the first
Special Payment Date and the [[Class B]] Expected Final Payment Date. Upon the
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<PAGE>
termination of the Reserve Account, all amounts on deposit therein (after giving
effect to any withdrawal from the Reserve Account on such date as described
above) will be distributed to, or at the direction of, the Depositor. Any
amounts withdrawn from the Reserve Account and distributed to, or at the
direction of, the Depositor as described above will not be available for
distribution to the Certificateholders.]
REALLOCATION OF CASH FLOWS; [CLASS B] INVESTED AMOUNT
With respect to each Distribution Date, on each Determination Date,
the Servicer will determine the "[Class A] Required Amount," which will be equal
to the amount, if any, by which (a) the sum of (i) [Class A] [Monthly]
[Quarterly] [Semi-Annual] Interest for such Distribution Date, (ii) any
[Class A] [Monthly] [Quarterly] [Semi-Annual] Interest previously due but not
paid to [Class A] Certificateholders on a prior Distribution Date, (iii) any
[Class A] additional Interest, (iv) the [Class A] Servicing Fee for such
Distribution Date and any unpaid [Class A] Servicing fee and (v) the [Class A]
Default Amount, if any, for such Distribution Date, exceeds the [Class A]
Available Funds. If the [Class A] Required Amount is greater than zero, Excess
Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] and available
for such purpose will be used to fund the [Class A] Required Amount with respect
to such Distribution Date. If such Excess Spread and Excess Finance Charges
available with respect to such Distribution Date are less than the [Class A]
Required Amount, then amounts, if any, on deposit in the Cash Collateral Account
available to pay amounts in respect of the [Class A] Certificates will then be
used to fund the remaining [Class A] Required Amount. [If such Excess Spread and
Excess Finance Charges and amounts available from the Cash Collateral Account
are insufficient to fund the [Class A] Required Amount, then collections of
Principal Receivables allocable to the [Class B] Certificates for the related
Monthly Period will then be used to fund the remaining [Class A] Required Amount
("Reallocated Principal Receivables").] If Reallocated Principal Receivables
with respect to the related Monthly Period (together with Excess Spread and
Excess Finance Charges allocated to Series 199[ ]-[ ] and amounts available from
the Cash Collateral Account) are insufficient to fund the [Class A] Required
Amount for such related Monthly Period, then the Collateral Invested Amount, if
any, will be reduced by the amount of such excess (but not by more than the
[Class A] Default Amount for such Distribution Date). In the event that such
reduction would cause the Collateral Invested Amount to be a negative number,
the Collateral Invested Amount will be reduced to zero, and the [Class B]
Invested Amount will be reduced by the amount by which the Collateral Invested
Amount would have been reduced below zero (but not by more than the excess of
the [Class A] Default Amount, if any, for such Distribution Date over the amount
of such reduction, if any, of the Collateral Invested Amount with respect to
such Distribution Date). In the event that such reduction would cause the
[Class B] Invested Amount to be a negative number, then the [Class B] Invested
Amount will be reduced to zero, and the [Class A] Invested Amount will be
reduced by the amount by which the [Class B] Invested Amount would have been
reduced below zero (but not by more than the excess, if any, of the [Class A]
Default Amount for such Distribution Date over the amount of the reductions, if
any, of the Collateral Invested Amount and the [Class B] Invested Amount with
respect to such
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Distribution Date as described above).] Any such reduction in the [Class A]
Invested Amount will have the effect of slowing or reducing the return of
principal and interest to the [Class A] Certificateholders. In such case, the
[Class A] Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust.
Reductions of the [Class A] [or [Class B]] Invested Amount shall
thereafter be reimbursed and the [Class A] [or Class B] Invested Amount will be
increased on each Distribution Date by the amount, if any, of Excess Spread and
Excess Finance Charges. See "APPLICATION OF COLLECTIONS -- Excess Spread;
Excess Finance Charges". When such reductions of the [Class A] and [Class B]
Invested Amount have been fully reimbursed, reductions of the [Collateral]
Invested Amount shall be reimbursed and the [Collateral] Invested Amount
increased in a similar manner.
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items. On each Distribution Date,
the Trustee, acting pursuant to the [Seller's] [Servicer's] instructions, will
apply the [Class A] Available Funds [and [Class B] Available Funds] (each as
defined under "--Interest Payments" above) on deposit in the Collection Account
in the following priority:
(A) On each Distribution Date, an amount equal to the [Class A] Available
Funds with respect to such Distribution Date will be distributed in the
following priority:
(i) an amount equal to [Class A] Monthly Interest for such
Distribution Date, plus the amount of any [Class A] Monthly Interest
previously due but not distributed to the [Class A] Certificateholders on a
prior Distribution Date, plus any additional interest with respect to
interest amounts that were due but not distributed to the [Class A]
Certificateholders on a prior Distribution Date at a rate equal to the
[Class A] Certificate Rate [plus [ %] per annum ("[Class A] Additional
Interest"),] will be:
[(x)] distributed to [Class A] Certificateholders [if such
Distribution Date is an Interest Payment Date or (y) deposited in the
Interest Funding Account, if such Distribution Date is not an Interest
Payment Date or Special Payment Date for distribution to [Class A]
Certificateholders on the next Interest Payment Date or Special
Payment Date];
(ii) an amount equal to the [Class A] Servicing Fee for such
Distribution Date, plus the amount of any [Class A] Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution
Date, will be distributed to the Servicer (unless such amount has been
netted against deposits to the Collection Account);
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(iii) an amount equal to the [Class A] Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" below.
[(B) On each Distribution Date, an amount equal to the [Class B] Available
Funds with respect to such Distribution Date will be distributed in the
following priority:]
[(i) an amount equal to [Class B] Monthly Interest for such
Distribution Date, plus the amount of any [Class B] Monthly Interest
previously due but not distributed to the [Class B] Certificateholders on a
prior Distribution Date, plus any additional interest with respect to
interest amounts that were due but not distributed to the [Class B]
Certificateholders on a prior Distribution Date at a rate equal to the
[Class B] Certificate Rate plus [ %] per annum ("[Class B] Additional
Interest"), will be:]
[(x)] distributed to [Class B] Certificateholders [if such
Distribution Date is an Interest Payment Date or (y) deposited in the
Interest Funding Account, if such Distribution Date is not an Interest
Payment Date or Special Payment Date for distribution to [Class
B]Certificateholders on the next Interest Payment Date or Special
Payment Date];]
[(ii) an amount equal to the [Class B] Servicing Fee for such
Distribution Date, plus the amount of any [Class B] Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution
Date, will be distributed to the Servicer (unless such amount has been
netted against deposits to the Collection Account); and]
[(iii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "--Excess Spread; Excess Finance
Charges" below.]
"[Class A] Monthly Interest" means, with respect to any Distribution
Date, an amount equal to the product of (i) a fraction, the numerator of which
is the actual number of days in the period from and including the prior
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, (ii) the [Class A] Certificate Rate and (iii) the [Class A]
Invested Amount as of the preceding Record Date.
["[Class B] Monthly Interest" means, with respect to any Distribution
Date, an amount equal to the product of (i) a fraction, the numerator of which
is the actual number of days in the period from and including the prior
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, (ii) the [Class B] Certificate Rate and (iii) the [Class B]
Invested Amount as of the preceding Record Date.]
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"Excess Spread" means, with respect to any Distribution Date, an
amount equal to the sum of the amounts described in clause (A)(iv) above [and
clause (B)(iii) above,] [in the definition of [Class A] Montly Interest [and
[Class B] Monthly Interest]].
Excess Spread; Excess Finance Charges. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] with respect to
the related Monthly Period to make the following distributions in the following
priority to the extent funds are available:
[(a)] an amount equal to the [Class A] Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clauses (A) (i), (ii) and (iii) above in such order of
priority;
[(b)] [an amount equal to the aggregate amount of [Class A] Investor
Charge-Offs which have not been previously reimbursed (after giving effect
to the allocation on such Distribution Date of certain other amounts
applied for that purpose) will be treated as a portion of Available
Investor Principal Collections for such Distribution Date as described
under "--Payments of Principal" below;]
[(c)] [an amount equal to the [Class B] Required Amount, if any, with
respect to such Distribution Date will be used first (I) to fund any
deficiency pursuant to clauses (B) (i) and (ii) above under "--Payment of
Interest, Fees and Other Items" in such order of priority, and (II) second
to pay any [Class B] Default Amount with respect to such Distribution
Date].
[(d)] [an amount equal to the aggregate by which the [Class B]
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "[Class B] Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Available Investor Principal Collections for such Distribution
Date;]
[(e)] [an amount equal to [the "Cash Collateral Fee" (as described in
the Loan Agreement (the "[Loan] Agreement") among the [Depositor] [Seller],
the Cash Collateral Depositor and the Trustee) for such Distribution Date
shall be distributed to the Cash Collateral Depositor for application in
accordance with the [Loan] Agreement;]
[(f)] [an amount equal to the aggregate amount by which the
Collateral Invested Amount has been reduced pursuant to clauses (c) and (d)
of the definition of "Collateral Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Available Principal Collections for such Distribution Date;]
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[(g)] [an amount equal to the Monthly Servicing Fee due but not paid
to the Servicer on such Distribution Date or a prior Distribution Date
shall be paid to the Servicer;]
[(h)] [an amount up to the excess, if any, of the Required Cash
Collateral Amount over the remaining Available Cash Collateral Amount shall
be deposited into the Cash Collateral Account;]
[(i)] [on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account
terminates, an amount up to the excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount shall be deposited
into the Reserve Account;]
[(j)] [an amount equal to the aggregate of any other amounts then due
to the Collateral Interest Holder pursuant to the [Loan] Agreement (to the
extent such amounts are payable pursuant to the [Loan] Agreement out of
Excess Spread and Excess Finance Charges) shall be distributed to the
Collateral Interest Holder for application in accordance with the [Loan]
Agreement; and
[(k)] the balance, if any, will constitute a portion of Excess
Finance Charges for such Distribution Date and will be available for
allocation to other Series in Group [ ] or to the [Seller] [Depositor] as
described in "Description of the Certificates -- Sharing of Excess Finance
Charges" in the Prospectus.
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the [Seller's] [Servicer's] instructions, will distribute Available
Principal Collections (see "--Principal Payments" above) on deposit in the
Collection Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections will be distributed [or deposited] in
the following priority:
[(a)] [an amount equal to the excess, if any, of the
Collateral Invested Amount over the Required Collateral Invested Amount
will be paid to the Collateral Interest Holder; and]
[(b)] [the balance]
[such Available Principal Collections] will be treated as Shared Principal
Collections and applied in accordance with the Agreement and the Series
Supplement.]
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(ii) on each Distribution Date with respect to the [Controlled Amortization
Period] [Accumulation Period] or the Rapid Amortization Period, all such
Available Principal collections will be distributed [or deposited] in the
following priority:
[(a)] [an amount equal to [Class A] Monthly Principal, up to the
[Class A] Adjusted Invested Amount on such Distribution Date will be
distributed to [Class A] Certificateholders [if such Distribution Date is a
Principal Distribution Date or deposited in the Principal Funding Account
if such Distribution Date is not a Principal Distribution Date] (during the
[Class A] Accumulation Period) or distributed to the [Class A]
Certificateholders (during the Rapid Amortization Period)[; and]]
[(b) for each Distribution Date after the [Class A] Adjusted
Invested Amount has been paid in full, an amount equal to [Class B] Monthly
Principal, up to the [Class B] Adjusted Invested Amount on such
Distribution Date, will be distributed to [Class B] Certificateholders [if
such Distribution Date is a Principal Distribution Date or deposited in the
Principal Funding Account if such Distribution Date is not a Principal
Distribution Date] (during the [Class B] Accumulation Period) or
distributed to the Class B Certificateholders (during the Rapid
Amortization Period);]
[(a)] [an amount equal to [Class A] Monthly Principal, up to the
[Class A] Adjusted Invested Amount on such Distribution Date will be
deposited in the Principal Funding Account (during the [Class A]
Accumulation Period) or distributed to the [Class A] Certificateholders
(during the Rapid Amortization Period)[; and]]
[(b) for each Distribution Date beginning on the [Class B] Principal
Commencement Date, an amount equal to [Class B] Monthly Principal for such
Distribution Date, up to the [Class B] Adjusted Invested Amount on such
Distribution Date, will be deposited in the Principal Funding Account
(during the [Class B] Accumulation Period) or distributed to the [Class B]
Certificateholders (during the Rapid Amortization Period)].
(c) for each Distribution Date with respect to the Rapid
Amortization Period, beginning with the Distribution Date on which the
Invested Amount is paid in full, an amount equal to the balance, if any, of
such Available Principal collections then on deposit in the Collection
Account, to the extent of the Collateral Invested Amount, if any, shall be
distributed to the Collateral Interest Holder for application in accordance
with the [Loan] Agreement; and
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(d) for each Distribution Date, after giving effect to paragraphs
(a), (b) and (c) above, an amount equal to the balance, if any, of such
Available Principal Collections will be allocated to Shared Principal
Collections and applied in accordance with the Agreement.
"[Class A] Monthly Principal" with respect to any Distribution Date
relating to the [Class A] [Controlled Amortization Period] [Accumulation Period]
or the Rapid Amortization Period will equal the lesser of (i) the Available
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date, (ii) for each Distribution Date with respect to the [Class A]
[Controlled Amortization Period] [Accumulation Period], [and on or prior to the
[Class A] Expected Final Payment Date,] the [Controlled Distribution Amount]
[Controlled Deposit Amount] for such Distribution Date and (iii) the [Class A]
Adjusted Invested Amount on such Distribution Date.
["[Class B] Monthly Principal" with respect to any Distribution Date
relating to the [Class B] [Controlled Amortization Period] [Accumulation Period]
or the Rapid Amortization Period, after the [Class A] Certificates have been
paid in full, will equal the lesser of (i) the Available Principal Collections
on deposit in the Collection Account with respect to such Distribution Date
(minus the portion of such Available Principal Collections applied to [Class A]
Monthly Principal on such Distribution Date), (ii) for each Distribution Date
with respect to the [Class B] [Controlled Amortization Period] [Accumulation
Period], [and on or prior to the [Class B] Expected Final Payment Date,] the
[Controlled Distribution Amount] [Controlled Deposit Amount] for such
Distribution Date and (iii) the [Class B] Adjusted Invested Amount on such
Distribution Date.]
["Controlled Accumulation Amount" means [(a)] for any Distribution Date
with respect to the [Class A] Accumulation Period, $[ ]; provided, however,
that, if the commencement of the [Class A] Accumulation Period is delayed as
described above under "--Principal Payments", the Accumulation Amount for each
Distribution Date may be different for each Distribution Date with respect to
the [Class A] Accumulation Period and will be determined by the [Seller]
[Servicer] [Depositor] in accordance with the [Agreement] [and the Series
Supplement] based on the principal payment rates for the Accounts and on the
invested amounts of other Principal Sharing Series that are scheduled to be in
their revolving periods and then scheduled to create Shared Principal
Collections during the [Class A] Accumulation Period[; and (b) for any
Distribution Date with respect to the [Class B] Accumulation Period, an amount
equal to [$ ] [the [Class B] Invested Amount] as of the [Class B] Principal
Commencement Date].]]
["Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the [Class A] Accumulation Period [or the
[Class B] Accumulation Period,] the excess, if any, of the Controlled
Accumulation Amount for such Distribution Date over the amount [deposited in the
Principal Funding Account on such Distribution Date] [distributed from
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the Collection Account as [Class A] Monthly Principal [or [Class B] Monthly
Principal, as the case may be,] for such Distribution Date] and (b) on each
subsequent Distribution Date with respect to the [Class A] Accumulation Period
[or the [Class B] Accumulation Period,] the excess, if any, of the Controlled
Deposit Amount for such subsequent Distribution Date plus any Deficit Controlled
Accumulation Amount for the prior Distribution Date over the amount [deposited
in the Principal Funding Account on such Distribution Date] [distributed from
the Collection Account as [Class A] Monthly Principal [or [Class B] Monthly
Principal, as the case may be,] for such subsequent Distribution Date].]]
["Controlled Deposit Amount" means, for any Distribution Date with
respect to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.]
[CASH COLLATERAL ACCOUNT]
[The Trust will have the benefit of the Cash Collateral Account for
the benefit of the Certificateholders [and the Collateral Interest Holder], as
their interests appear in the Series Supplement, and in the case of the
Collateral Interest Holder, in the [Loan] Agreement (which interest, in the case
of the Collateral Interest Holder, will be subordinated to the interests of the
Certificateholders as provided in the Series Supplement). The Cash Collateral
Account will be one or more Eligible Deposit Accounts. Funds on deposit in the
Cash Collateral Account will be invested in certain Eligible Investments that
mature on or before the business day immediately preceding the next Distribution
Date. [On each Distribution Date, all interest and earnings (net of losses and
investment expenses) accrued since the preceding Distribution Date on funds on
deposit in the Cash Collateral Account shall be paid to the Collateral Interest
Holder for application in accordance with the [Loan] Agreement.]]
[The Cash Collateral Account will be funded on the Issuance Date in
the Initial Cash Collateral Amount which amount will include the proceeds of an
advance to be made by one or more lenders to be selected by the Seller (such
lender or lenders, the "Collateral Interest Holders"). Such advance will be
repaid pursuant to the [Loan] Agreement. The Cash Collateral Account will be
terminated following the earliest to occur of (a) the date on which the
Certificates are paid in full, (b) the date on which the entire Available Cash
Collateral Amount is distributed to the Certificateholders as a result of the
occurrence of an Pay Out Event, (c) the Termination Date and (d) the
termination of the Trust pursuant to the Agreement.]
[On each Distribution Date, the amount available to be withdrawn from
the Cash Collateral Account (the "Available Cash Collateral Amount") will be
equal to the lesser of the amount on deposit in the Cash Collateral Account
(before giving effect to any deposit to be made
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to, or withdrawal from, the Cash Collateral Account on such Distribution Date)
or the Required Cash Collateral Amount.]
[The "Required Cash Collateral Amount" means, with respect to any
Distribution Date, the lesser of the (a) [the sum of] [the Required Shared
Collateral Amount] [and] [the Initial [Class B] Collateral Amount] as of such
Distribution Date and (b) the adjusted Invested Amount as of such Distribution
Date.]
[The "Required Shared Collateral Amount" means, with respect to any
Distribution Date, the product of (a) the Adjusted Invested Amount as of such
Distribution Date after taking into account distributions made on such date and
(b) [ ]% or such higher percentage as is specified by each Rating Agency;
provided, however, that (i) if there are any withdrawals from the Cash
Collateral Account to fund the [Class A] Required Amount [or the [Class B]
Required Amount,] or a Pay Out Event occurs with respect to Series 199[ ]-[ ],
then the Required Shared Collateral Amount for any Distribution Date shall equal
the Required Shared Collateral Amount on the Distribution Date immediately
preceding such withdrawal or Pay Out Event and (ii) notwithstanding the
foregoing, the Required Shared Collateral Amount with respect to any
Distribution Date will not be less than $[ ].]
[The Required Shared Collateral Amount [and the Initial [Class B]
Collateral Amount] may be reduced without the consent of the Certificateholders,
if the [Depositor] [Seller] shall have received written notice from each Rating
Agency that such reduction will not have a Ratings Effect and the [Depositor]
[Seller] shall have delivered to the Trustee a certificate of an authorized
officer to the effect that, based on the facts known to such officer at the
time, in the reasonable belief of the [Depositor] [Seller], such reduction will
not cause a Pay Out Event or an event that, after the giving of notice of the
lapse of time, would constitute a Pay Out Event, to occur with respect to Series
199[ ]-[ ].]
[On each Distribution Date, one or more withdrawals will be made from
the Cash Collateral Account in an amount up to the Available Shared Collateral
Amount, to fund the following amounts in the following priority:]
[(a)] the excess, if any, of the [Class A] Required Amount
with respect to the related Distribution Date over the amount of
Excess Spread and Excess Finance Charges allocated to Series 199[ ]-[
] and available to fund such [Class A] Required Amount will be used
first to fund any deficiency in current [Class A] Monthly Interest,
overdue [Class A] Monthly Interest and any current or overdue [Class
A] Additional Interest, second to fund any deficiency in the [Class A]
Servicing Fee and any overdue [Class A] Servicing Fee and third to pay
the [Class A] Default Amount, if any, for such Distribution Date[;
and]
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[(b) the excess, if any, of the [Class B] Required Amount with
respect to the related Distribution Date over the amount of Excess
Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] and
available to fund such [Class B] Required Amount will be used first to
fund any deficiency in current [Class B] Monthly Interest, overdue
[Class B] Monthly Interest and any current or overdue [Class B]
Additional Interest, second to fund any deficiency in the [Class B]
Servicing Fee and any overdue [Class B] Servicing Fee, and third to
pay the [Class B] Default Amount, if any, for such Distribution Date.]
On each Distribution Date, the "Available Shared Collateral Amount"
shall equal the lesser of (a) the Required Shared Collateral Amount and (b) the
excess, if any, of the amount on deposit in the Cash Collateral Account for such
Distribution Date over the Initial [Class B] Collateral Amount.
On the first Special Payment Date following a Pay Out Event described
in clause (e) under "--Pay Out Events" after giving effect to any payment of
principal on such date described under "--Application of Collections -- Payments
of Principal", the Available Shared Collateral Amount (after giving effect to
any withdrawal from the Cash Collateral Account on such date to fund the
Required Amount) will be applied to pay principal of the [Class A] Certificates
[and the remainder of the Available Cash Collateral Amount will be applied to
pay principal of the [Class B] Certificates].
[On each Distribution Date commencing with the [Class B] Principal
Commencement Date, unless as Pay Out Event has occurred, a withdrawal will be
made from the Cash Collateral Account, to the extent of the Available Cash
Collateral Amount, in an amount equal to the excess, if any, of the [Class B]
Initial Invested Amount (minus the sum of the aggregate amount of principal
payments previously deposited to the Principal Funding Account or distributed in
respect of the [Class B] Certificates) over the [Class B] Invested Amount on the
last day of the related Monthly Period (determined after giving effect to any
changes to be made in the [Class B] Invested Amount pursuant to clauses (iii),
(iv), (v) or (vi) of the definition of "[Class B] Invested Amount" under "--
Allocation Percentages" on the following Distribution Date).]
[In the event of a sale of the Receivables and an early termination of
the Trust due to an Insolvency Event, an optional repurchase of the
Certificateholders' Interest by the [Depositor] [Seller] Servicer], a sale of a
portion of the Receivables in connection with the Termination Date, a repurchase
or sale of the Certificateholders' Interest and the certificateholders' interest
of all other Series in connection with a Servicer Default or a reassignment of
the Certificateholders' Interest and the certificateholders' interest of all
other Series in connection with a breach by the [Seller] [Depositor] [Servicer]
of certain representations and warranties, any Available Cash Collateral Amount
on the related Distribution Date (after giving effect to all other withdrawals
from the Cash Collateral Account on such Distribution Date
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as described above) will be withdrawn from the Cash Collateral Account and the
proceeds thereof will be distributed to [Class B] Certificateholders to the
extent of all previous reductions of the [Class B] Invested Amount [pursuant to
clauses (iii), (iv) or (v) of the definition of "[Class B] Invested Amount"
under "--Allocation Percentages" above.]
On each Distribution Date, the [Seller] [Servicer] or the Trustee,
acting pursuant to the [Seller's] [Servicer's] instructions, will apply Excess
Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] (to the extent
described above under "--Application of Collections -- Excess Spread; Excess
Finance Charges") to increase the amount on deposit in the Cash Collateral
Account to the extent such amount is less than the Required Cash Collateral
Amount. In addition, if on any Distribution Date the amount on deposit in the
Cash Collateral Account exceeds the Required Cash Collateral Amount, such excess
will be withdrawn and paid to the Collateral Interest Holder for application in
accordance with the [Loan] Agreement.
DEFAULTED RECEIVABLES CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the Defaulted
Amount for such Monthly Period. [A portion of the Investor Default Amount will
be allocated to the [Class A] Certificateholders (the "[Class A] Default
Amount") on each Distribution Date in an amount equal to the product of the
[Class A] Floating Percentage applicable during the related Monthly Period and
the Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the [Class B] Certificateholders (the
"[Class B] Default Amount") in an amount equal to the product of the [Class B]
Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. An amount equal to the
[Class A] Default Amount for each Monthly Period will be paid from [Class A]
Available Funds, Excess Spread and Excess Finance Charges allocated to Series
199[ ]-[ ] or from amounts available under the Cash Collateral Account and
Reallocated Principal Receivables and applied as described above in
"--Application of Collections -- Payment of Interest, Fees and Other Items" and
"--Reallocation of Cash Flows; [Class B] Invested Amount". An amount equal to
the [Class B] Default Amount for each Monthly Period will be paid from Excess
Spread and Excess Finance Charges allocated to Series 199[ ]-[ ] or from
amounts, if any, available under the Cash Collateral Account and applied as
described above in "--Application of Collections -- Payment of Interest, Fees
and Other Items".]
On each Distribution Date, if the [Class A] Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 199[ ]-[ ], then amounts, if any, on deposit in the Cash
Collateral Account up to the Available Shared Collateral Amount and Reallocated
Principal Receivables, the Collateral Invested Amount, if any,
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will be reduced by the amount of such excess, but not by more than the [Class A]
Default Amount for such Distribution Date. [In the event that such reduction
would cause the Collateral Invested Amount to be a negative number, the
Collateral Invested Amount will be reduced to zero, and the [Class B] Invested
Amount will be reduced by the amount by which the Collateral Invested Amount
would have been reduced below zero, but not by more than the excess, if any, of
the [Class A] Default Amount for such Distribution Date over the amount of such
reduction, if any, of the Collateral Invested Amount with respect to such
Distribution Date. In the event that such reduction would cause the [Class B]
Invested Amount to be a negative number, the [Class B] Invested Amount will be
reduced to zero, and the [Class A] Invested Amount will be reduced by the amount
by which the [Class B] Invested Amount would have been reduced below zero, but
not by more than the excess, if any, of the [Class A] Default Amount for such
Distribution Date over the amount of the reductions, if any, of the Collateral
Invested Amount and the [Class B] Invested Amount with respect to such
Distribution Date as described above (a "[Class A] Charge-Off"), which will
have the effect of slowing or reducing the return of principal to the [Class A]
Certificateholders.] If the [Class A] Invested Amount has been reduced by the
amount of any [Class A] Charge-Offs, it will thereafter be increased on any
Distribution Date (but not by an amount in excess of the aggregate [Class A]
Charge-Offs) by the amount of Excess Spread and Excess Finance Charges allocated
to Series 199[ ]-[ ] and available for such purpose.
[On each Distribution Date, if the [Class B] Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 199[ ]-[ ] and not required to pay the [Class A] Required
Amount and amounts, if any, on deposit in the Cash Collateral Account which are
allocated and available to fund such amount, then the Collateral Invested
Amount, if any, will be reduced by the amount of such excess. In the event that
such reduction would cause the Collateral Invested Amount to be a negative
number, the Collateral Invested Amount will be reduced to zero, and the
[Class B] Invested Amount will be reduced by the amount by which the Collateral
Invested Amount would have been reduced below zero, but not by more than the
excess, if any, of the [Class B] Default Amount for such Distribution Date over
the amount of such reduction, if any, of the Collateral Invested Amount with
respect to such Distribution Date (a "[Class B] Charge-Off").]
[If on any Distribution Date Reallocated Principal Receivables for
such Distribution Date are applied to fund the Required Amount, the Collateral
Invested Amount, if any, will be reduced by the amount of such Reallocated
Principal Receivables. In the event such reductions would cause the Collateral
Investment Amount to be a negative number, the Collateral Invested Amount shall
be reduced to zero, and the [Class B] Invested Amount will be reduced by the
amount by which the Collateral Invested Amount would have been reduced below
zero.]
[The [Class B] Invested Amount will thereafter be reimbursed (but not
in excess of the aggregate unreimbursed [Class B] Charge-Offs) on any
Distribution Date by the amount of Excess Spread and Excess Finance Charges
allocated to Series 199[ ]-[ ] and available for such purpose.]
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[Any such reductions of the Collateral Invested Amount shall
thereafter be reimbursed and the Collateral Invested Amount increased (but not
by any amount in excess of the aggregate reductions of the Collateral Invested
Amount) on any Distribution Date by the amount of Excess Spread and Excess
Finance Charges allocated to Series 199[ ]-[ ] and available for such purpose as
described under "--Application of Collections -- Payment of Interest, Fees and
Other Items".]
ISSUANCE OF ADDITIONAL CERTIFICATES
The Series Supplement provides that from time to time during the
Revolving Period, the [Depositor] [Seller] may, subject to certain conditions
described below, cause the Trustee to issue Additional Certificates (each such
issuance, an "Additional Issuance"). When issued, the Additional Certificates
[of each class] will be identical in all respects to the other outstanding
Certificates [of that class] and will be equally and ratably entitled to the
benefits of the Agreement and the Series Supplement without preference, priority
or distinction.
In connection with each Additional Issuance, the outstanding principal
amounts of the [Class A] Certificates [and the [Class B] Certificates] and the
aggregate amount of Credit Enhancement will all be increased pro rata. The
additional Credit Enhancement provided in connection with an Additional Issuance
may take the form of an increase in the Required Cash Collateral Amount or
another form of Credit Enhancement, provided that the form and amount of
additional Credit Enhancement will not cause a Ratings Effect.
Following an Additional Issuance, the [Controlled Amortization Amount]
[Controlled Accumulation Amounts] of each Class will be increased
proportionately to reflect the principal amount of Additional Certificates.
Additional Certificates may be issued only upon the satisfaction of
certain conditions provided in the Series Supplement, including the following:
(a) on or before the fifth business day immediately preceding the date on which
the Additional Certificates are to be issued, the [Depositor] [Seller] shall
have given the Trustee, [the Seller,] [the Servicer,] each Rating Agency and any
provider of Credit Enhancement written notice of such issuance and the date upon
which it is to occur, (b) after giving effect to the Additional Issuance, the
total amount of Principal Receivables shall be at least equal to the Required
Principal Balance, (c) the [Depositor] [Seller] shall have delivered to the
Trustee an amended Series Supplement, executed by each of the parties to such
agreement; (d) the [Depositor] [Seller] shall have received written notice from
each Rating Agency that such Additional Issuance will not have a Ratings Effect;
(e) the [Depositor] [Seller] shall have delivered to the Trustee a certificate
of an authorized officer to the effect that, based on the facts known to such
officer at the time, in the reasonable belief of the [Depositor] [Seller], such
Additional Issuance will not cause a Pay Out Event or an event that, after the
giving of notice or the lapse of time, would constitute a Pay Out Event, to
occur with respect to Series 199[ ]-[ ];
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(f) as of the date of the Additional Issuance and taking the Additional Issuance
into account, the amount of Credit Enhancement with respect to Series
199[ ]-[ ], together with any additional Credit Enhancement, shall not be less
than the amount required so that the additional issuance will not result in a
Ratings Effect; (g) as of the date of the Additional Issuance, all amounts due
and owing to the holders of Certificates shall have been paid, and there shall
not be any unreimbursed [Class A] Charge-Offs [or [Class B] Charge-Offs]; (h)
the excess of the principal amount of the Additional Certificates over their
issue price shall not exceed the maximum amount permitted under the Code without
the creation of original issue discount; (i) the [Seller's] remaining interest
in Principal Receivables shall not be less than [ %] of the total amount of
Principal Receivables, in each case as of the date upon which the Additional
issuance is to occur after giving effect to such issuance; (j) the [Depositor]
[Seller] shall have delivered to the Trustee, each Rating Agency and any
provider of Credit Enhancement, a Tax Opinion with respect to the Additional
Issuance; (k) the [Depositor] [Seller] shall have obtained additional Credit
Enhancement for the benefit of the holders of Certificates, provided that the
ratio of the sum of the Required Cash Collateral Amount and the amount of such
Credit Enhancement to the Invested Amount (after giving effect to such
Additional Issuance) shall be greater than or equal to the ratio of the Required
Cash Collateral Amount to the Invested Amount (before giving effect to such
Additional Issuance); (l) the [Depositor] [Seller] shall have delivered to each
Rating Agency (i) an opinion of counsel to the effect that such Additional
Issuance will not violate applicable Federal Securities laws and (ii) such other
documents as the Rating Agencies may request; and (m) the ratio of the
[Controlled Amortization Amount] [Controlled Accumulation Amount] (after giving
effect to such Additional Issuance) to the Invested Amount (after giving effect
to such Additional Issuance) shall be equal to the ratio of the [Controlled
Amortization Amount] [Controlled Accumulated Amount] (before giving effect to
such Additional Issuance) to the Invested Amount (before giving effect to such
Additional Issuance).
There are no restrictions on the time or amount of any Additional
Issuance, provided that the conditions described above are met. As of the date
of any Additional Issuance, the [Class A] Invested Amount [and the [Class B]
Invested Amount] will be increased to reflect the initial principal balance of
the Additional Certificates of the respective classes.
[PAIRED SERIES]
[The Series 199[ ]-[ ] Certificates may be paired with one or more
other Series (each a "Paired Series"). Each Paired Series either will be
prefunded with an initial deposit to a prefunding account in an amount up to the
initial principal balance of such Paired Series and primarily from the proceeds
of the sale of such Paired Series or will have a variable principal amount. Any
such prefunding account will be held for the benefit of such Paired Series and
not for the benefit of Certificateholders. As funds are accumulated in the
Principal Funding Account, either (i) in the case of a prefunded Paired Series,
an equal amount of funds on deposit in any prefunding account for such prefunded
Paired Series will be released (which funds will be distributed to the Seller)
or (ii) in the case of a Paired Series having a variable principal amount,
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an interest in such variable Paired Series, in an equal or lesser amount may be
sold by the Trust (and the proceeds thereof will be distributed to the Seller)
and, in either case, the invested amount in the Trust of such Paired Series will
increase by up to a corresponding amount. Upon payment in full of Series
199[ ]-[ ], assuming that there have been no unreimbursed charge-offs with
respect to any related Paired Series, the aggregate invested amount of such
related Paired Series will have been increased by an amount up to an aggregate
amount equal to the Series 199[ ]-[ ] Invested Amount paid to the
Certificateholders. There can be no assurance, however, that the terms of any
Paired Series might not have an impact on the timing or amount of payments
received by Certificateholders. See "Maturity Considerations" herein.
REQUIRED PRINCIPAL BALANCE; ADDITION TO ACCOUNTS
The obligation of the Trustee to authenticate certificates of a new
Series and to execute and deliver the related Series Supplement shall be subject
to the conditions described in the Prospectus and to the additional condition
that, as of the Series Issuance Date and after giving effect to such issuance,
the aggregate amount of Principal Receivables in the Trust equals or exceeds the
Required Principal Balance. The "Required Principal Balance" means, as of any
date of determination, the sum of the initial invested amount (as defined in the
relevant Supplement) of each Series outstanding on such date (other than any
Series or portion thereof (as "Excluded Series") which is designated in the
relevant Supplement as then being an Excluded Series) minus the principal amount
on deposit in the Excess Funding Account on such date; provided, however, that
if at any time the only Series outstanding are Excluded Series and Pay Out Event
has occurred with respect to one or more such Series, the Required Principal
Balance shall mean the sum of the "Invested Amount" (as defined in the relevant
Supplement) of each such Excluded Series as of the earliest date on which any
such pay Out Event is deemed to have occurred minus the principal amount on
deposit in the Excess Funding Account; and provided further that the Required
Principal Balance may be reduced to a lesser amount without the consent of the
Certificateholders, if the [Depositor] [Seller] shall have received written
notice from each Rating Agency that such reduction will not have a Ratings
Effect.
If, as of the close of business on the last business day of any
Monthly Period, the aggregate amount of Principal Receivables in the Trust is
less than the Required Principal Balance on such date, the [Depositor] [Seller]
shall on or before the [ ] [tenth] business day following such day, unless
the amount of Principal Receivables in the Trust equals or exceeds the Required
Principal Balance as of the close of business on any day after the last business
day of such Monthly Period and prior to such tenth business day, make an
Addition to the Trust such that, after giving effect to such Addition, the
amount of Principal Receivables in the Trust is at least equal to the Required
Principal Balance.
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PAY OUT EVENTS
The Pay Out Events with respect to the Certificates will include each
of the events specified in the Prospectus and the following:
(a) failure on the part of the [Depositor] [Seller] [Servicer] (i) to make
any payment or deposit required by it under the Agreement or the Series
Supplement within [five] [ ] business days after the day such payment or
deposit is required to be made; or (ii) to observe or perform any of its other
covenants or agreements set forth in the Agreement the Series Supplement, which
failure has a material adverse effect on the Series 199[ ]-[ ]
Certificateholders and which continues unremedied for a period of [60] [ ]
days (or for such longer period, not in excess of [150] [ ] days, as may be
reasonably necessary to remedy such failure; provided that such failure is
capable of remedy within [150] [ ] days or less and the [Seller] [Servicer]
[Depositor] delivers an officer's certificate to the effect that the [Seller]
[Servicer] [Depositor] has commenced, or will promptly commence and diligently
pursue, all reasonable efforts to remedy such failure) after the earlier to
occur of the discovery thereof by the [Seller] [Servicer] [Depositor] or written
notice;
(b) any representation or warranty made by [Seller] [Servicer] [Depositor]
in the Agreement or the Series Supplement or any information required to be
given by the [Depositor] [Seller] [Servicer] to the Trustee to identify the
Accounts proves to have been incorrect in any material respect when made and
continues to be incorrect in any material respect for a period of [60] [ ]
days (or for such longer period, not in excess of [150] [ ] days, as may be
reasonably necessary to remedy such breach; provided that such misrepresentation
is capable of remedy within [150] [ ] days or less and the [Seller]
[Servicer] [Depositor] delivers an officer's certificate to the effect that the
[Seller] [Servicer] [Depositor] has commenced or will promptly commence and
diligently pursue, all reasonable efforts to remedy such misrepresentation)
after the earlier to occur of discovery thereof by the [Seller] [Servicer]
[Depositor] or written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected; provided, however,
that a Pay Out Event shall not be deemed to occur thereunder if the [Seller]
[Servicer] [Depositor] has repurchased the related Receivables or all such
Receivables, if applicable, during such period in accordance with the provisions
of the Agreement;
(c) a failure by the [Depositor] [Seller] to make an Addition to the Trust
within five business days after the day on which it is required to make such
Addition pursuant to the Agreement or the Series Supplement;
(d) the occurrence of any Servicer Default with respect to the
Certificates;
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(e) the average Portfolio Yield for any three consecutive Monthly
Periods is less than the average of the Base Rates with respect to Series
199[ ]-[ ] for such Monthly Periods;
(f) the failure to pay in full the [Class A] Invested Amount on the [Class
A] Expected Final Expected Final Payment Date[, or the [Class B] Invested Amount
on the [Class B] Expected Final Payment Date]; and
(g) the [Depositor] [Seller] is unable for any reason to transfer
Receivables to the Trust in accordance with the Agreement or the Series
Supplement.
Then, in the case of any event described in subparagraph (a), (b) or
(d), after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Certificates evidencing more than 50% of
the aggregate unpaid principal amount of Series 199[ ]-[ ] by notice then given
in writing to the [Seller] [Servicer] [Depositor] (and to the Trustee if given
by the Certificateholders) may declare that a Pay Out Event has occurred with
respect to Series 199[ ]-[ ] as of the date of such notice, and, in the case of
any event described in subparagraph (c), (e), (f) or (g), a Pay Out Event shall
occur with respect to Series 199[ ]-[ ], without any notice or other action on
the part of the Trustee immediately upon the occurrence of such event.
For purposes of the Pay Out Event described in clause (e) above, the
terms "Base Rate" and "Portfolio Yield" will be defined as follows with respect
to the Certificates:
"Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the sum
of [Class A] Monthly Interest, [[Class B] Monthly Interest] and the Monthly
Servicing Fee with respect to Series 199[ ]-[ ] for the related Distribution
Date and the denominator of which is the Invested Amount as of the last day of
the preceding Monthly Period.
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) the Floating Allocation Percentage of collections of Finance Charge
Receivables (including any investment earnings and certain other amounts that
are to be treated as Finance Charge Receivables in accordance with the
Agreement) for such Monthly Period calculated on a billed basis, plus (b) the
amount of Principal Funding Investment Proceeds for the related Distribution
Date, plus (c) the amount of funds withdrawn from the Reserve Account and which
are required to be included as [Class A] Available Funds [or [Class B] Available
Funds], in each case for the Distribution Date with respect to such Monthly
Period minus (d) the Investor Default Amount for the Distribution Date with
respect to such Monthly Period, and the denominator of which is the Invested
Amount as of the last day of the preceding Monthly Period.
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If the proceeds of any sale of the Receivables following the
occurrence of an Insolvency Event with respect to the [Depositor] [Seller]
[Servicer] allocated to the [Class A] Invested Amount and the proceeds of any
collections on the Receivables in the Collection Account are not sufficient to
pay in full the remaining amount due on the [Class A] Certificates, then the
[Class A] Certificateholders will suffer a corresponding loss [and no such
proceeds will be available to the [Class B] Certificateholders].
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to Series 199[ ]-[ ] with
respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal to
one twelfth of the product of (a) [ %] (the "Servicing Fee Rate") and (b) the
sum of the Adjusted Invested Amount and the Collateral Invested Amount, if any,
as of the last day of the Monthly Period preceding such Distribution Date (the
amount calculated pursuant to this clause (b) is referred to as the "Servicing
Base Amount"); provided, however, that the Monthly Servicing Fee with respect to
the first Distribution Date will be [$ ] [equal to the Servicing Fee accrued
on the Initial Invested Amount at the Servicing Fee Rate for the period from the
Issuance Date to but excluding the first Distribution Date calculated on the
basis of the actual number of days in the period from the Issuance Date to such
first Distribution Date and a 360-day year]. On each Distribution Date, but
only if [Servicer Name] or the Trustee is the Servicer, Interchange with respect
to the related Monthly Period that is on deposit in the Collection Account shall
be withdrawn from the Collection Account and paid to the Servicer as payment of
a portion of the Monthly Servicing Fee with respect to such Monthly Period. The
"Servicer Interchange" for any Monthly Period for which [Servicer Name] or the
Trustee is the Servicer will be equal to the product of (a) the Floating
Allocation Percentage for such Monthly Period and (b) the portion of Finance
Charge Receivables allocated to the Trust with respect to such Monthly Period
that is attributed to Interchange; provided, however, that Servicer Interchange
for a Monthly Period shall not exceed one twelfth of the product of (i) the sum
of the Invested Amount and the Collateral Investment Amount, if any, as of the
last day of such Monthly Period and (ii) [ %]. In the case of any
insufficiency of Servicer Interchange on deposit in the Collection Account, a
portion of the Monthly Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency and in no event shall the Trust,
the Trustee or the Certificateholders be liable for the share of the Servicing
Fee to be paid out of Servicer Interchange.
[The share of the Monthly Servicing Fee allocable to the [Class A]
Certificateholders (after giving effect to the distribution of any Servicer
Interchange to the Servicer) with respect to any Distribution Date (the
"[Class A] Servicing Fee") shall be equal to one twelfth of the product of (a)
the [Class A] Floating Percentage, (b) [ %], or if [Servicer Name] or the
Trustee is not the Servicer, [ %] (the "Net Servicing Fee Rate") and (c) the
Servicing Base Amount; provided, however, with respect to the first Distribution
Date, the [Class A] Servicing Fee shall be equal to the [Class A]
Certificateholders' share of the Monthly Servicing Fee for the period from the
Issuance Date to but excluding the first Distribution Date.
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[The share of the Monthly Servicing Fee allocable to the [Class B]
Certificateholders (after giving effect to any distribution of Servicer
Interchange to the Servicer) with respect to any Distribution Date (the
"[Class B] Servicing Fee") shall be equal to one twelfth of the product of (a)
the [Class B] Floating Percentage, (b) the Net Servicing Fee Rate and (c) the
Servicing Base Amount; provided, however, with respect to the first Distribution
Date, the [Class B] Servicing Fee shall be equal to the [Class B]
Certificateholders' share of the Monthly Servicing Fee for the period from the
Series Issuance Date to but excluding the first Distribution Date. The remainder
of the Servicing Fee shall be paid by the [Depositor] [Seller] or the
certificateholders of other Series (as provided in the related Supplements) or,
to the extent of any insufficiency of Servicer Interchange as described above,
not be paid and in no event shall the Trust, the Trustee or the
Certificateholders be liable for the share of the Servicing Fee to be paid by
the [Depositor] [Seller] or the Certificateholders of any other Series or to be
paid out of Servicer Interchange. The [Class A] Servicing Fee [and the [Class B]
Servicing Fee] shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof.]
SERIES TERMINATION
If on the Distribution Date which is two months prior to the
Termination Date, the Invested Amount or the Collateral Invested Amount, if any
(in each case after giving effect to all changes therein on such date) exceeds
zero, the Servicer will, within the 40-day period beginning on such date,
solicit bids for the sale of interests in the Principal Receivables or certain
Principal Receivables, together in each case with the related Finance Charge
Receivables, in an amount equal to the sum of the Invested Amount and the
Collateral Invested Amount, if any, at the close of business on the last day of
the Monthly Period preceding the Termination Date (after giving effect to all
distributions required to be made on the Termination Date). The [Depositor]
[Seller] (provided that the sum of the Invested Amount and the Collateral
Invested Amount, if any, is less than or equal to [ %] of the Initial
Invested Amount), and the Collateral Interest Holder will be entitled to
participate in, and to receive notice of each bid submitted in connection with,
such bidding. Upon the expiration of 40-day period, the Trustee will determine
(a) which bid is the highest cash purchase offer (the "Highest Bid") and (b) the
amount (the "Available Final Distribution Amount") which otherwise would be
available in the Collection Account on the Termination Date for distribution to
the Certificateholders and the Collateral Interest Holder. The Servicer will
sell such Receivables on the Termination Date to the bidder who provided the
Highest Bid and will deposit the proceeds of such sale in the Collection Account
for allocation (together with the Available Final Distribution Amount) to the
Certificateholders' Interest.
REPORTS
No later than the third business day prior to each Distribution Date,
the Servicer will forward to the Trustee, [the Collateral Interest Holder] [the
Cash Collateral Depositor] [the Depositor] the Paying Agent and each Rating
Agency a statement (the "Monthly Report") prepared by the Servicer setting forth
certain information with respect to the Trust and the Certificates,
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including: (a) the aggregate amount of Principal Receivables and Finance Charge
Receivables in the Trust as of the end of such Monthly Period; (b) the [Class A]
Invested Amount [and] [the [Class B] Invested Amount] [and] [the Collateral
Invested Amount] at the close of business on the last day of the preceding
Monthly Period; (c) the Floating Allocation Percentage and, during the
[Controlled Amortization Period] [Accumulation Period] or Rapid Amortization
Period with respect to such Series, the Principal Allocation Percentage with
respect to the Certificates; (d) the amount of collections of Principal
Receivables and Finance Charge Receivables processed during the related Monthly
Period and the portion thereof allocated to the Certificateholders' Interest;
(e) the aggregate outstanding balance of Accounts which were 30, 60, and 90 days
or more delinquent as of the end of such Monthly Period; (f) the Defaulted
Amount with respect to such Monthly Period and the portion thereof allocated to
the Certificateholders' Interest [and the Collateral Interest Holder]; (g) the
amount, if any, of [Class A] Charge-Offs [and [Class B] Charge-Offs]; (h) the
Monthly Servicing Fees; (i) the Portfolio Yield for such Monthly Period; (j) the
amount to be withdrawn from the Cash Collateral Account, if any, to fund the
[Class A] Required Amount [or the [Class B] Required Amount] for such
Distribution Date; (k) the Available Cash Collateral Amount, the Available
Shared Collateral Amount and the Required Cash Collateral with respect to Series
199[ ]-[ ] and (l) Reallocated Principal Receivables.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Depositor and the
underwriters named below (the "Underwriters"), the Depositor has agreed to sell
to the Underwriters, and each of the Underwriters has severally agreed to
purchase, the principal amount of the [Class A] Certificates [and [Class B]
Certificates] set forth opposite its name (the "Underwritten Certificates"):
<TABLE>
<CAPTION>
Principal Amount Principal Amount
of [Class A] of [Class B]
Underwriter Certificates Certificates
----------- ---------------- ----------------
<S> <C> <C>
CS First Boston.......
[Other underwriter]...
Total.................
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Underwritten Certificates are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. All of the Certificates offered hereby will be issued if any
are issued. Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Underwritten Certificates
offered hereby, if any are taken.
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<PAGE>
The Underwriters propose initially to offer the [Class A] Certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of [ ]% of the principal
amount of the [Class A] Certificates. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of [ ]% of the principal
amount of the [Class A] Certificates to certain brokers and dealers. After the
initial public offering, the public offering price and other selling terms may
be changed by the Underwriters.
[The Underwriters propose initially to offer the [Class B]
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of [ ]% of
the principal amount of the [Class B] Certificates. The Underwriters may allow,
and such dealers may reallow, concessions not in excess of [ ]% of the
principal amount of the [Class B] Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriters.]
The Depositor will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
In the ordinary course of their respective businesses, the
Underwriters and their respective affiliates have engaged and may engage in
investment banking and/or commercial banking transactions with the Depositor and
its affiliates.
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INDEX OF DEFINED TERMS
Accounts.......................................................
Accumulation Period............................................
Additional Certificates........................................
Adjusted Invested Amount.......................................
Available Final Distribution Amount............................
Available Principal Collections................................
Available Reserve Account Amount...............................
Available Shared Collateral Amount.............................
Base Rate......................................................
Cash Collateral Account........................................
Cash Collateral Depositor......................................
Certificateholders.............................................
Certificate Owners.............................................
Certificates...................................................
[Class A] Accumulation Amount..................................
[Class A] Accumulation Period..................................
[Class A] Additional Interest..................................
[Class A] Adjusted Invested Amount.............................
[Class A] Available Funds......................................
[Class A] Certificate Rate.....................................
[Class A] Certificateholders' Interest.........................
[Class A] Certificates.........................................
[Class A] Controlled Accumulation..............................
[Class A] Controlled Amortization Amount.......................
[Class A] Controlled Amortization Period.......................
[Class A] Floating Percentage..................................
[Class A] Initial Invested Amount..............................
[Class A] Invested Amount......................................
[Class A] Charge Off...........................................
[Class A] Default Amount.......................................
[Class A] Monthly Interest.....................................
[Class A] Principal Commencement Date..........................
[Class A] Principal Percentage.................................
[Class A] Required Amount......................................
[Class A] Servicing Fee........................................
[Class B] Accumulation Amount..................................
[Class B] Accumulation Period..................................
[Class B] Additional Interest..................................
[Class B] Adjusted Invested Amount.............................
[Class B] Available Funds......................................
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<PAGE>
[Class B] Certificate Rate.....................................
[Class B] Certificateholders' Interest.........................
[Class B] Certificates.........................................
[Class B] Controlled Amortization Amount.......................
[Class B] Controlled Amortization Period.......................
[Class B] Floating Percentage..................................
[Class B] Initial Invested Amount..............................
[Class B] Invested Amount......................................
[Class B] Charge Off...........................................
[Class B] Default Amount.......................................
[Class B] Monthly Interest.....................................
[Class B] Principal Commencement Date..........................
[Class B] Principal Percentage.................................
[Class B] Required Amount......................................
[Class B] Servicing Fee........................................
Closing Date...................................................
Code...........................................................
Collateral Additional Interest.................................
Collateral Available Funds.....................................
Collateral Charge-Off..........................................
Collateral Default Amount......................................
Collateral Floating Percentage.................................
Collateral Initial Invested Amount.............................
Collateral Interest............................................
Collateral Interest Holder.....................................
Collateral Interest Servicing Fee..............................
Collateral Invested Amount.....................................
Collateral Monthly Interest....................................
Collateral Principal Percentage................................
Collateral Rate................................................
Controlled Accumulation Amount.................................
Controlled Accumulation Period.................................
Controlled Accumulation Period Length..........................
Controlled Amortization Amount.................................
Controlled Amortization Period.................................
Controlled Deposit Amount......................................
Covered Amount.................................................
Credit Enhancement.............................................
Cut-Off Date...................................................
Defaulted Amount...............................................
Deficit Controlled Accumulation Amount.........................
Definitive Certificates........................................
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Depositor......................................................
Distribution Date..............................................
Excess Spread..................................................
Excess Finance Charge Receivables..............................
Expected Final Payment Date....................................
Final Scheduled Payment Date...................................
Finance Charge Receivables.....................................
Floating Allocation Percentage.................................
Funding Period.................................................
Group [ ].....................................................
Initial Cash Collateral Amount.................................
Initial [Class B] Collateral Amount............................
Initial Cut-Off Date...........................................
Initial Invested Amount........................................
Initial Shared Collateral Amount...............................
Interest Funding Account.......................................
Interest Payment Date..........................................
Interest Period................................................
Invested Amount................................................
Investor Default Amount........................................
Issuance Date..................................................
Loan Agreement.................................................
Mandatory Prepayment...........................................
Monthly Period.................................................
Monthly Report.................................................
Monthly Servicing Fee..........................................
Paired Series..................................................
Pay Out Event..................................................
Period Length Determination Date...............................
Pooling and Servicing Agreement................................
Pre-Funding Account............................................
Principal Allocation Percentage................................
Principal Funding Account......................................
Principal Funding Account......................................
Principal Funding Investment Proceeds..........................
Principal Receivables..........................................
Rapid Amortization Period......................................
Rating Agency..................................................
Ratings Effect.................................................
Reallocated Principal Receivables..............................
Reallocated Principal Collections..............................
Receivables....................................................
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<PAGE>
Required Amount................................................
Required Cash Collateral Amount................................
Required Collateral Invested Amount............................
Required Reserve Account Amount................................
Required [Seller's] Amount.....................................
Reserve Account................................................
Reserve Account Funding Date...................................
Revolving Period...............................................
Series Supplement..............................................
[Servicer].....................................................
Servicing Fee..................................................
Shared Principal Collections...................................
Special Payment Date...........................................
Subsequent Cut-Off Date........................................
Subsequent Receivables.........................................
Subsequent Transfer Date.......................................
Termination Date...............................................
Trust..........................................................
Trust Portfolio................................................
Trustee........................................................
Underwriters...................................................
Underwriting Agreement.........................................
S-74
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, soliciation 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[ ]
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Notes,
[Class] [1]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Notes,
[Class] [2]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed
Certificates, [Class] [3]
ASSET BACKED SECURITIES CORPORATION, DEPOSITOR
The CSFB Card Account Trust 199[ ]-[ ] (the "Trust") will be formed
pursuant to a trust agreement to be dated as of [ ], 199[ ] (the "Trust
Agreement") and entered into by Asset Backed Securities Corporation (the
"Depositor"), and [Owner Trustee name], as owner trustee (the "Owner Trustee").
The Trust will issue $[ ] aggregate principal amount of Class [1] [ %]
[Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed Notes (the "Class
[1] Notes") and $[ ] aggregate principal amount of Class [2] [% ] [Floating
Rate ] [Adjustable Rate] [Variable Rate] Asset Back Notes (the "Class [2] Notes"
and, together with the Class [1] Notes, the "Notes"). The Notes will be issued
pursuant to an indenture to be dated as of [ ], 199[ ] (the "Indenture"),
between the Trust and [Indenture Trustee name] as indenture trustee (the
"Indenture Trustee"). The Trust will also issue $[ ] aggregate
(Continued on the following page)
--------------------
THE SECURITIES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY AND DO
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, OWNER TRUSTEE,
INDENTURE TRUSTEE OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
PROVIDED HEREIN. NEITHER THE SECURITIES NOR THE UNDERLYING
ASSETS ARE INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Public Underwriting Discount Proceeds to the
Seller (1)
<S> <C> <C> <C>
Per [Class A] Certificate
[Per Class B Certificate]
Total
</TABLE>
===============================================================================
(1) Before deduction of expenses payable by the Seller, estimated ].
to be $[
--------------------
The Securities offered hereby will be purchased by CS First Boston
Corporation (the "Underwriter") from the Depositor and will, in each case, be
offered by the Underwriter from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. [The aggregate proceeds to the Depositor from the sale of the Notes are
expected to be $[ ] and from the sale of the Certificates are expected to be
$[ ] before deducting expenses payable by the Depositor of $[ ].
The Securities are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is expected that
the Notes will be [available for delivery] [delivered in book-entry form] [at
the offices of the Underwriter] [through the facilities of The Depository Trust
Company] [(in the United States)] [and] [Cedel S.A. and the Euroclear System (in
Europe)] on or about [ ], 199[ ] [at the offices of the Underwriter]. [The
Securities will be offered in the United States of America and in Europe.]
--------------------
Underwriters of the Securities
LOGO CS First Boston
The date of this Prospectus Supplement is [ ], 199[ ].
<PAGE>
principal amount of Class [3] [% ] [Floating Rate] [Adjustable Rate] [Variable
Rate] Asset Backed Certificates (the "Class [3] Certificates" or the
"Certificates" and, together with the Notes, the "Securities"). Terms used and
not otherwise defined herein shall have the respective meanings ascribed to such
terms in the Prospectus dated [ ], 199[ ] attached hereto (the "Prospectus").
The Trust will consist of certain asset backed certificates
(collectively, the "CRB Securities") each issued pursuant to a pooling and
servicing agreement or master pooling and servicing agreement (collectively, the
"Agreements"). Each of the CRB Securities evidences an interest in a trust fund
created by one of the Agreements, the property of which includes a portfolio of
[charge card] [credit card] [consumer] [corporate] [debit card] [revolving]
receivables (collectively, the "Receivables") generated or to be generated from
time to time in the ordinary course of business in a portfolio of [charge card]
[credit card] [consumer] [debit card] [revolving] accounts (collectively, the
"Accounts"), all monies due in payment of the Receivables and certain other
properties, as more fully described herein. [In addition, the Trust will enter
into the Ancillary Agreements (as defined herein).]
The per annum rate of interest on the Class [1] Notes for each
[monthly] [quarterly] [semi-annually] Interest Accrual Period (as defined
herein) will equal [ %] [insert interest formula]. The per annum rate of
interest on the Class [2] Notes for each [monthly] [quarterly] [semi-annually]
Interest Accrual Period (as defined herein) will equal [ %] [insert interest
formula]. Interest on the Notes will be payable on the [ ] day of each [month]
[quarter] [semi-annual period] or, if any such day is not a Business Day, on the
next succeeding Business Day (the "Payment Date") commencing [ ], 199[ ].
Principal of the Class [1] Notes will be payable on each Payment Date,
commencing with the [ ], 199[ ] Payment Date (or earlier under certain
circumstances) to the extent described herein pro rata to the holders of the
Class [1] Notes. Principal of the Class [2] Notes will be payable on each
Payment Date, commencing with the [ ], 199[ ] Payment Date (or earlier under
certain circumstances) to the extent described herein pro rata to the holders of
the Class [2] Notes.
The Certificates will represent fractional undivided interests in the
Trust. Interest at a rate equal to [ %] [insert interest formula] will be
distributed to the Certificateholders on each Payment Date. Principal, to the
extent described herein, will be distributed to the Certificateholders on each
Payment Date, commencing with the [ ], 199[ ] Payment Date. Distributions
of principal and interest on the Certificates will be subordinated in priority
to payments due on the Notes as described herein.
There is currently no market for the Securities offered hereby and
there can be no assurance that such a market will develop or if it does develop
that it will continue. See "RISK FACTORS" herein.
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Securities whether or not participating in
this distribution, may be required to deliver a Prospectus Supplement and
Prospectus to investors [and may be required to deliver a Global Prospectus
Supplement to non-U.S. investors]. This is in addition to the obligation of
dealers acting as underwriters to deliver a Prospectus Supplement and Prospectus
with respect to their unsold allotments or subscriptions.
--------------------
The Securities offered hereby constitute part of a separate series of
Asset Backed Securities being offered by the Depositor from time to time
pursuant to its Prospectus dated [ ], 199[ ]. This Prospectus Supplement
does not contain complete information about the offering of the Securities.
Additional information is contained in the Prospectus and investors are urged to
read both this Prospectus Supplement and the Prospectus in full as well as any
prospectus relating to the CRB Securities. [Non-U.S. investors are also urged
to read the Global Prospectus Supplement.] Sales of the Securities may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus [and, if a non-U.S. purchaser, the Global Prospectus
Supplement].
S-2
<PAGE>
SUMMARY
The following summary of certain pertinent information is
qualified in its entirety by reference to the detailed information
appearing elsewhere in this Prospectus Supplement and in the accompanying
Prospectus and in the prospectus and prospectus supplement for each of the
CRB Securities. Certain capitalized terms used herein are defined
elsewhere in the Prospectus Supplement or in the Prospectus.
Securities Offered.................... (i) [ %] [Floating Rate] [Adjustable
Rate] [Variable Rate] Asset Backed
Notes, [Class] [1] (the "[Class] [1]
Notes");
(ii) [ %] [Floating Rate]
[Adjustable Rate] Variable Rate]
Asset Backed Notes, [Class] [2] (the
"Class [2] Notes" and, together with
the [Class] [1] Notes, the "Notes");
and
(iii) [ %] [Floating Rate]
[Adjustable Rate] [Variable Rate]
Asset Backed Certificates, [Class]
[3] (the "[Class] [3] Certificates"
or the "Certificates" and, together
with the Notes, the "Securities").
Trust................................. Card Account Trust, Series 199[ ]-[
] (the "Trust" or the "Issuer").
Depositor............................. Asset Backed Securities Corporation.
Indenture............................. The Notes will be issued pursuant to
an indenture dated as of [ ], 199[
] (the "Indenture") between the Trust
and [insert Indenture Trustee name],
in its capacity as indenture trustee
(the "Indenture Trustee"). The
Indenture Trustee will allocate
distributions of principal and
interest received in respect of the
CRB Securities to holders of the
Notes (the "Noteholders") in
accordance with the terms of the
Indenture.
S-3
<PAGE>
Trust Agreement....................... Pursuant to a trust agreement dated
as of [ ], 199[ ] (the "Trust
Agreement"), among the Depositor and
[insert Owner Trustee name] in its
capacity as owner trustee (the "Owner
Trustee"), the Trust will issue the
[Class] [3] Certificates in an
initial aggregate amount of $[ ].
The Certificates will represent
fractional undivided interests in the
Trust.
CRB Securities........................ The CRB Securities are described
herein and in Appendix A attached to
this Prospectus Supplement. The CRB
Securities will consist of certain
eligible asset backed certificates,
as more fully described herein, each
issued pursuant to a pooling and
servicing agreement or master pooling
and servicing agreement
(collectively, the "Agreements").
Description of Notes.................. Each Class of Notes will be secured
by a specified group of assets of the
Trust pursuant to the Indenture.
A. Interest Rates
Payable on Notes............ [Class] [1] [ %] [insert interest
rate index, margin above index and
cap, if any] (the "[Class] [1] Note
Rate").
[Class] [2] [ %] [insert interest
rate index, margin above index and
cap, if any] (the "[Class] [2] Note
Rate").
B. Interest Payments............ Interest will accrue on the unpaid
principal amount of the Notes at the
respective per annum interest rates
specified herein. Interest will be
payable to Noteholders on each
Payment Date. Interest in respect of
a Payment Date will accrue on the
Notes from and including the
preceding Payment Date (in the case
of the first Payment Date, from and
including [ ], 199[ ] (the
"Closing Date")) to but excluding such
S-4
<PAGE>
current Payment Date (each, an
"Interest Accrual Period"). Interest
will be calculated on the basis of
the [actual number of days in each
Interest Accrual Period divided by
360] [a 360 day year of twelve 30 day
months]. A failure to pay interest
on any Class of Notes on any Payment
Date that continues for five days
constitutes an Event of Default under
the Indenture. [Except for payments
made pursuant to the Ancillary
Agreements described below,] interest
on the [Class] [1] Notes will be
payable only from interest received
on the [Group] [1] CRB Securities and
interest on the [Class] [2] Notes
will be payable only from interest
received on the [Group] [2] CRB
Securities.
C. Principal Payments........... No principal will be payable to the
Noteholders until the [ ], 199[ ]
Payment Date with respect to the
[Class] [1] Notes and the [ ],
199[ ] Payment Date with respect to
the [Class] [2] Notes, or, upon the
occurrence of an CRB Securities
Amortization Event, the first Payment
Date thereafter, as described herein.
Principal payable on the [Class] [1]
Notes on a Payment Date will
generally be equal to [insert [Class]
[1] Note Percentage]% (the "[Class]
[1] Note Percentage") of the
principal received on the [Group] [1]
CRB Securities only on such Payment
Date, as calculated by the Indenture
Trustee, and will be paid pro rata to
the holders of the [Class] [1] Notes.
Principal payable on the [Class] [2]
Notes on a Payment Date will
generally be equal to [insert [Class]
[1] Note Percentage]% (the "[Class]
[2] Note Percentage") of the
principal received on the [Group] [2]
CRB Securities only on such Payment
Date, as calculated by the
S-5
<PAGE>
Indenture Trustee, and will be paid
pro rata to the holders of the
[Class] [2] Notes.
D. Payment Date................. The [ ] day of each [month]
[quarter] [semi-annual period] or, if
such day is not a Business Day, the
next succeeding Business Day,
commencing with [ ], 199[ ]. A
"Business Day" is any day other than
a Saturday or Sunday or another day
on which banking institutions in New
York, New York [or London, England]
are authorized or obligated by law,
regulations or executive order to be
closed.
E. Record Date.................. Payments on the Notes will be made to
the Noteholders in whose name the
Notes were registered at the close of
business on the last day of the month
prior to the [month] [quarter]
[semi-annual period] in which such
payment occurs.
F. Final Scheduled
Payment Date................. To the extent not previously paid,
the principal balance of the [Class]
[1] Notes will be due on the [ ],
199[ ] Payment Date and the principal
balance of the [Class] [2] Notes will
be due on the [ ], 199[ ] Payment
Date. Failure to pay the full
principal balance of each Class of
Notes on or before the applicable
final scheduled payment dates
constitutes an Event of Default under
the Indenture.
G. Final Legal
Maturity..................... [ ], [ ].
H. Form and
Registration................. [The Notes will initially be
delivered in book-entry form
("Book-Entry Notes"). Noteholders
may elect to hold their interests
through The Depository Trust Company
("DTC"), in the United States, or
S-6
<PAGE>
Centrale de Livraison de Valeurs
Mobilieres S.A. ("Cedel") or the
Euroclear System ("Euroclear'), in
Europe. Transfers within DTC, Cedel
or Euroclear, as the case may be,
will be in accordance with the usual
rules and operating procedures of the
relevant system. So long as the
Notes are Book-Entry Notes, such
Notes will be evidenced by one or
more securities registered in the
name of Cede & Co. ("Cede"), as the
nominee of DTC or one of the relevant
depositaries (collectively, the
"European Depositaries").
Cross-market transfers between
persons holding directly or
indirectly through DTC, on the one
hand, and counterparties holding
directly or indirectly through Cedel
or Euroclear, on the other, will be
effected in DTC through Citibank N.A.
("Citibank") or Morgan Guaranty Trust
Company of New York ("Morgan"), the
relevant depositaries of Cedel and
Euroclear, respectively, and each a
participating member of DTC. The
Notes will initially be registered in
the name of Cede. The interests of
such Noteholders will be represented
by book entries on the records of DTC
and participating members thereof.
No Noteholder will be entitled to
receive a definitive note
representing such person's interest,
except in the event that Notes in
fully registered, certificated form
("Definitive Notes") are issued under
the limited circumstances described
in "CERTAIN INFORMATION REGARDING THE
SECURITIES--Definitive Securities" in
the Prospectus. All references in
this Prospectus Supplement to Notes
reflect the rights of Noteholders
only as such rights may be exercised
through DTC and its participating
organizations for so long as such
Notes are held by DTC. See "RISK
FACTORS--
S-7
<PAGE>
Book Entry Registration" and "CERTAIN
INFORMATION REGARDING THE
SECURITIES--Book Entry Registration"
in the Prospectus and "Annex 1"
thereto.]
[The Notes will be Definitive Notes.
See "CERTAIN INFORMATION REGARDING
THE SECURITIES--Definitive
Securities" in the Prospectus.
I. Denominations................ The Notes will be issued in minimum
denominations of $[ ] and integral
multiples of $1,000 in excess thereof.
J. Title........................ DTC, Cedel and Euroclear, or their
respective nominees, will be deemed
the registered holders of Book-Entry
Notes. Title to each Definitive Note
will be held by the Noteholder (or
its nominee) in whose same such Note
has been registered.
Description of Certificates........... Each certificate will represent an
undivided interest in the Trust as
herein described.
A. [Class] [3].................. The [Class] [3] Certificates
represent $[ ] aggregate principal
amount. Interest thereon will accrue
at a rate per annum equal to [ %]
[insert interest formula] [the
product of [insert [Group] [1]
interest formula] and the ratio that
the principal amount of the [Group]
[1] CRB Securities bears to the
aggregate principal amount of the CRB
Securities, [such amount being
subject to a maximum rate of [insert
[Group] [1] interest cap, if any]];
plus the product of [insert [Group]
[2] interest formula] and the ratio
that the principal amount of the
[Group] [2] CRB Securities bears to
the aggregate principal amount of the
CRB Securities, [such amount being
subject to a maximum rate of [insert
[Group] [2] interest cap, if any]],
payable
S-8
<PAGE>
[monthly] [quarterly] [semi-annually]
on each Payment Date[, provided that
the rate of interest on the [Class]
[3] Certificates shall not exceed
[insert Certificate interest cap, if
any] per annum] (the "[Class] [3]
Certificate Rate").
B. Interest Distributions
on the [Class] [3]
Certificates................. Interest will accrue on the unpaid
principal amount of the [Class] [3]
Certificates at the per annum rate
specified herein. Except as
otherwise provided herein, interest
will be distributed to [Class] [3]
Certificateholders on each Payment
Date. Interest in respect of a
Payment Date will accrue on the
[Class] [3] Certificates during the
preceding Interest Accrual Period and
will be calculated [on the basis of
the actual number of days in such
Interest Accrual Period divided by
360] [on the basis of a 360 day year
of twelve 30 day months].
C. Principal Distributions
on the [Class] [3]
Certificates................. No principal will be distributable to
[Class] [3] Certificateholders until
the [ ], 199[ ] Payment Date or,
upon the occurrence of an CRB
Securities Amortization Event, the
first Payment Date thereafter, as
described herein.
Principal distributable on the
[Class] [3] Certificates will
generally equal [the sum of] [insert
[Group] [1] Certificate Percentage]%
(the "[Group] [1] Certificate
Percentage") of the principal
received on the [Group] [1] CRB
Securities and [insert [Group] [2]
Certificate Percentage]% (the
"[Group] [2] Certificate Percentage")
of the
S-9
<PAGE>
principal received on the [Group] [2]
CRB Securities.
D. Record Date.................. Distribution on the Certificates will
be made to Certificateholders in
whose name the Certificates were
registered at the close of business
on the last day of the month prior to
the [month] [quarter] [semi-annual
period] in which such payment occurs.
E. Subordination................ Distributions of interest on the
Certificates with respect to the
[Group] [1] CRB Securities and the
[Group] [2] CRB Securities will be
subordinated in priority of payment
to the payment of interest due on the
[Class] [1] Notes and [Class] [2]
Notes respectively. Distributions of
principal on the Certificates with
respect to the [Group] [1] CRB
Securities and the [Group] [2] CRB
Securities will be subordinated in
priority of payment to the payment of
principal due on the [Class] [1]
Notes and [Class] [2] Notes,
respectively. Consequently,
Certificateholders will not receive
distributions of interest with
respect to the [Group] [1] CRB
Securities or the [Group] [2] CRB
Securities until the full amount of
interest due on the respective Class
of Notes on such Payment Date is paid
in full and will not receive any
distributions of principal with
respect to the [Group] [1] CRB
Securities or the [Group] [2] CRB
Securities until the full amount of
principal due on the respective Class
of Notes on such Payment Date is paid
in full.
F. Form......................... [The Certificates will initially be
delivered in book-entry form
("Book-Entry Certificates").
Certificateholders may elect to hold
their interests through The
Depository Trust Company ("DTC"), in
the United States, or Centrale de
Livraison de
S-10
<PAGE>
Valeurs Mobilieres S.A. ("Cedel") or
the Euroclear System ("Euroclear'),
in Europe. Transfers within DTC,
Cedel or Euroclear, as the case may
be, will be in accordance with the
usual rules and operating procedures
of the relevant system. So long as
the Certificates are Book-Entry
Certificates, such Certificates will
be evidenced by one or more
securities registered in the name of
Cede & Co. ("Cede"), as the nominee
of DTC or one of the relevant
depositaries (collectively, the
"European Depositaries").
Cross-market transfers between
persons holding directly or
indirectly through DTC, on the one
hand, and counterparties holding
directly or indirectly through Cedel
or Euroclear, on the other, will be
effected in DTC through Citibank N.A.
("Citibank") or Morgan Guaranty Trust
Company of New York ("Morgan"), the
relevant depositaries of Cedel and
Euroclear, respectively, and each a
participating member of DTC. The
Certificates will initially be
registered in the name of Cede. The
interests of such Certificateholders
will be represented by book entries
on the records of DTC and
participating members thereof. No
Certificateholder will be entitled to
receive a definitive certificate
representing such person's interest,
except in the event that Certificates
in fully registered, certificated
form ("Definitive Certificates") are
issued under the limited
circumstances described in "CERTAIN
INFORMATION REGARDING THE SECURITIES
-- Definitive Securities" in the
Prospectus. All references in this
Prospectus Supplement to Certificates
reflect the rights of
Certificateholders only as such
rights may be exercised through DTC
and its participating organizations
for so long as
S-11
<PAGE>
such Certificates are held by DTC.
See "RISK FACTORS -- Book-Entry
Registration" and "CERTAIN
INFORMATION REGARDING THE SECURITIES
-- Book-Entry Registration" in the
Prospectus and "Annex 1" thereto.]
[The Certificates will be Definitive
Certificates. See "CERTAIN
INFORMATION REGARDING THE
SECURITIES--Definitive Securities" in
the Prospectus.]
G. Denominations................ The Certificates will be issued in
minimum denominations of $[ ] and
integral multiples of $1000 in excess
thereof and will not be eligible to
be resold or subdivided into units
smaller than the minimum denomination
for issuance, except that one
Certificate will be issued in a
denomination of $[ ] and will be
held by the Depositor. [In addition,
non-United States persons will not be
permitted to purchase Certificates.
Such restrictions will be set forth
in a legend contained in the
registered form of Certificate. By
accepting delivery of a Certificate,
the holder will be deemed to have
agreed to comply with such
restrictions. Any attempt to
transfer [Class] [3] Certificates in
violation of the foregoing
restrictions will be null and void
and such transfer will not be
recorded by the registrar.]
H. Title........................ Title to each Definitive Certificate
will be held by the Certificateholder
(or its nominee) in whose name such
Certificate has been registered.
[Ancillary Arrangements............... On the Closing Date the Trust will
enter into ancillary arrangements
(such agreements, the "Ancillary
S-12
<PAGE>
Arrangements"). [Insert description
of Ancillary Arrangements.]
[Calculation of LIBOR................. LIBOR applicable to the calculation
of the [Class] [1] Note Rate in
respect of a Payment Date shall be
equal to the weighted average of the
LIBOR interest rates (weighted on the
basis of the outstanding principal
balances of the [Group] [1] CRB
Securities immediately prior to such
date) applicable to the distributions
of interest on the [Group] [1] CRB
Securities distributable on such
date.]
[LIBOR applicable to the calculation
of the [Class] [2] Note Rate in
respect of a Payment Date shall be
equal to the weighted average of the
LIBOR interest rates (weighted on the
basis of the outstanding principal
balances of the [Group] [2] CRB
Securities immediately prior to such
date) applicable to the distributions
of interest on the [Group] [2] CRB
Securities distributable on such
date.]
[LIBOR applicable to the calculation
of the interest rate on the [Class]
[3] Certificates in respect of a
Payment Date shall be equal to the
weighted average of the LIBOR
interest rates (weighted on the basis
of the outstanding principal balances
of the CRB Securities immediately
prior to such date) applicable to the
distributions of interest on the CRB
Securities distributable on such
date.]
[The LIBOR applicable to the CRB
Securities is described under
"Description of the CRB
Securities--Interest Distributions"
herein.]
Tax Considerations.................... In the opinion of Sidley & Austin
("Federal
S-13
<PAGE>
Tax Counsel"), the Trust will not be
an association (or publicly traded
partnership) taxable as a corporation
for federal income tax purposes. The
Trust will agree, and the Note Owners
will agree by their purchase of
Notes, to treat the Notes as debt for
federal tax purposes. Federal Tax
Counsel has advised the Trust that
the Notes will be classified as debt
for federal income tax purposes. The
Trust will also agree, and the
related Certificate Owners will agree
by their purchase of Certificates, to
treat the Trust as a partnership for
purposes of federal and state income
tax, franchise tax and any other tax
measured in whole or in part by
income, with the assets of the
partnership being the assets held by
the Trust, the partners of the
partnership being the Certificate
Owners (including, to the extent
relevant, the Depositor in its
capacity as recipient of
distributions from any Reserve Fund)
and the Notes being debt of the
partnership. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" in the
Prospectus for additional information
concerning the application of federal
income tax laws to the Trust.
Legal Investment...................... Institutions whose investment
activities are subject to legal
investment laws and regulations or to
review by certain regulatory
authorities may be subject to
restrictions on investment in the
Securities. See "LEGAL INVESTMENT
CONSIDERATIONS" herein.
ERISA................................. [State whether the Notes may be
classified as indebtedness without
substantial equity features for ERISA
purposes.]
S-14
<PAGE>
Rating................................ It is a condition to the issuance of
each Class of Notes that they be
rated [in the highest rating
category] by a Rating Agency, as
defined herein. It is a condition to
the issuance of the [Class] [3]
Certificates that they be rated [in
one of the [three] highest rating
categories] by a Rating Agency.
There is no assurance that such
rating will continue for any period
of time or that it will not be
revised or withdrawn entirely by such
rating agency, if, in its judgment,
circumstances so warrant. A revision
or withdrawal of such rating may have
an adverse effect on the market price
of the Securities. A security rating
is not a recommendation to buy, sell
or hold securities.
S-15
<PAGE>
RISK FACTORS
Limited Liquidity. There is currently no secondary market for the
Securities. CS First Boston currently intends to make a market in the Securities
but is under no obligation to do so. There can be no assurance that a secondary
market will develop in the Securities or, if a secondary market does develop,
that it will provide holders of the Securities with liquidity of investment or
will continue for the life of the Securities.
Trust's Relationship to the Depositor. The Depositor is not obligated to
make any payments in respect of the Securities or the CRB Securities.
Maturity Assumptions. The rate of payment of principal of each Class of
Securities, the aggregate amount of each distribution on, and the yield to
maturity of, each Class of Securities will depend on the rate of payment of
principal of the CRB Securities. Each Series of CRB Securities is subject to
early amortization upon the occurrence of any of the amortization events
applicable to such CRB Securities as described herein and in the prospectus used
in connection with the offering of such CRB Securities.
The rate of payment of principal of the Securities may also be affected by
the repurchase by each CRB Securities Issuer of the CRB Securities issued by it,
pursuant to a repurchase option which is exercisable after the aggregate
principal balance of the CRB Securities is less than [ %] of their original
principal balance at the purchase price equal to a percentage of the principal
balance of such CRB Securities, plus accrued and unpaid interest. In such event
the repurchase price paid by the CRB Securities Issuer would be passed through
to the Certificateholders and Noteholders as a payment of principal.
Rating of the Certificates and Notes. It is a condition to the issuance and
sale of each Class of the Notes that they each be rated [in the highest rating
category] by Moody's Investors Service, Inc. ("Moody's") and by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. ("S&P") (each of S&P and
Moody's being hereinafter referred to as a "Rating Agency"). A rating is not a
recommendation to purchase, hold or sell securities, inasmuch as such rating
does not comment as to market price or suitability for a particular investor.
The ratings address the likelihood of the receipt of distributions due on the
Securities pursuant to their terms. However, a Rating Agency does not evaluate,
and the ratings of the Securities do not address, the possibility that investors
may receive a lower yield than anticipated. There can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant.
Risks Attendant to Investments in the Certificates. Distributions of
interest on the Certificates with respect to the [Group] [1] CRB Securities and
the [Group] [2] CRB Securities will be subordinated in priority of payment to
the interest due on the [Class] [1] Notes and [Class] [2] Notes, respectively.
Distributions of principal on the Certificates with respect to the [Group] [1]
CRB Securities and the [Group] [2] CRB Securities will be subordinated in
priority of payment to the payment of principal due on the [Class] [1] Notes and
[Class] [2] Notes, respectively. Consequently, the Certificateholders will not
receive any distributions of Interest with respect an Interest Accrual Period
until the full amount of interest on the respective Class of Notes on such
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Payment Date has been paid in full and will not receive any distributions of
principal with respect to the [Group] [1] CRB Securities or the [Group] [2] CRB
Securities until the full amount of principal due on the respective Class of
Notes on such Payment Date is paid in full.
THE TRUST
GENERAL
The Issuer, Card Account Trust, Series 199[ ]-[ ], is [insert description
of Trust] After its formation, the Issuer will not engage in any activity other
than [(i)] [acquiring, holding and managing the CRB Securities and the other
assets of the Trust and proceeds therefrom,] [(ii)] [issuing the Notes and the
Certificates,] [(iii)] [making payments on the Notes and the Certificates] [and]
[(iv)] [engaging in other activities that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected therewith].
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture dated as of [ ], 199[],
between the Trust and [Indenture Trustee name], as Indenture Trustee. The
Depositor will provide a copy of the Indenture to prospective investors without
charge upon request.
The following summaries describe certain terms of the Notes and the
Indenture. The summaries do not purport to be complete and are subject to, and
qualified in their entirety by reference to, the provisions of the Indenture.
Wherever particular defined terms of the Indenture are referred to, such defined
terms are thereby incorporated herein by reference. See "THE INDENTURE" herein
for a summary of additional terms of the Indenture.
The Notes will be issued [in fully registered form only] and each class of
Notes will be secured by a specified group of assets of the Trust. The Notes
will be freely transferable and exchangeable at the corporate trust office of
the Indenture Trustee. The Depositor will retain at least [ ]% of the
outstanding principal interest of each Class of Notes at all times prior to the
payment in full of the Notes.
PAYMENTS ON NOTES
Payments on the Notes, as described below, will be made by the Indenture
Trustee on the Payment Date to persons in whose names the Notes are registered
on the last day of the month preceding the [month] [quarter] [semi-annual
period] in which such Payment Date occurs (the "Record Date"). Payments to each
Noteholder will be made through the facilities of The Depository Trust Company
("DTC") (in the United States) or Cedel or Euroclear (in Europe) to an account
specified in writing by such holder as of the preceding Record Date or in such
other manner as may be agreed to by the Indenture Trustee and such holder. The
final payment in retirement of a Note will be made only upon surrender of the
Note to the Indenture Trustee at the
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office thereof specified in the notice to Noteholders of such final payment.
Notice will be mailed prior to the Payment Date on which the final payment of
principal and interest on a Note is expected to be made to the holder thereof.
PAYMENTS OF INTEREST
Interest on the principal balances of the Classes of the Notes will accrue
at the respective per annum interest rates specified below and will be payable
monthly on each Payment Date.
Interest in respect of a Payment Date will accrue on the outstanding
principal of the Notes from and including the preceding Payment Date (in the
case of the first Payment Date, from and including [ ], 199[ ] (the "Closing
Date") to but including such current Payment Date (each, an "Interest Accrual
Period"). Interest will be calculated on the basis of [the actual number of days
in each Interest Accrual Period divided by 360] [a 360 day year of twelve 30 day
months].
Except for payments made pursuant to the Ancillary Arrangements described
below, interest payments on the [Class] [1] Notes will be funded from the
collections of interest on the [Group] [1] CRB Securities on such date, and
interest payments on the [Class] [2] Notes will be funded from the collections
of interest on the [Group] [2] CRB Securities on such date. Interest on all of
the CRB Securities is payable on the [ ] day of each [month] [quarter] [semi-
annual period] or, if such day is not a Business Day, the next succeeding
Business Day (each a "CRB Securities Distribution Date"). If interest
collections on the [Group] [1] CRB Securities or the [Group] [2] CRB Securities
[plus amounts received with respect to the respective Ancillary Arrangements]
are not sufficient to pay the interest due on the respective classes of Notes
for any Payment Date and such default continues for five days, an Event of
Default will occur in respect of all of the Notes.
[Calculation of LIBOR. LIBOR applicable to the calculation of the interest
rates on the [Class] [1] Notes in respect of a Payment Date shall be calculated
by the Indenture Trustee and shall be equal to the weighted average of the LIBOR
interest rates (weighted on the basis of the outstanding principal balances of
the [Group] [1] CRB Securities immediately prior to such CRB Securities
Distribution Date) applicable to the distributions of interest on the [Group]
[1] CRB Securities distributable on such CRB Securities Distribution Date. LIBOR
applicable to the calculation of the interest rates on the [Class] [2] Notes in
respect of a Payment Date shall be calculated by the Indenture Trustee and shall
be equal to the weighted average of the LIBOR interest rates (weighted on the
basis of the outstanding principal balances of the [Group] [2] CRB Securities
immediately prior to such CRB Securities Distribution Date) applicable to the
distributions of interest on the [Group] [2] CRB Securities distributable on
such CRB Securities Distribution Date. The LIBOR applicable to the CRB
Securities is described under "DESCRIPTION OF THE CRB SECURITIES--Interest
Distributions" herein. The Indenture Trustee shall transmit the results of its
calculations of LIBOR to any securities exchange to which application to list
the Notes has been made prior to the Closing Date.]
[Class] [1]. The [Class] [1] Notes will bear interest at an annual rate
equal to [insert [Class] [1] interest rate formula, interest rate index and
margin above index, if any] on the aggregate principal amount of the [Class] [1]
Notes [, subject to a maximum rate of [insert interest
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rate cap, if any] [until the [ ], 199[ ] Payment Date, and, subsequently,
subject to no maximum rate]] (the "[Class] [1] Note Rate").
[Class] [2]. The [Class] [2] Notes will bear interest at an annual rate
equal to [insert [Class] [1] interest rate formula, interest rate index and
margin above index, if any] on the aggregate principal amount of the [Class] [2]
Notes [, subject to a maximum rate of [insert interest rate cap, if any] [until
the [ ], 199[ ] Payment Date, and, subsequently, subject to no maximum rate]]
(the "[Class] [2] Note Rate").
PAYMENTS OF PRINCIPAL
Principal payments to the Noteholders are expected to commence on the [ ],
199[ ] Payment Date with respect to the [Class] [1] Notes and the [ ], 199[ ]
Payment Date with respect to the [Class] [2] Notes. If, however, an CRB
Securities Amortization Event (as defined herein) shall occur, principal
payments on the Notes will commence on the first Payment Date after such CRB
Securities Amortization Event.
On each Payment Date in respect of which principal is distributed on the
[Group] [1] CRB Securities, principal payments will be made on the [Class] [1]
Notes in an amount generally equal to [insert [Class] [1] Note Percentage] (the
"[Class] [1] Note Percentage") of the principal distributed on the [Group] [1]
CRB Securities only. Such principal will be applied pro rata in accordance with
the outstanding principal balances of the [Class] [1] Notes. The principal
balance of the [Class] [1] Notes, to the extent not previously paid, will be due
on the [ ], 199[ ] Payment Date (the "[Class] [1] Final Schedule Payment Date").
On each Payment Date in respect of which principal is distributed on the
[Group] [2] CRB Securities, principal payments will be made on the [Class] [2]
Notes in an amount generally equal to [insert [Class] [2] Note Percentage] (the
"[Class] [2] Note Percentage") of such principal distributed on the [Group] [2]
CRB Securities only. Such principal will be applied pro rata in accordance with
the outstanding principal balances of the [Class] [2] Notes. The principal
balance on the [Class] [2] Notes, to the extent not previously paid, will be due
on the [ ], 199[ ] Payment Date (the "[Class] [2] Final Schedule Payment Date").
Principal on the [Class] [1] Notes will be payable solely from principal on
the [Group] [1] CRB Securities and principal on the [Class] [2] Notes will be
payable solely from principal on the [Group] [2] CRB Securities.
[ANCILLARY ARRANGEMENTS]
[On the Closing Date the Trust will enter into ancillary arrangements (such
agreements, the "Ancillary Arrangements").] [Insert description of the Ancillary
Arrangements.]
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DISTRIBUTIONS ON THE CRB SECURITIES; COLLECTION ACCOUNT
All distributions on the CRB Securities will be remitted directly to an
account (the "Collection Account") to be established with the Indenture Trustee
under the Indenture on the Closing Date. The Indenture Trustee will hold such
moneys uninvested and without liability for interest thereon for the benefit of
holders of the Securities. The CRB Securities Distribution Date in each month is
the Payment Date for such month.
[ASSIGNMENT OF CRB SECURITIES]
[The Depositor will acquire the CRB Securities for deposit into the Trust
from [insert Seller name]. At the time of issuance of the Securities, the
Depositor will cause the beneficial interest in such CRB Securities, which will
be held in book-entry form through the facilities of The Depository Trust
Company, to be delivered to the Indenture Trustee's participant account at The
Depository Trust Company.]
TERMINATION
All obligations of the Depositor and the Indenture Trustee created by the
Indenture will terminate upon the payment to Noteholders of all amounts required
to be paid to them pursuant to the Indenture. In addition, the occurrence of
certain CRB Securities Amortization Events (as defined herein) may lead to an
early termination of the obligations of the Depositor and the Indenture Trustee
created by the Indenture.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement dated as of
[ ], 199[ ], among the Depositor and [insert Owner Trustee name] as Owner
Trustee. The Depositor will provide a copy of the Trust Agreement to prospective
investors without charge upon request.
The following summaries describe certain terms of the Certificates and the
Trust Agreement. The summaries do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the provisions of the Trust
Agreement. Wherever particular defined terms of the Trust Agreement are referred
to, such defined terms are thereby incorporated herein by reference. See "THE
TRUST AGREEMENT" herein for a summary of additional terms of the Trust
Agreement.
The Certificates will be issued [in fully registered, certificated form
only] and will represent undivided interests in the Trust. Subject to the
limitations described in this paragraph, the Certificates will be freely
transferable and exchangeable at the corporate trust office of the Owner
Trustee. The Certificates will be issued in minimum denominations of $[ ] and
will not be eligible to be resold or subdivided in units smaller than the
minimum denomination for issuance [, except for one Certificate issued in a
denomination of $[ ] which will be held by the Depositor]. In addition, non-
United States persons will not be permitted to purchase Certificates.
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Such restrictions will be set forth in a legend contained in the registered form
of Certificate. By accepting delivery of a Certificate the holder will be deemed
to have agreed to comply with such restrictions. Any attempt to transfer
Certificates in violation of the foregoing restrictions will be null and void
and such transfer will not be recorded by the registrar. The Depositor will
retain at least [ ]% of the outstanding principal amount of the Certificates at
all times prior to the termination of the Trust Agreement.
[DISTRIBUTIONS ON CERTIFICATES]
[Pursuant to an administration agreement entered into between the Trust,
Indenture Trustee, [insert Administrator name], as administrator (the
"Administrator") and the Owner Trustee (the "Administration Agreement"),
distributions on the Certificates, as described below, will be made on behalf of
the Owner Trustee by the Administrator on the Payment Date to persons in whose
names the Certificates are registered on the Record Date. Distributions to each
Certificateholder will be made by the Administrator to an account specified in
writing by such holder as of the preceding Record Date or in such other manner
as may be agreed to by the Owner Trustee and such holder. The final distribution
in retirement of a Certificate will be made only upon surrender of the
Certificate to the Owner Trustee at the office thereof specified in the notice
to Certificateholders of such final distribution. Notice will be mailed prior to
the Payment Date on which the final distribution of principal and interest on a
Certificate is expected to be made to the holder thereof.]
DISTRIBUTIONS OF INTEREST
Interest on the principal balance of the [Class] [3] Certificates will
accrue at the per annum interest rate specified below and will be distributable
[monthly] [quarterly] [semi-annually] on each Payment Date. Interest in respect
of a Payment Date will accrue on the outstanding principal of the Certificates
from and including the preceding Payment Date (in the case of the first Payment
Date, from and including the Closing Date) to but excluding such current Payment
Date (each, and "Interest Accrual Period"). Interest will be calculated on the
basis of [the actual number of days in each Interest Accrual Period divided by
360] [a 360 day year of twelve 30 day months].
[Calculation of LIBOR: LIBOR applicable to the calculation of the interest
rates on the [Class] [3] Certificates in respect of a Payment Date shall be
calculated by the Indenture Trustee and shall be equal to the weighted average
of the LIBOR interest rates (weighted on the basis of the outstanding principal
balances of the CRB Securities immediately prior to such CRB Securities
Distribution Date) applicable to distributions of interest on the CRB Securities
distributable on such CRB Securities Distribution Date. The LIBOR applicable to
the CRB Securities is described under "DESCRIPTION OF THE CRB SECURITIES--
Interest Distributions" herein. The Indenture Trustee shall transmit the results
of its calculations of LIBOR to any securities exchange to which application to
list the Certificates has been made prior to the Closing Date.]
[Class] [3]. The [Class] [3] Certificates will bear interest on the
aggregate principal amount of such Certificates at an annual rate equal to (x)
[insert [Class] [3] index] [plus (i) [insert [Group] [1] interest rate formula]
multiplied by the ratio that the principal amount of the [Group]
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[1] Underlying Assets bears to the aggregate principal amount of the CRB
Securities [,such amount being subject to a maximum rate of [insert interest
rate cap, if any]]; [plus (ii) [insert [Group] [2] interest rate formula]
multiplied by the ratio that the principal amount of the [Group] [2] CRB
Securities bears to the aggregate principal amount of the CRB Securities [, such
amount being subject to a maximum rate of [insert interest rate cap, if any]]].
DISTRIBUTIONS OF PRINCIPAL
Principal distributions to Certificateholders are expected to commence on
the [ ], 199[ ] Payment Date. If, however, an CRB Securities Amortization Event
(as defined herein) shall occur, principal distributions on the Certificates
will commence on the first Payment Date after such CRB Securities Amortization
Event.
On each Payment Date in respect of which principal is distributed on the
CRB Securities, principal distributions will, subject to the prior rights of the
holders of the Notes described under "Subordination" below, be made on the
[Class] [3] Certificates in an amount generally equal to [insert [Group] [1]
Certificate percentage]% (the "[Group] [1] Certificate Percentage) of the
principal amount on the [Group] [1] CRB Securities and [insert [Group] [2]
Certificate Percentage]% (the "[Group] [2] Certificate Percentage") of the
principal distributed on the [Group] [2] CRB Securities. Such principal will be
applied pro rata in accordance with the outstanding principal balances of the
[Class] [3] Certificates. The principal balance of the [Class] [3] Certificates
at any time will be equal to the outstanding principal balance of the CRB
Securities at such time multiplied by the [Class] [3] Certificate Percentage at
such time. As more fully described herein, the outstanding principal balance of
the CRB Securities will be reduced as a result of principal payments on the
Receivables that are distributed in respect of the CRB Securities.
SUBORDINATION
Distributions of interest on the [Class] [3] Certificates with respect to
the [Group] [1] CRB Securities and the [Group] [2] CRB Securities will be
subordinated in priority of payment to the payment of interest due on the
[Class] [1] Notes and [Class] [2] Notes, respectively. Distributions of
principal on the Certificates with respect to the [Group] [1] CRB Securities and
the [Group] [2] CRB Securities will be subordinated in priority of payment of
principal due on the [Class] [1] Notes and [Class] [2] Notes, respectively.
Consequently, the Certificateholders will not receive any distributions of
interest with respect to the [Group] [1] CRB Securities or the [Group] [2] CRB
Securities with respect to a Payment Date until the full amount of interest due
on the respective Class of Notes on such Payment Date is paid in full and will
not receive any distributions of principal with respect to the [Group] [1] CRB
Securities or the [Group] [2] CRB Securities until the full amount of principal
due on the respective Class of Notes on such Payment Date is paid in full.
TERMINATION
All obligations of the Depositor and the Owner Trustee created by the Trust
Agreement will terminate upon the distribution to Certificateholders of all
amounts required to be distributed
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to them pursuant to the Trust Agreement. In addition, the occurrence of certain
CRB Securities Amortization Events (as defined herein) will lead to an early
termination of the obligations of the Depositor and the Owner Trustee created by
the Trust Agreement.
DESCRIPTION OF THE CRB SECURITIES
The table below sets forth certain of the characteristics of the CRB
Securities. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the prospectuses and prospectus
supplements pursuant to which the CRB Securities were offered and sold. The CRB
Securities are not listed on any securities exchange.
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DESCRIPTION OF THE CRB SECURITIES
Issuer..................................
Servicer................................
Trustee.................................
Designation.............................
Principal Amount to be Sold to Trust....
Approximate percentage of total CRB
Securities to be Sold to Trust.........
Initial Certificate Amount..............
Series Termination Date.................
Certificate Rate........................
Monthly Distribution Date...............
Commencement of Controlled Amortization
Period.................................
Minimum Seller's Percentage.............
Cash Collateral Guaranty Amount.........
Percentage of Subordinated Class B
Certificates...........................
Optional Repurchase Percentage..........
Ratings (Moody's/S&P)...................
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GENERAL
This Prospectus Supplement sets forth certain relevant terms with respect
to the CRB Securities, but does not provide detailed information with respect to
the CRB Securities. Appendix A to this Prospectus Supplement contains excerpts
from each prospectus pursuant to which the CRB Securities were offered and sold.
This Prospectus Supplement relates only to the Securities offered hereby and
does not relate to the CRB Securities.
CRB SECURITIES CONSIDERATIONS; RECENT DEVELOPMENTS
Each of the CRB Securities represents an obligation of the related CRB
Issuer only. Prospective investors in the Securities should consider carefully
the risk factors and special considerations [insert applicable references] in
each CRB Securities Offering Document and should avail themselves of the same
information concerning each CRB Seller, CRB Servicer and CRB Issuer as they
would if they were purchasing the CRB Securities or similar investments backed
by Receivables. Each CRB Issuer [or [ ], as originator of a CRB Issuer,] is
subject to the informational requirements of the Exchange Act. Accordingly, each
CRB Issuer or [ ] files annual and periodic reports and other information,
including monthly Servicer Reports (collectively, "CRB Issuer Exchange Act
Reports") with the Commission. Copies of such CRB Issuer Exchange Act Reports,
each CRB Securities Offering Document, Servicer Reports and other information
(collectively, the "CRB Securities Disclosure") may be inspected and copied at
certain offices of the Commission at the addresses listed under "Available
Information" in the Prospectus. If any CRB Issuer or [ ] ceases to be subject to
the informational requirements of the Exchange Act, the Depositor will not be
relieved from the informational requirements of the Exchange Act.
Neither the Depositor nor the Underwriter participated in the [offering of
the CRB Securities or in the] preparation of the publicly available information
referred to above or of any CRB Securities Offering Document, nor has the
Depositor or the Underwriter made any due diligence inquiry with respect to the
information provided therein. Although neither the Depositor nor the Underwriter
is aware of any material misstatements or omissions in any CRB Securities
Offering Document speaking as of its date, the information provided therein or
in the other publicly available documents referred to above cannot be verified
by the Depositor or the Underwriter as to accuracy or completeness. Information
set forth in each CRB Securities Offering Document speaks only as of the date of
such CRB Securities Offering Document; there can be no assurance that all events
occurring prior to the date hereof that would affect the accuracy or
completeness of any statements included in such CRB Securities Offering Document
or in the other publicly available documents filed by or on behalf of the CRB
Issuer have been publicly disclosed.
[Describe any other recent material developments that may exist based on
publicly available information.]
AN INVESTMENT IN THE SECURITIES IS DIFFERENT FROM, AND SHOULD NOT BE
CONSIDERED A SUBSTITUTE FOR, AN INVESTMENT IN THE CRB SECURITIES.
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Set forth below is certain information excerpted and summarized from each
prospectus relating to the CRB Securities.
The CRB Securities have been issued pursuant to Agreements entered into
between various sellers and various trustees. See "Appendix A" for further
description of the various CRB Securities Issuers. The following summary
describes certain general terms of such Agreements, but investors should refer
to the Agreements themselves for all the terms governing the CRB Securities.
Each of the CRB Securities represents an undivided interest in one of the
CRB Securities Issuers, including the right to a percentage of cardholder
payments on the Receivables underlying such issue of CRB Securities. The assets
of each CRB Securities Issuer include a pool of Receivables arising under
Accounts, funds collected or to be collected from cardholders in respect of the
Receivables and services in the Accounts, monies on deposit in certain accounts
of the CRB Securities Issuers, the right to draw upon various enhancements and
may also include the right to receive certain interchange fees attributed to
cardholder charges for merchandise. Each of the CRB Securities represents the
right to receive payments of interest for the related interest period at the
applicable CRB Securities Certificate Rate (as defined herein) for such interest
period from collections of Receivables and, in certain circumstances, from draws
on applicable enhancement, and payments of principal during the CRB Securities
Amortization Period (as defined herein) funded from collections of Receivables.
Each seller of CRB Securities (each, a "Seller") holds the interest in the
Receivables of an CRB Securities Issuer not represented by the CRB Securities
and any other series of securities issued by the CRB Securities Issuer. Such
Seller holds an undivided interest in the CRB Securities Issuer (the "Seller's
Interest"), including the right to a percentage (the "Seller's Percentage") of
all cardholder payments on the Receivables.
THE [GROUP] [1] CRB SECURITIES
The [Group] [1] CRB Securities will consist of the CRB Securities issued by
the following CRB Securities Issuers: [insert description of [Group] [1] card
issuers].
THE [GROUP] [2] CRB SECURITIES
The [Group] [2] CRB Securities will consist of the CRB Securities issued by
the following CRB Securities Issuers: [insert description of [Group] [2] card
issuers].
INTEREST DISTRIBUTIONS
Interest accrues on the CRB Securities at the certificate rate for each
class and series of CRB Securities (a "CRB Securities Certificate Rate"), from
the date of the initial issuance of the CRB Securities. Interest at the
applicable rate will be distributed to the holders of the CRB Securities
[monthly] [quarterly] [semi-annually] on each CRB Securities Distribution Date.
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Interest on the CRB Securities is calculated [on the basis of the actual
number of days in the related interest period and a 360-day year] [on the basis
of a 360 day year of twelve 30 day months].
[The CRB Securities all bear interest at a rate per annum of [insert
description of CRB Securities interest rates]. [LIBOR is determined according to
[the Reuters Screen LIBO Page (as defined in the International Swap Dealers
Association, Inc. Code of Standard Wording, Assumption and Provisions for SWAPS,
1986 edition) ("Reuters LIBOR")] [the Telerate Page 3750 of the Dow Jones
Telerate Service (or such other page as may replace Telerate Page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks) ("Telerate LIBOR")].
PRINCIPAL DISTRIBUTION
Generally, principal distributions due to the holders of the CRB Securities
are scheduled to commence on the first CRB Securities Distribution Date with
respect to a controlled amortization period for a series of CRB Securities (a
"CRB Securities Controlled Amortization Period"), but may be distributed earlier
or later than such date. However, if a Rapid Amortization Event, Early
Amortization Event, Pay Out Event, Liquidation Event or Economic Pay Out Event
(as such terms are defined in the Agreements) (each such event, a "CRB
Securities Amortization Event") occurs, [monthly] [quarterly] [semi-annual]
distributions of principal to the holders of the CRB Securities will begin on
the first CRB Securities Distribution Date following the occurrence of such CRB
Securities Amortization Event. See "CRB Securities Amortization Events" below.
If an CRB Securities Amortization Event does not occur, principal will be
distributed to the holders of the CRB Securities on the first CRB Securities
Distribution Date during the applicable CRB Securities Controlled Amortization
Period. If, however, the amount of principal distributed on the scheduled final
CRB Securities Distribution Date is not sufficient to pay the holders of the CRB
Securities in full, then monthly distributions of principal to the holders of
CRB Securities will occur on each CRB Securities Distribution Date after the
scheduled final CRB Securities Distribution Date.
INVESTOR PERCENTAGE AND SELLER'S PERCENTAGE
Pursuant to the Agreements, all amounts collected on Receivables will be
allocated between the investor interest of the holders of the CRB Securities,
the investor interest of any other Series, and the Seller's Interest by
reference to the investor percentage of the holders of the CRB Securities, the
investor percentage of any other Series, and the Seller's Percentage.
The Seller's Percentage in all cases means the excess of 100% over the
aggregate investor percentages of all Series then outstanding.
ALLOCATION OF COLLECTIONS
The CRB Securities Servicer will deposit any payments collected by the CRB
Securities Servicer with respect to the Receivables and will generally allocate
such amounts as follows:
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(a) an amount equal to the applicable Seller's Percentage of the aggregate
amount of deposits in respect of Principal Receivables and Finance
Charge Receivables, respectively, will be paid to the holder of the
Seller's Interest,
(b) an amount equal to the applicable investor percentage of the aggregate
amount of such deposits in respect of Finance Charge Receivables will
be deposited into an account for the benefit of the holders of the CRB
Securities,
(c) during the revolving period, an amount generally equal to the
applicable investor percentage of the aggregate amount of such
collections in respect of Principal Receivables will be paid to the
holder of the Seller's Certificate; provided, however, that such
amount may not exceed the amount equal to the Seller's Interest,
(d) during the CRB Securities Controlled Amortization Period or after the
occurrence of an CRB Securities Amortization Event, collections of
Principal Receivables will be allocated to the holders of CRB
Securities based on the investor percentage.
The term "Seller's Interest" also encompasses the terms Seller's Certificate,
Transferor's Certificate, Exchangeable Seller's Certificate and Exchangeable
Transferor's Certificate. "Principal Receivables" generally consist of amounts
charged by cardholders for merchandise and services, amounts advanced as cash
advances and the interest portion of any participation interests. "Finance
Charge Receivables" generally consist of monthly periodic charges, annual fees,
cash advance fees, late charges, over-limit fees and all other fees billed to
cardholders, including administrative fees.
CRB SECURITIES AMORTIZATION EVENTS
The following is a summary of the typical CRB Securities Amortization
Events for each series of CRB Securities. Certain additional CRB Securities
Amortization Events unique to particular series of CRB Securities are described
following this summary:
(a) failure to make payments to holders of CRB Securities within the time
periods given in the Agreements,
(b) material breaches of certain representations, warranties or covenants
or failure to observe or perform in a material respect any covenant or
agreement under an Agreement,
(c) occurrence of a material default by a servicer of the Receivables
underlying a series of CRB Securities (a "CRB Securities Servicer"),
(d) failure to maintain the Seller's Interest in an amount at least equal
to minimum Seller's Percentage of Principal Receivables in the CRB
Securities Issuer as of such date,
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(e) failure to maintain a certain minimum level of Receivables or
Accounts, or if the Seller is unable to transfer Receivables or
Accounts to an CRB Securities Issuer,
(f) certain events of bankruptcy or insolvency relating to the Seller,
(g) an CRB Securities Issuer becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended,
(h) any reduction of the portfolio yield or excess spread (averaged out
over any three consecutive months) to a rate below a certain rate
provided in the Agreement for such period,
(i) the available amount of the Cash Collateral Guaranty is less than 3%
of the amount of the investor interest for the underlying series of
CRB Securities.
[Insert additional Amortization Events for particular CRB Securities.]
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Generally, the CRB Securities Servicer's compensation for its servicing
activities and reimbursement for its expenses for any monthly period will be a
servicing fee (a "CRB Securities Servicing Fee") payable monthly. The CRB
Securities Servicing Fee will be allocated among the Seller's Interest and the
investor interests of all Series issued by the CRB Securities Issuer.
Generally, the CRB Securities Servicer will pay from its servicing
compensation certain expenses incurred in connection with servicing the
Receivables including, without limitation, payment of the fees and disbursements
of the CRB Securities Trustee and independent accountants and other fees which
are not expressly stated in the related Agreement to be payable by the CRB
Securities Issuer or the holders of CRB Securities.
THE DEPOSITOR
The Depositor is a special-purpose Delaware corporation organized for the
purpose of issuing the Securities and other securities issued under the
Registration Statement backed by receivables or underlying securities of various
types and acting as settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not expected that the Depositor
will have any significant assets. The Depositor is an indirect, wholly owned
finance subsidiary of Collateralized Mortgage Securities Corporation which is a
wholly owned subsidiary of CS First Boston Securities Corporation, which is a
wholly owned subsidiary of CS First Boston, Inc. Neither CS First Boston
Securities Corporation nor CS First Boston, Inc. nor any of their affiliates has
guaranteed, will guarantee or is or will be otherwise obligated with respect to
any Series of Securities.
The Depositor's principal executive office is located at Park Avenue Plaza,
55 East 52nd Street, New York, New York 10055, and its telephone number is (212)
909-2000.
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THE INDENTURE
The following summary describes certain terms of the Indenture. The summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the provisions of the Indenture. Whenever particular sections
or defined terms of the Indenture are referred to, such sections or defined
terms are thereby incorporated herein by reference. See "DESCRIPTION OF THE
NOTES" herein for a summary of certain additional terms of the Indenture.
COLLECTION OF DISTRIBUTIONS ON CRB SECURITIES
The CRB Securities will be assets of the Trust. All distributions on the
CRB Securities will be made directly to the Indenture Trustee. The obligation of
the Indenture Trustee in making payments on the Notes is limited to
distributions on the CRB Securities [and payments in respect of the Ancillary
Arrangements] which were actually received by it. However, if the Indenture
Trustee has not received a distribution with respect to the CRB Securities by
the [ ] Business Day after the date on which such distribution was due and
payable pursuant to the terms of such CRB Securities, the Indenture will require
it to take such actions as are permissible pursuant to the related CRB
Securities Agreement to ensure that the distribution be made as promptly as
possible and legally permitted, and to take such legal action as the Indenture
Trustee deems appropriate under the circumstances, including the prosecution of
any claims in connection therewith. The reasonable legal fees and expenses
incurred by the Indenture Trustee in connection with the prosecution of any
legal action will be reimbursable to the Indenture Trustee out of the proceeds
of any such action and will be retained by the Indenture Trustee prior to the
deposit of any remaining proceeds in the Collection Account pending distribution
thereof to Noteholders. Payments on the Notes will be reduced by an aggregate
amount equal to such fees and expenses in proportion to the payments of
principal and interest that would have been otherwise made on the Notes on the
Payment Date following the recovery of any such proceeds. In the event that the
Indenture Trustee has reason to believe that the proceeds of any such legal
action may not be sufficient to reimburse it for its projected legal fees and
expenses, the Indenture Trustee will notify the Noteholders that it is not
obligated to pursue any such available remedies unless adequate indemnity for
its legal fees and expenses is provided by the Noteholders.
REPORTS TO NOTEHOLDERS
The Indenture Trustee will mail to each Noteholder, at such Noteholder's
request, at its address listed on the Note Register maintained with the
Indenture Trustee, a report stating (i) the amounts of principal and interest,
respectively, paid on each $1,000 in face amount of Notes, (ii) the outstanding
principal balance of each Class of Notes and (iii) the outstanding balances of
the [Group] [1] CRB Securities or the [Group] [2] CRB Securities.
The Indenture Trustee shall forward by mail to each Noteholder the most
current CRB Securities Distribution Date Statement (as defined in the Indenture)
received by the Indenture Trustee as of the date of such request.
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EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Notes, "Events of Default" under the Indenture will
consist of: (i) a default for [ ] days or more in the payment of any interest on
any Note; (ii) a default in the payment of the principal of, or any installment
of the principal of, any Note when the same becomes due and payable; (iii) a
default in the observance or performance of any covenant or agreement of the
Trust made in the Indenture and the continuation of any such default for a
period of [ ] days after notice thereof is given to the Trust by the Indenture
Trustee, or to the Trust and the Indenture Trustee, or to the Trust and the
Indenture Trustee by the holders of at least [ %] in principal amount of the
Notes then outstanding; (iv) any representation or warranty made by the Trust in
the Indenture or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect in a material respect as of the time made, and
such breach not having been cured within 30 days after notice thereof is given
to the Trust by the Indenture Trustee or to the Trust and the Indenture Trustee
by the holders of at least [ %] in principal amount of Notes then outstanding;
or (v) certain events of bankruptcy, insolvency, receivership or liquidation of
the Trust. The amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Collection Account. Therefore, the failure to pay principal on a Class of Notes
generally will not result in the occurrence of an Event of Default until the
final scheduled Payment Date for such Class of Notes.
If there is an Event of Default with respect to a Note due to late payment
or nonpayment of interest due on a Note, additional interest will accrue on such
unpaid interest at the interest rate on the Note (to the extent lawful) until
such interest is paid. Such additional interest on unpaid interest shall be due
at the time such interest is paid. If there is an Event of Default due to late
payment or nonpayment of principal on a Note, interest will continue to accrue
on such principal at the interest rate on the Note until such principal is paid.
If an Event of Default should occur and be continuing with respect to the
Notes, the Indenture Trustee or holders of [ %] in principal amount of each
Class of Notes then outstanding may declare the principal of such Class of Notes
to be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by the holders of [ %] in principal amount of the
applicable Class of Notes then outstanding.
If the Notes are due and payable following an Event of Default with respect
thereto, the Indenture Trustee may institute proceedings to collect amounts due
or to foreclose on Trust property, exercise remedies as a secured party, sell
the CRB Securities or elect to have the Trust maintain possession of the CRB
Securities and continue to apply collections on the CRB Securities as if there
had been no declaration or acceleration. The Indenture Trustee is prohibited
from selling the CRB Securities following an Event of Default, other than a
default in the payment of any principal of, or a default for five days or more
in the payment of any interest on, any Note, unless (i) the holders of all
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on the
outstanding Notes at the date of such sale or (iii) the Indenture Trustee
determines that the proceeds of CRB Securities would not be sufficient on an
ongoing basis to make all payments on the Notes as such payments
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would have become due if such obligations had not been declared due and payable,
and the Indenture Trustee obtains the consent of the holders of at least [ %] of
the aggregate outstanding amount of the Notes.
If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee will be under no obligation to exercise any of the rights
or powers under the Indenture at the request or direction of any of the holders
of the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, the holders
of [ %] in principal amount of the Notes then outstanding may, in certain cases,
waive any default in respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant or provision of the
Indenture that cannot be modified without the waiver or consent of all the
holders of the outstanding Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than [ %] in principal amount of the outstanding Notes have
made written request to the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such holder or holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for [ ]
days failed to institute such proceeding and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during the [ ]-day
period by the holders of [ %] in principal amount of the Notes.
In addition, the Indenture Trustee and the Noteholders, by accepting the
Notes, will covenant that they will not at any time institute against the Trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to the Trust, neither the Indenture Trustee nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate representing
an ownership interest in the Trust nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors or
assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the Notes
or for the agreements of the Trust contained in the Indenture.
CERTAIN COVENANTS
The Indenture will provide that the Trust may not consolidate with or merge
into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the
Trust's obligation to make due and punctual payments upon the Notes and the
performance or observance of any agreement and covenant of the Trust under the
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Trust has been advised
that the ratings of the Securities then in effect would not be reduced or
withdrawn by a Rating Agency as a result of such merger or consolidation and
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(v) the Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to the
Trust or to any Noteholder or Certificateholder.
The Trust will not, among other things, (i) except as expressly permitted
by the Indenture, sell, transfer, exchange or otherwise dispose of any of the
assets of the Trust, (ii) claim any credit on or make any deduction from the
principal and interest payable in respect of the Notes (other than amounts
withheld under the Code or applicable state law) or assert any claim against any
present or former holder of Notes because of the payment of taxes levied or
assessed upon the Trust, (iii) dissolve or liquidate in whole or in part, (iv)
permit the validity or effectiveness of the Indenture to be impaired or permit
any person to be released from any covenants or obligations with respect to the
Notes under the Indenture except as may be expressly permitted thereby or (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extent to or otherwise arise upon or burden the
assets of the Trust or any part thereof, or any interest therein or the proceeds
thereof.
The Trust may not engage in any activity other than as specified under "The
Trust" herein. The Trust will not incur, assume or guarantee any indebtedness
other than indebtedness incurred pursuant to the Notes and the Indenture.
ANNUAL COMPLIANCE STATEMENT
The Trust will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee will be required to mail each year to all Noteholders
a report relating to any change in its eligibility and qualification to continue
as Indenture Trustee under the Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of any indebtedness owing
by the Trust to the Indenture Trustee in its individual capacity, any change in
the property and funds physically held by the Indenture Trustee in its
individual capacity, any change in the property and funds physically held by the
Indenture Trustee as such and any action taken by it that materially affects the
Notes and that has not been previously reported, but if no such changes have
occurred then no report shall be required.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing
the Notes upon the delivery to the Indenture Trustee for cancellation of all
Notes, or with certain limitations, upon deposit with the Indenture Trust of
funds sufficient for the payment in full of all the Notes.
MODIFICATION OF INDENTURE
With the consent of the holders of [ %] in principal amount of the Notes,
the Trust and the Indenture Trustee may execute a supplemental indenture to add
provisions to, change in any
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manner or eliminate any provisions of, the Indenture, or modify (except as
provided below) in any manner rights of the Noteholders.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture will: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate specified thereon, or the redemption price
with respect thereto, or change any place of payment where or the coin or
currency in which any Note or interest thereon is payable; (ii) impair the right
to institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (iii) reduce the percentage of the aggregate amount of the
outstanding Notes, the consent of the holders of which is required for any
waiver of compliance with certain provisions of the Indenture or of certain
defaults thereunder and their consequences as provided for in the Indenture;
(iv) modify or alter the provisions of the Indenture regarding the voting of
Notes held by the Trust, the Depositor or an affiliate of any of them; (v)
reduce the percentage of the aggregate outstanding amount of Notes, the consent
of the holders of which is required to direct the Indenture Trustee to sell or
liquidate the CRB Securities if the proceeds of such sale would be insufficient
to pay the principal amount and accrued but unpaid interest on the outstanding
Notes; (vi) decrease the percentage of the aggregate principal amount of Notes
required to amend the sections of the Indenture which specify the applicable
percentage of aggregate principal amount of the Notes necessary to amend the
Indenture or certain other related agreements; or (vii) permit the creation of
any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the collateral for the Notes or, except as otherwise permitted
or contemplated in the Indenture, terminate the lien of the Indenture on any
such collateral or deprive the holder of any Note of the security afforded by
the lien of the Indenture.
The Trust and the Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders, for the purpose
of, among other things, adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of modifying in any manner
the rights of the Noteholders; provided that such action will not materially and
adversely affect the interest of any Noteholder.
VOTING RIGHTS
At all times, the voting rights of Noteholders under the Indenture will be
allocated among the Notes pro rata in accordance with their outstanding
principal balances.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Indenture Trustee nor any director, officer or
employee of the Depositor or the Indenture Trustee will be under any liability
to the Trust or the related Noteholders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Indenture or for
errors in judgment; provided, however, that none of the Indenture Trustee, the
Depositor and any director, officer or employee thereof will be protected
against any liability which would otherwise be imposed by reason of willful
malfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties under the Indenture.
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Subject to certain limitations set forth in the Indenture, the Indenture
Trustee and any director, officer, employee or agent of the Indenture Trustee
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with investigating, preparing to defend or
defending any legal action, commenced or threatened, relating to the Indenture
or the CRB Securities other than any loss, liability or expense incurred by
reason of willful malfeasance, bad faith or gross negligence in the performance
of its duties under such Indenture or by reason of reckless disregard of its
obligations and duties under the Indenture. Any such indemnification by the
Trust will reduce the amount distributable to the Noteholders.
All persons into which the Indenture Trustee may be merged or with which it
may be consolidated or any person resulting from such merger or consolidation
shall be the successor of the Indenture Trustee under each Indenture.
THE TRUST AGREEMENT
The following summary describes certain terms of the Trust Agreement. The
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Trust Agreement. Whenever
particular sections or defined terms of the Trust Agreement are referred to,
such sections or defined terms are thereby incorporated herein by reference. See
"DESCRIPTION OF THE CERTIFICATES" herein for a summary of certain additional
terms of the Trust Agreement.
COLLECTION OF DISTRIBUTIONS ON CRB SECURITIES
The CRB Securities will be assets of the Trust. All distributions thereon
will be made directly to the Indenture Trustee. Pursuant to the Administration
Agreement, distributions on the Certificates will be made to Certificateholders
by the Administrator acting on behalf of the Owner Trustee.
EXERCISE OF REMEDIES
The Trust Agreement provides that until all the Notes have been paid in
full, the Indenture Trustee will take all actions to collect any distributions
due on the CRB Securities or to exercise remedies pursuant to the Indenture.
REPORTS TO CERTIFICATEHOLDERS
The Owner Trustee will mail to each Certificateholder, at such
Certificateholder's request, at its address listed on the Certificate Register
maintained with the Owner Trustee, a report stating (i) the amounts of principal
and interest, respectively, distributed on each $1,000 in face amount of
Certificates and (ii) the outstanding balances of the CRB Securities.
The Owner Trustee shall forward by mail to each Certificateholder the most
current CRB Securities Distribution Date Statement (as defined in the Trust
Agreement) received by the Owner Trustee as of the date of such request.
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AMENDMENT
The Trust Agreement may be amended by the Depositor and the Owner Trustee,
without consent of the Noteholders or Certificateholders, to cure any ambiguity,
to correct or supplement any provision or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
thereof or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided, however, that such action will not, as evidenced
by an opinion of counsel satisfactory to the Owner Trustee, adversely affect in
any material respect the interests of any Noteholders or Certificateholders.
The Trust Agreement may also be amended by the Depositor and the Owner Trustee
with the consent of the holders of Notes evidencing at least [ %] in principal
amount of then outstanding Notes and Certificateholders owning Voting Interests
(as herein defined) aggregating not less than [ %] of the aggregate Voting
Interests for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Trust Agreement or modifying in any
manner the rights of the Noteholders or Certificateholders; provided, however,
that no such amendment may (i) increase or reduce in any manner the amount of,
or delay the timing of, collections of payments on the CRB Securities or
distributions that are required to be made for the benefit of such Noteholders
or Certificateholders or (ii) reduce the aforesaid percentage of the Notes or
the Voting Interests of Certificates which are required to consent to any such
amendment, without the consent of all the outstanding Notes or Certificates, as
the case may be.
INSOLVENCY EVENT
"Insolvency Event" means, with respect to any Person, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings with respect to such
Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
If an insolvency Event occurs with respect to the Depositor, the CRB
Securities will be liquidated and the Trust will be terminated. Upon termination
of the Trust, the Owner Trustee shall direct the Indenture Trustee promptly to
sell the assets of the Trust (other than the Collection Account) in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from any such sale, disposition or liquidation of the CRB Securities
will be treated as collections on the CRB Securities and deposited in the
Collection Account. If the proceeds from the liquidation of the [Group] [1] CRB
Securities or the [Group] [2] CRB Securities and any respective amounts on
deposit in the Collection Account are not sufficient to pay the [Class] [1]
Notes or [Class] [2] Notes, respectively, and the Certificates in full, the
amount of principal returned to the respective Noteholders and
Certificateholders will be reduced and some or all of the Noteholders and
Certificateholders will incur a loss.
The Trust Agreement will provide that the Owner Trustee does not have the
power to commence a voluntary proceeding in bankruptcy with respect to the Trust
without the unanimous prior approval of all Certificateholders (including the
Depositor) of the Trust and the delivery to the Owner Trustee by each
Certificateholder (including the Depositor) of a certificate certifying that the
Certificateholder reasonably believes that the Trust is insolvent.
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LIABILITY OF THE DEPOSITOR
Under the Trust Agreement, the Depositor will agree to be liable directly
to an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder in
the capacity of an investor with respect to the Trust) arising out of or based
on the arrangement created by the Trust Agreement.
VOTING INTERESTS
As of any date, the aggregate principal balance of all Certificates
outstanding will constitute the voting interest of the Issuer (the "Voting
Interests"), except that, for purposes of determining Voting Interests,
Certificates owned by the Issuer or its affiliates (other than the Depositor)
will be disregarded and deemed not to be outstanding; and except that, in
determining whether the Owner Trustee is protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Owner Trustee knows to be so owned will be so disregarded.
Certificates so owned that have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Owner Trustee
the pledgor's right so to act with respect to such Certificates and that the
pledgee is not the Issuer or its affiliates.
CERTAIN MATTERS REGARDING THE OWNER TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Owner Trustee, nor any director, officer or
employee of the Depositor or the Owner Trustee will be under any liability to
the Trust or the related Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the Trust
Agreement or for errors in judgment; provided, however, that none of the Owner
Trustee, the Depositor and any director, officer or employee thereof will be
protected against any liability which would otherwise be imposed by reason of
willful malfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under the Trust
Agreement.
Subject to certain limitations set forth in the Trust Agreement, the Owner
Trustee and any director, officer, employee or agent of the Owner Trustee shall
be indemnified by the Trust and held harmless against any loss, liability or
expense incurred in connection with investigating, preparing to defend or
defending any legal action, commenced or threatened, relating to the Trust
Agreement or the CRB Securities other than any loss, liability or expense
incurred by reason of willful malfeasance, bad faith or gross negligence in the
performance of its duties under such Trust Agreement or by reason of reckless
disregard of its obligations and duties under the Trust Agreement. Any such
indemnification by the Trust will reduce the amount distributable to the
Certificateholders.
All persons into which the Owner Trustee may be merged or with which it may
be consolidated or any person resulting from such merger or consolidation shall
be the successor of the Owner Trustee under each Trust Agreement.
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[ADMINISTRATION AGREEMENT]
[The Indenture Trustee, in its capacity as Administrator, will enter into
the Administration Agreement with the Trust and the Owner Trustee pursuant to
which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide notices and perform other administrative
obligations required by the Indenture and the Trust Agreement.]
THE INDENTURE TRUSTEE
[Insert Indenture Trustee name] is the Indenture Trustee under the
Indenture. The mailing address of the Indenture Trustee is [insert Indenture
Trustee address].
THE OWNER TRUSTEE
[Insert Owner Trustee name] is the Owner Trustee under the Trust Agreement.
The mailing address of the Owner Trustee is [insert Owner Trustee address].
USE OF PROCEEDS
[The net proceeds from the sale of the Certificates and the Notes will be
applied by the Depositor on the Closing Date towards the purchase price of the
CRB Securities, the payment of expenses related to such purchase and other
corporate purposes.] [The Depositor will transfer approximately [ %] of the net
proceeds from the sale of the Securities to the Trust to fund the purchase price
to the Trust of the CRB Securities and the payment of expenses related to such
purchase.]
ERISA CONSIDERATIONS
[State whether the Notes may be classified as indebtedness without
substantial equity features for ERISA purposes.]
LEGAL INVESTMENT CONSIDERATIONS
The appropriate characterization of the Securities under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase Securities, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Securities will constitute legal investments for them.
The Depositor makes no representation as to the proper characterization of
the Securities for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase Securities
under applicable legal investment restrictions. The uncertainties described
above (and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the Securities) may
adversely affect the liquidity of the Securities.
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UNDERWRITING
Subject to the terms and conditions set forth in the respective
underwriting agreements, relating to the Notes and the Certificates (the
"Underwriting Agreements"), the Depositor has agreed to cause the Trust to sell
to CS First Boston Corporation (the "Underwriter"), and the Underwriter has
agreed to purchase, all of the Securities.
The underwriter proposes to offer the Securities to the public initially at
the public offering prices set forth on the cover page of this Prospectus
Supplement, and to certain dealers at such prices less a concession of [ %] per
[Class] [1] Note, [ %] per [Class] [2] Note and [ %] per Certificate; and, the
Underwriter and such dealers may allow a discount of [ %] per [Class] [1] Note,
[ %] per [Class] [2] Note and [ %] per Certificate on sales to certain other
dealers; and after the initial public offering of the Securities, such public
offering prices and the concessions and discounts to dealers may be changed by
the Underwriter.
The Underwriting Agreements provide that the Seller will indemnify the
Underwriter against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriter may be required to
make in respect thereof.
The Trust may, from time to time, invest the funds in the Trust Accounts in
Eligible Investments acquired from the Underwriter.
The closing of the sale of the Certificates is conditioned on the closing
of the sale of the Notes, and the closing of the sale of the Notes is
conditioned on the closing of the sale of the Certificates.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter within the period
during which there is an obligation to deliver a Prospectus Supplement and
Prospectus, the Depositor or the Underwriter will promptly deliver, or cause to
be delivered, without charge, a paper copy of the Prospectus Supplement and the
Prospectus.
LEGAL MATTERS
Certain legal matters will be passed upon by Sidley & Austin, New York, New
York.
RATING
It is a condition to issuance that each Class of the Notes be rated [in the
highest rating category by a Rating Agency]. It is a condition to issuance that
the Certificates be rated [in one of the [three] highest rating categories by a
Rating Agency].
A securities rating addresses the likelihood of the receipt by
Certificateholders and Noteholders of distributions on the CRB Securities. The
rating takes into consideration the characteristics of the CRB Securities and
the structural, legal and tax aspects associated with the
S-39
<PAGE>
Certificates and Notes. The ratings on the Securities do not, however,
constitute statements regarding the possibility that Certificateholders or
Noteholders might realize a lower than anticipated yield.
A securities rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each securities rating should be evaluated independently of
similar ratings on different securities.
S-40
<PAGE>
INDEX OF DEFINED TERMS
Accounts..............................................................
Administration Agreement..............................................
Administrator.........................................................
Agreements............................................................
Ancillary Arrangements................................................
Book-Entry Notes......................................................
Book-Entry Certificate................................................
Business Day..........................................................
Cash Collateral.......................................................
Cash Collateral Account...............................................
Cash Collateral Guaranty..............................................
Cede..................................................................
Cedel.................................................................
Certificates..........................................................
Citibank..............................................................
[Class] [1] Final Scheduled Payment Date..............................
[Class] [1] Note Percentage...........................................
[Class] [1] Notes.....................................................
[Class] [2] Final Scheduled Payment Date..............................
[Class] [2] Note Percentage...........................................
[Class] [2] Notes.....................................................
[Class] [3] Certificates..............................................
Closing Date..........................................................
Code..................................................................
Collateral Amount.....................................................
Collateral Invested Amount............................................
Collection Account....................................................
CRB Securities........................................................
CRB Securities Amortization Event.....................................
CRB Securities Certificate Rate.......................................
CRB Securities Controlled Amortization Period.........................
CRB Securities Distribution Date......................................
CRB Securities Servicer...............................................
CRB Securities Servicing Fee..........................................
Definitive Notes......................................................
Depositor.............................................................
DTC...................................................................
ERISA.................................................................
ERISA Counsel.........................................................
Euroclear.............................................................
European Depositaries.................................................
Event of Default......................................................
Final Legal Maturity..................................................
S-41
<PAGE>
Foreign Person........................................................
[Group] [1] CRB Securities............................................
[Group] [1] Certificate Percentage....................................
[Group] [2] CRB Securities............................................
[Group] [2] Certificate Percentage....................................
Holdings..............................................................
Indenture.............................................................
Indenture Trustee.....................................................
Insolvency Event......................................................
Interest Accrual Period...............................................
Issuer................................................................
Labor.................................................................
LIBOR.................................................................
Moody's...............................................................
Morgan................................................................
Noteholders...........................................................
Notes.................................................................
Owner Trustee.........................................................
Parties In Interest...................................................
Payment Date..........................................................
Plan..................................................................
Plan Asset Regulation.................................................
Prospectus............................................................
Rating Agency.........................................................
Receivables...........................................................
Record Date...........................................................
Required Collateral Amount............................................
Reuters LIBOR.........................................................
Securities............................................................
Seller................................................................
Seller's Interest.....................................................
Seller's Percentage...................................................
S&P...................................................................
Telerate LIBOR........................................................
Trust.................................................................
Trust Agreement.......................................................
Underwriter...........................................................
Voting Interests......................................................
S-42
<PAGE>
APPENDIX A
TABLE OF CONTENTS
APPENDIX A PAGE
- ---------- ----
This Appendix A contains excepts from each prospectus pursuant to which the
CRB Securities were offered and sold.
Capitalized terms used in the excerpts included in this Appendix A have the
meanings defined either within the text of such excerpt or within the related
prospectus. Such terms are not applicable to any other section of this
Prospectus Supplement or Prospectus unless such terms are defined as such in the
Prospectus Supplement or the Prospectus. Complete copies of the prospectus
relating to a particular series of CRB Securities may be obtained upon request
from the Depositor.
S-43
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion dated [ ], 199[ ]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 1995
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
$[ ] [Class A] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates
$[ ] [Class B] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates
ASSET BACKED SECURITIES CORPORATION, DEPOSITOR
The CSFB Card Account Trust 199[ ]-[ ] (the "Trust") will be formed
pursuant to a pooling agreement dated as of [ ], 199[ ] (the "Pooling
Agreement") [between] [among] Asset Backed Securities Corporation (the
"Depositor"), [and] [Trustee name], as trustee (the "Trustee") [and [Seller
name], as Seller]. The Trust will issue $ [ ] aggregate principal amount of
[Class A] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed
Certificates (the "[Class A] Certificates") [and $ [ ] aggregate principal
amount of [Class B] [ %] [Floating Rate] [Adjustable Rate]
(Continued on the following page)
--------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN THE DEPOSITOR, TRUSTEE OR ANY AFFILIATE THEREOF, EXCEPT TO THE
EXTENT PROVIDED HEREIN. NEITHER THE CERTIFICATES NOR THE UNDERLYING
ASSETS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
====================================================================================================================================
Price to Public Underwriting Discount Proceeds to the Seller (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per [Class A] Certificate
- ------------------------------------------------------------------------------------------------------------------------------------
[Per Class B Certificate]
- ------------------------------------------------------------------------------------------------------------------------------------
Total
====================================================================================================================================
</TABLE>
(1) Before deduction of expenses payable by the Seller, estimated to be $[ ].
--------------------
The Certificates offered hereby will be purchased by CS First Boston
Corporation (the "Underwriter") from the Depositor and will, in each case, be
offered by the Underwriter from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The aggregate proceeds to the Depositor from the sale of the Certificates
are expected to be $[ ] before deducting expenses payable by the Depositor
of $[ ].
The Certificates are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is expected that
the Certificates will be [available for delivery] [delivered in book-entry form]
[at the offices of the Underwriter] [through the facilities of The Depository
Trust Company] on or about [ ], 199[ ]. [The Certificates will be offered in
the United States of America and in Europe].
--------------------
Underwriters of the Securities
[LOGO] CS First Boston
The date of this Prospectus Supplement is [ ], 199[ ].
<PAGE>
[Variable Rate] Asset Backed Certificates (the "[Class B] Certificates," and
together with the [Class A] Certificates, the "Certificates")]. Terms used and
not otherwise defined herein shall have the respective meanings ascribed to such
terms in the Prospectus dated [ ], 199[ ] attached hereto (the "Prospectus").
The Trust will consist of certain asset backed certificates (collectively,
the "Card Receivables Backed Securities," or "CRB Securities") each issued
pursuant to a pooling and servicing agreement or master pooling and servicing
agreement (collectively, the "Agreements"). Each of the CRB Securities
evidences an interest in a trust created by one of the Agreements, the property
of which includes a portfolio of [charge card] [credit card] [consumer]
[corporate] [debit card] [revolving] receivables (collectively, the
"Receivables") generated or to be generated from time to time in the ordinary
course of business in a portfolio of [charge card] [credit card] [consumer]
[corporate] [debit card] [revolving] accounts (collectively, the "Accounts"),
all monies due in payment of the Receivables and certain other properties, as
more fully described herein. The CRB Securities [will be transferred to the
Trust by the Depositor] [will be purchased by the Trust with funds received from
the Depositor in exchange for the Certificates] pursuant to the Pooling
Agreement. [In addition, the Trust will enter into the Ancillary Arrangements
(as defined herein).] [The trust may also draw on funds on deposit in a Reserve
Account, to the extent described herein, to meet shortfalls in amounts due to
Certificateholders on any Distribution Date.]
The [Class A] Certificates will represent in the aggregate fractional
undivided interests in [approximately [ %] of] the Trust. [The Class B
Certificates[, which are not being offered hereby,] will represent in the
aggregate fractional undivided interests in [approximately [ %] of] the
Trust.]
Distributions on the Certificates will be made on the [ ] day of each
[month] [quarter] [semi-annual period] or, if any such day is not a Business
Day, on the next succeeding Business Day (the "Distribution Date") commencing [
], 199[ ].
Interest at a rate equal to [ %] [insert Class A Certificate Rate
formula] will be distributed to the [Class A] Certificateholders on each
Distribution Date. [Interest at a rate equal to [ %] [insert Class B
Certificate Rate formula] will be distributed to the Class B Certificateholders
on each Distribution Date.]
Principal, to the extent described herein, will be distributed to the
[Class A] Certificateholders on each Distribution Date, commencing with the [
], 199[ ] Distribution Date (or earlier under certain circumstances).
[Principal, to the extent described herein, will be distributed to the [Class B]
Certificateholders on each Distribution Date, commencing with the [ ], 199 [ ]
Distribution Date (or earlier under certain circumstances).]
There is currently no market for the Certificates offered hereby and there
can be no assurance that such a market will develop or if it does develop that
it will continue. See "RISK FACTORS" herein.
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and Prospectus
to investors [and may be required to deliver a Global Prospectus Supplement to
non-U.S. investors]. This is in addition to the obligation of dealers acting as
underwriters to deliver a Prospectus Supplement and Prospectus with respect to
their unsold allotments or subscriptions.
--------------------
The Certificates offered hereby constitute part of a separate series of
Asset Backed Certificates being offered by the Depositor from time to time
pursuant to its Prospectus dated [ ], 199[ ]. This Prospectus Supplement
does not contain complete information about the offering of the Certificates.
Additional information is contained in the Prospectus and investors are urged to
read both this Prospectus Supplement and the Prospectus in full as well as any
prospectus relating to the CRB Securities. Sales of the Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary of certain pertinent information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and in the accompanying Prospectus and in the prospectus
supplement for each of the CRB Securities. Certain capitalized terms used herein
are defined elsewhere in this Prospectus Supplement or in the Prospectus.
Securities Offered ................ [Class A] [ %] [Floating Rate]
[Adjustable Rate] Asset Backed
Certificates (the "[Class A]
Certificates"); and
[[Class B] [ %] [Floating Rate]
[Adjustable Rate] Asset Backed
Certificates (the "[Class B]
Certificates" and, together with the
[Class A] Certificates, the
"Certificates").]
Trust ............................. Card Account Trust 199[ ]-[ ] (the
"Trust" or the "Issuer"), a trust
established pursuant to the Pooling
Agreement (as defined herein).
Depositor ......................... Asset Backed Securities Corporation is a
special-purpose Delaware corporation
organized for the purpose of issuing the
Certificates and other securities issued
under the Registration Statement backed
by receivables or underlying securities
of various types and acting as settlor
or depositor with respect to trusts,
custody accounts or similar arrangements
or as general or limited partner in
partnerships formed to issue securities.
It is not expected that the Depositor
will have any significant assets. The
Depositor is an indirect, wholly owned
finance subsidiary of Collateralized
Mortgage Securities Corporation, which
is a wholly owned subsidiary of CS First
Boston Securities Corporation, which is
a wholly owned subsidiary of CS First
Boston, Inc. Neither CS First Boston
Securities Corporation nor CS First
Boston, Inc., nor any of their
affiliates, has guaranteed, will
guarantee or is or will be otherwise
obligated with respect to any Series of
Securities.
S-3
<PAGE>
The Depositor's principal executive
office is located at Park Avenue Plaza,
55 East 52nd Street, New York, New York
10055, and its telephone number is (212)
909-2000.
Pooling Agreement ............. Pursuant to a pooling agreement dated as
of [ ], 199[ ] (the "Pooling
Agreement"), among the Depositor and
[insert Trustee name] in its capacity as
trustee (the "Trustee"), the Trust will
issue the [Class A] Certificates in an
initial aggregate amount of $[ ] [and
the Class B Certificate in an initial
aggregate amount of $[ ]].
CRB Securities ................ The CRB Securities are described herein
and in Appendix A attached to this
Prospectus Supplement. The CRB
Securities will consist of certain asset
backed certificates, as more fully
described herein, each issued pursuant
to a pooling and servicing agreement or
master pooling and servicing agreement
(collectively, the "Agreements") .
Description of
Certificates................... Each of the Certificates will represent
a fractional undivided interest in the
Trust as described herein.
The [Class A] Certificates will evidence
in the aggregate an undivided ownership
interest in approximately [ %] of the
Trust (the "Class A Percentage") [and
the [Class B] Certificates will evidence
in the aggregate an undivided ownership
interest in approximately [ %] of the
Trust (the "Class B Percentage")]. [Only
the Class A Certificates are being
offered hereby.] [The Class B
Certificates will be subordinated to the
Class A Certificates to the extent
described herein.] See "THE
CERTIFICATES" herein.
Interest Distribution on the
Certificates................... Interest will accrue on the unpaid
principal amount of the [Class A]
Certificates at a rate per annum equal
to [insert [Class A] Certificate Rate
formula] payable [monthly] [quarterly]
[semi-annually] on each Distribution
Date [subject to a maximum rate of [ ]%
until the [ ], 199[ ] Distribution Date]
[, and subsequently subject to no
maximum rate] (the "[Class A]
Certificate Rate").
S-4
<PAGE>
Interest will accrue on the unpaid
principal amount of the [Class B]
Certificates at a rate per annum equal
to [insert Class B Certificate Rate
formula] payable [monthly] [quarterly]
[semi-annually] on each Distribution
Date [subject to a maximum rate of [ ]%
until the [ ], 199[ ] Distribution Date]
[, and subsequently subject to no
maximum rate.]
Interest will be distributed to
Certificate on each Distribution Date
[to the extent that funds are available
therefor, from] [(i)] the Interest
Distribution Amount , [(ii)] [the
Reserve Account,] [and] [(iii)] [amounts
payable to the Trust pursuant to the
Ancillary Arrangements]. Interest in
respect of a Distribution Date will
accrue on the Certificates from and
including the preceding Distribution
Date (in the case of the first
Distribution Date, from and including [
], 199[ ] (the "Closing Date")) to but
excluding such Distribution Date (each,
a "Collection Period") [and will be
calculated on the basis of the actual
number of days in such Collection Period
divided by 360] [and will be calculated
on the basis of a 360 day year of twelve
30 day months].
Principal Distributions
on the Certificates .......... No principal will be distributable to
Certificateholders until the [ ], 199[ ]
Distribution Date or, upon the
occurrence of a CRB Securities
Amortization Event, the first
Distribution Date thereafter, as
described herein.
Principal distributable on the
Certificates will equal the principal
received on the CRB Securities.
Principal of the [Class A] Certificates
will be payable on each Distribution
Date, pro rata to the [Class A]
Certificateholders, in a maximum amount
equal to the [Class A] Principal
Distributable Amount for the related
Collection Period. The [Class A]
Principal Distributable Amount with
respect to any Distribution Date will
equal the [Class A] Percentage of the
Principal Distribution Amount for the
related Collection Period.
S-5
<PAGE>
[On each Distribution Date, [subject to
the prior distribution on such date of
the Class A Interest Distributable
Amount and the Class A Principal
Distributable Amount,] the Trustee will
distribute to holders of the [Class B]
Certificateholders (i) the [Class B]
Interest Distributable Amount to the
extent of funds available therefor from
the [Class B] Percentage of the Interest
Distribution Amount and the Reserve
Account and (ii) the [Class B] Principal
Distributable Amount. The [Class B]
Principal Distributable Amount with
respect to any Distribution Date will
equal the [Class B] Percentage of the
Principal Distribution Amount for the
related Collection Period.]
The outstanding principal amount, if
any, of the [Class A] Certificates [and
the [Class B] Certificates] will be
payable in full on [ ], 199[ ] (the
"Final Scheduled Distribution Date").
Optional Prepayment ........... If the Depositor exercises its option to
purchase the CRB Securities, which it
may do after the aggregate principal
balance of the CRB Securities (the "Pool
Balance") declines to [ %] or less of
the initial Pool Balance, the [Class A]
Certificateholders will receive an
amount equal to the [Class A]
Certificate Balance together with
accrued interest at the [Class A]
Certificate Rate, [and the [Class B]
Certificateholders will receive an
amount equal to the Class B Certificate
Balance together with accrued interest
at the Class B Certificate Rate], and
the Certificates will be retired.
[Credit Enhancement] .......... [Subordination. The rights of the [Class
B] Certificateholders to receive
distributions to which they would
otherwise be entitled with respect to
the Receivables are subordinated to the
rights of the [Class A]
Certificateholders, as described more
fully herein.]
[Reserve Account. The Reserve Account
will be created with an initial deposit
by the Depositor on the Closing Date of
cash or eligible investments having a
value of at least $[ ] (the "Reserve
Account Initial Deposit"). Funds will be
withdrawn from the Reserve Account on
any
S-6
<PAGE>
Distribution Date if, and to the extent
that, the Total Distribution Amount for
the related Collection Period is less
than the [Class A] Distributable Amount.
Such funds will be distributed to the
[Class A] Certificateholders. In
addition, after giving effect to any
such withdrawal and distribution to the
[Class A] Certificateholders, funds will
be withdrawn from the Reserve Account
if, and to the extent that, the portion
of the Total Distribution Amount
remaining after payment of the [Class A]
Distributable Amount is less than the
[Class B] Distributable Amount. Such
funds will be distributed to the [Class
B] Certificateholders.]
[On each Distribution Date, the Reserve
Account will be reinstated up to the
Required Reserve Account Balance by the
deposit thereto of the portion, if any,
of the Total Distribution Amount
remaining after payment of the [Class A]
Distributable Amount [and the [Class B]
Distributable Amount]. The "Required
Reserve Account Balance" with respect to
any Distribution Date generally will be
equal to [insert Required Reserve
Account Balance formula]. Certain
amounts in the Reserve Account on any
Distribution Date (after giving effect
to all distributions to be made on such
Distribution Date) in excess of the
Specified Reserve Account Balance for
such Distribution Date will be released
to the Depositor and will no longer be
available to the Certificateholders.]
[The Reserve Account will be maintained
with the Trustee as a segregated trust
account, but will not be part of the
Trust.]
Distribution Date ............. The [ ] day of each [month] [quarter]
[semi-annual period] or, if such day is
not a Business Day, the next succeeding
Business Day, commencing on [ ], 199[ ].
A "Business Day" is any day other than a
Saturday or Sunday or another day on
which banking institutions in New York,
New York are authorized or obligated by
law, regulations or executive order to
be closed.
Record Date ................... Distributions on the Certificates will
be made to Certificateholders in whose
name the Certificates were
S-7
<PAGE>
registered at the close of business on
the last day of the month prior to the
[month] [quarter] [semi-annual period]
in which such distribution occurs.
Form and Registration ......... [The Certificates will initially be
delivered in book-entry form ("Book-
Entry Certificates"). Certificateholders
will initially hold their interests
through the Depository Trust Company
("DTC"). Transfers within DTC will be in
accordance with the usual rules and
operating procedures of DTC. So long as
the Certificates are Book-Entry
Certificates, such Certificates will be
evidenced by one or more securities
registered in the name of Cede & Co.
("Cede"), as the nominee of DTC. No
Certificateholder 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 in
"CERTAIN INFORMATION REGARDING THE
SECURITIES--Definitive Securities" in
the Prospectus. All references in this
Prospectus Supplement to Certificates
reflect the rights of Certificateholders
only as such rights may be exercised
through DTC and its participating
organizations for so long as such
Certificates are held by DTC. See "RISK
FACTORS--Book-Entry Registration" and
"CERTAIN INFORMATION REGARDING THE
SECURITIES--Book-Entry Registration" in
the Prospectus and Annex I thereto.]
Denominations ................. The Certificates will be issued in
minimum denominations of $[ ] and
integral multiples of $1,000 in excess
thereof.
[Ancillary Arrangements........ On the Closing Date the Trust will
enter into ancillary arrangements (such
agreements, the "Ancillary
Arrangements").]
[Calculation of LIBOR ......... LIBOR applicable to the calculation of
the interest rate on the Certificates in
respect of a Distribution Date shall be
equal to the weighted average of the
LIBOR Interest rates (weighted on the
basis of the outstanding principal
balances of the CRB Securities
immediately prior to such
S-8
<PAGE>
date) applicable to the distribution of
interest on the CRB Securities
distributable on such date.]
Tax Considerations ............ In the opinion of Sidley & Austin
("Federal Tax Counsel"), the Trust
will be classified as a grantor trust
for federal income tax purposes and
will not be classified as an
association taxable as a corporation.
Subject to the discussion under
"Certain Federal Income Tax
Consequences" in the Prospectus, each
Owner of a beneficial interest in the
Certificates must include in income
its pro rata share of interest and
other income from the CRB Securities
and, subject to certain limitations,
may deduct its pro rata share of fees
and other deductible expenses paid by
the Trust. See "Certain Federal
Income Tax Consequences" in the
Prospectus for additional information
concerning the application of federal
income tax laws to the Trust and the
Certificates.
Legal Investment .............. Institutions whose investment
activities are subject to legal
investment laws and regulations or to
review by certain regulatory
authorities may be subject to
restrictions on investment in the
Certificates. See "LEGAL INVESTMENT
CONSIDERATIONS" herein.
ERISA ......................... Except as otherwise described herein,
the Certificates may not be acquired
by an employee benefit plan subject
to the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), by any individual
retirement account or by any other
"plan" as defined in Section 4975 of
the Code. See "ERISA CONSIDERATIONS"
herein and in the Prospectus.
Rating ........................ It is a condition to the issuance of
the [Class A] Certificates that they
be rated [in the highest rating
category] by at least one Rating
Agency, as defined herein. [It is a
condition to the issuance of the
[Class B] Certificates that they be
rated [in one of the three highest
rating categories] by at least one
Rating Agency.] There is no assurance
that such rating will continue for
any period of time or that it will
not be revised or withdrawn
S-9
<PAGE>
entirely by such rating agency if, in
its judgement, circumstances so
warrant. A revision or withdrawal
of such rating may have an adverse
effect on the market price of the
Certificates. A security rating is
not a recommendation to buy, sell or
hold securities.
S-10
<PAGE>
SPECIAL CONSIDERATIONS
Limited Liquidity. There is currently no secondary market for the
Certificates. CS First Boston currently intends to make a market in the
Certificates but is under no obligation to do so. There can be no assurance that
a secondary market will develop in the Certificates or, if a secondary market
does develop, that it will provide holders of the Certificates with liquidity of
investment or will continue for the life of the Certificates.
Trust's Relationship to the Depositor. The Depositor is not obligated to
make any payments in respect of the Certificates or the CRB Securities.
Maturity Assumptions. The rate of payment of principal of the
Certificates, the aggregate amount of each distribution on, and the yield to
maturity of, the Certificates will depend on the rate of payment of principal of
the CRB Securities. Each series of the CRB Securities is subject to early
amortization upon the occurrence of any of the amortization events applicable to
such CRB Securities as described herein and in the prospectus used in connection
with the offering of such CRB Securities.
The rate of payment of principal of the Certificates may also be affected
by the repurchase by an issuer of CRB Securities (a "CRB Issuer") of the CRB
Securities it has issued pursuant to a purchase option, which may be exercised
after the aggregate principal balance of such CRB Securities is less than [ %]
of their original principal balance at a purchase price equal to a percentage of
the principal balance of such CRB Securities plus accrued and unpaid interest.
In such event, the repurchase price paid by the Issuer would be passed through
to the Certificateholders as a payment of principal.
Rating of the Certificates. It is a condition to the issuance and sale of
the [Class A] Certificates that they be rated [in the highest rating category]
by [at least one of] [Moody's Investors Service, Inc. ("Moody's")] [and]
[Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. ("S&P")]
([each of] [Moody's] [and] [S&P] [being hereinafter referred to as] a "Rating
Agency"). [It is a condition to the issuance and sale of the Class B
Certificates that they be rated [in one of the three highest] rating categories
by [at least one Rating Agency.] A rating is not a recommendation to purchase,
hold or sell securities, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings address the
likelihood of the receipt of distributions due on the Certificates pursuant to
their terms. However, a Rating Agency does not evaluate, and the ratings of the
Certificates do not address, the possibility that investors may receive a lower
yield than anticipated. There can be no assurance that a rating will remain for
any given period of time or that a rating will not be lowered or withdrawn
entirely by a Rating Agency if in its judgment circumstances in the future so
warrant.
S-11
<PAGE>
THE TRUST
GENERAL
The Issuer, Card Account Trust 199[ ]-[ ], is a trust formed
pursuant to the Pooling Agreement for the transactions described in this
Prospectus Supplement. After its formation, the Issuer will not engage in any
activity other than (i) acquiring, holding and managing the CRB Securities and
the other assets of the Trust and proceeds therefrom, (ii) issuing the
Certificates, (iii) making distributions on the Certificates and (iv) engaging
in other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling Agreement
dated as of [ ], 199[ ] [between] [among] the Depositor [and] [insert Trustee
name], as Trustee [and [Seller name], as Seller.] The Depositor will provide a
copy of the Pooling Agreement to prospective investors without charge upon
request.
The following summaries describe certain terms of the Certificates and
the Pooling Agreement. The summaries do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the provisions of
the Pooling Agreement. Wherever particular defined terms of the Pooling
Agreement are referred to, such defined terms are thereby incorporated herein by
reference. See "THE POOLING AGREEMENT" herein for a summary of additional terms
of the Pooling Agreement.
The Certificates will be issued in book-entry form only ("Book-Entry
Certificates") and will represent undivided interests in the Trust. The
Certificates will be issued in minimum denominations of $[ ] and integral
multiples of $1,000 in excess thereof.
[BOOK-ENTRY CERTIFICATES]
[The Book-Entry Certificates will be issued in one or more
certificates which equal the aggregate initial principal balance of the
Certificates and which will be held by a nominee of The Depository Trust Company
(together with any successor depository selected by the Depositor, the
"Depository"). Beneficial interests in the Book-Entry Certificates will be held
indirectly by investors through the book-entry facilities of the Depository, as
described herein. Investors may hold such beneficial interests in the Book-
Entry Certificates in minimum denominations representing an original principal
amount of $[ ] and integral multiples of $1,000 in excess thereof. The
Depositor has been informed by the Depository that its nominee will be Cede &
Co. ("Cede"). Accordingly, Cede is expected to be the holder of record of the
Book-Entry
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Certificates. Except as described in the Prospectus under "CERTAIN INFORMATION
REGARDING THE SECURITIES--Definitive Securities," no person acquiring a Book-
Entry Certificate (each, a "beneficial owner") will be entitled to receive a
Definitive Certificate.]
[Unless and until Definitive Certificates are issued, it is
anticipated that the only "Certificateholder" of the Book-Entry Certificates
will be Cede, as nominee of the Depository. Beneficial owners of the Book-Entry
Certificates will not be Certificateholders as that term is used in the Pooling
Agreement. Beneficial owners are only permitted to exercise the rights of
Certificateholders indirectly through the Depository and its participating
organizations. Any reports on the Trust provided to Cede, as nominee of the
Depository, may be made available to beneficial owners upon request, in
accordance with the rules, regulations and procedures creating and affecting the
Depository, and to the Depository's participating organizations to whose
Depository accounts the Book-Entry Certificates of such beneficial owners are
credited.]
[For a description of the procedures generally applicable to the Book-
Entry Certificates, see "CERTAIN INFORMATION REGARDING THE SECURITIES--Book-
Entry Registration" in the Prospectus.]
DISTRIBUTION ON CERTIFICATES
Distributions on the Certificates, as described below, will be made by
the Trustee on the Distribution Date to persons in whose names the Certificates
are registered on the last day of the month preceding the [month] [quarter]
[semi-annual period] in which such Distribution Date occurs (the "Record Date").
Distributions to each Certificateholder will be made by the Trustee to an
account specified in writing by such holder as of the preceding Record Date or
in such other manner as may be agreed to by the Trustee and such holder. The
final distribution in retirement of a Certificate will be made only upon
surrender of the Certificate to the Trustee at the office thereof specified in
the notice to Certificateholders of such final distribution. Notice will be
mailed prior to the Distribution Date on which the final distribution of
principal and interest on a Certificate is expected to be made to the holder
thereof.
DISTRIBUTIONS OF INTEREST
The [Class A] Certificates will bear interest on the aggregate
principal amount of the [Class A] Certificates of an annual rate equal to
[insert Class A Certificate Rate formula], [subject to a maximum rate of [insert
cap if any] until the [ ], 199[ ] Distribution Date] [,and subsequently
subject to no maximum rate] (the "[Class A] Certificate Rate").
[The [Class B] Certificates will bear interest on the aggregate
principal amount of the [Class B] Certificates of an annual rate equal to
[insert Class B Certificate Rate formula], [subject to a maximum rate of [insert
cap if any] until the [ ], 199[ ] Distribution Date][, and subsequently
subject to no maximum rate] (the "Class B Certificate Rate").]
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Interest accrued on the Certificates will be distributable [monthly]
[quarterly] [semi-annually] [on each Distribution Date] [to the extent of funds
available therefor from] [(i)] [the Interest Distribution Amount] [(ii)]
[amounts, if any, on deposit in the Reserve Account] [and] [(iii)] [amounts
payable to the Trust pursuant to the Ancillary Arrangements]. Interest in
respect of a Distribution Date will accrue on the outstanding principal amount
of the Certificates from and including the preceding Distribution Date (in the
case of the first Distribution Date, from and including the Closing Date) to but
excluding such current Distribution Date (each, a "Collection Period").
Interest will be calculated [on the basis of the actual number of days in each
Collection Period divided by 360] [on the basis of a 360 day year of twelve 30
day months].
[Calculation of LIBOR: LIBOR applicable to the calculation of the
interest rates on the Certificates in respect of a Distribution Date shall be
calculated by the Trustee and shall be equal to the weighted average of the
LIBOR interest rates (weighted on the basis of the outstanding principal
balances of the CRB Securities immediately prior to such Distribution Date)
applicable to the distribution of interest on the CRB Securities distributable
on the CRB Securities Distribution Date (as defined herein) occurring on such
Distribution Date. The LIBOR applicable to the CRB Securities is described
under "DESCRIPTION OF THE CRB SECURITIES--Interest Distributions" herein.]
On each Distribution Date, interest distributions on the CRB
Securities in excess of the amount required to be distributed as interest to
Certificateholders on any Distribution Date shall be available to pay the
expenses of the Trust (including the fees and expenses of the Trustee), and any
remaining amounts shall be distributed to the Depositor.
DISTRIBUTIONS OF PRINCIPAL
No principal will be distributable to [Class A] Certificateholders
until the [ ], 199[ ] Distribution Date, or upon the occurrence of a CRB
Securities Amortization Event, the First Distribution Date thereafter, as
described herein. [No principal will be distributable to the [Class B]
Certificateholders until the principal amount of the [Class A] Certificates has
been paid in full.] Principal distributions to [Class A] Certificateholders are
expected to commence on the [ ], 199[ ] Distribution Date. [Principal
distributions to the [Class B] Certificateholders are expected to commence on
the [ ], 199[ ] Distribution Date.] If, however, a CRB Securities
Amortization Event (as defined herein) shall occur, principal distributions on
the Certificates will commence on the first Distribution Date after such CRB
Securities Amortization Event.
On each CRB Securities Distribution Date in respect of which principal
is distributed on the CRB Securities, principal distributions will be made on
the Certificates on the Distribution Date occurring on such date in an amount
equal to the principal distributed on the CRB Securities. Such principal will be
distributed on a pro rata basis in accordance with the outstanding principal
balances of the Certificates. Principal of the [Class A] Certificates will be
payable on each Distribution Date, pro rata to the [Class A] Certificateholders,
in a maximum amount equal to the [Class A] Principal Distributable Amount for
the related Collection Period. The [Class A] Principal
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Distributable Amount with respect to any Distribution Date will equal the [Class
A] Percentage of the Principal Distribution Amount for the related Collection
Period.
On each Distribution Date, subject to the prior distribution on such
date of the [Class A] Interest Distributable Amount and the [Class A] Principal
Distributable Amount, the Trustee will distribute to holders of the [Class B]
Certificateholders (i) the [Class B] Interest Distributable Amount to the extent
of funds available therefor from the [Class B] Percentage of the Interest
Distribution Amount and the Reserve Account and (ii) the [Class B] Principal
Distributable Amount. The [Class B] Principal Distributable Amount with respect
to any Distribution Date will equal the [Class B] Percentage of the Principal
Distribution Amount for the related Collection Period. The outstanding
principal amount of the [Class A] Certificates [and the [Class B] Certificates],
if any, will be payable in full on [ ], 199[ ] (the "Final Scheduled
Distribution Date").
The aggregate principal balance of the Certificates at any time will
be equal to the outstanding principal balance of the CRB Securities at such
time. As more fully described herein, the outstanding principal balance of the
CRB Securities will be reduced as a result of principal payments on the
Receivables that are distributed in respect of the CRB Securities.
[ANCILLARY ARRANGEMENTS]
[On the Closing Date the Trust will enter into ancillary arrangements
(such agreements, the "Ancillary Arrangements")].
[Insert description of Ancillary Arrangements.]
[RESERVE ACCOUNT]
[The Reserve Account will be created with an initial deposit by the
Depositor on the Closing Date of cash or eligible investments having a value of
at least $[ ] (the "Reserve Account Initial Deposit"). Funds will be
withdrawn from the Reserve Account on any Distribution Date if, and to the
extent that, the Total Distribution Amount for the related Collection Period is
less than the [Class A] Distributable Amount. Such funds will be distributed to
the [Class A] Certificateholders. In addition, after giving effect to any such
withdrawal and distribution to the [Class A] Certificateholders, funds will be
withdrawn from the Reserve Account if, and to the extent that, the portion of
the Total Distribution Amount remaining after payment of the [Class A]
Distributable Amount is less than the [Class B] Distributable Amount. Such
funds will be distributed to the [Class B] Certificateholders.]
[On each Distribution Date, the Reserve Account will be reinstated up
to the Required Reserve Account Balance by the deposit thereto of the portion,
if any, of the Total Distribution Amount remaining after payment of the [Class
A] Distributable Amount and the [Class B] Distributable Amount. The "Required
Reserve Account Balance" with respect to any Distribution Date generally will be
equal to [insert Required Reserve Account Balance formula]. Certain
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amounts in the Reserve Account on any Distribution Date (after giving effect to
all distributions to be made on such Distribution Date) in excess of the
Specified Reserve Account Balance for such Distribution Date will be released to
the Depositor and will no longer be available to the Certificateholders.]
[The Reserve Account will be maintained with the Trustee as a
segregated trust account, but will not be part of the Trust.]
DISTRIBUTIONS ON THE CRB SECURITIES; COLLECTION ACCOUNT
All distributions on the CRB Securities will be remitted directly to
an account (the "Collection Account") to be established with the Trustee under
the Pooling Agreement on the Closing Date. The Trustee will hold such moneys
uninvested and without liability for interest thereon for the benefit of holders
of the Certificates. [The "CRB Securities Distribution Date" in each [month]
[quarter] [semi-annual period] is the Distribution Date for such [month]
[quarter] [semi-annual period.]
[[ASSIGNMENT] [PURCHASE] OF CRB SECURITIES]
[The Depositor will acquire the CRB Securities for deposit into the
Trust from [insert Seller name, if any]. At the time of issuance of the
Certificates, the Depositor will cause the beneficial interest in such CRB
Securities, which will be held in book-entry form through the facilities of The
Depository Trust Company, to be delivered to the Trustee's participant account
at The Depository Trust Company.] [The CRB Securities will be purchased by the
Trust with funds received from the Depositor in exchange for the Certificates.]
DESCRIPTION OF THE CRB SECURITIES
The table below sets forth certain of the characteristics of the CRB
Securities. The table does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the prospectuses pursuant to which
the CRB Securities were offered and sold. The CRB Securities are not listed on
any securities exchange.
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DESCRIPTION OF THE CRB SECURITIES
- --------------------------------------------------------------------
Issuer
- --------------------------------------------------------------------
Servicer
- --------------------------------------------------------------------
Trustee
- --------------------------------------------------------------------
Designation
- --------------------------------------------------------------------
Principal Amount to be Sold to Trust
- --------------------------------------------------------------------
Approximate percentage of total CRB Securities to be Sold to Trust
- --------------------------------------------------------------------
Initial Certificate Amount
- --------------------------------------------------------------------
Series Termination Date
- --------------------------------------------------------------------
Certificate Rate
- --------------------------------------------------------------------
Monthly Distribution Date
- --------------------------------------------------------------------
Commencement of Controlled Amortization Period
- --------------------------------------------------------------------
Minimum Seller's Percentage
- --------------------------------------------------------------------
Cash Collateral Guaranty Amount
- --------------------------------------------------------------------
Percentage of Subordinated Class B Certificates
- --------------------------------------------------------------------
Optional Repurchase Percentage
- --------------------------------------------------------------------
Ratings (Moody's/S&P)
- --------------------------------------------------------------------
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GENERAL
This Prospectus Supplement sets forth certain relevant terms with
respect to the CRB Securities, but does not provide detailed information with
respect to the CRB Securities. Appendix A to this Prospectus Supplement contains
excerpts from each prospectus pursuant to which the CRB Securities were offered
and sold. This Prospectus Supplement relates only to the Certificates offered
hereby and does not relate to the CRB Securities.
CRB SECURITIES CONSIDERATIONS; RECENT DEVELOPMENTS
Each of the CRB Securities represents an obligation of the related CRB
Issuer only. Prospective investors in the Securities should consider carefully
the risk factors and special considerations [insert applicable references] in
each CRB Securities Offering Document and should avail themselves of the same
information concerning each CRB Seller, CRB Servicer and CRB Issuer as they
would if they were purchasing the CRB Securities or similar investments backed
by Receivables. Each CRB Issuer [or [ ], as originator of a CRB Issuer,] is
subject to the informational requirements of the Exchange Act. Accordingly,
each CRB Issuer or [ ] files annual and periodic reports and other
information, including Monthly Servicer Reports (collectively, "CRB Issuer
Exchange Act Reports") with the Commission. Copies of such CRB Issuer Exchange
Act Reports, each CRB Securities Offering Document, Servicer Reports and other
information, including Monthly Servicer Reports (collectively, the "CRB
Securities Disclosure") may be inspected and copied at certain offices of the
Commission at the addresses listed under "Available Information" in the
Prospectus. If any CRB Issuer or [ ] ceases to be subject to the
informational requirements of the Exchange Act, the Depositor will not be
relieved from the informational requirements of the Exchange Act.
Neither the Depositor nor the Underwriter participated in the
[offering of the CRB Securities or in the] preparation of the publicly available
information referred to above or of any CRB Securities Offering Document, nor
has the Depositor or the Underwriter made any due diligence inquiry with respect
to the information provided therein. Although neither the Depositor nor the
Underwriter is aware of any material misstatements or omissions in any CRB
Securities Offering Document speaking as of its date, the information provided
therein or in the other publicly available documents referred to above cannot be
verified by the Depositor or the Underwriter as to accuracy or completeness.
Information set forth in each CRB Securities Offering Document speaks only as of
the date of such CRB Securities Offering Document; there can be no assurance
that all events occurring prior to the date hereof that would affect the
accuracy or completeness of any statements included in such CRB Securities
Offering Document or in the other publicly available documents filed by or on
behalf of the CRB Issuer have been publicly disclosed.
[Describe any other recent material developments that may exist based
on publicly available information.]
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AN INVESTMENT IN THE SECURITIES IS DIFFERENT FROM, AND SHOULD NOT BE
CONSIDERED A SUBSTITUTE FOR, AN INVESTMENT IN THE CRB SECURITIES.
Set forth below is certain information excerpted and summarized from
each prospectus relating to the CRB Securities.
The CRB Securities have been issued pursuant to Agreements entered
into between various [sellers] [depositors] [or] [transferors] and various
trustees. See "Appendix A" for a further description of the various CRB
Issuers. The following summary describes certain general terms of such
Agreements, but investors should refer to the Agreements themselves for all the
terms governing the CRB Securities.
Each of the CRB Securities represents an undivided interest in one of
the CRB Issuers, including the right to a percentage of cardholder payments on
the Receivables underlying such CRB Securities. The assets of each CRB Issuer
include a pool of Receivables arising under Accounts, funds collected or to be
collected from cardholders in respect of the Receivables in the Accounts, monies
on deposit in certain accounts of the CRB Issuers, and the right to draw upon
various enhancements. The assets of each CRB Issuer may also include the right
to receive certain interchange fees attributed to cardholder charges for
merchandise. Each of the CRB Securities represents the right to receive
payments of interest for the related interest period at the applicable CRB
Securities Certificate Rate (as defined herein) for such interest period from
collections of Receivables and, in certain circumstances, from draws on
applicable enhancement, and payments of principal during the CRB Securities
Amortization Period (as defined herein) [or payments of principal on the
Expected Final Payment Date] funded from collections of Receivables.
[Each seller of CRB Securities (each, a "Seller") holds the interest
in the Receivables of a CRB Issuer not represented by the CRB Securities and any
other series of securities issued by the CRB Issuer. Such Seller holds an
undivided interest in the CRB Issuer (the "Seller's Interest"), including the
right to a percentage (the "Seller's Percentage") of all cardholder payments on
the Receivables.]
INTEREST DISTRIBUTIONS
Interest accrues on the CRB Securities at the certificate rate for
each class and series of CRB Securities (a "CRB Securities Certificate Rate"),
from the date of the initial issuance of the CRB Securities. Interest at the
applicable rate will be distributed to the holders of the CRB Securities monthly
on each CRB Securities Distribution Date.
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Interest on the CRB Securities is calculated [on the basis of a 360
day year of twelve 30 day months].
The CRB Securities [all] bear interest at [ %] [a rate [ ] per
annum above the arithmetic mean of London interbank offered quotations for one-
month Eurodollar deposits ("LIBOR")] [; provided, however, that the rate at
which interest will accrue on the CRB Securities will in no event exceed [insert
interest rate cap] per annum]. [LIBOR is determined according to [the Reuters
Screen LIBO Page (as defined in the International Swap Dealers Association, Inc.
Code of Standard Wording, Assumption and Provisions for SWAPS, 1986 edition)
("Reuters LIBOR")] [Telerate Page 3750 of the Dow Jones Telerate Service (or
such other page as may replace Telerate Page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks) ("Telerate
LIBOR")].]
PRINCIPAL DISTRIBUTIONS
Generally, principal distributions due to the holders of the CRB
Securities are scheduled to commence on the first CRB Securities Distribution
Date with respect to a controlled amortization period for a series of CRB
Securities (a "CRB Securities Controlled Amortization Period"), but may be
distributed earlier or later than such date. However, if a Rapid Amortization
Event, Early Amortization Event, Payout Event, Liquidation Event or Economic Pay
Out Event (as such terms are defined in the Agreements) (each such event, a "CRB
Securities Amortization Event") occurs, monthly distributions of principal to
the holders of the CRB Securities will begin on the first CRB Securities
Distribution Date following the occurrence of such CRB Securities Amortization
Event. See "CRB Securities Amortization Events" below.
If a CRB Securities Amortization Event does not occur, principal will
be distributed to the holders of the CRB Securities on the [earlier of the]
first CRB Securities Distribution Date during the applicable CRB Securities
Controlled Amortization Period] [and the first CRB Securities Expected Final
Payment Date]. If, however, the amount of principal distributed on the
scheduled final CRB Securities Distribution Date is not sufficient to pay the
holders of the CRB Securities in full, then monthly distributions of principal
to the holders of CRB Securities will occur on each CRB Securities Distribution
Date after the scheduled final CRB Securities Distribution Date until such
holders of the CRB Securities are paid in full.
INVESTOR PERCENTAGE AND SELLER'S PERCENTAGE
Pursuant to the Agreements, all amounts collected on Receivables will
be allocated between the investor interest of the holders of the CRB Securities,
the investor interest of any other series, and the Seller's Interest by
reference to the investor percentage of the holders of the CRB Securities, the
investor percentage of any other series, and the Seller's Percentage.
The Seller's Percentage in all cases means the excess of 100% over the
aggregate investor percentages of all series then outstanding.
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ALLOCATION OF COLLECTIONS
The CRB Servicer will deposit any payments collected by the CRB
Servicer with respect to the Receivables and will generally allocate such
amounts as follows:
(a) an amount equal to the applicable Seller's Percentage of the
aggregate amount of deposits in respect of Principal Receivables
and Finance Charge Receivables, respectively, will be paid to the
holder of the Seller's Interest,
(b) an amount equal to the applicable investor percentage of the
aggregate amount of such deposits in respect of Finance Charge
Receivables will be deposited into an account for the benefit of
the holders of the CRB Securities ,
(c) during the revolving period, an amount generally equal to the
applicable investor percentage of the aggregate amount of such
collections in respect of Principal Receivables will be paid to
the holder of the Seller's Certificate; provided, however, that
such amount may not exceed the amount equal to the Seller's
Interests,
(d) during the CRB Securities Controlled Amortization Period or after
the occurrence of a CRB Securities Amortization Event, collections
of Principal Receivables will be allocated to the holders of CRB
Securit ies based on the applicable investor percentage,
[(e) on the Expected Final Payment Date, collections of Principal
Receivables that have been deposited into a Principal Funding
Account during the Controlled Accumulation Period will be
allocated to the holders of CRB Securities.]
The term "Seller's Interest" also encompasses the terms Seller's Certificate,
Exchangeable Seller's Certificate, Transferor's Certificate and Exchangeable
Transferor's Certificate. "Principal Receivables" generally consist of amounts
charged by cardholders for merchandise and services, amounts advanced as cash
advances and the interest portion of any participation interests. "Finance
Charge Receivables" generally consist of monthly periodic charges, annual fees,
cash advance fees, late charges, over-limit fees and all other fees billed to
cardholders, including administrative fees.
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CRB SECURITIES AMORTIZATION EVENTS
The following is a summary of the typical CRB Securities Amortization
Events for each series of CRB Securities. Certain additional CRB Securities
Amortization Events unique to particular series of CRB Securities are described
following this summary:
(a) failure to make payments to holders of CRB Securities within the
time periods given in the Agreements,
(b) material breaches of certain representations, warranties or
covenants or failure to observe or perform in a material respect
any covenant or agreement under an Agreement,
(c) occurrence of a material default by a servicer of the Receivables
underlying a series of CRB Securities (a "CRB Servicer"),
(d) failure to maintain the Seller's Interest in an amount at least
equal to the minimum Seller's Percentage of Principal Receivables
in the CRB Issuer as of such date,
(e) failure to maintain a certain minimum level of Receivables or
Accounts, or inability of the Seller to transfer Receivables or
Accounts to a CRB Issuer,
(f) certain events of bankruptcy or insolvency relating to the Seller,
(g) Issuer becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended,
(h) any reduction of the portfolio yield or excess spread (averaged
over any three consecutive months) to a rate below a certain rate
provided in the Agreement for such period,
(i) the available amount of the Cash Collateral Guaranty is less than
3% of the amount of the investor interest for the underlying
series of CRB Securities.
[Insert additional Amortization Events for particular CRB Securities.]
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Generally, the CRB Servicer's compensation for its servicing
activities and reimbursement for its expenses for any monthly period will be a
servicing fee (a "CRB Securities Servicing Fee") payable monthly. The CRB
Securities Servicing Fee will be allocated among the Seller's Interest and the
investor interests of all series issued by the CRB Issuer.
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Generally, the CRB Servicer will pay from its servicing compensation,
certain expenses incurred in connection with servicing the Receivables
including, without limitation, payment of the fees and disbursements of the CRB
Trustee and independent accountants and other fees which are not expressly
stated in the related Agreement to be payable by the CRB Issuer or the holders
of CRB Securities.
THE DEPOSITOR
The Depositor is a special-purpose Delaware corporation organized for
the purpose of issuing the Certificates and other securities issued under the
Registration Statement backed by receivables or underlying securities of various
types and acting as settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or limited partner in
partnerships formed to issue securities. It is not expected that the Depositor
will have any significant assets. The Depositor is an indirect, wholly owned
finance subsidiary of Collateralized Mortgage Securities Corporation, which is a
wholly owned subsidiary of CS First Boston Securities Corporation, which is a
wholly owned subsidiary of CS First Boston, Inc. Neither CS First Boston
Securities Corporation nor CS First Boston, Inc. nor any of their affiliates has
guaranteed, will guarantee or is or will be otherwise obligated with respect to
any Series of Certificates.
The Depositor's principal executive office is located at Park Avenue
Plaza, 55 East 52nd Street, New York, New York 10055, and its telephone number
is (212) 909-2000.
THE POOLING AGREEMENT
The following summary describes certain terms of the Pooling
Agreement. The summary does not purport to be complete, and is subject to, and
qualified in its entirety by reference to, the provisions of the Pooling
Agreement. Whenever particular sections or defined terms of the Pooling
Agreement are referred to, such section or defined terms are thereby
incorporated herein by reference. See "DESCRIPTION OF THE CERTIFICATES" herein
for a summary of certain additional terms of the Pooling Agreement.
COLLECTION OF DISTRIBUTIONS ON CRB SECURITIES
The CRB Securities will be assets of the Trust. All distributions on
the CRB Securities will be made directly to the Trustee. The obligation of the
Trustee in making distributions on the Certificates is limited to distributions
on the CRB Securities [and] [payments actually received by the Trust pursuant to
the Ancillary Arrangements] [and] [amounts available in the Reserve Account].
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REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail to each Certificateholder, at such
Certificateholder's request, at its address listed on the Certificate Register
maintained with the Trustee a report stating (i) the amounts of principal and
interest, respectively, distributed on each $1,000 in face amount of
Certificates and (ii) the outstanding balances of the CRB Securities.
The Trustee shall forward by mail to each Certificateholder the most
current CRB Securities Distribution Date Statement (as defined in the Pooling
Agreement) received by the Trustee as the date of such request.
AMENDMENT
The Pooling Agreement may be amended by the Depositor and the Trustee,
without the consent of the Certificateholders, to cure any ambiguity, to correct
or supplement any provisions therein which may be inconsistent with any other
provisions of the Pooling Agreement, to add to the duties of the Depositor, or
to add or amend any provisions of the Pooling Agreement as required by a Rating
Agency in order to maintain or improve any rating of the Certificates (it being
understood that, after obtaining the ratings in effect on the Closing Date,
neither the Depositor nor the Trustee is obligated to obtain, maintain, or
improve any such rating) or to add any other provisions with respect to matters
or questions arising under the Pooling Agreement which shall not be inconsistent
with the provisions of the Pooling Agreement; provided, however, that such
action will not, as evidenced by an opinion of counsel satisfactory to the
Trustee, adversely affect in any material respect the interests of any
Certificateholders. The Pooling Agreement may also be amended by the Depositor
and the Trustee with the consent of Certificateholders owning Voting Rights (as
herein defined) aggregating not less than [ ]% of the aggregate Voting Rights
for the purpose of the Pooling Agreement or modifying in any manner the rights
of the Certificateholders; provided, however, that no such amendment may (i)
increase or reduce in any manner the amount of, or delay the timing of,
collections of distributions on the CRB Securities or distributions that are
required to be made for the benefit of such Certificateholders or (ii) reduce
the aforesaid percentage of the Voting Rights of Certificates which are required
to consent to any such amendment.
TERMINATION; RETIREMENT OF THE CERTIFICATES
The Trust will terminate on the Distribution Date following the
earliest of (i) the Distribution Date on which the aggregate principal balance
of the Certificates has been reduced to zero, (ii) the final payment or other
liquidation of the last CRB Securities in the Trust and (iii) the Distribution
Date in [ ], 199[ ]. In no event, however, will the Trust created by the
Pooling Agreement continue after the death of certain individuals named in the
Pooling Agreement. Written notice of termination of the Pooling Agreement will
be given to each Certificateholder, and the final distribution will be made only
upon surrender and cancellation of the Certificates at an officer or agency
appointed by the Trustee which will be specified in the notice of termination.
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ACTION IN RESPECT OF THE CRB SECURITIES
If at any time the Trustee, as the holder of the CRB Securities, is
requested in such capacity to take any action or to give any consent, approval
or waiver, including without limitation in connection with an amendment of an
Agreement, or if any Event of Default (as defined in the Agreements) occurs
under the Agreements, the Pooling Agreement provides that the Trustee, in its
capacity as certificateholder of the CRB Securities, may take action in
connection with the enforcement of any rights and remedies available to it in
such capacity with respect thereto, will promptly notify all of the holders of
the Certificates and will act only in accordance with the written directions of
holders of the Certificate evidencing at least [ ]% of the Voting Rights.
VOTING RIGHTS
At all times, the "Voting Rights" of Certificateholders under the
Pooling Agreement will be allocated among the Certificates in proportion to
their respective Percentage Interests. The "Percentage Interest" represented by
a Certificate will be equal to the percentage derived by dividing the
denomination of such Certificate by the original aggregate principal balance of
the Certificates as of the Closing Date.
CERTAIN MATTERS REGARDING THE TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Trustee nor any director, officer or
employee of the Depositor or the Trustee will be under any liability to the
Trust or the Certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the Pooling Agreement or for
errors in judgment; provided, however, that none of the Trustee, the Depositor
and any director, officer or employee thereof will be protected against any
liability which would otherwise be imposed by reason of willful malfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under the Pooling Agreement.
The Trustee may have normal banking relationships with the Depositor
and/or its affiliates.
The Trustee may resign at any time, in which event the Depositor will
be obligated to appoint a successor Trustee. The Depositor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. Upon becoming aware of
such circumstances, the Depositor will be obligated to appoint a successor
Trustee. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
No holder of a Certificate will have any right under the Pooling
Agreement to institute any proceeding with respect to the Pooling Agreement
unless such holder previously has given to the Trustee written notice of default
and unless Certificateholders holding at least [ %] of the Voting Rights have
made written requests 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
S-25
<PAGE>
[ ] days has neglected or refused to institute any such proceeding. The
Trustee will be under no obligation to exercise any of the trusts or powers
vested in it by the Pooling Agreement or to make any litigation thereunder or in
relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the cost, expenses and liabilities
which may be incurred therein or thereby.
The Trustee and the Certificateholders, by accepting the Certificates,
will covenant that they will not at any time institute against the Depositor or
the Trust any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
THE TRUSTEE
[ ] is Trustee under the Pooling Agreement. [ ] is a [ ]
banking corporation, and its principal offices are located at [ ]. The
Depositor or any of its affiliates may maintain normal commercial banking
relations with the Trustee and its affiliates.
USE OF PROCEEDS
[The net proceeds from the sale of the Certificates will be applied by
the Depositor on the Closing Date towards the purchase price of the CRB
Securities, the payment of expenses related to such purchase and other corporate
purposes.] [The Depositor will transfer approximately [ %] of the net
proceeds from the sale of the Certificates to the Trust to fund the purchase
price to the Trust of the CRB Securities and the payment of expenses related to
such purchase.
ERISA CONSIDERATIONS
Under current law the purchase and holding of the Certificates by or
on behalf of any Plan may result in a "prohibited transaction" within the
meaning of ERISA and the Code. Consequently, Certificates may not be transferred
to a proposed transferee that is a Plan subject to ERISA or that is described in
Section 4975(e)(1) of the Code, or a person acting on behalf of any such Plan or
using the assets of such plan unless the Trustee and the Depositor receive an
opinion of counsel reasonably satisfactory to the Trustee and the Depositor to
the effect that the purchase and holding of such Certificate will not result in
the assets of the Trust being deemed to be "plan assets" for ERISA purposes and
will not result in any non-exempt prohibited transaction under ERISA or Section
4975 of the Code and will not subject the Trustee or the Depositor to any
obligation in addition to those undertaken in the Pooling Agreement. See "ERISA
CONSIDERATIONS" in the Prospectus.
S-26
<PAGE>
LEGAL INVESTMENT CONSIDERATIONS
The appropriate characterization of the Certificates under various
legal investments restrictions, and thus the ability of investors subject to
these restrictions to purchase Certificates, may be subject to significant
interpretive uncertainties. All investors whose investment authority is subject
to legal restrictions should consult their own legal advisors to determine
whether, and to what extent, the Certificates will constitute legal investments
for them.
The Depositor makes no representation as to the proper
characterization of the Certificates for legal investments or financial
institution regulatory purposes, or as to the ability of particular investors to
purchase 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Depositor has agreed to cause the Trust to sell to CS First
Boston Corporation (the "Underwriter"), and the Underwriter has agreed to
purchase, the entire principal amount of the Certificates.
The Underwriter proposes to offer the Certificates to the public
initially at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession of
[ %] per Certificates; the Underwriter and such dealers may allow a discount
of [ %] per Certificates on sales to certain other dealers; and after the
initial public offering of the Certificates, the public offering price and the
concessions and discounts to dealers may be changed by the Underwriter.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain liabilities under applicable securities laws, or
contribute to payments the Underwriter may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds in the Trust
Accounts in Eligible Investments acquired from the Underwriter.
Upon receipt of a request by an investor who has received an
electronic Prospectus Supplement and Prospectus from the Underwriter within the
period during which there is an obligation to deliver a Prospectus Supplement
and Prospectus, the Company or the Underwriter will promptly deliver, or cause
to be delivered, without charge, a paper copy of the Prospectus Supplement and
Prospectus.
S-27
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon by Sidley & Austin, New York, New York.
RATING
It is a condition to issuance that the [Class A] Certificates be rated
[in the highest rating category] by a Rating Agency. [It is a condition to
issuance that the Class B Certificates be rated [in one of the three highest
rating categories by a Rating Agency.]
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the CRB Securities. The rating takes
into consideration the characteristics of the CRB Securities and the structural,
legal and tax aspects associated with the Certificates. The ratings on the
Certificates do not, however constitute statements regarding the possibility
that Certificateholders might realize a lower than anticipated yield.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
S-28
<PAGE>
INDEX OF DEFINED TERMS
Accounts.....................................................
Agreement Date...............................................
Agreements...................................................
Ancillary Arrangements.......................................
Beneficial Owner.............................................
Book-Entry Certificates......................................
Business Day.................................................
Cash Collateral..............................................
Cash Collateral Account......................................
Cash Collateral Guaranty.....................................
Cede.........................................................
Certificateholder............................................
Certificates.................................................
[Class A] Percentage.........................................
[Class A] Certificate Rate...................................
[Class B] Percentage.........................................
[Class B] Certificate Rate...................................
Closing Date.................................................
Code.........................................................
Collection Account...........................................
Collection Period............................................
CRB Securities...............................................
CRB Securities Amortization Event............................
CRB Securities Certificate Rate..............................
CRB Securities Controlled Amortization Period................
CRB Securities Distribution Date.............................
CRB Securities Servicing Fee.................................
CRB Servicer.................................................
CRB Servicer Reports.........................................
CRB Securities Servicing Fee.................................
Depositor....................................................
Depository...................................................
Distribution Date............................................
DTC..........................................................
ERISA........................................................
Final Scheduled Distribution Date............................
Federal Tax Counsel..........................................
Finance Charge Receivables...................................
Holdings.....................................................
Interest Distributable Amount................................
IRS..........................................................
S-29
<PAGE>
Issuer.......................................................
Labor........................................................
LIBOR........................................................
Moody's......................................................
Parties in Interest..........................................
Percentage Interest..........................................
Plans........................................................
Plan Asset Regulation........................................
Pool Balance.................................................
Pooling Agreement............................................
Principal Distributable Amount...............................
Principal Receivables........................................
Prospectus...................................................
Rating Agency................................................
Receivables..................................................
Record Date..................................................
Required Reserve Account Balance.............................
Reserve Account..............................................
Reserve Account Initial Deposit..............................
Reuters LIBOR................................................
S&P..........................................................
Seller.......................................................
Seller's Interest............................................
Seller's Percentage..........................................
Swap Regulations.............................................
Telerate LIBOR...............................................
Trust........................................................
Trustee......................................................
Underwriter..................................................
U.S. Certificateholder.......................................
Voting Rights................................................
Withholding Agent............................................
S-30
<PAGE>
APPENDIX A
TABLE OF CONTENTS
This Appendix A contains excerpts from each prospectus pursuant to which
the CRB Securities were offered and sold.
Capitalized terms used in the excerpts included in this Appendix A have the
meanings defined either within the text of such excerpt or within the related
prospectus. Such terms are not applicable to any other section of this
Prospectus Supplement or Prospectus unless such terms are defined as such in the
Prospectus Supplement or the Prospectus. Complete copies of the prospectus
relating to a particular series of CRB Securities may be obtained upon request
from the Depositor.
S-31
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to completion
Preliminary Prospectus dated [ ], 199[ ]
PROSPECTUS
CS FIRST BOSTON CARD RECEIVABLES TRUSTS
Asset Backed Notes
Asset Backed Certificates
(Issuable in Series)
ASSET BACKED SECURITIES CORPORATION, DEPOSITOR
--------------------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each Series of Securities will be issued by a trust (each, a "Trust") to be
formed pursuant to a Trust Agreement, Pooling and Servicing Agreement, Master
Pooling and Servicing Agreement or similar agreement (an "Agreement") as
described herein. Each such Series may include one or more classes (each, a
"Class") of Notes and/or one or more classes of Certificates.
The property of each Trust will include certain Base Assets (as defined
herein), which may consist of credit card, charge card or certain other types of
Receivables or Participations (each as defined herein) or certain "card
receivables backed securities" ("CRB Securities", as defined herein), and may
also include certain Series Enhancements (as defined herein) or other assets as
described herein or in the related Prospectus Supplement. Any such Receivables
will consist of one or more pools of receivables arising from time to time in
the ordinary course of business in one or more portfolios of credit card, charge
card or certain other types of accounts (collectively, "Accounts"). Any
Participations included in the Base Assets for a Series will consist of
undivided interests in one or more pools of Receivables, and any CRB Securities
included therein will consist of asset backed securities representing interests
in, or notes or loans secured by, one or more underlying pools of Receivables.
For Base Assets consisting of Receivables, the property of the related
Trust will include the right to receive all monies due thereunder net (to the
extent provided in the related Prospectus Supplement) of certain amounts payable
to the servicer of such Receivables specified in such Prospectus Supplement (the
"servicer"), which servicer may also be the Seller. Unless otherwise indicated
in the related Prospectus Supplement, the Base Assets for a Series will be
(Continued on the following page)
--------------------------
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE NOTES OF
A SERIES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES WILL
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY, AND WILL NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
CS FIRST BOSTON CORPORATION, THE DEPOSITOR, ANY OF THEIR RESPECTIVE AFFILIATES,
OR ANY UNITED STATES GOVERNMENTAL AGENCY.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
IN THIS PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of Securities of any Series unless accompanied by a
Prospectus Supplement.
---------------------
Underwriters of the Securities
[LOGO] CS FIRST BOSTON
This date of this Prospectus is [ ], 1995.
<PAGE>
(Continued from the previous page)
sold to the Trust by Asset Backed Securities Corporation, a Delaware
corporation (the "Depositor"), and any Receivables included in the Base Assets
for a Series will have been purchased by the Depositor from the seller or
sellers designated in the related Prospectus Supplement (collectively, the
"Seller"). Series Enhancement with respect to a Series may include Credit
Enhancement (as defined herein) and/or certain types of Ancillary Arrangements
(as defined herein).
Except as otherwise specified in the related Prospectus Supplement, each
Class of Securities of any Series will represent the right to receive a
specified amount of payments of principal and interest on the related Base
Assets, at the rates, on the dates and in the manner described herein and in
the related Prospectus Supplement. As more fully described herein and in the
related Prospectus Supplement, distributions on any Class of Securities may be
senior or subordinate to distributions on one or more other Classes of
Securities of the same Series, and payments on the Certificates of a Series may
be subordinated in priority to payments on the Notes of such Series. If
provided in the related Prospectus Supplement, a Series of Securities may
include one or more classes of Securities entitled to principal distributions
with disproportionate, nominal or no distributions in respect of interest, or
to interest distributions with disproportionate, nominal or no distributions in
respect of principal.
-2-
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be
offered hereunder will, among other things, set forth with respect to such
Series of Securities: (i) the aggregate principal amount, interest rate and
authorized denominations of each Class of such Securities; (ii) certain
information concerning the Base Assets and the related Seller and Servicer, as
applicable; (iii) the terms of any Series Enhancement applicable to any Class
or Classes of such Securities; (iv) information concerning any other assets in
the related Trust; (v) the expected date or dates on which the principal amount
of each Class of such Securities will be paid to holders of such Securities;
(vi) the extent to which any Class within such Series is subordinated to any
other Class of such Series; and (vii) additional information with respect to
the plan of distribution of such Securities. To the extent that the terms of
this Prospectus conflict or are otherwise inconsistent with the terms of the
related Prospectus Supplement, the terms of such related Prospectus Supplement
shall govern.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities (as defined herein) are issued,
unaudited reports containing information concerning the related Trust will be
sent by the Trustee on behalf of such Trust or by the related Indenture Trustee
annually and on each Distribution Date specified in the related Prospectus
Supplement only to Cede & Co. ("Cede"), as nominee for the Depository Trust
Company ("DTC") and registered holder of the Securities (the "Securityholder").
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. See "ADDITIONAL INFORMATION
REGARDING THE SECURITIES - Book Entry registration" and "DESCRIPTION OF THE
TRUST OR POOLING AGREEMENT - Reports to Holders" . The Depositor, as
originator of the Trust, will file with the Securities and Exchange Commission
(the "Commission") such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations of the Commission thereunder but may at any time cease to file any
reports that are no longer so required.
AVAILABLE INFORMATION
The Depositor, as originator of the Trusts, has filed with the Commission
a Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended, (the "Securities Act") with respect to the Securities being offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement, which is
available for inspection without charge at the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and the regional offices of the Commission at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such information can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor on behalf of the Trust referred to
in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of the offering of the Securities
offered by such Trust shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the dates of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the accompanying Prospectus Supplement) or in any subsequently filed
document that also is or is deemed to be
-3-
<PAGE>
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or supersede, to constitute a part of this Prospectus.
The Depositor on behalf of any Trust will provide without charge to each
person to whom a copy of this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents. Requests for such
copies should be directed to the Secretary of Asset Backed Securities
Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055.
Telephone requests may be directed to the Secretary of Asset Backed Securities
Corporation at (212) 909-2000.
-4-
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to each Series contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of
Certificates and/or Notes of such Series.
Issuer............... With respect to any Series of Securities, a Trust formed
pursuant to either (i) a trust agreement (a "Trust
Agreement") between the Depositor and the Trustee for
such Trust (each such Trust being referred to herein as
an "Owner Trust") or (ii) a pooling and servicing
agreement, master pooling and servicing agreement or
similar agreement (a "Pooling Agreement") among the
Depositor, the Seller, the Servicer (if other than the
Seller) and the Trustee for such Trust (each such Trust
being referred to herein as a "Grantor Trust").
Depositor............ The Depositor is a special-purpose Delaware corporation
organized for the purpose of causing the issuance of the
Securities and other securities issued under the
Registration Statement backed by receivables or
underlying securities of various types and acting as
settlor or depositor with respect to trusts, custody
accounts or similar arrangements or as general or limited
partner in partnerships formed to issue securities. It is
not expected that the Depositor will have any significant
assets. The Depositor is an indirect, wholly owned
finance subsidiary of Collaterized Mortgage Securities
Corporation, which is a wholly owned subsidiary of CS
First Boston Securities Corporation, which is a wholly
owned subsidiary of CS First Boston, Inc. Neither
Collaterized Mortgage Securities Corporation, CS First
Boston Securities Corporation nor CS First Boston, Inc.
nor any of their affiliates has guaranteed, will
guarantee or is or will be otherwise obligated with
respect to any Series of Securities.
-5-
<PAGE>
The Depositor's principal executive office is located at
Park Avenue Plaza, 55 East 52nd Street, New York, New
York 10055, and its telephone number is (212) 909-2000.
Trustee............. With respect to each Trust, the trustee specified in the
related Prospectus Supplement (the "Trustee").
Servicer............ With respect to each Trust for which the Base Assets
include Receivables or Participations, the servicer
specified in the related Prospectus Supplement (the
"Servicer").
Indenture Trustee... With respect to any Series of Securities that includes
one or more classes of Notes, the indenture trustee
specified in the related Prospectus Supplement (the
"Indenture Trustee").
Securities Offered.. Each Series of Securities issued by a Trust will include
one or more classes (each a "Class") of Certificates and
may also include one or more Classes of Notes. Any Series
of Securities issued under a Pooling Agreement will only
include Certificates (such Certificates being sometimes
referred to herein as "Receivables Pooling
Certificates"). Each Class of Notes will be issued
pursuant to an indenture (each, an "Indenture") between
the related Trust and the Indenture Trustee specified in
the related Prospectus Supplement. Each Class of
Certificates will be issued pursuant to the related Trust
Agreement or Pooling Agreement. The related Prospectus
Supplement will specify which Class or Classes of Notes
and/or Certificates of the related Series are being
offered thereby.
A Trust may issue one or more classes of additional
Certificates representing interests in the assets of such
Trust that are not being offered by this Prospectus or
any related Prospectus Supplement.
-6-
<PAGE>
Notes............... Unless otherwise specified in the related Prospectus
Supplement, each Class of Notes will have a stated
principal amount and will bear interest at a specified
rate or rates (with respect to each Class of Notes, the
"Interest Rate"). Each Class of Notes may have a
different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate or any combination of the
foregoing. The related Prospectus Supplement will specify
the Interest Rate, or the method for determining the
Interest Rate, for each Class of Notes.
A Series of Securities may include two or more Classes of
Notes that differ as to timing and priority of payments,
seniority, Interest Rate or amount of payments of
principal or interest. Additionally, payments of
principal or interest in respect of any such Class or
Classes may or may not be made upon the occurrence of
specified events or on the basis of collections from
designated portions of the Base Assets. If specified in
the related Prospectus Supplement, one or more Classes of
Notes ("Strip Notes") may be entitled to (i) principal
payments with disproportionate, nominal or no interest
payments or (ii) interest payments with disproportionate,
nominal or no principal payments. See "DESCRIPTION OF THE
NOTES - Distributions of Principal and Interest".
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof
and will be available in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement,
Noteholders will be able to receive Definitive Notes (as
defined herein under "RISK FACTORS - Book-Entry
Registration") only in the limited circumstances
described herein or in
-7-
<PAGE>
the related Prospectus Supplement. See "CERTAIN
INFORMATION REGARDING THE SECURITIES - Definitive
Securities".
If a Servicer, Seller or Depositor with an option to
purchase the Base Assets of a Trust exercises such option
(or if not and, if and to the extent provided in the
related Prospectus Supplement, satisfactory bids for the
purchase of such Base Assets are received), in the manner
and on the respective terms and conditions described
under "DESCRIPTION OF THE TRUST OR POOLING AGREEMENT -
Termination", the outstanding Notes will be redeemed as
set forth in the related Prospectus Supplement.
The Certificates..... Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have an
original principal amount and will accrue interest on
such original principal amount at a specified rate (with
respect to each class of Certificates, the "Pass-Through
Rate"). Each Class of Certificates may have a different
Pass- Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate, or any combination of the
foregoing. The related Prospectus Supplement will specify
the Pass- Through Rate, or the method for determining the
applicable Pass-Through Rate, for each Class of
Certificates.
A Series of Securities may include two or more Classes of
Certificates that differ as to timing and priority of
distributions, seniority, allocations of losses, Pass-
Through Rate or amount of distributions in respect of
principal or interest. Additionally, distributions in
respect of principal or interest in respect of any such
Class or Classes may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the related Base
Assets. If specified in the related Prospectus
Supplement, one or more Classes of
-8-
<PAGE>
Certificates ("Strip Certificates") may be entitled to
(i) principal distributions with disproportionate,
nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no
principal distributions. See "DESCRIPTION OF THE
CERTIFICATES - Payments of Principal" and "- Payments of
Interest". If a Series of Securities includes Classes of
Notes, distributions in respect of the Certificates may
be subordinated in priority of payment to payments on the
Notes to the extent specified in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase
in a minimum denomination of $100,000 and in integral
multiples of $1,000 in excess thereof and will be
available in book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
Certificateholders will be able to receive Definitive
Certificates (as defined under "RISK FACTORS - Book Entry
Registration") only in the limited circumstances
described herein or in the related Prospectus Supplement.
See "CERTAIN INFORMATION REGARDING THE SECURITIES -
Definitive Securities".
If a Servicer, Seller or Depositor with an option to
purchase the Base Assets of a Trust exercises such option
(or if not and, if and to the extent provided in the
related Prospectus Supplement, satisfactory bids for the
purchase of such Base Assets are received), in the manner
and on the respective terms and conditions described
under "DESCRIPTION OF THE TRUST OR POOLING AGREEMENT -
Termination", the Certificates will be prepaid as set
forth in the related Prospectus Supplement.
Receivables Pooling Certificates
-9-
<PAGE>
A. Certificateholders'
Interest; Seller's
Interest......... In the case of a Series of Receivables Pooling
Certificates, a portion of the assets of the related
Trust will be allocated among the Certificateholders of
such Series (the "Certificateholders' Interest") and the
remainder will be allocated to the interest of the Seller
or Depositor therein (the "Seller's Interest") and as
otherwise provided in the related Prospectus Supplement.
The Seller's Interest represents the right to the assets
of the Trust not allocated to the Certificateholders'
Interest of any Series or any interests in the Trust
issued as Series Enhancement. In the case of a master
Trust, the related Seller may cause the issuance of
additional Series from time to time and any such issuance
will have the effect of decreasing the Seller's Interest.
The Seller's Interest may be evidenced by an exchangeable
certificate that is subject to certain transfer
restrictions. The aggregate principal amount of the
Certificateholders' Interest will, except as provided
herein or in the related Prospectus Supplement, remain
fixed at the aggregate initial principal amount of the
Certificates of such Series and the principal amount of
the Seller's Interest will fluctuate as the amount of the
Principal Receivables held by the Trust changes from time
to time. If so provided in the related Prospectus
Supplement, in certain circumstances, interests in the
assets of a Trust may be allocated to a Credit Enhancer,
and in the case of a master Trust interests in the assets
of the Trust may be allocated to the Certificateholders
of more than one Series.
B. Issuance of
Additional
Series.......... Unless otherwise provided in the related Prospectus
Supplement, in the case of a master Trust, the related
Pooling Agreement will provide that pursuant to one or
more supplements to such Pooling Agreement (each, a
"Supplement"), the related Seller may cause the related
Trustee to issue one or more new Series
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<PAGE>
and accordingly cause a reduction in the Seller's
Interest represented by the Seller's Certificate. Under
such Pooling Agreement, such Seller may define, with
respect to any Series, the principal terms of such
Series. A new Series will only be issued upon
satisfaction of the conditions described herein or in the
related Prospectus Supplement.
C. Collections...... All collections of Receivables with respect to a given
Trust will be allocated by the related Servicer as
amounts collected on Principal Receivables and on Finance
Charge Receivables. The Servicer will allocate between
the Certificateholders' Interest of each Series (if more
than one) of such Trust and the Seller's Interest all
amounts collected with respect to Finance Charge
Receivables and Principal Receivables and the Defaulted
Amount (as defined under "DESCRIPTION OF THE
CERTIFICATES -Receivables Pooling Certificates -
Collections"). Collections of Finance Charge Receivables
and the Defaulted Amount will be allocated to each such
Series at all times based upon its Floating Allocation
Percentage. Collections of Principal Receivables will be
allocated to each such Series at all times based upon its
Principal Allocation Percentage. The Floating Allocation
Percentage and the Principal Allocation Percentage with
respect to each such Series will be determined as set
forth in the related Supplement and, with respect to each
such Series offered hereby, in the related Prospectus
Supplement. See "DESCRIPTION OF THE CERTIFICATES -
Allocation Percentages". Collections will be deposited in
the related Collection Account and invested in the manner
described under "PROSPECTUS SUMMARY-Servicing" and
"SERVICING OF RECEIVABLES-Deposits to the Collection
Account".
D. Interest......... Interest will accrue on the invested amount of the
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<PAGE>
Receivables Pooling Certificates of a Series or Class
offered hereby specified in the related Prospectus
Supplement (the "Invested Amount" of such Series or
Class) at the per annum rate either specified in or
determined in the manner specified in the related
Prospectus Supplement. If the Prospectus Supplement for a
Series of Receivables Pooling Certificates so provides,
the interest rate and interest payment dates applicable
to each Certificate of that Series may be subject to
adjustment from time to time. Any such interest rate
adjustment would be determined by reference to one or
more indices or by a remarketing firm, in each case as
described in the Prospectus Supplement for such Series.
Except as otherwise provided herein or in the related
Prospectus Supplement, collections of Finance Charge
Receivables and certain other amounts allocable to the
Certificateholders' Interest of a Series offered hereby
will be used to make interest payments to
Certificateholders of such Series on each Interest
Payment Date with respect thereto, provided that if a
Rapid Amortization Period commences with respect to such
Series, thereafter interest will be distributed to such
Certificateholders monthly on each Special Payment Date.
If the Interest Payment Dates for a Series or Class occur
less frequently than monthly, collections of Finance
Charge Receivables or other amounts (or the portion
thereof allocable to such Class) will be deposited in one
or more trust accounts (each an "Interest Funding
Account") and used to make interest payments to
Certificateholders of such Series or Class on the
following Interest Payment Date with respect thereto. If
a Series has more than one Class of Receivables Pooling
Certificates, each such Class may have a separate
Interest Funding Account.
E. Principal......... The principal of any Receivables Pooling Certificates
will be scheduled to be paid either in full on an
expected date specified in the related
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<PAGE>
Prospectus Supplement (the "Expected Final Payment
Date"), in which case such Series will have an
Accumulation Period as described below under
"Accumulation Period", or in installments commencing on a
date specified in the related Prospectus Supplement (the
"Principal Commencement Date"), in which case such
Certificates will have a Controlled Amortization Period
as described below under "Controlled Amortization
Period". If such a Series has more than one Class of
Certificates, a different method of paying principal,
Expected Final Payment Date and/or Principal Commencement
Date may be assigned to each Class. The payment of
principal with respect to the Certificates of such a
Series or Class may be made or commence earlier than the
applicable Expected Final Payment Date or Principal
Commencement Date, as the case may be, and the final
principal payment with respect to the Certificates of
such Series or Class may be made earlier or later than
the applicable Expected Final Payment Date or Principal
Commencement Date, if a Pay Out Event occurs with respect
to such Series or Class or under certain other
circumstances described herein or in the related
Prospectus Supplement.
F. Revolving Period. Receivables Pooling Certificates will have a revolving
period (a "Revolving Period"), which will commence on the
date specified in the related Prospectus Supplement as
the Series Cut- Off Date and continue until the earlier
of (a) the commencement of the Rapid Amortization Period
with respect to such Series and (b) the date specified in
the related Prospectus Supplement as the last day of the
Revolving Period with respect to such Series. During the
Revolving Period with respect to such Series, collections
of Principal Receivables and certain other amounts
otherwise allocable to the Certificateholders' Interest
of such Series will be distributed to or for the benefit
of the Certificateholders of other Series (if so
provided
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<PAGE>
in the related Prospectus Supplement) or the Seller or
the Depositor in respect of the Seller's Interest.
G. Accumulation
Period........... If so specified by the related Prospectus Supplement in
the case of a Series of Receivables Pooling
Certificates, and unless a Rapid Amortization Period
commences with respect to such Series, the Certificates
of such Series will have an accumulation period (the
"Accumulation Period"). The Accumulation Period will
commence on the close of business on the date specified
or determined in the manner specified in the related
Prospectus Supplement and continue until the earliest of
(a) the commencement of a Rapid Amortization Period with
respect to such Series, (b) payment in full of the
Invested Amount of the Certificates of such Series or (c)
the occurrence of the Series Termination Date with
respect to such Series.
During the Accumulation Period with respect to a Series
of Receivables Pooling Certificates, collections of
Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series will
be deposited on each Distribution Date (which date during
each calendar month will be specified in the related
Prospectus Supplement) in a trust account established for
the benefit of the Certificateholders of such Series (a
"Principal Funding Account") and used to make principal
distributions to such Certificateholders when due. The
amount to be deposited in the Principal Funding Account
on any such Distribution Date may, but will not
necessarily, be limited to an amount (the "Controlled
Deposit Amount") equal to the amount specified in the
related Prospectus Supplement (the "Controlled
Accumulation Amount") plus any existing deficit with
respect to the Controlled Accumulation Amount arising
from prior Distribution Dates (the "Deficit Controlled
Accumulation Amount"). If a Series
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<PAGE>
of Receivables Pooling Certificates has more than one
Class, each Class may have a separate Principal Funding
Account and Controlled Accumulation Amount. In addition,
the related Prospectus Supplement may describe certain
priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts. In
general, unless a Pay Out Event shall have occurred prior
thereto, on the Expected Final Payment Date for a
particular Series or Class, all amounts accumulated in
the Principal Funding Account with respect to such Series
or Class during the Accumulation Period will be
distributed as a single repayment of principal with
respect to such Series or Class.
H. Controlled
Amortization
Period........... If the related Prospectus Supplement so specifies with
respect to a Series of Receivables Pooling Certificates,
unless a Rapid Amortization Period commences with respect
to such Series, the Certificates of such Series will have
an amortization period during which collections of
Principal Receivables allocable to Certificates within
one or more Classes of such Series will be used to make
periodic installment payments of principal with respect
to such Certificates (the "Controlled Amortization
Period"). The Controlled Amortization Period will
commence at the close of business on the date specified
or determined in the manner specified in the related
Prospectus Supplement and continue until the earlier of
(a) the commencement of the Rapid Amortization Period
with respect to such Series, (b) payment in full of the
Invested Amount of the Certificates of such Series or (c)
the Series Termination Date with respect to such Series.
During the Controlled Amortization Period with respect to
a Series, collections of Principal Receivables and
certain other amounts allocable to the
Certificateholders' Interest of such Series will be used
on each Distribution Date to make principal distributions
to Certificateholders of
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<PAGE>
such Series or any Class of such Series then scheduled to
receive such distributions. The amount to be distributed
to Certificateholders of any Series on any Distribution
Date may, but will not necessarily, be limited to an
amount (the "Controlled Distribution Amount") equal to an
amount (the "Controlled Amortization Amount") specified
in the related Prospectus Supplement plus any existing
deficit with respect to the Controlled Amortization
Amount arising from prior Distribution Dates (the
"Deficit Controlled Amortization Amount"). If a Series of
Receivables Pooling Certificates has more than one Class,
each Class may have a separate Controlled Amortization
Amount. In addition, the related Prospectus Supplement
may describe certain priorities among such Classes with
respect to such distributions.
I. Rapid Amortization
Period........... During the period beginning at the close of business on
the Business Day immediately preceding the day on which a
Pay Out Event is deemed to have occurred with respect to
a Series of Receivables Pooling Certificates and ending
upon the earlier to occur of (i) the payment in full of
the Invested Amount of the Certificates of such Series
and any amount required to be paid to a provider of
Series Enhancement with respect thereto or (ii) the
Series Termination Date (the "Rapid Amortization
Period"), collections of Principal Receivables and
certain other amounts allocable to the
Certificateholders' Interest of such Series will be
distributed as principal payments to the
Certificateholders of such Series monthly on each
Distribution Date beginning with the first Special
Payment Date with respect to such Series. During the
Rapid Amortization Period with respect to a Series,
distributions of principal to Certificateholders will not
be subject to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement
of the Rapid Amortization
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<PAGE>
Period with respect to a Series, any funds on deposit in
a Principal Funding Account with respect to such Series
will be paid to the Certificateholders of the relevant
Class or Series on the first Special Payment Date with
respect to such Series. See "Pay Out Events" below for a
discussion of the events which might lead to the
commencement of the Rapid Amortization Period with
respect to a Series.
J. Pay Out Events... As described above, the Revolving Period with respect to
a Series of Receivables Pooling Certificates will
continue until the commencement of the Accumulation
Period or the Controlled Amortization Period with respect
thereto, which will continue until the Invested Amount of
such Series shall have been paid in full or the Series
Termination Date with respect to such Series occurs,
unless a Pay Out Event occurs with respect to such Series
prior to any of such dates. Except as otherwise provided
in the related Prospectus Supplement with respect to such
Series, a "Pay Out Event" with respect to such Series
refers to any of the following events and any other
events specified as such in the related Prospectus
Supplement:
(a) the occurrence of an Insolvency Event (as defined
under "DESCRIPTION OF THE CERTIFICATES -Receivables
Pooling Certificates- Pay Out Events") relating to
the Seller or the Depositor, or
(b) the Trust becomes an investment company within the
meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
In the case of any event described above, a Pay Out Event
with respect to the affected Series will
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<PAGE>
be deemed to have occurred without any notice or other
action on the part of the Trustee or the
Certificateholders of such Series immediately upon the
occurrence of such event. The Rapid Amortization Period
with respect to a Series will commence at the close of
business on the day immediately preceding the day on
which a Pay Out Event occurs with respect thereto.
Distributions of principal to the Certificateholders of
such Series will begin on the Distribution Date next
following the month during which such Pay Out Event
occurs (such Distribution Date and each following
Distribution Date with respect to such Series, a "Special
Payment Date"). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account with
respect to such Series at such time will be distributed
on the first such Special Payment Date to the
Certificateholders of such Series. If a Series has more
than one Class of Certificates, each Class may have
different Pay Out Events which, in the case of any Series
of Certificates offered hereby, will be described in the
related Prospectus Supplement.
In addition to the consequences of a Pay Out Event
discussed above, if any Insolvency Event occurs with
respect to the Seller, pursuant to the Pooling Agreement,
on the day of such Insolvency Event, the Seller will
immediately cease to transfer Principal Receivables
directly or indirectly to the Trust and promptly give
notice to the Trustee of such Insolvency Event. Under the
terms of the Pooling Agreement applicable to such Series,
within 15 days the Trustee will publish a notice of the
occurrence of the Insolvency Event stating that the
Trustee intends to sell, dispose of or otherwise
liquidate the Receivables in a commercially reasonable
manner and on commercially reasonable terms unless within
90 days from the date such notice is published the
holders of Certificates of each
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<PAGE>
Series or, if a Series includes more than one Class, each
Class of such Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or
Class and certain other interested parties specified in
the related Prospectus Supplement instruct the Trustee
not to dispose of or liquidate the Receivables and to
continue transferring Principal Receivables as before
such Insolvency Event. The proceeds from any such sale,
disposition or liquidation of the Receivables will be
deposited in the Collection Account and allocated as
described in the applicable Pooling Agreement and the
related Prospectus Supplement. If the sum of (a) the
portion of such proceeds allocated to the
Certificateholders' Interest of any Series and (b) the
proceeds of any collections of the Receivables in the
Collection Account allocated to the Certificateholders'
Interest of such Series is not sufficient to pay the
Invested Amount of the Certificates of such Series in
full, such Certificateholders will incur a loss.
K. Paired Series..... If so specified in the related Prospectus Supplement, a
Series of Certificates may be paired with another Series
issued by the related Trust (a "Paired Series") on or
prior to the commencement of a Accumulation Period or
Controlled Amortization Period for such Series. As the
principal amount of the Series having a Paired Series is
reduced, the principal amount of the Paired Series will
increase by an equal amount. Upon payment in full of such
Series, the principal amount of the Paired Series will be
equal to the amount of the principal paid to
Certificateholders of such Series.
Final Scheduled
Payment Date....... The Final Scheduled Payment Date for each Class of
Certificates of a Series is the date after which no
Certificates of such Class are expected to remain
outstanding, calculated on the basis of the assumptions
applicable to such Series
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<PAGE>
described in the related Prospectus Supplement. The Final
Scheduled Payment Date of a Class may equal the maturity
date of the Base Asset in the related Trust which has the
latest stated maturity, or will be determined as
described herein and in the related Prospectus
Supplement.
The actual final Payment Date of the Certificates of any
Class will depend principally upon the rate of payment
(including early amortization, prepayments and
repurchases) of the Receivables underlying or comprising
the Base Assets in the related Trust and, in the case of
Certificates backed by CRB Securities, the terms of such
CRB Securities. Unless otherwise specified in the related
Prospectus Supplement, the actual final Payment Date of
Securities of a given Class is likely to occur earlier
(and may occur substantially earlier) than the Final
Scheduled Payment Date of such Class as a result of the
application of prepayments to the reduction of the
principal balance of such Certificates or if any early
amortization period occurs with respect to the Base
Assets underlying such Class, but may also occur later
than the applicable Final Scheduled Payment Date. See
"RISK FACTORS" and "DESCRIPTION OF THE CERTIFICATES"
herein for a more detailed description of factors that
may affect the timing of principal payments on the
Certificates.
The Trust Property
General............ On or prior to the date of issuance of a Series of
Securities specified in the related Prospectus Supplement
(the "Closing Date"), the Depositor will transfer Base
Assets to the related Trust (after acquiring such Base
Assets, in certain cases, from the seller or sellers
specified in the related Prospectus Supplement
(collectively, the "Seller")) having the aggregate
principal balance specified in such Prospectus Supplement
as of the date specified therein (the "Series Cutoff
Date"). Alternatively, if so specified in the
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<PAGE>
related Prospectus Supplement, in certain circumstances
the Depositor may transfer cash to the Trust and the
Trust will use such cash to acquire such Base Assets.
The assets of the Trust may also include one or more
types of Series Enhancement (as described below), certain
Ancillary Arrangements (as described below) and certain
trust accounts, including the related Collection Account,
Distribution Account and Reserve Account and any other
account or asset identified in the applicable Prospectus
Supplement. See "DESCRIPTION OF THE TRUST OR POOLING
AGREEMENT - Trust Accounts".
A. Base Assets..... The Base Assets for a Series may consist of any
combination of the following assets, to the extent and as
specified in the related Prospectus Supplement: (1)
Receivables and Participations in Receivables and (2) CRB
Securities. To the extent set forth in the related
Prospectus Supplement, the Base Assets for a Series (x)
may be purchased by the Depositor from the related Seller
and transferred to the related Trust, (y) may be
purchased by the Depositor in the open market or in
privately negotiated transactions (including transactions
with entities affiliated with the Depositor) and
transferred to the Trust or (z) may be purchased by the
related Trust in the open market or in privately
negotiated transactions.
(1) Receivables and
Participations
(a) General.... The assets of the Trust created with respect to a Series
may include a pool of receivables ("Receivables") arising
from time to time in the ordinary course of business in
one or more designated portfolios of credit card, charge
card or certain other types of accounts ("Accounts"),
together with any monies due under such
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<PAGE>
Receivables net, if and as provided in the related
Prospectus Supplement, of certain amounts payable to the
related Servicer.
Any designated Accounts will meet the criteria provided
in the applicable Agreement applied as of the applicable
Series Cut-Off Date specified therein. The Accounts will
consist of certain initial Accounts described in the
related Prospectus Supplement ("Initial Accounts") and
any Additional Accounts (as described below), but will
not include any Removed Accounts (as described below).
Pursuant to the applicable Agreement: (a) the Seller of
the Initial Accounts may (subject to certain limitations
and conditions), and in some circumstances will be
obligated to, designate additional Accounts ("Additional
Accounts"), the Receivables arising in which will be
added to the Trust or, in lieu thereof or in addition
thereto, transfer eligible Participations to the Trust
and (b) such Seller will have the right (subject to
certain limitations and conditions), but not the
obligation, to remove the Receivables in certain Accounts
from the Trust ("Removed Accounts").
All new Receivables arising during the term of a Trust in
any designated Accounts (including in any Additional
Accounts) will be the property of the Trust. Accordingly,
the amount of Receivables in the Trust will fluctuate as
new Receivables are generated and as existing Receivables
are collected, charged off as uncollectible or otherwise
adjusted. Receivables may be payable in U.S. dollars or
in any foreign currency.
"Participations" are undivided interests in a pool of
assets primarily consisting of Receivables owned by a
Seller or an affiliate of the Seller, together with any
collections thereon.
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<PAGE>
Unless otherwise set forth in the related Prospectus
Supplement, the Receivables comprising or underlying the
Base Assets in a Trust will principally consist of Credit
Card Receivables and/or Charge Card Receivables (as
described below).
(b) Credit Card
Receivables..... "Credit Card Receivables" are receivables due to issuers
of credit cards (such as VISA or MasterCard credit cards)
from the holders of such cards, including receivables for
periodic finance charges, annual membership fees, cash
advance fees, late charges on amounts charged for
merchandise and services and certain other designated
fees (collectively, "Finance Charge Receivables") and
receivables representing amounts charged by cardholders
for merchandise and services, amounts advanced to
cardholders as cash advances and certain other fees
billed to cardholders on the Accounts (collectively,
"Principal Receivables"). In addition, certain
Interchange attributed to cardholder charges for
merchandise and services in the Accounts may be treated
as Finance Charge Receivables.
"Interchange" consists of certain fees received by a
credit card-issuing bank from the VISA USA, Inc.
("VISA"/1/) and MasterCard International Incorporated
("MasterCard International"/1/) associations as partial
compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior
to initial billing.
- -------------------------
/1/ VISA and MasterCard are registered trademarks of VISA USA, Inc. And
MasterCard International Incorporated, respectively.
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<PAGE>
Recoveries of charged-off Finance Charge Receivables will
be treated as collections of Finance Charge Receivables
and recoveries of charged-off Principal Receivables will
be applied against charge-offs of Principal Receivables.
From time to time, subject to certain conditions, certain
of the amounts described above which are included in
Principal Receivables may be treated as Finance Charge
Receivables.
(c) Charge Card
Receivables "Charge Card Receivables" are receivables due from
charge account customers of merchants who permit their
customers to maintain charge card accounts, and generally
represent amounts charged on the designated Accounts for
merchandise and services and annual membership fees and
certain other administrative fees billed to such
customers. Inasmuch as Receivables originated under
charge card Accounts are generally not subject to a
monthly finance charge, a portion of the collections on
the Charge Card Receivables will be treated as "yield",
with the remainder treated as payments of principal.
(2) CRB Securities.. Base Assets for a Series may consist, in whole or in
part, of asset backed securities ("card receivables
backed securities" or "CRB Securities") consisting of
certificates representing undivided interests in, or
notes or loans secured by, Receivables arising in
Accounts (as described above). Such certificates, notes
or loans will have previously been offered and
distributed to the public pursuant to an effective
registration statement registered under the Securities
Act or will be so registered, offered and distributed
concurrently with the offering of a Series of Securities.
See "THE TRUST ASSETS -- CRB Securities" . Unless
otherwise specified in the Prospectus Supplement relating
to a Series of Securities, payments on the CRB Securities
will
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<PAGE>
be distributed directly to the Trustee as registered
owner of such CRB Securities or, where applicable, to the
Indenture Trustee as pledgee thereof.
The related Prospectus Supplement for a Series which
includes CRB Securities Base Assets will specify (such
disclosure may be on an approximate basis), to the extent
relevant and to the extent such information is reasonably
available to the Depositor and the Depositor reasonably
believes such information to be reliable, (i) the
approximate aggregate principal amount and type of the
CRB Securities; (ii) certain characteristics of the
Receivables which comprise the underlying assets for the
CRB Securities; (iii) the expected maturity and the final
maturity of the CRB Securities; (iv) the certificate rate
for the CRB Securities; (v) the issuer or issuers of the
CRB Securities (collectively, the "CRB Issuer"), the
servicer or servicers of the CRB Securities
(collectively, the "CRB Servicer") and the trustee or
trustees of the Securities (collectively, the "CRB
Trustee"); (vi) certain characteristics of enhancement,
if any, relating to the CRB Securities, such as reserve
funds, insurance policies, letters of credit or
guarantees; (vii) any rapid or early amortization events
applicable to the CRB Securities; (viii) the terms on
which the CRB Securities or the underlying Receivables
may, or are required to, be repurchased prior to the
stated maturity of such CRB Securities; and (ix) the
terms on which substitute Receivables may be delivered to
replace those initially deposited with the CRB Trustee.
See "THE TRUST ASSETS - CRB Securities".
B. Collection, Distri-
bution, Pre-Funding
and other Trust
Accounts......... Unless otherwise provided in the related Prospectus
Supplement, all payments on or with respect to the Base
Assets for a Series will be
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<PAGE>
remitted directly to an account (the "Collection
Account") to be established for such Series with the
related Trustee (or the related Indenture Trustee), or
with the related Servicer in the name of such Trustee (or
Indenture Trustee).
Unless otherwise provided in the related Prospectus
Supplement, the Trustee (or the Indenture Trustee) shall
be required to apply a portion of the amount in the
Collection Account, together with reinvestment earnings
thereon at the rate or rates specified in the related
Prospectus Supplement, to the payment, if and as provided
in the related Prospectus Supplement, of certain amounts
payable to the Servicer under the related Agreement and
any other person specified in the related Prospectus
Supplement, and to deposit a portion of the amount in the
Collection Account into one or more separate accounts
(each a "Payment Account" or "Funding Account", as the
case may be) to be established for such Series, each in
the manner and at the times established in the related
Prospectus Supplement. All amounts deposited in any such
Payment Account will be available unless otherwise
specified in the related Prospectus Supplement, for (i)
application to the payment of principal of and/or
interest on certain Classes of the Securities of such
Series on the next Payment Date, (ii) the making of
adequate provision for future payments on certain Classes
of Securities and/or (iii) any other purpose specified in
the related Prospectus Supplement. After applying the
funds in the Collection Account as described above, any
funds remaining in the Collection Account may be paid
over to the Servicer, the Depositor, any provider of
Credit Enhancement with respect to such Series (a "Credit
Enhancer") or any other person entitled thereto in the
manner and at the times established in the related
Prospectus Supplement.
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<PAGE>
A Prospectus Supplement may also provide that the assets
of a Trust will include a Pre-Funding Account (the "Pre-
Funding Account"). In such event, to the extent provided
in the related Prospectus Supplement, the Depositor
and/or the Seller will be obligated (subject only to the
availability thereof) to deposit, and the related Trust
will be obligated to accept (subject to the satisfaction
of certain conditions described in the applicable
Agreement), additional Base Assets (the "Additional Base
Assets") from time to time during the Funding Period
specified in the related Prospectus Supplement having an
aggregate principal balance approximately equal to the
amount on deposit in the Pre-Funding Account (the "Pre-
Funded Amount") on the related Closing Date.
From time to time, various additional accounts may be
created under the terms of the documents related to a
specific Series.
Series Enhancement... If stated in the Prospectus Supplement relating to a
Series, enhancement may be provided with respect to one
or more Classes of the Securities of such Series in the
form of one of more types of Credit Enhancement (as
described below) or Ancillary Arrangements (as described
below), or both. The Series Enhancement will support the
payments on the Securities and may be used for other
purposes, to the extent and under the conditions
specified in such related Prospectus Supplement. See
"SERIES ENHANCEMENT".
Credit Enhancement with respect to a Trust or any Class
or Classes of Securities may include any one or more of
the following: the subordination of one or more Classes
of such Securities to other Classes of such Securities, a
letter of credit, the establishment of a cash collateral
guaranty or account, a reserve fund, a surety bond or
insurance, a spread account or the use of cross support
features or another method
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<PAGE>
of Credit Enhancement described in the related Prospectus
Supplement. Ancillary Arrangements may take the form of
guaranteed rate agreements, maturity liquidity
facilities, tax protection agreements, interest rate cap,
floor or collar agreements, interest rate or currency
swap agreements or other similar arrangements that are
incidental or related to the Base Assets included in a
Trust. If so specified in the related Prospectus
Supplement, any such Credit Enhancement or Ancillary
Arrangements may be provided by the Depositor or an
affiliate thereof.
Servicing............ For Series for which the Base Assets include Receivables
or Participations, the Servicer designated in the related
Prospectus Supplement will be responsible for servicing,
managing and making collections on such Receivables or
Participations. The Servicer may perform such functions
alone, through subservicers or in conjunction with a
master servicer, as described in such Prospectus
Supplement. In performing these functions, the Servicer
will be required to exercise the same degree of skill and
care that it customarily exercises with respect to
similar receivables owned or serviced by it. Under
certain limited circumstances, the Servicer may resign or
be removed, in which event either the Trustee or a third
party Servicer will act as Servicer. The Servicer will
receive a periodic fee as servicing compensation and may,
as specified herein and in the related Prospectus
Supplement, receive certain additional compensation. See
"SERVICING OF RECEIVABLES".
Tax Considerations... In the case of an Owner Trust, Sidley & Austin
("Federal Tax Counsel") will deliver its opinion that the
Trust will not be an association (or publicly traded
partnership) taxable as a corporation for federal income
tax purposes.
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The Owner Trust will agree, and the beneficial owners of
the Notes (each a "Note Owner") will agree by their
purchase of Notes, to treat the Notes as debt for federal
tax purposes. Federal Tax Counsel will, except as
otherwise provided in the related Prospectus Supplement,
advise the Owner Trust that the Notes will be classified
as debt for federal income tax purposes. The Owner Trust
will also agree, and the related beneficial owners of the
Certificates (each a "Certificate Owner") will agree by
their purchase of Certificates, to treat the Owner Trust
as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or
in part by income, with the assets of the partnership
being the assets held by the Trust, the partners of the
partnership being the Certificate Owners (including, to
the extent relevant, the Seller or Depositor in its
capacity as recipient of distributions from any reserve
fund), and the Notes being debt of the partnership. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Owner Trusts"
herein for additional information concerning the
application of federal income tax laws to each Owner
Trust and the related Securities.
In the case of a Grantor Trust, Federal Tax Counsel will
deliver its opinion that the Grantor Trust will be
classified as a grantor trust for federal income tax
purposes and will not be classified as an association
taxable as a corporation. In general, each owner of a
beneficial interest in the Certificates must include in
income its pro rata share of interest and other income
from the Receivables, Participations or CRB Securities
and other assets of the Trust and, subject to certain
limitations, may deduct its pro rata share of fees and
other deductible expenses paid by the Grantor Trust. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES-- Grantor
Trusts" herein for additional information concerning the
application of federal income tax
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laws to each Grantor Trust and the related Certificates.
In the case of a Master Trust, Federal Tax Counsel will
deliver its opinion that, although no transaction closely
comparable to that contemplated herein has been the
subject of any Treasury regulation, revenue ruling or
judicial decision, based upon its analysis of the factors
discussed below, the Seller is properly treated as the
owner of the Receivables or CRB Securities and the other
assets of the Trust for federal income tax purposes and
accordingly, the Certificates, when issued, will be
properly characterized for federal income tax purposes as
indebtedness of the Seller that is secured by the
Receivables. The Seller, by entering into the Agreement,
each Certificateholder, by the acceptance of a
Certificate, and each Certificate Owner, by virtue of
accepting a beneficial interest in a Certificate, will
agree to treat the Certificates (or the beneficial
interests therein) as indebtedness of the Seller secured
by the assets of the Trust for federal, state and local
income and franchise tax purposes and for the purposes of
any other tax imposed on or measured by income. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES--Master Trusts"
herein for additional information concerning the
application of federal income tax laws to each Master
Trust and the related Certificates.
Certain ERISA
Considerations...... Subject to the considerations discussed under "ERISA
CONSIDERATIONS" herein and in the related Prospectus
Supplement, and unless otherwise specified therein, the
Notes of any Series issued by a Trust are eligible for
purchase by employee benefit plans.
Persons investing assets of employee benefit plans
subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or of plans as defined in
Section 4975 of the Code
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should read "ERISA Considerations" herein and consult
their own legal advisors to determine whether and to what
extent the Certificates constitute permissible
investments for such employee benefit plans.
Legal Investment..... Investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to
determine whether and to what extent the Certificates or
Notes constitute legal investments for them.
Use of Proceeds...... The Depositor will use the net proceeds from the sale of
each Series of Securities for one or more of the
following purposes: (i) to purchase the related Base
Assets and/or Series Enhancement, (ii) to repay
indebtedness which has been incurred to obtain funds to
acquire such Base Assets and/or Series Enhancement, (iii)
to fund the purchase of such Base Assets and/or Series
Enhancement by the related Trust on the Closing Date or
to establish a Pre-Funding Account for such Series, (iv)
to establish any Reserve Account or Cash Collateral
Accounts described in the related Prospectus Supplement
or (v) to pay costs of structuring and issuing such
Securities. If so specified in the related Prospectus
Supplement, the purchase of the Base Assets for a Series
may be effected in whole or in part by an exchange of
Certificates with the Seller of such Base Assets. See
"USE OF PROCEEDS".
Ratings.............. It will be a requirement for the issuance of any Class
of Securities of a Series offered by this Prospectus and
the related Prospectus Supplement that such Securities be
rated by at least one Rating Agency in one of its four
highest applicable rating categories. The rating or
ratings applicable to such Securities will be as set
forth in the related Prospectus Supplement. For more
detailed information regarding the ratings assigned to
any Class of a particular
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Series of Securities, see "SUMMARY OF TERMS - Rating of
the Securities" and "RISK FACTORS - Ratings of the
Securities" in the related Prospectus Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in
the related Prospectus Supplement to be prepared and delivered in connection
with the offering of any Series of Securities, prospective investors should
carefully consider the following risk factors before investing in any Class or
Classes of Securities of any such Series.
Limited Liquidity. There can be no assurance that a secondary market for
any Class of Securities of any Series will develop or, if it does develop, that
such market will provide holders of such Securities with liquidity of investment
or that it will continue for the life of such Securities. The Underwriters
presently expect to make a secondary market in certain Classes of the Securities
offered hereby and pursuant to the related Prospectus Supplements, but have no
obligation to do so.
Dependency on Cardholder Repayments; Maturity and Repayment Considerations.
The Receivables comprising or underlying the Base Assets for any Series of
Securities offered hereunder may be paid at any time, and there is no assurance
that there will be new Receivables created in the related Accounts, that
Receivables will be added to the related Trust or any underlying CRB Trust (as
defined herein, under "TRUST ASSETS -- CRB Securities") or that any particular
pattern of accountholder repayments will occur. The actual rate of accumulation
of principal in a Principal Funding Account with respect to a Series of
Receivables Pooling Certificates during an Accumulation Period and the rate of
distributions of principal with respect to any such Series during a Controlled
or Rapid Amortization Period will depend on, among other factors, the rate of
accountholder repayments, the timing of the receipt of repayments and the rate
of default by accountholders. As a result, no assurance can be given that the
Invested Amount of a Class of Receivables Pooling Certificates will be paid on
the Expected Final Payment Date, if any, with respect to such Class or that
payment of the principal during the Controlled Amortization Period, if any, with
respect to such Class will equal the Controlled Amortization Amount, if any,
with respect to such Class or will follow any expected pattern.
Accountholder monthly payment rates with respect to Accounts are dependent
upon a variety of factors, including seasonal purchasing and payment habits of
accountholders, the availability of other sources of credit, general economic
conditions, tax laws and the terms of the Accounts, including the periodic rate
finance charges assessed on the Accounts (which are subject to change by the
Seller). Increased convenience use, in which accountholders pay their Account
balances in full on or prior to the due date and thus avoid all finance charges,
would decrease the effective yield on the Accounts and could cause the
commencement of a Rapid Amortization Period for one or more Series, as well as a
decrease in protection to holders of Securities against defaults under the
Accounts. No assurance can be given as to the accountholder payment rates which
will actually occur in any future period.
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The rate of payment of principal of Securities of a Series for which the
Base Assets consist of CRB Securities, and the aggregate amount of each
distribution on and the yield to maturity of such Securities, will depend on a
number of factors, including the performance of such CRB Securities and the rate
of payment of principal (including prepayments) thereof, which will in turn
depend in large part on the rate of repayment of the underlying Receivables and
the possible occurrence of any related Pay Out Events. The rate of payment of
principal of such Securities may also be affected by the repurchase of the
Receivables underlying the CRB Securities, and the corresponding retirement of
such CRB Securities. See "MATURITY CONSIDERATIONS" in the related Prospectus
Supplement.
Generation of Additional Receivables. The continuation of the Revolving
Period for any Series of Receivables Pooling Certificates will depend on the
continued generation of new Receivables for the related Trust. A decline in
the amount of Receivables in the Accounts for any reason (including the decision
by accountholders to use competing sources of credit, an economic downturn,
increased convenience use or other factors) could result in the occurrence of a
Pay Out Event with respect a Series and commencement of a Rapid Amortization
Period with respect to such Series. In such event, Certificateholders would
bear the risk of reinvestment of the principal amounts of their Certificates.
The Pooling Agreement for such a Series will provide that if the Seller's
Interest is not maintained at a minimum level equal to an amount specified in
the Pooling Agreement and the related Prospectus Supplement (the "Required
Seller's Interest"), then the Seller will be required to transfer Additional
Accounts to the Trust. In the event that the Seller fails to transfer such
Additional Accounts to the Trust pursuant to the Pooling Agreement, a Pay Out
Event will occur unless otherwise provided in the related Prospectus Supplement.
Limited Nature of Rating. Any rating assigned to any Class of Securities
of a Series by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), or such other nationally
recognized rating agency specified in the related Prospectus Supplement (each, a
"Rating Agency"), will reflect such Rating Agency's assessment solely of the
likelihood that Securityholders will receive the payments of interest and
principal required to be made under the applicable Agreement or Indenture and
will be based primarily on the value of the Base Assets in the Trust and the
availability of any Series Enhancement with respect to such Class or Series.
The rating will not be a recommendation to purchase, hold or sell Securities of
such Class or Series, and such rating will not comment as to the marketability
of such Securities, any market price or suitability for a particular investor.
There is no assurance that any rating will remain for any given period of time
or that any rating will not be lowered or withdrawn entirely by a Rating Agency
if in such Rating Agency's judgment circumstances so warrant.
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, each Class of the Securities of a given Series initially
will be represented by one or more certificates registered in the name of Cede &
Co. ("Cede"), or any other nominee of The Depository Trust Company ("DTC") set
forth in the related Prospectus Supplement, and will not be issued in fully
registered, certified form to the holders of the Securities of such Series or
their
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nominees ("Definitive Certificates", in the case of Certificates so issued in
fully registered, certified form, "Definitive Notes", in the case of Notes so
issued in fully registered, certified form, and collectively, "Definitive
Securities"). Because of this, unless and until Definitive Securities for such
Series are issued, holders of such Securities will not be recognized by the
applicable Trustee or Indenture Trustee as "Certificateholders", "Noteholders"
or "Securityholders", as the case may be (as such terms are used herein or in
the related Agreement or the related Indenture, as applicable). Hence, until
Definitive Securities are issued, holders of such Securities will be able to
exercise the rights of Securityholders only indirectly through DTC and its
participating organizations. See "CERTAIN INFORMATION REGARDING THE SECURITIES
- -- Book-Entry Registration" and "-- Definitive Securities" .
Certain Legal Aspects -- Consumer Protection Laws. The Accounts and
Receivables are subject to numerous federal and state consumer protection laws
which impose requirements on the making, enforcement and collection of consumer
loans. The United States Congress and the states may enact laws and amendments
to existing laws to regulate further the credit card and consumer revolving loan
industry or to reduce finance charges or other fees or charges applicable to
credit card and other consumer revolving loan accounts. Such laws, as well as
any new laws or rulings which may be adopted, may adversely affect the ability
of a Servicer to collect on the Receivables comprising or underlying the Base
Assets for a Series or maintain the current level of periodic finance charges
and other fees and charges with respect to Accounts. In addition, failure by a
Servicer to comply with such requirements could adversely affect the ability of
such Servicer to enforce the Receivables. In October 1987, November 1991 and
March 1994, members of Congress attempted unsuccessfully to limit the maximum
annual percentage rate that may be assessed on credit card accounts. In
addition, in May 1992, two members of the House Banking Committee asked the
United States General Accounting Office (the "GAO") to undertake a study of
competition in the credit card industry and particularly to address how a
government imposed limit on credit card interest rates could affect credit
availability. In Spring 1994, the GAO released its study on competitive pricing
and disclosure in the credit card industry. The GAO did not recommend that
Congress enact legislation capping interest rates on credit cards, but did
recommend monitoring of the industry. The Depositor cannot predict what action,
if any, will be taken by Congress as a result thereof. If federal legislation
were enacted which contained an interest rate cap substantially lower than the
annual percentage rates currently assessed on the Accounts, it is possible that
the average yield on the portfolio of Accounts in a Trust would be reduced and
therefore a Pay Out Event could occur with respect to the related Series of
Securities, if the related Prospectus Supplement so provides. See "DESCRIPTION
OF THE CERTIFICATES __ Pay Out Events". In addition, during recent years, there
has been increased consumer awareness with respect to the level of finance
charges and fees and other practices of credit card issuers and other consumer
revolving loan providers. As a result of these developments and other factors,
there can be no assurance as to whether any federal or state legislation will be
promulgated which would impose additional limitations on the monthly periodic
rate finance charges or other fees or charges relating to the Accounts.
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Application of federal and state bankruptcy and debtor relief laws would
affect the interests of Securityholders in the Receivables comprising or
underlying the Base Assets for a Series if such laws result in any Receivables
being charged off as uncollectible when there are no funds available from Series
Enhancement or other sources.
Certain Legal Aspects -- Transfers of Receivables. For Series involving a
transfer of Receivables to the related Trust, the related Seller (and to a
certain extent the Depositor) will warrant in the related Agreement that such
transfer of the Receivables to the Trust is and will be either a valid transfer
and assignment of all right, title and interest of the Seller in the Receivables
and all proceeds thereof to the Trust or the grant to the Trust of a security
interest in such Receivables. The Seller (and to a certain extent the
Depositor) will take certain actions required to perfect the Trust's interest in
the Receivables and will warrant that if the transfer to the Trust is deemed to
be a grant to the Trust of a security interest in the Receivables, the Trustee
will have a first priority perfected security interest therein. If any such
transfer of the Receivables and the proceeds thereof to the Trust is deemed to
create a security interest therein, a tax or government lien on property of the
Seller (or of the Depositor) arising before such Receivables come into existence
(or are transferred to the Depositor) may have priority over the Trust's
interest in such Receivables. See "CERTAIN LEGAL ASPECTS OF RECEIVABLES --
Transfer of Receivables".
Certain Legal Aspects -- Receivership of a Seller. If any Seller is a
regulated financial institution, to the extent that such Seller grants a
security interest in the Receivables directly or indirectly to the Trust and
that security interest is validly perfected before any insolvency of the Seller
and is not granted or taken in contemplation of insolvency or with the intent to
hinder, delay or defraud the Seller or its creditors, that security interest
should not be subject to avoidance in the event of insolvency and receivership
of the Seller, and payments to the Trust with respect to the Receivables should
not be subject to recovery by a conservator or receiver for the Seller. If,
however, any such conservator or receiver were to assert a contrary position, or
were to require the Trustee to establish its right to those payments by
submitting to and completing the administrative claims procedure established
under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), or the conservator or receiver were to request a stay or proceedings
with respect to the Seller as provided under FIRREA, delays in payments on the
Securities and possible reductions in the amount of those payments could occur.
If a conservator or receiver were appointed for the Seller, new Principal
Receivables would not thereafter be transferred to the related Trust and the
Trustee would sell the portion of the Receivables allocable to each related
Series in accordance with the Agreement (unless the Securityholders holding the
required percentage of the outstanding Securities of each Class within such
Series instruct otherwise), thereby causing early termination of such Trust and
a loss to the holders of such Securities if the net proceeds of such sale and
any related Series Enhancement were insufficient to pay such Securities in full.
Upon the occurrence of a Pay Out Event, if a conservator or receiver were
appointed for the Seller or the Depositor and no Pay Out Event other than such
conservatorship, receivership or insolvency of the Seller or the Depositor
existed, the
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conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Rapid
Amortization Period. In addition, a conservator or receiver for the Seller or
the Depositor may have the power to cause early payment of the Securities. See
"CERTAIN LEGAL ASPECTS OF THE RECEIVABLES -- Certain Matters Relating to
Receivership".
Certain Legal Aspects -- Receivership of a Servicer. In the event of a
Servicer Default with respect to a Series, if a conservator or receiver is
appointed for the Servicer, and no Servicer Default other than such
conservatorship or receivership or insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or the
Securityholders from effecting a transfer of servicing to a successor Servicer.
Certain Legal Concerns Applicable to Accounts. Since October 1991, a
number of lawsuits and administrative actions have been filed in several states
against out-of-state banks (both federally insured state-chartered banks and
federally insured national banks) which issue cards. These actions challenge
various fees and charges (such as late fees, over-the-limit fees, returned
payment check fees and annual membership fees) assessed against residents of the
states in which suits were filed, based on restrictions or prohibitions under
such states' laws alleged to be applicable to the out-of-state cards' issuers.
There can be no assurance that one of the Sellers will not be named as a
defendant in future lawsuits or administrative actions challenging the fees and
charges which it assesses residents of other states. In October 1991, the
United States District Court for the State of Massachusetts held that Greenwood
Trust Company (a federally-insured, Delaware-chartered bank that issues the
Discover credit card) was prohibited by Massachusetts law from assessing late
charges on credit card accounts of Massachusetts residents. On August 6, 1992,
that decision was reversed by the United States Court of Appeals for the First
Circuit, which held that the Massachusetts law was preempted by federal law
permitting the charges in question. In November 1992, the Commonwealth of
Massachusetts petitioned the United States Supreme Court to accept the case. On
January 11, 1993, the U.S. Supreme Court denied the petition of the Commonwealth
to review the decision of the First Circuit. The California Supreme Court in
March 1992 refused to review a lower court's determination that the practice by
Wells Fargo Bank of charging its cardholders over-the-limit and late payment
fees violated California laws that require banks to limit such charges to their
costs. On November 29, 1995, the Supreme Court of New Jersey ruled that a
national bank that issued credit cards in New Jersey but is located in another
state, and that is entitled under the National Bank Act to charge borrowers
interest at a rate allowed by the laws of the State where the bank is located,
was not entitled to charge New Jersey cardholders certain late payment fees,
notwithstanding the fact that the state in which the bank is located permits
such late payment fees, because late payment fees are not defined as interest
within the meaning of the National Bank Act and because New Jersey state law
forbade the charging of such late payment fees. Such actions and similar actions
which may be brought in other states as a result of such actions, if resolved
adversely to card issuers, could have the effect of limiting certain charges,
other than periodic finance charges, that could be assessed on accounts of
residents of such states and could require card issuers to pay refunds and civil
penalties with respect to charges previously imposed on cardholders in such
states. Consequently
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such actions could have an adverse impact on a Seller's card operations. One
potential effect of any such litigation involving a Seller, if successful, would
be to reduce the Net Portfolio Yield for a Series. The terms "Portfolio Yield"
and "Net Portfolio Yield" have the meanings set forth in the Prospectus
Supplement relating to such Series. If such a reduction occurs, a Pay Out Event
may occur.
Competition. The credit card and charge card industry is highly
competitive. There is increased competitive use of advertising, target
marketing and pricing competition in interest rates and annual cardholder fees
as both traditional and new credit card and charge card issuers seek to expand
or to enter the market. As a result of this competition, certain major credit
card and charge card issuers assess finance charges for selected portions of
their portfolio at rates lower than the rates currently being assessed on the
Accounts. A Seller's ability to compete in the credit card and charge card
industry will affect its ability to generate new Receivables.
Social, Geographic and Economic Factors. Changes in card use, payment
patterns and the rate of defaults by cardholders may result from a variety of
social, economic and geographic factors. Economic factors include the rate of
inflation and relative interest rates offered for various types of loans.
Adverse changes in economic conditions in any states where cardholders are
located could have a direct impact on the timing and amount of payments on the
Securities of any Series. The Depositor is unable to determine and has no basis
to predict whether, or to what extent, economic, social or geographic factors
will affect future card use or repayment patterns. New credit card issuers have
been entering the market while other issuers have been seeking to expand market
share through increased advertising, target marketing and pricing competition.
Additionally, the use of incentive or affinity programs (e.g., gift awards for
card usage) may affect card usage patterns.
In 1992, a jury in Federal court in Utah held that the VISA association
violated antitrust laws when it denied membership in VISA to a subsidiary of
Sears Roebuck & Co., on the basis that another Sears subsidiary is the issuer of
the Discover card, a competitor of the VISA credit card. In April 1993, a motion
by VISA for a new trail was denied. VISA is currently appealing this decision
to the United States Court of Appeals for the Tenth Circuit. MasterCard has
settled a similar lawsuit. This settlement by MasterCard and/or a final
decision against, or a similar settlement by, VISA could result in increased
competition among issuers of VISA and MasterCard credit cards and thereby have
adverse consequences for members of the VISA and MasterCard associations.
A Seller's Ability to Change Terms of the Receivables. The Seller or other
originator of any Receivables comprising or underlying the Base Assets of a
Trust may have the right to determine the finance charges and the other fees and
charges which will be applicable from time to time on its Accounts, to alter the
minimum monthly payment required under the Accounts and to change various other
terms of its agreement with cardholders with respect to the Accounts. A
decrease in the finance charges and other fees and charges assessed on the
Accounts would decrease the effective yield on the Accounts and could result in
the occurrence of a Pay Out Event for one or
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more Series and commencement of the Rapid Amortization Period for such Series.
Under the applicable Agreement, a Seller may agree that, unless required by law
or as is otherwise necessary in its good faith judgment to maintain its credit
card business on a competitive basis, it will not reduce the annual percentage
rate at which finance charges are assessed on the Receivables or the other fees
and charges assessed on the Accounts, if, as a result of such reduction, the Net
Portfolio Yield for any Series as of such date would be less than the Base Rate
for such Series. The term "Base Rate" for a Series has the meaning set forth in
the Prospectus Supplement relating to such Series. A Seller may also covenant
that it will change the terms relating to the Accounts only if the change is
made applicable to the comparable segment of the accounts owned and serviced by
the Seller with characteristics the same as or substantially similar to the
Accounts, except as otherwise restricted by the terms of the applicable
cardholder agreement. In servicing Accounts, a Servicer will be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own comparable accounts. Except as set forth above or as
otherwise set forth in the applicable Prospectus Supplement, an Agreement may
not contain any restrictions on the ability of a Seller to change the terms of
the Accounts or the Receivables. There can be no assurance that changes in
applicable law, changes in the marketplace or prudent business practice might
not result in a determination by a Seller to decrease finance charges or other
fees and charges for existing accounts, or take actions which would otherwise
change the terms of the Accounts.
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one or more
Classes of Certificates of a Series may be subordinated in priority of payment
to interest and principal due on the Notes, if any, of such Series or one or
more Classes of Certificates of such Series. Moreover, none of the Trusts will
have, nor will any such Trust be permitted or expected to have, any significant
assets or sources of funds other than the Base Assets and, to the extent
provided in the related Prospectus Supplement, a Reserve Account or other form
of Series Enhancement. The Notes, if any, of any Series will represent
obligations solely of, and the Certificates of any such Series will represent
interests solely in, the related Trust, and neither the Notes nor the
Certificates of any such Series will represent obligations of or interests in,
or be insured or guaranteed by, the Depositor or the related Seller, Servicer,
Trustee or Indenture Trustee, or any other entity. Consequently, holders of the
Securities of any Series must rely for repayment upon payments on the related
Base Assets and, if and to the extent available, amounts available under any
available form of Series Enhancement, as specified in the related Prospectus
Supplement.
Risk of Commingling. With respect to each Trust for which a Servicer has
been appointed, such Servicer will deposit all payments on the related Base
Assets (from whatever source) and all proceeds of such Base Assets collected
during the period specified in the related Prospectus Supplement (a "Collection
Period") into the related Collection Account within two business days of receipt
thereof. However, in the event that a Servicer satisfies certain requirements
for monthly or less frequent remittances and the Rating Agencies affirm their
initial rating of the related Securities, then for so long as such servicer is
the Servicer and provided that (i) no Servicer Default exists and (ii) each
other condition to making monthly or less frequent deposits as may
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be specified by the Rating Agencies and described in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account of such Trust until the business day
preceding each Distribution Date. The Servicer will deposit the aggregate amount
(the "Repurchase Amount") paid for the purchase of Receivables by the Servicer
during the related Collection Period into the applicable Collection Account on
or before the business day preceding each Distribution Date. Pending deposit
into such Collection Account, collections may be invested by the Servicer at its
own risk and for its own benefit and will not be segregated from funds of the
Servicer. If the Servicer were unable to remit such funds, the applicable
Securityholders might incur a loss. To the extent set forth in the related
Prospectus Supplement, the Servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Base Assets or payment of the aggregate Repurchase Amount with respect to
Receivables purchased by the Servicer.
Servicer Default. With respect to a Series of Securities that includes
Notes, unless otherwise provided in the related Prospectus Supplement, upon the
occurrence of a Servicer Default the related Indenture Trustee or Noteholders
will have the right to remove the Servicer without the consent of the related
Trustee or any Certificateholders, and the Trustee or the Certificateholder with
respect to such Series will not have the ability to remove the Servicer if a
Servicer Default occurs. In addition, the Noteholders with respect to such
Series would have the ability, with certain specified exceptions, to waive
defaults by the Servicer, including defaults that could materially adversely
affect the Certificateholders of such Series.
THE TRUSTS
The Depositor will establish each Trust pursuant to an Agreement. The
Trustee of each such Trust will be a commercial bank, savings and loan
association or trust company identified as such Trustee in the related
Prospectus Supplement. The property of the Trust will include certain Base
Assets and may also include certain Series Enhancements and other assets
specified in the related Prospectus Supplement.
Each Trust will issue one or more Series of Securities that will include
one or more Classes of Certificates and may also include one or more Classes of
Notes. Any Notes included in a Series will be issued pursuant to an Indenture
entered into between the related Trust and an indenture trustee (the "Indenture
Trustee"). The Indenture Trustee will also be a commercial bank, savings and
loan association or trust company identified as such Indenture Trustee in the
related Prospectus Supplement.
A form of Trust Agreement, a form of Pooling Agreement and a form of
Indenture have each been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Agreement and, if applicable, the
Indenture relating to a particular Series of Securities will be
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filed as an exhibit to a report on Form 8-K to be filed with the Commission
within 15 days following the issuance of such Series of Securities.
TRUST ASSETS
GENERAL
The assets of the Trust for a Series of Certificates will include certain
Base Assets described below and may include Certain Series Enhancements with
respect to such Series and certain other assets described in the related
Prospectus Supplement.
The Base Assets for a Series will consist of one or more of the following
types of assets: (a) Receivables, (b) Participations in Receivables or (c) CRB
Securities. The Base Assets for a Series may be purchased by the Depositor from
the Seller identified in the related Prospectus Supplement or, with respect to
CRB Securities, may be purchased by the Depositor in the open market or in
privately negotiated transactions (which may include transactions with
affiliates of the Depositor), and then, in each such case, will be transferred
by the Depositor to the Trust in exchange for Securities issued by the Trust.
Alternatively, the Trust may purchase some or all of the Base Assets in the open
market or in privately negotiated transactions with cash obtained by the Trust
in exchange for the issuance of Securities of the Trust to the Depositor.
If so specified in the related Prospectus Supplement, the assets of the
Trust for a Series may include monies on deposit in a Pre-Funding Account
established with the Trustee (or the Indenture Trustee), which monies are to be
used for the purchase of additional Base Assets during a Funding Period
specified in such Prospectus Supplement.
The following is a brief description of the Base Assets expected to be
included in Trusts. Specific information regarding the Base Assets with respect
to a Series of Securities will be provided in the related Prospectus Supplement
and, to the extent not contained in the related Prospectus Supplement, in a
report on Form 8-K to be filed with the Commission within 15 days after the
initial issuance of such Securities.
RECEIVABLES AND PARTICIPATIONS
General. The Base Assets for a Series may consist, in whole or in part, of
Receivables arising from time to time in the ordinary course of business in a
portfolio of consumer, corporate, revolving credit card, charge card or debit
card accounts (collectively, the "Accounts"). The Receivables may be payable
in U.S. dollars or in any other foreign currency. The Accounts will consist of
the Initial Accounts described below, as well as any Additional Accounts added
to the Trust from time to time as provided below, but will not include any
Removed Accounts removed from the Trust as provided below.
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A Seller will initially convey to the related Trust (or will convey to the
Depositor, which will promptly reconvey to such Trust) all Receivables existing
on the Series Cut-Off Date in the Initial Accounts, together with all
Receivables arising in such Initial Accounts from time to time after the Series
Cut-Off Date until the termination of such Trust. After the Series Cut-Off
Date, a Seller may convey to the related Trust (which conveyance may be through
the Depositor) Receivables arising in certain Additional Accounts, in each case
in accordance with the provisions of the applicable Pooling Agreement. In
addition, pursuant to the related Agreement, a Seller in some circumstances
will be obligated to designate Additional Accounts the Receivables arising in
which will be conveyed to the related Trust. The Seller will convey to the
Trust all Receivables arising in any such Additional Accounts, whether such
Receivables are then existing or thereafter created. The addition to a Trust of
Receivables arising in Additional Accounts or Participations will be subject to
certain conditions. Pursuant to the related Pooling Agreement, a Seller will
also have the right (subject to certain limitations and conditions), but not the
obligation, to remove the Receivables in any Account that becomes a Removed
Account. The amount of Receivables in a Trust will fluctuate from day to day as
new Receivables are generated or added to the Trust and as existing Receivables
are collected, charged-off as uncollectible, removed or otherwise adjusted. If
so specified in the related Prospectus Supplement, a Seller will be able to
include Participations in the related Trust in lieu of or in addition to
Receivables.
Credit Card Accounts and Receivables. "Credit Card Receivables" are
receivables arising under credit card accounts ("Credit Card Accounts"),
including Finance Charge Receivables and Principal Receivables. In addition,
certain Interchange attributed to cardholder charges for merchandise and
services in the Accounts may be treated as Finance Charge Receivables.
Recoveries of charged-off Finance Charge Receivables will be treated as
collections of Finance Charge Receivables and recoveries of charged-off
Principal Receivables will be applied against charge-offs of Principal
Receivables. From time to time, subject to certain conditions, certain of the
amounts described above which are included in Principal Receivables may be
treated as Finance Charge Receivables. "Interchange" consists of certain fees
received by a credit card issuer from the VISA and MasterCard International
associations as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior to initial billing.
Under the VISA and MasterCard International systems, a portion of the
Interchange in connection with cardholder charges for merchandise and services
is passed from banks which clear the transactions for merchants to credit card-
issuing banks. VISA and MasterCard International may from time to time change
the amount of Interchange reimbursed to banks issuing their credit cards.
Charge Card Accounts and Receivables. "Charge Card Receivables" are
receivables arising under customer charge accounts ("Charge Card Accounts"), and
generally represent amounts charged on designated Accounts for merchandise and
services, and all annual membership fees and certain other administrative fees
billed to the designated Accounts. Receivables arising under Charge Card
Accounts are generally not subject to monthly finance charges.
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There are distinctions between Credit Card Accounts and Charge Card
Accounts. Credit Card Accounts offer revolving credit plans to customers.
Charge Card Accounts generally have no pre-set spending limit and are designed
for use as a convenient method of payment for the purchase of merchandise and
services. Charge Card Accounts generally cannot be used as a means of financing
such purchases. Accordingly, the full balance of a month's purchases is billed
to cardmembers and is due upon receipt of the billing statement. By contrast,
revolving credit plans allow customers to make a minimum monthly payment and to
borrow the remaining outstanding balance from the credit card issuer up to a
predetermined limit. As a result of these payment requirement differences, the
Charge Card Accounts have a high monthly payment rate and balances which turn
over rapidly relative to their charge volume when compared to Credit Card
Accounts.
Another distinction between Charge Card Accounts and Credit Card Accounts
is that Charge Card Account balances are generally not subject to monthly
finance charges. As described above, the full Account balance is billed monthly
and is due upon receipt of the billing statement. Cardmembers do not have the
option of using their Charge Card Accounts to extend payment and to pay a
finance charge on the remaining outstanding balance. Credit Card Accounts, by
contrast, do allow customers to pay a specified minimum portion of an
outstanding amount and to finance the balance at a finance charge rate
determined by the credit card issuer. (Because Charge Card Account balances are
not assessed finance charges, for the purpose of providing yield to the Trust, a
portion of Collections on Receivables in Charge Card Accounts received in any
Monthly Period equal to the product of Collections and a yield factor which may
be specified in the related Prospectus Supplement (the "Yield Factor") will
generally be treated as Yield Collections). Each related Prospectus Supplement,
where applicable, will describe the Yield Calculation for a specific portfolio
of Charge Card Accounts.
Additional Information Relating to Receivables
The related Prospectus Supplement for each Series will provide information
with respect to any Receivables that constitute Base Assets as of the Series
Cut-off Date, including, among other things, the aggregate principal balance of
the Receivables and whether the Receivables are Credit Card Receivables or
Charge Card Receivables.
The eligibility criteria which shall apply with respect to the inclusion of
Receivables in the Base Assets for a Series will be specified in the related
Prospectus Supplement. The information provided in the related Prospectus
Supplement with respect to such Receivables will include, among other things:
(a) underwriting criteria; (b) the loss and delinquency experience for the
portfolio of Receivables; (c) the composition of the portfolio by Account
balance; and (d) the geographic distribution of Accounts and Receivables. The
related Prospectus Supplement will also specify any other limitations on the
types or characteristics of Receivables included in the Base Assets for a
Series.
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If information of the nature described above respecting the Receivables
included in the Base Assets of a Series is not known to the Seller at the time
the Securities of the Series are initially offered, approximate or more general
information of the nature described above will be provided in the related
Prospectus Supplement and additional information will be set forth in a Current
Report on Form 8-K to be available to investors on the date of issuance of the
related Securities and to be filed with the Commission within 15 days after the
initial issuance of such Securities.
CRB SECURITIES
General. Base Assets for a Series may consist, in whole or in part, of
card receivables backed securities ("CRB Securities") consisting of certificates
evidencing an undivided interest in, or notes or loans secured by, Receivables
generated in Accounts. Such certificates, notes or loans will have previously
been offered and distributed to the public pursuant to an effective registration
statement registered under the Securities Act or will be so registered, offered
and distributed concurrently with the offering of the related Series of
Securities. CRB Securities will have been issued pursuant to a pooling and
servicing agreement, a master pooling and servicing agreement, a sale and
servicing agreement, a trust agreement, indenture or similar agreement (a "CRB
Agreement"). The Securities represent an undivided interest in or obligation of
a Trust formed pursuant to a CRB Agreement (a "CRB Trust"). The seller/servicer
of the underlying Receivables will have entered into the CRB Agreement with the
trustee under such CRB Agreement (the "CRB Trustee"). Receivables underlying a
CRB Security will be serviced by a servicer (the "CRB Servicer") directly or by
one or more sub-servicers who may be subject to the supervision of the CRB
Servicer.
The issuer of the CRB Securities (the "CRB Issuer") will be a financial
institution, corporation or other entity engaged generally in the business of
issuing credit or charge cards; any form of store, merchandiser or service
provider that issues credit or charge cards; or a limited purpose corporation
organized for the purpose of, among other things, establishing trusts and
acquiring and selling receivables to such trusts, and selling beneficial
interests in such trusts; or one of such trusts. If so specified in the related
Prospectus Supplement, the CRB Issuer may be an affiliate of the Depositor. The
obligations of the CRB Issuer will generally be limited to certain
representations and warranties with respect to the assets conveyed by it to the
related trust. Unless otherwise specified in the related Prospectus Supplement,
the CRB Issuer will not have guaranteed any of the assets conveyed to the
related trust or any of the CRB Securities issued under the CRB Agreement.
Distributions of principal and interest will be made on the CRB Securities
on the dates specified in the related Prospectus Supplement. The CRB Securities
may be entitled to receive nominal or no principal distributions or nominal or
no interest distributions. Principal and interest distributions will be made on
the CRB Securities by the CRB Trustee or the CRB Servicer. The CRB Issuer or
the CRB Servicer may have the right to repurchase assets underlying the CRB
Securities after a certain date or under other circumstances specified in the
related Prospectus Supplement.
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Underlying Receivables. The Receivables underlying the CRB Securities may
consist of Credit Card Receivables, Charge Card Receivables or other specified
types of Receivables.
Credit Enhancement Relating to CRB Securities. Credit Enhancement in the
form of reserve funds, subordination of other CRB Securities, guarantees,
letters of credit, cash collateral accounts, insurance policies or other types
of Credit Enhancement may be provided with respect to the Receivables underlying
the CRB Securities or with respect to the CRB Securities themselves. The type,
characteristics and amount of Credit Enhancement will be a function of certain
characteristics of the Receivables and other factors and will have been
established for the CRB Securities on the basis of requirements of the
applicable Rating Agencies.
Additional Information. The related Prospectus Supplement for a Series for
which the Base Assets include CRB Securities will specify, to the extent
relevant and to the extent such information is reasonably available to the
Depositor and the Depositor reasonably believes such information to be reliable,
(i) the aggregate approximate principal amount and type of the CRB Securities to
be included in the Base Assets; (ii) certain characteristics of the Receivables
which comprise the underlying assets for the CRB Securities, including (A)
whether such Receivables are Credit Card Receivables, Charge Card Receivables or
other types of Receivables, (B) the fees and charges associated with such
Receivables and (C) the servicing fee or range of servicing fees with respect to
such Receivables; (iii) the expected and final maturity of the CRB Securities;
(iv) the interest rate of the CRB Securities; (v) the CRB Issuer, the CRB
Servicer (if other than the CRB Issuer) and the CRB Trustee for such CRB
Securities; (vi) certain characteristics of the credit enhancement, if any,
relating to the Receivables underlying the CRB Securities or to such CRB
Securities themselves; (vii) the terms on which the underlying Receivables for
such CRB Securities may be, or are required to be, purchased prior to their
stated maturity or the stated maturity of the CRB Securities; and (viii) the
terms on which Receivables may be substituted for those originally underlying
the CRB Securities.
If information of the nature described above representing the CRB
Securities is not known to the Depositor at the time the related Series of
Securities are initially offered, approximate or more general information of the
nature described above will be provided in the related Prospectus Supplement and
the additional information, if available, will be set forth in a Current Report
on Form 8-K to be available to investors on the date of issuance of the related
Series of Securities and to be filed with the Commission within 15 days of the
initial issuance of such Securities.
Collection and Payment Accounts
A separate Collection Account will be established by the Trustee (or, in
the case of a Series that includes Notes, the Indenture Trustee), or by the
Servicer in the name of the Trustee (or the Indenture Trustee), for each Series
of Securities for receipt of the amount of cash, if any, specified in the
related Prospectus Supplement to be initially deposited therein by the
Depositor, all amounts received on or with respect to the Base Assets and,
unless or except to the extent otherwise specified in the related Prospectus
Supplement, any income earned thereon. Certain
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amounts on deposit in such Collection Account and certain amounts available
pursuant to any Series Enhancement, as provided in the related Prospectus
Supplement, will be deposited in one or more related Payment Accounts, which
will also be established by the Trustee (or the Indenture Trustee) for such
Series of Securities, for payment to the related holders of such Securities. The
Trustee (or Indenture Trustee) will invest the funds in the Collection and
Payment Accounts in Eligible Investments maturing, with certain exceptions, in
the case of funds in the Collection Account, not later than the day preceding
the date such funds are due to be deposited in the applicable Payment Account or
otherwise paid, and in the case of funds in a Payment Account, not later than
the day preceding the next Payment Date for the related Class or Classes of
Securities. Eligible Investments include among other investments, obligations of
the United States and certain agencies thereof, federal funds, certificates of
deposits, commercial paper, demand and time deposits and banker's acceptances,
certain repurchase agreements of United States government securities and certain
guaranteed investment contracts, in each case, acceptable to the applicable
Rating Agencies.
From time to time, various other accounts, which may include a Pre-Funding
Account may be created under the terms of the documents related to a specific
Series.
SERIES ENHANCEMENT
General
For any Series or Securities, Series Enhancement may be provided with
respect to one or more Classes thereof. Series Enhancement may consist of
Credit Enhancement (as described below), Ancillary Arrangements (as described
below), or both.
Credit Enhancement in General
"Credit Enhancement" with respect to a Series of Securities or one or more
specific Classes of such Series may take the form of the subordination of one or
more Classes of such Securities to other Classes of such Series, a letter of
credit, the establishment of a cash collateral guaranty or account, a surety
bond, insurance, the use of cross support features or another method of Credit
Enhancement described in the related Prospectus Supplement, or any combination
of the foregoing. If so specified in the related Prospectus Supplement, any
form of Credit Enhancement may be structured so as to be drawn upon by more than
one Class of Securities of a Series to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, any Credit Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Securities and interest thereon. If losses occur which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, holders of Securities will bear their allocable share of
deficiencies.
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If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Credit Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount payable
under such Credit Enhancement may be reduced and under which such Credit
Enhancement may be terminated or replaced and (d) any material provisions of any
agreement relating to such Credit Enhancement. Additionally, the related
Prospectus Supplement may set forth certain information with respect to the
issuer of any third-party Credit Enhancement, 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 which 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 related Prospectus Supplement. If
so specified in the related Prospectus Supplement, the issuer of such third
party Credit Enhancement may have a subordinated interest in the Trust, the
Receivables or certain cash flows in respect of the Receivables to the extent
described in such Prospectus Supplement (the "Enhancement Invested Amount").
Subordination
If so specified in the related Prospectus Supplement, one or more Series of
Securities or one or more Classes of Securities of a Series or one or more
classes of other certificated or uncertificated interests in the assets of a the
related Trust ("Collateral Indebtedness Interests") may be subordinated to one
or more other Series or one or more Classes of such Series. If so specified in
the related Prospectus Supplement, the rights of holders of the subordinated
Securities or Collateral Indebtedness Interests to receive distributions of
principal and/or interest on any Payment Date will be subordinated to such
rights of the holders of the Securities which are senior to such subordinated
Securities to the extent set forth in the related Prospectus Supplement. The
related Prospectus Supplement will also set forth information concerning the
amount of subordination of a Series or Class of subordinated Securities or
Collateral Indebtedness Interests, the circumstances in which such subordination
will be applicable, the manner, if any, in which the amount of subordination
will decrease over time and the conditions under which amounts available from
payments that would otherwise be made to holders of such subordinated Securities
or Collateral Indebtedness Interests will be distributed to holders of
Securities which are senior to such subordinated Securities or Collateral
Indebtedness Interests. The amount of subordination will decrease whenever
amounts otherwise payable to the holders of subordinated Securities or
Collateral Indebtedness Interests are paid to the holders of the Securities
which are senior to such subordinated Securities or Collateral Indebtedness
Interests. If so specified in the related Prospectus Supplement, subordination
may apply only in the event of certain types of losses not covered by another
Credit Enhancement.
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Letter of Credit
If so specified in the related Prospectus Supplement, support for a Series
of Securities or one or more Classes of a Series may be provided by one or more
letters of credit. A letter of credit may provide limited protection against
certain losses in addition to or in lieu of another form of Credit Enhancement.
The issuer of the letter of credit named in the related Prospectus Supplement
(the "L/C Bank") will be obligated to honor demands with respect to such letter
of credit, to the extent of the amount available thereunder, to provide funds
under the circumstances and subject to such conditions as are specified in the
related Prospectus Supplement. The liability of the L/C Bank under its letter
of credit may be reduced by the amount of unreimbursed payments thereunder.
The maximum liability of a L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related Prospectus
Supplement of the initial principal amount of a Series of Securities or a Class
of such Series. The maximum amount available at any time to be paid under a
letter of credit will be determined in the manner specified therein and in the
related Prospectus Supplement.
Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for a Series
of Securities or one or more Classes of a Series may be provided by a guaranty
(a "Cash Collateral Guaranty") secured by the deposit of cash or certain
permitted investments in an account (a "Cash Collateral Account") reserved for
the beneficiaries of the Cash Collateral Guaranty, or by a Cash Collateral
Account alone. Any such Cash Collateral Account will generally take the form of
a cash collateral trust formed pursuant to a trust agreement involving a cash
collateral depositor and a cash collateral trustee. The Cash Collateral
Guaranty will generally be an obligation of the cash collateral trust and not of
the cash collateral depositor, the cash collateral trustee (except to the extent
of amounts on deposit in the Cash Collateral Account), or the related Trustee,
Indenture Trustee, Seller, Servicer or the Depositor. The amount available
pursuant to a Cash Collateral Guaranty or a Cash Collateral Account will be the
lesser of the amount on deposit in the Cash Collateral Account and an amount
specified in the related Prospectus Supplement. The related Prospectus
Supplement will set forth the circumstances under which payments will be made to
beneficiaries of a Cash Collateral Guaranty from the related Cash Collateral
Account or from the Cash Collateral Account directly.
Reserve Account
If so specified in the related Prospectus Supplement, the Depositor may
deposit cash, a letter or letters of credit, short-term investments or other
instruments acceptable to the applicable Rating Agency or Rating Agencies in one
or more reserve accounts (each, a "Reserve Account") to be established in the
name of the Trustee (or the Indenture Trustee). Any such Reserve Account will
be used, as specified in such Prospectus Supplement, by the Trustee (or the
Indenture Trustee) to
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make required payments of principal of or interest on the Securities of the
related Series or one or more Classes thereof, to make adequate provision for
future payments on one or more Classes of such Securities or for any other
purpose specified in the Agreement with respect to such Series, to the extent
that funds are not otherwise available for such purpose. In the alternative or
in addition to such deposit, a Reserve Account for a Series may be funded
through application of all or a portion of the excess cash flow from the Base
Assets for such Series, to the extent described in the related Prospectus
Supplement. If applicable, the initial amount of the Reserve Account and the
Reserve Account maintenance requirements for a Series will be described in the
related Prospectus Supplement. Amounts deposited in a Reserve Account will be
invested by the Trustee (or the Indenture Trustee) in Eligible Investments
meeting certain specified maturity criteria.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, Credit Enhancement
for a Series or one or more Classes of Securities of a Series may be provided by
the issuance of insurance by one or more insurance companies. Such insurance
will guarantee distributions of interest or principal on the affected Securities
in the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, Credit Enhancement
for a Series or one or more Classes of Securities of a Series may take the form
of a surety bond purchased for the benefit of the holders of such Securities to
assure distributions of interest or principal with respect to such Securities in
the manner and amount specified in the related Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes of Securities of a Series may be provided by the periodic
deposit of certain available excess cash flow from the Trust assets into an
account (the "Spread Account") intended to assure the subsequent distribution of
interest and principal on such Securities in the manner specified in the related
Prospectus Supplement.
Ancillary Arrangements
If so specified in the related Prospectus Supplement, the Trust may enter
into one or more derivative arrangements that are related to or incidental to
one or more of the Base Assets for a Series ("Ancillary Arrangements"). Such
Ancillary Arrangements may take the form of guaranteed rate agreements, maturity
liquidity facilities, tax protection agreements, interest rate cap, floor or
collar agreements, interest rate or currency swap agreements or other similar
arrangements. If so specified in the related Prospectus Supplement, such
Ancillary Arrangements may be entered into with the Depositor or an affiliate
thereof. The related Prospectus Supplement will to the extent appropriate
contain analogous disclosure with respect to any such Ancillary Arrangements as
is set forth herein or in such Prospectus Supplement with respect to the Base
Assets.
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SERVICING OF RECEIVABLES
General
Customary servicing functions with respect to any Receivables included in
the Base Assets for a Series or underlying any Participations included therein
will be provided by the Servicer named in the related Prospectus Supplement
pursuant to the related Agreement. In general, comparable servicing functions
will be performed by the CRB Servicer with respect to the Receivables underlying
any CRB Securities included in the Base Assets.
Collection Procedures
The Servicer will make reasonable efforts to collect all payments required
to be made under the Accounts and will, consistent with the terms of the related
Agreement for a Series and any applicable Credit Enhancement, follow such
collection procedures as it follows with respect to comparable receivables held
in its own portfolio.
Deposits to the Collection Account
Unless otherwise specified in the related Prospectus Supplement and subject
to certain exceptions that will be described therein, the Servicer will deposit
any collections on the Receivables in a Monthly Period (which period will be
defined for each Servicer in the related Prospectus Supplement) into the
Collection Account within two business days of the Date of Processing (or, in
the case of Interchange, on each Distribution Date) to the extent such
collections are allocable to the Certificateholders' Interest of any Series and
are required to be deposited into an account for the benefit of, or distributed
to, the Certificateholders of any Series or the issuer of any Series
Enhancement. In certain limited circumstances, the Servicer will not be
required to segregate, and will be permitted to use for its own benefit
collections on the Receivables received by it during each Monthly Period until
the related Distribution Date. The "Distribution Date" for each calendar month
will be specified in the Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement and subject to certain exceptions that will be
described therein, on the earlier of (i) the second business day following the
Date of Processing and (ii) the day on which the Servicer deposits any
collections into the Collection Account, the Servicer will pay to the Seller its
allocable portion of any collections then held by the Servicer. The "Date of
Processing" will generally be the business day on which a record of any
transaction is first recorded on the Servicer's computer file of consumer
revolving accounts (without regard to the effective date of such recordation).
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will establish the Collection Account in the name of the Trustee (or,
for a Series that includes Notes, the Indenture Trustee). Unless otherwise
indicated in the related Prospectus Supplement, the Collection Account will be
an account maintained (i) at a depository institution, the long-term
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unsecured debt obligations of which at the time of any deposit therein are rated
as described in the related Prospectus Supplement and as specified by the Rating
Agencies rating the Securities of such Series or (ii) in an account or accounts
the deposits in which are insured to the maximum extent available by the FDIC or
which are secured in a manner meeting requirements established by such Rating
Agencies.
Unless otherwise specified in the related Prospectus Supplement, the funds
held in the Collection Account may be invested, pending remittance to the
Trustee (or the Indenture Trustee), in Eligible Investments. If so specified in
the related Prospectus Supplement, the Servicer will be entitled to receive as
additional compensation any interest or other income earned on funds in the
Collection Account. The related Prospectus Supplement will describe the
obligations of the Servicer (if different from those described above), the
Seller, the Trustee, the Indenture Trustee and/or the Depositor to deposit
certain payments and/or collections received by them in respect of the Trust
assets into the Collection Account. In addition, to the extent so provided in
the related Prospectus Supplement, if the Servicer deposits in the Collection
Account for a Series any amount not required to be deposited therein, it may, at
any time, withdraw such amount from such Collection Account.
Servicing Compensation and Payment Of Expenses
Except as otherwise provided in the related Prospectus Supplement, the
Servicer will be entitled to receive a servicing fee in an amount to be
determined as specified in the related Prospectus Supplement (the "Servicing
Fee"). The Servicing Fee may be fixed or variable, as specified in the related
Prospectus Supplement.
As specified in the related Prospectus Supplement, the Servicer may be
required to pay certain expenses incurred in connection with the servicing of
the Receivables including, without limitation, the payment of the fees and
expenses of the Trustee (and Indenture Trustee) and independent accountants,
payment of the cost of any Series Enhancement and payment of expenses incurred
in preparation of reports to holders of Securities. To the extent specified in
the related Prospectus Supplement, the rights of the Servicer to receive funds
from the Collection Account for a Series, whether as the Servicing Fee or other
compensation, or for the reimbursement of expenses or otherwise, may be
subordinate to the rights of holders of the Securities of such Series.
Evidence as to Compliance
The Pooling Agreement for a Series may provide that, each year, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that such firm has examined certain documents and records relating to the
servicing of the Receivables by the Servicer and that, on the basis of such
examination, such firm is of the opinion that the servicing has been conducted
in compliance with the Pooling Agreement, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other exceptions as are set forth
in such statement. The Pooling Agreement for a Series will provide for delivery
to the Trustee for such Series of an annual
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statement signed by an officer of the Servicer to the effect that the Servicer
has fulfilled its obligations under the Pooling Agreement throughout the
preceding calendar year. Comparable statements and reports may be required to be
delivered to the Indenture Trustee pursuant to any Indenture relating to such
Series.
Certain Matters Regarding the Servicer
Any Servicer for a Series will be identified in the related Prospectus
Supplement. The Servicer may be an affiliate of the Seller or the Depositor and
may have other business relationships with the Seller, the Depositor or their
respective affiliates.
If certain events (each a "Servicer Default") occur with respect to the
Servicer under an Agreement, the related Trustee (or a specified percentage of
the holders of Securities as set forth in the related Prospectus Supplement) may
terminate the Servicer, in which case the Trustee will appoint a successor
Servicer. Unless otherwise specified in the related Prospectus Supplement,
Servicer Defaults and the rights of the Trustee and the holders of Securities
upon the occurrence of a Servicer Default under the Agreement for a Series will
be substantially similar to those described under "DESCRIPTION OF THE TRUST OR
POOLING AGREEMENT -- Servicer Defaults" and "-- Rights upon Servicer Defaults".
Unless otherwise provided in the related Prospectus Supplement, the
Servicer may not resign from its obligations and duties under the Agreement,
except (a) upon determination that (i) the performance of its duties under the
Agreement is no longer permissible under applicable law and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law, (b) in connection with a
conveyance, consolidation or merger by the Servicer with any corporation, or
conveyance or transfer of its properties or assets substantially as an entirety
to any other person permitted under the Agreement or (c) upon the satisfaction
of the following conditions: (i) the acceptance and assumption, by an agreement
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, of the obligations and duties of the Servicer
thereunder by a proposed successor Servicer, (ii) the Servicer having given
written notice to each applicable Rating Agency of such transfer and each such
Rating Agency having notified the Servicer in writing to the effect
that its then current rating of the Securities of any Series will not be reduced
or withdrawn as a result of such transfer, (iii) the provider of Credit
Enhancement, if any, having consented in writing to such transfer (such consent
not to be unreasonably withheld) and (iv) the proposed successor Servicer being
an Eligible Servicer (as defined below). Notwithstanding anything in the
Pooling Agreement to the contrary, any successor Servicer appointed under clause
(c) will be deemed to be a successor Servicer. Any such determination
permitting the resignation of the Servicer will be evidenced as to clause (a)
above by an opinion of counsel to such effect delivered to the Trustee. No such
resignation will become effective until the Trustee or a successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with the Pooling Agreement.
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"Eligible Servicer" means the Trustee (or the Indenture Trustee) or an
entity which, at the time of its appointment as Servicer (i) is an established
financial institution having capital or a net worth of not less than
$100,000,000, (ii) is servicing a portfolio of consumer credit card or charge
card accounts, (iii) is legally qualified and has the capacity to service the
Accounts, (iv) has demonstrated the ability to professionally and completely
service a portfolio of similar accounts in accordance with standards of skill
and care customary in the industry and (v) is qualified to use the software that
is then currently being used to service the Accounts or obtains the right to use
or has its own software which is adequate to perform its duties under the
Pooling Agreement.
Indemnification
Except to the extent otherwise provided therein, each Pooling Agreement
will provide that the Servicer will indemnify the Trust, the Trustee and the
holders of all Securities of a Series from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of activities of the Servicer with
respect to the Trust or the Trustee or any co-trustee pursuant to the Pooling
Agreement, including those arising from acts or omissions of the Servicer
pursuant to the Pooling Agreement, including but not limited to any judgment,
award, settlement, reasonable attorneys' fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim; provided, however, that the Servicer shall not indemnify:
(i) the Trust or the Trustee if such acts, omissions or alleged acts or
omissions constitute fraud, gross negligence, breach of fiduciary duty or
misconduct by the Trustee; (ii) the Trust, the Trustee or the holders of such
Securities for any liability, cost or expense of the Trust with respect to any
action taken by the Trust at the request of such holders in accordance with the
Pooling Agreement or with respect to any Federal, state or local income or
franchise taxes (or any interest or penalties with respect thereto) required to
be paid by the Trust or such holders to any taxing authority; or (iii) the Trust
or such holders for any losses incurred by any of them as a result of defaulted
Receivables or Receivables which are written off as uncollectible unless such
write-off is caused by a breach of the Pooling Agreement by the Servicer.
Subject to certain exceptions in the Pooling Agreement, any indemnification
pursuant to the Pooling Agreement will be only from the assets of the Servicer.
DESCRIPTION OF THE NOTES
General
The following summaries describe certain provisions in the Indentures which
are anticipated to be common to any Notes included in a Series of Securities.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the provisions of the related
Notes, Indenture and Prospectus Supplement. Where particular provisions or
terms used in such Notes or Indentures are referred to herein,
the actual provisions (including definitions of terms) are incorporated herein
by reference as part of such summaries.
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The Notes included in any Series will be issued in one or more Classes.
The Notes will only be issued in fully registered form, without coupons, in the
authorized denominations for each Class specified in the related Prospectus
Supplement. Upon satisfaction of the conditions, if any, applicable to a Class
of Notes of a Series, as described in the related Prospectus Supplement, the
transfer of the Notes may be registered, and the instruments evidencing such
Notes may be exchanged, at the office of the registrar (which may be the
Indenture Trustee) appointed from time to time pursuant to the Indenture (the
"Registrar") without the payment of any service charge other than any tax or
governmental charge payable in connection with such registration of transfer or
exchange. If specified in the related Prospectus Supplement, one or more
Classes of Notes of a Series may be available in book-entry form only.
Unless otherwise provided in the related Prospectus Supplement, payments of
principal of and interest on the Notes of a Series will be made on the dates
specified in the related Prospectus Supplement (the "Payment Dates") by check
mailed to holders of such Notes, registered as such at the close of business on
the record date applicable to such Payment Dates at their addresses appearing on
the register of Notes for such Series, except that (a) payments may be made by
wire transfer (at the expense of the Noteholder requesting payment by wire
transfer) in certain circumstances described in the related Prospectus
Supplement and (b) final payments of principal in retirement of any Note will be
made only upon presentation and surrender of such Note at the office of the
Indenture Trustee specified in the related Prospectus Supplement. Notice of the
final payment on a Note will be mailed to the holder of such Note before the
Payment Date on which the final principal payment on any Note is expected to be
made to the holder of such Note.
Payments of principal of and interest on the Notes will be made by the
Indenture Trustee, or a paying agent provided for under the Indenture, as
specified in the related Prospectus Supplement.
Payments of Interest and Principal
Unless otherwise specified in the related Prospectus Supplement, each Class
of Notes of a Series will have a stated principal amount and will bear interest
at a specified Interest Rate. Each Class of Notes may have a different Interest
Rate, which may be fixed, variable or an adjustable Interest Rate, or any
combination of the foregoing. The Notes included in any Series may include one
or more Classes of Notes entitled to (i) principal payments with
disproportionate, nominal or no interest payments or (ii) interest payments with
disproportionate, nominal or no principal payments. The related Prospectus
Supplement will specify the Interest Rate for each Class of Notes or the method
for determining such Interest Rate. The right of holders of any Class of Notes
to receive payments of principal and interest may be senior or subordinate to
the rights of holders of one or more other Class or Classes of Notes of such
Series, as described in the related Prospectus Supplement. Unless otherwise
provided in such Prospectus Supplement, payments of interest on Notes will be
made prior to payments of principal thereon.
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One or more Classes of Notes of a Series may be redeemable in whole or in
part under the circumstances specified in the related Prospectus Supplement,
including as the result of the exercise by the Servicer, the Seller or the
Depositor of any option that it may have to purchase the Base Assets of the
related Trust. To the extent specified in the related Prospectus Supplement,
one or more Classes of Notes of a Series may have fixed principal payment
schedules as set forth therein. Holders of Notes will have the right to receive
payments of principal on any given Payment Date in the applicable amount set
forth in such schedule with respect to such Notes. Notes may also be subject to
prepayment of principal to the extent set forth in the related Prospectus
Supplement.
With respect to a Series that includes two or more Classes of Notes, each
Class may differ as to the timing and priority of payments, seniority,
allocations of losses, Interest Rates or amount of payments of principal or
interest, and payments of principal or interest in respect of any such Class or
Classes may be subject to the occurrence of specified events or may be made on
the basis of collections from designated portions of the Base Assets.
CERTAIN PROVISIONS OF THE INDENTURE
Events of Default; Rights upon Event of Default. Unless otherwise
specified in the related Prospectus Supplement, "Events of Default" in respect
of a Series of Notes under the related Indenture will consist of: (i) a default
for five days or more in the payment of any interest on any such Note: (ii) a
default in the payment of the principal of, or any installment of the principal
of, any such Note when the same becomes due and payable; (iii) a default by the
related Trust in the observance or performance in any material respect of any
covenant or agreement made in such Indenture and the continuation of any such
default for a period of 30 days after notice thereof is given to the related
Trust by the applicable Indenture Trustee or to such Trust and the related
Indenture Trustee by the holders of 25% of the aggregate outstanding principal
amount of such Notes; (iv) any representation or warranty made by such Trust in
the related Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in any material respect as of the
time made, if such breach is not cured with 30 days after notice thereof is
given to such Trust by the applicable Indenture Trustee or to such Trust and
such Indenture Trustee by the holders of 25% of the aggregate outstanding
principal amount of such Notes; and (v) certain events of bankruptcy,
insolvency, receivership or liquidation with respect to such Trust. The amount
of principal required to be paid to Noteholders of each Series under the related
Indenture on any Payment Date generally will be limited to amounts available to
be deposited in the applicable Payment Account; therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a Class of Notes generally will not result in the occurrence of an Event of
Default until the applicable final scheduled Payment Date for such Class of
Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
Series, the related Indenture Trustee or holders of a majority in principal
amount of such Notes may declare the principal of
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such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of such Notes then outstanding. If the Notes of any Series are declared
due and payable following an Event of Default, the related Indenture Trustee may
institute proceedings to collect amounts due thereon, foreclose on the property
of the Trust, exercise remedies as a secured party, sell the related Base Assets
or elect to have the applicable Trust maintain possession of such Base Assets
and continue to apply collections on such Base Assets as if there had been no
declaration of acceleration. Unless otherwise specified in the related
Prospectus Supplement, however, the Indenture Trustee will be prohibited from
selling the Base Assets following an Event of Default, other than a default in
the payment of any principal of, or a default for five days or more in the
payment of any interest on, any Note of such Series, unless (i) the holders of
all such outstanding Notes consent to such sale, (ii) the proceeds of such sale
are sufficient to pay in full the principal of and the accrued and unpaid
interest on such outstanding Notes at the date of such sale or (iii) such
Indenture Trustee determines that the proceeds of the Base Assets would not be
sufficient on an ongoing basis to make all payments on such Notes as such
payments would become due if such obligations had not been declared due and
payable, and such Indenture Trustee obtains the consent of the holders of
66-2/3% of the aggregate outstanding principal amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a Series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders of such Notes if it reasonably
believes it will not be adequately indemnified against the costs, expenses and
liabilities that might be incurred by it in complying with such request.
Subject to the provisions for indemnification and certain limitations contained
in the related Indenture, the holders of a majority of the aggregate outstanding
principal amount of the Notes of a Series will have the right to direct the
time, method and place of conducting any proceeding or exercising any remedy
available to the related Indenture Trustee; in addition, the holders of Notes
representing a majority of the aggregate outstanding principal amount of such
Notes may, in certain cases, waive any default with respect thereto, except a
default in the payment of principal of or interest on any Note or a default in
respect of a covenant or provision of such Indenture that cannot be modified or
amended without the waiver or consent of the holders of all the outstanding
Notes of such Series.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note will have the right to institute any proceeding with respect to the
related Indenture, unless (i) such holder previously has given to the applicable
Indenture Trustee written notice of a continuing Event of Default; (ii) the
holders of not less than 25% of the outstanding principal amount of such Notes
have made written request to such Indenture Trustee to so institute such
proceeding in its own name as Indenture Trustee; (iii) such holder or holders
have offered such Indenture Trustee reasonable indemnity; (iv) such Indenture
Trustee has for 60 days failed to institute such proceeding; and (v) no
direction inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority of the
outstanding principal amount of the Notes of such Series.
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With respect to any Series of Securities that includes Notes, none of the
related Indenture Trustee in its individual capacity, the related Trustee in its
individual capacity, any holder of a Certificate representing an ownership
interest in such Trust or any other holder of an interest in such Trust, or any
of their respective beneficiaries, agents, officers, directors, employees,
affiliates, successors or assigns will, in the absence of an express agreement
to the contrary, be personally liable for the payment of the principal of or
interest on the related Notes or for the agreements of such Trust contained in
the related Indenture.
No Trust may engage in any activity other than as described herein or in
the related Prospectus Supplement. Except as may be provided in the related
Prospectus Supplement, no Trust will incur, assume or guarantee any indebtedness
other than indebtedness incurred pursuant to the related Notes and the related
Indenture.
Certain Covenants. Unless otherwise specified in the related Prospectus
Supplement, each Indenture will provide that the related Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States, any state of the United States or the District of Columbia; (ii)
such entity expressly assumes such Trust's obligation to make due and punctual
payments upon the Notes of the related Series and to perform or observe every
agreement and covenant of such Trust under the Indenture; (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation; (iv) such Trust has been advised by each Rating Agency that such
merger or consolidation will not result in the qualification, reduction or
withdrawal of its then-current rating of any Class of the Notes or Certificates
of such Series; and (v) such Trust has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any related Noteholder or Certificateholder.
No Trust relating to a Series of Securities that includes Notes will (i)
except as expressly permitted by the applicable Indenture, the applicable Trust
Agreement or Pooling Agreement or certain other documents with respect to such
Trust (the "Related Documents"), sell, transfer, exchange or otherwise dispose
of any of the assets of such Trust; (ii) claim any credit on or make any
deduction from principal and interest payments in respect of the related Notes
(other than amounts withheld under the Code or applicable state tax laws) or
assert any claim against any present or former holder of such Notes because of
the payment of taxes levied or assessed upon such Trust; (iii) dissolve or
liquidate in whole or in part; (iv) permit the validity or effectiveness of the
related Indenture to be impaired or permit any person to be released from any
covenants or obligations with respect to the related Notes under such Indenture
except as may be expressly permitted thereby; (v) permit any lien, charge,
excise, claim, security interest, mortgage, or other encumbrance to be created
on or extend to or otherwise arise upon or burden the assets of such Trust or
any part thereof, or any interest therein or the proceeds thereof; or (vi)
permit the lien of the related Indenture not to constitute a valid first
priority security interest (other than with respect to a tax, mechanics' or
similar lien) in the assets of such Trust.
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Each Indenture Trustee and the related Noteholders, by accepting the
related Notes, will covenant that they will not at any time institute against
the applicable Trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
Modification of Indenture. The Trust and the related Indenture Trustee
may, with the consent of the holders of a majority of the aggregate outstanding
principal amount of the Notes of the related Series, execute a supplemental
indenture to add provisions to, change in any manner or eliminate any provisions
of, the related Indenture, or modify (except as provided below) in any manner
the rights of the related Noteholders, provided that, unless otherwise specified
in the related Prospectus Supplement, without the consent of the holder of each
outstanding Note affected thereby, no supplemental indenture will: (i) change
the due date of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any such Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such Series, the
consent of the holders of which is required for any such supplemental indenture
or for any waiver of compliance with certain provisions of the related Indenture
or of certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor on
such Notes, the Seller or an affiliate of any of them; (v) reduce the percentage
of the aggregate outstanding amount of such Notes, the consent of the holders of
which is required to direct the related Indenture Trustee to sell or liquidate
the Base Assets in the Trust if the proceeds of such sale would be insufficient
to pay the principal amount and accrued and unpaid interest on the outstanding
Notes of such Series; (vi) decrease the percentage of the aggregate principal
amount of such Notes required to amend the sections of the related Indenture
that specify the percentage of the aggregate principal amount of the Notes of
such Series necessary to amend such Indenture or certain other related
agreements; or (vii) permit the creation of any lien ranking prior to or on a
parity with the lien of the related Indenture with respect to any of the
collateral for such Notes or, except as otherwise permitted or contemplated in
such Indenture, terminate the lien of such Indenture on any such collateral or
deprive the holder of any such Note of the security afforded by the lien of
such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the related Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
Series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
Annual Compliance Statement. Each Trust for a Series of Securities that
includes Notes will be required to file annually with the related Indenture
Trustee a written statement as to the fulfillment of its obligations under the
related Indenture.
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Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
for a Series of Securities that includes Notes will be required to mail each
year to all related Noteholders a brief report relating to its eligibility and
qualification to continue as Indenture Trustee under the related Indenture, any
amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by such Trust to the applicable
Indenture Trustee in its individual capacity, the property and funds physically
held by such Indenture Trustee as such and any action taken by it that
materially affects the related Notes that has not been previously reported.
Satisfaction and Discharge of Indenture. Each Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
The Indenture Trustee
The Indenture Trustee for a Series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any Series may resign
at any time, in which event the related Trust will be obligated to appoint a
successor indenture trustee for such Series. The Trust may also remove the
related Indenture Trustee if such Indenture Trustee ceases to be eligible to
continue as such under the related Indenture or if such Indenture Trustee
becomes insolvent. In such circumstances, such Trust will be obligated to
appoint a successor indenture trustee for the applicable Series of Notes. No
resignation or removal of the Indenture Trustee and appointment of a successor
indenture trustee for a Series of Notes will become effective until the
acceptance of the appointment by the successor indenture trustee for such
Series.
DESCRIPTION OF THE CERTIFICATES
General
The following summaries describe certain provisions in the Agreements which
generally are anticipated to be common to the Certificates of each Series, as
well as certain provisions of the Pooling Agreement which are anticipated to be
common to Series consisting of Receivables only Certificates. 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 Prospectus Supplement and
Agreement relating to each Series of Certificates. Where particular provisions
or terms used in such Certificates or Agreements are referred to herein, the
actual provisions (including definitions of terms) are incorporated herein by
reference as part of such summaries.
Unless otherwise specified in the related Prospectus Supplement, each Class
of Certificates will have an original principal amount and will accrue interest
on such original principal amount at a specified Pass-Through Rate. Each Class
of Certificates may have a different Pass-Through
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Rate, which may be a fixed, variable or adjustable Pass-Through Rate, or any
combination of the foregoing. The related Prospectus Supplement will specify the
Pass-Through Rate, or the method for determining the applicable Pass-Through
Rate, for each Class of Certificates.
A Series of Securities may include two or more Classes of Certificates that
differ as to timing and priority of distributions, seniority, allocations of
losses, Pass-Through Rate or amount of distributions in respect of principal or
interest. Additionally, distributions in respect of principal or interest in
respect of any such Class or Classes may or may not be made upon the occurrence
of specified events or on the basis of collections from designated portions of
the related Base Assets. If specified in the related Prospectus Supplement, one
or more Classes of Certificates may be Strip Certificates. If a Series of
Securities includes Classes of Notes, distributions in respect of the
Certificates may be subordinated in priority of payment to payments on the Notes
to the extent specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
Certificates will be available for purchase in a minimum denomination of
$100,000 and in integral multiples of $1,000 in excess thereof and will be
available in book-entry form only. Unless otherwise specified in the related
Prospectus Supplement, Certificateholders will be able to receive Definitive
Certificates only in the limited circumstances described herein or in the
related Prospectus Supplement. The Certificates of each Series will be issued
only in fully registered form, without coupons, in the authorized denominations
for each Class specified in the related Prospectus Supplement. Upon
satisfaction of the conditions, if any, applicable to a Class of Certificates of
a Series, as described in the related Prospectus Supplement, the transfer of the
Certificates may be registered and the Certificates may be exchanged at the
office of the Trustee specified in the related Prospectus Supplement without the
payment of any service charge other than any tax or governmental charge payable
in connection with such registration of transfer or exchange.
Unless otherwise provided in the related Prospectus Supplement, payments of
principal of and interest on the Certificates of a Series will be made on the
dates specified in the related Prospectus Supplement (the "Payment Dates") by
check mailed to Certificateholders of such Series, registered as such at the
close of business on the record date applicable to each Payment Date at their
addresses appearing on the register of Certificates for such Series, except that
(a) payments may be made by wire transfer (at the expense of the
Certificateholder requesting payment by wire transfer) in certain circumstances
described in the related Prospectus Supplement and (b) final payments of
principal in retirement of any Certificate will be made only upon presentation
and surrender of such Certificate at the office of the Trustee specified in the
related Prospectus Supplement. Notice of the final payment on a Certificate
will be mailed to the holder of such Certificate before the Payment Date on
which the final principal payment on any Certificate is expected to be made to
the holder of such Certificate.
Payments of principal of and interest on the Certificates will be made by
the Trustee, or a paying agent on behalf of the Trustee, as specified in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, all payments with respect to the Base
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Assets for a Series, together with reinvestment income thereon, amounts
withdrawn from any Reserve Account and amounts available pursuant to any other
Series Enhancement will be deposited directly into the Collection Account net
(if and as provided in the related Prospectus Supplement) of certain amounts
payable to the Servicer under the related Agreement and specified in the related
Prospectus Supplement, and will thereafter be deposited into the applicable
Payment Accounts and be available to make payments on Certificates of such
Series on the next Payment Date, as the case may be. See "THE TRUST ASSETS --
Collection and Payment Accounts" .
PAYMENTS OF INTEREST
The Certificates of each Class which by their terms are entitled to receive
interest will bear interest (calculated, unless otherwise specified in the
related Prospectus Supplement, on the basis of a 360-day year of twelve 30-day
months) from the date and at the rate per annum specified, or calculated in the
method described, in the related Prospectus Supplement. Interest on such
Certificates of a Series will be payable on the Payment Dates specified in the
related Prospectus Supplement. The rate of interest on one or more Classes of
Certificates of a Series may be floating. A Class of Certificates may by its
terms be "Principal Only Certificates", which may not be entitled to receive any
interest distributions or may be entitled to receive only nominal interest
distributions. A Class of Certificate may by its terms be "Zero Coupon
Certificates", the interest on which is not paid on the related Payment Date,
but will accrue and be added to the principal thereof on such Payment Date.
Interest payable on the Certificates on a Payment Date will include all
interest accrued during the related period specified in the related Prospectus
Supplement. In the event interest accrues during the calendar month preceding a
Payment Date, the effective yield to Certificateholders will be reduced from the
yield that would otherwise be obtainable if interest payable on the Certificates
were to accrue through the day immediately preceding such Payment Date.
PAYMENTS OF PRINCIPAL
On each Payment Date for Certificates of a Series, principal payments will
be made to the holders of such Certificates on which principal is then payable,
to the extent set forth in the related Prospectus Supplement. Such payments
will be made in an aggregate amount determined as specified in the related
Prospectus Supplement and will be allocated among the respective Classes of a
Series in the manner, at the times and in the priority (which may, in certain
cases, include allocation by random lot) set forth in the related Prospectus
Supplement.
With respect to each Class of Certificates not issued pursuant to a Pooling
Agreement, a "Final Scheduled Payment Date" will be specified in the related
Prospectus Supplement, which will be the date (calculated on the basis of the
assumptions applicable to such Series described therein) on which the entire
aggregate principal balance of such Class is expected to be reduced to zero.
Because payments received on the Base Assets will generally be used to make
distributions in reduction of the outstanding principal amounts of such
Certificates, it is likely that
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the final principal payment with respect to a Class of Certificates will occur
earlier, and may occur substantially earlier than its Final Scheduled Payment
Date.
RECEIVABLES POOLING CERTIFICATES
Certificateholders' Interest; Seller's Interest. In the case of a Series
of Receivables Pooling Certificates, a portion of the assets of the related
Trust will be allocated among the Certificateholders' Interest and the remainder
will be allocated to the Seller's Interest and as otherwise provided in the
related Prospectus Supplement. The Seller's Interest represents the rights to
the assets of the Trust not allocated to the Certificateholders' Interest of any
Series or any interests in the Trust issued as Series Enhancement. In the case
of a master Trust, the related Seller may cause the issuance of additional
Series of Certificates from time to time and any such issuance will have the
effect of decreasing the Seller's Interest. The Seller's Interest may be
evidenced by an exchangeable certificate that is subject to certain transfer
restrictions. The aggregate principal amount of the Certificateholders' Interest
will, except as provided herein or in the related Prospectus Supplement, remain
fixed at the aggregate initial principal amount of the Certificates of such
Series and the principal amount of the Seller's Interest will fluctuate as the
amount of the Principal Receivables held by the Trust changes from time to time.
If so provided in the related Prospectus Supplement, in certain circumstances,
interests in the assets of a Trust may be allocated to a Credit Enhancer, and in
the case of a master Trust interests in the assets of the Trust may be allocated
to the Certificateholders of more than one Series.
Issuance of Additional Series. Unless otherwise provided in the related
Prospectus Supplement, in the case of a master Trust, the related Pooling
Agreement will provide that pursuant to one or more supplements to such Pooling
Agreement (each, a "Supplement"), the related Seller may cause the related
Trustee to issue one or more new Series of Certificates and accordingly cause a
reduction in the Seller's Interest represented by the Seller's Certificate.
Under such Pooling Agreement, such Seller may define, with respect to any
Series, the principal terms of such Series. A new Series will only be issued
upon satisfaction of certain conditions including, among others, that (a) the
Seller shall have received written notice from each Rating Agency that such
issuance will not have a Ratings Effect and (b) the Seller shall have delivered
to the Trustee and certain providers of Series Enhancement a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at the time, in the reasonable belief of the Seller, such issuance will not at
the time of its occurrence cause a Pay Out Event or an event that, after the
giving of notice or the lapse of time, would constitute a Pay Out Event, to
occur with respect to any Series and (c) as otherwise provided in the related
Prospectus Supplement.
Allocation Percentage. Pursuant to the Agreement, all amounts collected
with respect to Finance Charge Receivables and Principal Receivables and the
Defaulted Amount with respect to any Monthly Period will be allocated among the
Certificateholders' Interest of each Series and the Seller's Interest, and all
Adjustment Payments and Deposit Amounts deposited in the Collection Account
(collectively, "Miscellaneous Payments") with respect to any Monthly Period will
be allocate among the Certificateholders' Interest of each Series, as follows:
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(a) collections of Finance Charge Receivables and the Defaulted Amount will
at all times be allocated to the Certificateholders' Interest of a
Series based on the Floating Allocation Percentage of such Series;
(b) collections of Principal Receivables will at all times be allocated to
the Certificateholders' Interest of a Series based on the Principal
Allocation Percentage of such Series; and
(c) miscellaneous Payments will at all times be allocated among the
Certificateholder's Interest of each Series based on their respective
Invested Amounts.
The "Floating Allocation Percentage" and the "Principal Allocation Percentage"
with respect to any Series will be determined as set forth in the related
Supplement and, with respect to each Series offered hereby, in the related
Prospectus Supplement. Amounts not allocated to the Certificateholders'
Interest of any Series as described above will be allocated to the Seller's
Interest.
Collections. All collections of Receivables with respect to a given Trust
will be allocated by the related Servicer as amounts collected on Principal
Receivables and on Finance Charge Receivables. The Servicer will allocate
between the Certificateholders' Interest of each Series (if more than one) of
such Trust and the Seller's Interest all amounts collected with respect to
Finance Charge Receivables and Principal Receivables and the Defaulted Amount.
The "Defaulted Amount" for any Monthly Period will be an amount (not less than
zero) equal to (a) the amount of Principal Receivables which were charged off as
uncollectible in such Monthly Period in accordance with the Servicer's customary
and usual servicing procedures ("Defaulted Receivables") for such Monthly Period
minus (b) the sum of (i) the amount of any Defaulted Receivables of which either
the Seller or the Servicer becomes obligated to accept reassignment or
assignment during such Monthly Period (unless an Insolvency Event shall have
occurred with respect to the Seller or the Servicer, in which event the amount
of such Defaulted Receivables will not be added to the sum so subtracted), (ii)
the aggregate amount of recoveries (net of collection expenses) received in such
Monthly Period with respect to both Finance Charge Receivables and Principal
Receivables previously charged off as uncollectible and (iii) the excess, if
any, for the immediately preceding Monthly Period of the sum computed pursuant
to this clause (b) for such Monthly Period over the amount of Principal
Receivables which became Defaulted Receivables in such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount will be
allocated to each such Series at all times based upon its Floating Allocation
Percentage. Collections of Principal Receivables will be allocated to each such
Series at all times based upon its Principal Allocation Percentage. The
Floating Allocation Percentage and the Principal Allocation Percentage with
respect to each such Series will be determined as set forth in the related
Supplement and, with respect to each such Series offered hereby, in the related
Prospectus Supplement. Collections will be deposited in the related Collection
Account and invested in the manner described under "SERVICING OF RECEIVABLES --
Deposits in the Collection Account".
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Interest. Interest will accrue on the Invested Amount of the Receivables
Pooling Certificates of a Series or Class offered hereby at the per annum rate
either specified in or determined in the manner specified in the related
Prospectus Supplement. If the Prospectus Supplement for a Series of Receivables
Pooling Certificates so provides, the interest rate and interest payment dates
applicable to each Class of Certificates of that Series may be subject to
adjustment from time to time. Any such interest rate adjustment would be
determined by reference to one or more indices or by a remarketing firm, in each
case as described in the Prospectus Supplement for such Series. Except as
otherwise provided herein or in the related Prospectus Supplement, collections
of Finance Charge Receivables and certain other amounts allocable to the
Certificateholders' Interest of a Series offered hereby will be used to make
interest payments to Certificateholders of such Series on each Interest Payment
Date with respect thereto, provided that if a Rapid Amortization Period
commences with respect to such Series, thereafter interest will be distributed
to such Certificateholders monthly on each Special Payment Date. If the
Interest Payment Dates for a Series or Class occur less frequently than monthly,
collections or other amounts (or the portion thereof allocable to such Class)
will be deposited in one or more Interest Funding Accounts and used to make
interest payments to Certificateholders of such Series or Class on the following
Interest Payment Date with respect thereto. If a Series has more than one Class
of Receivables Pooling Certificates, each such Class may have a separate
Interest Funding Account.
Principal. The principal of any Receivables Pooling Certificates will be
scheduled to be paid either in full on the related Expected Final Payment Date,
in which case such Series will have an Accumulation Period as described below
under " -- Accumulation Period", or in installments commencing on the related
Principal Commencement Date, in which case such Certificates will have a
Controlled Amortization Period as described below under " -- Controlled
Amortization Period". If such a Series has more than one Class of Certificates,
a different method of paying principal, Expected Final Payment Date and/or
Principal Commencement Date may be assigned to each Class. The principal with
respect to the Certificates of such a Series or Class may be made or commence
earlier than the applicable Expected Final Payment Date or Principal
Commencement Date, as the case may be, and the final principal payment with
respect to the Certificates of such Series or Class may be made earlier or later
than the applicable Expected Final Payment Date or Principal Commencement Date,
if a Pay Out Event occurs with respect to such Series or Class or under certain
other circumstances described herein or in the related Prospectus Supplement.
Revolving Period. In the case of Receivables Pooling Certificates, such
Certificates will have a Revolving Period, which will commence on the date
specified in the related Prospectus Supplement as the Series Cut-Off Date and
continue until the earlier of (a) the commencement of the Rapid Amortization
Period with respect to such Series and (b) the date specified in the related
Prospectus Supplement as the last day of the Revolving Period with respect to
such Series. During the Revolving Period with respect to such Series,
collections of Principal Receivables and certain other amounts otherwise
allocable to the Certificateholders' Interest of such Series will be distributed
to or for the benefit of the Certificateholders of other Series (if so provided
in the related Prospectus Supplement) or the Seller or the Depositor in respect
of the Seller's Interest.
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Accumulation Period. If so specified by the related Prospectus Supplement
in the case of a Series of Receivables Pooling Certificates, and unless a Rapid
Amortization Period commences with respect to such Series, one or more Classes
of Certificates of such Series will have an Accumulation Period. The
Accumulation Period will commence on the close of business on the date specified
or determined in the manner specified in the related Prospectus Supplement and
continue until the earlier of (a) the commencement of a Rapid Amortization
Period with respect to such Series, (b) payment in full of the Invested Amount
of the Certificates of such Series or (c) the occurrence of the Series
Termination Date with respect to such Series.
During the Accumulation Period with respect to a Series of Receivables
Pooling Certificates, collections of Principal Receivables and certain other
amounts allocable to the Certificateholders' Interest of such Series will be
deposited on each Distribution Date in a Principal Funding Account established
for the benefit of the Certificateholders of such Series and used to make
principal distributions to such Certificateholders when due. The amount to be
deposited in the Principal Funding Account on any such Distribution Date may,
but will not necessarily, be limited to the Controlled Deposit Amount equal to
the Controlled Accumulation Amount specified in the related Prospectus
Supplement plus any existing Deficit Controlled Accumulation Amount. If a
Series of Receivables Pooling Certificates has more than one Class, each Class
may have a separate Principal Funding Account and Controlled Accumulation
Amount. In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to deposits of principal into such
Principal Funding Accounts. In general, unless a Pay Out Event shall have
occurred prior thereto, on the Expected Final Payment Date for a particular
Series or Class, all amounts accumulated in the Principal Funding Account with
respect to such Series or Class during the Accumulation Period will be
distributed as a single repayment of principal with respect to such Series or
Class.
Controlled Amortization Period. If the related Prospectus Supplement so
specifies with respect to a Series of Receivables Pooling Certificates, unless a
Rapid Amortization Period commences with respect to such Series, one or more
Classes of Certificates of such Series will have a Controlled Amortization
Period. The Controlled Amortization Period will commence at the close of
business on the date specified or determined in the manner specified in the
related Prospectus Supplement and will continue until the earlier of (a) the
commencement of the Rapid Amortization Period with respect to such Series, (b)
payment in full of the Invested Amount of the Certificates of such Series or (c)
the occurrence of the Series Termination Date with respect to such Series.
During the Controlled Amortization Period with respect to a Series, collections
of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be used on each Distribution
Date to make principal distributions to Certificateholders of such Series or any
Class of such Series then scheduled to receive such distributions. The amount to
be distributed to Certificateholders of any Series on any Distribution Date may,
but will not necessarily, be limited to a Controlled Distribution Amount which
will be equal to the Controlled Amortization Amount specified in the related
Prospectus Supplement plus any existing Deficit Controlled Amortization Amount.
If a Series of Receivables Pooling Certificates has more than one Class, each
Class may have a separate Controlled Amortization
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Amount. In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to such distributions.
Rapid Amortization Period. During the Rapid Amortization Period,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be distributed as principal
payments to the Certificateholders of such Series monthly on each Distribution
Date beginning with the first Special Payment Date with respect to such Series.
During the Rapid Amortization Period with respect to a Series, distributions of
principal to Certificateholders will not be subject to any Controlled Deposit
Amount or Controlled Distribution Amount. In addition, upon the commencement of
the Rapid Amortization Period with respect to a Series, any funds on deposit in
a Principal Funding Account with respect to such Series will be paid to the
Certificateholders of the relevant Class or Series on the first Special Payment
Date with respect to such Series. See "DESCRIPTION OF THE CERTIFICATES -- Pay
Out Events" below for a discussion of the events which might lead to the
commencement of the Rapid Amortization Period with respect to a Series.
Pay Out Events. As described above, the Revolving Period with respect to a
Series of Receivables Pooling Certificates will continue until the commencement
of the Accumulation Period or the Controlled Amortization Period with respect
thereto, which will continue until the Invested Amount of such Series shall have
been paid in full or the Series Termination Date with respect to such Series
occurs, unless a Pay Out Event occurs with respect to such Series prior to any
of such dates. Except as otherwise provided in the related Prospectus
Supplement with respect to such Series, a "Pay Out Event" with respect to such
Series refers to any of the following events and any other events specified as
such in the related Prospectus Supplement:
(a) the occurrence of an "Insolvency Event" (which shall mean the
appointment of the FDIC as receiver of the Seller or another person
specified in related Prospectus Supplement) or certain other events
relating to the bankruptcy, insolvency or receivership of the Seller or
the Depositor (or such other person specified in the related Prospectus
Supplement).
(b) the Trust becomes an investment company within the meaning of the
Investment Company Act.
In the case of any event described above, a Pay Out Event with respect to
the affected Series will be deemed to have occurred without any notice or other
action on the part of the Trustee or the Certificateholders of such Series
immediately upon of the occurrence of such event. The Rapid Amortization Period
with respect to a Series will commence at the close of business on the day
immediately preceding the day on which a Pay Out Event occurs with respect
thereto. Distributions of principal to the Certificateholders of such Series
will begin on the Distribution Date next following the month during which such
Pay Out Event occurs (such Distribution Date and each following Distribution
Date with respect to such Series, a "Special Payment Date"). Any amounts on
deposit in a Principal Funding Account or an Interest Funding Account with
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respect to such Series at such time will be distributed on the first such
Special Payment Date to the Certificateholders of such Series. If a Series has
more than one Class of Certificates, each Class may have different Pay Out
Events which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event discussed above, if any
Insolvency Event occurs with respect to the Seller, pursuant to the Pooling
Agreement, on the day of such Insolvency Event, the Seller will immediately
cease to transfer Principal Receivables directly or indirectly to the Trust and
promptly give notice to the Trustee of such Insolvency Event. Under the terms
of the Pooling Agreement applicable to such Series, within 15 days the Trustee
will publish a notice of the occurrence of the Insolvency Event stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms unless
within 90 days from the date such notice is published the holders of
Certificates of each Series or, if a Series includes more than one Class, each
Class of such Series evidencing more than 50% of the aggregate unpaid principal
amount of each such Series or Class and certain other interested parties
specified in the related Prospectus Supplement instruct the Trustee not to
dispose of or liquidate the Receivables and to continue transferring Principal
Receivables as before such Insolvency Event. The proceeds from any such sale,
disposition or liquidation of the Receivables will be deposited in the
Collection Account and allocated as described in the applicable Pooling
Agreement and the related Prospectus Supplement. If the sum of (a) the portion
of such proceeds allocated to the Certificateholders' Interest of any Series and
(b) the proceeds of any collections of the Receivables in the Collection Account
allocated to the Certificateholders' Interest of such Series, together with any
related rights under any applicable Series Enhancement, is not sufficient to pay
the Invested Amount of the Certificates of such Series in full, such
Certificateholders will incur a loss.
Paired Series. If so specified in the related Prospectus Supplement, a
Series of Receivables Pooling Certificates may be paired with another Series
issued by the related Trust (a "Paired Series") on or prior to the commencement
of the Accumulation Period or Amortization Period for such Series. As the
principal amount of the Series having a Paired Series is reduced, the principal
amount of the Paired Series will increase by an equal amount. Upon payment in
full of the Series having a Paired Series, the principal amount of the Paired
Series will be equal to the principal amount paid to Certificateholders of the
Series having a Paired Series.
Optional Termination; Final Payment of Principal. If specified in the
Prospectus Supplement with respect to any Series of Certificates offered hereby
and subject to any conditions described therein, on any day occurring on or
after the day that the principal amount of the Certificates of a Series and the
Enhancement Invested Amount, if any, with respect to such Series is reduced to a
percentage of the initial outstanding aggregate principal amount of the
Certificates of such Series set forth in such Prospectus Supplement, the Seller
will have the option to repurchase the Certificateholders' Interest of such
Series. The purchase price will be equal to the sum of the principal amount
such Series (less the amount, if any, on deposit in any Principal Funding
Account with respect
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to such Series), plus the Enhancement Invested Amount, if any, with respect to
such Series, plus accrued and unpaid interest on the unpaid principal amount of
the Certificates (including the Collateral Indebtedness Interest, if any) and
(if applicable) on the Enhancement Invested Amount (and accrued and unpaid
interest with respect to interest amounts that were due but not paid on a prior
Payment Date) through (a) if the day on which such repurchase occurs is a
Distribution Date, the day preceding such Distribution Date or (b) if the day on
which such repurchase occurs is not a Distribution Date, the day preceding the
Distribution Date following such day, at the applicable certificate rate.
Following any such repurchase and the deposit of the aggregate purchase price
into the Collection Account, the Certificateholders of such Series will have no
further rights with respect to the Receivables. In the event that the Seller
shall fail for any reason to deposit the aggregate purchase price for the
Certificateholders' Interest of a Series, payments would continue to be made to
the Certificateholders of such Series as described herein and in the related
Prospectus Supplement.
In any event, the last payment of principal and interest on the Securities
of a Series will be due and payable not later than the date (the "Series
Termination Date") specified in the related Prospectus Supplement. In the event
that the principal amount of the Securities of any such Series or the
Enhancement Invested Amount is greater than zero on the Series Termination Date,
the Trustee will sell or cause to be sold interests in the Base Assets of the
related Trust, as specified in the Pooling Agreement, in an amount equal to the
sum of the principal amount of the outstanding Securities and the Enhancement
Invested Amount, if any, with respect to such Series at the close of business on
the Series Termination Date. The net proceeds of such sale will be deposited in
the Collection Account and allocated to the Securityholders of such Series or
the holder of the Enhancement Invested Amount after such Securityholders are
paid in full, as provided in the Pooling Agreement with respect to such Series.
The Depositor may, at its option, purchase a Class of Certificates of any
Series, on any Distribution Date under the circumstances, if any, specified in
the Prospectus Supplement relating to such Series. Alternatively, if so
specified in the related Prospectus Supplement for a Series of Certificates, the
Depositor, the Servicer, or another entity designated in the related Prospectus
Supplement may, at its option, cause an early termination of a Trust by
repurchasing all of the Base Assets from such Trust on or after a date specified
in the related Prospectus Supplement, or on or after such time as the aggregate
outstanding principal amount of the Certificates or Base Assets, as specified in
the related Prospectus Supplement, is less than the amount or percentage
specified in the related Prospectus Supplement. Notice of such purchase or
termination must be given by the Depositor, the Servicer or the Trustee prior to
the related date. The purchase or repurchase price will be set forth in the
related Prospectus Supplement.
In addition, the related Prospectus Supplement may provide other
circumstances under which holders of Certificates of a Series could be fully
paid significantly earlier than would otherwise be the case as a result of the
occurrence of a Rapid Amortization Event.
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CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, holders of
Securities may hold their Securities through DTC (in the United States) or CEDEL
or Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations which are participants in such systems.
Cede, as nominee for DTC, will hold one or more global Securities.
Unless and until Definitive Securities are issued under the limited
circumstances described in the related Prospectus Supplement, all references
herein or in such Prospectus Supplement to actions by holders of Securities
shall refer to actions taken by DTC upon instructions from its participating
organizations (the "Participants") and all references herein to distributions,
notices, reports and statements to holders of Securities shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Securities, as the case may be, for distribution to the beneficial
owners of such Securities in accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on
the books of DTC. Citibank, N.A. will act as depositary for CEDEL and Morgan
Guaranty Trust Company of New York will act as depositary for Euroclear (in such
capacities, the "Depositaries").
Transfers between DTC Participants will occur in the ordinary way in
accordance with DTC rules. Transfers among CEDEL Participants or Euroclear
Participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of CEDEL and Euroclear.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through CEDEL or
Euroclear, 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.
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Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC Participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear Participant or CEDEL Participant on such business day. Cash received
in CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC. For additional information regarding clearance and settlement
procedures for the Securities, see Annex I hereto and for information with
respect to tax documentation procedures relating to the Securities, see Annex I
hereto and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Foreign Investors" .
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations (including the
Underwriters). 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 (the "Indirect Participants").
Holders of Securities that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Securities may do so only through Participants and Indirect
Participants. In addition, holders of Securities will receive all distributions
of principal of and interest on the Securities from the Trustee (or the
Indenture Trustee), as paying agent, or its successor in such capacity (the
"Paying Agent"), through the Participants who in turn will receive them from
DTC. Under a book-entry format, holders of Securities may experience some delay
in their receipt of payments, since such payments will be forwarded by the
Paying Agent to Cede, as nominee for DTC. DTC will forward such payments to its
Participants which thereafter will forward them to Indirect Participants or
holders of Securities. It is anticipated that the only "Certificateholder",
"Noteholder" and/or "Securityholder" for a Series will be Cede, as nominee of
DTC. Holders of Securities would not then be recognized by the Trustee as
"Certificateholders", "Noteholders" or "Securityholders", as such terms are used
in the Agreement, and holders of Securities would only be permitted to exercise
the rights of a "Certificateholder", "Noteholder" or "Securityholder" indirectly
through the Participant who in turn will exercise such rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with
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respect to the Securities and is required to receive and transmit distributions
of principal of and interest on the Securities. Participants and Indirect
Participants with which holders of Securities have accounts with respect to the
Securities similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective holders of Securities.
Accordingly, although holders of Securities will not possess Securities, holders
of Securities will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a holder of Securities to pledge
Securities to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such Securities, may be limited due to the
lack of a physical certificate or instrument for such Securities.
DTC will take any action permitted to be taken by a
"Certificateholder", "Noteholder" or "Securityholder" under the applicable
Agreement or Indenture only at the direction of one or more Participants to
whose account with DTC the relevant Securities are credited. Additionally, DTC
will take such actions with respect to specified percentages of the
Certificateholders', Noteholders' or Securityholders' interests only at the
direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. 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.
Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") is
incorporated under the laws of Luxembourg as a professional depositary. CEDEL
holds securities for its participating organizations ("CEDEL Participants") and
facilitates the clearance and settlement of securities transactions between
CEDEL Participants through electronic book-entry changes in accounts of CEDEL
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL, in any of 28 currencies
including United States dollars. CEDEL provides to the 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.
The Euroclear System ("Euroclear") was created in 1968 to hold
securities for its participants ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating both the
need for physical movement of certificates and the risk resulting from transfers
of securities and cash that are not simultaneous.
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The Euroclear System has subsequently been extended to clear and
settle transactions between Euroclear Participants counterparties both in CEDEL
and in many domestic securities markets. Transactions may be settled in any of
32 settlement currencies, including United States dollars. In addition to
safekeeping (custody) and securities clearance and settlement, the Euroclear
System includes securities lending and borrowing and money transfer services.
The Euroclear System is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance System S.C., a Belgian cooperative corporation that
establishes policy on behalf of Euroclear Participants. 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.
All operations are conducted by the Euroclear Operator and all
Euroclear securities clearance accounts and cash accounts are accounts with the
Euroclear Operator. They are governed by the Terms and Conditions Governing Use
of Euroclear and the related Operating Procedures of the Euroclear System, and
applicable Belgian law (collectively, the "Terms and Conditions"). The Terms
and Conditions govern all transfers of securities and cash, both within the
Euroclear System and receipts and withdrawals of securities and cash. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly. The
Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Securities held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES". CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholder, Noteholder or Securityholder under the
applicable Agreement or Indenture on behalf of a CEDEL Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Securities among participants of
DTC, CEDEL and Euroclear, they are
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under no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
Definitive Securities
The Securities of any Series will be issued as Definitive Securities,
rather than to DTC or its nominee, only if (i) the Depositor advises the Trustee
(and any Indenture Trustee) in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
Securities, and the Trustee (or the Indenture Trustee) or the Depositor are
unable to locate a qualified successor, (ii) the Depositor, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, holders of Securities of the related Series
evidencing not less than 50% of the aggregate unpaid principal amount of such
Securities advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interests of the holders of such Securities.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
physical certificates or notes held by Cede that represent the Securities, and
instructions for registration, the Trustee (or the Indenture Trustee) will issue
such Securities in the form of Definitive Securities, and thereafter the Trustee
(or the Indenture Trustee) will recognize the holders of such Definitive
Securities as holders of Securities, under the applicable Agreement or Indenture
and the related Prospectus Supplement ("Holders").
If Definitive Securities are issued, distribution of principal and
interest on the Definitive Securities will be made by the Paying Agent or the
Trustee (or the Indenture Trustee) directly to the Holders in whose names the
Definitive Securities were registered on the related Record Date in accordance
with the procedures set forth herein and in the related Agreement, Indenture and
Prospectus Supplement. Distributions will be made by check mailed to the
address of each Holder as it appears on the register maintained by the Trustee
(or the Indenture Trustee), except that the final payment on any Definitive
Security will be made only upon presentation and surrender of such Definitive
Security on the date for such final payment at such office or agency as is
specified in the notice of final distribution to Holders. The Trustee (or the
Indenture Trustee) will provide such notice to Holders not later than the date
specified in the related Prospectus Supplement.
Definitive Securities will be transferable and exchangeable at the
offices of the Transfer agent specified pursuant to the applicable Agreement or
Indenture (the "Transfer Agent") and the Registrar. No service charge will be
imposed for any registration of transfer or exchange, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
DESCRIPTION OF THE TRUST OR POOLING AGREEMENT
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The following summaries describe certain provisions in the Trust
Agreements and Pooling Agreements which are anticipated to be common to any
Series of Securities. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the provisions
of the related Agreement. Where particular provisions or terms used in an
Agreement are referred to herein, the actual provisions (including definitions
of terms) are incorporated herein by reference as part of such summaries.
ASSIGNMENT OF BASE ASSETS TO THE TRUST
Assignment of Receivables; Pre-Funding Account. For any Series of
Receivables Pooling Certificates, pursuant to the related Agreement, the Seller
will sell and assign to the related Trust on the Closing Date specified in the
related Prospectus Supplement (the "Closing Date"), either directly or by
assignment to the Depositor and reassignment by the Depositor to the Trust,
without recourse to the Seller (or the Depositor), all Receivables in the
Initial Accounts outstanding as of the Series Cut-Off Date, and will similarly
sell and assign to the Trust all Receivables in the Additional Accounts as of
the applicable additional cut-off dates and all Receivables thereafter created
under the Initial Accounts or the Additional Accounts (other than the Removed
Accounts) any Participations added to the Trust and the proceeds of all of the
foregoing. To the extent specified in the related Prospectus Supplement, a
portion of the proceeds from the sale of the Securities of a Series may be
applied by the Depositor to the deposit of a Pre-Funded Amount into a Pre-
Funding Account. Where a Pre-Funding Account is provided for, the related
Prospectus Supplement will specify the terms, conditions and manner under which
additional Receivables will be purchased by the Trust from time to time during
the Funding Period provided for therein.
In connection with any transfer of any such Receivables, the Seller
will annotate and indicate in its computer files that such Receivables have been
conveyed to the Trust. In addition, the Seller will provide to the Trustee a
computer file or a microfiche list containing a true and complete list showing
each Account, the Receivables of which have been designated for inclusion in the
Trust, identified by account number, collection status, the amount of
Receivables outstanding and the amount of Principal Receivables as of the
initial Series Cut-Off Date, or additional Cut-Off Date. The Seller will not
deliver to the Trustee any other records or agreements relating to such Accounts
or the Receivables. The records and agreements relating to such Accounts and
the Receivables maintained by the Seller or the Servicer will not be segregated
by the Seller or the Servicer from other documents and agreements relating to
other accounts and receivables and will not be stamped or marked to reflect the
transfer of the Receivables to the Trust. Each Seller will file the UCC
financing statements meeting the requirements of applicable state law with
respect to the Receivables. See "RISK FACTORS -- Certain Legal Aspects --
Transfer of Receivables" and "RISK FACTORS-- Certain Legal Aspects -- Risk of
Commingling" and "CERTAIN LEGAL ASPECTS OF THE RECEIVABLES".
Assignment of CRB Securities; Pre-Funding Account. For Series for
which the Base Assets include CRB Securities, unless otherwise provided in the
related Prospectus Supplement, all or
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a portion of the net proceeds received from the sale of the Securities of such
Series will be applied to the purchase of the related CRB Securities from the
Depositor or other Seller on the Closing Date and, to the extent specified in
the related Prospectus Supplement, to the deposit of a Pre- Funded Amount into a
Pre-Funding Account. Where a Pre-Funding Account is provided for, the related
Prospectus Supplement will specify the terms, conditions and manner under which
additional CRB Securities will be purchased by the Trust from time to time
during the Funding Period provided for therein. The Trustee will cause any CRB
Securities purchased by the Trust to be registered in the name of the Trustee
(or its nominee or correspondent) or, where applicable, the Indenture Trustee,
and the Trustee (or its agent or correspondent) or such Indenture Trustee will
have possession of any certificated CRB Securities. Unless otherwise specified
in the related Prospectus Supplement, the Trustee will not be in possession of
or be assignee of record of any underlying assets for a CRB Security. See "THE
TRUST ASSETS --CRB Securities".
Each CRB Security to be transferred to the Trust will be identified in
a schedule appearing as an exhibit to the related Agreement (the "CRB
Schedule"), which will specify the original principal amount, outstanding
principal balance as of the Cut-off Date (or subsequent cut-off date), annual
pass-through rate or interest rate and maturity date for each such CRB Security.
In the Agreement, to the extent that any CRB Securities are purchased from the
Depositor, the Depositor will represent and warrant to the Trustee regarding the
CRB Securities: (i) that the information contained in the CRB Schedule is true
and correct in all material respects; (ii) that, immediately prior to the
conveyance of the CRB Securities, the Depositor had good title thereto, and was
the sole owner thereof; (iii) that there has been no other sale by it of such
CRB Securities; and (iv) that there is no existing lien, charge, security
interest or other encumbrance on such CRB Securities.
Repurchase and Substitution of Non-Conforming Base Assets
In general, the Depositor and/or the Seller or another entity will
make certain representations and warranties to the Trust regarding the Base
Assets to be purchased by the Trust. To the extent described in the related
Prospectus Supplement, the Agreement will provide that if the Depositor, the
Seller or such other entity cannot cure a breach of any such representations and
warranties in all material respects within the time period specified in such
Prospectus Supplement after notification by the Trustee of such breach, and if
such breach is of a nature that materially and adversely affects the value of
such Base Asset the Depositor, the Seller or such other entity will be required
to repurchase the affected Base Assets on the terms and conditions and in the
manner described in such Prospectus Supplement. If provided in the related
Prospectus Supplement, the Depositor, the Seller or such other entity may,
rather than repurchase a Base Asset as described above, remove such Base Asset
from the Trust (the "Removed Base Asset") and substitute in its place one or
more other Base Assets meeting the qualifications described in such Prospectus
Supplement (each, a "Qualifying Substitute Base Asset"). Unless otherwise
provided in the related Prospectus Supplement, the above-described cure,
repurchase or substitution obligations constitute the sole remedies available to
holders of Securities or the Trustee (or Indenture Trustee) for a breach of a
representation or warranty in respect of a Base Asset. Where Base Assets are
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purchased by a Depositor from a Seller and reconveyed to the Trustee, unless
otherwise specified in the related Prospectus Supplement, the Depositor's only
source of funds to effect any cure, repurchase or substitution will be through
the enforcement of the corresponding obligations of such Seller to the
Depositor.
TRUST ACCOUNTS
With respect to any Series of Securities that includes Notes, the
Servicer will establish and maintain with the related Indenture Trustee (a) one
or more accounts, in the name of the Indenture Trustee on behalf of the related
Securityholders, into which all payments made on or in respect of the related
Base Assets will be deposited (the "Collection Account") and (b) one or more
accounts, in the name of the Indenture Trustee on behalf of the Noteholders,
into which amounts released from the Collection Account and any Reserve Account
or other form of Series Enhancement for payment to such Noteholders will be
deposited and from which all payments to such Noteholders will be made (the
"Note Payment Account"). With respect to each Trust, the Servicer will
establish and maintain one or more accounts with the related Trustee, in the
name of such Trustee on behalf of the Certificateholders, into which amounts
released from the Collection Account and any Reserve Account or other form of
Series Enhancement for distribution to such Certificateholders will be deposited
and from which all distributions to such Certificateholders will be made (the
"Certificate Payment Account"). With respect to any Series that does not
include Notes, the Servicer will also establish and maintain the Collection
Account and any other account in the name of the related Trustee on behalf of
the related Certificateholders.
For each Series of Securities, funds in the Collection Account, Note
Payment Account and Certificate Payment Account and any Reserve Account or other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") will be invested as provided in the related Agreement or
Indenture in Eligible Investments. "Eligible Investments" will generally be
limited to investments acceptable to the Rating Agencies as being consistent
with the rating of the related Securities. Except as described hereafter or in
the related Prospectus Supplement, Eligible Investments will be limited to
obligations or securities that mature on or before the date of the next
scheduled distribution to Securityholders of such Series. However, to the
extent permitted by the Rating Agencies, funds in any Reserve Account may be
invested in securities that will not mature prior to the date of such next
scheduled distribution with respect to such Notes or Certificates and will not
be sold prior to maturity to meet any shortfalls. Thus, the amount of available
funds on deposit in a Reserve Account at any time may be less than the balance
of such Reserve Account. If the amount required to be withdrawn from a Reserve
Account to cover shortfalls in collections on the related Receivables (as
provided in the related Prospectus Supplement) exceeds the amount of available
funds on deposit in such Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result, which
could, in turn, increase the average life of the related Notes or Certificates.
Except as otherwise specified in the related Prospectus Supplement, investment
earnings on funds deposited in the Trust Accounts, net of losses and investment
expenses
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(collectively, "Investment Earnings"), will be treated as collections of
interest on the related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories that signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or Trustee, as applicable, or (b) a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank) (i) that has either (A) a long-term unsecured debt
rating acceptable to the Rating Agencies or (B) a short-term unsecured debt
rating or certificate of deposit rating acceptable to the Rating Agencies and
(ii) whose deposits are insured by the FDIC.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will prepare and forward to each Certificateholder on each
Distribution Date, or as soon thereafter as is practicable, a statement setting
forth, to the extent applicable to any Series, the information specified in the
related Prospectus Supplement for such Series. In addition, within a reasonable
period of time after the end of each calendar year the Trustee, unless otherwise
specified in the related Prospectus Supplement, will furnish to each holder of
record at any time during such calendar year a statement setting forth the
information specified in such Prospectus Supplement, which will include
information intended to enable holders of Certificates to prepare their tax
returns. Information in the Distribution Date reports and the annual reports
provided to the holders will not have been examined and reported upon by an
independent public accountant. However, any Servicer will provide to the
Trustee an annual report by independent public accountants with respect to the
Servicer's servicing of the Receivables. See "SERVICING OF RECEIVABLES --
Evidence as to Compliance".
SERVICER DEFAULTS
Unless otherwise specified in the related Prospectus Supplement,
"Servicer Defaults" under the Agreement for a Series will include (i) any
failure by the Servicer to deposit amounts in the Collection Account and any
Payment Account to enable the Trustee to distribute to Securityholders of such
Series any required payment, which failure continues unremedied for five days
after the giving of written notice of such failure to the Servicer by the
Trustee for such Series, or to the Servicer and the Trustee by the holders of
the required percentage of any Class of Securities of such Series specified in
the related Prospectus Supplement, (ii) any failure by the Servicer duly to
observe or perform in any material respect any other of its covenants or
agreements in the
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Agreement which continues unremedied for 30 days after the giving of written
notice of such failure to the Servicer by the Trustee, or to the Servicer and
the Trustee by the holders of the required percentage of any Class of Securities
of such Series and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain actions
by the Servicer indicating its insolvency, reorganization or inability to pay
its obligations.
RIGHTS UPON SERVICER DEFAULTS
So long as a Servicer Default remains unremedied under the Agreement
for a Series (and subject to any right of any Indenture Trustee), the Trustee
for such Series or holders of the required percentage of any Class of Securities
specified in the related Prospectus Supplement may terminate all of the rights
and obligations of the Servicer as servicer under the Agreement in and to the
Receivables, whereupon the Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Agreement and will be entitled
to reasonable servicing compensation not to exceed the applicable Servicing Fee,
together with other servicing compensation in the form of assumption fees, late
payment charges or as otherwise provided in the Agreement.
In the event that the Trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a financial
institution, bank or loan servicing institution with a net worth of at least
$15,000,000 to act as successor Servicer under the provisions of such Agreement
relating to the servicing of the Receivables. The successor Servicer would be
entitled to reasonable servicing compensation in an amount not to exceed the
Servicing Fee as set forth in the related Prospectus Supplement, together with
the other servicing compensation in the form of assumption fees, late payment
charges or otherwise, as provided in the Agreement.
During the continuance of any Servicer Default under the Agreement for
a Series, the Trustee for such Series will have the right to take action to
enforce its rights and remedies and to protect and enforce the rights and
remedies of the Securityholders of such Series, and holders of the required
percentages of the Securities specified in the related Prospectus Supplement may
direct 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. However, the Trustee will not be under any obligation to pursue any
such remedy or to exercise any of such trusts or powers unless such
Securityholders have offered the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby. Also, the Trustee may decline to follow any such direction
if the Trustee determines that the action or proceeding so directed may not
lawfully be taken or would involve it in personal liability or be unjustly
prejudicial to the nonassenting Securityholders.
No Securityholder of a Series, solely by virtue of such holder's
status as a Securityholder, will have any right under the Agreement for such
Series to institute any proceeding with respect to the Agreement, unless such
holder previously has given to the Trustee for such Series written notice of
default and unless the holders of the required percentages of the outstanding
Securities
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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 60
days has neglected or refused to institute any such proceeding.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or
trust company named as the Trustee for each Series of Certificates will be set
forth in the related Prospectus Supplement. The entity serving as Trustee may
have normal banking relationships with the Depositor, the Seller or the
Servicer. In addition, for the purpose of meeting the legal requirements of
certain local jurisdictions, the Trustee will have the power to appoint co-
trustees or separate trustees of all or any part of the Trust relating to a
Series of Securities. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon the Trustee by the Agreement
relating to such Series will be conferred or imposed upon the Trustee and each
such separate trustee or co-trustee jointly, or in any jurisdiction in which the
Trustee shall be incompetent or unqualified to perform certain acts, singly upon
such separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee. The
Trustee may also appoint agents to perform any of the responsibilities of the
Trustee, which agents shall have any or all of the rights, powers, duties and
obligations of the Trustee conferred on them by such appointment; provided that
the Trustee shall continue to be responsible for its duties and obligations
under the Agreement.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Securities or of any Base Asset, Series
Enhancement or related documents. If no Servicer Default (as defined in the
related Agreement) has occurred, the Trustee is required to perform only those
duties specifically required of it under the Agreement. Upon receipt of the
various certificates, statements, reports or other instruments required to be
furnished to it, the Trustee is required to examine them to determine whether
they are in the form required by the related Agreement; however, the Trustee
will not be responsible for the accuracy or content of any such documents
furnished by it or the Securityholders to the Servicer under the Agreement.
The Trustee may be held liable for its own negligent action or failure
to act, or for its own misconduct; provided, however, that the Trustee will 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 the
Securityholders upon a Servicer Default. See "-- Rights Upon Servicer Defaults"
above. The Trustee is not required to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties under an
Agreement, or in the exercise of any of its rights or powers, if it has
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
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REPLACEMENT OF THE TRUSTEE
The Trustee may, upon written notice to the Depositor, resign at any
time, in which event the Depositor will be obligated to use its best efforts to
appoint a successor Trustee. If no successor Trustee has been appointed and has
accepted the appointment within 30 days after giving such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
appointment of a successor Trustee. The Trustee may also be removed at any time
(i) by the Depositor, if the Trustee ceases to be eligible to continue as such
under the related Agreement, (ii) if the Trustee becomes insolvent or (iii) by
the holders of the required percentages of the outstanding Securities specified
in the related Prospectus Supplement upon 30 days' advance written notice to the
Trustee and to the Depositor. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee.
AMENDMENT OF THE AGREEMENT
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for each Series of Securities may be amended by the Depositor and the
related Trustee, and where applicable the Seller and the Servicer, without
notice to or consent of the Securityholders (i) to cure any ambiguity, (ii) to
correct any defective provisions or to correct or supplement any provision
therein which may be inconsistent with any other provision therein, (iii) to add
to the duties of the Depositor, Seller or Servicer, (iv) to add any other
provisions with respect to matters or questions arising under such Agreement or
related Series Enhancement, (v) to add or amend any provisions of such
Agreement as required by a Rating Agency in order to maintain or improve the
rating of any Class of the Securities, or (vi) to comply with any requirements
imposed by the Code; provided that any such amendment pursuant to clause (iv)
above will not adversely affect in any material respect the interests of any
Securityholders of such Series, as evidenced by an opinion of counsel. Any such
amendment except pursuant to clause (vi) of the preceding sentence shall be
deemed not to adversely affect in any material respect the interests of any
Securityholder if the Trustee receives written confirmation from each Rating
Agency rating such Securities that such amendment will not cause such Rating
Agency to reduce the then current rating thereof. The Agreement for each Series
may also be amended by the Depositor and the Trustee, and where applicable the
Seller and the Servicer, with the consent of the holders of the required
percentages of the outstanding Securities of each Series affected thereby
specified in the related Prospectus Supplement, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Agreement or modifying in any manner the rights of Securityholders of such
Series; provided, however, that no such amendment may (a) reduce the amount or
delay the timing of payments on any Security without the consent of the holder
of such Security; or (b) reduce the aforesaid percentage of aggregate
outstanding principal amount of Securities of each Class, the holders of which
are required to consent to any such amendment without the consent of the holders
of 100% of the aggregate outstanding principal amount of each Class of
Securities affected thereby.
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LIST OF CERTIFICATEHOLDERS
Upon written request of three or more Certificateholders of record of
a Series for purposes of communicating with other Certificateholders with
respect to their rights under the Agreement or under the Certificates for such
Series, which request is accompanied by a copy of the communication which such
Certificateholders propose to transmit, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders of that Series held by the Trustee.
No Agreement will provide for the holding of any annual or other
meeting of Certificateholders.
Termination
The obligations created by the Agreement for a Series will terminate
upon the distribution to Certificateholders of all amounts distributable to them
pursuant to such Agreement after the earlier of (i) the final payment or other
liquidation of the last Base Asset remaining in the Trust for such Series or
(ii) the repurchase, as described below, by the Servicer from the Trustee for
such Series of all Base Assets and other property at that time subject to the
Agreement. The Agreement for each Series will permit, but will not require, the
Servicer, the Seller and/or the Depositor to repurchase from the Trust for such
Series all remaining Base Assets at a price equal to 100% of the aggregate
principal amount of such Base Assets plus, with respect to any property acquired
in respect of a Base Asset, if any, the outstanding principal amount of the
related Base Asset, and unreimbursed expenses (that are reimbursable pursuant to
the terms of the Agreement), plus accrued interest thereon at the weighted
average rate on the related Base Assets through the last day of the Monthly
Period in which such repurchase occurs. The exercise of such right will effect
early retirement of the Certificates of such Series, but the Servicer's right to
so purchase is subject to the aggregate Principal Balance of the Base Assets at
the time of repurchase being less than a fixed percentage, to be set forth in
the related Prospectus Supplement, of the Cut-off Date aggregate Principal
Balance. In no event, however, will the trust created by the Agreement continue
beyond the expiration of 21 years from the death of the last survivor of certain
persons identified therein. For each Series, the Servicer or the Trustee, as
applicable, will give written notice of termination of the Agreement to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency specified in the
notice of termination. If so provided in the related Prospectus Supplement for
a Series, the Depositor or another entity may effect an optional termination of
the Trust under the circumstances described in such related Prospectus
Supplement. See "DESCRIPTION OF THE CERTIFICATES--Optional Termination; Final
Payment of Principal".
Payment in Full of the Notes
Upon the payment in full of all outstanding Notes of a given Series
and the satisfaction and discharge of the related Indenture, the related Trustee
will succeed to all the rights of the
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Indenture Trustee, and the Certificateholders of such Series will succeed to all
the rights of the Noteholders of such Series under the related Trust Agreement
or Pooling Agreement, except as otherwise provided therein.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
The following discussion contains summaries of certain legal aspects
of credit, charge and debit card receivables which are general in nature.
Because certain of 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 Receivables originate. The summaries are qualified
in their entirety by reference to the applicable federal and state laws
governing the Receivables.
TRANSFER OF RECEIVABLES
With respect to each transfer of Receivables to a Trust, the Seller
and/or the Depositor will warrant in the applicable Agreement that such transfer
constitutes either a valid transfer and assignment to the Trust of all right,
title and interest of the Seller (and the Depositor) in and to the Receivables
free and clear from liens arising from or through the Seller (or the Depositor),
except, to the extent specified in the related Prospectus Supplement, for
certain potential tax liens, any interest of the Seller or the Depositor as
holder of the Seller's Interest and the Servicer's right to receive interest and
investment earnings (net of losses and investment expenses) in respect of the
Collection Account, or a valid grant to the Trust of a security interest in the
Receivables. The Seller and/or the Depositor will also warrant in the Agreement
that, in the event the transfer of the Receivables to the Trust is deemed to
create a security interest under the Uniform Commercial Code (the "UCC") as in
effect in the state in which its principal office is located, there will exist a
valid, subsisting and enforceable first priority perfected security interest in
the Receivables in favor of the Trust and a valid, subsisting and enforceable
first priority perfected security interest in the Receivables created thereafter
in the relevant Accounts in favor of the Trust on and after their creation
except for certain liens as described in the Agreement.
The Receivables are generally considered to be "accounts" for purposes
of the UCC. Both the transfer of accounts and the transfer of accounts as
security for an obligation are treated under Article 9 of the UCC as creating a
security interest therein and are subject to its provisions, and the filing of
appropriate financing statements is required to perfect the security interest of
the Trust. Financing statements covering the Receivables will be filed with the
appropriate governmental authority to protect the interest of the Depositor in
the Trust.
There are certain limited circumstances under the UCC in which a prior
or subsequent transferee of Receivables coming into existence after the date on
which such Receivables are transferred to the Trust could have an interest in
such Receivables with priority over the Trust's
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interest. Under the Agreement, however, the Seller and/or the Depositor will
warrant that the Receivables have been transferred to the Trust free and clear
of the lien of any third party, except for certain tax and other governmental
liens. In addition, the Seller and the Depositor will each covenant that, except
as permitted by the Agreement, it will not sell, pledge, assign, transfer or
grant any lien on any Receivable (or any interest therein) other than to the
Trust. A tax or other government lien on property of the Seller or the Depositor
arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivable. In addition, if a
Seller is a Bank, if the FDIC were appointed as receiver of the Bank, certain
administrative expenses of the receiver may also have priority over the interest
of the Trust in such Receivables.
A case recently decided by the United States Court of Appeals for the
Tenth Circuit contains language to the effect that accounts sold by an entity
which subsequently became bankrupt remained property of the debtor's bankruptcy
estate. If a Seller were to become a debtor under the federal bankruptcy code
and a court were to follow the reasoning of the Tenth Circuit, Securityholders
could experience a delay or reduction in distributions.
Certain Matters Relating to Receivership
It is likely that many of the Sellers of Receivables to a Trust
hereunder will be banking institutions. FIRREA, which became effective August
9, 1989, sets forth certain powers that the FDIC could exercise if it were
appointed as receiver of a Seller which is a national bank.
Subject to clarification by FDIC regulations or interpretations, it
would appear from the positions taken by the FDIC before the passage of FIRREA
that the FDIC in its capacity as receiver for a Seller would not interfere with
the timely transfer to the Trust of payments collected on the Receivables or
interfere with the timely liquidation of Receivables as described below. To the
extent that a Seller granted a security interest in the Receivables to the
related Trust (or granted such a security interest to the Depositor which was
then assigned the related Trust), and that interest was validly perfected before
the Seller's insolvency and was not taken or granted in contemplation of
insolvency or with the intent to hinder, delay or defraud the Seller or its
creditors, that security interest should not be subject to avoidance, and
payments to the Trust with respect to the Receivables should not be subject to
recovery by the FDIC as receiver of the Seller. If, however, the FDIC were to
assert a contrary position, or were to require the related Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, delays in payments on the Securities
of any Series relating to such Seller outstanding at such time and possible
reductions in the amount of those payments could occur.
Each Agreement as to which a banking institution is the Seller will
provide that, upon the appointment of a receiver for the Seller, the Seller will
promptly give notice thereof to the Trustee, and a Pay Out Event will occur.
Under the Agreement, no new Principal Receivables will be transferred to the
Trust and, unless otherwise instructed within a specified period by the
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holders of the required percentages of outstanding Securities specified in the
related Prospectus Supplement or unless otherwise prohibited by law, the Trustee
will proceed to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale of the Receivables would then be treated by the Trustee
as collections on the Receivables. This procedure could by delayed as described
above. The net proceeds of any such sale will first be treated by the Trustee as
collections on the Finance Charge Receivables, if any. Upon the occurrence of a
Pay Out Event, if a conservator or receiver is appointed for the Seller or the
Depositor and no Pay Out Event other than such conservatorship or receivership
or insolvency of the Seller or the Depositor exists, the conservator or receiver
may have the power to prevent the early sale, liquidation or disposition of the
Receivables and the commencement of a Rapid Amortization Period with respect to
any outstanding Series. In addition, a conservator or receiver for the Seller or
the Depositor may have the power to cause early payment of the Certificates.
If a Seller that is a banking institution is servicing its Receivables
and a conservator or receiver is appointed for the Servicer, and no Servicer
Default other than such conservatorship or receivership or insolvency of the
Servicer exist, the conservator or receiver may have the power to prevent either
the Trustee or the Certificateholders from effecting a transfer of servicing to
a successor Servicer.
CONSUMER PROTECTION LAWS
The relationship of cardholder and card issuer is extensively
regulated by Federal and state consumer protection laws. The most significant
of these laws include the Federal Truth-in- Lending Act, Equal Credit
Opportunity Act, Fair Credit Reporting Act, Electronic Funds Transfer Act and,
to the extent that the Seller is a bank, the National Bank Act (if such Seller
is a national banking association), as well as the banking statutes of the state
in which the bank is located, and comparable statutes in the states in which
cardholders reside. These statutes impose disclosure requirements when an
account is advertised, when it is opened, at the end of monthly billing cycles,
upon account renewal for accounts on which annual fees are assessed, and at year
end and, in addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, and impose certain
limitations on the type of account-related charges that may be assessed. Newly
adopted Federal legislation requires card issuers to disclose to consumers the
interest rates, annual cardholder fees, grace periods, and balance calculation
methods associated with their accounts. Cardholders are entitled under current
law to have payments and credits applied to the account promptly, to receive
prescribed notices and to have billing errors resolved promptly.
Various proposed laws and amendments to existing laws have been
introduced in Congress and certain state and local legislatures that, if
enacted, would further regulate the credit card industry. Certain such laws
would, among other things, impose a ceiling on the rate at which a financial
institution may assess finance charges on credit card accounts that would be
substantially below the rates of the finance charges currently assessed by most
Sellers on their accounts. A
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proposed bill of this nature was defeated in the United States House of
Representatives in 1987, and on November 14, 1991, the United States Senate
approved by a vote of 74 to 19 a measure which could have established, if it
were enacted as law, a ceiling on credit card interest rates of 4% above the
rate that the IRS charges on the underpayment of taxes. Such a law would, in
effect, reduce all interest rates on credit cards to 14% per annum until the IRS
calculates the new rate, which is currently done on a quarterly basis. Although
this proposed legislation was not passed by Congress, the issue of federal
regulation of interest rates on credit cards continues to be debated, and there
can be no assurance that such a bill will not become law in the future. The
potential effect of any legislation which limits the amount of finance charges
that may be charged on credit cards could be to reduce the Net Portfolio Yield
of each Series. If such Net Portfolio Yield of a Series is reduced, a Pay Out
Event for such Series may occur, and the Rapid Amortization Period for such
Series would commence.
Since October 1991, a number of lawsuits and administrative actions
have been filed in several states against out-of-state banks (both federally
insured state-chartered banks and federally insured national banks) which issue
cards. These actions challenge various fees and charges (such as late fees,
overlimit fees, returned payment check fees and annual membership fees) assessed
against residents of the states in which such suits were filed, based on
restrictions or prohibitions under such states' laws alleged to be applicable to
the out-of-state card issuers. In October 1991, the United States District Court
for the State of Massachusetts held that Greenwood Trust Company (a federally-
insured, Delaware-charted bank that issues the Discover credit card) was
prohibited by Massachusetts law from assessing late charges on credit card
accounts of Massachusetts residents. On August 6, 1992, the decision was
reversed by the United States Court of Appeals for the First Circuit, which held
that the Massachusetts law was preempted by federal law permitting the charges
in question. In November 1992, the Commonwealth of Massachusetts petitioned the
United States Supreme Court to accept the case. On January 11, 1993, the U.S.
Supreme Court denied the petition of the Commonwealth to review the decision of
the First Circuit. The California Supreme Court in March 1992 refused to review
a lower court's determination that the practice by Wells Fargo Bank of charging
its cardholders over-the-limit and late payment fees violated California laws
that require banks to limit such charges to their costs. On November 29, 1995,
the Supreme Court of New Jersey ruled that a national bank that issued credit
cards in New Jersey but is located in another state, and that is entitled under
the National Bank Act to charge borrowers interest at a rate allowed by the laws
of the State where the bank is located, was not entitled to charge New Jersey
cardholders certain late payment fees, notwithstanding the fact that the state
in which the bank is located permits such late payment fees, because late
payment fees are not defined as interest within the meaning of the National Bank
Act and because New Jersey state law forbade the charging of such late payment
fees. Such actions and similar actions which may be brought in other states as a
result of such actions, if resolved adversely to card issuers, could have the
effect of limiting certain charges, other than periodic finance charges, that
could be assessed on accounts of residents of such states and could require card
issuers to pay refunds and civil penalties with respect to charges previously
imposed on cardholders in such states.
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The Trust may be liable for certain violations of consumer protection
laws that apply to the Receivables, either as assignee of the Seller with
respect to obligations arising before transfer of the Receivables to the Trust
or as a party directly responsible for obligations arising after the transfer.
In addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. Each
Seller will covenant in the Agreement to accept the retransfer of all
Receivables in an Account if any Receivable in such Account has not been created
in compliance with the requirements of such laws.
Application of Federal and state bankruptcy and debtor relief laws
would adversely affect the interests of the Certificateholders if such laws
result in any Receivables being written off as uncollectible.
THE DEPOSITOR
General
The Depositor is a special purpose Delaware corporation organized for
the purpose of causing the issuance of the Securities and other securities
issued under the Registration Statement backed by receivables or underlying
securities of various types and acting as settlor or depositor with respect to
trusts, custody accounts or similar arrangements or as general or limited
partner in partnerships formed to issue securities. It is not expected that the
Depositor will have any significant assets. The Depositor is an indirect,
wholly owned finance subsidiary of Collateralized Mortgage Securities
Corporation, which is a wholly owned subsidiary of CS First Boston Securities
Corporation, which is a wholly owned subsidiary of CS First Boston, Inc.
Neither CS First Boston Securities Corporation, nor CS First Boston, Inc., nor
any of their affiliates, has guaranteed, will guarantee or is or will be
otherwise obligated with respect to any Series of Securities. The Depositor's
principal executive office is located at Park Avenue Plaza, 55 East 52nd Street,
New York, New York 10055, and its telephone number is (212) 909-2000.
USE OF PROCEEDS
The Depositor will use the net proceeds from the sale of each Series
of Securities for one or more of the following purposes: (i) to purchase the
related Base Assets and/or Series Enhancement, (ii) to repay indebtedness which
has been incurred to obtain funds to acquire such Base Assets and/or Series
Enhancement, (iii) to fund the purchase of such Base Assets and/or Series
Enhancement by the related Trust on the Closing Date or to establish a Pre-
Funding Account for such Series, (iv) to establish any Reserve Account or Cash
Collateral Accounts described in the related Prospectus Supplement or (v) to pay
costs of structuring and issuing such Securities. If so specified in the
related Prospectus Supplement, the purchase of the Base Assets for a Series may
be effected in whole or in part by an exchange of Securities with the Seller of
such Base Assets.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of Securities. The
summary does not purport to deal with federal income tax consequences applicable
to all categories of holders, some of which may be subject to special rules.
For example, it does not discuss the tax treatment of beneficial owners of Notes
("Note Owners") or Certificates ("Certificate Owners", together with Note
Owners, "Security Owners") that are insurance companies, regulated investment
companies or dealers in securities. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving both debt and
equity interests issued by a trust with terms similar to those of the Notes and
the Certificates. As a result, the IRS might disagree with all or part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Sidley & Austin ("Federal Tax Counsel") regarding certain
federal income tax matters. An opinion of Federal Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the Trust, the Notes, the Certificates and related terms, parties
and documents shall be deemed to refer, unless otherwise specified herein, to
each Trust and the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
OWNER TRUSTS
Tax Characterization of the Owner Trusts
In the case of an Owner Trust, Federal Tax Counsel will deliver its
opinion that the Trust will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. The
opinion of Federal Tax Counsel will be based on the assumption that the terms of
the Trust Agreement and related documents will be complied with, and on such
counsel's conclusions that (i) the Trust will not have certain characteristics
necessary for a trust to be classified as an association taxable as a
corporation and (ii) the nature of the income of the Trust, or the restrictions
(if any) on transfers of the Certificates, will exempt the Trust from the rule
that certain publicly traded partnerships are taxable as corporations.
If an Owner Trust were taxable as a corporation for federal income tax
purposes, the Owner Trust would be subject to corporate income tax on its
taxable income. The Trust's taxable income
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would include all of its income on the related Base Assets, which might be
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificate Owners (and possibly Note
Owners) could be liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO NOTE OWNERS
Treatment of the Notes as Indebtedness. The Trust will agree, and the
Note Owners will agree by their purchase of Notes, to treat the Notes as debt
for federal tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Owner Trust that the
Notes will be classified as debt for federal income tax purposes. As noted
above, there are no cases or IRS rulings on similar transactions involving both
debt and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates and, as a result, the IRS might disagree will such
conclusion. If, contrary to the opinion of Federal Tax Counsel, the IRS
successfully asserted that one or more of the Notes did not represent debt for
federal income tax purposes, the Notes might be treated as equity interests in
the Trust. If so treated, the Trust might be taxable as a corporation with the
adverse consequences described above (and the resulting taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on Notes recharacterized as equity). Alternatively, the Trust might be
treated as a publicly traded partnership that would be taxable as a corporation
unless it met certain qualifying income tests. Treatment of the Notes as equity
interests in a partnership could have adverse tax consequences to certain
holders, even if the Trust were not treated as a publicly traded partnership
taxable as a corporation. For example, income to certain tax-exempt entities
(including pension funds) would be "unrelated business taxable income", income
to foreign holders generally would be subject to U.S. federal income tax and
U.S. federal tax return filing and withholding requirements, and individual
holders might be subject to certain limitations on their ability to deduct their
share of Trust expenses. The discussion below assumes that the Notes will be
characterized as debt for federal income tax purposes.
Interest Income on the Notes. The taxation of interest on a Note will
depend on whether the interest constitutes "qualified stated interest" (as
defined below). Interest on a Note that constitutes qualified stated interest
is includible in a Note Owner's income as ordinary interest income when actually
or constructively received, if such Note Owner uses the cash method of
accounting for federal income tax purposes, or when accrued, if such Note Owner
uses an accrual method of accounting for federal income tax purposes. Interest
that does not constitute qualified stated interest is included in a Note Owner's
income under the rules described below under "-- Original Issue Discount",
regardless of such Note Owner's method of accounting, or, in certain
circumstances, under rules governing contingent payments under which the
interest is recognized as ordinary gross income only as the interest payments
become fixed in each accrual period. Notwithstanding the foregoing, interest
that is payable on a Note with a maturity of one year or less from its issue
date is included in a Note Owner's income under the rules described below under
"--Short Term Notes". It is believed that any prepayment premium paid as a
result of a
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mandatory redemption will be taxable as contingent interest when it becomes
fixed and unconditionally payable.
In general, "qualified stated interest" is stated interest that,
during the entire term of the Note, is unconditionally payable at least annually
at a single fixed rate of interest or, subject to certain exceptions summarized
below, at a variable rate that is a single "qualified floating rate" or a single
"objective rate" (each as described below). If stated interest is
unconditionally payable at two or more qualified floating rates, a single fixed
rate and one or more qualified floating rates, or a single fixed rate and a
single objective rate that is a "qualified inverse floating rate" (as defined
below), all or a portion of the stated interest might be treated as "qualified
stated interest" See --Original Issue Discount", below. Under Treasury
Regulations issued in January 1994 under Sections 1271-1273 and 1275 of the Code
(the "OID Regulations"), interest is considered unconditionally payable only if
late payment or nonpayment is expected to be penalized or reasonable remedies
exist to compel payment. If stated interest is payable at a variable rate other
than in accordance with the foregoing, the interest will not be treated as
"qualified stated interest", and it is unclear whether such payments must be
treated as part of a Note's "stated redemption price at maturity" (as described
below) and governed by the rules described below under "-- Original Issue
Discount" or, alternatively, must be taxed as contingent interest that is
recognized as ordinary gross income only as the interest payments become fixed
in each accrual period.
Stated interest generally qualifies as a "qualified floating rate" if
variations in the value of the rate can reasonably be expected to measure
contemporaneous fluctuations in the cost of newly borrowed funds in the currency
in which the Note is denominated. A variable rate will be considered a
qualified floating rate if the variable rate equals (i) the product of an
otherwise qualified floating rate and a fixed multiple that is greater than zero
but not more than 1.35 or (ii) an otherwise qualified floating rate (or the
product described in clause (i)) plus or minus a fixed rate. If the variable
rate equals the product of an otherwise qualified floating rate and a single
multiplier greater than 1.35, however, such rate will generally constitute an
objective rate, described more fully below.
Stated interest generally qualifies as an "objective rate" if
variations in the rate are determined using a single fixed formula and are based
on (i) one or more qualified floating rates, (ii) one or more rates where each
rate would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Note is denominated, (ii) the
yield or changes in the price of one or more items of personal property that are
"actively traded", or (iv) a combination of rates described in the three
foregoing clauses. The IRS may designate other objective rates. An objective
rate is a "qualified inverse floating rate" if (a) the rate is equal to a fixed
rate minus a qualified floating rate and (b) the variations in the rate can
reasonably be expected to reflect inversely contemporaneous variations in the
cost of newly borrowed funds (disregarding certain caps, floors, governors or
similar restrictions).
All or a portion of interest that otherwise is treated as qualified
stated interest under the rules summarized above will not be treated as
qualified stated interest if, among other
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circumstances: (i) the variable rate of interest is subject to one or more
minimum or maximum rate floors or ceilings which are not fixed throughout the
term of the Note and which are reasonably expected as of the issue date to cause
the rate in certain accrual periods to be significantly higher or lower than the
overall expected return on the Note determined without such floor or ceiling;
(ii) it is reasonably expected that the average value of the variable rate
during the first half of the term of the Note will be either significantly less
than or significantly greater than the average value of the rate during the
final half of the term of the Note; (iii) the "issue price" of the Note (as
described below) exceeds the total noncontingent principal payments by more than
an amount equal to the lesser of .015 multiplied by the product of the total
noncontingent principal payments and the number of complete years to maturity
from the issue date (or, in certain cases, its weighted average maturity) and 15
percent of the total noncontingent principal, (iv) the Note does not provide
that a qualified floating rate or objective rate in effect at any time during
the term of the Note is set at the value of the rate on any day that is no
earlier than three months prior to the first day on which the value is in effect
and no later than one year following that first day, or (v) if interest is not
unconditionally payable. In these situations, as well as others, it is unclear
whether such interest payments must be treated either as part of a Note's
"stated redemption price at maturity" (as described below) resulting in original
issue discount, or represent contingent payments which are recognized as
ordinary gross income for federal income tax purposes only as the interest
payments become fixed in each accrual period.
Original Issue Discount. Notes may be issued with "original issue
discount". Rules governing original issue discount are set forth in Sections
1271-1273 and 1275 of the Code and the OID Regulations. The discussion herein
is based in part on the OID Regulations, which generally apply to debt
instruments issued on or after April 4, 1994. Note Owners also should be aware
that the OID Regulations do not address certain issues relevant to prepayable
securities such as the Notes.
In general, a Note's original issue discount, if any, is the
difference between the "stated redemption price at maturity" of the Note and its
"issue price".
The original issue discount with respect to a Note will be considered
to be zero if it is less than a specified de minimis amount of 0.25% of the
Note's stated redemption price at maturity multiplied by the number of complete
years from the date of issue of such Note to its maturity date or, in the case
of Notes that have more than one principal payment or that have interest
payments that are not qualified stated interest, the weighted average maturity
of the Note. Because of the possibility of prepayments, it is not clear how the
de minimis rules will apply to the Notes. It is possible that the anticipated
rate of prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption") will be required to be used in determining the weighted average
maturity of the Notes. In the absence of authority to the contrary, the
Depositor presently expects to apply the de minimis rule by using the Prepayment
Assumption. Generally, an original Note Owner includes de minimis original
issue discount in income as principal payments are made. The amount includable
in income with respect to each principal payment equals a pro rata portion of
the entire amount of de minimis original issue discount with respect
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to that Note. Any de minimis amount of original issue discount includable in
income by a Note Owner is generally treated as a capital gain if the Note is a
capital asset in the hands of the Note Owner.
The "stated redemption price at maturity" of a Note generally will be
equal to the sum of all payments, whether denominated as principal or interest,
to be made with respect thereto other than "qualified stated interest" (as
described above). In the absence of authority to the contrary and if otherwise
appropriate, [the Depositor expects to determine the stated redemption price at
maturity of a Note by assuming that the anticipated rate of prepayment for such
Note will occur in such a manner that the initial interest rate for a Note will
not change.]
In general, the "issue price" of a Note is the first price at which a
substantial amount of the Notes of such class are sold for money to the public
(excluding bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers).
If a Note is determined to be issued with original issue discount, the
Note Owner must generally include the original issue discount in ordinary gross
income for federal income tax purposes as it accrues in advance of the receipt
of any cash attributable to such income. The amount of original issue discount,
if any, required to be included in a Note Owner's ordinary gross income for
federal income tax purposes in any taxable year will be computed in accordance
with Section 1272(a) of the Code and the OID Regulations. Under such section and
the OID Regulations, original issue discount accrues on a daily basis under a
constant yield method that takes into account the compounding of interest.
The amount of original issue discount includable in income by a Note
Owner is the sum of the "daily portions" of the original issue discount for each
day during the taxable year on which the holder held the Note. The daily
portions of original issue discount are determined by allocating to each day in
any "accrual period" a pro rata portion of the excess, if any, of (A) the sum of
(i) the present value of all remaining payments to be made on the Note as of the
close of the "accrual period" and (ii) the payments during the accrual period of
amounts included in the stated redemption price of the Note over (B) the
"adjusted issue price" of the Note at the beginning of the accrual period.
Generally, the "accrual period" for the Notes corresponds to the intervals at
which amounts are paid or compounded with respect to such Note, beginning with
their date of issuance and ending with the maturity date. The "adjusted issue
price" of a Note at the beginning of any accrual period is the sum of the issue
price and accrued original issue discount for each prior accrual period reduced
by the amount of payments other than payments of qualified stated interest made
during each prior accrual period. The Code and certain related legislative
history require, pending the issuance of Treasury Regulations the present value
of the remaining payments to be determined on the bases of (a) the original
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period), (b)
events, including actual prepayments, which have occurred before the close of
the accrual period and (c) the assumption that the remaining payments will be
made in accordance with the original Prepayment Assumption. Although original
issue discount, if any, will be
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reported to Note Owners based on the Prepayment Assumption, no representation is
made to Note Owners that the Notes will be prepaid at that rate or at any other
rate.
In general, a subsequent purchaser of a Note will also be required to
include in such purchaser's ordinary gross income for federal income tax
purposes the original issue discount, if any, accruing with respect to such
Note, unless the price paid equals or exceeds the Note's stated redemption price
at maturity. If the price paid exceeds the Note's "adjusted issue price" (as
described above), but does not equal or exceed the stated redemption price at
maturity, the amount of original issue discount to be accrued will be reduced in
accordance with a formula set forth in Section 1272(a)(7)(B) of the Code. If
the price paid is less than the Note's adjusted issue price, the purchaser will
be required to include in income any original issue discount on the Note and, to
the extent the price paid is less than the adjusted issue price, the Note will
be treated as having been purchased with "market discount". See "--Market
Discount", below.
If a variable rate Note is deemed to have been issued with original
issue discount, as described above, the amount of original issue discount
accrues on a daily basis under a constant yield method that takes into account
the compounding of interest; provided, however, that the interest associated
with such a Note generally is assumed to remain constant throughout the term of
the Note at a rate that, in the case of a qualified floating rate, equals the
value of such qualified floating rate as of the issue date of the Note, or, in
the case of an objective rate, at a fixed rate that reflects the yield that is
reasonably expected for the Note. A holder of such a Note would then recognize
original issue discount during each accrual period which is calculated based
upon such Note's assumed yield to maturity. If the interest actually accrued or
paid during an accrual period exceeds (or is less than) the constant interest
assumed to be accrued or paid during the accrual period under the foregoing
rules, qualified stated interest or original issue discount allocable to an
accrual period is increased (or decreased) under rules set forth in the OID
Regulations.
The Depositor believes that the owner of a Note determined to be
issued with original issue discount will be required to include the original
issue discount in ordinary gross income for federal income tax purposes computed
in the manner described above. However, the OID Regulations either do not
address or are subject to varying interpretations with respect to several issues
concerning the computation of original issue discount for obligations such as
the Notes.
Market Discount. Notes, whether or not issued with original issue
discount, will be subject to the market discount rules of the Code. A purchaser
of a Note who purchases the Note at a price that is less than the Note's "stated
redemption price at maturity" or, in the case of a Note issued with original
issue discount, at a price that is less than the Note's "adjusted issue price"
(as such terms are described above under "--Original Issue Discount") will be
required to recognize accrued market discount as ordinary income as payments of
principal are received on such Note or upon the sale or exchange of the Note. In
general, the holder of a Note may elect to treat market discount as accruing
either (i) under a constant yield method that is similar to the method for the
accrual of original issue discount or (ii) in proportion to accruals of original
issue discount (or, if there is no original issue discount, in proportion to
accruals of stated interest), in each case
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computed taking into account the Prepayment Assumption. The amount of accrued
market discount for purposes of determining the amount of ordinary income to be
recognized with respect to subsequent payments on such a Note is to be reduced
by the amount previously treated as ordinary income under the market discount
rule.
The Code provides that the market discount in respect of a Note will
be considered to be zero if the market discount is less than a specified de
minimis amount of 0.25% of the Note's stated redemption price at maturity
multiplied by the number of complete years remaining to its maturity after the
holder acquired the Note. If market discount is treated as de minimis under this
rule, the actual discount would be allocated among the scheduled payments
included in the stated redemption price at maturity of such Note, and the
portion of the discount allocable to each such payment would be reported as
income when such payment occurs or is due.
The Code grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, such as certain of the Notes, that are subject to repayment. Until
such time as regulations are issued, rules described in the legislative history
for these provisions of the Code will apply. Note Owners who acquire a Note at a
market discount should consult their tax advisors concerning various methods
which are available for accruing that market discount.
In general, the Code requires a holder of a Note having market
discount to defer a portion of the interest deductions attributable to any
indebtedness incurred or continued to purchase or carry such Note.
Alternatively, a holder of a Note may elect to include market discount in gross
income as it accrues and, if he makes such an election, is exempt from this
rule. The adjusted basis of a Note subject to such election will be increased to
reflect market discount included in gross income, thereby reducing any gain or
increasing any loss on a sale or other taxable disposition.
Amortizable Premium. A Note Owner who holds the Note as a capital
asset and who purchased the Note at a price greater than its stated redemption
price at maturity will be considered to have purchased the Note at a premium. In
general, the Note Owner may elect to deduct the amortizable bond premium as it
accrues under a constant yield method. A Note Owner's tax basis in the Note will
be reduced by the amount of the amortizable bond premium deducted. In addition,
it appears that the same methods which apply to the accrual of market discount
on obligations providing for principal payments prior to maturity are intended
to apply in computing the amortizable bond premium deduction with respect to a
Note. It is not clear, however, (i) whether the alternatives to the constant-
yield method which may be available for the accrual of market discount are
available for amortizing premium on Notes and (ii) whether the Prepayment
Assumption should be taken into account in determining the term of a Note for
this purpose. Note Owners who pay a premium for a Note should consult their tax
advisors concerning such an election and rules for determining the method for
amortizing bond premium.
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Election to Treat All Interest as Original Issues Discount. The OID
Regulations permit an election to accrue all interest, discount (including de
minimis market or original issue discount) (reduced by any premium) in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a Note, the Note Owner 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 Note Owner acquires during the year
of the election or thereafter. Similarly, a Note Owner that makes this election
for a Note 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 Note Owner owns or acquires. See "-- Amortizable
Premium", above. The election to accrue interest, discount and premium on a
constant yield method with respect to a Note is irrevocable.
Gain or Loss on Disposition. If a Note is sold, the selling Note
Owner will recognize gain or loss equal to the difference between the amount
realized from the sale and the selling Note Owner's adjusted basis in such Note.
The adjusted basis generally will equal the cost of such Note to the seller,
increased by any original issue discount and market discount on such Note
included in the seller's income, and reduced (but not below zero) by any
payments on the Note other than qualified stated interest and reduced further by
any amortizable premium. Similarly, a Note Owner who receives a principal
payment with respect to a Note will recognize gain or loss equal to the
difference between the amount of the payment and the owner's allocable portion
of its adjusted basis in the Note. Except as discussed above or with respect to
market discount, any gain or loss recognized upon a sale, exchange, retirement,
or other imposition of a Note will be capital gain if the Note is held as a
capital asset.
Short-Term Notes. In the case of a Note with a maturity of one year
or less from its issue date (a "Short-Term Note"), no interest is treated as
qualified stated interest, and therefore all interest is included in original
issue Discount. Note Owners that report income for federal income tax purposes
on an accrual method and certain other Note Owners, including banks and dealers
in securities, are required to include original issue discount in income on such
Short-Term Notes on a straight-line basis, unless an election is made to accrue
the original issue discount according to a constant yield method based on daily
compounding.
Any other Note Owner of a Short-Term Note is not required to accrue
original issue discount for federal income tax purposes, unless it elects to do
so. In the case of a Note Owner that is not required, and does not elect, to
include original issue discount in income currently, any gain realized on the
sale, exchange or retirement of a Short-Term Note is ordinary income to the
extent of the original issue discount accrued on a straight-line basis (or, if
elected, according to a constant yield method based on daily compounding)
through the date of sale, exchange or retirement. In addition, Note Owners that
are not required, and do not elect, to include original issue discount on a
Short-Term Note in income currently are required to defer deductions for any
interest paid on indebtedness incurred or continued to purchase or carry such
Short-Term Note in an amount not exceeding the deferred interest income with
respect to such Short-Term Note (which includes both the accrued original issue
discount and accrued interest that are payable but
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that have not been included in gross income), until such deferred interest
income is realized. Such a Note Owner may elect to apply the foregoing rules
(except for the rule characterizing gain on sale, exchange or retirement as
ordinary) with respect to "acquisition discount" rather than original issue
discount. Acquisition discount is the excess of the stated redemption price at
maturity of the Short-Term Note over the Note Owner's basis in the Short-Term
Note. This election applies to all obligations acquired by the taxpayer on or
after the first day of the first taxable year to which such election applies,
unless revoked with the consent of the IRS. A Note Owner's tax basis in a Short-
Term Note is increased by the amount included in such Owner's income on such a
Note.
Taxation of Certain Foreign Note Owners. As used herein, the term
"Non-United States Holder" means a Note Owner that is, for United States federal
income tax purposes, (i) a nonresident alien individual, (ii) a foreign
corporation, (iii) a nonresident alien fiduciary of a foreign estate or trust or
(iv) a foreign partnership one or more of the members of which is, for United
States federal income tax purposes, a nonresident alien individual, a foreign
corporation or a nonresident alien fiduciary of a foreign estate or trust.
In general, Non-United States Holders will not be subject to United
States federal withholding tax with respect to payments of principal and
interest on Notes (including original issue discount), provided that certain
conditions are met. Under United States federal income tax law now in effect,
and subject to the discussion of backup withholding in the following section,
payments of principal and interest (including original issue discount) with
respect to a Note to any Non-United States Holder will not be subject to United
States federal withholding tax, provided, in the case of interest (including
original issue discount), that (i) such Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of equity of the Trust, (ii) such Holder is not for federal income tax purposes
a controlled foreign corporation related, directly or indirectly, to the Trust
through equity ownership, (iii) such Holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (iv) either (A) the Non-
United States Holder certifies, under penalties of perjury, to the Trust or
paying agent, as the case may be, that such Holder is a Non-United States Holder
and provides such Holder's name and address, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Note, certifies, under penalties of perjury, to the
Trust or paying agent, as the case may be, that such Note has been received from
the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof. A certificate
described in this paragraph is effective only with respect to payments of
interest (including original issue discount) made to the certifying Non-United
States Holder after the issuance of the certificate in the calendar year of its
issuance and the two immediately succeeding calendar years.
Notwithstanding the foregoing, interest described in Section 871(h)(4)
of the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any income
or profits of the
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issuer or a related person, any change in the value of any property of the
issuer or a related person or any dividends, partnership distribution or similar
payments made by the issuer or a related person. Interest described in Section
871(h)(4) of the Code may include other types of contingent interest identified
by the IRS in future Treasury Regulations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including original issue discount) on the Note is
effectively connected with the conduct of such trade or business, the Non-United
States Holder, although exempt from the withholding tax discussed in the two
preceding paragraphs, will be subject to United States federal income tax on
such interest (including original issue discount) in the same manner as if it
were a United States person (as defined below). In lieu of the certificate
described above, such Holder will be required to provide a properly executed IRS
Form 4224 in order to claim an exemption from withholding tax. In addition, if
such Holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% (or such lower rate as may be specified by an applicable treaty) of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, interest (including original issue discount) on
a Note will be included in the earnings and profits of such Holder if such
interest (including original issue discount) is effectively connected with the
conduct by such Holder of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or original issue discount) realized upon the sale, exchange,
retirement or other disposition of a Note by a Non- United States Holder will
not be subject to United States federal income tax unless (i) such gain or
income is effectively connected with a trade or business in the United States of
the Non-United States Holder or (ii) in the case of a Non-United States Holder
who is a nonresident alien individual, the Non-United States Holder is present
in the United States for 183 days or more in the taxable year of such sale,
exchange, retirement or other disposition and either (a) such individual has a
"tax home" (as defined in Section 911(d)(3) of the Code) in the United States or
(b) the gain is attributable to an office or other fixed place of business
maintained by such individual in the United States.
Backup Withholding and Information Reporting. Under current United
States federal income tax law, information reporting requirements apply to
interest (including original issue discount) and principal payments made to, and
to the proceeds of sales before maturity by, certain Note Owners that are United
States persons. "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
or an estate or trust the income of which is includible in gross income for
United States federal income tax purposes, without regard to its source.
In addition, a 31% backup withholding tax will apply if such Note
Owner (i) fails to furnish its Taxpayer Identification Number ("TIN") (which,
for an individual, would be his or her Social Security Number) to the payor in
the manner required, (ii) furnishes an incorrect TIN and the payor is so
notified by the IRS, (iii) is notified by the IRS that it has failed properly to
report
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payments of interest and dividends or (iv) in certain circumstances, fails to
certify, under penalties of perjury, that it has not been notified by the IRS
that it is subject to backup withholding for failure properly to report interest
and dividend payments. Backup withholding will not apply with respect to
payments made to certain exempt recipients, such as corporations (within the
meaning of Section 7701(a) of the Code) and tax-exempt organizations.
In the case of a Non-United States Holder, under Treasury Regulations,
backup withholding and information reporting will not apply to payments of
principal and interest made by the Trust or any paying agent thereof on a Note
with respect to which such holder has provided the required certification under
penalties of perjury that it is a Non-United States Holder or has otherwise
established an exemption, provided that (i) the Trust or paying agent, as the
case may be, does not have actual knowledge that the payee is a United States
person and (ii) certain other conditions are satisfied.
Subject to the discussion below, payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies under penalties of perjury as to its
status as a Non-United States Holder and certain other qualifications (and no
agent of the broker who is responsible for receiving or reviewing such statement
has actual knowledge that it is incorrect) and provides his or her name and
address or the holder otherwise establishes an exemption.
In general, if principal or interest payments on a Note are collected
outside the United States by a foreign office of a custodian, nominee or other
agent acting on behalf of a Note Owner, such custodian, nominee or other agent
will not be required to apply backup withholding to such payments made to such
owner and will not be subject to information reporting. However, if such
custodian, nominee or other agent is a United States person, a controlled
foreign corporation for United States tax purposes, or a foreign person 50% or
more of whose gross income is effectively connected with its conduct of a United
States trade or business for a specified three-year period, such custodian,
nominee or other agent may be subject to certain information reporting (but not
backup withholding) requirements with respect to such payment unless such
custodian, nominee or other agent has in its records documentary evidence that
the Note Owner is not a United States person and certain conditions are met or
the Note Owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such custodian,
nominee or other agent is required to report if such custodian, nominee or other
agent has actual knowledge that the payee is a United States person.
Under Treasury Regulations, payments on the sale, exchange or
retirement of a Note to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States tax purposes, or a
foreign person 50% or more of whose gross income is effectively connected with
its conduct of a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless such broker has in its records documentary evidence that the Note Owner
is not a United States person and certain other conditions are met
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or the Note Owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such broker is
required to report if such broker has actual knowledge that the payee is a
United States person.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a Note Owner under the backup withholding rules will
be allowed as a refund or a credit against such owner's United States federal
income tax, provided that the required information is furnished to the IRS.
Note Owners should consult their tax advisors regarding the
application of information reporting and backup withholding to their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available.
Tax Consequences to Certificate Owners
Treatment of the Trust as a Partnership. The Trust will agree, and
the related Certificate Owners will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of federal and state income tax,
franchise tax and any other tax measured in whole or in part by income, with the
assets of the partnership being the assets held by the Trust, the partners of
the partnership being the Certificate Owners (including, to the extent relevant,
the Seller or the Depositor in its capacity as recipient of distributions from
any reserve fund), and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller, the Depositor and the Servicer is not
certain because there is no authority on transactions closely comparable to that
contemplated herein. A variety of alternative characterizations are possible.
For example, to the extent the Certificates have certain features characteristic
of debt, the Certificates might be considered debt of the Seller, the Depositor
or the Trust. Any such characterization is not expected to result in materially
adverse tax consequences to Certificate Owners as compared to the consequences
from treatment of the Certificates as equity in a partnership, described below.
The following discussion assumes that the Certificates represent
equity interests in a partnership, none of the Certificates represents Strip
Certificates and that a Series of Securities includes a single class of
Certificates. If these conditions are not satisfied with respect to any given
Series of Certificates, additional tax considerations with respect to such
Certificates will be disclosed in the related Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificate Owner will be required to take
into account separately such Owner's allocated share of income, gains, losses,
deductions and credits of the Trust (whether or not there is a corresponding
cash distribution). Thus, cash basis holders will in effect be required to
report income from the Certificates on the accrual basis and Certificate Owners
may become liable for taxes on Trust income even if they have not received cash
from the Trust to pay such taxes. The
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Trust's income will consist primarily of interest and finance charges earned on
the related Base Assets (including appropriate adjustments for market discount,
original issue discount and bond premium) and any gain upon collection or
disposition of such Base Assets. The Trust's deductions will consist primarily
of interest accruing with respect to the Notes to the extent the Notes are
property characterized as debt, as discussed above under "--Tax Consequences to
Note Owners", servicing and other fees, and losses or deductions upon collection
or disposition of Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(i.e., the Trust Agreement and related documents). The Trust Agreement is
expected to provide, in general, that the Certificate Owners will be allocated
taxable income of the Trust for each month equal to the sum of: (i) the interest
or other income that accrues on the Certificates in accordance with their terms
for such month including, as applicable, interest accruing at the related Pass-
Through Rate for such month and interest on amounts previously due on the
Certificates but not yet distributed; (ii) any Trust income attributable to
discount on the related Base Assets that corresponds to any excess of the
principal amount of the Certificates over their initial issue price; (iii) any
prepayment premium payable to the Certificate Owners for such month; and (iv)
any other amounts of income payable to the Certificate Owners for such month.
Such allocation will be reduced by any amortization by the Trust of premium on
Base Assets that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining taxable income of the Trust will be
allocated to the Seller.
Based on the economic arrangement of the parties, the foregoing
approach for allocating Trust income should be permissible under applicable
Treasury regulations, although no assurance can be given that the IRS would not
require a greater amount of income to be allocated to Certificate Owners.
Moreover, even under the foregoing method of allocation, Certificate Owners may
be allocated income equal to the entire Pass-Through Rate plus the other items
described above, even though the Trust might not have sufficient cash to make
current cash distributions of such amount. In addition, because tax allocations
and tax reporting will be done on a uniform basis for all Certificate Owners,
but Certificate Owners may be purchasing Certificates at different times and at
different prices, Certificate Owners may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
All of the taxable income allocated to a Certificate Owner that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will generally constitute
"unrelated business taxable income" taxable to such holder under the Code.
A non-Corporate Certificate Owner's share of expenses of the Trust
(including fees to the Servicer, but not interest expense) would generally be
"miscellaneous itemized deductions" and thus deductible only to the extent such
expenses plus all other miscellaneous itemized deductions exceed two percent of
such Certificate Owner's adjusted gross income. In addition, Section 68 of the
Code provides that the amount of all "itemized deductions" otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds a
threshold amount specified
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in the Code ($114,700 in 1995 in the case of a joint return) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. Accordingly, such deductions might be
disallowed to such individual in whole or in part and might result in such
Certificate Owner being taxed on an amount of income that exceeds the amount of
cash actually distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificate Owners on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Base Assets, the
Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificate Owners.
Discount and Premium. Except as otherwise provided in the related
Prospectus Supplement, it is believed that the Base Assets were not issued with,
and, therefore, the Trust should not have original issue discount income.
However, the purchase price paid by the Trust for the related Base
Assets may be greater or less than the remaining principal balance of the
Receivables at the time of purchase. If so, the Receivables will have been
acquired at a premium or market discount, as the case may be. See "Tax
Consequences to Note Owners--Market Discount" and "--Amortizable Premium" above.
(As indicated above, the Trust will make this calculation on an aggregate basis,
but might be required to recompute it on a Receivable-by-Receivable basis.)
If the Trust acquires the Base Assets at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Base Assets or to offset any such premium against
interest income on the Base Assets. As indicated above, a portion of such
market discount income or premium deduction may be allocated to Certificate
Owners.
Section 708 Termination. Under Section 708 of the Code, the Trust
will be deemed to terminate for federal income tax purpose if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificate Owner's tax basis in a Certificate will generally equal the
Certificate's cost, increased by the share of Trust income allocable to such
Certificate Owner
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with respect to such Certificates and decreased by any distributions received
with respect to such Certificate. In addition, both the tax basis in the
Certificates and the amount realized on a sale of a Certificate would include
the Certificate Owner's share (determined under Treasury Regulations) of the
Notes and other liabilities of the Trust. A Certificate Owner acquiring
Certificates at different prices will generally be required to maintain a single
aggregate adjusted tax basis in such Certificates and, upon a sale or other
disposition of some of the Certificates, allocate a portion of such aggregate
tax basis to the Certificates sold (rather than maintaining a separate tax basis
in each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
If a Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificate Owners
based on the principal amount of Certificates owned by them as of the close of
the last day of such month. As a result, a Certificate Owner purchasing
Certificates may be allocated tax items (which will affect the purchaser's tax
liability and tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
Treasury Regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificate Owners. The Seller will
be authorized to revise the Trust's method of allocation between transferors and
transferees.
Section 754 Election. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificate Owners might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Trustee is required to keep complete and
accurate books of the Trust. Such books will be maintained for financial
reporting and tax purposes on an accrual basis, and the fiscal year of the Trust
will be the calendar year. The Trustee will file a partnership information
return (IRS Form 1065) with the IRS for each taxable year of the Trust and will
report each Certificate Owner's allocable share of items of Trust income and
expense to Certificate
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Owners and the IRS on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, Certificate
Owners must file tax returns that are consistent with the information return
filed by the Trust or be subject to penalties unless the holder notifies the IRS
of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (a) the names address and identification number of such person,
(b) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (c) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold
Certificates through a nominee are required to furnish directly to the Trust
information as to themselves and their ownership of Certificates. A clearing
agency registered under Section 17A of the Exchange Act is not required to
furnish any such information statement to the Trust. The information referred
to above for any calendar year must be furnished to the Trust on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust with the information described above may be subject to
penalties.
Except as provided otherwise in the relevant Prospective Supplement,
the Depositor will be designated as the tax matters partner for each Trust in
the related Trust Agreement and, as such, will be responsible for representing
the Certificate Owners in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners, and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificate Owner's returns and adjustments of
items not related to the income and losses of the Trust.
Taxation of Certain Foreign Certificate Owners. As used herein, the
term "Non-United States Owner" means a Certificate Owner that is, for United
States federal income tax purposes, (i) a nonresident alien individual, (ii) a
foreign corporation, (iii) a nonresident alien fiduciary of a foreign estate or
trust or (iv) a foreign partnership one or more of the members of which is, for
United States federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate or
trust.
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It is not clear whether the Trust would be considered to be engaged in
a trade or business in the United States for purposes of federal withholding
taxes with respect to Non-United States Owners because there is no clear
authority dealing with that issue under facts substantially similar to those
described herein. Although it is not expected that the Trust would be engaged in
a trade or business in the United States for such purposes, the Trust will
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to Non-United States Owners
pursuant to Section 1446 of the Code, as if such income were effectively
connected to a U.S. trade or business, at a rate of 35% for Non-United States
Owners that are taxable as corporations and 39.6% for all other Non-United
States Owners. Subsequent adoption of Treasury regulations or the issuance of
other administrative pronouncements may require the Trust to change its
withholding procedures. In determining a Certificate Owner's withholding status,
the Trust may rely on IRS Form W-8, IRS Form W-9 or the Certificate Owner's
certification of nonforeign status signed under penalties of perjury.
Each Non-United States Owner might be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the Trust's income. Each
Non-United States Owner must obtain a taxpayer identification number from the
IRS and submit that number to the Trust on Form W-8 in order to assure
appropriate crediting of the taxes withheld. Assuming that the Trust is
determined not to be engaged in a U.S. trade or business, a Non-United States
Owner might be entitled to a refund with respect to taxes withheld by the Trust
if and to the extent that, among other things, such Owner's allocable share of
interest from the Trust constituted "portfolio interest" under the Code.
Such interest, however, may not constitute "portfolio interest" if,
among other reasons, the underlying obligation is not in registered form or if
the interest is determined without regard to the income of the Trust (in the
later case, such interest being properly characterized as a guaranteed payment
under Section 707(c) of the Code). If this were the case, Non-United States
Owners would be subject to a United States federal income and withholding tax at
a rate of 30 percent (without any deductions or other allowances for costs and
expenses incurred in producing such income), unless reduced or eliminated
pursuant to an applicable treaty. In such case, a Non- United States Owner
would only be entitled to a refund for that portion of the taxes in excess of
the taxes that should have been withheld with respect to such interest.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificate Owner fails to comply
with certain identification procedures, unless the certificate owner is an
exempt recipient under applicable provisions of the Code.
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GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE GRANTOR TRUSTS
Characterization. In the case of a Grantor Trust, Federal Tax Counsel
will deliver its opinion that the Trust will not be classified as an association
taxable as a corporation and that such Trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code. In this case,
beneficial owners of Certificates (referred to herein as "Grantor Trust
Certificateholders") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as "Grantor
Trust Certificates".
Taxation of Grantor Trust Certificateholders--General. Subject to the
discussion below under "--Stripped Certificates" and "--Subordinated
Certificates", each Grantor Trust Certificateholder will be treated as the owner
of a pro rata undivided interest in the Base Assets and other assets of the
Trust. Accordingly, and subject to the discussion below of the
recharacterization of the Servicing Fee, each Grantor Trust Certificateholder
must include in income its pro rata share of the interest and other income from
the Base Assets (including any interest, original issue discount, market
discount, prepayment fees, assumption fees, and late payment charges with
respect to the Receivables), and, subject to certain limitations discussed
below, may deduct its pro rata share of the fees and other deductible expenses
paid by the Trust, at the same time and to the same extent as such items would
be included or deducted by the Grantor Trust Certificateholder if the Grantor
Trust Certificateholder held directly a pro rata interest in the assets of the
Trust and received and paid directly the amounts received and paid by the Trust.
Any amounts received by a Grantor Trust Certificateholder in lieu of amounts due
with respect to Base Assets 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.
Under Sections 162 and 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 Servicer, provided that such amounts are reasonable compensation
for services rendered to the Trust. A non-corporate Grantor Trust
Certificateholder's share of expenses of the Trust would generally be
"miscellaneous itemized deductions" and thus deductible only to the extent such
expenses plus all other miscellaneous itemized deductions exceed two percent of
such Grantor Trust Certificateholder's adjusted gross income. In addition,
Section 68 of the Code provides that the amount of "itemized deductions"
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds a threshold amount specified in the Code ($114,700 in 1995 in the
case of a joint return) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the specified threshold amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for such taxable year. In
addition, such deductions are not allowable for purposes of the alternative
minimum tax.
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The servicing compensation to be received by the Servicer might be
questioned by the IRS with respect to certain Certificates or Base Assets as
exceeding a reasonable fee for the services being performed in exchange
therefor, and a portion of such servicing compensation could be recharacterized
as an ownership interest retained by the Servicer or other party in a portion of
the interest payments to be made pursuant to the Base Assets. In this event, a
Certificate might be treated as a Stripped Certificate subject to the stripped
bond rules of Section 1286 of the Code and therefore be subject to the original
issue discount rules. See the discussion below under "--Stripped Certificates".
Except as discussed below under "--Stripped Certificates" or "--Subordinated
Certificates", this discussion assumes that the servicing fees paid to the
Servicer do not exceed reasonable servicing compensation.
A purchaser of a Grantor Trust Certificate will be treated as
purchasing an interest in each Base Assets in the Trust at a price determined by
allocating the purchase price paid for the Certificate among all Base Assets in
proportion to their fair market values at the time of the purchase of the
Certificate. To the extent that the portion of the purchase price of a Grantor
Trust Certificate allocated to a Base Assets is less than or greater than the
portion of the stated redemption price at maturity of the Base Assets, the
interest in the Base Assets will have been acquired at a discount or premium.
See "--Market Discount" and "--Premium", below.
The treatment of any discount on a Base Assets will depend on whether
the discount represents original issue discount or market discount. Except as
indicated otherwise in the applicable Prospectus Supplement, it is not expected
that any Base Assets will have original issue discount (except as discussed
below under "--Stripped Certificates" or "--Subordinated Certificates").
The information provided to Grantor Trust Certificateholders will not
include information necessary to compute the amount of discount or premium, if
any, at which an interest in each Receivable is acquired.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Base Assets may be subject to the market discount rules of
Sections 1276 through 1278 of the Code to the extent an undivided interest in a
Receivable is considered to have been purchased at a "market discount".
Generally, the amount of market discount is equal to the amount by which the
purchase price of a Grantor Trust Certificate allocated to a Base Asset is less
than the allocable portion of the Base Asset's stated redemption price at
maturity. Market discount with respect to an interest in a Base Asset will be
considered to be zero if the amount of market discount is less than 0.25% of the
stated redemption price at maturity of the interest in the Base Asset multiplied
by the weighted average maturity of the Base Asset 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 Sections 1276 and 1278 of the Code.
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The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain or disposition of a market discount bond
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 Code grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments
such as certain of the Base Assets, 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, in the case
of a debt instrument not issued with original issue discount, according to the
following alternative method. Under the alternative method, 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. 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 Certificateholder.
A Grantor Trust Certificateholder that acquired an interest in a Base
Asset at a market discount also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such interest. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such Grantor Trust
Certificateholder 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. To the extent a Grantor Trust Certificateholder is
considered to have purchased an undivided interest in a Base Asset for an amount
that is greater than the stated redemption price at maturity of such interest,
such Grantor Trust Certificateholder will be considered to have purchased the
interest in the Base Asset at a "premium" equal in amount to such excess. A
Grantor Trust Certificateholder who holds the Certificate as a capital asset may
elect under Section 171 of the Code to amortize such premium. Under the Code,
premium is allocated among the interest payments on the Base Asset to which it
relates and is considered as an offset against (and thus reduction of) such
interest payments. With certain exceptions, such an election would apply to all
debt instruments held or subsequently acquired by the electing holder. Absent
such an election, the premium will be deductible as a loss only upon disposition
of the Certificate or pro rata as principal is paid on the Base Asset.
Stripped Certificates. Certain classes of Certificates may be subject
to the stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates". In general, a
Stripped Certificate will be subject to the stripped bond rules where
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there has been a separation of ownership of the right to receive some or all of
the principal payments on a Base Asset from ownership of the right to receive
some or all of the related interest payments. In general, where such separation
has occurred, under the stripped bond rules of Section 1286 of the Code the
holder of a right to receive a principal or interest payment on the Base Asset
is required to accrue into income, on a constant yield basis under rules
governing original issue discount (see "Owner Trust--Tax Consequences to Note
Owners--Original Issue Discount"), the difference between the holder's initial
purchase price for such right and the principal or interest payment to be
received with respect to such right.
Certificates will constitute Stripped Certificates and will be subject
to these rules under various circumstances, including the following: (i) if any
servicing compensation is deemed to exceed a reasonable amount (see "--Taxation
of Grantor Trust Certificateholders--General", above); (ii) if the Company or
any other party retains a retained yield with respect to the Base Assets held by
the Trust; (iii) if two or more classes of Certificates are issued representing
the right to non-pro rata percentages of the interest or principal payments on
the Base Assets; or (iv) if Certificates are issued which represent the right to
interest-only payments or principal-only payments.
The tax treatment of the Stripped Certificates with respect to the
application of the original issue discount provisions of the Code is currently
unclear. However, the Trustee intends to treat each Stripped Certificate as a
single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount. Original issue discount with respect
to a Stripped Certificate must be included in ordinary gross income for federal
income tax purposes as it accrues in accordance with the constant yield method
that takes into account the compounding of interest and such accrual of income
may be in advance of the receipt of any cash attributable to such income. See
"Owner Trust--Tax Consequences to Note Owners--Original Issue Discount" above.
For purposes of applying the original issue discount provisions of the Code, the
issue price of a Stripped Certificate will be the purchase price paid by each
holder thereof and the stated redemption price at maturity may include the
aggregate amount of all payments to be made with respect to the Stripped
Certificate whether or not denominated as interest. The amount of original issue
discount with respect to a Stripped Certificate may be treated as zero under the
original issue discount de minimis rules described above.
When an investor purchases more than one class of Stripped
Certificates it is currently unclear whether for federal income tax purposes
such classes of Stripped Certificates should be treated separately or aggregated
for purposes of applying the original issue discount rules described above.
Notwithstanding the position that the Trustee intends to take, it is
possible that the Service may take a contrary position for purposes of applying
the original issue discount provisions of the Code to the Stripped Certificates.
For example, a holder of a Stripped Certificate might be treated as the owner of
(i) as many stripped bonds or stripped coupons as there are scheduled payments
of principal and/or interest on each Base Asset or (ii) a separate installment
obligation for each
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Base Asset representing the Stripped Certificate's pro rata share of principal
and/or interest payments to be made with respect thereto. As a result of these
possible alternative characterizations, investors should consult their own tax
advisors regarding the proper treatment of Stripped Certificates for federal
income tax purposes.
Subordinated Certificates. In the event the Trust issues two classes
of Grantor Trust Certificates that are identical except that one class is a
subordinate class (with a relatively higher Pass-Through Rate) and the other is
a senior class (with a relatively lower Pass - Through Rate), (referred to
herein as the "Subordinate Certificates" and "Senior Certificates",
respectively), the Trust would deemed to have acquired the following assets:
(i) the principal portion of each Receivable plus a portion of the interest due
on each Receivable (the "Trust Stripped Bond"), and (ii) a portion of the
interest due on each Receivable equal to the difference between the Pass -
Through Rate on the Subordinate Certificates and the Pass - Through Rate on the
Senior Certificates, if any, which difference is then multiplied by the
Subordinate Class Percentage (the "Trust Stripped Coupon"). The "Subordinate
Class Percentage" equals the initial aggregate principal amount of the
Subordinate Certificates divided by the sum of the initial aggregate principal
amount of the Subordinate Certificates and the Senior Certificates. The "Senior
Class Percentage" equals the initial aggregate principal amount of the Senior
Certificates divided by the sum of the initial aggregate principal amount of the
Subordinate Certificates and the Senior Certificates.
The Senior Certificateholders in the aggregate will own the Senior
Class Percentage of the Trust Stripped Bond and accordingly each Senior
Certificateholder will be treated as owning its pro rata share of such asset.
The Senior Certificateholders will not own any portion of the Trust Stripped
Coupon. The Subordinate Certificateholders in the aggregate own both the
Subordinate Class Percentage of the Trust Stripped Bond plus 100% of the Trust
Stripped Coupon, if any, and accordingly each Subordinate Certificateholder will
be treated as owning its pro rata share in both such assets. The Trust Stripped
Bond will be treated as a "stripped bond" and the Trust Stripped Coupon will be
treated as "stripped coupons" within the meaning of Section 1286 of the Code.
Because the purchase price paid by each Subordinate Certificateholder will be
allocated between that Certificateholder's interest in the Trust Stripped Bond
and the Trust Stripped Coupon based on the relative fair market value of each
asset on the date such Subordinate Certificate is purchased, the Trust Stripped
Bond may be issued with original issue discount.
Except to the extent modified below, the income of the Trust Stripped
Bond represented by a Certificate will be reported in the same manner as
described generally above for holders of Certificates. The interest income on
the Subordinate Certificates at the Senior Certificate Pass- Through Rate and
the portion of the Servicing Fee that does not constitute excess servicing may
be treated as qualified stated interest.
The Trust Stripped Coupon will be treated as a debt instrument with
original issue discount equal to the excess of the total amount payable with
respect to such Trust Stripped Coupon over the portion of the purchase price
allocated thereto. The sum of the daily portions of original issue
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discount on the Trust Stripped Coupon for each day during a year in which the
Subordinate Certificateholder holds the Trust Stripped Coupon will be included
in the Subordinate Certificateholder's income. It is unclear whether a
Subordinated Certificateholder's interest in Trust Stripped Bonds and Trust
Stripped Coupons should be treated separately, or aggregated and treated as a
single debt instrument for purposes of applying the original issue discount
rules. However, the Trustee intends to treat each Subordinated
Certificateholder's interest in Trust Stripped Bonds and Trust Stripped Coupons
as a single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount.
If the Subordinate Certificateholders receive distribution of less
than their share of the Trust's receipts of principal or interest (the
"Shortfall Amount") because of the subordination of the Subordinate
Certificates, holders of Subordinate Certificates would probably be treated for
federal income tax purposes as if they had (i) received as distributions their
full share of such receipts, (ii) paid over to the Senior Certificateholders an
amount equal to such Shortfall Amount and (iii) retained the right to
reimbursement of such amounts to the extent such amounts are otherwise available
as a result of collections on the Receivables or amounts available from a
Reserve Account or other form of credit enhancement, if any.
Under this analysis, (a) Subordinate Certificateholders would be
required to accrue as current income any interest income or original issue
discount on the Receivables that was a component of the Shortfall Amount, even
though such amount was in fact paid to the Senior Certificateholders, (b) a loss
would only be allowed to the Subordinate Certificateholders when their right to
receive reimbursement of such Shortfall Amount became worthless (i.e., when it
becomes clear that amount will not be available from any source to reimburse
such loss) and (c) reimbursement of such Shortfall Amount prior to such a claim
of worthlessness would not be taxable income to Subordinate Certificateholders
because such amount was previously included in income. Those results should not
significantly affect the inclusion of income for Subordinate Certificateholders
on the accrual method of accounting, but could accelerate inclusion of income to
Subordinate Certificateholders on the cash method of accounting by, in effect,
placing them on the accrual method. Moreover, the character and timing of loss
deductions is unclear. Subordinate Certificateholders are strongly urged to
consult their own tax advisors regarding the appropriate timing, amount and
character of any losses sustained with respect to the Subordinate Certificates
including any loss resulting from the failure to recover previously accrued
interest or discount income.
Election to Treat All Interest as Original Issues Discount. The OID
Regulations permit a Grantor Trust Certificateholder to elect to accrue all
interest, discount (including de minimis market or original issue discount)
(reduced by any premium) in income as interest, based on a constant yield
method. If such an election were to be made with respect to an interest in a
Base Asset with market discount, the Certificate Owner 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 Grantor Trust
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Grantor Trust Certificateholder that makes this election for an
interest
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in a Base Asset 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 (including other Base Assets) that such Grantor Trust
Certificateholder owns or acquires. See "-- Premium", above. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of
a Grantor Trust Certificate prior to its maturity will be treated as a sale or
exchange of the Grantor Trust Certificateholder's interest in the assets of the
Grantor Trust and will result in gain or loss equal to the difference, if any,
between the amount realized (exclusive of amounts attributable to accrued and
unpaid interest, which will be treated as ordinary income) and the owner's
adjusted basis in those assets. Such adjusted basis generally will equal the
Seller's cost for the Grantor Trust Certificate, increased by the original issue
discount and any market discount included in the seller's gross income with
respect to the Grantor Trust Certificate, and reduced (but not below zero) by
any premium amortized by the Seller and 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 the interests in the assets of the
Grantor Trust represented by the Grantor Trust Certificate are "capital assets"
within the meaning of Section 1221, except that gain will be treated in whole or
in part as ordinary interest income to the extent of the Seller's interest in
accrued market discount not previously taken into income on underlying Base
Assets having a fixed maturity date of more than one year from the date of
origination. A capital gain or loss will be long-term or short-term depending
on whether or not the Grantor Trust Certificate has been owned for the long-term
capital gain holding period (currently more than one year).
Non-United States Grantor Trust Certificate Owners. Amounts paid to
Non-United States Owners (as defined above under "Owner Trusts--Tax Consequences
to Certificate Owners-- Taxation of Certain Foreign Certificate Owners) of
Grantor Trust Certificates will be treated as interest for purposes of United
States withholding tax. Such interest attributable to the underlying
Receivables will not be subject to the normal 30% (or such lower rate provided
for by an applicable tax treaty) withholding tax imposed on such amounts
provided that such Owner fulfills certain certification and other requirements.
Under these requirements, such Owner must certify, under penalty of perjury,
that it is not a "United States person" (as defined above under "Owner Trusts--
Tax Consequences to Note Owners--Backup Withholding and Information Reporting")
and must provide its name and address. If, however, interest or gain is
effectively connected to the conduct of a trade or business within the United
States by such Owner, such owner will be subject to United States federal income
tax thereon at graduated rates. Potential investors who are not United States
persons should consult their own tax advisors regarding the specific tax
consequences of owning a Certificate.
Backup Withholding. Distributions made on the Grantor Trust
Certificates and proceeds from the sale of such Certificates will be subject to
a "backup" withholding tax of 31% if, in general, the Grantor Trust
Certificateholder fails to comply with certain identification procedures, unless
such Owner is an exempt recipient under applicable provisions of the Code.
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MASTER TRUSTS
TREATMENT OF THE CERTIFICATES AS INDEBTEDNESS
In the case of a Master Trust, Federal Tax Counsel will deliver its
opinion that, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, based upon its analysis of the factors discussed below, the
Depositor (or the Seller) is properly treated as the owner of the Receivables
for federal income tax purposes and, accordingly, the Certificates, when issued,
will be properly characterized for federal income tax purposes as indebtedness
of the the Depositor (or the Seller) that is secured by the Receivables.
The Seller and Certificate Owners will express in the Agreement the
intent that, for federal, state and local income and franchise tax purposes, and
for the purposes of any other tax imposed on or measured by income, the
Certificates will be indebtedness of the Seller secured by the Receivables. The
Seller, by entering into the Agreement, each Certificate holder, by the
acceptance of a Certificate, and each Certificate Owner, by virtue of accepting
a beneficial interest in a Certificate, will agree to treat the Certificates (or
the beneficial interests therein) as indebtedness of the Seller secured by the
Receivables for federal, state and local income and franchise tax purposes and
for the purposes of any other tax imposed on or measured by income. However,
because different criteria are used in determining the non-tax accounting
treatment of a transaction, the Seller is expected to treat the Agreement for
financial accounting purposes as a transfer of an ownership interest in the
Receivables and not as creating a debt obligation of the Seller.
The economic substance of a transaction generally determines its
federal income tax consequences and the form of a transaction, while a relevant
factor, is generally not conclusive evidence of its economic substance. In
appropriate circumstances the courts have allowed taxpayers, as well as the IRS,
to treat a transaction in accordance with its economic substance,
notwithstanding that participants characterized the transaction differently for
nontax purposes. In some instances, however, courts have held that a taxpayer
is bound by the particular form it has chosen for a transaction, even if the
substance of the transaction does not accord with its form. Based on the advice
of Federal Tax Counsel, the Depositor believes that the rationale of those cases
will not apply to this transaction.
The determination of whether the economic substance of a transfer of
an interest in property is a sale or a loan secured by the transferred property
depends on numerous factors that indicate whether the transferor has
relinquished (and the transferee has obtained) substantial incidents of
ownership in the property. Among the primary factors considered are whether the
transferee has obtained the opportunity for gain if the property increases in
value, has assumed the risk of loss if the property decreases in value and, in
the case of accounts receivable such as the Receivables, whether the transferee,
at the time of transfer, has a fixed interest in the proceeds of the receivable
when collected. Federal Tax Counsel will consider such factors in rendering its
opinion that the
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Certificates are properly characterized for federal income tax purposes as
indebtedness of the Seller secured by the Receivables. Contrary
characterizations that could be asserted by the IRS are described under
"Possible Characterization of the Arrangement as a Partnership or Association
Taxable as a Corporation" below. Except as otherwise expressly indicated, the
following discussion assumes that the Certificates are properly treated as debt
obligations of the Seller for federal income tax purposes.
Interest Income to Certificate Owners. It is anticipated that the
Certificates will be issued at par value (or at an insubstantial discount from
par value) and therefore, except as discussed below or in the applicable
Prospectus Supplement, will not be issued with original issue discount.
As discussed above under "Owner Trust--Tax Consequences to Note
Owners--Interest Income on the Notes" and "--Original Issue Discount", interest
that constitutes "qualified stated interest" is includible in a Certificate
Owner's income as ordinary interest income when it is received or accrued in
accordance with the Certificate Owner's method of tax accounting. Interest that
does not constitute "qualified stated interest" is generally included in the
Certificate's stated redemption price at maturity and is included in the
Certificate Owner's income under the rules governing original issue discount.
One requirement for treatment as "qualified stated interest" is that
the interest be "unconditionally payable". Under the OID Regulations, interest
is considered unconditionally payable only if late payment or nonpayment is
expected to be penalized or reasonable remedies exist to compel payment. The IRS
has recently clarified this rule in a published ruling. Because the Certificate
Owners will not have available default remedies ordinarily available to holders
of debt instruments, the IRS could take the position that the interest payable
on the Certificates is not "unconditionally payable" within the meaning of the
Original issue discount Regulations. In such case, all or a portion of the
stated interest on a Certificate would be included in a Certificate Owner's
income under the rules governing original issue discount (and the actual receipt
of stated interest would not be included in income). Under the rules summarized
below, if the yield on the Certificates is not materially different from the
coupon, this treatment would have no significant effect on Certificate Owners
using the accrual method of accounting. However, cash method Certificate Owners
may be required to report income with respect to the Certificates in advance of
the receipt of cash attributable to such income. The Certificate Owners may be
required to accrue any carryover amount in income in advance of the receipt of
cash with respect to such regardless of whether such Certificate Owners are on
the cash or accrual method of accounting.
If the Certificates were treated as being issued with Original issue
discount, the following rules would apply. The excess of the payments with
respect to the Certificates over their issue price (in this case, the first
price at which a substantial amount of the Certificates is sold, excluding sales
to brokers or similar persons acting in the capacity of underwriters, placement
agents or wholesalers) would constitute original issue discount. A Certificate
Owner must include original issue discount in income as interest over the term
of the Certificate under a constant yield method. In general, original issue
discount must be included in income in advance of the receipt
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of cash representing that income. In the case of a debt instrument as to which
the repayment of principal may be accelerated as a result of the prepayment of
other obligations securing the debt instrument, the periodic inclusion of
original issue discount is determined under a special provision by taking into
account prepayment assumptions used in pricing the debt instrument and actual
prepayment experience. If this provision applies to the Certificates, the amount
of original issue discount which will accrue in any given "accrual period" may
either increase or decrease depending upon the actual prepayment rate. In the
event of a carryover amount, an accrual basis taxpayer will likely be required
to accrue the amount of each carryover amount even though such carryover amount
will not be paid until a later time. The amount and rate of accrual of original
issue discount with respect to securities similar to the Certificates are
calculated based on a reasonable assumed prepayment rate (the "Prepayment
Assumption") and adjustments are made in the amount and rate of accrual of such
discount to reflect differences between the actual prepayment rate and the
Prepayment Assumption. It is anticipated that future Treasury regulations will
provide that the assumed prepayment rate for securities such as the Certificates
will be the rate used in pricing the initial offering of the securities. No
representation is made that, in fact, the Receivables will be prepaid at a rate
based on the Prepayment Assumption or at any other rate.
Market Discount and Premium. A Certificate Owner who purchases a
Certificate at a market discount may be subject to the "market discount" rules
of the Code. These rules provide, in part, for the treatment of gain
attributable to accrued market discount as ordinary income upon the receipt of
partial principal payments or on the sale or other disposition of the
Certificate, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the market discount Certificate. See "Owner
Trusts--Tax Consequences to Note Owners--Market Discount.
If a Certificate is purchased by a Certificate Owner at a premium,
such premium will be amortized as an offset to interest income (with a
corresponding reduction in the Certificate Owner's basis) under a constant yield
method over the term of the Certificate if an election under Section 171 of the
Code is made or is previously in effect. See "Owner Trusts--Tax Consequences to
Note Owners--Premium.
Disposition of Certificates. If a Certificate is sold, exchanged or
otherwise disposed of, a Certificate Owner generally will recognize gain or loss
in an amount equal to the difference between the amount realized on the sale,
exchange or disposition and the Certificate Owner's adjusted tax basis in the
Certificate. The adjusted tax basis of a Certificate generally will equal the
cost of the Certificate to the Certificate Owner, increased by any original
issue discount or market discount previously includible in the Certificate
Owner's gross income, and reduced by the portion of the basis of the Certificate
allocable to payments on the Certificate previously received by the Certificate
Owner and any amortized premium. Subject to the market discount rules, gain or
loss on the sale or other disposition of a Certificate will generally be capital
gain or loss if the Certificate is held by the Certificate Owner as a capital
asset. Capital gain or loss will be long-term if the Certificate is held by the
Certificate Owner for more than one year and otherwise will be short-term.
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Possible Characterization of the Arrangement as a Partnership or Association
Taxable as a Corporation
Although, as described above, Federal Tax Counsel will deliver an
opinion that the Certificates are properly characterized as debt of the Seller
for federal income tax purposes, such opinion is not binding on the IRS or the
courts and no assurance can be given that this characterization would prevail.
If the IRS were to contend successfully that the Certificates were not debt
obligations of the Seller for federal income tax purposes, the arrangement among
the Seller and the Certificate Owners might be classified for federal income tax
purposes as either a partnership (including a publicly traded partnership) or an
association taxable as a corporation that owns the Receivables.
If the Certificates were treated as interests in a partnership, the
partnership would probably be treated as a "publicly traded partnership." A
publicly traded partnership is taxed in the same manner as a corporation unless
at least 90% of its gross income consists of specified types of "qualifying
income." Such qualifying income includes, among other things, "interest" that
is not "derived in the conduct of a financial or insurance business." If a
deemed partnership between the Seller and the Certificate Owners were to qualify
for the foregoing exception from taxation as a corporation, the deemed
partnership would not be subject to federal income tax but each item of income,
gain, loss, and deduction generated as a result of the ownership of the
Receivables by the partnership would be passed through to the Seller and the
Certificate Owners as partners in such a partnership according to their
respective interests therein.
The income reportable by the Certificate Owners as partners could
differ from the income reportable by the Certificate Owners as holders of debt
obligations of the Seller. For example, a cash basis Certificate Owner might be
required to report income when it accrued to the partnership rather than when it
is received by the Certificate Owner. Moreover, an individual's share of
expenses of the partnership would be miscellaneous itemized deductions that, in
the aggregate, are allowed as deductions only to the extent they exceed two
percent of the individual's adjusted gross income, and an individual Certificate
Owner's deduction for such holder's share of expenses of the partnership would
be subject to reduction under Section 68 of the Code if the individual's
adjusted gross income exceeded certain limits. As a result, the individual
might be taxed on a greater amount of income than the stated rate on the
Certificates.
If, alternatively, the arrangement created by the Agreement were
treated as either an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, the resulting entity may be subject to
federal income taxes at corporate tax rates on its taxable income from the
Receivables. Because neither the Seller nor the Depositor will provide any
indemnity for income taxes such a tax might result in reduced distributions to
Certificate Owners and Certificate Owners might be liable for a share of such a
tax. Moreover, distributions by the entity would probably not be deductible in
computing the entity's taxable income and all or part of the distributions to
Certificate Owners would generally be treated as dividend income to the
Certificate Owners.
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Since the Seller will treat the Certificates as indebtedness for
federal income tax purposes, the Seller will not comply with the tax reporting
requirements that would apply under these alternative characterizations of the
Certificates.
Foreign Investors
Subject to the discussion of backup withholding below, and assuming
the Certificates represent debt obligations of the Seller for federal income tax
purposes, Foreign Investors generally will not be subject to United States
federal withholding tax with respect to payments of principal and interest on
Certificates, provided that certain conditions are met. Under United States
federal income tax law now in effect, payments of principal and interest
(including original issue discount) with respect to a Certificate to any Foreign
Investor will not be subject to United States federal withholding tax, provided,
in the case of interest (including original issue discount), that (i) such
Investor does not actually or constructively own 10% or more of the total
combined voting power of all classes of equity of the Trust, (ii) such Investor
is not for federal income tax purposes a controlled foreign corporation related,
directly or indirectly, to the Trust through equity ownership, (iii) such
Investor is not a bank receiving interest described in Section 881(c)(3)(A) of
the Code and (iv) either (A) the Foreign Investor certifies, under penalties of
perjury, to the Trust or paying agent, as the case may be, that such Investor is
a Foreign Investor and provides such Investor's name and address, or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Certificate, certifies, under penalties
of perjury, to the Trust or paying agent, as the case may be, that such
Certificate has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor with a
copy thereof. A certificate described in this paragraph is effective only with
respect to payments of interest (including original issue discount) made to the
certifying Foreign Investor after the issuance of the certificate in the
calendar year of its issuance and the two immediately succeeding calendar years.
As used herein, the term "Foreign Investor" means a Certificate Owner
that is, for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of a
foreign estate or trust or (iv) a foreign partnership one or more of the members
of which is, for United States federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.
Notwithstanding the foregoing, interest described in Section 871(h)(4)
of the Code will be subject to United States withholding tax at a 30% rate (or
such lower rate as may be provided by an applicable treaty). In general,
interest described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any income
or profits of the issuer or a related person, any change in the value of any
property of the issuer or a related person or any dividends, partnership
distribution or similar payments made by the issuer or a related person.
Interest described in Section 871(h)(4) of the Code may include other types of
contingent
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interest identified by the IRS in future Treasury Regulations. If the Trust
issues Certificates the interest on which is described in Section 871(h)(4) of
the Code, the United States withholding tax consequences of any such
Certificates will be described in the applicable Prospectus Supplement.
If a Foreign Investor is engaged in a trade or business in the United
States and interest (including original issue discount) on the Certificate is
effectively connected with the conduct of such trade or business, the Foreign
Investor, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest (including original
issue discount) in the same manner as if it were a United States person (as
defined below). In lieu of the certificate described above, such Investor will
be required to provide a properly executed IRS Form 4224 in order to claim an
exemption from withholding tax. In addition, if such Investor is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate as may be specified by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to adjustments.
For this purpose, interest (including original issue discount) on a Certificate
will be included in the earnings and profits of such Investor if such interest
(including original issue discount) is effectively connected with the conduct by
such Investor of a trade or business in the United States.
Generally, any gain or income (other than that attributable to accrued
interest or original issue discount) realized upon the sale, exchange,
retirement or other disposition of a Certificate will not be subject to United
States federal income tax unless (i) such gain or income is effectively
connected with a trade or business in the United States of the Foreign Investor
or (ii) in the case of a Foreign Investor who is a nonresident alien individual,
the Foreign Investor is present in the United States for 183 days or more in the
taxable year of such sale, exchange, retirement or other disposition and either
(a) such individual has a "tax home" (as defined in Section 911(d)(3) of the
Code) in the United States or (b) the gain is attributable to an office or other
fixed place of business maintained by such individual in the United States.
If the IRS were to contend successfully that the Certificates
represent interests in a partnership (not taxable as a corporation), a
Certificate Owner that is a nonresident alien, foreign corporation or foreign
estate or trust might be required to file a U.S. individual or corporate income
tax return and pay tax on its share of partnership income at regular U.S. rates,
including the branch profits tax in the case of a corporation, and would be
subject to withholding tax on its share of partnership income. If the
Certificates were recharacterized as interests in a association taxable as a
corporation or a "publicly traded partnership" taxable as a corporation, to the
extent distributions under the Agreement were treated as dividends, a
nonresident alien individual or foreign corporation would generally be subject
to withholding tax on the gross amount of such dividends at the rate of 30% (or
lower rate as provided by an applicable treaty). In either case, and assuming
the Certificates are recharacterized as partnership interests or equity
interests in a corporation, a Certificate Owner that is a nonresident alien,
foreign corporation, foreign partnership or foreign estate or trust might be
subject to federal income tax on any gain from the sale of the Certificates.
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BACKUP WITHHOLDING
Distributions made on the Certificates and proceeds from the sale of
such Certificates will be subject to a "backup" withholding tax of 31% if, in
general, the Certificate Owners fails to comply with certain identification
procedures, unless such Owner is an exempt recipient under applicable provisions
of the Code.
CERTAIN STATE AND LOCAL TAX CONSIDERATIONS
An investment in the Securities may have state or local income,
franchise, personal property or other tax consequences. Such consequences may
depend upon, among other things, the tax laws of the jurisdiction where the
Security Owners reside or are doing business, the characterization of the Trust
(e.g., as a trust, partnership or other entity) for state or local tax purposes,
whether the Trust is considered to be doing business in a particular
jurisdiction, and the classification of the Securities as equity or debt or as
an undivided interest in the underlying Base Assets under the laws of a
jurisdiction.
Generally, the tax treatment of the Securities for federal income tax
purposes should apply for state and local tax purposes. Thus, if the
Certificates or Notes are treated as indebtedness for federal income tax
purposes, they should likewise be treated as indebtedness for state and local
tax purposes. In such case, Certificate Owners and Note Owners not otherwise
subject to state or local tax would not become subject to such tax solely
because of their ownership of the Securities. However, a Security Owner already
subject to tax in a state or locality could be required to pay additional tax as
a result of such holder's ownership or disposition of Securities.
If some or all of the Securities are treated as equity interests in a
partnership (not treated as a publicly traded partnership taxable as a
corporation) for federal income tax purposes, such Securities generally should
be treated as partnership interests for state and local income tax purposes. In
such case, the partnership should be viewed as a passive holder of investments
and, as a result, should not be subject to state or local taxation and the
Security Owners should not be subject to taxation on income received through the
partnership unless they are already subject to tax in such jurisdiction.
However, if the state or local jurisdiction viewed such partnership as doing
business in such jurisdiction, Security Owners would normally be subject to
taxation in such jurisdiction on their allocable share of the partnership's
income even though they otherwise had no contact with such jurisdiction.
Additionally, notwithstanding the flow-through treatment that generally applies
to partnerships, some states and localities impose an entity level tax on
partnerships and trusts doing business within their jurisdiction.
The foregoing discussion presents some of the state and local tax
consequences that might apply to Security Owners. Additional tax disclosure
will be provided in the Prospectus Supplement if necessary. However, because of
the variation in each state's and locality's tax laws based in whole or in part
upon income, it is impossible to predict tax consequences to Note Owners and
Certificate Owners all of the taxing jurisdictions in which they are already
subject to
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tax. Accordingly, Security Owners are strongly urged to consult their own tax
advisors with respect to state and local tax consequences arising out of the
purchase, ownership and disposition of Securities.
***
THE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTE OWNER'S OR
CERTIFICATE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF NOTES
OR CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND
CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
GENERAL
Set forth below are certain consequences under ERISA and the Code that
a fiduciary (a "Plan Fiduciary") of an "employee benefit plan" (as defined in
and subject to ERISA) or of a "plan" (as defined in Section 4975 of the Code)
who has investment discretion should consider before deciding to invest the
plan's assets in Securities. The following summary is intended to be a summary
of certain relevant ERISA issues and does not purport to address all ERISA
considerations that may be applicable to a particular plan.
In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code (a "Plan") refer to any plan or
account of various types which provide retirement benefits or welfare benefits
to an individual or to an employer's employees and their beneficiaries. Plans
include corporate pension and profit-sharing plans, "simplified employee pension
plans", Keogh plans for self-employed individuals (including partners in a
partnership), individual retirement accounts described in Section 408 of the
Code and health insurance plans.
Each Plan Fiduciary must give appropriate consideration to the facts
and circumstances that are relevant to an investment in the Securities,
including the role that an investment in the Securities plays in the Plan's
investment portfolio. Each Plan Fiduciary, before deciding to invest in the
Securities, must be satisfied that investment in the Securities is a prudent
investment for the Plan, that the investments of the Plan, including the
investment in the Securities, are diversified
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so as to minimize the risks of large losses and that an investment in the
Securities complies with the Plan and related trust documents.
Each Plan considering acquiring a Security should consult its own
legal and tax advisors before doing so.
EXEMPT PLANS
ERISA and Section 4975 of the Code do not apply to governmental plans
and certain church plans, each as defined in Section 3 of ERISA and Section
4975(g) of the Code. However, fiduciaries with respect to these plans may be
subject to federal, state or other laws similar in effect to ERISA and Section
4975 of the Code. The discussion below does not purport to address
considerations under such federal, state or other laws.
INELIGIBLE PURCHASERS
Securities may not be purchased with the assets of a Plan that is
sponsored by or maintained by the Depositor, the Trustee, the Issuer, the
Servicer or any of their respective affiliates. Securities may not be purchased
with the assets of a Plan if the Depositor, the Trustee, the Issuer, the
Servicer or any of their respective affiliates or any employees thereof: (i)
has investment discretion with respect to the investment of such Plan assets; or
(ii) has authority or responsibility to give or regularly gives investment
advice with respect to such Plan assets for a fee, pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such Plan assets and that such advice will be based on
the particular investment needs of the Plan. A party that is described in
clause (i) or (ii) of the preceding sentence is a fiduciary under ERISA and the
Code with respect to the Plan, and any such purchase might result in a
"prohibited transaction" under ERISA and the Code.
PLAN ASSETS
It is possible that the purchase of a Security by a Plan will cause,
for purposes of Title I of ERISA and Section 4975 of the Code, the related Base
Assets to be treated as assets of that Plan. A regulation (the "DOL
Regulation") issued under ERISA by the United States Department of Labor (the
"DOL") contains rules for determining when an investment by a Plan in an entity
will result in the underlying assets of the entity being plan assets. Those
rules provide that the assets of an entity will not be "plan assets" of a Plan
that purchases an interest therein if such interest is not an "equity interest".
The DOL Regulation defines an equity interest as an interest other than an
instrument that is treated as indebtedness under applicable local law and that
has no substantial equity features. The DOL Regulation provides, with respect to
the purchase of an equity interest by a Plan, that the assets of an entity will
not be plan assets of a Plan that purchases an interest therein if certain
exceptions apply including the following: (i) the investment by all "benefit
plan investors" is not "significant"; or (ii) the security issued by the entity
is a "publicly
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offered security". The Prospectus Supplement will specify whether any of the
exceptions set forth in the regulation under ERISA may apply with respect to a
Series of Securities.
With respect to clause (i) of the preceding paragraph, the term
"benefit plan investors" includes all plans and accounts of the types described
above under "General" as employee benefit plans and accounts, whether or not
subject to ERISA, as well as entities that hold "plan assets" due to investments
made in such entities by any of such plans or accounts. Investments by benefit
plan investors will be deemed not significant if benefit plan investors own, in
the aggregate, less than a 25% interest in the entity, determined without regard
to the investments of persons with discretionary authority or control over the
assets of such entity, of any person who provides investment advice for a fee
with respect to such assets and of "affiliates" of such persons (within the
meaning of the DOL Regulation).
With respect to clause (ii) of the second preceding paragraph, a
publicly offered security is one which is (a) "freely transferable", (b) part of
a class of securities that is "widely held" and (c) either as (1) part of a
class of securities registered under Section 12(b) or 12(g) of the Exchange Act,
or (2) sold to the Plan as part of a public offering pursuant to an effective
registration statement under the Securities Act and registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Securities and Exchange Commission) after the end of the fiscal year of the
issues in which the offering of such security occurred. Whether a security is
"freely transferable" is based on all relevant facts and circumstances. A class
of securities is "widely held" only if it is of a class of securities owned by
100 or more investors independent of the issuer and of each other.
If none of the exceptions set forth in the DOL Regulation (including
those discussed above) apply, the Base Assets will be deemed to be the assets of
each benefit plan investor for purposes of ERISA. In such a case, the
discussion set forth in the following sections will apply.
Consequences of Characterization as Plan Assets
If the Base Assets are plan assets, the Trustee, or, in the case of
Notes, the Depositor or its affiliate will be a fiduciary under ERISA with
respect to Plan investors, and its duties and liabilities will be subject to the
provisions of ERISA. Generally, the fiduciary provisions of ERISA require Plan
Fiduciaries to act for the exclusive benefit of participants and beneficiaries
of the Plan, to employ the care, skill, prudence and diligence that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, to diversify
investments so as to minimize the risk of large losses and to comply with the
Plan and trust documents of the Plan.
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Prohibited Transactions
If the Base Assets are plan assets, Section 406 of ERISA will prohibit
the Trustee, among others, from causing the assets of the Issuer to be involved,
directly or indirectly, in certain types of transactions with "parties in
interest" to investing Plans unless a statutory or administrative exemption
applies. If the prohibited transaction restrictions of Section 406 of ERISA are
violated, ERISA generally provides for criminal and civil penalties upon the
Plan Fiduciary and possibly other persons. Section 4975(c) of the Code
generally imposes an excise tax on "disqualified persons" who engage, directly
or indirectly, in similar types of transactions with the assets of Plans subject
to such Section (except that an IRA that engages in a prohibited transaction may
instead forfeit its tax-exempt status) and also requires recision of such
transaction.
The types of transactions subject to the prohibited transaction
restrictions of ERISA and Section 4975(c) of the Code include: (i) sales,
exchanges or leases of property (such as the Securities), (ii) loans or other
extensions of credit and (iii) the furnishing of goods and services. As
described in Section 406(b)(1) or Section 4975(c)(1)(E) of the Code, the use of
plan assets by or for the benefit of parties in interest or disqualified persons
may also constitute a prohibited type of transaction.
The Depositor, the Trustee, the Issuer, the Servicer and certain other
persons and certain affiliates thereof, might be considered or might become a
party in interest or disqualified person with respect to a Plan. If so, the
acquisition, holding or disposition of Securities by or on behalf of such Plan
could give rise to one or more "prohibited transactions" within the meaning of
Section 406 ERISA and Section 4975(c) of the Code unless an exemption described
below or some other exemption is available. In particular, the sale of a
Security by the Underwriters or the services provided by the Trustee to such
Plan would appear in certain circumstances to be a prohibited transaction unless
an exemption applies.
There are numerous exemptions to the prohibited transaction
restrictions of Section 406 of ERISA and Section 4975 of the Code, and the
applicability of any particular exemption depends upon the circumstances.
Certain exemptions are described below:
The prohibited transaction restrictions of Section 406(a) of ERISA and
Sections 4975(c)(1)(A) through (D) of the Code also do not apply to the purchase
or sale of Securities by a Plan from a party in interest that is a registered
broker-dealer if the conditions set forth in Prohibited Transaction Class
Exemption 75-1 ("PTCE 75-1") are satisfied. That exemption, however, does not
extend to violations of Section 406(b) of ERISA or Section 4975(c)(1)(E) of the
Code. The conditions that must be satisfied for PTCE 75-1 to apply as follows:
(i) the broker-dealer is registered under the Exchange Act and
customarily purchases and sells securities for its own account in the
ordinary course of its business as a broker-dealer;
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(ii) the transaction is at least as favorable to the Plan as an
arm's-length transaction with an unrelated party and, at the time of the
transaction, was not a prohibited transaction within the meaning of Section
503(b) of the Code;
(iii) the broker dealer is not a fiduciary with respect to the Plan
and is a party in interest with respect to the Plan solely because it or an
affiliate provides services to the Plan; and
(iv) for a period of six years from the date of the transaction, the
Plan maintains or causes to be maintained such records as are necessary to
determine whether the foregoing conditions have been met, and such records
are unconditionally available for examination during normal business hours by
the DOL and certain other persons.
Section 408(b)(2) of ERISA and Section 4975(d)(2) of the Code permit
the payment of fees to parties in interest that perform services for a Plan if
(i) such services are appropriate and helpful for the establishment or operation
of the Plan, (ii) such services are provided under a reasonable arrangement
(including termination upon reasonably short notice without penalty); and (iii)
no more than reasonable compensation is paid therefor.
Before purchasing any Securities, a Plan Fiduciary should consult with
its counsel and determine whether there exists any prohibition to the
acquisition and holding of such Securities. In particular, a Plan Fiduciary
should determine whether the Underwriters, the Issuer, the Trustee, the
Depositor or the Servicer are parties in interest with respect to the Plan and
whether any prohibited transaction exemptions, such as the Underwriter's
Exemption PTCE 75-1, Section 408(b)(2) of ERISA or Section 4975(d)(2) of the
Code, apply. A Prospectus Supplement may specify that Plans may not purchase a
Security if no Exemption would apply.
Prohibited Transaction Class Exemptions
Certain prohibited transaction class exemptions ("PTCEs") issued by
DOL, including PTCE 84-14 (qualified professional asset managers), PTCE 90-1
(insurance company pooled separate accounts) and PTCE 91-38 (bank collective
investment fund), may apply to Plans purchasing Securities and to some or all
transactions involving the Securities if the conditions for an applicable
exemption are satisfied.
Except as otherwise set forth, the foregoing statements regarding the
consequences under ERISA of an investment in Securities are based on the
provisions of the Code and ERISA as currently in effect, and the existing
administrative and judicial interpretations thereunder. No assurance can be
given that administrative, judicial or legislative changes will not occur that
would not make the foregoing statements incorrect or incomplete.
Acceptance of subscriptions on behalf of individual retirement
accounts or other Plans is in no respect a representation by the Depositor the
Issuer, the Trustee, the Servicer or any other party that this investment meets
all relevant legal requirements with respect to investments by any
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particular Plan or that such investment is appropriate for any particular Plan.
Each Plan Fiduciary should consult with attorneys and financial advisors as to
the propriety of such an investment in light of the circumstances of the
particular Plan and current tax law.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement
with respect to the Notes, if any, of a given Series and an underwriting
agreement with respect to the Certificates of such Series (collectively, the
"Underwriting Agreements"), the Depositor will agree to cause the related Trust
to sell to the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase, the
principal amount of each Class of Notes and Certificates, as the case may be, of
the related Series set forth therein and in the related Prospectus Supplement.
In the Underwriting Agreements with respect to any given Series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all of the Notes and Certificates, as
the case may be, described therein that are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at
which each Class of Notes and Certificates, as the case may be, being offered
thereby will be offered to the public and any concessions that may be offered to
certain dealers participating in the offering of such Notes and Certificates, as
the case may be, or (ii) specify that the related Notes and Certificates, as the
case may be, are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of such sale. After the initial
public offering of any such Notes and Certificates, as the case may be, such
public offering prices and such concessions may be changed.
Each Underwriting Agreement will provide that the related Seller will
indemnify the related underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust
Accounts in Eligible Investments acquired from such underwriters.
Pursuant to each of the Underwriting Agreements with respect to a
given Series of Securities, the closing of the sale of any Class of Securities
will be conditioned on the closing of the sale of all other such Classes under
such Underwriting Agreement.
The place and time of delivery for the Notes and Certificates, as the
case may be, in respect of which this Prospectus is delivered will be set forth
in the related Prospectus Supplement.
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LEGAL MATTERS
Certain legal matters relating to the Securities of any Series will be
passed upon by Sidley & Austin, New York, New York. Certain federal income tax
and other matters will be passed upon for each Trust by Sidley & Austin and
certain state tax and other matters will be passed upon for each Trust by
[ ].
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INDEX OF DEFINED TERMS
TERM PAGE
- ---- ----
Accounts................................................................
Accumulation Period.....................................................
Adjusted Issue Price....................................................
Additional Accounts.....................................................
Additional Base Assets..................................................
Agreement...............................................................
Ancillary Arrangements..................................................
Asset Backed Certificates...............................................
Asset Backed Notes......................................................
Base Assets.............................................................
Carryover Amount........................................................
Cash Collateral Guaranty................................................
Cash Collateral Account.................................................
Cede....................................................................
CEDEL...................................................................
CEDEL Participants......................................................
Certificateholder.......................................................
Certificateholders......................................................
Certificateholder's Interest............................................
Certificates............................................................
Class of Receivables Pooling Certificates...............................
CODE....................................................................
Collateral Indebtedness Interests.......................................
Collection Account......................................................
Collection Period.......................................................
Commission..............................................................
Controlled Accumulation Amount..........................................
Controlled Amortization Period..........................................
Controlled Amortization Amount..........................................
Controlled Deposit Amount...............................................
CRB Trust...............................................................
CRB Servicer............................................................
CRB Trustee.............................................................
CRB Issuer..............................................................
Credit Enhancement......................................................
Credit Card Accounts....................................................
Credit Card Receivables.................................................
Date of Processing......................................................
Defaulted Amount........................................................
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TERM PAGE
- ---- ----
Definitive Securities...................................................
Depositaries............................................................
Depositor...............................................................
Distribution Date.......................................................
DTC.....................................................................
Due Period..............................................................
Eligible Deposit Account................................................
Eligible Institution....................................................
Eligible Investments....................................................
Eligible Servicer.......................................................
Enhancement Invested Amount.............................................
ERISA...................................................................
Euroclear...............................................................
Euroclear Operator......................................................
Euroclear Participants..................................................
Exchange Act............................................................
Exemption...............................................................
Expected Final Payment Date.............................................
Expected Final Payment..................................................
Federal Tax Counsel.....................................................
Final Scheduled Payment Date............................................
Finance Charge Receivables..............................................
FIRREA..................................................................
Floating Allocation Percentage..........................................
Foreign Investor........................................................
GAO.....................................................................
Grantor Trust Certificateholder.........................................
Holders.................................................................
Indenture Trustee.......................................................
Indirect Participants...................................................
Initial Accounts........................................................
Insolvency Event........................................................
Interest Rate...........................................................
Investment Earnings.....................................................
IRS.....................................................................
L\C Bank................................................................
Labor...................................................................
Lump Sum Additions......................................................
Master Pooling and Servicing Agreement..................................
Master Trust............................................................
Maturity Assumptions....................................................
Net Portfolio Yield.....................................................
-126-
<PAGE>
TERM PAGE
- ---- ----
Non-United States Holder................................................
Non-United States Owner.................................................
Notes...................................................................
Note Distribution Account...............................................
Noteholder..............................................................
Noteholders.............................................................
objective rate..........................................................
OID Regulations.........................................................
Owner Trust.............................................................
Paired Series...........................................................
Participations..........................................................
Pass-Through Rate.......................................................
Pay Out Events..........................................................
Paying Agent............................................................
payment date............................................................
Plan....................................................................
Plan Assets Regulation..................................................
Pooling Agreement.......................................................
Pre-Funded Amount.......................................................
Pre-Funding Account.....................................................
Prepayment Assumption...................................................
Principal Allocation Percentage.........................................
Principal Funding Account...............................................
Principal Receivables...................................................
Principal Only Certificates.............................................
Principal Funding Account...............................................
Principal Commencement..................................................
Prospectus..............................................................
Prospectus Supplement...................................................
Qualifying Substitute Base Asset........................................
Rapid Amortization Period...............................................
Rating Agency...........................................................
Rating Effect...........................................................
Receivables Pooling Certificates........................................
Registrar...............................................................
Related Documents.......................................................
Removed Accounts........................................................
Removed Base Asset......................................................
Repurchase Amount.......................................................
Required Seller's Interest..............................................
Reserve Account.........................................................
Reserve Account.........................................................
-127-
<PAGE>
TERM PAGE
- ---- ----
Restricted Group........................................................
Revolving Period........................................................
Sale and Servicing Agreement............................................
Securities..............................................................
Securityholder..........................................................
Securityholders.........................................................
Seller..................................................................
Senior Certificate......................................................
Senior Class Percentage.................................................
Series..................................................................
Series Cut-Off Date.....................................................
Series Enhancement......................................................
Series of Receivables Pooling Certificates..............................
Series of Securities....................................................
Series Termination Date.................................................
Servicer Default........................................................
Servicer................................................................
Servicing Fee...........................................................
Short Term Note.........................................................
Shortfall Amount........................................................
Special Payment Date....................................................
Spread Account..........................................................
stated redemption price at maturity.....................................
Stripped Certificates...................................................
Stripped Certificates...................................................
Subordinate Certificates................................................
Subordinate Certificateholder...........................................
Subordinate Class Percentage............................................
tax home................................................................
TIN.....................................................................
Transfer Agent..........................................................
Trust Accounts..........................................................
Trust Stripped Bond.....................................................
Trust Stripped Coupon...................................................
Trustee.................................................................
UCC.....................................................................
Underwriter.............................................................
Underwriting Agreements.................................................
United States Person....................................................
Yield Calculation.......................................................
Yield Factor............................................................
Zero Coupon Certificates................................................
-128-
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Certificates (the "Global Securities") will be available only in book entry
form. Unless otherwise specified in a Prospectus Supplement for a Series,
investors in the Global Securities may hold such Global Securities through any
of DTC, CEDEL or Euroclear. The Global Securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
participants holding Global Securities will be effected on a delivery-against-
payment basis through Citibank and Morgan as the respective depositaries of
CEDEL and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S.
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will he held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, Citibank and Morgan, which in turn will hold such
positions in accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to conventional asset-backed
securities. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
AI-1
<PAGE>
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in same-
day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desire value
date.
Trading between DTC participants. Secondary market trading between
DTC participants will be settled using the procedures applicable to conventional
asset-backed securities.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC participant to
the account of a CEDEL Participant or a Euroclear Participant, the purchaser
will send instructions to CEDEL or Euroclear through a participant at least one
business day prior to settlement. CEDEL or Euroclear will instruct Citibank or
Morgan, respectively, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date. Payment will then be made by Citibank or Morgan to the DTC participant's
account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the CEDEL Participant's or Euroclear Participant's account. The Global
Securities credit will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the CEDEL or Euroclear cash debit will be valued instead as of
the actual settlement date.
CEDEL Participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
AI-2
<PAGE>
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, CEDEL
Participants or Euroclear Participants purchasing Global Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Securities were credited to their accounts. However, interest on the
Global Securities would accrue from the value date. Therefore, in many cases,
the investment income on the Global Securities earned during that one-day period
may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for sending Global Securities
to Citibank or Morgan for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CEDEL and Euroclear Participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through Citibank or
Morgan, to a DTC participant. The seller will send instructions to CEDEL or
Euroclear through a participant at least one business day prior to settlement.
In these cases, CEDEL or Euroclear will instruct Citibank or Morgan, as
appropriate, to deliver the Global Securities to the DTC participant's account
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the CEDEL
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the CEDEL or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the CEDEL or Euroclear Participant have a line of credit with
its respective clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will extinguish
any overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the CEDEL or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
AI-3
<PAGE>
(2) borrowing the Global Securities in the U.S. from a DTC participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
CEDEL or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. persons, unless such holder takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. persons (Form W-8). Non U.S. persons that are
beneficial owners can obtain a complete exemption from the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status).
Exemption for non-U.S. persons with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. persons that are beneficial owners residing in a
country that has a tax treaty with the United States can obtain an exemption or
reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner or
his agent.
Exemption for U.S. persons (Form W-9). U.S. persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Global Security
holder, or in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom he holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
AI-4
<PAGE>
This summary does not deal with all aspects of foreign income tax
withholding that may be relevant to foreign holders of these Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of these Global Securities.
AI-5
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR CS FIRST BOSTON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
---------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary..................................................................
Special Considerations...................................................
The Trust................................................................
Description of the Notes.................................................
Description of the Certificates..........................................
Description of the CRB...................................................
The Depositor............................................................
The Indenture............................................................
The Trust Agreement......................................................
Administration Agreement.................................................
The Indenture Trustee....................................................
The Owner Trustee........................................................
Use of Proceeds..........................................................
Certain Federal Income Tax Consequences..................................
State Tax Consequences...................................................
ERISA Considerations.....................................................
Legal Investment Considerations..........................................
Underwriting.............................................................
Legal Matters............................................................
Rating...................................................................
Index of Defined Terms...................................................
PROSPECTUS
Prospectus Supplement....................................................
Reports to Securityholders...............................................
Available Information....................................................
Incorporation of Certain Documents by Reference..........................
Summary of Terms.........................................................
Rick Factors.............................................................
The Trusts...............................................................
Trust Assets.............................................................
Series Enhancement.......................................................
Servicing of Receivables.................................................
Description of the Notes.................................................
Description of the Certificates..........................................
Certain Information Regarding the Securities.............................
Description of the Trust or Pooling Agreements...........................
Certain Legal Aspects of the Receivables.................................
The Depositor............................................................
Use of Proceeds..........................................................
Certain Federal Income Tax Consequences..................................
Certain State and Local Tax Considerations...............................
ERISA Considerations.....................................................
Plan of Distribution.....................................................
Legal Matters............................................................
Experts..................................................................
Index of Defined Terms...................................................
Annex I..................................................................
Until [ ] days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Class A Certificates described in this Prospectus
Supplement, whether or not participating in this distribution, may be required
to deliver this Prospectus Supplement and the Prospectus. This is in addition
to the obligation of dealers to deliver this Prospectus Supplement and the
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
================================================================================
$[ ]
CSFB CARD
RECEIVABLES TRUSTS
$[ ] Floating Rate
Asset Backed Notes, Class [ ]
$[ ] Floating Rate
Asset Backed Notes, Class [ ]
$[ ] Floating Rate
Asset Backed Certificates, Class [ ]
Asset Backed Securities Corporation
(Depositor)
_________________
PROSPECTUS SUPPLEMENT
[ ], 199[ ]
___________________
CS First Boston
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
-------------------------------------------
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions:
Registration Fee........................... $ 345
Printing and Engraving Expenses............
Trustee's Fees and Expenses................
Legal Fees and Expenses....................
Blue Sky Fees and Expenses.................
Accountant's Fees and Expenses.............
Rating Agency Fees.........................
Miscellaneous.............................. ____________
Total
==============
_____________
* To be completed by amendment.
Item 15. Indemnification of Directors and Officers
-----------------------------------------
The Certificate of Incorporation and By-laws of Asset Backed
Securities Corporation (the "Company") provide for the indemnification of
directors and officers of the Company to the fullest 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 they are or were
such directors, officers, employees and agents, against expenses incurred in any
such action, suit or proceeding.
CS First Boston, Inc. carries directors' and officers' liability
insurance that covers certain liabilities and expenses of the Company's
directors and officers and covers the Company for reimbursement of payments to
directors and officers in respect of such liabilities and expenses.
Item 16. Exhibits
--------
1.1.1 Form of Certificate Underwriting Agreement.*
1.1.2 Form of Note Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of Asset Backed Securities
Corporation.*
4.1.1 Form of Indenture. (Owner Trust, Auto Receivables)
4.1.2 Form of Indenture. (Owner Trust, Auto Securities)*
4.1.3 Form of Indenture. (Owner Trust, Credit Card Securities)
4.2.1 Form of Pooling and Servicing Agreement. (Grantor Trust, Auto
Receivables)
II-1
<PAGE>
4.2.2 Form of Master Pooling and Servicing Agreement. (Credit Card
Receivables)
4.2.3 Form of Standard Terms and Conditions of Pooling and Servicing. (Grantor
Trust, Manufactured Housing Contracts)
4.2.4 Form of Standard Terms and Conditions of Pooling and Servicing. (Grantor
Trust, Mortgage Loans)
4.3.1 Form of Series Supplement to Pooling and Servicing Agreement Agreement.
(Credit Card Receivables)
4.3.2 Form of Reference Agreement (Grantor Trust, Manufactured Housing
Contracts) (Version A)
4.3.3 Form of Reference Agreement (Grantor Trust, Manufactured Housing
Contracts) (Version B)
4.3.4 Form of Reference Agreement (Grantor Trust, Mortgage Loans)*
4.4.1 Form of Trust Agreement. (Owner Trust, Auto Receivables)
4.4.2 Form of Trust Agreement. (Owner Trust, Auto Securities)*
4.4.3 Form of Trust Agreement. (Grantor Trust, Auto Securities)*
4.4.4 Form of Trust Agreement. (Owner Trust, Credit Card Securities)*
4.4.5 Form of Trust Agreement. (Grantor Trust, Credit Card Securities)
4.4.6 Form of Deposit Trust Agreement. (Grantor Trust, Mortgage Loans)*
5.1 Opinion of Sidley & Austin.*
8.1 Opinion of Sidley & Austin with respect to tax matters.*
10.1.1 Form of Receivables Purchase Agreement. (Auto Loan Receivables)*
10.1.2 Form of Receivables Purchase Agreement. (Credit Card Receivables)
10.1.3 Form of Master Seller's Warranty and Servicing Agreement. (Mortgage
Loans)
10.2.1 Form of Sale and Servicing Agreement. (Owner Trust, Auto Loan
Receivables)
23.1 Consent of Sidley & Austin.*
24.1 Powers of Attorney of directors and officers of Asset Backed Securities
Corporation. (Included in the signature pages hereto.)
__________________
* To be filed by amendment.
Item 17. Undertakings
------------
(a) As to Rule 415:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities
II-2
<PAGE>
registered hereby, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of this
registration statement (or the most recent post-effective
amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this registration statement; and
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in
this registration statement or any material change to
such information in this registration statement;
provided, however, that the undertakings set forth in clauses
(i) and (ii) above do not apply if the information required
to be included in a post-effective amendment by those clauses
is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in
this registration statement;
(2) that, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(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) As to documents subsequently filed that are incorporated by
reference:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15 of
this Registration Statement or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, and will be governed by the
final adjudication of such issue.
II-3
<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 the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this 23rd day of
January, 1996.
Asset Backed Securities Corporation
By: /s/ Gina Hubbell
----------------------------------
Name: Gina Hubbell
Title: Director and Vice President
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gina Hubbell his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or her substitutes, may lawfully do our cause to be done by virtue
hereof.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Andrew Stone Director and Chairman of the January 23, 1996
- ------------------------ Board
Andrew Stone
/s/ Scott Ulm President and Director January 23, 1996
- ------------------------ (Principal Executive Officer)
Scott Ulm
/s/ Gina Hubbell Director and Vice President January 23, 1996
- ------------------------
Gina Hubbell
/s/ William Pitofsky Director January 23, 1996
- ------------------------
William Pitofsky
/s/ Richard Eimbinder Vice President January 23, 1996
- ------------------------
Richard Eimbinder
/s/ Thomas Zingalli Vice President and Controller January 23, 1996
- ------------------------ (Principal Accounting Officer)
Thomas Zingalli
/s/ Linda Hanauer Treasurer (Principal Financial January 23, 1996
- ------------------------ Officer)
Linda Hanauer
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Page Number
-----------
1.1.1 Form of Certificate Underwriting Agreement.*
1.1.2 Form of Note Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of Asset Backed Securities
Corporation.*
4.1.1 Form of Indenture. (Owner Trust, Auto Receivables)
4.1.2 Form of Indenture. (Owner Trust, Auto Securities)*
4.1.3 Form of Indenture. (Owner Trust, Credit Card Securities)
4.2.1 Form of Pooling and Servicing Agreement. (Grantor Trust, Auto
Receivables)
4.2.2 Form of Master Pooling and Servicing Agreement. (Credit Card
Receivables)
4.2.3 Form of Standard Terms and Conditions of Pooling and Servicing.
(Grantor Trust, Manufactured Housing Contracts)
4.2.4 Form of Standard Terms and Conditions of Pooling and Servicing.
(Grantor Trust, Mortgage Loans)
4.3.1 Form of Series Supplement to Pooling and Servicing Agreement Agreement.
(Credit Card Receivables)
4.3.2 Form of Reference Agreement (Grantor Trust, Manufactured Housing
Contracts) (Version A)
4.3.3 Form of Reference Agreement (Grantor Trust, Manufactured Housing
Contracts) (Version B)
4.3.4 Form of Reference Agreement (Grantor Trust, Mortgage Loans)*
4.4.1 Form of Trust Agreement. (Owner Trust, Auto Receivables)
4.4.2 Form of Trust Agreement. (Owner Trust, Auto Securities)*
4.4.3 Form of Trust Agreement. (Grantor Trust, Auto Securities)*
4.4.4 Form of Trust Agreement. (Owner Trust, Credit Card Securities)*
4.4.5 Form of Trust Agreement. (Grantor Trust, Credit Card Securities)
4.4.6 Form of Trust Agreement. (Grantor Trust, Mortgage Loans)*
5.1 Opinion of Sidley & Austin.*
8.1 Opinion of Sidley & Austin with respect to tax matters.*
10.1.1 Form of Receivables Purchase Agreement. (Auto Loan Receivables)*
10.1.2 Form of Receivables Purchase Agreement. (Credit Card Receivables)
<PAGE>
10.1.3 Form of Master Seller's Warranty and Servicing Agreement. (Mortgage
Loans)
10.2.1 Form of Sale and Servicing Agreement. (Owner Trust, Auto Loan
Receivables)
23.1 Consent of Sidley & Austin.*
24.1 Powers of Attorney of directors and officers of Asset Backed Securities
Corporation. (Included in the signature pages hereto.)
__________________
* To be filed by amendment.
<PAGE>
EXHIBIT 4.1.1
- --------------------------------------------------------------------------------
[FORM OF INDENTURE]
between
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199 -__.
as Issuer
and
_____________________________,
as Indenture Trustee
Dated as of ______________
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I -- Definitions...............................................3
SECTION 1.01. Definitions.....................................3
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act.............................................9
SECTION 1.03. Rules of Construction..........................10
ARTICLE II -- The Notes...............................................11
SECTION 2.01. Form...........................................11
SECTION 2.02. Execution, Authentication and Delivery.........11
SECTION 2.03. Temporary Notes................................12
SECTION 2.04. Registration; Registration of Transfer and
Exchange.......................................12
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes.....13
SECTION 2.06. Persons Deemed Owner...........................14
SECTION 2.07. Payment of Principal and Interest; Defaulted
Interest.......................................14
SECTION 2.08. Cancellation...................................15
SECTION 2.09. Release of Collateral..........................16
SECTION 2.10. Book-Entry Notes...............................16
SECTION 2.11. Notices to Clearing Agency.....................17
SECTION 2.12. Definitive Notes...............................17
SECTION 2.13. Tax Treatment..................................17
ARTICLE III -- Covenants..............................................18
SECTION 3.01. Payment of Principal and Interest..............18
SECTION 3.02. Maintenance of Office or Agency................18
SECTION 3.03. Money for Payments To Be Held in Trust.........18
SECTION 3.04. Existence......................................20
SECTION 3.05. Protection of Trust Estate.....................20
SECTION 3.06. Opinions as to Trust Estate....................21
SECTION 3.07. Performance of Obligations; Servicing of
Receivables....................................21
SECTION 3.08. Negative Covenants.............................23
SECTION 3.09. Annual Statement as to Compliance..............24
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain
Terms..........................................24
SECTION 3.11. Successor or Transferee........................26
SECTION 3.12. No Other Business..............................26
SECTION 3.13. No Borrowing...................................27
SECTION 3.14. Servicer's Obligations.........................27
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities....................................27
SECTION 3.16. Capital Expenditures...........................27
SECTION 3.17. Restricted Payments............................27
SECTION 3.18. Notice of Events of Default....................27
SECTION 3.19. Further Instruments and Acts...................28
i
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ARTICLE IV -- Satisfaction and Discharge..............................28
SECTION 4.01. Satisfaction and Discharge of Indenture........28
SECTION 4.02. Application of Trust Money.....................29
SECTION 4.03. Repayment of Moneys Held by Paying Agent.......29
ARTICLE V -- Remedies.................................................29
SECTION 5.01. Events of Default..............................29
SECTION 5.02. Acceleration of Maturity: Rescission and
Annulment......................................31
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee...............32
SECTION 5.04. Remedies; Priorities...........................34
SECTION 5.05. Optional Preservation of the Receivables.......35
SECTION 5.06. Limitation of Suits............................36
SECTION 5.07. Unconditional Rights of Noteholders To Receive
Principal and Interest.........................36
SECTION 5.08. Restoration of Rights and Remedies.............37
SECTION 5.09. Rights and Remedies Cumulative.................37
SECTION 5.10. Delay or Omission Not a Waiver.................37
SECTION 5.11. Control by Noteholders.........................37
SECTION 5.12. Waiver of Past Defaults........................38
SECTION 5.13. Undertaking for Costs..........................38
SECTION 5.14. Waiver of Stay or Extension Laws...............39
SECTION 5.15. Action on Notes................................39
SECTION 5.16. Performance and Enforcement of Certain
Obligations....................................39
ARTICLE VI -- The Indenture Trustee...................................40
SECTION 6.01. Duties of Indenture Trustee....................40
SECTION 6.02. Rights of Indenture Trustee....................41
SECTION 6.03. Individual Rights of Indenture Trustee.........42
SECTION 6.04. Indenture Trustee's Disclaimer.................42
SECTION 6.05. Notice of Defaults.............................42
SECTION 6.06. Reports by Indenture Trustee to Holders........42
SECTION 6.07. Compensation and Indemnity.....................42
SECTION 6.08. Replacement of Indenture Trustee...............43
SECTION 6.09. Successor Indenture Trustee by Merger..........44
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee.....................44
SECTION 6.11. Eligibility; Disqualification..................45
SECTION 6.12. Preferential Collection of Claims Against
Issuer.........................................46
ARTICLE VII -- Noteholders' Lists and Reports.........................46
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders.......................46
ii
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SECTION 7.02. Preservation of Information; Communications to
Noteholders....................................46
SECTION 7.03. Reports by Issuer..............................46
SECTION 7.04. Reports by Indenture Trustee...................47
ARTICLE VIII -- Accounts, Disbursements and Releases..................47
SECTION 8.01. Collection of Money............................47
SECTION 8.02. Trust Accounts.................................48
SECTION 8.03. General Provisions Regarding Accounts..........48
SECTION 8.04. Release of Trust Estate........................49
SECTION 8.05. Opinion of Counsel.............................50
ARTICLE IX -- Supplemental Indentures.................................50
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders....................................50
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders....................................51
SECTION 9.03. Execution of Supplemental Indentures...........53
SECTION 9.04. Effect of Supplemental Indentures..............53
SECTION 9.05. Conformity with Trust Indenture Act............54
SECTION 9.06. Reference in Notes to Supplemental Indentures..54
ARTICLE X -- Redemption of Notes......................................54
SECTION 10.01. Redemption....................................54
SECTION 10.02. Form of Redemption Notice.....................55
SECTION 10.03. Notes Payable on Redemption Date..............55
ARTICLE XI -- Miscellaneous...........................................55
SECTION 11.01. Compliance Certificates and Opinions, etc.....55
SECTION 11.02. Form of Documents Delivered to Indenture
Trustee.......................................58
SECTION 11.03. Acts of Noteholders...........................58
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer
and Rating Agencies...........................59
SECTION 11.05. Notices to Noteholders; Waiver................60
SECTION 11.06. Alternate Payment and Notice Provisions.......60
SECTION 11.07. Conflict with Trust Indenture Act.............60
SECTION 11.08. Effect of Headings and Table of Contents......61
SECTION 11.09. Successors and Assigns........................61
SECTION 11.10. Separability..................................61
SECTION 11.11. Benefits of Indenture.........................61
SECTION 11.12. Legal Holidays................................61
SECTION 11.13. Governing Law.................................61
SECTION 11.14. Counterparts..................................61
SECTION 11.15. Recording of Indenture........................62
SECTION 11.16. Trust Obligation..............................62
SECTION 11.17. No Petition...................................62
SECTION 11.18. Inspection....................................62
iii
<PAGE>
INDENTURE dated as of ______________, between CS FIRST BOSTON AUTO
RECEIVABLES TRUST 199 -__, a Delaware business trust (the "Issuer"), and
_______________________, a ______________ banking corporation, as trustee and
not in its individual capacity (the "Indenture Trust").
RECITALS
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Class A-1 ___%
Asset Backed Notes (the "Class A-1 Notes") and Class A-2 ___% Asset Backed Notes
(the "Class A-2 Notes" and, together with the Class A-1 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (a) the Receivables and all moneys
due thereon on or after the Cutoff Date, in the case of Precomputed Receivables,
and all moneys received thereon on and after the Cutoff Date, in the case of
Simple Interest Receivables; (b) the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of the
Issuer in such Financed Vehicles; (c) any proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors; (d) any Financed
Vehicle that shall have secured an Receivable and that shall have been acquired
by or on behalf of the Company, the Servicer or the Issuer; (e) all funds on
deposit from time to time in the Trust Accounts, including the Reserve Account
Initial Deposit, and in all investments and proceeds thereof (including all
income thereon); (f) the Sale and Servicing Agreement (including the Issuer's
right to cause the Company to repurchase Receivables from the Issuer under
certain circumstances described therein); and (g) all present and future claims,
demands, causes of action and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion thereof, voluntary or involuntary, into cash or other liquid
property, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights
to payment of any and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing (collectively, the
"Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders
of the Notes, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the
<PAGE>
best of its ability to the end that the interests of the Holders of the Notes
may be adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. (a) Definitions. Except as otherwise specified
-----------
herein or as the context may otherwise require, the following terms have the
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
---
"Affiliate" means, 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 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.
"Authorized Officer" means, with respect to the Issuer, any officer of
------------------
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented form time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
---------------
the Sale and Servicing Agreement, the Note Depository Agreement, the Certificate
Depository Agreement and other documents and certificates delivered in
connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1 Notes
----------------
and the Class A-2 Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in The City of New York are
authorized or obligated by law, regulation or executive order to remain closed.
"Certificate Depository Agreement" has the meaning specified in
--------------------------------
Section 1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit B to the Trust Agreement.
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<PAGE>
"Class A-1 Interest Rate" means _____% per annum (computed on the
-----------------------
basis of a 360-day year consisting of twelve 30-day months).
"Class A-1 Notes" means the Class A-1 _____% Asset Backed Notes,
---------------
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means _____% per annum (computed on the
-----------------------
basis of a 360-day year consisting of twelve 30-day months).
"Class A-2 Notes" means the Class A-2 _____% Asset Backed Notes,
---------------
substantially in the form of Exhibit A-2.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means
------------ _________________.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of
----------
this Indenture.
"Company" means Asset Backed Securities Corporation, a Delaware
-------
corporation and any successor in interest.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at ____________________________; Attention: ___________________, or at such
other address as the Indenture Trustee may designate from time to time by notice
to the Noteholders and the Issuer, or the principal corporate trust office of
any successor Trustee at the address designated by such successor Indenture
Trustee by notice to the Noteholders and the Issuer.
"Cutoff Date" means
----------- ____________.
"Default" means any occurrence that is, or with notice or the lapse
-------
of time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
----------------
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<PAGE>
"Event of Default" has the meaning specified in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and a right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ -----------
registered on the Note Register.
"Indenture Trustee" means ______________________, a _____________
-----------------
banking corporation, as Indenture Trustee under this Indenture, or any successor
Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor on
the Notes, the Company and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Company or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Company or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
-----------------------
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
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<PAGE>
"Interest Accrual Period" means, with respect to any Distribution
-----------------------
Date, the period from and including the first day of the calendar month
immediately preceding the month in which such Distribution Date occurs (or, in
the case of the first Distribution Date, the Closing Date) to and including the
last day of such calendar month.
"Interest Rate" means the Class A-1 Interest Rate or the Class A-2
-------------
Interest Rate.
"Issuer" means CS First Boston Auto Receivables 199 -__ until a
------
successor replaces it and, thereafter, means such successor and, for the
purposes of any provision contained herein and required by the TIA, each other
obligor on the Notes.
"Issuer Order" or "Issuer Request" means a written order or request
------------ --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note" means a Class A-1 Note or a Class A-2 Note.
----
"Note Depository Agreement" means the agreement dated
-------------------------
_________________, among the Issuer, the Indenture Trustee and the Depository
Trust Company, as the initial Clearing Agency, relating to the Notes,
substantially in the form of Exhibit B.
"Note Owner" means, with respect to a Book-Entry Note, the Person who
----------
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.05.
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
-5-
<PAGE>
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee or
any Paying Agent in trust for the Holders of such Notes (provided, however, that
if such Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision for such notice has been made,
satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are held
by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Company or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that the Indenture Trustee knows to be so
owned shall be so disregarded. Notes so owned that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Company or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means ________________, not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreement, or any successor Owner
Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Collection Account and the Note Distribution Account, including payments of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
------------
-6-
<PAGE>
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Company, the Servicer and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes.
"Rating Agency" means _________________ or, if no such organization or
-------------
successor is any longer in existence, a nationally recognized statistical rating
organization or other comparable Person designated by the Issuer, notice of
which designation shall be given to the Indenture Trustee, the Owner Trustee and
the Servicer.
"Record Date" means, with respect to a Distribution Date or Redemption
-----------
Date, the close of business on the day immediately preceding such Distribution
Date or Redemption Date.
"Redemption Date" means in the case of a redemption of the Notes
---------------
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.01(a) or (b), as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
----------------
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the weighted
average of the Interest Rates for each Class of Notes being so redeemed to but
excluding the Redemption Date, or (b) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President,
-7-
<PAGE>
Assistant Vice President, Treasurer, Assistant Treasurer, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
----------------------------
dated as of _______________, among the Issuer, the Company, and __________, as
Servicer.
"Schedule of Receivables" means the listing of the Receivables set forth
-----------------------
in Schedule I (which Schedule may be in the form of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Servicer" means __________ in its capacity as servicer under the Sale
--------
and Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 States of the United States of America
-----
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
------------------
"Trust Estate" means all money, instruments, rights and other property
------------
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, all property and interests Granted to the Indenture Trustee),
including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission;
-8-
<PAGE>
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Indenture
Trustee; and
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
-9-
<PAGE>
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The Class A-1 Notes and the Class A-2 Notes, in
----
each case together with the Indenture Trustee's certificate of authentication,
shall be in substantially the form set forth in Exhibit A-1 and Exhibit A-2,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A-1 and Exhibit A-2 are part of the terms of this
Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes
--------------------------------------
shall be executed on behalf of the Issuer by any of its Authorized Officers.
The signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of
$_____________ and Class A-2 Notes for original issue in an aggregate principal
amount of $____________. The aggregate principal amount of Class A-1 Notes and
Class A-2 Notes outstanding at any time may not exceed such respective amounts
except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples of $1 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual
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signature of one of its authorized signatories, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of
---------------
definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange.
---------------------------------------------------
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes of the same Class in any authorized
denominations of a like aggregate principal amount.
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At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i)
------------------------------------------
any mutilated Note is surrendered to the Indenture Trustee or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note and (ii) there is delivered to the Indenture Trustee such security
or indemnity as may be required by it to hold the Issuer and the Indenture
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, the Issuer shall execute, and upon its request the Indenture Trustee
shall authenticate and deliver, in exchange for or in lieu of any such mutilated
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may
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pay such destroyed, lost or stolen Note when so due or payable or upon the
Redemption Date without surrender thereof. If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith).
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) The Class A-1 Notes and the Class A-2 Notes shall accrue interest at
the Class A-1 Interest Rate and the Class A-2 Interest Rate, respectively, as
set forth in Exhibit A-1 and Exhibit A-2, respectively, and such interest shall
be payable on each Distribution Date as specified therein, subject to Section
3.01. Any installment of interest or principal payable on a Note that is
punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered on the Record Date by check mailed first-
class postage prepaid to such Person's address as it appears on the Note
Register on such Record Date,
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except that (i) unless Definitive Notes have been issued pursuant to Section
2.12, with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payment will be made by wire transfer in immediately available funds to the
account designated by such nominee and (ii) the final installment of principal
payable with respect to such Note on a Distribution Date or on the applicable
class final scheduled Distribution Date (and except for the Redemption Price for
any Note called for redemption pursuant to Section 10.01(a)) will be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit A-1
and Exhibit A-2. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.02. All principal payments
on each Class of Notes shall be made pro rata to the Noteholders of such Class
entitled thereto. The Indenture Trustee shall notify the Person in whose name a
Note is registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be
mailed or transmitted by facsimile prior to such final Distribution Date and
shall specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as provided
in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date and, at least 15 days before any such
special record date, shall mail to each Noteholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder that the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section except as expressly permitted
by this
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Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time, unless the Issuer shall direct by an Issuer Order that they
be destroyed or (provided that such Issuer Order is timely and the Notes have
not been previously disposed of by the Indenture Trustee) returned to it.
SECTION 2.09. Release of Collateral. Subject to Section 11.01 and
---------------------
the terms of the Basic Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in form of typewritten Notes representing the Book-Entry Notes,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered
initially on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes
and the giving of instructions or directions hereunder) as the
sole holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Note
Depository Agreement. Unless and until Definitive Notes are issued
pursuant to Section 2.12, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of
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and interest on the Notes to such Clearing Agency Participants;
and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of
the beneficial interest in the Notes and has delivered such
instructions to the Indenture Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or
--------------------------
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12. Definitive Notes. If (i) the Company advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Company is unable to locate a qualified successor, (ii) the
Company at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Default, Owners of the Book-
Entry Notes representing beneficial interests aggregating at least a majority of
the Outstanding Amount of such Notes advise the Clearing Agency in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
SECTION 2.13. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer secured by the Trust Estate. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of a Note (and each Note Owner by its acceptance of an interest in the
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applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of the
Issuer.
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal and Interest. The Issuer will
---------------------------------
duly and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement (i) for the
benefit of the Class A-1 Notes, to the Class A-1 Noteholders and (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided
--------------------------------------
in Section 8.02(a) and (b), all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.02(c) shall be
made on behalf of the Issuer by the Indenture Trustee or by another Paying
Agent, and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto and (unless the
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Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure to so act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) of which it has actual knowledge
in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to
be met by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent, and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request;
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and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Issuer for payment thereof (but only to the extent of the
amounts so paid to the Issuer), and all liability of the Indenture Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and
employ, at the expense and direction of the Issuer, any other reasonable means
of notification of such repayment (including, but not limited to, mailing notice
of such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time
--------------------------
to time execute and deliver all such supplements and amendments hereto and all
such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively
the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
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The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing
---------------------------
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before _____________, in each calendar year, beginning in 199 ,
the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until ________________ in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables.
----------------------------------------------------
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Servicer to assist the Issuer in performing its
duties under this Indenture.
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(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including but
not limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided
therein, the Issuer shall not waive, amend, modify, supplement or terminate any
Basic Document or any provision thereof without the consent of the Indenture
Trustee or the Holders of at least a majority of the Outstanding Amount of the
Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default.
If a Servicer Default shall arise from the failure of the Servicer to perform
any of its duties or obligations under the Sale and Servicing Agreement with
respect to the Receivables, the Issuer shall take all reasonable steps available
to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination to
the Servicer of the Servicer's rights and powers pursuant to Section 8.01 of the
Sale and Servicing Agreement, the Issuer shall appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may resign as the Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer enters into a servicing agreement with the Issuer
as provided below. Upon delivery of any such notice to the Issuer, the Issuer
shall obtain a new servicer as the Successor Servicer under the Sale and
Servicing Agreement. Any Successor Servicer other than the Indenture Trustee
shall (i) be an established financial institution having a net worth of not less
than $100,000,000 and whose regular business includes the servicing of Contracts
and (ii) enter into a servicing agreement with the Issuer having substantially
the same provisions as the provisions of the Sale and Servicing Agreement
applicable to the Servicer. If within 30 days after the delivery of the notice
referred to above, the Issuer shall not have obtained such a new servicer, the
Indenture Trustee may appoint, or may petition a court of competent jurisdiction
to appoint, a Successor Servicer. In connection with any such appointment, the
Indenture Trustee may make such arrangements for the compensation of such
successor as it and such successor shall agree, subject to the limitations set
forth below and in the Sale and Servicing Agreement, and in accordance with
Section 8.02 of the Sale and Servicing Agreement, the Issuer shall enter into an
agreement with such successor for the servicing of the Receivables (such
agreement to be in form and substance satisfactory to the Indenture Trustee).
If the Indenture Trustee shall succeed to the Servicer's duties as servicer of
the Receivables as provided herein, it shall do so in its individual capacity
and not in its
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capacity as Indenture Trustee and, accordingly, the provisions of Article VI
hereof shall be inapplicable to the Indenture Trustee in its duties as the
successor to the Servicer and the servicing of the Receivables. In case the
Indenture Trustee shall become successor to the Servicer under the Sale and
Servicing Agreement, the Indenture Trustee shall be entitled to appoint as
Servicer any one of its affiliates, provided that it shall be fully liable for
the actions and omissions of such affiliate in such capacity as Successor
Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee. As soon as a Successor Servicer is appointed, the Issuer shall notify
the Indenture Trustee of such appointment, specifying in such notice the name
and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee or the Holders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral (except to the
extent otherwise provided in the Sale and Servicing Agreement) or the Basic
Documents, or waive timely performance or observance by the Servicer or the
Company under the Sale and Servicing Agreement; and (ii) that any such amendment
shall not (A) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions that are required to be made for the benefit
of the Noteholders or (B) reduce the aforesaid percentage of the Notes that is
required to consent to any such amendment, without the consent of the Holders of
all the Outstanding Notes. If any such amendment, modification, supplement or
waiver shall be so consented to by the Indenture Trustee or such Holders, the
Issuer agrees, promptly following a request by the Indenture Trustee to do so,
to execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer,
including those included in the Trust Estate, unless directed to
do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of
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the payment of the taxes levied or assessed upon any part of the
Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be
expressly permitted hereby, (B) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance (other
than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof (other
than tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on any of the Financed Vehicles
and arising solely as a result of an action or omission of the
related Obligor) or (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any
such tax, mechanics' or other lien) security interest in the
Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 199 ), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been
a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and
the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and
shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form
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satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed,
all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that
such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent
herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange
Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is
hereby restricted (A) shall be a United States citizen or a
Person organized and existing under the laws of the United States
of America or any State, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture
Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all
Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly
agrees by means of such supplemental indenture that all right,
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title and interest so conveyed or transferred shall be subject
and subordinate to the rights of Holders of the Notes, (D) unless
otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against
and from any loss, liability or expense arising under or related
to this Indenture and the Notes and (E) expressly agrees by means
of such supplemental indenture that such Person (or if a group of
Persons, then one specified Person) shall make all filings with
the Commission (and any other appropriate Person) required by the
Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that
such conveyance or transfer and such supplemental indenture
comply with this Article III and that all conditions precedent
herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange
Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation
-----------------------
or merger of the Issuer in accordance with Section 3.10(a), the Person formed by
or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), CS First Boston Auto Receivables Trust
199 -__ will be released from every covenant and agreement of this Indenture to
be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice
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to the Indenture Trustee stating that CS First Boston Auto Receivables Trust
199 -__ is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur,
------------
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the
----------------------
Servicer to comply with Sections 4.09, 4.10, 4.11 and 5.09(b) and Article IX of
the Sale and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not, directly
-------------------
or indirectly, pay any dividend or make any distribution (by reduction of
capital or otherwise) whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or set
aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, distributions to the
Servicer, the Owner Trustee and the Certificateholders as contemplated by, and
to the extent funds are available for such purpose under, the Sale and Servicing
Agreement or the Trust Agreement. The Issuer will not directly or indirectly,
make payments to or distributions from the Collection Account except in
accordance with this Indenture and the Basic Documents.
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SECTION 3.18. Notice of Events of Default. The Issuer shall give
---------------------------
the Indenture Trustee and the Rating Agencies prompt written notice of each
Event of Default hereunder and each default on the part of the Servicer or the
Company of their obligations under the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This
---------------------------------------
Indenture shall cease to be of further effect with respect to the Notes except
as to rights of registration of transfer and exchange, substitution of
mutilated, destroyed, lost or stolen Notes, rights of Noteholders to receive
payments of principal thereof and interest thereon, Sections 3.03, 3.04, 3.05,
3.08, 3.10, 3.12 and 3.13, the rights, obligations and immunities of the
Indenture Trustee hereunder (including the rights of the Indenture Trustee under
Section 6.07 and the obligations of the Indenture Trustee under Section 4.02)
and the rights of Noteholders as beneficiaries hereof with respect to the
property so deposited with the Indenture Trustee payable to all or any of them,
and the Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.05 and (ii) Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the Indenture
Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable.
b. will become due and payable at the Class A-2 Final Scheduled
Distribution Date within one year, or
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c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of
notice of redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer.
and the Issuer, in the case of a., b. or c. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable final scheduled Distribution Date or Redemption Date
(if Notes shall have been called for redemption pursuant to Section 10.01(a)),
as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section
11.01(a) and, subject to Section 11.02, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In
----------------------------------------
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
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ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a
period of five days; or
(ii) default in the payment of the principal of any Note when the same
becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance
of which is elsewhere in this Section specifically dealt with), or
any representation or warranty of the Issuer made in this
Indenture or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same
shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there
shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the Holders of at least 25% of the Outstanding Amount
of the Notes, a written notice specifying such default or
incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a notice of Default
hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Trust
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Estate, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the
Issuer to the entry of an order for relief in an involuntary case
under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
the Issuer or for any substantial part of the Trust Estate, or the
making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts
as such debts become due, or the taking of any action by the
Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if the Event
of Default giving rise to such acceleration had not occurred; and
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(B) all sums paid or advanced by the Indenture Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have
been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
----------------------------------------------------
by Indenture Trustee.
- --------------------
(a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will upon demand of the Indenture Trustee,
pay to it, for the benefit of the Holders of the Notes, the whole amount then
due and payable on such Notes for principal and interest, with interest on the
overdue principal, and, to the extent payment at such rate of interest shall be
legally enforceable, on overdue installments of interest, at the rate borne by
the Notes and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such right, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state
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bankruptcy, insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, or liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Issuer or its
property or such other obligor or Person, or in case of any other comparable
judicial Proceedings relative to the Issuer or other obligor upon the Notes, or
to the creditors or property of the Issuer or such other obligor, the Indenture
Trustee, irrespective of whether the principal of any Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in
such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement
of all expenses and liabilities incurred, and all advances made,
by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any
such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any
Proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee, such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, an all other expenses and
liabilities incurred,
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and all advances made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities.
--------------------
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may do one or more of the following (subject to Section
5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, by
declaration or otherwise, enforce any judgment obtained and
collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights
and
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remedies of the Indenture Trustee and the Holders of the Notes;
and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called
and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for principal and
interest or (C) the Indenture Trustee (1) determines that the Trust Estate will
not continue to provide sufficient funds for the payment of principal and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable and (2) obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out such money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest (including any premium), ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for interest
(including any premium);
THIRD: to Holders of the Class A-1 Notes for amounts due and unpaid on
the Class A-1 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-1 Notes for
principal, until the Outstanding Amount of the Class A-1 Notes is reduced to
zero;
FOURTH: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-2 Notes for
principal, until the Outstanding Amount of the Class A-2 Notes is reduced to
zero; and
FIFTH: to the Issuer for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement.
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The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Receivables. If the
----------------------------------------
Notes have been declared to be due and payable under Section 5.02 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to maintain possession
of the Trust Estate. In determining whether to maintain possession of the Trust
Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in
its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain
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priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provision of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive
----------------------------------------------
Principal and Interest. Notwithstanding any other provisions in this Indenture,
- ----------------------
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective due dates thereof expressed in such Note or
in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission
------------------------------
of the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Holders of a majority of
----------------------
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of
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conducting any Proceeding for any remedy available to the Indenture Trustee with
respect to the Notes or exercising any trust or power conferred on the Indenture
Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Trust Estate shall be
by Holders of Notes representing not less than 100% of the
Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture
Trustee by Holders of Notes representing less than 100% of the
Outstanding Amount of the Notes to sell or liquidate the Trust
Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of
-----------------------
the acceleration of the maturity of the Notes as provided in Section 5.02 the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
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SECTION 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of a Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
--------------------------------
covenants (to the extent that it may lawfully do so) that will not at any time
insist upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to
---------------
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the assets of the Issuer. Any money or property collected
by the Indenture Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so,
the Issuer shall take all such lawful action as the Indenture Trustee may
request to compel or secure the performance and observance by the Company or the
Servicer, as applicable, of each of their obligations to the Issuer under or in
connection with the Sale and Servicing Agreement, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement to the extent and in the
manner directed by the Indenture Trustee, including the transmission of notices
of default on the part of the Company or the Servicer thereunder and the
institution of
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legal or administrative actions or proceedings to compel or secure performance
by the Company or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Company or the Servicer
under or in connection with the Sale and Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Company or the Servicer, as the case may be, of each of their obligations
to the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing Agreement and any
right of the Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee.
---------------------------
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of
this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
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<PAGE>
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.02. Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
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<PAGE>
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, that such conduct by the Indenture Trustee does not
constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes, and may otherwise deal with the Issuer or its Affiliates with the same
rights that it would have if it were not Indenture Trustee. Any Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of such Default
within 90 days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold such notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders. The
---------------------------------------
Indenture Trustee shall deliver to each Noteholder such information as may be
required to enable such holder to prepare its federal and state income tax
returns.
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SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to
--------------------------
the Indenture Trustee from time to time reasonable compensation for its
services. The Indenture Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuer shall reimburse
the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay the fees
and expenses of such counsel. The Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer. The Holders of a
majority in Outstanding Amount of the Notes may remove the Indenture Trustee by
so notifying the Indenture Trustee and may appoint a successor Indenture
Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
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A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the
-------------------------------------
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.
If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and if at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
-----------------------------------------------
Indenture Trustee.
- -----------------
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust
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<PAGE>
Estate may at the time be located, the Indenture Trustee shall have the power
and may execute and deliver all instruments to appoint one or more Persons to
act as a co-trustee or co-trustees, or separate trustee or separate trustees, of
all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to the Trust Estate,
or any part hereof, and subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Indenture Trustee may
consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-trustee
or separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to
act separately without the Indenture Trustee joining in such
act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding
of title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of
the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
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<PAGE>
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA (S) 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of Baa3 or better by Moody's or shall
otherwise be acceptable to Moody's. The Indenture Trustee shall comply with TIA
(S) 310(b), including the optional provision permitted by the second sentence of
TIA (S) 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA (S) 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
---------------------------------------------
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
- ------------------------
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders of Notes as of such Record Date and (b) at such other times as
the Indenture Trustee may request in writing, within 30 days after receipt by
the Issuer of any such request, a list of similar form and content as of a date
not more than 10 days prior to the time such list is furnished; provided,
however, that so long as the Indenture Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders.
- -----------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and
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addresses of Holders of Notes received by the Indenture Trustee in its capacity
as Note Registrar. The Indenture Trustee may destroy any list furnished to it
as provided in Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA (S) 312(c).
SECTION 7.03. Reports by Issuer.
-----------------
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Issuer may be required to file
with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to
time by the Commission such additional information, documents
and reports with respect to compliance by the Issuer with the
conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA (S)
313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses
(i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee. If required by TIA (S)
----------------------------
313(a), within 30 days after each ___________ beginning with ________, ___, the
Indenture Trustee shall mail to each Noteholder as required by TIA (S) 313(c) a
brief report dated as of such date that complies with TIA (S) 313(a). The
Indenture Trustee also shall comply with TIA (S) 313(b).
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A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Trust Estate, the Indenture Trustee may take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
SECTION 8.02. Trust Accounts.
--------------
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Noteholders and the Certificateholders, the Trust Accounts as
provided in Section 5.01 of the Sale and Servicing Agreement.
(b) On or before each Distribution Date, the Total Distribution Amount
with respect to the preceding Collection Period will be deposited in the
Collection Account as provided in Section 5.02 of the Sale and Servicing
Agreement. On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding
Collection Period pursuant to Sections 5.06 and 5.07 of the Sale and Servicing
Agreement will be transferred from the Collection Account and/or the Reserve
Account to the Note Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes for principal and interest (including any premium) in the following
amounts and in the following order of priority (except as otherwise provided in
Section 5.04(b)):
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(i) accrued and unpaid interest on the Notes; provided, that if there
are not sufficient funds in the Note Distribution Account to pay
the entire amount of accrued and unpaid interest then due on the
Notes, the amount in the Note Distribution Account shall be
applied to the payment of such interest on the Notes pro rata on
the basis of the total such interest due on the Notes;
(ii) to the Holders of the Class A-1 Notes on account of principal
until the Outstanding Amount of the Class A-1 Notes is reduced to
zero; and
(iii) to the Holders of the Class A-2 Notes on account of principal
until the Outstanding Amount of the Class A-2 Notes is reduced to
zero.
SECTION 8.03. General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Eligible Investments and reinvested by the Indenture Trustee upon
Issuer Order, subject to the provisions of Section 5.01(b) of the Sale and
Servicing Agreement. All income or other gain from investments of moneys
deposited in the Trust Accounts shall be deposited by the Indenture Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to such account. The Issuer will not direct the Indenture Trustee to
make any investment of any funds or to sell any investment held in any of the
Trust Accounts unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the proceeds of such
sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer (or the Servicer pursuant to Section 5.01(b) of
the Sale and Servicing Agreement) shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable pursuant to Section 5.02 or
(iii) if
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such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Trust Estate are being applied
in accordance with Section 5.05 as if there had not been such a declaration,
then the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Eligible Investments.
SECTION 8.04. Release of Trust Estate.
-----------------------
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA (S)(S) 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall
------------------
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.04(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the holders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Trust Estate. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
Supplemental Indentures
-----------------------
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SECTION 9.01. Supplemental Indentures Without Consent of
------------------------------------------
Noteholders.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to
assure, convey and confirm unto the Indenture Trustee any
property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture
additional Property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the
Issuer herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any
supplemental indenture or to make any other provisions with
respect to matters or questions arising under this Indenture
or in any supplemental indenture; provided, that such action
shall not adversely affect the interests of the Holders of the
Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the
requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this
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Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner, the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior notice to the Rating Agencies and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or the Redemption Price with
respect thereto, change the provisions of this Indenture
relating to the application of collections on, or the proceeds
of the sale of, the Trust Estate to payment of principal of or
interest on the Notes, or change any place of payment where, or
the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article
V, to the payment of any such amount due on the Notes on or
after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with certain
provisions of
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this Indenture or certain defaults hereunder and their
consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents
cannot be modified or waived without the consent of the Holder
of each Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components
of such calculation) or to affect the rights of the Holders of
Notes to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of
the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth
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in general terms the substance of such supplemental indenture. Any failure of
the Indenture Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing,
------------------------------------
or permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment
-----------------------------------
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption.
----------
(a) The Class A-2 Notes are subject to redemption in whole, but not in
part, at the direction of the Servicer pursuant to Section 9.01(a) of the Sale
and Servicing Agreement, on any Distribution Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
9.01(a) for a purchase price equal to the Redemption Price; provided, that the
Issuer has available funds sufficient to pay the Redemption Price. The Servicer
or the Issuer shall furnish the Rating Agencies notice of such redemption. If
the Class A-2 Notes are to be redeemed pursuant to this Section 10.01(a), the
Servicer or the Issuer shall furnish notice of such election to the Indenture
Trustee not later than 20 days prior to the Redemption Date and the Issuer shall
deposit by 10:00 A.M. New York City time on the Redemption Date with the
Indenture Trustee in the Note Distribution Account the Redemption Price of the
Class A-2 Notes to be redeemed, whereupon all such Class A-2 Notes shall be due
and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 20 days prior to the Redemption Date, whereupon
all such amounts shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice.
-------------------------
(a) Notice of redemption under Section 10.01(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed
or transmitted not later than 10 days prior to the applicable Redemption Date to
each Holder of Notes, as of the close of business on the Record Date preceding
the applicable Redemption Date at such Holder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
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(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to
be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or
--------------------------------
portions thereof to be redeemed shall, following notice of redemption as
required by Section 10.02 (in the case of redemption pursuant to Section
10.01(a)), on the Redemption Date become due and payable at the Redemption Price
and (unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on the Redemption Price for any period after the date to
which accrued interest is calculated for purposes of calculating the Redemption
Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc.
-----------------------------------------
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
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(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each signatory, such signatory
has made such examination or investigation as is necessary to enable such
signatory to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the
basis for the release of any property or securities subject
to the lien of this Indenture, the Issuer shall, in addition
to any obligation imposed in Section 11.01(a) or elsewhere
in this Indenture, furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value
(within 90 days of such deposit) to the Issuer of the
Collateral or other property or securities to be so
deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the
Indenture Trustee an Independent Certificate as to the same
matters, if the fair value to the Issuer of the securities
to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer,
as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or more of the
Outstanding Amount of the Notes, but such a certificate need
not be furnished with respect to any securities so
deposited, if the fair value thereof to the Issuer as set
forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Outstanding Amount
of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to
the Indenture Trustee an Officer's Certificate
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certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of
such release) of the property or securities proposed to be
released and stating that in the opinion of such person the
proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
clause (iii) above, the Issuer shall also furnish to the
Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and
of all other property, other than property as contemplated
by clause (v) below or securities released from the lien of
this Indenture since the commencement of the then-current
calendar year, as set forth in the certificates required by
clause (iii) above and this clause (iv), equals 10% or more
of the Outstanding Amount of the Notes, but such certificate
need not be furnished in the case of any release of property
or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less
than one percent of the then Outstanding Amount of the
Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may, without compliance with the
requirements of the other provisions of this Section, (A)
collect, liquidate, sell or otherwise dispose of Receivables
and Financed Vehicles as and to the extent permitted or
required by the Basic Documents and (B) make cash payments
out of the Trust Accounts as and to the extent permitted or
required by the Basic Documents, so long as the Issuer shall
deliver to the Indenture Trustee every six months,
commencing __________________, ____, an Officer's
Certificate of the Issuer stating that all the dispositions
of Collateral described in clauses (A) or (B) above that
occurred during the preceding six calendar months were in
the ordinary course of the Issuer's business and that the
proceeds thereof were applied in accordance with the Basic
Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
the opinion of
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only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Company, or the Issuer, stating that the information with respect
to such factual matters is in the possession of the Servicer, the Company, or
the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to
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<PAGE>
Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and
-----------------------------------------------
Rating Agencies. Any request, demand, authorization, direction, notice,
- ---------------
consent, waiver or Act of Noteholders or other documents provided or permitted
by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee
at its Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall
be sufficient for every purpose hereunder if in writing and
mailed first-class, postage prepaid to the Issuer addressed to:
CS First Boston Auto Receivables Trust 199___- ___, in care of
_____________________, Attention: __________________, or at any
other address previously furnished in writing to the Indenture
Trustee by the Issuer. The Issuer shall promptly transmit any
notice received by it from the Noteholders to the Indenture
Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of the
Rating Agencies to:________________________________________; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to
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<PAGE>
each Noteholder affected by such event, at such Holder's address as it appears
on the Note Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Noteholders is given by mail, neither the failure to mail such notice
nor any defect in any notice so mailed to any particular Noteholder shall affect
the sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer will furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee will
cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
-60-
<PAGE>
SECTION 11.08. Effect of Headings and Table of Contents. The
----------------------------------------
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. In case any provision in this
------------
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which
--------------
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
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<PAGE>
SECTION 11.16. Trust Obligation. No recourse may be taken, directly
----------------
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under this Indenture or any certificate
or other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Company or the
Issuer, or join in any institution against the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable
----------
prior notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall, and shall cause its representatives to, hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
-62-
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199___-___.
By:____________________________________, not in its individual
capacity but solely as Owner Trustee
By:____________________________________
Name:
Title:
_____________________________________, not in its individual
capacity but solely as Indenture Trustee,
By:___________________________________
Name:
Title:
-63-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said CS FIRST
BOSTON AUTO RECEIVABLES TRUST 199___-___, a Delaware business trust, and that
he/she executed the same as the act of said business trust for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
_____________________________
-64-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
__________________________, a ____________ banking corporation, and that he/she
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
____________________________
-65-
<PAGE>
SCHEDULE I
[To be provided on the Closing Date]
-66-
<PAGE>
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $__________
No. R- CUSIP NO. ___________
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199____-____
CLASS A-1 _____% ASSET BACKED NOTES
CS First Boston Auto Receivables Trust 199___-___, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of [ ] DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE]
and the denominator of which is $__________ by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
Class A-1 Notes pursuant to Section 3.01 of the Indenture dated as of
____________(the "Indenture"), between the Issuer and ______________, a
____________ banking corporation, as Indenture Trustee (the "Indenture
Trustee"); provided however, that the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the ______________ Distribution
Date (the "Class A-1 Final Scheduled Distribution Date") and the Redemption
Date, if any, pursuant to Section 10.01(a) of the Indenture. Capitalized terms
used but not defined herein are defined in Article I of the Indenture, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the
A-1-1
<PAGE>
principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date), subject to certain limitations contained in Section 3.01 of
the Indenture. Interest on this Note will accrue for each Distribution Date
from the ______ day of the month [preceding] the month of such Distribution Date
(in the case of the first Distribution Date, from the Closing Date) to and
including the ____ day of the month of such Distribution Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
A-1-2
<PAGE>
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199___-____.
By:____________________________________, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement
By:____________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
____________________________, not in its individual capacity
but solely as Indenture Trustee
By:_____________________________
Authorized Signatory
A-1-3
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 ______% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes and Class A-2 Notes (collectively, the "Notes") are and
will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the ______
day of each month or, if any such date is not a Business Day, the next
succeeding Business Day, commencing ___________________________.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-1 Final Scheduled Distribution
Date and the Redemption Date, if any, pursuant to Section 10.01(a) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee or the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by
A-1-4
<PAGE>
notice mailed or transmitted by facsimile prior to such Distribution Date, and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Company or the Issuer, or join in any institution
against the Company or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
A-1-5
<PAGE>
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights
A-1-6
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of ________________ in its individual
capacity, _______________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or failure to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-1-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
_______________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, hereby irrevocably constitutes and
appoints: _______________________________, attorney, to transfer said Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated:_________________________ _______________________/1/
Signature Guaranteed:
________________________
_____________________________
/1/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
A-1-8
<PAGE>
EXHIBIT A-2
[FORM OF CLASS A-2 NOTE]
Unless this Note is presented by an authorized representative of the Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_______________
No. R- CUSIP NO._______________
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__
CLASS A-2 ______% ASSET BACKED NOTES
CS First Boston Auto Receivables Trust 199__-__, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of[ ] DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE]
and the denominator of which is $________________ by (ii) the aggregate amount,
if any, payable from the Note Distribution Account in respect of principal on
the Class A-2 Notes pursuant to Section 3.01 of the Indenture dated as of
_______________ (the "Indenture"); between the Issuer and ______, a _________
banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the earlier of the _______ Distribution Date (the "Class A-2 Final
Scheduled Distribution Date") and the Redemption Date, if any, pursuant to
Section 10.01(a) of the Indenture. No payments of principal of the Class A-2
Notes shall be made until the Class A-1 Notes have been paid in full.
Capitalized
A-2-1
<PAGE>
terms used but not defined herein are defined in Article I of the Indenture,
which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the per annum rate shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the ____________ day of the month [preceding]
the month of such Distribution Date in the case of the first Distribution Date,
from the Closing Date) to and including the ______ day of the month of such
Distribution Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__.
By:___________________, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:________________________________________________
Authorized Signatory
A-2-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
_______________________, not in its individual capacity
but solely as Indenture Trustee
By:_________________________________________
Authorized Signatory
A-2-3
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 ______% Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the indenture.
This Class A-1 Notes and the Class A-2 Notes (collectively, the "Notes")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
_____ day of each month or, if any such date is not a Business Day, the next
succeeding Business Day, commencing _______________.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments on the
Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date,
A-2-4
<PAGE>
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be redeemed in
whole but not in part, at the option of the Servicer, on any Distribution Date
on and after the date on which the Pool Balance is less than or equal to 10% of
the Cutoff Date Pool Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-2-5
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Company or the Issuer, or join in any institution against the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-2-6
<PAGE>
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________ in its individual
capacity, ________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-2-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- ------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________________________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ______________________ ______________________________________/*/
Signature Guaranteed:
_______________________________
/*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, in accordance with the Securities Exchange Act of
1934, as amended.
A-2-8
<PAGE>
EXHIBIT B
[Form of Note Depository Agreement]
Letter of Representations
[To be Completed by Issuer and Trustee]
____________________________
[Name of Issuer]
____________________________
[Name of Trustee]
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street: 49th Floor
New York, NY 10041-0099
Re: ______________________________________________________
______________________________________________________
______________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to a trust indenture dated
_________________, (the "Document"). ______________________ (the "Underwriter")
is distributing the Securities through The Depository Trust Company ("DTC").
B-1
<PAGE>
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
(a) Prior to closing on the Securities on __________________, 199 ,
there shall be deposited with DTC one Security certificate registered in the
name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in
the face amounts set forth on Schedule A hereto, the total of which represents
100% of the principal amount of such Securities. If, however, the aggregate
principal amount of any maturity exceeds $200 million, one certificate will be
issued with respect to each $200 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount. Each
$200 million certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC). ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
(b) In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to
DTC pursuant to this Paragraph by mail or by any other means shall be sent to
DTC's Reorganization Department as indicated in Paragraph 4.
(c) In the event of a full or partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be mailed to Security
holders or published (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business on the business day before
or, if possible, two business days before the Publication Date. Issuer or
Trustee shall forward such notice either in a separate secure transmission for
each CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be not
B-2
<PAGE>
less than 30 days nor more than 60 days prior to the redemption date or, in the
case of an advance refunding, the date that the proceeds are deposited in
escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the
party sending the notice does not receive a telecopy receipt from DTC confirming
that the notice has been received, such party shall telephone (516) 227-4070.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall be
sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
(d) In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
(e) All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
(f) Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof, preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also
contain the current pool factor and Trustee contact's name and telephone number,
shall be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if
by mail or by any other means to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
B-3
<PAGE>
(g) [Note: Issuer must represent one of the following, and cross out
---- ---------
the other:] [The interest accrual period is record date to record date.] [The
interest accrual period is payment date to payment date.]
(h) Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co.
Absent any other existing arrangements, such payments shall be addressed as
follows:
Manager, Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
(i) [Note: Issuer must represent one of the following, and cross out
---- ---------
the other.]
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS") System.
-----------------------------------------------------------------------
Other principal payments (redemption payments) shall be made in same-day
funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS") System.
-----------------------------------------------------------------------
Other principal payments (redemption payments) shall be made in next-day
funds by Trustee to Cede & Co., as nominee of DTC, or its registered assigns, on
each payment date. Such payments shall be made payable to the order of Cede &
Co., and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square: 23rd Floor
New York, NY 10004-2695
(j) DTC may direct Issuer or Trustee to use any other number or address
as the number or address to which notices or payments of interest or principal
may be sent.
(k) In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation
B-4
<PAGE>
on the Security certificate indicating the date and amount of such reduction in
principal except in the case of final maturity, in which case the certificate
will be presented to Issuer or Trustee prior to payment, if required.
(l) In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
(m) DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
(n) Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
(o) Nothing herein shall be deemed to require Trustee to advance funds
on behalf of Issuer.
B-5
<PAGE>
Notes: Very truly yours,
- -----
A. If there is a trustee (as defined ---------------------------------
in this Letter of Representations). (Issuer)
Trustee as well as Issuer must sign this
Letter. If there is no Trustee, in
signing this Letter Issuer itself
undertakes to perform all of the
obligations set forth herein.
By:___________________________________
(Authorized Officer's Signature)
__________________________________
(Trustee)
B. Schedule B contains statements that DTC
believes accurately describe DTC, the method
of effecting book-entry transfers of
securities distributed through DTC, and
certain related matters.
By:___________________________________
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:__________________________
cc: Underwriter
Underwriter's Counsel
B-6
<PAGE>
SCHEDULE A
----------
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
<PAGE>
EXHIBIT 4.1.3
[FORM OF INDENTURE]
between
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ],
as Issuer
and
[TRUSTEE NAME],
as Indenture Trustee
Dated as of [ ], 199[ ]
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I: Definitions and Incorporation by Reference..................2
------------------------------------------
SECTION 1.01. Definitions. ................................2
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act...............................9
SECTION 1.03. Rules of Construction.......................10
ARTICLE II: The Notes..................................................10
---------
SECTION 2.01. Form........................................10
SECTION 2.02. Execution, Authentication and Delivery......11
SECTION 2.03. Temporary Notes.............................11
SECTION 2.04. Registration; Registration of Transfer and
Exchange...................................11
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes..13
SECTION 2.06. Persons Deemed Owner........................14
SECTION 2.07. Payment of Principal and Interest;
Defaulted Interest.........................14
SECTION 2.08. Cancellation................................15
SECTION 2.09. Release of Collateral.......................15
SECTION 2.10. Book-Entry Notes............................15
SECTION 2.11. Notices to Clearing Agency..................16
SECTION 2.12. Definitive Notes............................16
SECTION 2.13. Tax Treatment...............................17
ARTICLE III:Covenants..................................................17
---------
SECTION 3.01. Payment of Principal and Interest...........17
SECTION 3.02. Maintenance of Office or Agency.............17
SECTION 3.03. Money for Payments To Be Held in Trust......17
SECTION 3.04. Existence...................................19
SECTION 3.05. Protection of Trust Estate..................19
SECTION 3.06. Opinions as to Trust Estate.................20
SECTION 3.07. Performance of Obligations..................20
SECTION 3.08. Negative Covenants..........................21
SECTION 3.09. Annual Statement as to Compliance...........21
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms..............................21
SECTION 3.11. Successor or Transferee.....................23
SECTION 3.12. No Other Business...........................23
SECTION 3.13. No Borrowing................................23
SECTION 3.14. Guarantees, Loans, Advances and Other
Liabilities................................24
SECTION 3.15. Capital Expenditures........................24
SECTION 3.16. Restricted Payments.........................24
SECTION 3.17. Notice of Events of Default.................24
SECTION 3.18. Further Instruments and Acts................24
i
<PAGE>
ARTICLE IV: Satisfaction and Discharge.................................24
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture.....24
SECTION 4.02. Application of Trust Money..................25
SECTION 4.03. Repayment of Moneys Held by Paying Agent....26
ARTICLE V: Remedies...................................................26
--------
SECTION 5.01. Events of Default...........................26
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment..................................27
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee...........28
SECTION 5.04. Remedies; Priorities........................30
SECTION 5.05. Optional Preservation of the Trust Estate...31
SECTION 5.06. Limitation of Suits.........................31
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest.............32
SECTION 5.08. Restoration of Rights and Remedies..........32
SECTION 5.09. Rights and Remedies Cumulative..............32
SECTION 5.10. Delay or Omission Not a Waiver..............33
SECTION 5.11. Control by Noteholders......................33
SECTION 5.12. Waiver of Past Defaults.....................33
SECTION 5.13. Undertaking for Costs.......................34
SECTION 5.14. Waiver of Stay or Extension Laws............34
SECTION 5.15. Action on Notes.............................34
SECTION 5.16. Performance and Enforcement of Certain
Obligations................................34
ARTICLE VI: The Indenture Trustee......................................35
---------------------
SECTION 6.01. Duties of Indenture Trustee.................35
SECTION 6.02. Rights of Indenture Trustee.................36
SECTION 6.03. Individual Rights of Indenture Trustee......37
SECTION 6.04. Indenture Trustee's Disclaimer..............37
SECTION 6.05. Notice of Defaults..........................37
SECTION 6.06. Reports by Indenture Trustee to Holders.....37
SECTION 6.07. Compensation and Indemnity..................37
SECTION 6.08. Replacement of Indenture Trustee............38
SECTION 6.09. Successor Indenture Trustee by Merger.......39
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee.................39
SECTION 6.11. Eligibility; Disqualification...............40
SECTION 6.12. Preferential Collection of Claims Against
Issuer.....................................40
ii
<PAGE>
ARTICLE VII:Noteholders' Lists and Reports.............................40
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders.........40
SECTION 7.02. Preservation of Information; Communications
to Noteholders.............................41
SECTION 7.03. Reports by Issuer...........................41
SECTION 7.04. Reports by Indenture Trustee................42
ARTICLE VIII:Accounts, Disbursements and Releases......................42
------------------------------------
SECTION 8.01. Collection of Money.........................42
SECTION 8.02. Trust Accounts..............................42
SECTION 8.03. General Provisions Regarding Accounts.......43
SECTION 8.04. Release of Trust Estate.....................44
SECTION 8.05. Opinion of Counsel..........................44
ARTICLE IX: Supplemental Indentures....................................44
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders................................44
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders................................45
SECTION 9.03. Execution of Supplemental Indentures........47
SECTION 9.04. Effect of Supplemental Indentures...........47
SECTION 9.05. Conformity with Trust Indenture Act.........47
SECTION 9.06. Reference in Notes to Supplemental
Indentures.................................47
ARTICLE X: Redemption of Notes.......................................48
--------------------
SECTION 10.01. Redemption..................................48
SECTION 10.02. Form of Redemption Notice...................48
SECTION 10.03. Notes Payable on Redemption Date............49
ARTICLE XI: Miscellaneous..............................................49
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc..49
SECTION 11.02. Form of Documents Delivered to Indenture
Trustee...................................51
SECTION 11.03. Acts of Noteholders........................52
SECTION 11.04. Notices, etc., to Indenture Trustee,
Issuer and Rating Agencies................52
SECTION 11.05. Notices to Noteholders; Waiver.............53
SECTION 11.06. Alternate Payment and Notice Provisions....54
SECTION 11.07. Conflict with Trust Indenture Act..........54
SECTION 11.08. Effect of Headings and Table of Contents...54
SECTION 11.09. Successors and Assigns.....................54
SECTION 11.10. Separability...............................54
SECTION 11.11. Benefits of Indenture......................54
SECTION 11.12. Legal Holidays.............................54
iii
<PAGE>
SECTION 11.13. GOVERNING LAW..............................54
-------------
SECTION 11.14. Counterparts...............................55
SECTION 11.15. Recording of Indenture.....................55
SECTION 11.16. Trust Obligation...........................55
SECTION 11.17. No Petition................................55
SECTION 11.18. Inspection.................................55
iv
<PAGE>
INDENTURE dated as of [ ], 199[ ], between CARD ACCOUNT TRUST,
SERIES 199[ ]-[ ], a [ ] business trust, as Issuer (the "Issuer"), and
[TRUSTEE NAME], a [ ] banking corporation, as trustee and not in its
individual capacity (the "Indenture Trust").
RECITALS
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's [Class [A]] [Adjustable
Rate] [Variable Rate] [Floating Rate] [ %] Asset Backed Notes (the "[Class [A]]
Notes") and [Class [B]] [Adjustable Rate] [Variable Rate] [Floating Rate] [ %]
Asset Backed Notes (the "[Class [B]] Notes" and, together with the [Class [A]]
Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (a) the CRB Securities (as defined
herein), (b) all moneys due thereon on or after the Cutoff Date, (c) all funds
on deposit from time to time in the Trust Accounts, including the Reserve Fund
and in all investments and proceeds thereof (including all income thereon); (d)
all present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property which at
any time constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions. Except as otherwise specified herein or as
--------------------------
the context may otherwise require, the following terms have the meanings set
forth below for all purposes of this Indenture.
<PAGE>
"Act" has the meaning specified in Section 11.03(a).
---
"Affiliate" means, 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
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.
"Agreement[s]" mean[s] the [Pooling and Servicing Agreement] [Master
------------
Pooling and Servicing Agreement] [and] [Trust Agreement] dated [ ], 199[
] among the [Seller] [Depositor] [and] [the Servicer] [and] the CRB Securities
Trustee [as supplemented by that certain Series 199[ ] Supplement dated [
], 199[ ]] pursuant to which the CRB Securities were issued.
"Agreement Payment Date" has the meaning specified in the Agreement.
----------------------
"Authorized Officer" means, with respect to the Issuer, any officer of the
------------------
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented form time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
---------------
Note Depository Agreement, the Certificate Depository Agreement and other
documents and certificates delivered in connection therewith.
"Beneficial Owner" means, with respect to any Note, the Person who is the
----------------
beneficial owner of such Note as reflected on the books of the Depository or on
the books of a Person maintaining an account with such Depository (directly as a
Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).
"Book-Entry Notes" means a beneficial interest in the [Class [A]] Notes and
----------------
the [Class [B]] Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day on
------------
which banking institutions or trust companies in the City of New York are
authorized or obligated by law, regulation or executive order to remain closed.
"Certificate Depository Agreement" has the meaning specified in Section
--------------------------------
1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit B to the Trust Agreement.
-2-
<PAGE>
"Certificateholder" means
-----------------
"[Class [A]] Note Interest Rate" means [[ %] per annum] [insert interest
------------------------------
rate formula] (computed on the basis of a 360-day year consisting of twelve 30-
day months).
"[Class [A]] Notes" means the [Class [A]] [Adjustable Rate] [Variable Rate]
----------------
[Floating Rate] [ %] Asset Backed Notes, substantially in the form of Exhibit
A.
"[Class [B]] Note Interest Rate" means [[ %] per annum] [insert interest
-----------------------------
rate formula] (computed on the basis of a 360-day year consisting of twelve 30-
day months).
"[Class [B]] Notes" means the [Class [B]] _____% Asset Backed Notes,
----------------
substantially in the form of Exhibit B.
"Clearing Agency" means an organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
---------------------------
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means [ ], 199[ ].
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
----------
Indenture.
"Company" means Asset Backed Securities Corporation, a Delaware corporation
-------
and any successor in interest.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at [ ], Attention: [ ], or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Trustee at the
address designated by such successor Indenture Trustee by notice to the
Noteholders and the Issuer.
"CRB Securities Interest Payment" means, as to each Payment Date, the
-------------------------------
payments of interest on the CRB Securities Securities received by the Trustee
and due to be paid on such Payment Date.
"CRB Securities Principal Payment" means, as to each Payment Date, the
--------------------------------
payment of principal of the CRB Securities Securities received by the Trustee
and due to be paid on any Principal Payment Date.
-3-
<PAGE>
"CRB Securities Schedule" means the schedule attached hereto as Schedule
-----------------------
II, such schedule setting forth as to each CRB Securities Security (i) the
original principal balance and (ii) the principal balance at the Closing Date.
"CRB Securities" means the certificates or notes designated [ ], Series
--------------
[ ] with an initial [approximate] principal amount of $[ ] issuance
pursuant to [an Agreement].
"CRB Securities Trustee" means [ ] or its successor in interest in
----------------------
its capacity as trustee under the Agreement, or any successor trustee appointed
as therein provided.
"Cutoff Date" means [ ], 199[ ].
-----------
"Default" means any occurrence that is, or with notice or the lapse of time
-------
or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
----------------
"Event of Default" has the meaning specified in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
-----
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and a right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Note Register.
"Indenture Trustee" means [ ], a [ ] banking corporation, as
-----------------
Indenture Trustee under this Indenture, or any successor Indenture Trustee under
this Indenture.
"Independent" means, when used with respect to any specified Person, that
-----------
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Company and any Affiliate
-4-
<PAGE>
of any of the foregoing Persons, (b) does not have any direct financial interest
or any material indirect financial interest in the Issuer, any such other
obligor, the Company or any Affiliate of any of the foregoing Persons and (c) is
not connected with the Issuer, any such other obligor, the Company or any
Affiliate of any of the foregoing Persons as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
-----------------------
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Interest Accrual Period" means, with respect to any Distribution Date, the
-----------------------
period from and including the first day of the calendar month immediately
preceding the month in which such Distribution Date occurs (or, in the case of
the first Distribution Date, the Closing Date) to and including the last day of
such calendar month.
"Interest Rate" means the [Class [A]] Interest Rate or the [Class [B]]
-------------
Interest Rate.
"Issuer" means Card Account Trust, Series 199[ ]-[ ], until a successor
------
replaces it and, thereafter, means such successor and, for the purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" or "Issuer Request" means a written order or request signed
------------ --------------
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Note" means a [Class [A]] Note or a [Class [B]] Note.
----
"Note Depository Agreement" means the agreement dated [ ], 199[ ],
-------------------------
among the Issuer, the Indenture Trustee and the Depository Trust Company, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
Exhibit B.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
----------
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings specified
------------- --------------
in Section 2.05.
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified,
-5-
<PAGE>
any reference in this Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
------------------
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes theretofore
-----------
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee or
any Paying Agent in trust for the Holders of such Notes (provided, however,
-------- -------
that if such Notes are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision for such notice has been made,
satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
- --------
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Company or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that the Indenture Trustee knows to be so
owned shall be so disregarded. Notes so owned that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Company or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means [ ], not in its individual capacity but
-------------
solely as Owner Trustee under the Trust Agreement, or any successor Owner
Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer
-6-
<PAGE>
to make payments to and distributions from the Collection Account and the Note
Distribution Account, including payments of principal of or interest on the
Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
------------
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Company and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
"Rating Agency" means Moody's Investors Service, Inc. or Standard &
-------------
Poor's Rating Group, a division of McGraw-Hill, Inc., or, if neither such
organization or successor is any longer in existence, a nationally recognized
statistical rating organization or other comparable Person designated by the
Issuer, notice of which designation shall be given to the Indenture Trustee and
the Owner Trustee.
"Record Date" means, with respect to a Distribution Date or Redemption
-----------
Date, the close of business on the day immediately preceding such Distribution
Date or Redemption Date.
"Redemption Date" means in the case of a redemption of the Notes
---------------
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Issuer pursuant to Section
10.01(a) or (b), as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
----------------
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the weighted
average of the Interest Rates for each Class of Notes being so redeemed to but
excluding the Redemption Date, or (b) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
-7-
<PAGE>
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer,
Secretary, Assistant Secretary or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"State" means any one of the 50 States of the United States of America
-----
or the District of Columbia.
"Trust Estate" means all money, instruments, rights and other property
------------
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, all property and interests Granted to the Indenture Trustee),
including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Indenture
Trustee; and
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
-8-
<PAGE>
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The [Class [A]] Notes and the [Class [B]] Notes,
----
in each case together with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit A and
Exhibit B, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A and Exhibit B are part of the terms of this
Indenture.
-9-
<PAGE>
SECTION 2.02. Execution, Authentication and Delivery. The Notes
--------------------------------------
shall be executed on behalf of the Issuer by any of its Authorized Officers.
The signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
[Class [A]] Notes for original issue in an aggregate principal amount of $[ ]
and [Class [B]] Notes for original issue in an aggregate principal amount of $[
]. The aggregate principal amount of [Class [A]] Notes and [Class [B]] Notes
outstanding at any time may not exceed such respective amounts except as
provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Issuer may execute, and upon receipt of an Issuer Order, the
Indenture Trustee shall authenticate and deliver temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange.
---------------------------------------------------
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of
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registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met, then the Issuer shall
execute, and the Indenture Trustee shall authenticate and the Noteholder shall
obtain from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes of the same Class in any authorized
denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met, then the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.06 not involving any transfer.
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The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If:
------------------------------------------
(i) any mutilated Note is surrendered to the Indenture Trustee or the
Indenture Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note; and
(ii) there is delivered to the Indenture Trustee such security or indemnity
as may be required by it to hold the Issuer and the Indenture Trustee harmless,
then, in the absence of notice to the Issuer, the Note Registrar or the
Indenture Trustee that such Note has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the UCC are met, the Issuer
shall execute, and upon its request the Indenture Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated destroyed, lost or
stolen Note, a replacement Note of the same Class; provided, however, that if
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any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, then
the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
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SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) The [Class [A]] Notes and the [Class [B]] Notes shall accrue
interest at the [Class [A]] Interest Rate and the [Class [B]] Interest Rate,
respectively, as set forth in Exhibit A and Exhibit B, respectively, and such
interest shall be payable on each Distribution Date as specified therein,
subject to Section 3.01. Any installment of interest or principal payable on a
Note that is punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the Person in whose name such Note
(or one or more Predecessor Notes) is registered on the Record Date by check
mailed first-class postage prepaid to such Person's address as it appears on the
Note Register on such Record Date, except that (i) unless Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and (ii) the final
installment of principal payable with respect to such Note on a Distribution
Date or on the applicable class final scheduled Distribution Date (and except
for the Redemption Price for any Note called for redemption pursuant to Section
10.01(a)) will be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit A
and Exhibit B. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.02. All principal payments
with respect to the Notes of a Class shall be made pro rata to the Noteholders
of such Class entitled thereto. The Indenture Trustee shall notify the Person
in whose name a Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
shall be mailed or transmitted by facsimile prior to such final Distribution
Date and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of such installment. Notices
in connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, then
the Issuer shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Interest Rate in any lawful
manner. The Issuer may pay such defaulted interest to the persons who
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are Noteholders on a subsequent special record date, which date shall be at
least five Business Days prior to the payment date. The Issuer shall fix or
cause to be fixed any such special record date and payment date and, at least 15
days before any such special record date, shall mail to each Noteholder a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder that the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section except as expressly permitted
by this Indenture. All canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time, unless the Issuer shall direct by an Issuer Order that
they be destroyed or (provided that such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee) returned to it.
SECTION 2.09. Release of Collateral. Subject to Section 11.01 and the
---------------------
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of Counsel in lieu
of such Independent Certificates to the effect that the TIA does not require any
such Independent Certificates.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in form of typewritten Notes representing the Book-Entry Notes,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered
initially on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of instructions
or directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this Section
shall control;
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(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Note Depository Agreement. Unless and until
Definitive Notes are issued pursuant to Section 2.12, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Indenture
Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Clearing Agency, and
shall have no obligation to such Note Owners.
SECTION 2.12. Definitive Notes. If:
----------------
(i) the Company advises the Indenture Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Book-Entry Notes and the Company is unable
to locate a qualified successor,
(ii) the Company at its option advises the Indenture Trustee in writing
that it elects to terminate the book-entry system through the Clearing Agency,
or
(iii) after the occurrence of an Event of Default, Owners of the
Book-Entry Notes representing beneficial interests aggregating at least a
majority of the Outstanding Amount of such Notes advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of such Note Owners,
then the Clearing Agency shall notify all Note Owners and the Indenture Trustee
of the occurrence of such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in
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relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
SECTION 2.13. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer secured by the Trust Estate. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of a Note (and each Note Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of the
Issuer.
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly
---------------------------------
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on a Distribution Date
by the Trust with respect to the CRB Securities (i) for the benefit of the
[Class [A]] Notes, to the [Class [A]] Noteholders and (ii) for the benefit of
the [Class [B]] Notes, to the [Class [B]] Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, the City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
--------------------------------------
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no
amounts so withdrawn from the Collection Account and the Note Distribution
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section.
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On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee of its action or failure to
so act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) of which it has actual knowledge in the making
of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying Agent at
the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent, and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such
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Note shall thereafter, as an unsecured general creditor, look only to the Issuer
for payment thereof (but only to the extent of the amounts so paid to the
Issuer), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
-------- -------
Indenture Trustee or such Paying Agent, before being required to make any such
repayment, shall at the expense and direction of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Indenture Trustee shall also adopt and employ, at the expense and direction
of the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying Agent,
at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of the State
of [ ] (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States of
America, in which case the Issuer will keep in full effect its existence, rights
and franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time to
--------------------------
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the purposes
hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee and the Noteholders in such Trust Estate against the
claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section 3.05.
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SECTION 3.06. Opinions as to Trust Estate.
---------------------------
(a) On the Closing Date, the Issuer shall furnish to the Indenture
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as is necessary to perfect and make
effective the lien and security interest of this Indenture and reciting the
details of such action, or stating that, in the opinion of such counsel, no such
action is necessary to make such lien and security interest effective.
(b) On or before [ ] in each calendar year, beginning in 199[ ], the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until [ ] in the following calendar year.
SECTION 3.07. Performance of Obligations.
--------------------------
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture or such other instrument or agreement.
(b) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee or the Holders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, or waive timely performance or observance by the Company under the
Trust Agreement or any CRB Issuer under any Agreement; and (ii) that any such
amendment shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the
Notes that is required to consent to any such amendment, without the consent of
the Holders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee or such
Holders, the Issuer agrees, promptly following a request by the Indenture
Trustee to do so,
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to execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of the Issuer,
including those included in the Trust Estate, unless directed to do so by the
Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly withheld
from such payments under the Code) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released from
any covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other than the
lien of this Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law) or (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 199[ ]), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under this
Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
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(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the laws
of the United States of America or any State and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual payment of
the principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that such
transaction will not have any material adverse tax consequence to the Issuer,
any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted (A) shall be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and delivered
to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Indenture on
the part of the Issuer to be performed or observed, all as provided herein, (C)
expressly agrees by means of such supplemental indenture that all right, title
and interest so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold harmless
the Issuer against and from any loss, liability or expense arising under or
related to this Indenture and the Notes and (E) expressly agrees by means of
such supplemental
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indenture that such Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that such
transaction will not have any material adverse tax consequence to the Issuer,
any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).
SECTION 3.11. Successor or Transferee.
-----------------------
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Card Account Trust, Series 199[ ]-[ ]
will be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee stating
that Card Account Trust, Series 199[ ]-[ ] is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the CRB
Securities in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
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SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities. The
-------------------------------------------------
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.15. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.16. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, pay any dividend or make any distribution (by reduction of capital
or otherwise) whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer, redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
-------- -------
cause to be made, distributions to the Owner Trustee and the Certificateholders
as contemplated by, and to the extent funds are available for such purpose under
the Trust Agreement. The Issuer will not directly or indirectly, make payments
to or distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
SECTION 3.17. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Company of its
obligations.
SECTION 3.18. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to
rights of registration of transfer and exchange, substitution of mutilated,
destroyed, lost or stolen Notes, rights of Noteholders to receive payments of
principal thereof and interest thereon, Sections 3.03, 3.04, 3.05, 3.08, 3.10,
3.12 and 3.13, the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.07 and
the obligations of the Indenture Trustee under Section 4.02) and the rights of
Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when
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(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.05 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable.
b. will become due and payable at the Final Scheduled
Distribution Date within one year, or
c. are to be called for redemption within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice of redemption by
the Indenture Trustee in the name, and at the expense, of the Issuer.
and the Issuer, in the case of a., b. or c. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable final scheduled Distribution Date or Redemption Date
(if Notes shall have been called for redemption pursuant to Section 10.01(a)),
as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.01(a) and, subject to
Section 11.02, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.02. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture
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Trustee, of all sums due and to become due thereon for principal and interest;
but such moneys need not be segregated from other funds except to the extent
required herein or required by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of five
days; or
(ii) default in the payment of the principal of any Note when the same
becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with), or any representation or warranty of the
Issuer made in this Indenture or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been incorrect in any
material respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition in
respect of which such misrepresentation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the Indenture
Trustee or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be remedied
and stating that such notice is a notice of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part of
the Trust Estate in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
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Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and
such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Issuer to the entry of an order for
relief in an involuntary case under any such law, or the consent by the Issuer
to the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer generally
to pay its debts as such debts become due, or the taking of any action by the
Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes if the
Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
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(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration, have
been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee.
- -----------------
(a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, then the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of the Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest on the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, on overdue installments of interest at
the rate borne by the Notes, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such right, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization, or
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any
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demand pursuant to the provisions of this Section, shall be entitled and
empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred and all advances
made by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any Proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, an all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar Person.
(f) All rights of action and asserting of claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or
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Proceedings instituted by the Indenture Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities.
--------------------
(a) If an Event of Default shall have occurred and be continuing, then
the Indenture Trustee may do one or more of the following (subject to Section
5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, by declaration or otherwise,
enforce any judgment obtained and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
- -------- -------
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for principal and
interest or (C) the Indenture Trustee (1) determines that the Trust Estate will
not continue to provide sufficient funds for the payment of principal and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable and (2) obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out such money or property in the following order:
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FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest (including any premium), ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for interest
(including any premium);
THIRD: to Holders of the [Class [A]] Notes for amounts due and unpaid on
the [Class [A]] Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the [Class [A]] Notes for
principal, until the Outstanding Amount of the [Class [A]] Notes is reduced to
zero;
FOURTH: to Holders of the [Class [B]] Notes for amounts due and unpaid
on the [Class [B]] Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the [Class [B]] Notes
for principal, until the Outstanding Amount of the [Class [B]] Notes is reduced
to zero; and
FIFTH: to the Issuer for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Trust Estate. If the Notes
-----------------------------------------
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
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(ii) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provision of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the Noteholders
is intended to be exclusive
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of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder or otherwise shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of
------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Holders of a majority of the
----------------------
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
--------
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be by
Holders of Notes representing not less than 100% of the Outstanding Amount
of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Outstanding Amount of
the Notes to sell or liquidate the Trust Estate shall be of no force and
effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the
-----------------------
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences,
except a Default (a) in payment of principal of or interest on any of the Notes
or (b) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Note. In the case of any such
waiver, the Issuer, the Indenture Trustee
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and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of a Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that if will not at any time insist
upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Trust Estate
or upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing
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promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the
Notes shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Company or the CRB Issuer under or in connection with any CRB
Agreement including the right or power to take any action to compel or secure
performance or observance by the Company or the CRB Issuer of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, and any right of the Issuer to take such action shall be
suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee.
---------------------------
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, that the Indenture
-------- -------
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
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(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.02. Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in such
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, that such conduct by the Indenture Trustee does not
--------
constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
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SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes, and may otherwise deal with the Issuer or its Affiliates with the same
rights that it would have if it were not Indenture Trustee. Any Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of such Default
within 90 days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold such notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to the
--------------------------
Indenture Trustee from time to time reasonable compensation for its services.
The Indenture Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay the fees
and expenses of such counsel. The Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv) or (v) with respect to the Issuer, the expenses
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are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
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SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
--------
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and if at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee.
- -------
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee or co-
trustee jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Indenture Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at the
direction of the Indenture Trustee;
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(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA (S) 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of Baa3 or better by Moody's or shall
otherwise be acceptable to Moody's. The Indenture Trustee shall comply with TIA
(S) 310(b), including the optional provision permitted by the second sentence of
TIA (S) 310(b)(9); provided, however, that there shall be excluded from the
-------- -------
operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA (S) 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more
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than five days after the earlier of (i) each Record Date and (ii) three months
after the last Record Date, a list, in such form as the Indenture Trustee may
reasonably require, of the names and addresses of the Holders of Notes as of
such Record Date and (b) at such other times as the Indenture Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
-------- -------
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders.
- -----------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in Section 7.01 upon receipt of a
new list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA (S) 312(c).
SECTION 7.03. Reports by Issuer.
-----------------
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this Indenture as
may be required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA (S) 313(c)) such
summaries of any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
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(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee. If required by TIA (S)
----------------------------
313(a), within 30 days after each [ ] beginning with [ ], 199[ ], the
Indenture Trustee shall mail to each Noteholder as required by TIA (S) 313(c) a
brief report dated as of such date that complies with TIA (S) 313(a). The
Indenture Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Trust Estate, the Indenture Trustee may take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
SECTION 8.02. Trust Accounts.
--------------
(a) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the [ ] to Noteholders in
respect of the Notes to the extent of amounts due and unpaid on the Notes for
principal and interest (including any premium) in the following amounts and in
the following order of priority (except as otherwise provided in Section
5.04(b)):
(i) accrued and unpaid interest on the Notes; provided, that if
--------
there are not sufficient funds in the Note Distribution Account to pay the
entire amount of accrued and unpaid interest then due on the Notes, the amount
in the Note Distribution Account shall be applied to the payment of such
interest on the Notes pro rata on the basis of the total such interest due on
the Notes;
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(ii) to the Holders of the [Class [A]] Notes on account of
principal until the Outstanding Amount of the [Class [A]] Notes is reduced
to zero; and
(iii) to the Holders of the [Class [B]] Notes on account of
principal until the Outstanding Amount of the [Class [B]] Notes is reduced
to zero.
SECTION 8.03. General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Eligible Investments and reinvested by the Indenture Trustee upon
Issuer Order. All income or other gain from investments of moneys deposited in
the Trust Accounts shall be deposited by the Indenture Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to such
account. The Issuer will not direct the Indenture Trustee to make any investment
of any funds or to sell any investment held in any of the Trust Accounts unless
the security interest Granted and perfected in such account will continue to be
perfected in such investment or the proceeds of such sale, in either case
without any further action by any Person, and, in connection with any direction
to the Indenture Trustee to make any such investment or sale, if requested by
the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an
Opinion of Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If:
(i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by
11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer
and Indenture Trustee) on any Business Day, or
(ii) a Default or Event of Default shall have occurred and be
continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02, or
(iii) such Notes shall have been declared due and payable
following an Event of Default, and amounts collected or receivable from the
Trust Estate are being applied in accordance with Section 5.05 as if there
had not been such a declaration,
then the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Eligible Investments.
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SECTION 8.04. Release of Trust Estate.
-----------------------
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA (S)(S) 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the holders in
contravention of the provisions of this Indenture; provided, however, that such
-------- -------
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
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(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien of
this Indenture additional Property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and
in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be inconsistent
with any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising under
this Indenture or in any supplemental indenture; provided, that such action
--------
shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other provisions as may
be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders of the Notes
but with prior notice to the Rating Agencies, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner, the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
-------- -------
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the
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Rating Agencies and with the consent of the Holders of not less than a majority
of the Outstanding Amount of the Notes, by Act of such Holders delivered to the
Issuer and the Indenture Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
-------- -------
the consent of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto, change
the provisions of this Indenture relating to the application of collections
on, or the proceeds of the sale of, the Trust Estate to payment of
principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Indenture Trustee to direct the Issuer to sell
or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date (including
the calculation of any of the individual components of such calculation) or
to affect the rights of the Holders of Notes to the benefit of any
provisions for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise
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permitted or contemplated herein, terminate the lien of this Indenture
on any property at any time subject hereto or deprive the Holder of any
Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution of
---------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and
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if required by the Indenture Trustee shall, bear a notation in form approved by
the Indenture Trustee as to any matter provided for in such supplemental
indenture. If the Issuer or the Indenture Trustee shall so determine, new Notes
so modified as to conform, in the opinion of the Indenture Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption.
----------
(a) The [Class [B]] Notes are subject to redemption in whole, but not
in part, at the direction of the Servicer pursuant to Section 9.01(a) of the
Sale and Servicing Agreement, on any Distribution Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
9.01(a) for a purchase price equal to the Redemption Price; provided, that the
--------
Issuer has available funds sufficient to pay the Redemption Price. The Servicer
or the Issuer shall furnish the Rating Agencies notice of such redemption. If
the [Class [B]] Notes are to be redeemed pursuant to this Section 10.01(a), the
Servicer or the Issuer shall furnish notice of such election to the Indenture
Trustee not later than 20 days prior to the Redemption Date and the Issuer shall
deposit by 10:00 A.M. New York City time on the Redemption Date with the
Indenture Trustee in the Note Distribution Account the Redemption Price of the
[Class [B]] Notes to be redeemed, whereupon all such [Class [B]] Notes shall be
due and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 20 days prior to the Redemption Date, whereupon
all such amounts shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice.
-------------------------
(a) Notice of redemption under Section 10.01(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed
or transmitted not later than 10 days prior to the applicable Redemption Date to
each Holder of Notes, as of the close of business on the Record Date preceding
the applicable Redemption Date at such Holder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
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(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required
to be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
--------------------------------
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc.
-----------------------------------------
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
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(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each signatory, such signatory
has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b)
(i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this
Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as
to the same matters, if the fair value to the Issuer of the securities to
be so deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of
such release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will not
impair the security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the
Issuer shall also furnish to the Indenture Trustee an Independent
Certificate as to the same matters if the fair value of the property or
securities
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and of all other property, other than property as contemplated by clause
(v) below or securities released from the lien of this Indenture since the
commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals
10% or more of the Outstanding Amount of the Notes, but such certificate
need not be furnished in the case of any release of property or securities
if the fair value thereof as set forth in the related Officer's Certificate
is less than $25,000 or less than one percent of the then Outstanding
Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the
other provisions of this Section, (A) collect, liquidate, sell or otherwise
dispose of Receivables and Financed Vehicles as and to the extent permitted
or required by the Basic Documents and (B) make cash payments out of the
Trust Accounts as and to the extent permitted or required by the Basic
Documents, so long as the Issuer shall deliver to the Indenture Trustee
every six months, commencing __________________, ____, an Officer's
Certificate of the Issuer stating that all the dispositions of Collateral
described in clauses (A) or (B) above that occurred during the preceding
six calendar months were in the ordinary course of the Issuer's business
and that the proceeds thereof were applied in accordance with the Basic
Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
the opinion of only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Company, or the Issuer, stating that the information with respect
to such factual matters is in the possession of the Servicer, the Company, or
the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective
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date of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions precedent to
the right of the Issuer to have such application granted or to the sufficiency
of such certificate or report. The foregoing shall not, however, be construed
to affect the Indenture Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.03. Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
- --------
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Indenture Trustee at its Corporate Trust
Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to:
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Card Account Trust, Series 199[ ]-[ ]
in care of [ ]
Attention: [ ]
or at any other address previously furnished in writing to the Indenture Trustee
by the Issuer. The Issuer shall promptly transmit any notice received by it
from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to:
(i) in the case of the Rating Agencies to:
--------------------------------------
--------------------------------------
--------------------------------------
or as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
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SECTION 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer will furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee will
cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in
----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE
-53-
<PAGE>
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
----------------
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes
of this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Company or the
Issuer, or join in any institution against the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall, and shall cause its representatives to, hold in confidence all
such information except to the extent disclosure may be required by law (and all
-54-
<PAGE>
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ],
By: [OWNER TRUSTEE NAME] not in its individual
capacity but solely as Owner Trustee
By:____________________________________
Name:
Title:
[INDENTURE TRUSTEE NAME],
not in its individual capacity but solely as Indenture
Trustee
By:____________________________________
Name:
Title:
-55-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said Card
Account Trust, Series 199[ ]-[ ], a [ ] business trust, and that he/she
executed the same as the act of said business trust for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
_____________________________
-56-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
__________________________, a ____________ banking corporation, and that he/she
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this_____ day of _________.
_________________________________
Notary Public in and for the State of ______.
My commission expires:
____________________________
-57-
<PAGE>
SCHEDULE I
[To be provided on the Closing Date]
-58-
<PAGE>
SCHEDULE II
CRB SECURITIES
[To be provided on the Closing Date]
-59-
<PAGE>
EXHIBIT A
---------
[FORM OF [CLASS [A]] NOTE]
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $__________
No. R- CUSIP NO. ___________
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
[CLASS [A]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED NOTES
Card Account Trust, Series 199[ ]-[ ], a business trust organized and
existing under the laws of the State of [ ] (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of $[ ] DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE]
and the denominator of which is $[ ] by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
[Class [A]] Notes pursuant to Section 3.01 of the Indenture dated as of [
], 199[ ] "Indenture"), between the Issuer and [ ], a [ ] banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided however,
-------- -------
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of the [ ] Distribution Date (the "[Class [A]] Final
Scheduled Distribution Date") and the Redemption Date, if any, pursuant to
Section 10.01(a) of the Indenture. Capitalized terms used but not defined
herein are defined in Article I of the Indenture, which also contains rules as
to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the [ ] day of the month [preceding] the
month of such Distribution Date (in the case of
A-1
<PAGE>
the first Distribution Date, from the Closing Date) to and including the [ ]
day of the month of such Distribution Date. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
By: [OWNER TRUSTEE NAME],
not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:____________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
By: [INDENTURE TRUSTEE NAME],
not in its individual capacity but solely
as Indenture Trustee
By:_____________________________
Authorized Signatory
A-2
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its [Class [A]] [Adjustable Rate] [Variable Rate] [Floating Rate]
[ %] Asset Backed Notes (herein called the "[Class [A]] Notes"), all issued
under the Indenture, to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The [Class [A]] Notes are subject to all terms of the Indenture.
The [Class [A]] Notes and [Class [B]] Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the [Class [A]] Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the [
] day of each month or, if any such date is not a Business Day, the next
succeeding Business Day, commencing [ ], 199[ ].
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the [Class [A]] Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments on the
[Class [A]] Notes shall be made pro rata to the [Class [A]] Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the City of New York.
A-3
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
[Class [A]] Interest Rate to the extent lawful.
As provided in the Indenture, the [Class [B]] Notes may be redeemed in
whole but not in part, at the option of the Issuer on any Distribution Date on
and after the date on which the Pool Balance is less than or equal to [1-%] [5%]
of the Cutoff Date Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Company or the Issuer, or join in any institution
against the Company or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
A-4
<PAGE>
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
A-5
<PAGE>
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of [ ] in its individual
capacity, [ ] in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
--------
however, that nothing contained herein shall be taken to prevent recourse to,
- -------
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
_______________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, hereby irrevocably constitutes and
appoints:
_______________________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:_________________________ _______________________/1/
Signature Guaranteed:
________________________
- ----------
/1/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
A-7
<PAGE>
EXHIBIT B
[FORM OF [CLASS [B]] NOTE]
Unless this Note is presented by an authorized representative of the Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_______________
No. R- CUSIP NO._______________
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
[CLASS [B]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED NOTES
Card Account Trust, Series 199[ ]-[ ], a business trust organized and
existing under the laws of the State of [ ] (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of $[ ] DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE]
and the denominator of which is $ [ ] by (ii) the aggregate amount, if
any, payable from the Note Distribution Account in respect of principal on the
[Class [B]] Notes pursuant to Section 3.01 of the Indenture dated as of [
], 199[ ] (the "Indenture"); between the Issuer and [ ], a [
] banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided,
--------
however, that the entire unpaid principal amount of this Note shall be due and
- -------
payable on the earlier of the [ ], 199[ ] Distribution Date (the "[Class
[B]] Final Scheduled Distribution Date") and the Redemption Date, if any,
pursuant to Section 10.01(a) of the Indenture. [No payments of principal of the
[Class [B]] Notes shall be made until the [Class [A]] Notes have been paid in
full.] Capitalized terms used but not defined herein are defined in Article I
of the Indenture, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the per annum rate shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
B-1
<PAGE>
contained in Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the [ ] day of the month [preceding] the
month of such Distribution Date in the case of the first Distribution Date, from
the Closing Date) to and including the [ ] day of the month of such
Distribution Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
By: [OWNER TRUSTEE NAME],
not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:____________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:
By: [INDENTURE TRUSTEE NAME],
not in its individual capacity but solely as
Indenture Trustee
By:_____________________________
Authorized Signatory
B-2
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its [Class [B]] [Adjustable Rate] [Variable Rate] [Floating Rate]
[ %] Asset Backed Notes (herein called the "[Class [B]] Notes"), all issued
under the Indenture, to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The [Class [B]] Notes are subject to all terms of the indenture.
This [Class [A]] Notes and the [Class [B]] Notes (collectively, the
"Notes") are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture.
Principal of the [Class [B]] Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the [
] day of each month or, if any such date is not a Business Day, the next
succeeding Business Day, commencing [ ], 199[ ].
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the [Class [B]] Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments on the
[Class [B]] Notes shall be made pro rata to the [Class [B]] Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with installments of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the City of New York.
B-3
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
[Class [B]] Interest Rate to the extent lawful.
As provided in the Indenture, the [Class [B]] Notes may be redeemed in
whole but not in part, at the option of the Issuer on any Distribution Date on
and after the date on which the Pool Balance is less than or equal to [1-%] [5%]
of the Cutoff Date Pool Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Company or the Issuer, or join in any
institution against the Company or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
B-4
<PAGE>
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the
B-5
<PAGE>
principal of and interest on this Note at the times, place and rate, and in the
coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of [ ] in its individual
capacity, [ ] in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
omission to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
--------
however, that nothing contained herein shall be taken to prevent recourse to,
- -------
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
B-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- ------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
- -------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books kept for
---------
registration thereof, with full power of substitution in the premises.
Dated: ______________________ ______________________________________/*/
Signature Guaranteed:
_______________________________
- ----------
/*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever. Such
signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, in accordance with the Securities Exchange Act of
1934, as amended.
B-7
<PAGE>
EXHIBIT C
---------
[Form of Note Depository Agreement]
Letter of Representations
[To be Completed by Issuer and Trustee]
____________________________
[Name of Issuer]
____________________________
[Name of Trustee]
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street: 49th Floor
New York, NY 10041-0099
Re: ______________________________________________________
______________________________________________________
______________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to a trust indenture dated
_________________, (the "Document"). ______________________ (the "Underwriter")
is distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
(a) Prior to closing on the Securities on __________________, 199_,
there shall be deposited with DTC one Security certificate registered in the
name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in
the face amounts set forth on Schedule A hereto, the total of which represents
100% of the principal amount of such Securities. If, however, the aggregate
C-1
<PAGE>
principal amount of any maturity exceeds $200 million, one certificate will be
issued with respect to each $200 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount. Each
$200 million certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC). ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
(b) In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to
DTC pursuant to this Paragraph by mail or by any other means shall be sent to
DTC's Reorganization Department as indicated in Paragraph 4.
(c) In the event of a full or partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be mailed to Security
holders or published (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business on the business day before
or, if possible, two business days before the Publication Date. Issuer or
Trustee shall forward such notice either in a separate secure transmission for
each CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be not less than 30 days nor more than 60 days prior to
the redemption date or, in the case of an advance refunding, the date that the
proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by
telecopy shall be sent to DTC's Call Notification Department at (516) 227-4039
or (516) 227-4190. If the party sending the notice does not receive a telecopy
receipt from DTC confirming that the notice has been received, such party shall
telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or
by any other means shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
C-2
<PAGE>
(d) In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
(e) All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
(f) Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof, preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also
contain the current pool factor and Trustee contact's name and telephone number,
shall be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if
by mail or by any other means to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
(g) [Note: Issuer must represent one of the following, and cross out the
---- ---------
other:] [The interest accrual period is record date to record date.] [The
interest accrual period is payment date to payment date.]
(h) Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co.
Absent any other existing arrangements, such payments shall be addressed as
follows:
Manager, Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
C-3
<PAGE>
New York, NY 10004-2695
(i) [Note: Issuer must represent one of the following, and cross out
---- ---------
the other.]
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS") System.
-----------------------------------------------------------------------
Other principal payments (redemption payments) shall be made in same-day
funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS") System.
-----------------------------------------------------------------------
Other principal payments (redemption payments) shall be made in next-day
funds by Trustee to Cede & Co., as nominee of DTC, or its registered assigns, on
each payment date. Such payments shall be made payable to the order of Cede &
Co., and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square: 23rd Floor
New York, NY 10004-2695
(j) DTC may direct Issuer or Trustee to use any other number or address
as the number or address to which notices or payments of interest or principal
may be sent.
(k) In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Issuer or Trustee prior to payment, if
required.
(l) In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
(m) DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
C-4
<PAGE>
(n) Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
(o) Nothing herein shall be deemed to require Trustee to advance funds
on behalf of Issuer.
C-5
<PAGE>
Notes: Very truly yours,
- -----
________________________________
A. If there is a trustee (as defined (Issuer)
in this Letter of Representations).
Trustee as well as Issuer must sign this
Letter. If there is no Trustee, in
signing this Letter Issuer itself
undertakes to perform all of the
obligations set forth herein. By:_____________________________
(Authorized Officer's Signature)
B. Schedule B contains statements that
DTC believes accurately describe DTC,
the method of effecting book-entry
transfers of securities distributed
through DTC, and certain related matters. ________________________________
(Trustee)
By:_____________________________
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:__________________________
cc: Underwriter
Underwriter's Counsel
C-6
<PAGE>
SCHEDULE A
----------
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
S-1
<PAGE>
FORM OF POOLING AND SERVICING AGREEMENT
among
ASSET BACKED SECURITIES CORPORATION,
as Company,
[ ],
as Servicer
and
[ ],
as Trustee
on behalf of the Certificateholders
Dated as of ___________
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__
___% Asset Backed Certificates, Class A
___% Asset Backed Certificates, Class B
<PAGE>
Table of Contents
Page
ARTICLE I
Definitions.........................1
Section 1.01. Definitions..................................1
ARTICLE II
Conveyance of Receivables; Original Issuance of Certificates17
Section 2.01. Conveyance of Receivables..................17
Section 2.02. Acceptance by Trustee......................18
Section 2.03. Representations and Warranties of
the Company................................18
Section 2.04. Repurchase Upon Breach.....................22
Section 2.05. Custody of Receivable Files................22
Section 2.06. Duties of Servicer as Custodian............23
Section 2.07. Instructions; Authority to Act.............24
Section 2.08. Custodian's Indemnification................24
Section 2.09. Effective Period and Terminations..........24
ARTICLE III
Administration and Servicing of Receivables........25
Section 3.01. Duties of Servicer.........................25
Section 3.02. Collection and Allocation of Receivable
Payments...................................25
Section 3.03. Realization Upon Receivables...............26
Section 3.04. Physical Damage Insurance..................26
Section 3.05. Maintenance of Security Interests
in Financed Vehicles.......................27
Section 3.06. Covenants of Servicer......................27
Section 3.07. Purchase of Receivables Upon Breach........27
Section 3.08. Servicing Fee..............................27
Section 3.09. Servicer's Certificate.....................28
Section 3.10. Annual Statement as to Compliance;
Notice of Default..........................28
Section 3.11. Annual Independent Certified Public
Accountant's Report........................28
Section 3.12. Access to Certain Documentation and
Information Regarding Receivables..........29
Section 3.13. Servicer Expenses..........................29
Section 3.14. Appointment of Subservicer.................29
ARTICLE IV
Accounts..........................30
Section 4.01. Establishment of Trust Accounts............30
Section 4.02. Reserve Account............................32
[Section 4.03. Yield Supplement Account..................35
i
<PAGE>
ARTICLE V
Payments and Statements to Certificateholders.......36
Section 5.01. Collections................................36
Section 5.02. Application of Collections.................36
Section 5.03. Advances...................................37
Section 5.04. Additional Deposits........................38
Section 5.05. Deposits...................................38
Section 5.06. Statements to Certificateholders...........41
Section 5.07. Accounting and Tax Returns.................42
Section 5.08. Net Deposits...............................42
ARTICLE VI
The Certificates......................42
Section 6.01. The Certificates...........................42
Section 6.02. Authentication of Certificates. ...........43
Section 6.03. Registration of Transfer and Exchange of
Certificates...............................43
Section 6.04. Mutilated, Destroyed, Lost or Stolen
Certificates...............................44
Section 6.05. Persons Deemed Owners......................44
Section 6.06. Access to List of Certificateholders'
Name and Addresses.........................44
Section 6.07. Maintenance of Office or Agency............45
Section 6.08. Book-Entry Certificates....................45
Section 6.09. Notices to Clearing Agency.................46
Section 6.10. Definitive Certificates....................46
[Section 6.11. Limitations on Transfer of the
Class B Certificates.......................47
ARTICLE VII
The Company........................49
Section 7.01. The Company's Representations..............49
Section 7.02. Corporate Existence........................50
Section 7.03. Liabilities of the Company. ..............50
Section 7.04. Merger or Consolidation of, or Assumption
of the Obligations of, the Company.........50
Section 7.05. Limitation on Liability of the
Company and Others.........................51
Section 7.06. The Company May Own Certificates...........51
ARTICLE VIII
The Servicer........................52
Section 8.01 Representations of Servicer................52
Section 8.02. Indemnities of Servicer....................53
Section 8.03. Merger or Consolidation of, or Assumption
of the Obligations of, Servicer............54
Section 8.04. Limitation on Liability of Servicer
and Others.................................54
ARTICLE IX
Default..........................55
Section 9.01. Events of Default..........................55
Section 9.02. Appointment of Successor...................57
Section 9.03. Repayment of Advances......................57
Section 9.04. Notification of Certificateholders.........58
ii
<PAGE>
Section 9.05. Waiver of Past Defaults....................58
ARTICLE X
The Trustee........................58
Section 10.01. Duties of Trustee.........................58
Section 10.02. Certain Matters Affecting Trustee.........59
Section 10.03. Trustee Not Liable for Certificates
or Receivables............................60
Section 10.04. Trustee May Own Certificates..............61
Section 10.05. Trustee's Fees and Expenses...............61
Section 10.06. Eligibility Requirements for Trustee......61
Section 10.07. Resignation or Removal of Trustee.........61
Section 10.08. Successor Trustee.........................62
Section 10.09. Merger or Consolidation of Trustee........63
Section 10.10. Appointment of Co-Trustee or Separate
Trustee...................................63
Section 10.11. Representations and Warranties of Trustee.65
ARTICLE XI
Termination........................66
Section 11.01. Termination of the Trust..................66
Section 11.02. Optional Purchase of All Receivables......67
ARTICLE XII
Miscellaneous Provision..................67
Section 12.01. Amendment.................................67
Section 12.02. Protection of Title to Trust..............68
Section 12.03. Separate Counterparts.....................70
Section 12.04. Limitation on Rights of Certificateholders70
Section 12.05. Governing Law.............................71
Section 12.06. Notices...................................71
Section 12.07. Severability of Provisions................71
Section 12.08. Assignment................................72
Section 12.09. Certificates Nonassessable and Fully Paid.72
Section 12.10. Limitations on Rights of Others...........72
Section 12.11. Headings..................................72
iii
<PAGE>
POOLING AND SERVICING AGREEMENT dated as of ______________, among ASSET BACKED
SECURITIES CORPORATION (the "Company"), as depositor, ____________, as servicer
(the "Servicer"), and ____________, a____________banking corporation, as trustee
(the "Trustee").
RECITALS
WHEREAS, the Company owns certain motor vehicle installment loan
agreements and motor vehicle retail installment sale contracts (collectively,
the "Motor Vehicle Installment Contracts"); and
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions pursuant to which the Trust (as hereinafter defined) will acquire the
Motor Vehicle Installment Contracts from the Company, and the Servicer will
service the Motor Vehicle Installment Contracts on behalf of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Company and the Trustee hereby agree as
follows:
ARTICLE I
Definitions
-----------
Section 1.01. Definitions. Whenever used in this Agreement, the
-----------
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Account Property" means any account established and maintained
----------------
pursuant to Article IV, all amounts and investments held from time to time in
any such account (whether in the form of deposit accounts, Physical Property,
book-entry securities, uncertificated securities or otherwise), and all proceeds
of the foregoing.
"Advances" means either a Precomputed Advance or a Simple Interest
----------
Advance or both, as applicable .
"Affiliate" means, 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 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.
"Agreement" means this Pooling and Servicing Agreement.
-----------
-1-
<PAGE>
"Amount Financed" means, with respect to any Receivable, the amount
---------------
advanced under the related Motor Vehicle Installment Contract toward the
purchase price of the Financed Vehicle and any related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
---------------------- ---
rate of finance charges stated in the related Motor Vehicle Installment
Contract.
"Benefit Plan" has the meaning set forth in Section 6.11(b).
------------
"Book-Entry Certificates" means a beneficial interest in the Class A
-----------------------
Certificates ownership and transfers of which shall be registered through book
entries by a Clearing Agency as described in Section 6.08.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in ______________ are
authorized or obligated by law, regulation or executive order to be closed.
"Certificate Balance" means, as of any date, the aggregate outstanding
-------------------
principal amount of the Certificates at such date.
"Certificate Owner" means, with respect to a Book-Entry Certificate,
-----------------
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Certificate Pool Factor" means, with respect to each class of
-----------------------
Certificates as of the close of business on the last day of a Collection Period,
a seven-digit decimal figure equal to the outstanding principal amount of such
class of Certificates (after giving effect to any reduction thereof to be made
on the immediately following Distribution Date) divided by the original
outstanding principal amount of such class of Certificates. The Certificate
Pool Factor will be 1.0000000 as of the Closing Date and, thereafter, will
decline to reflect reductions in the outstanding principal amount of such class
of Certificates.
"Certificateholder" or "Holder" means a Person in whose name a
----------------- ------
Certificate is registered in the Certificate Register.
"Certificate Register" and "Certificate Registrar" mean the register
-------------------- ---------------------
maintained and the registrar appointed pursuant to Section 6.03.
-2-
<PAGE>
"Certificates" means the Class A Certificates and the Class B
------------
Certificates.
"Class A Certificate" means a ___% Asset Backed Certificate, Class A,
-------------------
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit A.
"Class A Certificate Balance" means, initially, $__________, and as of
---------------------------
any date of determination thereafter, such initial Class A Certificate Balance
reduced by all amounts previously distributed to Holders of Class A Certificates
and allocable to principal.
"Class A Distributable Amount" means, with respect to any Distribution
----------------------------
Date, the sum of the Class A Principal Distributable Amount and the Class A
Interest Distributable Amount for such date.
"Class A Interest Carryover Shortfall" means, with respect to any
------------------------------------
Distribution Date, the excess of the sum of the Class A Monthly Interest
Distributable Amount for the preceding Distribution Date, and any outstanding
Class A Interest Shortfall on such preceding Distribution Date, over the amount
in respect of interest that Holders of the Class A Certificates actually
received on such preceding Distribution Date, plus 30 days' interest on such
excess, to the extent permitted by law, at the Class A Pass-Through Rate.
"Class A Interest Distributable Amount" means, with respect to any
-------------------------------------
Distribution Date, the sum of the Class A Monthly Interest Distributable Amount
for such Distribution Date and Class A Interest Carryover Shortfall for such
Distribution Date.
"Class A Monthly Interest Distributable Amount" means, with respect to
---------------------------------------------
any Distribution Date, an amount equal to the product of (i) one-twelfth, (ii)
the Class A Pass-Through Rate and (iii) the Class A Certificate Balance on the
preceding Distribution Date (or, the case of the first Distribution Date, the
Closing Date) after giving effect to any amount distributed to Holders of Class
A Certificates on such preceding Distribution Date and allocable to principal.
"Class A Monthly Principal Distributable Amount" means, with respect
----------------------------------------------
to any Distribution Date, the Class A Percentage of the Principal Distribution
Amount.
"Class A Pass-Through Rate" means ___%.
-------------------------
"Class A Percentage" means ___%.
------------------
"Class A Principal Carryover Shortfall" means, as of the close of any
-------------------------------------
Distribution Date, the excess of the Class A Monthly Principal Distributable
Amount and any outstanding Class
-3-
<PAGE>
A Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually distributed to Holders of the
Class A Certificates on such current Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
--------------------------------------
Distribution Date, the excess of the Class A Monthly Principal Distributable
Amount for such Distribution Date and the Class A Principal Carryover Shortfall
as of the closing of the preceding Distribution Date; provided, however, that
the Class A Principal Distributable Amount shall not exceed the Class A
Certificate Balance. In addition, on the Final Scheduled Distribution Date, the
principal required to be included in the Class A Principal Distributable Amount
will include the lesser of (a) the Class A Percentage of (1) any Scheduled
Payments of principal due and remaining unpaid on each Precomputed Receivable
and (2) any principal due and remaining unpaid to each Simple Interest
Receivable, in each case, in the Trust as of the final Scheduled Maturity Date
or (b) the amount that is necessary (after giving effect to the other amounts to
be distributed to Holders of the Class A Certificates on such Distribution Date
and allocable to principal) to reduce the Class A Certificate Balance to zero.
"Class B Certificate" means a ___% Asset Backed Certificate, Class B,
-------------------
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit B.
"Class B Certificate Balance" means initially, $__________, and as of
---------------------------
any date of determination thereafter, such initial Class B Certificate Balance
reduced by all amounts previously distributed to Holders of Class B Certificates
and allocable to principal.
"Class B Distributable Amount" means, with respect to any Distribution
----------------------------
Date, the sum of the Class B Principal Distributable Amount and the Class B
Interest Distributable Amount.
"Class B Interest Carryover Shortfall" means, with respect to any
------------------------------------
Distribution Date, the excess of the sum of the Class B Interest Distributable
Amount for the preceding Distribution Date and any outstanding Class B Interest
Carryover Shortfall on such preceding Distribution Date, over the amount in
respect of interest that Holders of the Class B Certificates actually received
on such preceding Distribution Date, plus 30 days' interest on such excess, to
the extent permitted by law, at the Class B Pass-Through Rate.
"Class B Interest Distributable Amount" means, with respect to any
-------------------------------------
Distribution Date, the sum of the Class B Monthly Interest Distributable Amount
for such Distribution Date and the Class B Interest Carryover Shortfall for such
Distribution Date.
-4-
<PAGE>
"Class B Monthly Interest Distributable Amount" means, with respect
----------------------------------------------
to any Distribution Date, an amount equal to the product of (i) one-twelfth,
(ii) the Class B Pass-Through Rate and (iii) the Class B Certificate Balance on
the preceding Distribution Date (or, in the case of the first Distribution Date,
the Closing Date) after giving effect to (a) any amount distributed to Holders
of the Class B Certificates on such preceding Distribution Date and allocable to
principal and (b) any Realized Losses allocated to the Class B Certificates on
such preceding Distribution Date.
"Class B Monthly Principal Distributable Amount" means, with respect
----------------------------------------------
to any Distribution Date, the Class B Percentage of the Principal Distribution
Amount.
"Class B Pass-Through Rate" means___%.
-------------------------
"Class B Percentage" means ___%.
------------------
"Class B Principal Carryover Shortfall" means, as of the close of any
-------------------------------------
Distribution Date, the excess of the Class B Monthly Principal Distributable
Amount and any outstanding Class B Principal Carryover Shortfall from the
preceding Distribution Date, over the amount in respect of principal that is
actually distributed to Holders of the Class B Certificates on such current
Distribution Date.
"Class B Principal Distributable Amount" means, with respect to any
--------------------------------------
Distribution Date, the sum of the Class B Monthly Principal Distributable Amount
for such Distribution Date and the Class B Principal Carryover Shortfall as of
the close of the preceding Distribution Date; provided, however, that the Class
B Principal Distributable Amount shall not exceed the Class B Certificate
Balance. In addition, on the Final Scheduled Distribution Date, the principal
required to be included in the Class B Principal Distributable Amount will
include the lesser of (a) the Class B Percentage of (1) any Scheduled Payments
of principal due and remaining unpaid on each Precomputed Receivable and (2) any
principal due and remaining unpaid on each Simple Interest Receivable, in each
case, in the Trust as of the Final Scheduled Maturity Date or (b) the amount
that is necessary (after giving effect to the other amounts to be deposited in
the Distribution Account on such Distribution Date and allocable to principal)
to reduce the Class B Certificate Balance to zero.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
-5-
<PAGE>
"Closing Date" means ______________.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collection Account"
------------------
means the account designated as such, established and maintained pursuant to
Section 4.01.
"Collection Period" means a calendar month (or in the case of the
-----------------
first Distribution Date, the period from and including the Cutoff Date to and
including the last day of the calendar month in which the Closing Date occurs).
Any amount stated as of the last day of a Collection Period or as of the first
day of a Collection Period or as of the first day of a collection Period shall
give effect to the following calculations as determined as of the close of
business on such last day: (a) all applications of collections, (b) all current
and previous Payaheads, (c) all applications of Payahead Balances, (d) all
Advances and reductions of Advances and (e) all distributions to be made on the
following Distribution Date.
"Corporate Trust Office" means the principal corporate trust office of
----------------------
the Trustee, which at the time of execution of this agreement is located at
______________________. Attention: ________________, or at such other address as
the Trustee may designate from time to time by notice to Certificateholders, the
Company and the Servicer, or the principal corporate trust office of any
successor Trustee (of which address such successor Trustee shall notify the
Certificateholders, the Company and the Servicer).
"Cutoff Date" means _______________.
-----------
"Cutoff Date Pool Balance" means the sum of the aggregate Principal
------------------------
Balance of the Receivables as of the Cutoff Date.
"Definitive Certificates" shall have the meaning specified in Section
-----------------------
6.11.
"Delivery" when used with respect to Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trustee or its nominee or custodian
by physical delivery to the Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Trustee or its nominee or custodian or endorsed
in blank, and, with respect to a certificated security (as defined in Section 8-
102 of the UCC) transfer thereof (i) by delivery of such certificated security
-6-
<PAGE>
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated securities as
belonging to the Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its nominee or custodian, or (ii) by delivery thereof
to a "clearing corporation" (as defined in Section 8-102(3) of the UCC) and the
making by such clearing corporation of appropriate entries on its books reducing
the appropriate securities account of the transferor and increasing the
appropriate securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in section 8-102(4) of the UCC) or
the nominee of either, subject to the clearing corporations' exclusive control,
the sending of a confirmation by the financial intermediary of the purchase by
the Trustee or its nominee or custodian of such securities and the making by
such financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or custodian
(all of the foregoing, "Physical Property"), and, in any event, any such
Physical Property in registered form shall be in the name of the Trustee or its
nominee or custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of ownership of any
such Account Property to the Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that are book-entry securities held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures, all
in accordance with applicable Law, including applicable federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Account Property to
an appropriate book-entry account maintained with Federal Reserve Bank by a
financial intermediary that is also a "depository" pursuant to applicable
federal regulations and issuance by such financial intermediary of deposit
advice or other written confirmation of such book-entry registration to the
Trustee or its nominee or custodian of the purchase by the Trustee or its
nominee or custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to federal book-entry
regulations as belonging to the Trustee, or its nominee or custodian and
indicating that such custodian holds such Account Property solely as agent for
the Trustee or its
-7-
<PAGE>
nominee or custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of any
such Account Property to the Trustee or its nominee or custodian consistent with
changes in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof
in the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee or
custodian of such uncertificated security, and the making by such financial
intermediary of entries on its books an records identifying such uncertificated
certificates as belonging to the Trustee or its nominee or custodian.
"Depository Agreement" means the agreement dated __________, among the
--------------------
Trustee and The Depository Trust Company, as the initial Clearing Agency,
substantially in the form of Exhibit C.
"Determination Date" means the ____day of each calendar month or, if
------------------
such day is not a Business Day, the immediately following Business Day.
"Distribution Account" means the account designated as such,
--------------------
established and maintained pursuant to Section 4.01.
"Distribution Date" means, with respect to each Collection Period, the
-----------------
___ day of the following calendar month or, if such day is not a Business Day,
the immediately following Business Day, commencing on ____
"Eligible Deposit Account" means either (a) a segregated account with
------------------------
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one to the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories that signifies
investment grade.
"Eligible Institution" means (a) the corporate trust department of the
--------------------
Trustee or (b) a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), which (1) has either (A) a long-term
unsecured debt rating of AAA or better by Standard & Poor's and A1 or better by
Moody's or (B) a certificate of
-8-
<PAGE>
deposit rating of A-1+ by Standard & Poor's and P-1 or better by Moody's or any
other long-term, short-term or certificate of deposit rating acceptable to the
Rating Agencies and (2) whose deposits are insured by the FDIC. If so
qualified, the Trustee may be considered an Eligible Institution for the
purposes of clause (b) of this definition.
"Eligible Investments" mean book-entry securities, negotiable
--------------------
instruments or securities represented by instruments in bearer or registered
form which evidence;
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (of any domestic branch of a
foreign bank ) and subject to supervision and examination by federal or state
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations thereof (other
than such obligations the rating of which is based on the credit of a Person
other than such depository institution or trust company) shall have a credit
rating of A-1+ from Standard & Poor's and P1 from Moody's;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating of A-1+ from Standard &
Poor's and P1 from Moody's;
(d) investments in money market funds having a rating of AAA-m or
AAAm-G from Standard & Poor's and Aaa from Moody's;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
described in clause (b);
(g) any other investment with respect to which the Trustee or the
Company has received written notification from the Rating Agencies that the
acquisition of such investment as an Eligible Investment will not in a
withdrawal or downgrading of the ratings of the Certificates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
-9-
<PAGE>
"Event of Default" means an event specified in Section 9.01.
----------------
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Final Scheduled Distribution Date" means ______________.
---------------------------------
"Final Scheduled Maturity Date" means __________________.
-----------------------------
"Financed Vehicle" means an automobile, van or light-duty truck,
----------------
together with all accessions thereto, securing an Obligor's indebtedness under
the related Receivable.
"Interest Distribution Amount" means, with respect to any Distribution
----------------------------
Date, the sum of the following amounts in respect of the preceding Collection
Period:(a) that portion of all collections on Receivables (including Payaheads)
allocable to interest, (b) Liquidation Proceeds with respect to the Receivables
to the extent allocable to interest due thereon in accordance with the
Servicer's customary servicing procedures, (c) all Advances made by the Servicer
of Interest due on Receivables, (d) the Purchase Amount of each Receivable that
became a Purchased Receivable during the related Collection Period to the extent
attributable to accrued interest on such Receivable, (e) the Yield Supplement
Amount; and (f) Recoveries; provided, however, that in calculating the Interest
Distribution Amount the following will be excluded: (i) amounts received on
Precomputed Receivables to the extent that the Servicer has previously made an
unreimbursed Precomputed Advance of interest; (ii) Liquidation Proceeds with
respect to a particular Precomputed Receivable to the extent of any unreimbursed
Precomputed Advances of interest; (iii) all payments and proceeds (including
Liquidation Proceeds) of any Purchased Receivables the Purchase Amount of which
has been included in the Interest Distribution Amount in a prior Collection
Period; (iv) the sum for all Simple Interest Receivables of collections
allocable to interest on each such Simple Interest Receivable received during
the preceding Collection Period in excess of the amount of interest that would
be due on the aggregate Principal Balance of the Simple Interest Receivables
during such Collection Period at their respective APR's if a payment were
received on each Simple Interest Receivable during such Collection Period on the
date payment is due under the terms of the related Motor Vehicle Installment
Contract; and (v) Liquidation Proceeds with respect to a Simple Interest
Receivable attributable to accrued and unpaid interest thereon (but not
including interest for the then current Collection Period) but only to the
extent of any unreimbursed Simple Interest Advances.
"Investment Earnings" means, with respect to any Distribution Date,
-------------------
the investment earnings (net of losses and
-10-
<PAGE>
investment expenses) on amounts on deposit in the Collection Account, Reserve
Account and Yield Supplement Account, which will be distributed on each
Distribution Date in the manner set forth in Article IV.
"Lien" means a security interest, lien, charge, pledge, equity, or
----
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law.
"Liquidated Receivable" means any Receivable liquidated by the
---------------------
Servicer through sale of a Financed Vehicle or otherwise.
"Liquidation Proceeds" means, with respect to a Liquidated Receivable,
--------------------
the monies collected in respect thereof, from whatever source, during the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the sum of any amounts expended by the Servicer in connection with such
liquidation, plus any amounts required by law to be remitted to the Obligor.
"Moody's" means Moody's Investors Service, Inc., or its successor.
-------
"Motor Vehicle Installment Contract" means a motor vehicle installment
----------------------------------
loan agreement originated by a Seller or a motor vehicle retail installment sale
contract acquired by a Seller from a motor vehicle dealer or another financial
institution.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
-------
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by the (a) chairman
---------------------
of the board, the president, the vice chairman of the board, any executive vice
president or any vice president and (b) a cashier, assistant cashier, any
treasurer, assistant treasurer, secretary or assistant secretary of the Company,
a Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel,
------------------
who may be an employee of or counsel to the Servicer, which counsel shall be
acceptable to the Trustee or Rating Agencies, as applicable.
"Outstanding Precomputed Advances" means on the Precomputed
--------------------------------
Receivables means the sum, as of the close of business on the last day of a
Collection Period, of all Precomputed Advances, reduced as provided by Section
5.03(a).
"Outstanding Simple Interest Advances" on the Simple Interest
------------------------------------
Receivables means the sum, as of the close of business
-11-
<PAGE>
on the last day of a Collection Period, of all Precomputed Advances, reduced as
provided by Section 5.03(b).
"Payahead" on a Receivable that is a Precomputed Receivable means the
--------
amount, as of the close of business on the last day of a Collection Period,
computed in accordance with Section 5.02 with respect to such Receivable.
"Payahead Balance" on a Precomputed Receivable means the sum, as of
----------------
the close of business on the last day of a Collection Period, of all Payaheads
made by or on behalf of the Obligor with respect to such Precomputed Receivable,
as reduced by applications of previous Payaheads with respect to such
Precomputed Receivable, pursuant to Sections 5.02 and 5.03.
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
-----------------
definition of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
------------
Collection Period, the aggregate Principal Balance of the Receivables as of such
date (excluding Purchased Receivables and Liquidated Receivables).
"Precomputed Advance" means the amount, as of the close of
-------------------
business on the last day of a Collection Period, which the Servicer is required
to advance on any Precomputed Receivable pursuant to Section 5.03(a).
"Precomputed Receivable" means any Receivable under which the portion
----------------------
of each payment allocable to earned interest (which may be referred to in the
Receivable as an add-on finance charge) and the portion allocable to the Amount
Financed are determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method, or which is a monthly actuarial
receivable.
"Principal Balance" means (a) with respect to any Precomputed
-----------------
Receivable, the Amount Financed minus the sum, as of the close of business on
the last day of a Collection Period, of (1) that portion of all Scheduled
Payments due on or prior to such day allocable to principal using the actuarial
or constant yield method, (2) any refunded portion of extended warranty
protection plan costs or physical damage, credit life or disability insurance
premiums included in the Amount Financed, (3) the portion of any related
Purchase Amount allocable to principal and (4) any prepayment in full or any
partial prepayments applied to reduce the related Principal Balance; and (b)
with respect to any Simple Interest Receivable, the Amount
-12-
<PAGE>
Financed minus the sum, as of the close of business on the last day of a
Collection Period, of (1) the portion of all payments made by or on behalf of
the related Obligor on or prior to such day and allocable to principal using the
Simple Interest Method and (2) the portion of any related Purchase Amount
allocable to principal.
"Principal Distribution Amount" means, for any Distribution Date, the
-----------------------------
sum of the following amounts with respect to the preceding Collection Period:
(a) that portion of all collections on Receivables (including amounts withdrawn
from the Payahead Account but excluding amounts deposited into the Payahead
Account pursuant to Sections 4.01(c) and 5.02) allocable to principal; (b) all
Liquidation Proceeds attributable to the principal amount of Receivables that
became Liquidated Receivables during such Collection Period in accordance with
the Servicer's customary servicing procedures, plus the amount of Realized
Losses with respect to such Liquidated Receivables; (c) all Precomputed Advances
made by the Servicer of principal due on the Precomputed Receivables; (d) to the
extent attributable to principal, the Purchase Amount received with respect to
each Receivable that became a Purchased Receivable during the related Collection
Period; (e) partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligor as of the date of the original Motor Vehicle Installment
Contract; and (f) on the Final Scheduled Distribution Date, any amounts advanced
by the Servicer on such date with respect to principal on the Receivables.
"Purchase Amount" means the amount, as of the close of business on the
---------------
last day of a Collection Period, required to prepay a Receivable in full under
the terms thereof, including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the
--------------------
close of business on the last day of a Collection Period by the Servicer
pursuant to Section 3.07 or by the Company pursuant to Section 2.04.
"Rating Agency" means Moody's or Standard & Poor's or, if neither such
-------------
organization nor a successor thereto remains in existence, any nationally
recognized statistical rating organization or other comparable Person designated
by the Company, notice of which designation shall be given to the Trustee and
the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that, within 7 days
of receipt of such notice, none of the Rating Agencies shall have notified the
-13-
<PAGE>
Company, the Servicer or the Trustee in writing that such action will result in
a reduction or withdrawal of the then current ratings of the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
---------------
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over that portion of Liquidation Proceeds allocable to principal.
"Receivable" means any Motor Vehicle Installment Contract listed on
----------
Schedule I (which schedule may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 2.05.
----------------
"Receivables Purchase Agreement" means an agreement, substantially in
------------------------------
the form of Exhibit H hereto, between the Company and a Seller, pursuant to
which such Seller sold Motor Vehicle Installment Contracts to be included in the
Trust to the Company.
"Record Date" with respect to each Distribution Date means the _____
-----------
day of the calendar month in which such Distribution Date occurs.
"Recoveries" means, with respect to any Receivable that becomes a
----------
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
"Reserve Account" means the account designated as such, established
---------------
and maintained pursuant t o Section 4.02.
"Reserve Account Initial Deposit" means, with respect to the Closing
-------------------------------
Date, an amount equal to the Specified Reserve Account Balance on the Closing
Date (which is equal to $_________) and, with respect to each Subsequent
Transfer Date, an amount equal to ___% of the Principal Balance of the
Subsequent Receivables transferred to the Trust on such Subsequent Transfer
Date.
"Scheduled Payment" with respect to any Precomputed Receivable means
-----------------
the payment required to be made by the Obligor during each Collection Period
under the related Motor Vehicle Installment Contract sufficient to amortize the
Principle Balance of such Precomputed Receivable, using the actuarial method,
over the term of the Receivable and to provide interest at the APR.
-14-
<PAGE>
"Seller" means, with respect to any Receivable, the Person from whom
------
such Receivable was acquired by the Company pursuant to the related Receivables
Purchase Agreement.
"Servicer" means ______________, and each successor Servicer pursuant
to Section 8.03 or 9.02.
"Servicer's Certificate" means the certificate required to be
----------------------
delivered by the Servicer pursuant to Section 3.09.
"Servicing Fee" means the fee payable to the Servicer for services
-------------
rendered during each Collection Period, determined pursuant to Section 3.08.
"Servicing Rate" means ___% per annum.
--------------
"Simple Interest Advance" means the amount of interest, as of the
-----------------------
close of business on the last day of a Collection Period, that the Servicer is
required to advance on the Simple Interest Receivables pursuant to Section
5.03(b).
"Simple Interest Method" means the method of allocating a fixed level
----------------------
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made and the remainder
of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the
--------------------------
portion of a payment allocable to interest and the portion allocable to
principle is determined in accordance with the Simple Interest Method.
"Specified Reserve Account Balance" means [STATE FORMULA].
---------------------------------
"Standard & Poor's" means Standard & Poor's Ratings Group, or its
-----------------
successor.
"Total Distribution Amount" means, for each Distribution Date, the sum
-------------------------
of the Interest Distribution Amount and the Principal Distribution Amount (other
than the portion thereof attributable to Realized Losses).
"Trust" means the trust created by this Agreement.
-----
"Trust Account" means any of the Collection Account, the
-------------
Distribution Account and the Payahead Account, established and maintained
pursuant to Section 4.01.
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<PAGE>
"Trustee" means ___________________, a _______________ banking
-------
corporation, its successors in interest and any successor Trustee hereunder.
"Trustee Officer" means any officer within the Corporate Trust Office
---------------
of the Trustee, including the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
New York on the date hereof.
"Weighted Average Pass-Through Rate" means the weighted average
----------------------------------
(calculated on the basis of the outstanding principal amounts) of the Class A
Pass-Through Rate and the Class B Pass-Through Rate.
"Yield Supplement Account" means the account established and
------------------------
maintained pursuant to Section 4.03.
"Yield Supplement Account Agreement" means the agreement dated as of
----------------------------------
____________, among the Company, the Servicer and the Trustee, substantially in
the form of Exhibit J.
"Yield Supplement Amount" means, with respect to any Receivable
-----------------------
(other than a Liquidated Receivable or Purchased Receivable after the Collection
Period in which such Receivable becomes a Liquidated Receivable or Purchased
Receivable) and any Distribution Date, the amount, if positive, equal to the
product of (a) one-twelfth, (b) the sum of (i) the Weighted Average Pass-Through
Rate, plus the Servicing Fee Rate, minus the APR of such Receivable and (c) the
Principal Balance of such Receivable.
"Yield Supplement Initial Deposit" means $____________.
--------------------------------
"Yield Supplement Maximum Amount" means $_____________.
-------------------------------
Section 1.02. Other Definitional Provisions. (a) All terms defined
-----------------------------
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto or thereto unless otherwise
defined therein.
(b) As used herein, and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined herein or in
any such certificate or other
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document, and accounting terms partly defined herein or in any such certificate
or other document to the extent not defined, shall have the respective meanings
given to them under United States generally accepted accounting principles. To
the extent that the definitions of accounting terms herein or in any such
certificate or other document are inconsistent with the meanings of such terms
under United States generally accepted accounting principles, the definitions
contained herein or in any such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and word of similar
import when used herein shall refer to this Agreement as a whole and not to any
particular provision hereof; Article, Section, Schedule and Exhibit references
contained herein are references to Articles, Sections, Schedules and Exhibits
herein; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables; Original Issuance of Certificates
------------------------------------------------------------
Section 2.01. Conveyance of Receivables. In consideration of the
-------------------------
Trustee's delivery on the Closing Date to or upon the order of the Company of
Class A Certificates in an initial aggregate principal amount of $_____________
and Class B Certificates in an initial aggregate principal amount of
$__________, the Company does hereby sell, transfer, assign, set over and
otherwise convey to the Trustee in trust for the benefit of the
Certificateholders, without recourse (subject to the obligations set forth
herein), all right, title and interest of the Company in and to:
(a) the Receivables and all moneys due thereon on or after the Cutoff
Date, in the case of Precomputed Receivables, or all moneys received thereon on
and after the Cutoff Date, in the case of Simple Interest Receivables;
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(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the Company in
such Financed Vehicles;
(c) any proceeds with respect to the Receivables from claims on any
physical damage, theft, credit life or disability insurance policies covering
Financed Vehicles or Obligors;
(d) any Financed Vehicle that shall have secured any such Initial
Receivable and shall have been acquired by or on behalf of the Company, the
Servicer or the Trust;
(e) all other assets com prising the estate of the Trust; and
(f) the proceeds of any and al l of the foregoing.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges
---------------------
the sale, transfer and assignment of the Receivables and the other assets of the
Trust referred to in Section 2.01 and declares that the Trustee holds and will
hold the Receivables and such other assets in trust, upon the terms herein set
forth, for the use and benefit of all present and future Certificateholders.
Section 2.03. Representations and Warranties of the Company. The
---------------------------------------------
Company makes the following representations and warranties as to the Receivables
conveyed to the Trust, on which the Trustee is deemed to have relied in
accepting the Receivables in trust and executing and authenticating the
Certificates. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date, but shall survive the
sale, transfer and assignment of the Receivables to the Trustee.
(a) Characteristics of Receivables. Each Receivable (1) was
------------------------------
originated by the Seller thereof or acquired from a motor vehicle dealer or
another financial institution by such Seller in the ordinary course of such
Seller's business, (2) has created a valid, subsisting and enforceable first
priority security interest in favor of such Seller in the Financed Vehicle,
which security interest is assignable by such Seller and the Company, (3)
contains customary and enforceable provisions such that the rights and remedies
of the holder thereof shall be adequate for realization against the collateral
of the benefits of the security, (4) provides for level monthly payments
(provided that the payment in the first or last month in the life of the
Receivable may be minimally different from the level payments) that fully
amortize the Amount Financed by maturity and yield interest at the Annual
Percentage Rate, and (5) in the case of a Precomputed Receivable, in the
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event that such contract is prepaid, provides for a prepayment that fully pays
the Principal Balance and includes accrued but unpaid interest through the date
of prepayment at the Annual Percentage Rate.
(b) Schedule of Receivables. The information set forth in Schedule I
-----------------------
to this Agreement is true and correct in all material respects as of the opening
of business on the Cutoff Date, and no selection procedures believed to be
adverse to the Certificateholders were utilized in selecting the Receivables.
The computer tape or other listing regarding the Receivables made available to
the Trustee is true and correct in all material respects as of the Cutoff Date.
(c) Compliance with Law. Each Receivable and the sale of the
-------------------
Financed Vehicle complied in all material respects at the time it was originated
or made and at the execution of this Agreement with all requirements of
applicable federal, state and local laws and regulations thereunder, including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act,
the Federal Reserve Board's Regulations B and Z, and State adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code, and other
consumer credit laws and equal credit opportunity and disclosure laws.
(d) Binding Obligation. Each Receivable represents the genuine,
------------------
legal, valid and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and to
general principles of equity (whether applied in a proceeding at law or in
equity).
(e) No Government Obligor. None of the Receivables is due from the
---------------------
United States of America or any State or from any agency, department or
instrumentality of the United States of America or any State.
(f) Security Interest in Financed Vehicle. Immediately prior to the
-------------------------------------
sale, assignment and transfer thereof to the Trustee, each Receivable shall be
secured by a validly perfected first security interest in the Financed Vehicle
in favor of the Company as secured party or all necessary and appropriate
actions have been commenced that would result in the valid perfection of a first
security interest in the Financed Vehicle in favor of the Company as secured
party.
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<PAGE>
(g) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released from the
lien granted by the related Receivable in whole or in part.
(h) No Waiver. No provision of a Receivable has been waived in such a
---------
manner that the Receivable fails to meet any other representation or warranty of
the Company with respect thereto.
(i) No Amendments. No Receivable shall have been amended such that
-------------
the amount of the Obligor's Scheduled Payments shall have been increased except
for increases resulting from the inclusion of any premiums for forced placed
physical damage insurance covering the Financed Vehicle.
(j) No Defenses. No facts are known to the Company that would give
-----------
rise to any right of rescission, setoff, counterclaim or defense, nor shall the
same have been asserted or threatened, with respect to any Receivable.
(k) No Liens. To the best of the Company's knowledge, no liens or
--------
claims have been filed for work, labor or materials relating to a Financed
Vehicle that are prior to, or equal or coordinate with, the security interest in
the Financed Vehicle granted by the Receivable.
(l) No Default. No Receivable has a payment that is more than 90 days
----------
overdue as of the related Cutoff Date and, except as permitted in this
paragraph, no default, breach, violation or event permitting acceleration under
the terms of any Receivable has occurred; no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation or
event permitting acceleration under the terms of any Receivable has arisen; and
the Company has not waived and shall not waive any of the foregoing.
(m) Insurance. The related Seller, in accordance with its customary
---------
procedures, has determined that the Obligor has obtained physical damage
insurance covering the Financed Vehicle and under the terms of the Receivable
the Obligor is required to maintain such insurance.
(n) Title. It is the intention of the Company that the transfer and
-----
assignment herein contemplated constitute a sale of the Receivables from the
Company to the Trust and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
petition of receivership by or against the Company. No Receivable has been
sold, transferred, assigned or pledged by the Company to any Person other than
the Trustee. Immediately prior to the transfer and assignment
-20-
<PAGE>
herein contemplated, the Company had good and marketable title to each
Receivable conveyed by it hereunder to the Trust, free and clear of all Liens
and rights of others and, immediately upon the transfer thereof, the Trustee, in
trust for the benefit of the Certificateholders, shall have good and marketable
title to each such Receivable, free and clear of all Liens and rights of others;
and the transfer of the Receivables to the Trustee for the benefit of the
Certificateholders has been perfected under the UCC.
(o) Lawful Assignment. No Receivable was originated in, or is subject
-----------------
to the laws of, any jurisdiction under which the sale, transfer and assignment
of such Receivable under this Agreement shall be unlawful, void or voidable.
(p) All Filings Made. All filings (including UCC filings) necessary
----------------
in any jurisdictions to give the Trustee a first perfected ownership interest in
the Receivables shall have been made.
(q) One Original. There shall be only one original executed copy of
------------
each Receivable.
(r) Scheduled Payments. (1) No Receivable has a payment that is more
------------------
than 90 days overdue as of the related Cutoff Date and (2) no Receivable has a
final scheduled payment date that is later than the Final Scheduled Maturity
Date.
(s) Location of Receivable Files. The Receivable Files are kept at one
----------------------------
or more of the locations listed in Schedule II.
(t) No Bankruptcies. No Obligor on any Receivable as of the related
---------------
Cutoff Date was noted in the related Receivable File as having filed for
bankruptcy.
(u) No Repossessions. No Financed Vehicle securing any Receivable is
----------------
in repossession status.
(v) Maturity of Receivables. The weighted average remaining term of
-----------------------
the Initial Receivables as of the Initial Cutoff Date is _______ months.
(w) Financing. Approximately ___% of the aggregate principal balance
---------
of the Receivables, constituting ___% of the number of Receivables as of the
Cutoff Date, represents financing of new vehicles and the remainder of the
Receivables represents financing of used vehicles; and approximately ___% of the
aggregate principal balance of the Receivables as of the Cutoff Date represent
Precomputed Receivables and the remainder of the Receivables represent Simple
Interest Receivables. The aggregate Principal
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<PAGE>
Balance of the Receivables as of the Cutoff Date is $_____________.
(x) Chattel Paper. Each Receivable constitutes "chattel paper" under
-------------
the UCC.
(y) Agreement. The representations and warranties of the Company in
---------
this Section and Section 7.01 are true and correct.
(z) APR. The weighted average Annual Percentage Rate of the
---
Receivables as of the Cutoff Date is approximately ___%.
Section 2.04. Repurchase Upon Breach. The Company, the Servicer or
----------------------
the Trustee, as the case may be, shall inform the other parties to this
Agreement promptly in writing, upon the discovery of any breach of the Company's
representations and warranties made pursuant to Section 2.03. Unless any such
breach is cured in all material respects by the last day of the second
Collection Period following the discovery thereof (and notice to the Company) by
the Trustee or receipt by the Trustee of notice thereof from the Company or the
Servicer, the Company shall be obligated to repurchase, as of such last day (or,
at the Company's option, the last day of the first Collection Period following
such discovery or notice), any Receivable conveyed by it to the Trust if the
interest of the Certificateholders in such Receivable is materially and
adversely affected by such breach. In consideration of the repurchase of any
such Receivable, the Company shall remit the Purchase Amount to the Collection
Account, in the manner specified in Section 5.04. The sole remedy of the
Trustee, the Trust or the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 2.03 and the agreement
contained in this Section shall be to require the Company to repurchase
Receivables pursuant to this Section 2.04, subject to the conditions contained
herein.
Section 2.05. Custody of Receivable Files. To assure uniform quality
---------------------------
in servicing the Receivables and to reduce administrative costs, the Trustee
hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Trustee as custodian of the following
documents or instruments, which are hereby constructively delivered to the
Trustee as of the Closing Date with respect to each Receivable:
(a) the fully executed original of the Receivable;
(b) a copy of the original c redit application as executed by the
Obligor;
(c) the original certificate of title or such documents that the
Servicer or the related Seller shall keep
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<PAGE>
on file, in accordance with their customary procedures, evidencing the security
interest of such Seller in the Financed Vehicle; and
(d) any and all other documents that the Servicer or related Seller
shall keep on file, in accordance with their customary procedures, relating
to a Receivable, an Obligor or a Financed Vehicle.
Section 2.06. Duties of Servicer as Custodian.
-------------------------------
(a) Safekeeping. The Servicer shall hold the Receivable Files as
-----------
custodian on behalf of the Trustee for the benefit of all present and future
Certificateholders, and shall maintain such accurate and complete accounts,
records and computer systems pertaining to each Receivable File as shall enable
the Trustee to comply with this Agreement. In performing its duties as
custodian, the Servicer shall act with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to the receivable
files relating to all comparable automotive receivables that the Servicer
services for itself or others. The Servicer shall conduct, or cause to be
conducted, periodic audits of the Receivable Files held by it under this
Agreement, and of the related accounts, records and computer systems, in such a
manner as shall enable the Trustee to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Trustee any failure
on its part to hold the Receivable Files and maintain its accounts, records and
computer systems as herein provided and shall promptly take appropriate action
to remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall
------------------------------------
maintain each Receivable File at its offices specified in Schedule II to this
Agreement or at such other office as shall be specified to the Trustee by
written notice not later than 90 days after any change in location. The
Servicer shall make available to the Trustee or its duly authorized
representatives, attorneys or auditors a list of locations of the Receivable
Files and the related accounts, records and computer systems maintained by the
Servicer at such times during normal business hours as the Trustee shall
instruct.
(c) Release of Documents. Upon instruction from the Trustee, the
--------------------
Servicer shall release any Receivable File to the Trustee, the Trustee's agent
or the Trustee's designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable, and upon the release and delivery
of any such document in accordance with the instructions of the Trustee, the
Servicer shall be released from any further liability and responsibility under
this Section 2.06 with respect to such documents unless and until such time as
such documents
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<PAGE>
shall be returned to the Servicer, and in no event shall the Servicer be
responsible for any loss occasioned by the Trustee's failure to return any
document in a timely manner.
Section 2.07. Instructions; Authority to Act. The Servicer shall be
------------------------------
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trustee Officer.
Section 2.08. Custodian's Indemnification. The Servicer as custodian
---------------------------
shall indemnify the Trustee and each of its officers, directors, employees and
agents for any and all liabilities, obligations, losses, compensatory damages,
payments, costs, or expenses of any kind whatsoever that may be imposed on,
incurred by or asserted against the Trustee or any of its officers, directors,
employees or agents as the result of any improper act or omission in any way
relating to the maintenance and custody by the Servicer as custodian of the
Receivable Files; provided, however, that the Servicer shall not be liable to
the Trustee or any such officer, director, employee or agent of the Trustee for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Trustee or any such officer, director, employee or agent of
the Trustee.
Section 2.09. Effective Period and Termination. The Servicer's
--------------------------------
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section
2.09. If the Servicer shall resign as Servicer in accordance with the
provisions of this Agreement or if all of the rights and obligations of any
Servicer shall have been terminated under Section 9.01, the appointment of such
Servicer as custodian shall be terminated by the Trustee, or by Holders of the
Certificates evidencing not less than 25% of the Certificate Balance, in the
same manner as the Trustee or such Holders may terminate the rights and
obligations of the Servicer under Section 9.01. The Trustee may terminate the
Servicer's appointment as custodian, with cause, at any time upon written
notification to the Servicer, and without cause upon 30 days' prior written
notification. As soon as practicable after any termination if such appointment,
the Servicer shall deliver the Receivable Files to the Trustee or the Trustee's
agent at such place or places as the Trustee may reasonably designate.
Notwithstanding any such termination of the Servicer as custodian, the Trustee
agrees to provide, or to cause its agent to provide, access to the Receivable
Files to the Servicer for the purpose of carrying out its duties and
responsibilities with respect to the servicing of the Receivables hereunder.
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ARTICLE III
Administration and Servicing of Receivables
-------------------------------------------
Section 3.01. Duties of Servicer. The Servicer, as agent for the
---------------------------------
Trustee (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and
posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment coupons to Obligors,
reporting tax information to Obligors, accounting for collections, furnishing
monthly and annual statements to the Trustee with respect to distributions, and
making Advances pursuant to Section 5.03. Subject to the provisions of Section
3.02, the Servicer shall follow its customary standards, policies and procedures
in performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered by the Trustee to execute
and deliver, on behalf of itself, the Trust, the Certificateholders, the
Trustee, or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments with respect to such Receivables or to the Financed Vehicles
securing such Receivables. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Trustee (in the case of any Receivable other than a
Purchased Receivable) shall thereupon be deemed to have automatically assigned,
solely for the purpose of collection, such Receivable to the Servicer. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Receivable on the ground that it shall not be a real party in interest
or a holder entitled to enforce such Receivable, the Trustee shall, at the
Servicer's expense and direction, take steps to enforce such Receivable,
including bringing suit in its name or the name of the Certificateholders. The
Trustee shall, upon written request of the Servicer, furnish the Servicer with
any powers of attorney and other documents reasonably necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.
3.02. Collection and Allocation of Receivable Payments. (a) The
------------------------------------------------
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others.
The Servicer shall allocate collections between principal and interest in
accordance with the customary servicing procedures it follows with respect to
all comparable automotive receivables that it services for itself and others.
The Servicer
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<PAGE>
may in its discretion waive any late payment charge or any other fees that may
be collected in the ordinary course of servicing a Receivable.
(b) The Servicer shall not agree to any alteration of the APR on any
Receivable or of the amount of the Scheduled Payments on a Precomputed
Receivable or the originally scheduled payments on Simple Interest Receivables.
The Servicer shall not grant rebates or adjustments on a Receivable that modify
the original due dates or amounts of the Scheduled Payments on a Precomputed
Receivable or the original due dates or amounts of the originally Scheduled
Payments on a Precomputed Receivable or the originally due dates or amounts of
the originally scheduled payments on a Simple Interest Receivable; provided,
however, that the Servicer may grant one extension of one month in any six month
period, provided that (1) either such extensions granted to an Obligor over the
term of a Receivable do not extend the date for final payment by such Obligor
thereunder beyond the Final Scheduled Maturity Date or (2) if such extensions do
result in a final scheduled payment date under a Receivable that occurs after
the Final Scheduled Maturity Date, the Servicer shall [pay to the Trust the
additional interest payable by the related Obligor with respect to such
extensions] [repurchase any Receivable so affected or advance any such deferred
payments to the Trust on the Final Scheduled Distribution Date if and to the
extent any shortfalls in the Class A Distributable Amount or Class B
Distributable Amount occur on such date].
Section 3.03. Realization Upon Receivables. On behalf of the Trust,
----------------------------
the Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Financed
Vehicle securing any Receivable as to which the Servicer shall have determined
eventual payment in full is unlikely. The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of automotive receivables, which may include selling the Financed
Vehicle at public or private sale. The Servicer shall be entitled to recover
all out-of-pocket expenses incurred by it in the course of converting a Financed
Vehicle into cash proceeds. The foregoing shall be subject to the provision
that, in any case in which the Financed Vehicle shall have suffered damage, the
Servicer shall not expend funds in connection with the repair or the
repossession of such Financed Vehicle unless it shall determine in its
discretion that such repair and/or repossession will increase the Liquidation
Proceeds by an amount greater than the amount of such expenses.
Section 3.04. Physical Damage Insurance. The Servicer, in accordance
-------------------------
with its customary servicing procedures, shall require that each Obligor shall
have obtained physical damage insurance covering the Financed Vehicle as of the
execution of the Receivable.
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Section 3.05. Maintenance of Security Interests in Financed Vehicles.
------------------------------------------------------
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle. The Trustee hereby
authorizes the Servicer to take such steps as are necessary to re-perfect such
security interest on behalf of the Trust in the event of the relocation of a
Financed Vehicle or for any other reason.
Section 3.06. Covenants of Servicer. The Servicer shall not release
---------------------
the Financed Vehicle securing any Receivable from the security interest granted
by such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Trust or the Certificateholders in such Receivables, nor shall the
Servicer increase the number of scheduled payments due under a Receivable.
Section 3.07. Purchase of Receivables Upon Breach. The Servicer or
-----------------------------------
the Trustee shall inform the other party and the Company promptly, in writing,
upon the discovery of any breach pursuant to Section 3.02, 3.05 or 3.06 that
materially and adversely affects the Certificateholders' interests in any
Receivable. Unless such breach shall have been cured by the last day of the
second Collection Period following such discovery (or, at the Servicer's
election, the last day of the first following Collection Period), the Servicer
shall purchase, as of such last day, any Receivable that is materially and
adversely affected by such breach. In consideration of the purchase of any such
Receivable pursuant to either of the two preceding sentences, the Servicer shall
remit the Purchase Amount to the Collection Account in the manner specified in
Section 5.04. For purposes of this Section 3.07, the Purchase Amount shall
consist in part of a release by the Servicer of all rights of reimbursement with
respect to Outstanding Precomputed Advances or Outstanding Simple Interest
Advances on the Receivable. The sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach pursuant to Section 3.02, 3.05 or
3.06 shall be to require the Servicer to repurchase Receivables pursuant to this
Section 3.07. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repurchase of
any Receivable pursuant to this Section.
Section 3.08. Servicing Fee. As compensation for servicing the
-------------
Receivables, the Servicer shall be entitled to receive the Servicing Fee on each
Distribution Date, from the Interest Distribution Amount available on such
Distribution Date, in an amount equal to the product of (a) one twelfth, (b) the
Servicing Rate and (c) the Pool Balance as of the first day of the preceding
Collection Period. The Servicer shall also be entitled to all late fees,
prepayment charges (including, in the case of a Receivable that provides for
payments according to the
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"Rule of 78s" and that is prepaid in full, the difference between the Principal
Balance of such Receivable (plus accrued interest to the date of prepayment) and
the principal balance of such Receivable computed according to the "Rule of
78s") and other administrative fees or similar charges allowed by applicable law
with respect to the Receivables, collected (from whatever source) on the
Receivables, as and when collected, plus any reimbursement pursuant to Section
8.02.
Section 3.09. Servicer's Certificate. Not later than 11:00 a.m. (New
----------------------
York time) on each Determination Date, the Servicer shall deliver to the
Trustee, the Rating Agencies and the Company, a Servicer's Certificate
containing all information necessary to make the distributions on the related
Distribution Date pursuant to Section 5.05 for the related Collection Period.
Receivables to be purchased by the Servicer or to be repurchased by the Company
shall be identified by the Servicer by account number with respect to such
Receivable (as specified in Schedule I).
Section 3.10. Annual Statement as to Compliance; Notice of Default.
----------------------------------------------------
(a) The Servicer shall deliver to the Trustee, on or before _____________ of
each year, an Officers' Certificate, dated as of _____________ of preceding
year, stating that (1) a review of the activities of the Servicer during the
preceding 12-month period (or such shorter period as shall have elapsed since
the Closing Date) and of its performance under this Agreement has been made
under such officers' supervision and (2) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Trustee shall send a copy of
such certificate and the report referred to in Section 3.11 to the Rating
Agencies. A copy of such certificate and the report referred to in Section 3.11
may be obtained by any Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee and to the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event
later than 5 Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Default under Section 9.01(a) or (b).
Section 3.11. Annual Independent Certified Public Accountant's
------------------------------------------------
Report. The Servicer shall deliver to the Trustee, on or before _____________
of each year beginning ______________, 199^, a report of a firm of independent
certified public accountants, addressed to the Board of Directors of the
Servicer to the effect that such firm has examined the financial statements of
the Servicer, and issued its report thereon, and
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that such examination (a) was made in accordance with generally accepted
auditing standards and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in the
circumstances; (b) included tests relating to automotive loans serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers (the "Program"), to the extent the procedures in such
Program are applicable to the servicing obligations set forth herein; and (c)
except as described in the report, disclosed no exceptions or errors in the
records relating to automobile, van and light duty truck loans serviced for
others that, in the firm's opinion, paragraph four of such Program requires such
firm to report.
The Report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
Section 3.12. Access to Certain Documentation and Information
-----------------------------------------------
Regarding Receivables. The Servicer shall provide to the Certificateholders
- ---------------------
access to the Receivable Files in such cases where Certificateholders shall be
required by applicable statutes or regulations to review such documentation.
Access shall be afforded without charge, but only upon reasonable request and
during the normal business hours at the offices of the Servicer. Nothing in
this Section shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section.
Section 3.13. Servicer Expenses. The Servicer shall be required to
-----------------
pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders.
Section 3.14. Appointment of Subservicer. The Servicer may at any
--------------------------
time appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, further, that the Servicer shall remain obligated
and shall be liable to the Trustee and the Certificateholders for the servicing
and administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and
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none of the Trust, the Trustee or the Certificateholders shall have any
responsibility therefor.
ARTICLE IV
Accounts
--------
Section 4.01. Establishment of Trust Accounts. (a) (1) The
-------------------------------
Servicer, for the benefit of the Certificateholders, shall establish and
maintain in the name of the Trustee an Eligible Deposit Account (the "Collection
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
(2) The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee a non-interest bearing account
(the "Distribution Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders.
(b) Funds on deposit in the Collection Account shall be invested by
the Trustee in Eligible Investments selected in writing by the Servicer
(pursuant to standing instructions or otherwise); provided, however, that it is
understood and agreed that the Trustee shall not be liable for any loss arising
from such investment in Eligible Investments. Investment Earnings on Eligible
Investments held in the Collection Account shall be for the benefit of the
Servicer and shall be distributed on each Distribution Date to the Servicer.
Unless otherwise permitted by the Rating Agencies, funds on deposit in the
Collection Account shall be invested in Eligible Investments that will mature
(1) not later than the Business Day immediately preceding the next Distribution
Date or (2) on such next Distribution Date if such investment is held in the
trust department of the institution with which the Collection Account and is
then maintained and is invested in a time deposit that is rated at least A-1
Standard & Poor's and P-1 by Moody's. Funds deposited in the Collection Account
upon the maturity of any Eligible Investments on the day immediately preceding a
Distribution Date are not required to be invested overnight. If at any time the
Collection Account ceases to be an Eligible Deposit Account, the Trustee (or the
Servicer on its behalf) shall, within 10 Business Days (or such longer period,
not to exceed 30 calendar days, to which each Rating Agency shall consent),
establish a new Collection Account as an Eligible Deposit Account and shall
transfer any cash and/or investments to such new account.
(c) (1) The Servicer shall establish and maintain with the Trustee
an Eligible Deposit Account
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(the "Payahead Account"). The Payahead Account shall not be property of
the Trust.
(2) The Servicer shall, on or prior to each Distribution Date (and
prior to deposits to the Distribution Account) transfer from the Collection
Account to the Payahead Account all Payaheads as described in Section 5.02
received by the Servicer during the related Collection Period. Notwithstanding
the foregoing and the first sentence of Section 5.01, for so long as the
Servicer is permitted to make monthly remittances to the Collection Account
pursuant to Section 5.01, Payaheads need not be remitted to and deposited in the
Payahead Account, but instead may be remitted to and held by the Servicer. So
long as such condition is met, the Servicer shall not be required to segregate
or otherwise hold separate any Payaheads remitted to the Servicer as aforesaid,
but shall be required to remit Payaheads to the Collection Account in accordance
with Section 5.05(a).
(d) (1) Except as otherwise provided herein, the accounts established and
maintained pursuant to this Article IV shall be under the sole dominion and
control of the Trustee for the benefit of the Certificateholders. With respect
to any Account Property, the Trustee agrees, by its acceptance hereof, that:
(A) Any Account Property that is held in deposit accounts shall be
held solely in Eligible Deposit Accounts (subject to the last sentence of
Section 4.01(b)); and, except as otherwise provided herein, each such
Eligible Deposit Account shall be subject to the exclusive custody and
control of the Trustee, and the Trustee shall have sole signature authority
with respect thereto;
(B) Any Account Property that constitutes Physical Property shall be
delivered to the Trustee in accordance with paragraph (a) of the definition
of "Delivery" and shall be held, pending maturity or disposition, solely by
the Trustee or a financial intermediary (as such term is defined in Section
8-313(4) of the UCC) acting solely for the Trustee;
(C) Any Account Property that is a book-entry security held through
the Federal Reserve System pursuant to federal book-entry regulations shall
be delivered in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued book-entry registration of such Account
Property as described in such paragraph; and
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(D) Any Account Property that is an "uncertificated security" under
Article 8 of the UCC and that is not governed by clause (C) above shall be
delivered to the Trustee in accordance with paragraph (c) of the definition
of "Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued registration of the Trustee's (or its
custodian's or its nominee's) ownership of such security.
(2) The Servicer shall have the power, revocable by the Trustee, to
instruct the Trustee to make withdrawals and payments from the trust accounts
for the purpose of permitting the Servicer or the Trustee to carry out its
respective duties hereunder.
Section 4.02. Reserve Account. (a) In order to effectuate the
---------------
subordination provided for herein and to assure that sufficient amounts to make
required distributions to Certificateholders will be available, the Servicer
shall establish and maintain an Eligible Deposit Account (the "Reserve
Account"), bearing a designation clearly indicating that the funds deposited
therein are held in trust for the benefit of the Certificateholders. The
Reserve Account will include the money and other property deposited and held
therein pursuant to this Section 4.02, Section 4.04(a) and Section 5.05(e).
On or prior to the Closing Date, the Company shall deposit an amount
equal to the Reserve Account Initial Deposit into the Reserve Account. The
Reserve Account shall not be part of the Trust, but instead will be held for the
benefit of the Certificateholders. The Company hereby acknowledges that all
funds on deposit in the Reserve Account (and any investment earnings thereon)
are owned directly by it, and the Company hereby agrees to treat the same as its
assets (and earnings) for federal income tax and all other purposes.
(b) In order to give effect to the subordination provided for herein
and to assure the availability of the amounts maintained in the Reserve
Account, the Company hereby sells, conveys and transfers to the Trustee, as
collateral agent, and its successors and assigns, the Reserve Account
Initial Deposit and all proceeds thereof and hereby pledges to the Trustee
as collateral agent, and its successors and assigns, all other amounts
deposited in or credited to the Reserve Account from time to time under this
Agreement, all Eligible Investments made with amounts on deposit therein,
all earnings and distributions thereon and proceeds thereof, subject,
however, to the limitations set forth below, and solely for the purpose of
securing and providing for payment of the Class A Distributable Amount and
the Class B Distributable Amount in accordance with
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Section 5.05(b) (all the foregoing, subject to the limitations set forth
below, the "Reserve Account Property"), to have and to hold all the
aforesaid property, rights and privileges unto the Trustee, its successors
and assigns, in trust for the uses and purposes, and subject to the terms
and provisions, set forth in this Section. The Trustee hereby acknowledges
such transfer and accepts the trusts hereunder and shall hold and distribute
the Reserve Account Property in accordance with the terms and provisions of
this Section.
(c) Consistent with the limited purposes for which such trust is
granted, the amounts on deposit in the Reserve Account on each Distribution
Date shall be available for distribution as provided in Section 5.05, in
accordance with and subject to the following: if the amount on deposit in
the Reserve Account (after giving effect to all deposits thereto and
withdrawals therefrom on such Distribution Date) is greater than the
Specified Reserve Account Balance, the Trustee shall release and distribute
all such excess amounts to the Company. Upon any such distribution to the
Company, the Certificateholders will have no further rights in, or claims
to, such amounts.
(d) Funds on deposit in the Reserve Account shall be invested by the
Trustee, as collateral agent, in Eligible Investments selected in writing by
the Company. Unless otherwise permitted by the Rating Agencies, funds on
deposit in the Reserve Account shall be invested in Eligible Investments
that will mature (1) not later than the Business Day immediately preceding
the next Distribution Date or (2) on such next Distribution Date if such
investment is held in the trust department of the institution with which the
Reserve Account is then maintained and is invested in a time deposit that is
rated at least A-1 by Standard & Poor's and P-1 by Moody's. Funds deposited
in the Reserve Account upon the maturity of any Eligible Investments on the
day immediately preceding a Distribution Date are not required to be
invested overnight. If, at any time, the Reserve Account ceases to be an
Eligible Deposit Account, the Trustee as collateral agent (or the Servicer
on its behalf) shall, within 10 Business Days ((or such longer period), not
to exceed 30 calendar days, to which each Rating Agency may consent),
establish a new Reserve Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new account.
(e) With respect to the Reserve Account Property, the Company, on
behalf of itself, its successors and assigns, and the Trustee agree that:
(1) Any Reserve Account Property that is held in deposit accounts
shall be held solely in the name of
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the Trustee, as collateral agent, at an Eligible Institution. Each such
deposit account shall be subject to the exclusive custody and control of
the Trustee, and the Trustee shall have sole signature authority with
respect thereto;
(2) Any Reserve Account Property that constitutes Physical
Property shall be delivered to the Trustee, as collateral agent, in
accordance with paragraph (a) of the definition of "Delivery" and shall
be held, pending maturity or disposition, solely by the Trustee, as
collateral agent, or a financial intermediary (as such term is defined
in Section 8-313(4) of the UCC) acting solely for the Trustee, as
collateral agent;
(3) Any Reserve Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee, as
collateral agent, pending maturity or disposition, through continued
book-entry registration of such Reserve Account Property as described in
such paragraph; and
(4) Any Reserve Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause
(3) above shall be delivered to the Trustee, as collateral agent, in
accordance with paragraph (c) of the definition of "Delivery" and shall
be maintained by the Trustee, as collateral agent, pending maturity or
disposition, through continued registration of the Trustee's (or its
custodian's or its nominee's) ownership of such security, in its
capacity as collateral agent.
Effective upon Delivery of any Reserve Account Property in the form of
Physical Property, book-entry securities or uncertificated securities, the
Trustee shall be deemed to have purchased such Reserve Account Property for
value, in good faith and without notice of any adverse claim thereto.
(f) The Company and the Servicer agree to take or cause to be taken such
further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments (including,
without limitation, any UCC financing statements or this Agreement) as may
be determined to be necessary in an Opinion of Counsel to the Company
delivered to the Trustee in order to perfect the interests created by this
Section and otherwise fully to effectuate the purposes, terms and conditions
of this Section. The Company shall:
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(1) promptly execute, deliver and file any financing statements,
amendments, continuation statements, assignments, certificates, and
other documents with respect to such interests and perform all such
other acts as may be necessary in order to perfect or maintain the
perfection of the Trustee's security interest; and
(2) file the necessary financing statements or amendments thereto
within five days, and promptly notify the Trustee of any such filing,
after the occurrence of any of the following: (A) any change in its
corporate name or any trade name; (B) any change in the location of its
chief executive office or principal place of business; and (C) any
merger or consolidation or other change in its identity or corporate
structure and promptly notify the Trustee of any such filings.
(g) The Trustee shall not enter into any subordination or
intercreditor agreement with respect to the Reserve Account Property.
(h) Following the payments in full of the Certificate Balance and of
all other amounts owing or to be distributed under this Agreement to
Certificateholders and the termination of the Trust, any amount remaining on
deposit in the Reserve Account shall be distributed to the Sellers.
[Section 4.03. Yield Supplement Account. (a) On or prior to the
------------------------
Closing Date, the Company shall establish an Eligible Deposit Account (the
"Yield Supplement-Account"), bearing a designation clearly indicating that the
funds deposited therein are for the benefit of the Certificateholders. On or
prior to the Closing Date, the Company, the Servicer and the Trustee shall enter
into the Yield Supplement Account Agreement and the Sellers shall deposit an
amount equal to the Yield Supplement Initial Deposit into the Yield Supplement
Account. The Yield Supplement Account shall not be part of the Trust, but
instead will be held for the benefit of the Certificateholders. The Company
hereby acknowledges that the Yield Supplement Initial Deposit and any investment
earnings thereon are owned directly by it, and the Company hereby agrees to
treat the same as its assets (and earnings) for federal income tax and all other
purposes.
(b) The Company hereby sells, conveys and transfers to Trustee, as
collateral agent, and its successors and assigns, the Yield Supplement Initial
Deposit and all proceeds thereof, and hereby pledges to the Trustee as
collateral agent, and its successors and assigns, all other amounts deposited in
or credited to the Trustee as collateral agent, and its successors and assigns,
all other amounts deposited in or credited to the Yield Supplement Account from
time to time under this Agreement, all Eligible
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<PAGE>
Investment made with amounts on deposit therein, all earnings and distributions
thereon, subject, however, to the limitations set forth below.
(c) The amounts on deposit in the Yield Supplement Account on each
Distribution Date shall be available for distribution as provided in Section
5.05; provided, however, that if the amount on deposit in the Yield
Supplement Account (after giving effect to all deposits thereto and
withdrawals therefrom on such Distribution Date) is greater than the Yield
Supplement Maximum Amount, the Trustee shall release and distribute such
excess amount to the Company. Upon any such distribution to the Company, the
Certificateholders will have no further rights in, or claims to, such
amounts.
(d) Following the payment in full of the Certificate Balance and of
all other amounts owing or to be distributed to Certificateholders under
this Agreement and the termination of the Trust, any amount remaining on
deposit in the Yield Supplement Account shall be distributed to the
Company.]
ARTICLE V
Payments and Statements to Certificateholders
---------------------------------------------
Section 5.01. Collections. The Servicer shall remit within two
-----------
Business Days of receipt thereof to the Collection Account all payments by or on
behalf of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds. Notwithstanding the foregoing, for
so long as (a) ________ remains the Servicer, (b) no Event of Default shall have
occurred and be continuing and (c)(1) __________ maintains a short-term rating
of at least A-1 by Standard & Poor's and P-1 by Moody's (and for five Business
Days following a reduction in either such rating) or (2) prior to ceasing daily
remittances, the Rating Agency Condition shall have been satisfied (and any
conditions or limitations imposed by the Rating Agencies in connection therewith
are complied with), the Servicer may remit all such payments and Liquidation
Proceeds with respect to any Collection Period to the Collection Account on a
less frequent basis, but in no event later than the Determination Date
immediately preceding each Distribution Date. For purposes of this Article V,
the phrase "payments by or on behalf of Obligors" shall mean payments made with
respect to the Receivables by Persons other than the Servicer or the Company.
Section 5.02. Application of Collections. All collections for a
--------------------------
Collection Period shall be applied by the Servicer as follows: With respect to
each Receivable (other than a Purchased Receivable), payments by or on behalf of
the Obligor
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shall be applied first, in the case of Precomputed Receivables, to reduce
Outstanding Precomputed Advances as described in Section 5.03(a) and, in the
case of Simple Interest Receivables, to reduce Outstanding Simple Interest
Advances as described in Section 5.03(b). Next, any excess shall be applied, in
the case of Precomputed Receivables, to the Scheduled Payment and, in the case
of Simple Interest Receivables, any remaining excess shall be added to the
Payahead Balance and shall be applied to prepay the Precomputed Receivable only
if the sum of such excess and the previous Payahead Balance shall be sufficient
to prepay the Receivable in full. Otherwise, and such remaining excess payment
shall constitute a Payahead and shall increase the Payahead Balance.
Section 5.03. Advances. (a) As of the close of business on the
--------
last day of each Collection Period, if the payments by or on behalf of an
Obligor on a Precomputed Receivable (other than a Purchased Receivable) shall be
less than the Scheduled Payment, the Payahead Balance, if any, with respect to
such Precomputed Receivable shall be applied by the Servicer to the extent of
the shortfall and such Payahead Balance shall be reduced accordingly. Next, the
Servicer shall advance any remaining shortfall (such amount a "Precomputed
Advance"), to the extent that the Servicer, at its sole discretion, shall
determine that such Precomputed Advance shall be recoverable from the Obligor,
the Purchase Amount or Liquidation Proceeds with respect to such Receivable or
proceeds of any other Precomputed Receivables. Each such Precomputed Advance
shall increase the aggregate amount of Outstanding Precomputed Advances.
Outstanding Precomputed Advances shall be reduced by subsequent payments by or
on behalf of the Obligor, collections of Liquidation Proceeds in respect of
Precomputed Receivables or payments of the Purchase Amount in respect of
Precomputed Receivables.
If the Servicer shall determine that an Outstanding Precomputed
Advance with respect to any Precomputed Receivable shall not be recoverable
as aforesaid, the Servicer shall be reimbursed from any collections made on
other Precomputed Receivables in the Trust, and Outstanding Precomputed
Advances with respect to such Precomputed Receivable shall be reduced
accordingly.
(b) At the close of business on the last day of each Collection
Period, the Servicer shall advance an amount equal to the amount of interest
due on the Simple Interest Receivables at their respective APR's for the
related Collection Period (assuming the Simple Interest Receivables pay on
their respective due dates) minus the amount of interest actually received
on the Simple Interest Receivables during the related Collection Period
(such amount, a "Simple Interest Advance"). Each such Simple Interest
Advance shall increase the aggregate amount of
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Outstanding Simple Interest Advances. If such calculation results in a
negative number, an amount equal to such negative number shall be paid to
the Servicer and the amount of Outstanding Simple Interest Advances shall be
reduced by such amount. In addition, in the event that a Simple Interest
Receivable becomes a Liquidated Receivable, Liquidation Proceeds with
respect to such Simple Interest Receivable attributable to accrued and
unpaid interest thereon (but not including interest for the then current
Collection Period) shall be paid to the Servicer to reduce Outstanding
Simple Interest Advances, but only to the extent of any current Outstanding
Simple Interest Advances. The Servicer shall not make any advance with
respect to principal of a Simple Interest Receivable.
Section 5.04. Additional Deposits. The Servicer shall deposit in
-------------------
the Collection Account the aggregate Advances pursuant to Section 5.03. The
Servicer and the Company shall deposit or cause to be deposited in the
Collection Account the aggregate Purchase Amount with respect to Purchased
Receivables, and the Servicer shall deposit therein all amounts to be paid under
Section 11.02. The Servicer shall deposit the aggregate Purchase Amount with
respect to Purchased Receivables in the Collection Account when such obligations
are due, unless the Servicer shall not be required to make daily deposits
pursuant to Section 5.01.
Section 5.05. Deposits. (a) On each Distribution Date, the Trustee
--------
shall cause the following transfers to be made in immediately available funds in
the amounts set forth in the Servicer's Certificate for such Distribution Date:
(1) from moneys on deposit in the Yield Supplement Account or
otherwise paid by the Company to the Trustee pursuant to the Yield
Supplement Account Agreement to the Distribution Account, an amount equal to
the Yield Supplement Amount for such Distribution Date;
(2) from the Collection Account to the Distribution Account, the
entire amount then on deposit in the Collection Account; provided, however,
that in the event the Servicer is required to make deposits to the
Collection Account on a daily basis pursuant to Section 5.01, the amount of
funds transferred from the Collection Account to the Distribution Account
will include only those funds that were deposited in the Collection Account
for the Collection Period related to such Distribution Date; and
(3) from the Payahead Account, or from the Servicer in the event that
the second and third sentences of Section 4.01(c)(2) are applicable, to the
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Distribution Account, the aggregate amount of previous Payaheads to be
applied to Scheduled Payments on Precomputed Receivables for the
related Collection Period or prepayments for the related Collection
Period, pursuant to Sections 5.02 and 5.03, in the amount set forth in
the Servicer's Certificate delivered on the related Determination
Date. A single, net transfer may be made.
(b) On each Determination Date, the Servicer shall calculate the Total
Distribution Amount, Interest Distribution Amount, Principal Distribution
Amount, Yield Supplement Amount, the Class A Principal Distributable Amount,
Class A Interest Distributable Amount, Class B Principal Distributable Amount
and Class B Interest Distributable Amount and, based on the Total Distribution
Amount and the other amounts to be distributed on such Distribution Date,
determine the amounts distributable to Holders of the Class A Certificates and
the Class B Certificates.
(c) On each Distribution Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 3.09) shall distribute amounts on deposit in the
Distribution Account and, if applicable, the Reserve Account, in the manner and
priority set forth below:
(1) to the Servicer, from the Interest Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(2) to the Class A Certificateholders:
(A) from the Class A Percentage of the Interest
Distribution Amount (after payment of the Servicing Fee and except as
provided in the proviso to subsection (d)(1 ) below), the Class A
Interest Distributable Amount;
(B) from the Class A Percentage of the Principal
Distribution Amount, the Class A Principal Distributable Amount;
(3) To the Class B Certificateholders:
(A) from the Class B Percentage of the Interest
Distribution Amount (after payment of the Servicing Fee), the (Class B
Interest Distributable Amount; and
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(B) from the Class B Percentage of the Principal
Distribution Amount, the Class B Principal Distributable Amount.
(d) The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates shall be and hereby are
subordinated to the rights of the Class A Certificateholders to receive
distributions in respect of the Class A Certificates and the rights of the
Servicer to receive the Servicing Fee (and any accrued and unpaid Servicing Fees
from prior Collection Periods) to the extent provided in this Section. Such
subordination shall be effected as follows, and all payments shall be affected
pursuant to clause (1) below prior to any payments pursuant to clause (2):
(1) If the Class A Percentage of the Interest Distribution
Amount (after such Interest Distribution Amount has been reduced by
Servicing Fee payments) is less than the Class A Interest Distributable
Amount on any Distribution Date, the Class A Certificateholders shall be
entitled to receive distributions in respect of such deficiency first,
from the Class B Percentage of the Interest Distribution Amount; second,
if such amounts are insufficient, from amounts on deposit in the Reserve
Account; and third, if such amounts are insufficient, from the Class B
Percentage of the Principal Distribution Amount; provided, however, that
if the amount of Simple Interest Advances required to be made for the
Collection Period have not been paid by the Servicer or withdrawn from
the Reserve Account, any resultant shortfall shall be allocated pro rata
between the Class A Certificates and the Class B Certificates and any
portion of such shortfall allocable to the Class A Certificates (and any
Class A Interest Carryover Shortfalls attributable thereto) shall be
paid only from amounts that are or become available in the Reserve
Account after giving effect to any deposit thereto on such day.
(2) If the Class A Percentage of the Principal Distribution
Amount is less than the Class A Principal Distributable Amount on any
Distribution Date, the Class A Certificateholders shall be entitled to
receive distribution in respect of such deficiency first, from the Class
B Percentage of the Principal Distribution Amount; second, if such
amounts are insufficient, from amounts on deposit in the Reserve Account
and third, if such amounts are insufficient, from the Class B Percentage
of the Interest Distribution Amount.
(e) On each Distribution Date, the Trustee shall distribute any excess
amounts remaining in the Distribution
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Account after making the distributions described in clauses (c)(1)
through (c)(3) above in the following amounts and in the following order
of priority: (1) to the Reserve Account until the amount on deposit
therein equals the Specified Reserve Account Balance and (2) to the
Company.
(f) Subject to Section 11.01 respecting the final payment upon
retirement of each Certificate, the Servicer shall instruct the Trustee
on each Distribution Date to distribute to each Certificateholder of
record on the preceding Record Date the interest and principal amounts
to be distributed to such Certificateholder on such Distribution Date.
Such distributions by the Trustee shall be made either (1) by wire
transfer in immediately available funds to the account of such Holder at
a bank or other entity having appropriate facilities thereof, provided
that such Holder holds Certificates with a minimum initial aggregate
principal amount of $1,000,000 and such Certificateholder has provided
appropriate instructions to the Servicer prior to such Distribution
Date, or (2) by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register.
Section 5.06. Statements to Certificateholders. On each
--------------------------------
Determination Date, the Servicer shall provide to the Trustee for the Trustee to
forward to each Certificateholder of record as of the most recent Record Date, a
statement setting forth the following information for the related Collection
Period as to each Class of Certificates to the extent applicable:
(a) the amount of such distribution allocable to principal of each
class of Certificates;
(b) the amount of such distribution allocable to interest of each
class of Certificates;
(c) the Pool Balance as of the close of business on the last day of
the related Collection Period after giving effect to payments allocated to
principal reported under (1) above;
(d) the Class A Certificate Balance and the Class B Certificate
Balance as of the close of business on the last day of the related Collection
Period, after giving effect to payments allocated to principal reported under
(1) above;
(e) the amount of the Servicing Fee paid to the Servicer for the
related Collection Period;
(f) the amount, if any, of Class A Principal Carryover Shortfall,
Class A Interest Carryover Shortfall, Class B Principal Carryover Shortfall and
Class B Interest Carryover
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Shortfall, as applicable, on such Distribution Date and any change in
the Class A Principal Carryover Shortfall, Class A Interest Carryover
Shortfall, Class B Principal Carryover Shortfall and Class B Interest
Carryover Shortfall, as applicable, from the preceding Distribution
Date;
(g) the amount of Realized Losses, if any, with respect to the
related Collection Period.
(h) the amount otherwise distributable to Holders of the Class B
Certificates that is distributed to Holders of Class A Certificates on
such Distribu tion Date.
(i) the balance of the Reserve Account on such Distribution
Date, after giving effect to deposits thereto and withdrawals therefrom
made on such Distribution Date;
(j) the Yield Supplement Amount and the amount on deposit in the
Yield Supplement Account after giving effect to distributions on such
date; and
(k) the aggregate Payahead Balance and the change in such
balance from the preceding Distribution Date.
Each amount set forth pursuant to subclauses (a), (b), (d) and (e) above shall
be expressed as a dollar amount per $1,000 of original principal balance of
Class A Certificate or Class B Certificate, as applicable.
Section 5.07. Accounting and Tax Returns. The Trustee shall (a)
--------------------------
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis and the accrual method of accounting and (b) deliver to each
Certificateholder such information as may be required by the Code and applicable
Treasury Regulations (including Form 1099) to enable each Holder to prepare its
federal and state income tax returns.
Section 5.08. Net Deposits. As an administrative convenience,
------------
unless the Servicer is required to remit collections daily, the Servicer will be
permitted to make the deposit of collections on the Receivables, aggregate
Advances and Purchase Amounts for or with respect to each Collection Period net
of distributions to be made to the Servicer with respect to such Collection
Period. The Servicer, however, will account to the Trustee and to the
Certificateholders as if all deposits, distributions and transfers were made
individually.
ARTICLE VI
The Certificates
----------------
Section 6.01. The Certificates. The Certificates shall be issued
----------------
in fully registered form in minimum denominations
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of $1,000 and integral multiples of $1 in excess thereof. The Certificates
shall be executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Trustee. Certificates bearing the manual or facsimile
signatures of signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefit of this Agreement, notwithstanding
the fact that such individuals or any of them have ceased to be so authorized
prior to the authentication and delivery of such Certificates or did not hold
such offices at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a Certificateholder and shall be
entitled to the rights and subject to the obligations of a Certificateholder
hereunder upon such transferee's acceptance of a Certificate duly registered in
such transferee's name pursuant to Section 6.03.
Section 6.02. Authentication of Certificates. Concurrently with
------------------------------
the conveyance of the Receivables to the Trust, the Trustee shall cause the
Certificates to be executed on behalf of the Trust, authenticated and delivered
to or upon the written order of the Company, signed by an authorized Trust
Officer, without further corporate action by the Company, in authorized
denominations. No Certificate shall entitle its Holder to any benefit under
this Agreement or be valid for any purpose unless there shall appear on such
Certificate a certificate of authentication, executed by the Trustee by manual
signature. Such authentication shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 6.03. Registration of Transfer and Exchange of
----------------------------------------
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 6.07, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. Unless otherwise specified in
this Agreement, the Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office, the Trustee shall execute, authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate amount dated the
date of authentication by the Trustee. At the option of a Holder, Certificates
may be exchanged for other Certificates of authorized denominations of a like
aggregate amount upon
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surrender at the Corporate Trust Office of the Certificates to be exchanged.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder or such Holder's attorney duly authorized in writing. Each
Certificate surrendered for registration of transfer and exchange shall be
canceled and subsequently disposed of by the Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
Section 6.04. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate shall be surrendered to the Certificate Registrar,
or if the Certificate Registrar shall receive evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (b) there shall be
delivered to the Certificate Registrar and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate has been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute, and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section, 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 connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership of a
beneficial interest in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.05. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.05 and for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
Section 6.06. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Trustee shall furnish or cause to be furnished to the Servicer,
- ---------
within 15 days after receipt by the Trustee of a request therefor from the
Servicer in writing, a list, in such form as the Servicer may reasonably
require, of the
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names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders, or one or more Holders of Certificates
evidencing no less than 25% of the Certificate Balance apply in writing to the
Trustee, and such application states that the applicants desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate, shall
be deemed to have agreed to hold neither the Servicer nor the Trustee
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
Section 6.07. Maintenance of Office or Agency. The Trustee shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. The Trustee
initially designates ___________________ as its office for such purposes. The
Trustee shall give prompt written notice to the Servicer and to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
Section 6.08. Book-Entry Certificates. The Class A Certificates,
-----------------------
upon original issuance, will be issued in the form of one or more typewritten
Certificates representing Book-Entry Certificates, to be delivered to the
Depository Trust Company, the initial Clearing Agency by or on behalf of the
Trust. The Class A Certificates shall be registered initially on the
Certificate Register in the name of Cede & Co. the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Certificates, except as
provided in Section 6.10. Unless and until definitive, fully registered
Certificates (the "Definitive Certificates") have been issued to such
Certificate Owners pursuant to Section 6.10
(a) the provisions of this Section shall be in full force and effect;
(b) the Company, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Class A Certificates) as the sole Holder of
such Certificates and shall have no obligation to the related Certificate
Owners;
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<PAGE>
(c) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section shall
control;
(d) the rights of such Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law
and agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Depository
Agreement. Unless and until Definitive Certificates are issued pursuant to
Section 6.10, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Class A Certificates to such
Clearing Agency Participants; and
(e) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Class A Certificates
evidencing a specified percentage of the Class A Certificate Balance, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Certificate
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Class A Certificates and has delivered such instructions to the Trustee.
Section 6.09. Notices to Clearing Agency. Whenever a notice or
--------------------------
other communication to Holders of the Class A Certificates is required under
this Agreement, unless and until Definitive Certificates have been issued to
such Certificate Owners pursuant to Section 6.10, the Trustee and the Servicer
shall give all such notices and communications specified herein to be given to
Holders of Class A Certificates to the Clearing Agency.
Section 6.10. Definitive Certificates. If (a) the Sellers advise
-----------------------
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities under the Depository Agreement and the
Company or the Trustee are unable to locate a qualified successor, (b) the
Company at its option advises the Trustee in writing that it elects to terminate
the book-entry system through the Clearing Agency or (c) after the occurrence of
an Event of Default, Certificate Owners representing beneficial interests
aggregating not less than a majority of the aggregate outstanding principal
amount of the Book-Entry Certificates advise the Trustee and the Clearing Agency
in writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of the Certificate Owners, then the
Clearing Agency shall notify all Certificate Owners and the Trustee of the
occurrence of such event and of the availability of Definitive
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<PAGE>
Certificates evidencing the same. Upon surrender to the Trustee of the
typewritten Certificates representing the Book-Entry Certificates by the
Clearing Agency, accompanied by registration instructions, the Trustee shall
execute and authenticate the Definitive Certificates in accordance with the
instructions of the Clearing Agency. None of the Company, the Certificate
Registrar or the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Trustee
shall recognize the Holders of the Definitive Certificates as Certificateholders
hereunder. The Definitive Certificates may be printed, lithographed or engraved
or produced in any other manner that is reasonably acceptable to the Trustee, as
evidenced by its execution thereof.
[Section 6.11. Limitations on Transfer of the Class B Certificates.
---------------------------------------------------
(a) The Class B Certificates have not been and will not be registered under the
Securities Act will not be listed on any exchange. No transfer of a Class B
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under said Act
and such state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and state securities laws, in
order to assure compliance with the Securities Act and such laws, the Holder
desiring to effect such transfer and such Holder's prospective transferee shall
each certify to the Trustee in writing the facts surrounding the transfer in
substantially the forms set forth in Exhibit E (the "Transferor Certificate")
and either Exhibit F (the "Investment Letter") or Exhibit G (the "Rule 144A
Letter"). Except in the case of a transfer as to which the proposed transferee
has provided a Rule 144A Letter, there shall also be delivered to the Trustee an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act and state securities laws, which Opinion of Counsel shall not
be an expense of the Trust or Trustee; provided that such Opinion of Counsel in
respect of the applicable state securities laws may be a memorandum of law
rather than an opinion if such counsel is not licensed in the applicable
jurisdiction. The Company shall provide to any Holder of a Class B Certificate
and any prospective transferee designated by any such Holder, information
regarding the Class B Certificates and the Receivables and such other
information as shall be necessary to satisfy the condition to eligibility set
forth in Rule 144A(d)(4) under the Securities Act for transfer of any such Class
B Certificate without registration thereof under the Securities Act pursuant to
the registration exemption provided by Rule 144A. Each Holder of a Class B
Certificate desiring to effect such a transfer shall, and does hereby agree to,
indemnify the Trust, the Trustees and the Company against any liability that may
result if the transfer is
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<PAGE>
not so exempt or is not made in accordance with federal and state securities
laws.
(b) No transfer of a Class B Certificate shall be made unless the Trustee
shall have received a representation from the transferee of such Class B
Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan,
trust or account (each a "Benefit Plan") subject to the fiduciary responsibility
provisions of ERISA or Section 4975 of the Code or a Person acting on behalf of
any such Benefit Plan or using assets of a Benefit Plan to acquire Class B
Certificates. For purposes of the preceding sentence, such representation shall
be deemed to have been made to the Trustee by the transferee's (including an
initial acquiror's) acceptance of a Class B Certificate. Notwithstanding
anything else to the contrary herein, any proposed transfer of a Class B
Certificate to or on behalf of a Benefit Plan subject to ERISA or the Code
without the delivery to the Trustee of an Opinion of Counsel satisfactory to the
Trustee shall be void and of no effect. The Trustee shall be under no liability
to any Person for any registration of transfer of any Class B Certificate that
is in fact not permitted by this Section 6.11 or for making any payments due on
such Class B Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as the
transfer was registered by the Trustee in accordance with the foregoing
requirements. The Trustee shall be entitled, but not obligated, to recover from
any Holder of a Class B Certificate that was in fact a Benefit Plan subject to
Section 406 of ERISA or Section 4975 of the Code, or a Person acting on behalf
of any such Benefit Plan at the time it became a Holder or which subsequently
became such a Benefit Plan or Person acting on behalf of such a Benefit Plan,
all payments made on such Class B Certificate at and after either such time.
Any payments so recovered by the Trustee shall be paid and delivered by the
Trustee to the last preceding Holder of such Certificate that is not, and was
not at the time it held such Certificate, a Benefit Plan or Person acting on
behalf of a Benefit Plan.
(c) The Trustee shall cause each Class B Certificate to contain a legend
stating that transfer of the Class B Certificates is subject to certain
restrictions and referring prospective purchasers of the Class B Certificates to
this Section 6.10 with respect to such restrictions.
(d) Unless otherwise set forth in this Agreement, no transfer of a Class B
Certificate or any interest therein shall be made unless prior to such transfer
the Holder of such Class B Certificate delivers to the Sellers and the Trustee
either a ruling of the Internal Revenue Service or
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an Opinion of Counsel to the effect that the proposed transfer will not
result in the arrangement contemplated by this Agreement being treated as an
association taxable as a corporation under either the Code or the tax laws
of the State of New York.]
ARTICLE VII
The Company
-----------
Section 7.01. The Company's Representations. The Company makes the
-----------------------------
following representations with respect to itself on which the Trustee is deemed
to have relied in accepting the Receivables in trust and executing and
authenticating the Certificates. The representations speak as of the execution
and delivery of this Agreement and as of the Closing Date and shall survive the
sale of the Receivables to the Trustee.
(a) Organization and Good Standing. The Company is duly organized and
------------------------------
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the corporate power, authority and legal right to acquire,
own and sell the Receivables.
(b) Due Qualification. The Company is duly qualified to do business as
-----------------
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Company has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms;
the Company has full power and authority to sell and assign the property to
be sold and assigned to and deposited with the Trustee by it as part of the
Trust, and the Company shall have duly authorized such sale and assignment
to the Trustee by all necessary corporate action; and the execution,
delivery and performance of this Agreement shall have been duly
authorized by the Company by all necessary corporate action.
(d) Binding Obligation. This Agreement when executed and delivered by
------------------
the Company, shall constitute a legal, valid and binding obligation of the
Company enforceable in accordance with its terms, subject to applicable
bankruptcy,
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insolvency, reorganization and similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and to general
principles of equity (whether applied in a proceeding at law or in
equity).
(e) No Violation. The consummation of the transactions contemplated
by------------this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Company,
or any material term of any indenture, agreement or other instrument to
which the Company is a party or by which it is bound; or result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument (other
than pursuant to this Agreement); or violate any law or, to the best of
the Company's knowledge, any order, rule or regulation applicable to the
Company of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(f) No Proceeding. There are no proceedings or investigations
-------------
pending or, to the Company's best knowledge, threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties:
(1) asserting the invalidity of this Agreement or the Certificates; (2)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement; (3) seeking
any determination or ruling that might materially and adversely affect
the performance by the Company of its obligations under, or the validity
or enforceability of, this Agreement or the Certificates; or (4)
relating to the Company and that might materially and adversely affect
the federal income tax attributes of the Certificates.
Section 7.02. Corporate Existence. During the term of this
-------------------
Agreement, the Company will keep in full force and effect its existence, rights
and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary or
appropriate to the proper administration of this Agreement and the transactions
contemplated hereby.
Section 7.03. Liabilities of the Company. The Company shall be
--------------------------
liable in accordance herewith only to the extent of the obligations specifically
undertaken and the representations and warranties made by the Company under this
Agreement.
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Section 7.04. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Company. Any Person (a) into which the Company may be
- ---------------------------
merged or consolidated, (b) which may result from any merger or consolidation to
which the Company shall be a party or (c) which may succeed to substantially all
of the properties and assets of the Company, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Company under this Agreement, shall be the successor to the Company
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 2.03 shall have been breached and no Event of Default, and
no event which, after notice or lapse of time, or both, would become an Event of
Default shall have happened and be continuing, (ii) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consideration, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Rating Agency Requirement shall have been satisfied with respect
to such transaction and (iv) the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, in the Opinion of such Counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Trustee in the Receivables and reciting the details of such
filings or (B) no such action is necessary to preserve and protect such
interest. Notwithstanding anything herein to the contrary, the execution of the
foregoing agreement of assumption and compliance with clauses (i), (ii), (iii)
and (iv) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b) or (c) above.
Section 7.05. Limitation on Liability of the Company and Others. The
-------------------------------------------------
Company and any director, officer, employee or agent of the Company may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Company shall be under no obligation to appear in, prosecute or
defend any legal action that shall not be related to its obligations under this
Agreement and that in its opinion may involve it in any expense or liability.
Section 7.06. The Company May Own Certificates. The Company and any
--------------------------------
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates with the same rights as it would have if it were not
the Company or an Affiliate thereof, except as otherwise provided herein.
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ARTICLE VIII
The Servicer
------------
Section 8.01. Representations of Servicer. The Servicer makes the
---------------------------
following representations on which the Trustee is deemed to have relied in
accepting the Receivables in trust and executing and authenticating the
Certificates. The representations speak as of the execution and delivery of
this Agreement and as of the Closing Date and shall survive the sale of the
Receivables to the Trustee.
(a) Organization and Good Standing. The Servicer is duly organized and
------------------------------
validly existing as a banking corporation in good standing under the laws of the
state of its incorporation, with power and authority to own its properties and
to conduct its business as such properties are currently owned and such business
is presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire, own, sell and service the
Receivables and to hold the Receivable Files as custodian on behalf of the
Trustee.
(b) Due Qualification. The Servicer is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the power and authority to
-------------------
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement have been duly authorized
by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Servicer enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar laws
nor or hereafter in effect relating to or affecting creditors' rights generally
and to general principles of equity (whether applied in a proceeding at law or
in equity).
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the fulfillment of the terms hereof does not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of
-52-
<PAGE>
the Servicer, or any material term of any indenture, agreement or other
instrument to which the Servicer is a party or by which it is bound; or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement); or violate any law or, to the best of the
Servicer's knowledge, any order, rule or regulation applicable to the
Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or,--------------to the Servicer's best knowledge, threatened, before
any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its
properties: (1) asserting the invalidity of this Agreement or the
Certificates; (2) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement; (3) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity of enforceability of, this Agreement
or the Certificates; or (4) relating to the Servicer and which might
materially and adversely affect the federal income tax attributes of
the Certificates.
Section 8.02. Indemnities of Servicer. The Servicer shall be liable
-----------------------
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
The Servicer shall defend, indemnify and hold harmless the Trustee,
the Trust and the Certificateholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from the use, ownership or operation by the Servicer or any Affiliate thereof of
a Financed Vehicle.
The Servicer shall indemnify, defend and hold harmless the Trustee,
the Trust and the Certificateholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities to the extent that such cost,
expense, loss, claim, damage, or liability arose out of, or was imposed upon any
such Person through, the negligence, willful misfeasance or bad faith of the
Servicer in the performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement.
For purposes of this Section, in the event of the termination of the
rights and obligations of _________ (or any successor thereto pursuant to
Section 8.03) as Servicer pursuant
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to Section 9.01, or a resignation by such Servicer pursuant to this Agreement,
such Servicer shall be deemed to be the Servicer pending appointment of a
successor Servicer (other than the Trustee) pursuant to Section 9.02.
Indemnification under this Section shall survive the resignation or
removal of the Trustee or the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, such Person shall
promptly repay such amounts to the Servicer, without interest.
Section 8.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
- ------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party, or (c) which may succeed to substantially all of
the properties and assets of the Servicer, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this Agreement
without further act on the part of any of the parties to this Agreement;
provided, however, that (i) immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse of time, or both,
would become an Event of Default shall have happened and be continuing, (ii) the
Servicer shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent provided for in this Agreement relating to such transaction
have been complied with, (iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction and (iv) the Servicer shall have
delivered to the Trustee an Opinion of Counsel stating that, in the Opinion of
such Counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Trustee in the Receivables and reciting
the details of such filings or (B) no such action is necessary to preserve and
protect such interest. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions to the consummation of the
transactions referred to in clauses (a), (b) or (c) above.
Section 8.04. Limitation on Liability of Servicer and Others.
----------------------------------------------
Neither the Servicer nor any of its directors, officers, employees or agents
shall be under any liability to the Trustee, the Trust or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the
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taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement.
The Servicer and any director, officer, employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be related to its duties as Servicer hereunder and that in its opinion may
involve it in any expense or liability; provided, however, that the Servicer may
undertake any reasonable action that it deems necessary or desirable with
respect to this Agreement and the rights and duties of the parties to this
Agreement and the interests of the Certificateholders under this Agreement.
ARTICLE IX
Default
-------
Section 9.01. Events of Default. The occurrence and continuation of
-----------------
any of the following events shall constitute an "Event of Default" for purposes
of this Agreement:
(a) Any failure by the Servicer to deliver to the Trustee any proceeds
or payment required to be so delivered under the terms of the Certificates
and this Agreement that shall continue unremedied for a period of three
Business Days after discovery of such failure by an officer of the Servicer
or after written notice of such failure is received by the Servicer from the
Trustee or Holders of Certificates evidencing not less than 25% of the
Certificate Balance; or
(b) Failure by the Servicer or the Company, as the case may be, duly
to observe or to perform in any material respect any other covenants or
agreements of the Servicer or the Company (as the case may be) set forth in
the Certificates or in this Agreement, which failure shall (1) materially
and adversely affect the rights of Certificateholders and (2) continue
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given (A)
to the Servicer or the Company (as the case may be) by the Trustee or (B) to
the Servicer or the Company (as the case may be) and to the Trustee by the
Holders of
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Certificates evidencing not less than 25% of the Certificate Balance; or
(c) The entry of a decree or order by court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver or liquidator for the Servicer in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(d) The consent by the Servicer to the appointment of a conservator,
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 substantially all of its property; or the
admission by the Servicer in writing of its inability to pay its debts
generally as they become due, the filing by the Servicer of a petition to
take advantage of any applicable insolvency or reorganization statute, the
making by the servicer of an assignment for the benefit of its creditors, or
the voluntary suspension by the Servicer of payment of its obligations;
If an Event of Default shall have occurred and for as long as such Event of
Default continues unremedied, either the Trustee or the Holders of Certificates
evidencing not less than a majority of the Certificate Balance, by notice given
in writing to the Servicer (and to the Trustee if given by Certificateholders)
may terminate all of the rights and obligations (other than the obligations set
forth in Section 8.02) of the Servicer under this Agreement. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Certificates or the
Receivables or otherwise, shall, without further action, pass to and be vested
in the Trustee or such successor Servicer as may be appointed under Section
9.02; and, without limitation, the Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer and the Trustee
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received with respect to any Receivable. All
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reasonable costs and expenses (including attorneys' fees) incurred in connection
with transferring the Receivable Files to the successor Servicer and amending
this Agreement to reflect the succession of such successor Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of an Event of Default, the Trustee shall give notice thereof to
the Rating Agencies.
Section 9.02. Appointment of Successor. (a) Upon the Servicer's
------------------------
receipt of notice of termination pursuant to Section 9.01 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termination,
until receipt of such notice and, in the case of resignation, until the earlier
of (1) the date that is 45 days after the date of delivery to the Trustee of
written notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (2) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in the
notice of resignation and accompanying Opinion of Counsel. In the event of the
Servicer's termination hereunder, the Trustee shall appoint a successor
Servicer, and the successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Trustee. In the event that a successor
Servicer has not been appointed at the time when the predecessor Servicer has
ceased to act as Servicer in accordance with this Section, the Trustee, without
any further action, shall automatically be appointed the successor Servicer and
shall be entitled to the Servicing Fee. Notwithstanding the above, the Trustee
shall, if it is legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established institution having a net
worth of not less than $100,000,000 and whose regular business includes the
servicing of automotive receivables as the successor to the Servicer under this
Agreement.
(b) Upon appointment, the successor Servicer (including the Trustee
acting as successor Servicer) shall be the successor in all respects to the
predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all of
the rights granted to the predecessor Servicer by the terms and provisions
of this Agreement.
Section 9.03. Repayment of Advances. The Servicer, if it resigns or
---------------------
is removed pursuant to the terms of this Agreement, shall be entitled to receive
reimbursement for Outstanding
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Precomputed Advances and Outstanding Simple Interest Advances made by it
pursuant to Sections 5.03 and 5.04.
Section 9.04. Notification of Certificateholders. Upon any
----------------------------------
termination of, or appointment of a successor to, the Servicer pursuant to this
Article IX, the Trustee shall give prompt written notice thereof to the
Certificateholders and to the Rating Agencies.
Section 9.05. Waiver of Past Defaults. The Holders of Certificates
-----------------------
evidencing not less than a majority of the Certificate Balance may, on behalf of
all Certificateholders, waive any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required deposits to or payments from the trust accounts 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 X
The Trustee
-----------
Section 10.01. Duties of Trustee. (a) The Trustee, both prior to
-----------------
and after the occurrence of an Event of Default, shall undertake to perform such
duties as are specifically set forth herein. If an Event of Default has
occurred and is continuing, the Trustee shall exercise 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; provided, however, that if the
Trustee shall assume the duties of the Servicer pursuant to Section 9.02, the
Trustee in performing such duties shall use the degree of skill and attention
customarily exercised by a servicer with respect to automobile receivables that
it services for itself or others.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement; provided,
however, that the Trustee shall examine such certificates and opinions to
determine whether or not they conform to the requirements of this Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as an exhibit to this Agreement and shall retain all
Servicer's Certificates
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identifying Receivables that become Purchased Receivables or Liquidated
Receivables.
(d) The Trustee shall not be liable for any action taken, suffered or
omitted to be taken in good faith in accordance with this Agreement or at the
direction of the Holders of Certificates evidencing not less than 25% of the
Certificate Balance 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.
(e) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent actions, its own negligent failure
to act or its own bad faith or willful misconduct; provided, however, that:
(1) this paragraph does not limit the effect of clause (d) of this
Section; and
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trustee Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(f) No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Except for actions expressly authorized by this Agreement, the Trustee
shall take no action reasonably likely to impair the security interests created
or existing under any Receivable or to impair the value of any Receivable.
Section 10.02. Certain Matters Affecting Trustee. Except as otherwise
---------------------------------
provided in Section 10.01:
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in any such document.
(b) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters or relating to this Agreement or the
Certificates shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or
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omitted by it under this Agreement in good faith and in accordance with such
advice or opinion of such counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement 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 that may be incurred therein or thereby; however, nothing
contained in this Agreement shall relieve the Trustee of its obligation,
upon the occurrence of an Event of Default (that shall not have been cured
or waived), 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 that person's own affairs.
(d) The Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Agreement; provided, that such
conduct does not constitute willful misconduct, bad faith or negligence on
the part of the Trustee.
(e) The Trustee may execute any of the trusts or powers or perform any
duties hereunder either directly or by or through agents or attorneys or a
custodian.
Section 10.03. Trustee Not Liable for Certificates or Receivables.
--------------------------------------------------
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Company or the Servicer, as the case may be, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates),
or of any Receivable or related document. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any security
interest created by any Receivable in any Financed Vehicle or the maintenance of
any such perfection and priority, or for or with respect to the efficacy of the
Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Financed Vehicle; the existence and
enforceability of any insurance thereon; the existence and contents of any
Receivable or any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or of any intervening
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assignment; the completeness of any Receivable; the performance or enforcement
of any Receivable; the compliance by the Company or the Servicer with any
warranty or representation made under this Agreement or in any related document
or the accuracy of any such warranty or representation before receipt of notice
or other discovery of any breach thereof; or any action of the Servicer taken in
the name of the Trustee.
Section 10.04. Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Certificates
and may deal with the Company and the Servicer in banking transactions with the
same rights that it would have if it were not Trustee.
Section 10.05. Trustee's Fees and Expenses. The Company shall pay to
---------------------------
the Trustee, and the Trustee shall be entitled to receive as compensation for
its services hereunder, such fees as have been separately agreed upon before the
date hereof between the Company and the Trustee, and the Trustee shall be
entitled to reimbursement by the Company for its reasonable expenses under this
Agreement, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Trustee may employ in
connection with the exercise and performance of its rights and duties under this
Agreement, except any such expenses and fees that may arise from the Trustee's
negligence, willful misfeasance or bad faith or that is the responsibility of
Certificateholders under this Agreement.
Section 10.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
shall at all times be a corporation having an office in the same state as the
location of the Corporate Trust Office; organized and doing business under the
laws of such state or the United States of America; authorized under such laws
to exercise corporate trust powers; having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) a rating of at least Baa3
by Moody's. If such corporation shall publish reports of condition at least
annually pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If 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 10.07.
Section 10.07. Resignation or Removal of Trustee. The Trustee may
---------------------------------
resign at any time and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer. Upon receiving such notice of
resignation, the Servicer shall promptly appoint a successor Trustee by written
instrument, in
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duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.06 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall be legally
unable to act, 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 Servicer may remove the
Trustee. If the Servicer shall remove the Trustee under the authority of the
immediately preceding sentence, the Servicer shall promptly appoint a successor
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Trustee so removed and one copy to the successor
Trustee, and shall pay all fees owed to the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to Section 10.08. The Servicer shall provide notice of any resignation
or removal of the Trustee to each of the Rating Agencies.
Section 10.08. Successor Trustee. Any successor Trustee appointed
-----------------
pursuant to Section 10.07 shall execute, acknowledge and deliver to the Servicer
and to its predecessor Trustee an instrument accepting its appointment as
successor Trustee under this Agreement, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor under this
Agreement, with like effect as if originally named as Trustee. The predecessor
Trustee shall deliver to the successor Trustee all documents and statements and
monies held by it under this Agreement; and the Servicer and the predecessor
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance
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such successor Trustee shall be eligible pursuant to Section 10.06.
Upon acceptance of appointment by a successor Trustee pursuant to this
Section, the Servicer shall mail notice thereof to all Certificateholders and to
the Rating Agencies. If the Servicer shall fail 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 Servicer.
Section 10.09. Merger or Consolidation of Trustee. Any corporation
----------------------------------
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided, that such
corporation is eligible to serve as Trustee pursuant to Section 10.06, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding. The
Trustee shall mail notice of any such merger or consolidation to the Rating
Agencies.
Section 10.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Financed Vehicle may at the time be located, the Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person, in such
capacity and for the benefit of the Certificateholders, such title to the Trust
or any part thereof and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
any such appointment within 15 days after the receipt by it of a request to do
so, the Trustee alone shall have the power to make such appointment. No co-
trustee or separate trustee under this Agreement shall be required to meet the
terms of eligibility as a successor Trustee pursuant to Section 10.06 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.08.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
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(a) All rights, powers, duties and obligations conferred or imposed
upon any such separate trustee or co-trustee shall be conferred 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, 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 or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Servicer and the Trustee acting jointly may at any time accept
the resignation of or remove any separate trustee or co-trustee;
(d) The execution, delivery and performance by the Trustee of this
Agreement (i) shall not violate any provision of any law governing the
banking and trust powers of the Trustee or, to the best of the Trustee's
knowledge, any order, writ, judgment or decree of any court, arbitrator or
governmental authority applicable to the Trustee or any of its assets, (ii)
shall not violate any provision of the corporate charter or bylaws of the
Trustee and (iii) shall not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation
or imposition of any Lien on any properties included in the Trust pursuant to
the provisions of, any mortgage, indenture, contract, agreement or other
undertaking to which it is a party, which violation, default or Lien could
reasonably be expected to materially and adversely affect the Trustee's
performance or ability to perform its duties under this Agreement or the
transactions contemplated in this Agreement.
(e) The execution, delivery and performance by the Trustee of this
Agreement shall not require the authorization, consent, approval of, the
giving of notice to, the filing or registration with, or the taking of any
other action in respect of, any governmental authority or agency regulating
the banking and corporate trust activities of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate
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trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article. Each separate trustee and co-
trustee, upon its acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment, either jointly
with the 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. Each such instrument shall be filed with the
Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint 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 co-trustee or separate trustee.
Section 10.11. Representations and Warranties of Trustee. The Trustee
-----------------------------------------
shall make the following representations and warranties, on which the Company
and Certificateholders shall be deemed to rely:
(a) The Trustee is a banking corporation duly organized, validly existing
and in good standing under the laws of its place of incorporation.
(b) The Trustee has full corporate power, authority and legal right to
execute and deliver, and to perform its obligations under, this Agreement, and
shall have taken all necessary action to authorize the execution and delivery
of, and the performance of its obligations under, this Agreement.
(c) This Agreement has been duly executed and delivered by the Trustee and
shall constitute the legal, valid and binding obligation of the Trustee, subject
to applicable bankruptcy, insolvency, reorganization and similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and to
general principles of equity (whether applied in a proceeding at law or in
equity).
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ARTICLE XI
Termination
-----------
Section 11.01. Termination of the Trust. (a) The respective
------------------------
obligations and responsibilities of the Company, the Servicer and the Trustee
hereunder and the Trust created hereby shall terminate upon the earlier to occur
of (1) the payment to Certificateholders of all amounts required to be paid to
them pursuant to this Agreement and the disposition of all property held as part
of the Trust and (2) the time provided in Section 11.02; provided, however, that
in no event shall the trust created by this Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James, living on the date of this Agreement. The Servicer shall promptly notify
the Trustee of any prospective termination pursuant to this Section.
(b) Except as provided in Section 11.01(a), neither the Company nor
any Certificate Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which Certificateholders shall surrender their
Certificates to the Trustee for payment of the final distribution and
cancellation of the Certificates, shall be given by the Trustee by letter to
Certificateholders mailed not earlier than the 15th day and not later than the
25th day of the calendar month immediately preceding the calendar month in which
such final Distribution Date shall occur, stating (1) the Distribution Date upon
which final payment of the Certificates will be made upon presentation and
surrender of the Certificates at the office of the Trustee therein designated,
(2) the amount of such final payment and (3) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.05.
In the event that all of the Certificateholders shall not have
surrendered their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders requesting that such
Certificateholders surrender their Certificates for cancellation and receive the
final distribution with respect thereto. If within one year after such second
notice all of the Certificates shall not have been surrendered for cancellation,
the Trustee may
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take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Trustee to
the Company.
Section 11.02. Optional Purchase of All Receivables. On the last day
------------------------------------
of any Collection Period as of which the Pool Balance shall be less than or
equal to 10% of the Cutoff Date Pool Balance, the Servicer shall have the option
to purchase the corpus of the Trust; provided, however, that the Servicer may
not effect any such purchase if at such time the rating of the Servicer's long-
term debt obligations is less than Baa3 by Moody's, unless the Trustee shall
have received an Opinion of Counsel to the effect that such purchase would not
constitute a fraudulent conveyance. To exercise such option, the Servicer shall
deposit an amount into the Collection Account pursuant to Section 5.04 equal to
the aggregate Purchase Amount for the Receivables (including defaulted
Receivables), plus the appraised value of any other property held by the Trust,
such value to be determined by an appraiser mutually agreed upon by the Servicer
and the Trustee. The Servicer thereafter shall succeed to all interests in and
to the Trust.
ARTICLE XII
Miscellaneous Provisions
------------------------
Section 12.01. Amendment. This Agreement may be amended by the
---------
Company, the Servicer and the Trustee, without the consent of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to, or
changing in any manner or eliminating any provision in, this Agreement or of
modifying in any manner the rights of the Certificateholders; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel delivered to
the Trustee, adversely affect in any material respect the interests of any
Certificateholder.
This Agreement may also be amended from time to time by the Company,
the Servicer and the Trustee with the consent of the Holders of Certificates
evidencing not less than a majority of the Certificate Balance, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (a) except
as otherwise provided in the first paragraph of this Section, increase or reduce
in any manner the amount of, or accelerate or delay the timing of, collections
of payments on the
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<PAGE>
Receivables or distributions that are required to be made on any Certificate or
(b) reduce the aforesaid percentage of the Certificate Balance required to
consent to any such amendment without the consent of the Holders of all
Certificates then outstanding.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of Certificateholders provided for in this Agreement) and of evidencing
the authorization of any action by Certificateholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement and
the Opinion of Counsel referred to in Section 12.02(i). The Trustee may, but
shall not be obligated to, enter into any such amendment that affects the
Trustee's own rights, duties or immunities under this Agreement or otherwise.
Section 12.02. Protection of Title to Trust. (a) The Company and the
----------------------------
Servicer shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interest of the Certificateholders and the Trustee in the Receivables and in the
proceeds thereof. The Company and the Servicer shall deliver (or cause to be
delivered) to the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Company nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of (S) 9-402(7) of
the UCC, unless the Company or the Servicer shall have given the Trustee at
least five days' prior written notice of such change and shall have promptly
filed appropriate amendments to all previously filed financing statements or
continuation statements.
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<PAGE>
(c) The Company and the Servicer shall have an obligation to give the
Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement, and shall promptly file any such amendment or new financing
statement. The Servicer shall at all times maintain its principal executive
office and each office from which it shall service Receivables within the United
States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (1) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (2)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Distribution
Account and Payahead Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any back-up archives) that refer to a
Receivable shall indicate clearly the interest of the Trust in such Receivable
and that such Receivable is owned by the Trustee. Indication of the Trustee's
ownership of a Receivable shall be deleted from or modified on the Servicer's
computer systems when, and only when, such Receivable shall have been paid in
full or repurchased.
(f) If at any time a Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to, any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trustee.
(g) The Servicer shall permit the Trustee and its agents to inspect,
audit and make copies of and abstracts from the Servicer's records regarding any
Receivable at any time during normal business hours upon reasonable notice.
(h) Upon request, the Servicer shall furnish to the Trustee, within
five Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the Trust.
-69-
<PAGE>
(i) The Servicer shall deliver to the Trustee, promptly after the
execution and delivery of this Agreement and, if required pursuant to Section
12.01, of each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such Counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trustee in the Receivables, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such details
are given, or (B) no such action is necessary to preserve and protect such
interest.
(j) The Company shall, to the extent required by applicable law, cause
the Certificates to be registered with the Securities and Exchange Commission
pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of
1934 within the time periods specified in such sections.
Section 12.03. Separate Counterparts. This Agreement may be executed
---------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 12.04. Limitation on Rights of Certificateholders. (a) The
------------------------------------------
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in Section 9.05 or 12.01) or in any manner otherwise control the
operation and management of the Trust or the obligations of the parties to this
Agreement; nor shall any provision in this Agreement or contained in 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 pursuant to any provision of this Agreement.
(c) 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, unless: (1) such Holder previously shall have given to the Trustee
written notice of a continuing Event of Default; (2) the Holders of Certificates
evidencing not less than 25% of the Certificate Balance shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee under this Agreement and shall have offered the Trustee such
reasonable
-70-
<PAGE>
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby; (3) 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; (4) during such 60-day period no
request or waiver inconsistent with such written request shall have been given
to the Trustee by Holders representing a majority of the Certificate Balance.
It is understood and intended that no one or more Certificateholders shall have
any right in any manner whatever by virtue of, or by availing of, any provisions
of this Agreement to affect, disturb or prejudice the rights of any other
Certificateholders, 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 provided in this Agreement.
SECTION 12.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.06. Notices. All demands, notices and communications upon
-------
or to the Company, the Servicer, the Trustee or the Rating Agencies under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Company, to
__________________________________________, Attention: ____________; (b) in the
case of the Servicer, to ________________________, Attention: ____________; (c)
in the case of the Trustee, at the Corporate Trust Office; (d) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007, and (e) in the case of Standard &
Poor's, to Standard & Poor's Ratings Group, 25 Broadway - 15th Floor, New York,
New York 10004, Attention: Asset Backed Surveillance Department. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder shall receive such notice.
Section 12.07. Severability of Provisions. Any provision of this
--------------------------
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
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<PAGE>
Section 12.08. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Sections 7.04 and 8.03 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Company or the Servicer without the
prior written consent of the Trustee and the Holders of Certificates evidencing
not less than 66% of the Certificate Balance.
Section 12.09. Certificates Nonassessable and Fully Paid.
-----------------------------------------
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever.
Section 12.10. Limitations on Rights of Others. The provisions of
-------------------------------
this Agreement are solely for the benefit of the Company, the Servicer, the
Trustee and the Certificateholders, and nothing in this Agreement, whether
express or implied, shall be construed to give any other Person any legal or
equitable right, remedy or claim in respect of the Trust or under or in respect
of this Agreement or any covenants, conditions or provisions contained herein.
Section 12.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
-72-
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Pooling and Servicing Agreement to be duly executed by their
respective officers as of the day and year first above written.
ASSET BACKED SECURITIES CORPORATION,
as Company
By: ____________________________________
Name:
Title:
-----------------------------------------,
as Servicer
By: ____________________________________
Name:
Title:
-----------------------------------------,
as Trustee
By: ____________________________________
Name:
Title:
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<PAGE>
SCHEDULE I
Schedule of Receivables
-----------------------
[to be delivered on the Closing Date]
I-1
<PAGE>
SCHEDULE II
Location of Receivables Files
-----------------------------
[To be provided at the Closing Date]
II-1
<PAGE>
EXHIBIT A
Form Of Class A Certificate
---------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS A CERTIFICATE
WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS CLASS A CERTIFICATE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
NUMBER $
R- CUSIP NO.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-_
___% ASSET BACKED CERTIFICATE, CLASS A
evidencing a fractional undivided interest in the Trust (as defined below), the
property of which includes a pool of motor vehicle installment loan contracts
and motor vehicle retail installment sale contracts (collectively, the "Motor
Vehicle Installment Contracts") secured by new and used automobiles, vans and
light duty trucks.
(This Class A Certificate does not represent an interest in, or obligation of,
Asset Backed Securities Corporation or any of its affiliates, except to the
extent described below).
THIS CERTIFIES THAT ________________________ is the registered owner
of ____________ DOLLARS nonassessable, fully-paid, fractional undivided interest
in CS First Boston Auto Receivables Trust 199_-_ (the "Trust") formed pursuant
to the Pooling and Servicing Agreement dated as of ____________, (the
"Agreement"), among Asset Backed Securities Corporation (the "Company"),
___________, as servicer (in such capacity, the "Servicer") and ____________, a
____________ banking association, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not
A-1
<PAGE>
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Agreement.
This certificate is one of a duly authorized series of Certificates,
designated as the __% Asset Backed Certificates, Class A (herein called the
"Class A Certificates"), all issued under the Agreement, to which Agreement
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Company, the Servicer, the Trustee and Holders of
the Certificates. The Class A Certificates are subject to all the terms of the
Agreement.
The property of the Trust includes a pool of Motor Vehicle Installment
Contracts secured by new and used automobiles, vans and light duty trucks
(collectively, the "Receivables"), all monies due under such Receivables on or
after the related Cutoff Date, in the case of Precomputed Receivables, or
received on or after the related Cutoff Date, in the case of Simple Interest
Receivables, security interests in the vehicles financed thereby, certain bank
accounts and the proceeds thereof, proceeds from claims on certain insurance
policies and all proceeds of the foregoing.
Under the Agreement, there will be distributed on the ___ day of each
month or, if such ___ day is not a Business Day, the next succeeding Business
Day (each, a "Distribution Date"), commencing on ________, to the Person in
whose name this Class A Certificate is registered at the close of business on
the ______ day of the month in which such Distribution Date occurs (the "Record
Date"), such Certificateholder's fractional undivided interest in the amount to
be distributed to Class A Certificateholders on such Distribution Date.
It is the intent of the Company, the Trustee and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust to be treated as a
grantor trust and the Certificates be treated as interests in a grantor trust.
The Company, the Servicer, the Trustee and each Certificateholder or Certificate
Owner, by its acceptance of a Certificate or of a beneficial interest in a
Certificate, respectively, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as interests in a
grantor trust.
Distributions on this Class A Certificate will be made as provided in
the Agreement by the Trustee by wire transfer or check mailed to the Person
identified as the Holder of record thereof in the Certificate Register, without
the presentation or surrender of this Class A Certificate or the making of any
notation hereon, except that with respect to Class A Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.),
A-2
<PAGE>
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Except as otherwise provided in the
Agreement and notwithstanding the above, the final distribution on this Class A
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the Trustee
in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Class A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Class A Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class A Certificate to be duly executed.
Date: CS FIRST BOSTON AUTO RECEIVABLES
TRUST 199_-_
By:______________________, not in its
individual capacity but solely
as Trustee
By:
---------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
Date:
------------------------------
as Trustee
By:
------------------------------
Authorized Signatory
A-4
<PAGE>
[REVERSE OF CLASS A CERTIFICATE]
The Class A Certificates do not represent an obligation of, or an
interest in, the Company, the Servicer, the Trustee or any of their respective
affiliates, and no recourse may be had against such parties or their assets
except as expressly set forth or contemplated herein or in the Agreement. In
addition, this Class A Certificate is not guaranteed by any governmental agency
or instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Receivables (and certain other amounts), all as
more specifically set forth herein and in the Agreement. A copy of the
Agreement may be examined by any Certificateholder upon written request during
normal business hours at the principal office of the Company and at such other
places, if any, designated by the Company.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company, the Servicer and the Trustee and the rights of the Certificateholders
at any time by the Company, the Servicer and the Trustee with the consent of the
Holders of Certificates evidencing not less than a majority of the Certificate
Balance. Any such consent by the Holder of this Class A Certificate shall be
conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Class A Certificate issued upon the transfer hereof or in
exchange here for in lieu hereof, whether or not notation of such consent is
made upon this Class A Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Class A Certificate is registerable in
the Certificate Register upon surrender of this Class A Certificate for
registration of transfer at the offices or agencies of the Certificate Registrar
maintained by the Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Class A Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Agreement is ________________________.
Except as provided in the Agreement, the Class A Certificates are
issuable only as registered certificates without coupons in a minimum
denomination of $1,000 and integral
A-5
<PAGE>
multiples of $1 in excess thereof. As provided in the Agreement and subject to
certain limitations therein set forth, the Class A Certificates are exchangeable
for new Class A Certificates of authorized denominations evidencing the same
aggregate denomination, as requested by the Holder surrendering the same. No
service charge will be made for any such registration of transfer or exchange,
but the Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Certificate Registrar and any agent of the Trustee or
the Certificate Registrar may treat the Person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and none of the
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held by the Trust. The Servicer of the Receivables
may at its option purchase the Trust property at a price specified in the
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Certificates; provided, however, that such
-------- -------
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 10% of the Cutoff
Date Pool Balance.
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address,
including postal zip code, of assignee)
the within Class A Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing ________________________ to transfer said Class A
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
____________________________*/
Signature Guaranteed:
____________________________*/
- -------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
- -
appears upon the face of the within Class A Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-7
<PAGE>
EXHIBIT B
Form of Class B Certificate
---------------------------
THIS CLASS B CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. THE TRANSFER OF THIS CLASS B
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN THE
AGREEMENT UNDER WHICH THIS CLASS B CERTIFICATE IS ISSUED (A COPY OF WHICH IS
AVAILABLE FROM THE TRUSTEE UPON REQUEST), INCLUDING RECEIPT BY THE TRUSTEE OF AN
INVESTMENT LETTER IN WHICH THE TRANSFEREE SHALL MAKE CERTAIN REPRESENTATIONS.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT IS AN
EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR
ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN") OR ANY PERSON
INVESTING THE ASSETS OF A PLAN, EXCEPT AS PROVIDED IN THE AGREEMENT REFERRED TO
HEREIN.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS B CERTIFICATE
WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS CLASS B CERTIFICATE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
NUMBER $
R- CUSIP NO.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-__
____% ASSET BACKED CERTIFICATE, CLASS B
evidencing a fractional undivided interest in the Trust (as defined below), the
property of which includes a pool of motor vehicle installment loan agreements
and motor vehicle retail installment sale contracts (collectively, the "Motor
Vehicle Installment Contracts") secured by new and used automobiles, vans and
light duty trucks.
(This Class B Certificate does not represent an interest in, or obligation of,
Asset Backed Securities Corporation or any of its affiliates, except to the
extent described below.)
THIS CERTIFIES THAT ______________________________ is the registered
owner of ___________________ DOLLARS nonassessable, fully-paid fractional
undivided interest in CS
B-1
<PAGE>
First Boston Auto Receivables Trust 199_-(the "Trust") form pursuant to a
Pooling and Servicing Agreement dated as of _________ (the "Agreement"), among
Asset Backed Securities Corporation (the "Company"), _______, as servicer (in
such capacity, the "Servicer") and _______, a _______ banking association, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
This Certificate is one of a dully authorized series of Certificates,
designated as the ___% Asset Backed Certificates, Class B herein called the
"Class B Certificates"), all issued under the Agreement, to which Agreement
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Company, the Servicer, the Trustee and Holders of
the Certificates. The Class B Certificates are subject to all the terms of the
Agreement.
The property of the Trust includes a pool of Motor Vehicle Installment
Contracts secured by new and used automobiles, vans and light duty trucks
(collectively, the "Receivables"), all monies due under such Receivables on or
after _____, in the case of Precomputed Receivables, or received on or after
______, in the case of Simple Interest Receivables, security interests in the
vehicles financed thereby, certain bank accounts and the proceeds thereof,
proceeds from claims on certain insurance policies and all proceeds of the
foregoing.
Under the Agreement, there will be distributed on the ______ day of
each month or, if such ______ day is not a Business Day, the next succeeding
Business Day (each, a "Distribution Date"), commencing on _____________, to the
Person in whose name this Class B Certificate is registered at the close of
business on the ____ day of the month in which such Distribution Date occurs
(the "Record Date"), such Certificateholder's fractional undivided interest in
the amount to be distributed to Class B Certificateholders on such Distribution
Date.
The Holder of this Class B Certificate acknowledges and agrees that
its right to receive distributions in respect of this Certificate are
subordinated to the rights of Holders of the Class A Certificates, to the extent
and in the manner set forth in the Agreement.
It is the intent of the Company, the Servicer, the Trustee and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust be treated as a
grantor trust and the Certificates be treated as interests in a grantor trust.
The Company, the Servicer, the Trustee and each Certificateholder or Certificate
Owner, by its acceptance of a Certificate or of a beneficial interest in a
Certificate, agree to treat, and to take
B-2
<PAGE>
no action inconsistent with the treatment of, the Certificates for such tax
purposes as interests in a grantor trust.
Distributions on this Class B Certificate will be made as provided in
the Agreement by the Trustee by wire transfer or check mailed to the Person
identified as the Holder of Record hereof in the Certificate Register, without
the presentation or surrender of this Class B Certificate or the making of any
notation hereon, except that with respect to Class B Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Agreement and notwithstanding the above, the final
distribution on this Class B Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Class B Certificate at the office or agency maintained for
that purpose by the Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Class B
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Class B Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-3
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class B Certificate to be duly executed.
CS FIRST BOSTON AUTO RECEIVABLES
TRUST 199_-__
By:
_________________________________
not in its individual capacity
but solely as Trustee
Date: By:
______________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to in the within-
mentioned Trust Agreement.
Date: By:
______________________________
Authorized Signatory
B-4
<PAGE>
[REVERSE OF CLASS B CERTIFICATE]
The Class B Certificates do not represent an obligation of, or an
interest in, the Company, the Servicer, the Trustee or any of their respective
affiliates, and no recourse may be had against such parties or their assets
except as expressly set forth or contemplated herein or in the Agreement. In
addition, this Class B Certificate is not guaranteed by any governmental agency
or instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Receivables (and certain other amounts), all as
more specifically set forth herein and in the Agreement. A copy of the
Agreement may be examined by any Certificateholder upon written request during
normal business hours at the principal office of the Company and at such other
places, if any, designated by the Company.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company, the Servicer and the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Company, the Servicer and the Trustee
with the consent of the Holders of Certificates evidencing not less than a
majority of the Certificate Balance. Any such consent by the Holder of this
Class B Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Class B Certificate and of any Class B Certificate issued
upon the transfer hereof or in exchange here for or in lieu hereof, whether or
not notation of such consent is made upon this Class B Certificate. The
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Certificates.
No transfer of this Class B Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with the
Securities Act and such state securities laws. In the event that the Holder
hereof desires to make such a transfer, the Holder and such Holder's transferee
will be required to comply with certain procedures set forth in the Agreement,
including the delivery of certain certificates and investment letters. The
Holder or Owner hereof, by acceptance of this Certificate or of a beneficial
interest in this Certificate, does hereby agree to indemnify the Trustee, the
Company, the Servicer and the Certificate Registrar against any liability that
may result if any such transfer is not so exempt or is not made in accordance
with federal and state laws. In connection with any such transfer, the Trustee
will also require (i) a representation letter, in the form described in the
Agreement, stating that transferee is not a Plan and is not acting on behalf of
a Plan or using the assets of a Plan to effect such purchase
B-5
<PAGE>
or (ii) if such transferee is a Plan, an opinion of counsel acceptable to and in
form and substance satisfactory to the Trustee with respect to certain matters
described in the Agreement.
Except as provided in the Agreement, the Class B Certificates are
issuable only as registered certificates without coupons in a minimum
denomination of $1,000 and integral multiples of $1 in excess thereof. As
provided in the Agreement and subject to certain limitations therein set forth,
Class B Certificates are exchangeable for new Class B Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration to transfer or exchange, but the Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Trustee, the Certificate Registrar and any agent of the Trustee or
the Certificate Registrar may treat the Person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and none of the
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held by the Trust. The Servicer of the Receivables
may at its option purchase the Trust property at a price specified in the
Agreement, and such purchase of the Receivables may at its option purchase the
Trust property at a price specified in the Agreement, and such purchase of the
Receivables and other property of the Trust will effect early retirement of the
Class B Certificates; provided, however, that such right of purchase is
exercisable only as of the last day of any Collection Period as of which the
Pool Balance is less than or equal to 10% of the Cutoff Date Pool Balance.
B-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
(Please print or type name and address, including
postal zip code, of assignee)
the within Class B Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing _____________________________________________ to
transfer said Class B Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
-------------------------------
*/
Signature
Guaranteed:
--------------------------------
*/
- ------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Class B Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-7
<PAGE>
EXHIBIT C
Form of Depository Agreement
LETTER OF REPRESENTATIONS
(To be Completed by Issuer and Trustee)
----------------------
(Name of Issuer)
----------------------
(Name of Trustee)
----------------
(Date)
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street: 49th Floor
New York, NY 10041-0099
RE: ___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the above-referenced issue (the "Securities"). Trustee will
act as trustee with respect to the Securities pursuant to a trust indenture
dated ________, 199_ (the "Document"). ______________ (the "Underwriter") is
distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
1. Prior to closing on the Securities on _____________, 199_, there
shall be deposited with DTC one Security certificate registered in the name of
DTC's nominee,
C-1
<PAGE>
Cede & Co., for each stated maturity of the Securities in the face amounts set
forth on Schedule I hereto, the total of which represents 100% of the principal
amount of such Securities. If, however, the aggregate principal amount of any
maturity exceeds $150 million, one certificate will be issued with respect to
each $150 million of principal amount and an additional certificate will be
issued with respect to any remaining principal amount. Each $150 million
certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment and any certificate
issued is registered in the name of Cede & Co., or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co., or to such other entity as is requested by an authorized
representative of DTC). ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to
DTC pursuant to this Paragraph by mail or by any other means shall be sent to
DTC's Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be mailed to Security
holders or published (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business on the business day before
or, if possible, two business days before the Publication Date. Issuer or
Trustee shall forward such notice either in a separated secure transmission for
each CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be not less than 30 days nor more than 60 days prior to
the redemption date or, in
C-2
<PAGE>
the case of an advance refunding, the date that the proceeds are deposited in
escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Call Notification Department at (516) 227-4039 or (516_ 227-4190. If the
party sending the notice does not receive a telecopy receipt from DTC confirming
that the notice has been received, said party shall telephone (516_ 227-4070.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall be
sent to:
Manager: Call
Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall e sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager: Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also
contain the current pool factor and Trustee contact's name and telephone number,
shall be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if
by mail or by any other means to:
Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
C-3
<PAGE>
7. [Note: Issuer must represent one of the following, and cross out
---- ----- ---
the other:] [The interest accrual period is record date to record date.] [The
interest accrual period is payment date to payment date.]
8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co.
Absent any other existing arrangements, such payments shall be addressed as
follows:
Manager: Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
9. [Note: Issuer must represent one of the following, and cross out
---- -----
the other.]
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS")
----------------------------------------------------------------
System. Other principal payments (redemption payments) shall be made in same-
- -------
day funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS")
----------------------------------------------------------------
System. Other principal payments (redemption payments) shall be made in next-
- -------
day funds by Trustee to Cede & Co., as nominee of DTC, or its registered
assigns, on each payment date. Such payments shall be made payable to the order
of Cede & Co., and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
10. DTC may direct Issuer or Trustee to use any other number or
address as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate
C-4
<PAGE>
indicating the date and amount of such reduction in principal except in the case
of final maturity, in which case the certificate will be presented to Issuer or
Trustee prior to payment, if required.
12. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
13. DTC may discontinue providing its services as securities
depository with respect to the Securities at any time by giving reasonable
notice to Issuer or Trustee (at which time DTC will confirm with Issuer or
Trustee the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Trustee shall cooperate fully with
DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trustee to advance funds
on behalf of Issuer.
Notes: Very truly yours,
- -----
A. If there is a Trustee (as ______________________________________
defined in this Letter of (Issuer)
Representations), Trustee as By:___________________________________
well as Issuer must sign this
Letter. If there is no
Trustee, in signing this (Authorized Officer's
Letter, Issuer itself Signature)
undertakes to perform all of
the obligations set forth
herein.
- -------------------------------------------------------------------------------
C-5
<PAGE>
B. Schedule B contains
statements that DTC believes _________________________________
accurately describe DTC, the
method of effecting book-entry (Trustee)
transfers of securities
distributed through DTC, and
certain related matters. By:_______________________________
(Authorized Officer's
Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:_________________________
cc: Underwriter
Underwriter's Counsel
C-6
<PAGE>
SCHEDULE A
----------
to Exhibit C
------------
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest
- ----- ---------------- ------------- --------
Rate
- -----
C-7
<PAGE>
SCHEDULE B
----------
SAMPLE COVERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
-----------------------------------
(Prepared by DTC-bracketed material may
be applicable only to certain issues)
1. The Depositary Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered pin the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Security certificate will
be issued for [each issue of the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $150 million, one certificate
will be issued with respect to each $150 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. 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 New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing
C-8
<PAGE>
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Securities
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event that
use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
[6. Redemption notices shall be sent to Cede & Co. If less than all of
the Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.]
7. Neither DTC nor Cede & co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Agent, or the Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to
C-9
<PAGE>
DTC is the responsibility of the Issuer of the Agent, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirement for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.]
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Issuer or the Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be reliable,
but the Issuer takes no responsibility for the accuracy thereof.
C-10
<PAGE>
EXHIBIT D
---------
[Form Of Accountants' Letter]
D-1
<PAGE>
EXHIBIT E
Form of Transferor Certificate
[DATE]
[Company]
[Company Address]
[Trustee]
[Trustee Address]
Re: CS First Boston Auto Receivables Trust 199__-__
Asset Backed Certificates, Class B
-------------------------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced ___% Asset
Backed Certificates, Class B (the "Certificates") we certify that (a) we
understand that the Certificates, have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are being transferred by us in a
transaction that is exempt from the registration requirements of the Act and (b)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:_____________________________
Authorized Officer
E-1
<PAGE>
EXHIBIT F
Form of Investment Letter
[DATE]
[Company]
[Company Address]
[Trustee]
[Trustee Address]
Re: CS First Boston Auto Receivables Trust 199__-__
Asset Backed Certificates, Class B
-------------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above-referenced Asset
Backed Certificates, Class B (the "Certificates"), we certify that (a) we
understand that the Certificates are not being registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we are an "accredited investor,"
as defined in Regulation D under the Act, and have such knowledge and experience
in financial and business matters that we are capable of evaluating the merits
and risks of investments in the Certificates, (c) we have had the opportunity
to ask questions of and receive answers from the Company concerning the purchase
of the Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificates, (d)
we are not an employee benefit plan or trust account that is subject to the
Employee Retirement Income Security Act of 1974, as amended, or section 4975 of
the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of
any such Plan or using the assets of any such Plan to acquire Class B
Certificates, (e) we are acquiring the Certificates for investment for our own
account and not with a view to any distribution of such Certificates (but
without prejudice to our right at all times to sell or otherwise dispose of the
Certificates in accordance with clause (g) below), (f) we have not offered or
sold any Certificates to, or solicited offers to buy any Certificates from, any
person, or otherwise approached or negotiated with any person with respect
thereto, or taken any other action that would result in a violation of Section 5
of the Act or any state
F-1
<PAGE>
securities laws and (g) we will not sell, transfer or otherwise dispose of any
Certificates unless (1) such sale, transfer or other disposition is made
pursuant to an effective registration statement under the Act and in compliance
with any relevant state securities laws or is exempt from such registration
requirements and, if requested, we will at our expense provide an opinion of
counsel satisfactory to the addresses of this certificate that such sale,
transfer or other disposition may be made pursuant to an exemption from the Act,
(2) the purchaser or transferee of such Note has executed and delivered to you a
certificate to substantially the same effect as this certificate and (3) the
purchaser or transferee has otherwise complied with any conditions for transfer
set forth in the Pooling and Servicing Agreement dated as of _____________,
among Asset Backed Securities Corporation, as Company, ______________ as
Servicer, and ____________, as Trustee.
Very truly yours,
[NAME OF TRANSFEREE]
By:_____________________________
Authorized Officer
F-2
<PAGE>
EXHIBIT G
Form of Rule 144A Letter
[DATE]
[Company]
[Company Address]
[Trustee]
[Trustee Address]
Re: CS First Boston Auto Receivables Trust 199__-__
Asset Backed Certificates, Class B
-------------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above-referenced ___% Asset
Backed Certificates, Class B (the "Certificates") we certify that (a) we
understand that the Certificates are not being registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we have such knowledge and
experience in financial and business matters that we are capable of evaluating
the merits and risks of investments in the Certificates, (c) we have had the
opportunity to ask questions of and receive answers from the Company concerning
the purchase of the Certificates and all matters relating thereto or any
additional information deemed necessary to our decision to purchase the
Certificates, (d) we are not an employee benefit plan, trust or account that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or
section 4975 of the Internal Revenue Code of 1986, as amended, nor are we acting
on behalf of any such Plan or using the assets of any such Plan to acquire
Class B Certificates, (e) we have not, nor has anyone acting on our behalf,
offered, transferred, pledged, sold or otherwise disposed of the Certificates,
any interest in the Certificates or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from or otherwise approached or negotiated with respect to the Certificates, any
interest in the Certificates or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any
G-1
<PAGE>
other action that would constitute a distribution of the Certificates under the
Act or that would constitute a distribution of the Certificates under the Act or
that would render the disposition of the Certificates a violation of Section 5
of the act or any state securities laws or require registration pursuant
thereto, and we will not act, or authorize any person to act, in such manner
with respect to the Certificates, and (f) we are a "qualified institutional
buyer" as that term is defined in Rule 144A under the Act. We are aware that
the sale to us is being made in reliance on Rule 144A. We are acquiring the
Certificates for our own account or for resale pursuant to Rule 144A and
understand that such Certificates may be resold, pledged or transferred only (i)
to a person reasonably believed to be a qualified institutional buyer that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A or (ii) pursuant to another exemption from registration
under the Act.
Very truly yours,
[NAME OF TRANSFEREE]
By:______________________________
Authorized Officer
G-2
<PAGE>
EXHIBIT H
Form of Receivables Purchase Agreement
[to be supplied]
H-1
<PAGE>
EXHIBIT J
YIELD SUPPLEMENT AGREEMENT
[Date]
- -----------------------------
- -----------------------------
- -----------------------------
- -----------------------------
Ladies and Gentlemen:
Asset Backed Securities Corporation (the "Company") hereby confirm
arrangements made as of the date hereof with you to be effective upon receipt by
us of the enclosed copy of this letter agreement (the "Yield Supplement
Agreement"), executed by you. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned thereto in the Pooling and Servicing
Agreement dated as of ________, ___ (the "Agreement"), among the Company,
_________, as servicer (the "Servicer"), and ________, as trustee (the
"Trustee").
1. On or prior to each Determination Date, by delivery of a
Servicer's Certificate pursuant to Section 3.09 of the Agreement, the Servicer
shall notify the Trustee of the Yield Supplement Amount for the related
Distribution Date.
2. To the extent that the amount on deposit in the Yield Supplement
Account is less than the Yield Supplement Deposit Amount for the related
Distribution Date, we agree to make a payment to the Trustee of additional
amounts until the amount on deposit therein equals the Maximum Yield Supplement
Amount by wire transfer of same day funds, to such account as the Trustee may
designate in writing to us no later than 12:00 P.M., New York City time, on the
Business Day immediately preceding such Distribution Date.
3. Our agreement set forth in this Yield Supplement Agreement is
our primary obligation and such obligation is irrevocable, absolute and
unconditional, shall not be subject to any counterclaim, setoff or defense
(other than full and strict compliance by us with our obligations hereunder) and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstances or condition
whatsoever.
J-1
<PAGE>
4. The Trustee's interest in this Yield Supplement Agreement shall
be transferable to any Trustee or successor Trustee under the Agreement.
5. This Yield Supplement Agreement will be governed by and
construed in accordance with the internal laws of [New York].
6. Except as otherwise provided int he Agreement, this Yield
Supplement Agreement shall terminate on the earlier to occur of (a) termination
of the Agreement pursuant to Section 10.01 and (b) the Final Scheduled
Distribution Date.
7. Except as otherwise provided herein, all notices pursuant to
this Yield Supplement Agreement shall be in writing and shall be effective upon
receipt thereof. All notices shall be directed as set forth below, or to such
other address or to the attention of such other person as the relevant party
shall have designated for such purpose in a written notice.
Asset Backed Securities Corporation
______________________________
______________________________
______________________________
Attention:______________________
The Trustee:
______________________________
______________________________
______________________________
Attention:______________________
8. This Yield Supplement Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, all
of which shall be deemed to be one and the same document.
9. In consideration for all future payments, if any, of Yield
Supplement Amounts to the Trustee pursuant to Paragraph 2 hereof, the Trustee
shall pay to the Company on the Closing Date under the Agreement such amount as
the Company and the Trustee shall separately agree.
10. This Agreement may not be assigned by the Company except as
contemplated by this Section and the Agreement; provided, however, that
-------- -------
simultaneously with the execution and delivery of this Agreement, the Company
shall assign all of their right, title and interest herein to the Trustee for
the benefit of the Certificateholders as provided in Section 4.03 of the
Agreement, to which the Servicer hereby expressly consents. The Servicer agrees
to perform its obligations hereunder for the benefit of the Trust and that the
Trustee may enforce the provisions of this Agreement, exercise the rights of the
Company and enforce the obligations of the Servicer hereunder without the
consent of the Company.
J-2
<PAGE>
11. The Servicer and the Company agree to do and perform, from time
to time, any and all acts and to execute any and all further instruments
required or reasonably requested by the other party hereto or by the Trustee
more fully to effect the purposes of this Agreement.
If the foregoing satisfactory set forth the terms and conditions of
our agreement, please indicate your acceptance thereof by signing in the space
provided below and returning to us the enclosed duplicate original of this
letter.
Very truly yours,
_____________________________,
as Servicer
By:_______________________
Name:
Title:
Agreed and Accepted as of ____________, 19__
________________________________________,
as Trustee
By______________________________________
Name:
Title:
ASSET BACKED SECURITIES CORPORATION
By______________________________________
Name:
Title:
J-3
<PAGE>
EXHIBIT 4.2.2
- --------------------------------------------------------------------------------
ASSET BACKED SECURITIES CORPORATION
Depositor,
[SERVICER NAME],
Servicer
and
[TRUSTEE NAME],
Trustee
CSFB CARD ACCOUNT MASTER TRUST
FORM OF POOLING AND SERVICING AGREEMENT
dated as of [ ]
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
Definitions
Section 1.01. Definitions.................................. 1
Section 1.02. Other Definitional Provisions and Rules of
Construction................................ 23
ARTICLE II.
Transfer of Receivables
Section 2.01. Transfer of Receivables...................... 24
Section 2.02. Acceptance by Trustee........................ 25
Section 2.03. Representations and Warranties of the
Depositor Relating to the Depositor......... 26
Section 2.04. Representations and Warranties of the
Depositor Relating to the Agreement and
Any Supplement and the Receivables.......... 28
Section 2.05. Reassignment of Ineligible Receivables....... 31
Section 2.06. Reassignment of Receivables in Trust
Portfolio................................... 32
Section 2.07. Covenants of the Depositor................... 33
Section 2.08. Addition of Accounts......................... 36
Section 2.09. Removal of Accounts.......................... 41
Section 2.10. Account Allocations.......................... 42
Section 2.11. Discount Option.............................. 43
ARTICLE III.
Administration and Servicing
of Receivable
Section 3.01. Acceptance of Appointment and Other Matters
Relating to the Servicer.................... 44
Section 3.02. Servicing Compensation....................... 46
Section 3.04. Reports and Records for the Trustee.......... 51
Section 3.05. Annual Certificate of Servicer............... 51
Section 3.06. Annual Servicing Report of Independent
Public Accountants; Copies of Reports
Available................................... 52
Section 3.07. Tax Treatment................................ 53
Section 3.08. Notices to the .............................. 53
Section 3.09. Adjustments.................................. 53
Section 3.10. Reports to the Commission.................... 54
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<PAGE>
Page
----
ARTICLE IV.
Rights of Certificateholders and
Allocation and Application of Collections
Section 4.01. Rights of Certificateholders................. 54
Section 4.02. Establishment of Collection Account and
Excess Funding Account...................... 55
Section 4.03. Collections and Allocations.................. 58
Section 4.04. Shared Principal Collections................. 60
Section 4.05. Excess Finance Charges....................... 60
ARTICLE V.
Distributions and Reports to
Certificateholders
ARTICLE VI.
The Certificates
Section 6.01. The Certificates............................. 61
Section 6.02. Authentication of Certificates............... 62
Section 6.03. New Issuances................................ 62
Section 6.04. Registration of Transfer and Exchange of
Certificates................................ 64
Section 6.05. Mutilated, Destroyed, Lost or Stolen
Certificates................................ 68
Section 6.06. Persons Deemed Owners........................ 68
Section 6.07. Appointment of Paying Agent.................. 69
Section 6.08. Access to List of Registered
Certificateholders Names and Addresses...... 70
Section 6.09. Authenticating Agent......................... 70
Section 6.10. Book-Entry Certificates...................... 71
Section 6.11. Notices to Clearing Agency................... 72
Section 6.12. Definitive Certificates...................... 73
Section 6.13. Global Certificate; Exchange Date............ 73
Section 6.14. Meetings of Certificateholders............... 75
ARTICLE VII.
Other Matters Relating to the Depositor
Section 7.01. Liability of the Depositor................... 78
Section 7.02. Merger or Consolidation of, or Assumption
of the Obligations of, the Depositor........ 78
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<PAGE>
Page
----
Section 7.03. Limitations on Liability of the Depositor.... 79
Section 7.04. Liabilities.................................. 79
ARTICLE VIII.
Other Matters Relating to the Servicer
Section 8.01. Liability of the Servicer.................... 80
Section 8.02. Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer............ 80
Section 8.03. Limitation on Liability of the Servicer and
Others...................................... 81
Section 8.04. Servicer Indemnification of the Trust and
the Trustee................................. 81
Section 8.05. The Servicer Not To Resign................... 82
Section 8.06. Access to Certain Documentation and
Information Regarding the Receivables....... 82
Section 8.07. Delegation of Duties......................... 83
Section 8.08. Examination of Records....................... 83
ARTICLE IX.
Pay Out Events
Section 9.01. Pay Out Events............................... 83
Section 9.02. Additional Rights upon the Occurrence of
Certain Events.............................. 84
ARTICLE X.
Servicer Defaults
Section 10.01. Servicer Defaults........................... 85
Section 10.02. Trustee To Act; Appointment of Successor.... 89
Section 10.03. Notification to Certificateholders.......... 90
ARTICLE XI
The Trustee
Section 11.01. Duties of Trustee........................... 90
Section 11.02. Certain Matters Affecting the Trustee....... 93
Section 11.03. Trustee Not Liable for Recitals in
Certificates............................... 94
Section 11.04. Trustee May Own Certificates................ 94
Section 11.05. The Servicer To Pay Trustee's Fees and
Expenses................................... 94
Section 11.06. Eligibility Requirements for Trustee........ 95
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<PAGE>
Page
----
Section 11.07 Resignation or Removal of Trustee........... 95
Section 11.08. Successor Trustee........................... 96
Section 11.09. Merger or Consolidation of Trustee.......... 97
Section 11.10. Appointment of Co-Trustee or Separate
Trustee.................................... 97
Section 11.11. Tax Returns................................. 98
Section 11.12. Trustee May Enforce Claims without
Possession of Certificates................. 99
Section 11.13. Suits for Enforcement....................... 99
Section 11.14. Rights of Certificateholders to Direct
Trustee....................................100
Section 11.15. Representations and Warranties of Trustee...101
Section 11.16. Maintenance of Office or Agency.............101
Section 11.17. Confidentiality.............................101
ARTICLE XII
Termination
Section 12.01. Termination of Trust........................102
Section 12.02. Final Distribution..........................102
Section 12.03. Depositor's Termination Rights..............104
ARTICLE XIII
Miscellaneous Provisions
Section 13.01. Amendment; Waiver of Past Defaults..........104
Section 13.02. Protection of Right, Title and Interest to
Trust......................................106
Section 13.03. Limitation on Rights of Certificateholders..107
Section 13.04. GOVERNING LAW...............................108
Section 13.05. Notices; Payments...........................108
Section 13.06. Rule 144A Information.......................109
Section 13.07. Severability of Provisions..................110
Section 13.08. Assignment
Section 13.09. Certificates Nonassessable and Fully Paid...110
Section 13.10. Further Assurances..........................110
Section 13.11. Nonpetition Covenant........................110
Section 13.12. No Waiver; Cumulative Remedies..............111
Section 13.13. Counterparts................................111
Section 13.14. Third-Party Beneficiaries...................111
Section 13.15. Actions by Certificateholders...............111
Section 13.16. Merger and Integration......................111
Section 13.17. Headings....................................112
Section 13.18. Agreement to Constitute Security Agreement..112
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<PAGE>
Page
----
Exhibit A Form of Depositor's Certificate
Exhibit B Form of Assignment of Receivables in
Additional Accounts.....................103
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<PAGE>
POOLING AND SERVICING AGREEMENT dated as of [ ], 199[ ] between
Asset Backed Securities Corporation, a Delaware corporation, as Depositor,
[Servicer Name], as Servicer, and [Trustee Name], a [ ] banking corporation,
as Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Certificateholders
and any Series Enhancer to the extent provided herein and in any Supplement:
ARTICLE I
Definitions
-----------
Section 1.01. Definitions. Whenever used in this Agreement, the
-----------
following words and phrases shall have the following meanings.
"ABSC" shall mean Asset Backed Securities Corporation.
----
"Account" shall mean each Initial Account and each Additional Account,
-------
but shall exclude any Account all the Receivables in which are either reassigned
or assigned to the Depositor or its designee or the Servicer in accordance with
the terms of this Agreement. The definition of Account shall include any
MasterCard(R) or Visa(R) /*// account or accounts (each, a "Related Account")
having the following characteristics: (a) such Related Account was established
in compliance with the Lending Guidelines pursuant to a Credit Card Agreement;
(b) the Obligor or Obligors with respect to such Related Account are the same
Person or Persons as the Obligor or Obligors of the Account; (c) such Related
Account is originated (i) as a result of the credit card with respect to the
Account being lost or stolen; (ii) as a result of the Obligor requesting a
change in his billing cycle; (iii) as a result of the Obligor requesting the
discontinuance of responsibility with respect to an Account; (iv) as a result of
the Obligor requesting a product change; or (v) for any other reasons permitted
by the Lending Guidelines; and (d) such Related Account can be traced or
identified by reference to or by way of the computer or other records of the
Depositor. From and after the date on which an Account replaced by a Related
Account is removed from the computer records of the Depositor, such Account
shall no longer be an Account hereunder. The term "Account" shall be deemed to
refer to an Additional Account only from and after the Addition Date with
respect thereto, and the term "Account" shall be deemed to refer to any Removed
Account only prior to the Removal Date with respect thereto.
"Accumulation Period" shall mean, with respect to any Series, the
-------------------
period, if any, specified as such in the related Supplement.
- ----------
/*// MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and of VISA USA, Inc., respectively.
-1-
<PAGE>
"Addition Date" shall mean (a) with respect to Additional Accounts,
-------------
the date on which the Receivables in such Additional accounts are conveyed to
the Trust pursuant to Section 2.08(a), (b) or (c), and (b) with respect to
Participation Interests, the date from and after which such Participation
Interests are to be included as Trust Assets pursuant to Section 2.08(a) or (b).
"Addition Discount Receivables" shall mean, as of any applicable
-----------------------------
Additional Cut-Off Date, the amount of Principal Receivables in Additional
Accounts designated by the Depositor to be treated as Finance Charge
Receivables; provided, however, that the Depositor may not make such designation
-------- -------
unless (i) shall have received written notice from each Rating Agency that such
designation will not have a Ratings Effect and shall have delivered copies of
each such written notice to the Servicer and the Trustee, and (ii) the Depositor
shall have delivered to the Trustee and any Series Enhancer entitled thereto
pursuant to the relevant Supplement an Officer's Certificate of the Depositor,
to the effect that the Depositor reasonably believes that such designation will
not, based on the facts known to such officer at the time of such certification,
then cause a Pay-Out Event or any event that, after the giving of notice or the
lapse of time, would constitute a Pay-Out Event to occur with respect to any
Series.
"Additional Account" shall mean each consumer revolving credit card
------------------
account or other consumer revolving credit account established pursuant to a
Credit Card Agreement, which account is designated pursuant to Section 2.08(a),
(b) or (c) to be included as an Account and is identified in a computer file or
microfiche list delivered to the Trustee by the Depositor pursuant to Sections
2.01 and 2.08 (g).
"Additional Cut-Off Date" shall mean the date as of which any
-----------------------
Additional Accounts or Participation Interests are to be included in the Trust,
as specified in the related Assignment.
"Additional Depositors" shall have the meaning specified in
---------------------
Section 2.08(f).
"Additional Payment" shall have the meaning specified in
------------------
Section 3.09(a).
"Affiliate" shall mean, 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, shall mean the power to direct the management
and policies of a 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 Trust shall not be
deemed an affiliate of the Depositor.
"Aggregate Addition Limit" shall mean the number of accounts
------------------------
designated as Automatic Additional Accounts, without prior Rating Agency
consent, and designated as Additional Accounts pursuant to Section 2.08(a),
without the prior Rating Agency notice described under Section 2.08(d)(v), which
would either (x) with respect to any three consecutive Monthly Periods, equal
15% of the number of Accounts at the end of the ninth Monthly Period preceding
the commencement of such three Monthly Periods (or, the Trust Cut-Off Date,
whichever is later)
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<PAGE>
and (y) with respect to any twelve Monthly Periods, equal 20% of the number of
Accounts as of the first day of such twelve Monthly Periods (or, the Trust Cut-
Off Date, whichever is later).
"Agreement" shall mean this Pooling and Servicing Agreement and all
---------
amendments hereof and supplement hereto, including, with respect to any Series
or Class, the related Supplement.
"Annual Membership Fees" shall mean annual membership fees or any
----------------------
similar term specified in the Credit Card Agreement applicable to each Account.
"Applicants" shall have the meaning specified in Section 6.08.
----------
"Appointment Date" shall have the meaning specified in
----------------
Section 9.02(a).
"Assignment" shall have the meaning specified in Section 2.08(g).
----------
"Authorized Newspaper" shall mean any newspaper or newspapers of
--------------------
general circulation (including The Wall Street Journal) in the Borough of
Manhattan, The City of New York, printed in the English language (and with
respect to any Series or Class, if and so long as the Investor Certificate of
such Series or Class are listed on a European stock exchange (including the
Luxembourg Stock Exchange) and such exchange shall so require, then in the city
of such exchange, printed in any language satisfying the requirements of such
exchange) and customarily published on each business day at such place, whether
or not published on Saturday, Sundays or holidays.
"Automatic Additional Account" shall mean each consumer revolving
----------------------------
credit card account or other consumer revolving credit account established
pursuant to a Credit Card Agreement, which account is designated pursuant to
Section 2.08(c) to be included as an Account and is identified in a computer
file or microfiche list delivered to the Trustee by the Depositor pursuant to
Sections 2.01 and
"Depositor's Amount" shall mean on any date of determination an amount
------------------
equal to the difference between (I) the sum of (A) the aggregate balance of
Principal Receivables at the end of the day immediately prior to such date of
determination and (B) Special Funding Amount at the end of the day immediately
prior to such date of determination minus (II) the Aggregate Invested Amount at
-----
the end of such day.
"Depositor's Certificate" shall mean the certificate executed by the
-----------------------
Depositor and authenticated by or on behalf of the Trustee, substantially in the
form of Exhibit A, as the same may be modified in accordance with Section
2.08(f).
"Depositor's Interest" shall have the meaning specified in
--------------------
Section 4.01.
"Bearer Certificates" shall have the meaning specified in
-------------------
Section 6.01.
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<PAGE>
"Benefit Plan" shall have the meaning specified in Section 6.04(c).
------------
"Book-Entry Certificates" shall mean beneficial interests in the
-----------------------
Investor Certificate, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 6.10.
"Business Day" shall mean any day other than (a) a Saturday or Sunday
------------
or (b) any other day on which national banking associations or state banking
institutions in New York, New York are authorized or obligated by law, executive
order or governmental decree to be closed.
"Cash Advance Fees" shall mean cash advance fees or any similar term
-----------------
as specified in the Credit Card Agreement applicable to each Account.
"Cedel" shall mean Cedel S.A.
-----
"Certificate" shall mean any one of the Investor Certificates or
-----------
the Depositor's Certificate.
"Certificate Owner" shall mean, with respect to a Book-Entry
-----------------
Certificate, the Person who is the owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
"Certificate Rate" shall mean, with respect to any Series or Class,
----------------
the certificate rate specified therefor in the related Supplement.
"Certificate Register" shall mean the register maintained pursuant to
--------------------
Section 6.04, providing for the Registration of the Registered Certificates and
the Depositor's Certificate and transfers and exchanges thereof.
"Certificateholder" or "Holder" shall mean an Investor
----------------- ------
Certificateholder or a Person in whose name the Depositor's Certificate is
registered in the Certificate Register.
"Certificateholders' Interest" shall have the meaning specified in
----------------------------
Section 4.01.
"Class" shall mean, with respect to any Series, any one of the classes
-----
of Investor Certificate of that Series.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency pursuant to the rules and regulations of such Clearing Agency.
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<PAGE>
"Closing Date" shall mean, with respect to any Series., the closing
------------
date specified in the related Supplement.
"Code" shall mean the Internal Revenue Code of 1986.
----
"Collection Account" shall have the meaning specified in
------------------
Section 4.02.
"Collections" shall mean (a) all payments by or on behalf of Obligors
-----------
(excluding Insurance Proceeds) received in respect to the Receivables, in the
form of cash, checks, wire transfers, electronic transfers, ATM transfers or any
other form of payment in accordance with the related Credit Card Agreement in
effect from time to time and (b) with respect to any Monthly Period, (i) a
portion, determined pursuant to Section 2.07(i), of the Interchange paid to the
Depositor through VISA and MasterCard with respect to such Monthly Period and
(ii) all Recoveries received during such Monthly Period and (iii) all payments
of Annual Membership Fees with respect to the accounts during such Monthly
Period.
"Commission" shall have the meaning specified in Section 3.01(b).
----------
"Controlled Amortization Period" shall mean, with respect to any
------------------------------
Series, the period, if any, specified as such in the related Supplement.
"Corporate Trust Office" shall have the meaning specified in
----------------------
Section 11.16.
"Coupons" shall have the meaning specified in Section 6.01.
-------
"Credit Card Agreement" shall mean, with respect to an Account
---------------------
governed by a Receivables Purchase Agreement, the agreements between the an
Account Owner and the related Obligor, governing the terms and conditions of
such Account, as such agreements may be amended, modified or otherwise changed
from time to time in accordance with Section 2.07(g), and as distributed
(including any amendments and revisions thereto) to holders of such Accounts.
"Date of Processing" shall mean, with respect to any transaction, the
------------------
date on which such transaction if first recorded under the Servicer's (or, in
the case of the Depositor, the Depositor's) computer file of consumer revolving
accounts (without regard to the effective date of such recordation).
"Defaulted Amount" shall mean, with respect to any Monthly Period, an
----------------
amount (which shall not be less than zero) equal to (a) the amount of Principal
Receivables which became Defaulted Receivables in such Monthly Period, minus (b)
the sum of (i) the amount of any Defaulted Receivables included in any Account
the Receivable in which the Depositor or the Servicer became obligated to accept
reassignment or assignment in accordance wit the terms of this Agreement during
such Monthly Period, (ii) the amount of Recoveries received in such Monthly
Period with respect to Finance Charge Receivables and Principal Receivables
previously charged off as uncollectible and (iii) the excess, if any, for the
immediately preceding Monthly
-5-
<PAGE>
Period of the sum computed pursuant to this clause (b) for such Monthly Period
over the amount of Principal Receivable which became Defaulted Receivables in
such Monthly Period; provided, however, that, if an Insolvency Event occurs with
-------- -------
respect to the Depositor, the amount of such Defaulted Receivables which are
subject to reassignment to the Depositor in accordance with the terms of the
Agreement shall not be added to the sums so subtracted and, if any of the events
described in Section 10.01(d) occur with respect to the Service, the amount of
such Defaulted Receivables which are subject to reassignment or assignment to
the Service in accordance with the terms of this Agreement shall not be added to
the sum so subtracted.
"Defaulted Receivables" shall mean, with respect to any Monthly
---------------------
Period, all Principal Receivables in any Account which are charged off as
uncollectible, other than due to any Adjustment Payment, in such Monthly Period
in accordance with the Lending Guidelines and the Servicer's customary and usual
servicing procedures for servicing consumer revolving credit card and other
consumer revolving credit account receivables comparable to the Receivable, but
in any event not later that 180 days after such Receivable became due for
payment by the Obligor. For purposes of this definition, a Principal Receivable
in any Account shall become a Defaulted Receivable on the day on which such
Principal Receivable is recorded as charged off on the Servicer's computer
master file or consumer revolving credit accounts.
"Definitive Certificates" shall have the meaning specified in
-----------------------
Section 6.10.
"Definitive Euro-Certificates" shall have the meaning specified in
----------------------------
Section 6.13(a).
"Deposit Date" shall mean each day on which the Service deposits
------------
Collections in the Collection Account.
"Depositaries" shall mean the Person specified in the applicable
------------
Supplement, in its capacity as depositary for the respective accounts of any
Clearing Agency or any Foreign Clearing Agencies.
"Depositary Agreement" shall mean, with respect to any Series or
--------------------
Class, the agreement among the Depositor, the Trustee and the initial Clearing
Agency substantially in the form of Exhibit F.
"Determination Date" shall mean the fourth Business Day prior to each
------------------
Distribution Date.
"Discount Option Receivables" shall have the meaning specified in
---------------------------
Section 2.11(a).
"Discount Option Receivables Collections" shall mean on any Date of
---------------------------------------
Processing on and after the date on which the Depositor's exercise of its
discount option pursuant to Section 2.11(a) takes effect, the product of (a) a
fraction the numerator of which is the amount of the Discount Option Receivables
and the denominator of which is the sum of the Principal Receivables other than
Discount Option Receivables) and the Discount Option Receivables in each case
(for
-6-
<PAGE>
both numerator and denominator) at the end of the prior Monthly Period and (b)
collection of Principal Receivables that arise in the Accounts on such day on or
after the date such option is exercised that would otherwise be Principal
Receivables.
"Discount Percentage" shall have the meaning specified in
-------------------
Section 2.11(a).
"Distribution Date" shall mean the 15th day of each calendar month
-----------------
during the term hereof, or, if such 15th day is not a Business Day, the next
succeeding Business Day.
"Document Delivery Date" shall mean the first Closing Date in the case
----------------------
of Initial Accounts and the day that is on or prior to the tenth Business Day
after the Addition Date in the case of Additional Accounts or Participation
Interests added to the Trust.
"Early Amortization Period" shall mean, with respect to any Series,
-------------------------
the Period beginning at the close of business on the Business Day immediately
preceding the day on which a Pay-Out Event is deemed to have occurred with
respect to such Series, and ending upon the earlier to occur of (i) the payment
in full to the Investor Certificateholders of such Series of the Invested Amount
with respect to such Series and the payment in full to any applicable Series
Enhancer with respect to such Series of the Enhancement Invested Amount, if any,
with respect to such Series and (ii) the Series Termination Date with respect to
such Series.
"Eligible Account" shall mean a MasterCard or VISA consumer revolving
----------------
credit card account or other consumer revolving credit account owned by the
Depositor or any Affiliated of the Depositor which as of the Trust Cut-Off Date
with respect to an Initial Account or as of the related Addition Date with
respect to an Additional Account: (a) is in existence and maintained with the
Depositor or any Affiliated of the Depositor on the Trust Cut-Off Date or the
Addition Date, as the case may be; (b) is payable in United States dollars; (c)
has not been identified as an account the credit cards or checks, if any, with
respect to which have been reported to the Depositor or any Affiliate of the
Depositor as having been lost or stolen; (d) the Obligor or which has provided,
as his or her current billing address, an address located in the United States
(or its territories or possessions or a military address); (e) has not been, and
does not have any Receivables which have been, sold, pledged, assigned or
otherwise conveyed to any Person (except pursuant to this Agreement); (f) except
as provided below, does not have any Receivables which are Defaulted
Receivables; (g) does not have any Receivables which have been identified by the
Depositor or any Affiliate of the Depositor or the relevant Obligor as having
been incurred as a result or fraudulent use of any related credit card or check;
and (h) relates to an Obligor who is not identified by the Depositor or any
Affiliate of the Depositor in its computer files as being the subject of a
voluntary or involuntary bankruptcy proceeding. Eligible Accounts may include
account, the Receivable or which have been written off; provided that (a) the
--------
balance of all Receivables included in such accounts is reflected on the books
and records of the Depositor or any Affiliate of the Depositor (and is treated
for purposes of this Agreement) as "zero", and (b) charging privileges with
respect to all such accounts have been concealed in accordance with the Lending
Guidelines of the Depositor and will not be reinstated by the Depositor or any
Affiliate of the Depositor or the Servicer.
-7-
<PAGE>
"Eligible Deposit Account" shall mean either (a) segregated account
------------------------
with an Eligible Institution or (b) a segregate trust account with the corporate
trust department of a depository institution organized under the laws of the
United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), or a trust company
acceptable to each Rating Agency, and acting as a trustee for funds deposited in
such account, so long as any of the securities of such depository institution or
trust company shall have a credit rating from each Rating Agency in one of its
generic credit rating categories which signifies investment grade.
"Eligible Institution" shall mean (a) a depository institution (which
--------------------
may be the Trustee) organized under the laws of the United States or any one of
the states thereof which at all times (i) has either (x) a long-term unsecured
debt rating of A2 or better by Moody's or (y) a certificate of deposit rating of
P-1 by Moody's, (ii) has either (x) a long-term unsecured debt rating of AAA by
Standard & Poor's or (y) a certificate of deposit rating of A-1+ by Standard
Poor's and (iii) is a member of the FDIC or (b) any other institution that is
acceptable to each Rating Agency.
"Eligible Investments" shall mean book-entry securities, negotiable
--------------------
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America
or any state thereof, including the District of Columbia, (or domestic
branches of foreign banks) and subject to supervision and examination by
federal or state banking or depository institution authorities; provided
--------
that at the time of the Trust's investment or contractual commitment to
invest therein, the short-term debt rating of such depository institution
or trust company shall be in the highest investment category of each Rating
Agency;
(c) commercial paper or other short-term obligations having, at the
time of the Trust's investment or contractual commitment to invest therein,
a rating from each Rating Agency in its highest investment category;
(d) demand deposits, time deposits and certificates of deposit which
are fully insured by the FDIC, with a Person the commercial paper of which
has a credit rating from each Rating Agency in its highest investment
category;
(e) notes or bankers' acceptances (having original maturities of no
more than 365 days) issued by any depository institution or trust company
referred to in (b) above;
-8-
<PAGE>
(f) investments in money market funds rated in the highest investment
category by each Rating Agency or otherwise approved in writing by each
Rating Agency;
(g) time deposits (having maturities of not more than 30 days), other
than as referred to in clause (d) above, with a Person the commercial paper
of which has a credit rating from each Rating Agency in its highest
investment category; or
(h) any other investments approved in writing by each Rating Agency.
"Eligible Receivable" shall mean each Receivable:
-------------------
(a) which has arisen under an Eligible Account;
(b) which was created in compliance in all material aspects with the
Lending Guidelines and all Requirements of Law applicable to the Depositor
or any Affiliate of the Depositor, the failure to comply with which would
have a material adverse effect on Investor Certificateholders, and pursuant
to a Credit Card Agreement which complies with all Requirements of Law
applicable to the Depositor or any Affiliate of the Depositor, the failure
to comply with which would have a material adverse effect on Investor
Certificateholders;
(c) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given by the
Depositor or any Affiliate of the Depositor in connection with the creation
of such Receivable or the execution, delivery and performance by the
Depositor or any Affiliate of the Depositor of its obligations, if any,
under the related Credit Card Agreement have been duly obtained, effected
or given and are in full force and effect as of such date of creation of
such Receivable;
(d) as to which, at the time of its transfer to the Trust, the
Depositor or any Affiliate of the Depositor or the Trust will have good and
marketable title free and clear of all Liens (other than any Lien for
municipal or other local taxes if such taxes are not then due and payable
or if the Depositor or any Affiliate of the Depositor is then contesting
the validity thereof in good faith by appropriate proceedings and has set
aside on its books adequate reserves with respect thereto);
(e) which has been the subject of either a valid transfer and
assignment from the Depositor or any Affiliate of the Depositor to the
Trust of all the right, title and interest therein of the Depositor or any
Affiliate of the Depositor (including any proceeds thereof), or the grant
of a first priority perfected security interest therein (and in the
proceeds thereof), effective until the termination of the Trust;
(f) which at and after the time of transfer to the Trust is the legal,
valid and binding payment obligation of the Obligor thereon, legally
enforceable against such
-9-
<PAGE>
Obligor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship or other similar laws, now or hereafter in
effect, affecting the enforcement of creditors, rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity) or matter as to
which the Servicer is required by Section 3.09 to make an adjustment;
(g) which constitutes either an "account" or a "general intangible"
under and as defined, in Article 9 of the UCC;
(h) which, at the time of its transfer to the Trust, has not been
waived or modified except as permitted in accordance with Section 3.03(h);
(i) which, at the time of its transfer to the Trust, is not subject to
any right of rescission, setoff, counterclaim or any other defense of the
Obligor (including the defense of usury), other than defenses arising out
of applicable bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship or other similar laws affecting the
enforcement of creditors, rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or equity) or matters as to which the Servicer
is required by Section 3.09 to make an adjustment;
(j) as to which, at the time of its transfer to the Trust, the
Depositor or any Affiliate of the Depositor has satisfied all obligations
on its part to be fulfilled at the time it is transferred to the Trust; and
(k) as to which, at the time of its transfer to the Trust, the
Depositor or any Affiliate of the Depositor has not taken any action which,
or failed to take any action, the omission of which, would, at the time of
its transfer to the Trust, impair in any material respect the rights of the
Trust or the Certificateholders therein.
"Eligible Servicer" shall mean the Trustee, a wholly-owned subsidiary
-----------------
of the Trustee, or an entity which, at the time of its appointment as Servicer,
(a) is servicing a portfolio of consumer revolving credit card accounts or other
consumer revolving credit accounts, (b) is legally qualified and has the
capacity to service the Accounts, (c) is qualified (or licensed) to use the
software that the Servicer is then currently using to service the Accounts or
obtains the right to use, or has its own, software which is adequate to perform
its duties under this Agreement, (d) has, in the reasonable judgment of the
Trustee, demonstrated the ability to Professionally and competently service a
portfolio of similar accounts in accordance with customary standards of skill
and care and (e) has a net worth of at least $50,000,000 as of the end of its
most recent fiscal quarter.
"Enhancement Agreement" shall mean any agreement, instrument or
---------------------
document governing the terms of any Series Enhancement or pursuant to which any
Series Enhancement is issued or outstanding.
-10-
<PAGE>
"Enhancement Invested Amount", with respect to any Series, shall have
---------------------------
the meaning specified in the related Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company of New
------------------
York, Brussels office, as operator of the Euroclear System.
"Excess Finance Charges" shall have the meaning specified in
----------------------
Section 4.05.
"Excess Funding Account" shall have the meaning specified in
----------------------
Section 4.02.
"Exchange Act", shall mean the Securities Exchange Act of 1934.
------------
"Exchange Date" shall mean, with respect to any Series, any date that
-------------
is after the related Series Issuance Date, in the case of Definitive Euro-
Certificates in registered form, or upon presentation of certification of non-
United States beneficial ownership (as described in Section 6.13), in the case
of Definitive Euro-Certificates in bearer form.
"Excluded Series" shall mean any Series designated as such in the
---------------
relevant Supplement.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
----
successor thereto.
"Finance Charge Receivables" shall mean, with respect to any Monthly
--------------------------
Period, the sum of (a) all amounts billed to the Obligors on any Account in
respect of (i) Periodic Rate Finance charges, (ii) Cash Advance Fees, (iii) Late
Charge Fees, (iv) Overlimit Fees, (v) Returned other incidental and
miscellaneous fees and charges billed on the Accounts from time to time, and (b)
the amount of Discount Option Receivables, if any, for such Monthly Period.
Collections of Finance Charge Receivables with respect to any Monthly Period
shall include (i) a portion, determined pursuant to Section 2.07(i), of the
Interchange paid to the Depositor through VISA and MasterCard with respect to
such Monthly Period, and (ii) the Addition Discount Receivables to be deposited
into the Collection Account with respect to such Monthly Period.
"Finance Charge Shortfalls" shall have the meaning specified in
-------------------------
Section 4.05.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
------
Enforcement Act of 1989.
"Floating Allocation Percentage" shall mean, with respect to any
------------------------------
Series, the floating allocation percentage specified in the related Supplement.
"Foreign Clearing Agency" shall mean Cedel and the Euroclear Operator.
-----------------------
-11-
<PAGE>
"Global Certificate" shall have the meaning specified in
------------------
Section 6.13(a).
"Governmental Authority" shall mean the United States of America, any
----------------------
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and having jurisdiction over the applicable Person.
"Group" shall mean, with respect to any Series, the group of Series,
-----
if any, in which the related Supplement specifies such Series is to be included.
"Ineligible Receivables" shall have the meaning specified in
----------------------
Section 2.05(a).
"Initial Account" shall mean each MasterCard and VISA account, in each
---------------
case established pursuant to a Credit Card Agreement, chosen from Eligible
Accounts of the Depositor and identified in the computer file or microfiche list
delivered to the Trustee by the Depositor an or prior to the first Closing Date
pursuant to Section 2.01.
"Insolvency Event" shall have the meaning specified in
----------------
Section 9.01(a).
"Insolvency Proceeds" shall have the meaning specified in
-------------------
Section 9.02(b).
"Insurance Proceeds" shall mean any amounts received by the Servicer
------------------
pursuant to any credit life, credit disability or unemployment insurance
policies covering any Obligor with respect to Receivables under such Obligor's
Account.
"Interchange" shall mean interchange fees payable to an Account Owner,
-----------
in its capacity as credit card-issuing bank, from VISA, MasterCard or any
similar entity or organization with respect to any other type of revolving
credit card accounts included as Accounts (except as otherwise provided in the
initial Assignment with respect to any such Accounts), in connection with
cardholder charges for goods and services. Any reference in this Agreement or
any Supplement to Interchange shall refer to only the fractional undivided
interest in the interchange fees that are transferred by an Account Owner to the
Depositor pursuant to a Receivables Purchase Agreement, which fractional
undivided interest may be less than a 100% interest therein.
"Invested Amount" shall mean, with respect to any Series and for any
---------------
date, an amount equal to the invested amount specified in the related
Supplement.
"Investment Company Act" shall mean the Investment Company
----------------------
Act of 1940.
"Investor Certificateholder" shall mean the Person in whose name a
--------------------------
Registered Certificate is registered in the Certificate Register or the bearer
of any Bearer Certificate (or the Global Certificate, as the case may be) or
Coupon.
-12-
<PAGE>
"Investor Certificates" shall mean any one of the certificates
---------------------
including the Bearer Certificates, the Registered Certificates or any Global
Certificate) executed by the Bank and authenticated by or on behalf of the
Trustee, substantially in the form attached to the related Supplement, other
than the Depositor's Certificate.
"Late Charge Fees" shall have the meaning specified in the Credit Card
----------------
Agreement applicable to each Account for late payment fees or similar terms with
respect to such Account.
"Lending Guidelines" shall mean an Account Owner's established
------------------
policies and procedures relating to the operation of its credit card business,
which are applicable to its entire portfolio of VISA and MasterCard and other
consumer-revolving accounts governed by a Receivables Purchase Agreement, and
are consistent with reasonably prudent practice, including the established
policies and procedures for determining the creditworthiness of credit card or
other revolving credit account customers, and the extension of credit-to-credit
card and other revolving credit account customers and relating to the
maintenance of credit card and other revolving credit accounts and collection of
receivables with respect thereto, as such policies and procedures may be
amended, modified, or otherwise changed from time to be in accordance with
Section 2.07(g).
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
----
assignment, participation or equity interest, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other security agreement, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC (other than any such financing statement
filed for informational purposes only) or comparable law of any jurisdiction to
evidence any of the foregoing, excluding any lien or filing pursuant to this
Agreement; provided, however, that any assignment or transfer pursuant to
-------- -------
Section 6.03(c) or Section 7.02 shall not be deemed to constitute a Lien.
"Manager" shall mean the lead manager, manager or co-manager or person
-------
performing a similar function with respect to an offering of Definitive Euro-
Certificates.
"MasterCard" shall mean MasterCard International Incorporated or any
----------
successor thereto.
"Miscellaneous Payments" shall mean, with respect to any Monthly
----------------------
Period, the sum of Adjustment Payments and Transfer Deposit Amounts deposited in
the Collection Account with respect to such Monthly Period.
"Monthly Period" shall mean, with respect to each Distribution Date, a
--------------
period of approximately 30 days, that (a) contains a full set of processing
cycles with respect to the Accounts, as defined by the Servicer, (b) commences
on the day immediately succeeding the last day of the immediately preceding
Monthly Period and (c) ends prior to the Determination Date
-13-
<PAGE>
for such Distribution Date; provided, however, that the initial Monthly Period
-------- -------
with respect to any Series will commence on the Cut-Off Date with respect to
such Series.
"Monthly Servicing Fee" shall have the meaning specified in
---------------------
Section 3.02.
"Moody's" shall mean Moody's Investors Service, Inc., or any successor
-------
thereto.
"Non-Code Entity" shall mean a savings and loan association, a
---------------
national banking association, a bank or other entity that is not subject to
Title 11 of the United States Code.
"Notices" shall have the meaning specified in Section 13.05(a).
-------
"Obligor" shall mean, with respect to any Account, the Person or
-------
Persons obligated to make payments with respect to such Account, including any
guarantor thereof.
"Officers Certificate" shall mean, unless otherwise specified in this
--------------------
Agreement, a certificate delivered to the Trustee signed by any officer of the
Depositor or the Servicer, as the case may be, or, in the case of a Successor
Servicer, a certificate signed by a vice president or more senior officer or the
financial controller (or an officer holding an office with equivalent or more
senior responsibilities of such successor Servicer, and delivered to the Trustee
at its Corporate Trust office.
"Opinion of Counsel" shall mean a written opinion of counsel, in a
------------------
form reasonably acceptable to the Trustee, by counsel for, or an employee of,
the Person providing the opinion and who shall be reasonably acceptable to the
Trustee.
"Overlimit Fees" shall mean overlimit fees or any similar term
--------------
specified in the Credit Card Agreement applicable to each Account.
"Participation Interests" shall mean participation representing
-----------------------
undivided interests in a pool of assets primarily consisting of revolving credit
card accounts or other revolving credit accounts owned by the Depositor or any
Affiliate thereof and collections thereon.
"Pay Out Event" shall mean, with respect to any Series, each event
-------------
specified in Section 9.01 and each additional event, if any, specified in the
relevant Supplement as a Pay-Out Event with respect to such Series.
"Paying Agent" shall mean any paying agent and co-paying agent
------------
appointed pursuant to Section 6.07, which initially shall be the Trustee.
"Periodic Rate" shall mean the periodic rate or rates determined in
-------------
the manner described in the Credit Card Agreement applicable to each Account.
-14-
<PAGE>
"Periodic Rate Finance Charges" shall mean finance charges based on
-----------------------------
the Periodic Rate or any similar term specified in the Credit Card Agreement
applicable to each Account.
"Person" shall mean any legal person, including any individual,
------
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Authority or other entity of
similar nature.
"Principal Allocation Percentage" shall mean, with respect to any
-------------------------------
Series, the Principal allocation percentage specified in the related Supplement.
"Principal Receivables" shall mean all amounts, other than amounts
---------------------
which represent Finance Charge Receivables, billed to the Obligors on any
Account in respect of (a) purchase of goods and services and (b) cash advances.
Such amounts shall exclude Defaulted Receivables. In calculating the aggregate
amount of Principal Receivables on any day, the amount of Principal Receivables
shall be reduced by the aggregate amount of credit balances in the Accounts on
such day. Any Principal Receivables which the Depositor is unable to transfer
as provided in Section 2.10 shall not be included in calculating the aggregate
amount of Principal Receivables, except to the extent so provided in Section
2.10.
"Principal Sharing Series" shall mean a Series that pursuant to the
------------------------
Supplement therefor, is entitled to receive Shared Principal Collections.
"Principal Shortfalls" shall have the meaning specified in
--------------------
Section 4.04.
"Principal Terms" shall mean, with respect to any Series, (i) the name
---------------
or designation; (ii) the initial principal amount (or method for calculating
such amount) and the Invested Amount of such Series; (iii) the Certificate Rate
(or method for the determination thereof) and the manner, if any, in which such
rate may be adjusted from time to time; (iv) the interest payment date or dates
and the manner, if any, in which the interest payment date or dates may be reset
from time to time and the date or dates from which interest shall accrue; (v)
the method for allocating collections to Certificateholders of such Series; (vi)
the designation of any Series Accounts and the terms governing the operation of
any such Series Accounts; (vii) the method of calculating the servicing fee with
respect thereto; (viii) the provider and the terms of any form of Series
Enhancement with respect thereto; (ix) the terms on which the Investor
Certificates of such Series may be exchanged for Investor Certificates of
another Series, repurchased by the Depositor or remarketed to other investors;
(x) the Series Termination Date; (xi) the number of Classes of Investor
Certificates of such Series and, if such Series consists of more than one Class,
the rights and priorities of each such Class; (xii) the extent to which that
Investor Certificates of such Series will be issuable in temporary or permanent
global form (and, in such case, the depositary for such Global Certificate or
Certificates, the terms and conditions, if any, upon which such Global
Certificate may be exchanged, in whole or in part, for Definitive Certificates,
and the manner in which any interest payable on a temporary or Global
Certificate will be paid); (xiii) whether the Investor Certificates of such
Series may be issued Bearer Certificates and any limitations imposed thereon;
(xiv) the priority of such Series with respect to any other Series (xv) the
Rating Agency
-15-
<PAGE>
or Agencies, if any, rating the Series; (xvi) the name of the Clearing Agency,
if any; (xvii) the base rate applicable to any series; (xviii) the minimum
amount of Principal Receivables required to be maintained through the
designation of Additional Accounts; (xix) any deposit into any account
maintained for the benefit of Certificateholders; (xx) the rights of the holder
of the Depositor's Certificate that have been transferred to the holders of such
Series; (xxi) the Group, if any, to which such Series belongs; (xxii) whether or
not such Series is a Principal Sharing Series; and (xxiii) any other terms of
such Series.
"Rating Agency" shall mean, with respect to any outstanding Series or
-------------
Class, each statistical rating agency selected by the Depositor to rate the
Investor Certificates of such Series or Class.
"Ratings Effect" shall mean, with respect to any action and any Rating
--------------
Agency, that such action will not result in such Rating Agency's reducing or
withdrawal its rating of any outstanding Series or Class of Certificates with
respect to which it is a Rating Agency.
"Reassignment" shall have the meaning specified in Section 2.09(b).
------------
"Receivables" shall mean all amounts shown on the Servicer's records
-----------
as Amounts payable by Obligors on any Account, from time to time, including
amounts payable for Principal Receivables and amounts payable for Finance Charge
Receivables; provided, however, that such amounts shall not be included as or
-------- -------
deemed Receivables on and after the day on which they become Defaulted
Receivables; provided, further, however, that for purposes of determining the
-------- ------- -------
amount of Principal Receivables in the Trust and the deduction of the principal
amount of (x) Ineligible Receivables from such total amount of Principal
Receivables as required by section 2.05(b) and (y) Defaulted Receivables from
such total amount of Principal Receivables as required by subsection 3.03, the
foregoing proviso shall not apply. Any reference in this Agreement or any
Supplement to a Receivable (including any Principal Receivable, Finance Charge
Receivable or Defaulted Receivable) and any Collections thereon or other amounts
recoverable with respect thereto (including any Insurance Proceeds or Recoveries
with respect thereto) shall refer to only the fractional undivided interest in
the amounts paid or payable by Obligers on the Accounts that are transferred by
an Account Owner to the Depositor pursuant to a Receivables Purchase Agreement,
which undivided interest may be less than a 100% undivided interest therein.
"Receivables Purchase Agreements" shall mean, as applicable, the
-------------------------------
receivables purchase agreements between [Seller Name] and the ABSC, dated as of
[ ], 199[ ], in each case as amended from time to time, and includes any
receivables purchase agreement, substantially in the form of such agreements
dated [ ], 199[ ], entered into between ABSC and an Account owner in the
future.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
last Business Day of the preceding Monthly Period, except as otherwise provided
with respect to a Series in the related Supplement.
-16-
<PAGE>
"Recoveries" shall mean all amounts, excluding Insurance Proceeds,
----------
received by the Servicer with respect to Receivables which have previously
become Defaulted Receivables, net of any out-of-pocket costs and expenses of
collection (including attorneys fees and expenses) deducted therefrom.
"Registered Certificateholder" shall mean the Holder of a
----------------------------
Registered Certificate.
"Registered Certificates" shall have the meaning specified in
-----------------------
Section 6.01.
"Related Account" shall have the meaning specified in the definition
---------------
of "Account".
"Removal Date" shall have the meaning specified in Section 2.09(a).
------------
"Removal Notice Date" shall have the meaning specified in
-------------------
subsection 2.09(a).
"Removed Accounts" shall have the meaning specified in Section 2.09(a)
----------------
"Required Designation Date" shall have the meaning specified in
-------------------------
Section 2.08(a).
"Required Principal Balance" shall mean, as of any date of
--------------------------
determination, (a) the sum of the "Initial Invested Amount" (as defined in the
relevant Supplement) of the Investor Certificates of each Series outstanding on
such date (other than any Series or portion thereof which is designated in the
relevant Supplement as then being an Excluded Series) minus (b) the principal
amount on deposit in the Excess Funding Account on such date; provided, however,
-------- -------
if at any time the only Series outstanding are Excluded Series and a Pay-Out
Event has occurred with respect to one or more of such Series, the Required
Principal Balance shall mean (a) the sum of the Invested Amount (as defined in
the relevant Supplement) of each such Excluded Series as of the earliest date on
which any such Pay-Out Event is deemed to have occurred, minus (b) the principal
amount on deposit in the Excess Funding Account.
"Required Depositor's Interest" shall mean, with respect to any date,
-----------------------------
an amount equal to the product of the Required Depositor's Percentage and the
aggregate amount of Principal Receivables in the Trust.
"Required Depositor's Percentage" shall mean 7%; provided, however,
------------------------------- -------- -------
that the Depositor may reduce the Required Depositor's Percentage upon (w) 30
days, prior notice to the Trustee, each Rating Agency and any Series Enhancer
entitled to receive such notice pursuant to the relevant Supplement, (x) receipt
of written notice by the Depositor from each Rating Agency that such reduction
will not have a Ratings Effect, (y) delivery by the Depositor of copies of each
such written notice to the Servicer and the Trustee and (z) delivery to the
Trustee and each such Series Enhancer of an Officer's Certificate of the
Depositor stating that the Depositor reasonably believes that such reduction
will not, based on the facts known to such officer at the time of such
certification, then cause a Pay-Out Event or any event that, after the giving of
notice or the lapse of time, would constitute a Pay-Out Event to occur with
respect to any Series; provided further,
-------- -------
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that the Required Depositor's Percentage shall not at any time be less than the
Specified Percentage.
"Requirements of Law" with respect to any Person shall mean the
-------------------
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, determination of an arbitrator or Governmental Authority, in each
case applicable to or binding upon such Person or to which such Person is
subject, whether Federal, state or local (including usury laws, the Federal
Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors
of the Federal Reserve System).
"Responsible Officer" shall mean any Vice President, any Assistant
-------------------
Vice President, the Secretary, any Assistant Secretary, the Treasure, any
Assistant Treasurer, or any other officer of the Trustee, the Depositor or 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.
"Returned Check Charges" shall mean the charges specified in the
----------------------
Credit Card Agreement payable for returned payment checks drawn on an Account.
"Revolving Period" shall mean, with respect to any Series, the period
----------------
specified as such in the related Supplement.
"RTC" shall mean the Resolution Trust any Series, the period
---
Corporation or any successor thereto.
"Rule 144A" shall mean Rule 144A under the Act.
---------
"Series" shall mean any series of Investor Certificates established
------
pursuant to a Supplement.
"Series Account" shall mean any deposit, trust, escrow or similar
--------------
account maintained for the benefit of the Investor Certificateholders of any
Series or Class, as specified in any Supplement.
"Series Enhancement" shall mean the rights and benefits provided to
------------------
the Investor Certificateholders of any Series or Class pursuant to any letter of
credit, surety bond, cash collateral guaranty, cash collateral account,
insurance policy, spread account, reserve account, guaranteed rate agreement,
maturity liquidity facility, tax protection agreement, interest rate swap
agreement, interest rate cap agreement, interest rate floor agreement, currency
exchange agreement, other derivative securities agreement or other similar
arrangement. The subordination of any Class or Series to another Class or
Series shall be deemed to be a Series Enhancement for such other Class or
Series.
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<PAGE>
"Series Enhancer" shall mean the Person or Persons providing any
---------------
Series Enhancement, other than the Investor Certificateholders of any Class or
Series which is subordinated to another Class or Series.
"Series Issuance Date" shall mean, with respect to any Series, the
--------------------
date on which the Investor Certificates of such Series are to be originally
issued in accordance with Section 6.03 and the related Supplement.
"Series Termination Date" shall mean, with respect to any Series, the
-----------------------
termination date specified in the related Supplement.
"Service Transfer" shall have the meaning specified in Section 10.01.
----------------
"Servicer" shall mean the [Servicer Name], in its capacity as Servicer
--------
pursuant to this Agreement, and, after any Service Transfer, the Successor
Servicer.
"Servicer Default" shall have the meaning specified in Section 10.01.
----------------
"Servicing Fee" shall have the meaning specified in Section 3.02.
-------------
"Servicing Fee Rate" shall mean, with respect to any series, the
------------------
servicing fee rate specified in the related Supplement.
"Servicing Officer" shall mean any officer or duly appointed attorney-
-----------------
in-fact of the Servicer who in either case is involved in, or responsible for,
the administration and servicing of the Receivables and whose name appears on a
list of servicing officers furnished to the Trustee by the Servicer, as such
list may from time to time be amended.
"Transfer Date" shall mean the Business Day immediately preceding
-------------
each Distribution Date.
"Transfer Deposit Amount" shall mean, with respect to any Distribution
-----------------------
Date, the amount, if any, deposited into the Excess Funding Account and the
Collection Account on such Distribution Date in connection with the reassignment
of an Ineligible Receivable pursuant to Section 2.05 or 2.07(a) or the
reassignment or assignment of a Receivable pursuant to Section 3.03.
"Transfer Restriction Event" shall have the meaning specified in
--------------------------
Section 2.10.
"Trust" shall mean the CSFB Card Account Master Trust created by this
-----
Agreement.
"Trust Assets" shall have the meaning specified in section 2.01.
------------
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<PAGE>
"Trust Cut-Off Date" shall mean November 1, 1994.
------------------
"Trustee" shall mean [Trustee Name], not in its Individual capacity,
-------
but solely in its capacity as trustee on behalf of the Trust, or its successor
in interest, or any successor trustee appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from time to
---
time, as in effect to the State of Ohio and in any other state where the filing
of a financing statement is required to perfect the Trust's interest in the
Receivables and the proceeds thereof or in any other specified jurisdiction.
"Unallocated Principal Collections", shall have the meaning specified
---------------------------------
in Section 4.03(c).
"United States" shall mean the United States of America (including the
-------------
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. Alien" or "United States Alien" shall mean any corporation,
---------- -------------------
partnership, individual or fiduciary that, as to the United States, and for
United States income tax purposes, is (i) a foreign corporation, (ii) a foreign
partnership one or more of the members of which is, as to the United states, a
foreign corporation, a nonresident alien individual or a nonresident alien
fiduciary of a foreign estate or trust, (iii) a nonresident alien individual or
(iv) a nonresident alien fiduciary of a foreign estate or trust.
"U.S. Person" or "United States Person" shall mean 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 an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source.
"VISA" shall mean VISA U.S.A., Inc., or any successor thereto.
----
Section 1.02. Other Definitional Provisions and Rules of
------------------------------------------
Construction. With respect to any Series, all terms used herein and not
otherwise defined herein shall have meanings ascribed to them in the related
Supplement.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles or regulatory accounting
-20-
<PAGE>
principles, as applicable, as in effect on the date of this Agreement or on the
date of any such certificate or other document. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles or regulatory accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.
(c) The agreements representations and warranties of ABSC in this
Agreement as Depositor shall be deemed to be the agreements, representations and
warranties of ABSC solely in its capacity for so long as ABSC acts in such
capacity under this Agreement.
(d) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; references to any Article,
Section, Schedule or Exhibit are references to Articles, Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" means "including without limitation".
(e) All references herein to laws, statutes, acts and regulations
shall mean laws, statutes, acts and regulations as amended or recodified from
time to time.
(f) All references herein (including the terms defined in Section
1.01) to the singular shall include the plural and vice versa, unless the
context requires otherwise.
(g) All references herein to the masculine, feminine or neuter gender
shall include all other genders.
ARTICLE II
Transfer of Receivables
-----------------------
Section 2.01. Transfer of Receivables. By execution of this
-----------------------
Agreement, the Depositor does hereby sell, transfer, assign, set over and
otherwise convey to the Trustee, on behalf of the Trust, for the benefit of the
Certificateholders, all its right, title and interest in, to and under the
Receivables existing at the opening of business on the Trust Cut-Off Date, in
the case of Receivables arising in the Initial Accounts, and on each Additional
Cut-Off Date, in the case of Receivables arising in the Additional Accounts, and
in each case thereafter created from time to time until the termination of the
Trust, all moneys due or to become due and all amounts received with respect
thereto and all proceeds (including "proceeds" as defined in the UCC, and
Recoveries but excluding Insurance Proceeds) thereof, and all its rights, title
and interest in, to and under the Interchange payable pursuant to Section
2.07(i). Such property, together with all moneys on deposit in the Collection
Account, the Excess Funding Account, the Series Accounts and any Series
Enhancement shall constitute the assets of the Trust (the "Trust Assets"). The
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<PAGE>
foregoing does not constitute and is not intended to result in the creation or
assumption by the Trust, the Trustee, any Investor Certificateholder or any
Series Enhancer of any obligation of the Depositor, the Servicer or any other
Person in connection with the Accounts or the Receivables or under any agreement
or instrument relating thereto, including any obligation to Obligors, merchant
banks, merchants clearance systems, VISA, MasterCard or insurers.
The Depositor agrees to record and file, at its own expense, financing
statements (and continuation statements when applicable) with respect to the
Receivables now existing and hereafter created in the Accounts meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect, and maintain the perfection of, the sale and
assignment of such Receivables to the Trust, and to deliver a file stamped copy
of each such financing statement or other evidence of such filing (which may,
for purposes of this Section 2.01, consist of telephone confirmation of such
filing) to the Trustee on or prior to the first Closing Date, in the case of
such Receivables arising in the Initial Accounts, and (if any additional filing
is so necessary) the applicable Addition Date, in the case of such Receivables
arising in Additional Accounts. The Trustee shall be under no obligation
whatsoever to file such financing or continuation statements or to make any
other filing under the UCC in connection with such sale and assignment.
The Depositor further agrees, at its own expense, (a) on or prior to
(x) the first Closing Date, in the case of the Initial Accounts, (y) the
applicable Addition Date, in the case of Additional Accounts, and (z) the
applicable Removal Date, in the case of Removed Accounts, to indicate clearly
and unambiguously in its computer files that Receivables created in connection
with the Accounts (other than Removed Accounts) have been conveyed to the Trust
pursuant to this Agreement for the benefit of the Certificateholders and (b) on
or prior to the applicable Document Delivery Date, to deliver to the Trustee a
computer file on media and in a file format reasonably acceptable to the Trustee
or microfiche list containing a true and complete list of all such Accounts
specifying for each such Account, as of the Trust Cut-Off Date, in the case of
the Account, as of the Trust Cut-Off Date, in the case of the Initial Accounts,
the applicable Additional Cut-Off Date, in the case of Additional Accounts, and
the applicable Removal Date, in the case of the Removed Accounts, its account
number, the collection status, the aggregate amount outstanding in such Account
and the aggregate amount of Principal Receivables outstanding in such Account.
Such file or list, as supplemented form time to time to reflect Additional
Accounts and Removed Accounts, shall be marked as Schedule 1 to this Agreement
and is hereby incorporated into and made a part of this Agreement.
Section 2.02. Acceptance by Trustee. The Trustee hereby
---------------------
acknowledges its acceptance on behalf of the Trust of all right, title and
interest to the property, now existing and hereafter created, conveyed to the
Trust pursuant to Section 2.01 and declares that it shall maintain such right,
title and interest, upon the trust herein set forth, for the benefit of all
Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Depositor
delivered to the Trustee the computer file or microfiche list relating to the
Initial Accounts described int he last paragraph of Section 2.01.
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<PAGE>
(a) The Trustee hereby agrees not to disclose to any Person any of the
account numbers or other information contained in the computer files or
microfiche lists marked as Schedule 1 or otherwise delivered to the Trustee from
time to time, except (i) to a Successor Servicer or as required by a Requirement
of Law applicable to the Trustee, (ii) in connection with the performance of the
Trustee's duties hereunder or (iii) in enforcing the rights of
Certificateholders. The Trustee agrees to take such measures as shall be
reasonably requested by the Depositor to protect and maintain the security and
confidentiality of such information and, in connection therewith, will allow the
Depositor to inspect the Trustee's security and confidentiality arrangements
from time to time during normal business hours. The Trustee shall when possible
provide the Depositor with written notice 30 days prior to any disclosure
pursuant to this Section.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement or any Supplement.
(c) The Trustee hereby agrees not to use any information it obtains
pursuant to this Agreement, including any of the account numbers or other
information contained in the computer files or microfiche lists marked as
Schedule 1 or otherwise delivered by the Depositor to the Trustee, directly or
indirectly, to compete or assist any person in competing with the Depositor in
its business.
Section 2.03. Representations and Warranties of the Depositor
-----------------------------------------------
Relating to the Depositor. The Depositor hereby represents and warrants to the
- -------------------------
Trust and the Trustee as of each Closing Date that:
(a) Organization and Good Standing. The Depositor is a corporation,
------------------------------
validly existing under the laws of the jurisdiction of its organization or
incorporation, and has, in all material respects, full power and authority to
own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement and each Supplement and to execute
and deliver to the Trustee the Certificates pursuant hereto.
(b) Due Qualification. The Depositor is duly qualified to do business
-----------------
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would render any Credit Card Agreement relating to an Account or any
Receivable unenforceable by the Depositor, the Servicer or the Trustee or would
have a material adverse effect on the interests of the Certificateholders
hereunder or under any Supplement; provided, however, that no representation or
-------- -------
warranty is made with respect to any qualifications, licenses or approvals which
the Trustee has or may be required at any time to obtain, if any, in connection
with the transactions contemplated hereby.
(c) Due Authorization. The execution and delivery of this Agreement
-----------------
and each Supplement, the execution and delivery to the Trustee of the
Certificates and the consummation
-23-
<PAGE>
of the transactions provided for in this Agreement and each Supplement have been
duly authorized by the Depositor by all necessary corporate action on the part
of the Depositor.
(d) No Conflict. The execution and delivery of this Agreement, each
-----------
Supplement and the Certificates, the performance of the transactions
contemplated by this Agreement and each Supplement and the fulfillment of the
terms hereof and thereof applicable to the Depositor will not conflict with or
violate the articles of association or by-laws of the Depositor or conflict
with, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a material default under, any
material indenture, contract, agreement, mortgage, deed of trust or other
instrument to which the Depositor is a party or by which it or any or its
properties are bound.
(e) No Violation. The execution and delivery of this Agreement, each
------------
Supplement and the Certificates, the performance of the transactions
contemplated by this Agreement and each Supplement and the fulfillment of the
terms hereof and thereof applicable to the Depositor will not conflict with or
violate in any material respect any Requirements of Law applicable to the
Depositor.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the best knowledge of the Depositor, threatened against the
Depositor, before any Governmental Authority (i) asserting the invalidity of
this Agreement, any Supplement or the Certificates, (ii) seeking to prevent the
issuance of the Certificates or the consummation by the Depositor of any of the
transactions contemplated by this Agreement, any Supplement or the Certificates,
(iii) seeking any determination or ruling that, in the reasonable judgment of
the Depositor, would materially and adversely affect the performance of its
obligations under this Agreement or any Supplement, (iv) seeking any
determination or ruling that would materially and adversely effect the valid or
enforceability of this Agreement, any Supplement or the Certificates or (v)
seeking to affect adversely the income tax attributes of the Trust under the
Federal income or Ohio income or franchise tax systems.
(g) All Consents Required. All authorizations, consents, orders or
---------------------
other actions of any Person or of any Governmental Authority required to be
obtained by the Depositor in connection with the execution and delivery by the
Depositor of this Agreement, each Supplement and the Certificates, the
performance by the Depositor of the transactions contemplated by this Agreement
and each Supplement and the fulfillment by the Depositor of the terms hereof and
thereof, have been obtained, except such as are required by state securities or
"Blue Sky" laws in connection with the distribution of the Certificates.
[(h) Insolvency. No Insolvency Event with respect to the Depositor
----------
has occurred and the transfer of the Receivables by the Depositor to the Trust
has not been made in contemplation of the occurrence thereof.]
[The representations and warranties set forth in this Section 2.03
shall survive the transfer and assignment of the Receivables to the Trust. Upon
discovery by a Responsible Officer
-24-
<PAGE>
of the Depositor, the Servicer or the trustee of a breach of any of the
representations and warranties set forth in this Section 2.03, the party,
discovering such breach shall give prompt written notice to the others and to
each Series Enhancer entitled thereto pursuant to the relevant Supplement within
three Business Days following such discovery. The Depositor agrees to cooperate
with the Servicer and the Trustee in attempting to cure any such breach. For
purposes of the representations and warranties set forth in this Section 2.03,
each reference to a Supplement shall be deemed to refer only to those
Supplements in effect as of the relevant Closing Date.]
Section 2.04. Representations and Warranties of the Depositor
-----------------------------------------------
Relating to the Agreement and Any Supplement and the Receivables.
- ----------------------------------------------------------------
(a) Representations and Warranties. The Depositor hereby represents
------------------------------
and warrants to the Trust and the Trustee as of the date of this Agreement and
the date of each Supplement, as of each Closing Date and, with respect to
Additional Accounts, as of the related Addition Date that:
(i) this Agreement, each Supplement and, in the case of
Additional Accounts, the related Assignment, each constitutes a legal,
valid and binding obligation of the Depositor enforceable against the
Depositor in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general or by general principles of equity (whether considered in a suit at
law or in equity);
(ii) as of the first Closing Date, as of the related
Addition Date, with respect to Additional Accounts, and as of the
applicable Removal Date, with respect to the Removed Accounts, Schedule 1
to this Agreement and the related computer file or microfiche list
delivered pursuant to this Agreement, as supplemented to such date, is an
accurate and complete listing in all material respects of all the Accounts
as the Trust Cut-Off Date, such Additional Cut-Off Date or such Removal
Date, as the case may be, and the information contained therein with
respect to the identify of such Accounts and the Receivables existing in
such Accounts is true and correct in all material respects as of the trust
Cut-Off Date, such Additional Cut-Off Date or such Removal Date, as the
case may be;
(iii) each Receivable conveyed to the Trust by the Depositor
has been conveyed to the Trust free and clear of any Lien (other than Liens
permitted under subsection 2.07(b));
(iv) with respect to each Receivable, all authorizations,
consents, licenses, orders or approvals of or registrations or declarations
with any Governmental Authority required to be obtained, effected or given
by the Depositor in connection with the transfer by the Depositor of
Receivables to the Trust have been duly obtained, effected or given and are
in full force and effect;
-25-
<PAGE>
(v) [subject, in each case pertaining to proceeds, to
Section 9-306 of the UCC, and further subject to any Liens permitted under
subsection 2.07(b), each of this Agreement and, in the case of Additional
Accounts, the related Assignment constitutes a valid sale, transfer and
assignment to the Trust of all right, title and interest of the Depositor
in the Receivables now existing or hereafter created and the proceeds
thereof; or, if this Agreement or, in the case of Additional Accounts, the
related Assignment does not constitute a sale of such property, it
constitutes a grant of a "security interest" (as defined in the UCC) in
such property to the Trust, which, in the case of existing Receivables and
the proceeds thereof, is enforceable upon execution and delivery of this
Agreement, or, with respect to then existing Receivables in Additional
Accounts, as of the applicable Addition Date, and which will be enforceable
with respect to such Receivables hereafter and thereafter created and the
proceeds thereof upon such creation. Upon the filing of the financing
statements pursuant to Section 2.01 and, in the case of Receivables
hereafter created and the proceeds thereof, upon the creation thereof, the
Trust shall have a first priority perfected security or ownership interest
in such property and proceeds except for Liens permitted under subsection
2.07(b);
[(vi) except as otherwise expressly provided in this
Agreement or any Supplement, neither the Depositor nor any Person claiming
through or under the Depositor has any claim to or interest in the
Collection Account, any Series Account or any Series Enhancement;]
(vii) on the Trust Cut-Off Date, each Account was an
Eligible Account and, in the case of Additional Accounts, on the Additional
Cut-Off Date with respect thereto, each such Account will be an Eligible
Account;
(viii) on the Trust Cut-Off Date, each Receivable then
existing was an Eligible Receivable and, in the case of Additional
Accounts, on the Addition Date with respect thereto, each Receivable
contained therein will be an Eligible Receivable;
(ix) as of the date of the creation of any new Receivable
in an Account specified in a Receivables Purchase Agreement, such
Receivable is an Eligible Receivable; and
(x) no selection procedure reasonably believed by the
Depositor to be materially adverse to the interests of the Investor
Certificateholders was used in selecting the Initial Accounts.
(b) Notice of Breach. The representations and warranties of the
----------------
Depositor set forth in Section 2.03, this Section 2.04 and Section 2.09(f) shall
survive the transfer and assignment by the Depositor of Receivables to the
Trust. Upon discovery by a Responsible Officer of the Depositor, the Servicer
or the Trustee of a breach of any of the representations and warranties by the
Depositor set forth in this in Section 2.03, this Section 2.04 and Section
2.09(f), the party discovering such breach shall give prompt written notice to
the others and to each Series
-26-
<PAGE>
Enhancer entitled thereto pursuant to the relevant Supplement within three
Business Days following such discovery. [The Depositor agrees to cooperate with
the Servicer and the Trustee in attempting to cure any such breach. For
purposes of the representations and warranties set forth in this Section 2.04,
each reference to a Supplement shall be deemed to refer only to those
Supplements in effect as of the date of the relevant representations or
warranties.]
Section 2.05. Reassignment of Ineligible Receivables.
--------------------------------------
(a) Reassignment of Receivables. In the event that:
---------------------------
(i) any representation or warranty contained in Section
2.04(a)(ii), (iii), (iv), [(vi)](vii), (viii), [(ix) or (x)] is not true
and correct in any material respect as of the date specified therein
(individually or together with any other breach or breaches then existing)
and such breach has a material adverse effect on the Certificateholders'
Interest of all Series in any Receivables transferred to the Trust (which
determination shall be made without regard to the availability of funds
under any Series Enhancement) and remains uncured for 60 days (or for such
longer period, not in excess of 150 days, as may be reasonably necessary to
remedy such breach; provided that such breach is capable of remedy within
150 days or less and the Depositor delivers an Officer's Certificate to the
Trustee to the effect that the Depositor has commenced, or will promptly
commence and diligently pursue, all reasonable efforts to remedy such
breach) after the earlier to occur of the discovery thereof by the
Depositor or receipt by the Depositor of written notice thereof given by
the Trustee, or
(ii) it is so provided in Section 2.07(a) with respect to any
Receivables,
then the Depositor shall accept reassignment of all Receivables in the
related Account ("Ineligible Receivables") on the terms and conditions set
forth in paragraph (b) below[; provided, however, that such Receivables
-------- -------
will not be deemed to be Ineligible Receivables and will not be reassigned to
the Depositor if, on any day prior to the end of such 60-day or longer period,
(x) either (A) in the case of an event described in clause (i) above the
relevant representation and warranty shall be true and correct in all material
respects as if made on such day or (B) in the case of an event described in
clause (ii) above the circumstances causing such Receivable to become an
Ineligible Receivable shall no longer exist and (y) the Depositor shall have
delivered to the Trustee an Officer's Certificate of the Depositor describing
the nature of such breach and the manner in which in the relevant representation
and warranty became true and correct].
(b) Price of Reassignment. The Servicer shall deduct the portion
---------------------
of such Ineligible Receivables reassigned to the Depositor which are Principal
Receivables from the aggregate amount of Principal Receivables used to calculate
the Depositor's Amount, the Depositor's Interest and the Floating Allocation
Percentage and the Principal Allocation Percentage applicable to any Series. In
the event that, following the exclusion of such Principal Receivables from the
calculation of the Depositor's Amount, the Depositor's Amount would be a
negative number, not later than 12:00 noon, New York City time on the first
Distribution Date
-27-
<PAGE>
following the Monthly Period in which such reassignment obligation arises, the
Depositor shall make a deposit in immediately available funds in an amount equal
to the principal portion and the interest portion of the amount by which the
Depositor's Amount would be below zero (up to the amount of such Principal
Receivables) into the Excess Funding Account and the Collection Account,
respectively. [Any amount deposited into the Excess Funding Account and the
Collection Account, respectively, in connection with the reassignment of an
Ineligible Receivable shall be considered a Transfer Deposit Amount and shall be
applied in accordance with Article IV and the terms of each Supplement.]
Upon the deposit, if any, required to be made to the Excess Funding
Account and the Collection Account, respectively, as provided in this Section
and the reassignment of Ineligible Receivables, the Trustee, on behalf of the
Trust, shall automatically and without further action be deemed to transfer,
assign, set-over and otherwise convey to the Depositor or its designee, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to such Ineligible Receivables, all monies due or to become due
with respect thereto and all proceeds thereof. The Trustee shall execute such
documents and instruments of transfer or assignment and take such other actions
as shall reasonably be requested by the Depositor to effect the transfer of such
Ineligible Receivables pursuant to this Section. The obligation of the
Depositor to accept reassignment of any Ineligible Receivables, and to make the
deposits, if any, required to be made to the Excess Funding Account and the
Collection Account, respectively, as provided in this Section, shall constitute
the sole remedy respecting the event giving rise to such obligation available to
Investor Certificateholders (or the Trustee on behalf of the Investor
Certificateholders) or any Series Enhancer.
Section 2.06. Reassignment of Receivables in Trust Portfolio. In the
----------------------------------------------
event any representation or warranty of the Depositor set forth in [Section 2.03
or Section 2.04(a)(i), (v) or (vi)] is not true and correct in any material
respect and such breach has a material adverse effect on the Certificateholders'
Interest of all Series in the Receivables (which determination shall be made
without regard to the availability of funds under any Series Enhancement), then
either the Trustee or the Holders of Investor Certificates evidencing more than
50% of the aggregate unpaid principal amount of all outstanding Investor
Certificates, by written notice then given to the Depositor and the Servicer
(and to the Trustee if given by the Investor Certificateholders), may direct the
Depositor to accept a reassignment of the Receivables if such breach and any
material adverse effect caused by such breach is not cured within 60 days of
such notice (or for such longer period, not in excess of 150 days, as may be
reasonably necessary to remedy such breach; provided that such breach is capable
of remedy within 150 days or less and the Depositor delivers an Officer's
Certificate to the Trustee to the effect that the Depositor has commenced, or
will promptly commence and diligently pursue, all reasonable efforts to remedy
such breach), and upon those conditions the Depositor shall be obligated to
accept such reassignment on the terms set forth below; provided, however, that
-------- -------
such Receivables will not be reassigned to the Depositor if, on any day prior to
the end of such 60-day or longer period (i) the relevant representation and
warranty shall be true and correct in all material respects as if made on such
day and (ii) the Depositor shall have delivered to the Trustee an Officer's
Certificate of the Depositor describing the nature of such breach and the manner
in which the relevant representation and warranty
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became true and correct and the breach of such representation and warranty shall
no longer materially adversely affect the interests of the Investor
Certificateholders.
The Depositor shall deposit in the Collection Account in immediately
available funds not later than 12:00 noon, New York City time, on the Transfer
Date immediately preceding the first Distribution Date following the Monthly
Period in which such reassignment obligation arises, in payment for such
reassignment, an amount equal to the sum of the amounts specified therefor with
respect to each outstanding Series in the related Supplement. Notwithstanding
anything to the contrary in this Agreement, such amounts shall be distributed on
such Distribution Date in accordance with Article IV and the terms of each
Supplement.
Upon the deposit, if any, required to be made to the Collection
Account as provided in this Section and the reassignment of the applicable
Receivables, the Trustee, on behalf of the Trust, shall automatically and
without further action be deemed to sell, transfer, assign, set over and
otherwise convey to the Depositor or its designee, without recourse,
representation or warranty, all the right, title and interest of the Trust in
and to such Receivables, all moneys due or to become due and all amounts
received with respect thereto and all proceeds thereof. The Trustee shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Depositor to affect the
conveyance of such Receivables pursuant to this Section. The obligation of the
Depositor to accept reassignment of any Receivables and to make the deposits, if
any, required to be made to the Collection Account as provided in this Section
shall constitute the sole remedy respecting the event giving rise to such
obligation available to the Certificateholders (or the Trustee on behalf of the
Certificateholders) or any Series Enhancer.
Section 2.07. Covenants of the Depositor. The Depositor hereby
--------------------------
covenants as follows:
(a) Receivables Not to be Evidenced by Promissory Notes. The
---------------------------------------------------
Depositor will take no action to cause or permit any Receivable to be evidenced
by any instrument or chattel paper (as defined in the UCC) and, if any such
Receivable is so evidenced it shall be deemed to be an Ineligible Receivable in
accordance with Section 2.05(a) and shall be reassigned to the Depositor in
accordance with Section 2.05(b)[; provided, however, that Receivables evidenced
-------- -------
by notes taken from Obligors in the ordinary course of business of the
Servicer's collection efforts shall not be deemed Ineligible Receivables solely
as a result thereof].
(b) Security Interests. Except for the conveyances hereunder, the
------------------
Depositor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; the
Depositor will immediately notify the Trustee of the existence of any Lien on
any Receivable; and the Depositor shall defend the right, title and interest of
the Trust in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Depositor.
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<PAGE>
(c) Depositor's Interest. Except for the conveyances hereunder, in
--------------------
connection with any transaction permitted by Section 7.02 and as provided in
Sections 2.08(f) and 6.03, the Depositor agrees not to transfer, assign,
exchange or otherwise convey or pledge, hypothecate or otherwise grant a
security interest in the Depositor's Interest represented by the Depositor's
Certificate or any Supplemental Certificate and any such attempted transfer,
assignment, exchange, conveyance, pledge, hypothecation or grant shall be void.
(d) Delivery of Collections. In the event that the Depositor receives
-----------------------
Collections, the Depositor agrees to pay the Servicer all such Collections as
soon as practicable after receipt thereof but in no event later than two
Business Days after the Date of Processing by the Depositor.
(e) Notice of Liens. The Depositor shall notify the Trustee and each
---------------
Series Enhancer entitled to such notice pursuant to the relevant Supplement
promptly after becoming aware of any Lien on any Receivable other than the
conveyances hereunder or Liens permitted under Section 2.07(b).
(f) Amendment of the Certificate of Incorporation. The Depositor will
---------------------------------------------
not amend in any material respect its Certificate of Incorporation without
providing the Rating Agency with notice no later than the fifth Business Day
prior to such amendment (unless the right to such notice is waived by the Rating
Agency) and satisfying the Rating Agency Condition.
(g) Other Indebtedness. The Depositor shall not incur any additional
------------------
debt, unless (i) such debt is incurred pursuant to the Revolving Credit
Agreement or (ii) the Rating Agency is provided with notice no later than the
fifth Business Day prior to the incurrence of such additional debt (unless the
right to such notice is waived by the Rating Agency) and the Rating Agency
Condition is satisfied with respect to the incurrence of such debt.
(h) [other organizational assurances by Depositor]
Section 2.08. Covenants of Depositor with Respect to Receivables
--------------------------------------------------
Purchase Agreement. Each Depositor in its capacity as purchaser of Receivables
- ------------------
from [Seller Name] pursuant to a Receivables Purchase Agreement, hereby
covenants that the Depositor will at all times enforce the covenants and
agreements of [Seller Name] in such Receivables Purchase Agreement, including
covenants to the effect set forth below only to the extent to which they are
enforceable against [Seller Name] pursuant to such Receivables Purchase
Agreement:
(i) Periodic Rate Finance Charge. (i) Except (x) as otherwise
----------------------------
required by any Requirements of Law or (y) as is deemed by [Seller Name] or
any other Account Owner, as the case may be, to be necessary in order for
it to maintain its credit card business or a program operated by such
credit card business on a competitive basis based on a good faith
assessment by it of the nature of the competition with respect to the
credit card business or such program, it shall not at any time make any
action which would have the effect of reducing the Portfolio Yield to a
level that cold be reasonably expected to
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<PAGE>
cause any Series to experience any Pay Out Event or Reinvestment Event
based on the insufficiency of the Portfolio Yield or any Requirements of
Law, it shall not take any action which would have the effect of reducing
the Portfolio Yield to less than the highest [current/future] Average Rate
for any Group.
(ii) Credit Card Agreements and Guidelines. Subject to compliance
-------------------------------------
with all Requirements of Law and paragraph (a) above, [Seller Name] or
other Account Owner, as the case may be, may change the terms and
provisions of the applicable Credit Card Agreements or the applicable
Credit Card Guidelines in any respect (including the calculation of the
amount or the timing of charge-offs and the Periodic Rate Finance Charges
to be assessed thereon). Notwithstanding the above, unless required by
Requirements of Law or as permitted by Section 2.08(a), [Selelr Name] or
other Account Owner, as the case may be, will take no action with respect
to the applicable Credit Card Agreements or the applicable Credit Card
Guidelines, which, at the time of such action, [Seller Name] or other
Account Owner, as the case may be, reasonably believes will have a material
adverse effect on the Investor Certificateholders.
The Depositor further covenants that it will not enter into any
amendments to a Receivables Purchase Agreement unless the Rating Agency
Condition has been satisfied.
Section 2.09. Addition of Accounts.
--------------------
(a) Required Additions.
------------------
(i) If, as of the close of business on the last Business Day of
any Monthly Period, [either (i) the Depositor's Amount is less than the
Required Depositor's Interest on such date, or (ii)] the aggregate amount
of Principal Receivables is less than the Required Principal Balance on
such date, the Depositor shall on or prior to the close of business on the
10th Business Day following the last Business Day of such Monthly Period
(the "Required Designation Date")[, unless the Depositor's Amount exceeds
the Required Depositor's Interest and the aggregate amount of Principal
Receivables equals or exceeds the Required Principal Balance as of the
close of business on any day after the last Business Day of such Monthly
Period and prior to the Required Designation Date,] cause to be designated
additional Eligible Accounts to be included as Accounts as of the Required
Designation Date or any earlier date in a sufficient amount such that,
after giving effect to such addition, [the Depositor's Amount as of the
close of business on the Addition Date is at least equal to the Required
Depositor's Interest on such date and] the aggregate amount of Principal
Receivables as of the Addition Date is at least equal to the Required
Principal Balance on such date. The failure of any condition set forth in
paragraph (c) or (d) below, as the case may be, shall not relieve the
Depositor of its obligation pursuant to this paragraph; provided, however,
-------- -------
that the failure of the Depositor to transfer Receivables to the Trust as
provided in this paragraph solely as a result of the
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<PAGE>
unavailability of a sufficient amount of Eligible Receivables shall not
constitute a breach of this Agreement; provided further that any such
----------------
failure which has not been timely cured will nevertheless result in the
occurrence of a Pay Out Event with respect to each Series for which,
pursuant to the Supplement therefor, a failure by the Depositor to convey
Receivables in Additional Accounts or Participation Interests to the Trust
by the day on which it is required to convey such Receivables or
Participation Interests pursuant to Section 2.08(a) constitutes a "Pay Out
Event" (as defined in such Supplement).
(ii) In lieu of, or in addition to, designating Additional
Accounts pursuant to clause (i) above, the Depositor may, subject to the
conditions specified in paragraph (d) below, convey Participation Interests
to the Trust. The addition of Participation Interests in the Trust pursuant
to this paragraph (a) or paragraph (b) below shall be effected by an
amendment hereto, dated the applicable Addition Date, pursuant to Section
13.01(a)
(b) Permitted Additions. The Depositor may from time to time, at his
-------------------
sole discretion, subject to the conditions specified in paragraph (c) or (d)
below, as the case may be, cause the designation of additional Eligible
Accounts to be included as Accounts or Participation Interests to be included as
Trust Assets, in either case as of the applicable Additional Cut-Off Date.
(c) Conditions to Addition. On the Addition Date with respect to any
----------------------
Additional Accounts or Participation Interests, the Trust shall purchase the
Receivables in such Additional Accounts (and such Additional Accounts shall be
deemed to be Accounts for purposes of this Agreement) or shall purchase such
Participation Interests, in each case as of the close of business on the
applicable Additional Cut-Off Date, subject to the satisfaction of the following
conditions:
(i) on or before the [eigth] Business Day immediately preceding
the Addition Date, the Depositor shall have given the Trustee, the
Servicer, each Rating Agency and any Series Enhancer entitled thereto
pursuant to the relevant Supplement written notice that the Additional
Accounts or Participation Interests will be included and specifying the
applicable Addition Date, the Additional Cut-Off Date, the approximate
number of accounts or other assets expected to be added and the approximate
aggregate balances expected to be outstanding in the accounts or other
assets to be added;
(ii) all Additional Accounts will be Eligible Accounts;
(iii) in the case of Additional Accounts, the Depositor shall
have delivered to the Trustee copies of UCC-1 financing statements covering
such Additional Accounts, if necessary to perfect the Trust's interest in
the Receivables arising therein;
(iv) in the case of Additional Accounts, to the extent required by
Section 4.03, the Depositor shall have deposited in the Collection Account
all Collections with respect to such Additional Accounts since the
Additional Cut-Off Date;
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<PAGE>
(v) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the Depositor shall have occurred
nor shall the transfer of the Receivables arising in the Additional
Accounts or of the Participation Interests to the Trust have been made in
contemplation of the occurrence thereof;
(vi) except in the case of an Addition pursuant to Section 2.08(a),
the Depositor shall have received written notice from each Rating Agency
that such Addition will not have a Ratings Effect and shall have delivered
copies of each such written notice to the Servicer and the Trustee;
(vii) the Depositor shall have delivered to the Trustee, each Rating
Agency and any Series Enhancer entitled thereto pursuant to the relevant
Supplement an Opinion of Counsel that for Federal income and Ohio income
and franchise tax purposes, such Addition will not cause a taxable event to
the holders of the Certificates;
(viii) the Depositor shall have delivered to the Trustee, each Rating
Agency and any Series Enhancer entitled thereto pursuant to the relevant
Supplement an Opinion of Counsel, dated the Addition Date, in accordance
with Section 13.02(d);
(ix) the Depositor shall have delivered to the Trustee and any
Series Enhancer entitled thereto pursuant to the relevant Supplement an
Officer's Certificate of the Depositor, dated the Addition Date, to the
effect that the Depositor reasonably believes that such Addition will not,
based on the facts known to such officer at the time of such certification,
then cause a Pay Out Event or any event that, after the giving of notice or
the lapse of time, would constitute a Pay Out Event to occur with respect
to any Series; and
(x) within ten Business Days of the Addition Date, the Depositor
shall have delivered to the Trustee a written assignment and a computer
file or a microfiche list containing a true and complete list of the
related Additional Accounts or Participation Interests specifying for each
such Account its account number, the collection status, the aggregate
amount outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account or comparable information in the
case of Participation Interests.
(d)[(f)]Representations and Warranties. The Depositor hereby
------------------------------
represents and warrants to the Trust and the Trustee as of the related
Addition Date as to the matters relating to it set forth in paragraph
(d)(iv) and (viii) above and that, in the case of Additional Accounts, the
file or list delivered pursuant to paragraph (g) below is, as of the
applicable Additional Cut-Off Date, true and complete in all material
respects.
(e) Additional Depositors. The Depositor may designate Affiliates
---------------------
of the Depositor to be included as Depositors ("Additional Depositors") under
this Agreement by an amendment hereto pursuant to Section 13.01(a) and, in
connection with such designation, the Bank
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<PAGE>
shall surrender the Depositor's Certificate to the Trustee in exchange for a
newly issued Depositor's Certificate modified to reflect such Additional
Depositor's interest in the Depositor's Interest; provided, however, that prior
-------- -------
to any such designation and exchange the conditions set forth in Section 6.03(c)
shall have been satisfied with respect thereto.]
(f) Delivery of Documents. In the case of the designation of
---------------------
Additional Accounts, the Depositor shall deliver to the Trustee (i) the computer
file or microfiche list required to be delivered pursuant to Section 2.01 with
respect to such Additional Accounts on the applicable Document Delivery Date and
(ii) a duly executed, written Assignment (including an acceptance by the Trustee
for the benefit of the Certificateholders), substantially in the form of Exhibit
B (the "Assignment"), on the Document Delivery Date; and, in the case of an
Addition of Participation Interests, the Depositor shall deliver comparable
information and documents with respect to such Participation Interests, on the
Document Delivery Date.]
(g) [Automatic Additional] [New] Accounts. The Depositor may from
--------------------------------------
time to time, at its sole discretion, subject to and in compliance with the
limitations specified in clause (ii) below and the applicable conditions
specified in paragraph (d) below, voluntarily designate Eligible Accounts to be
included as Accounts as of the applicable Additional Cut-Off Date. For purposes
of this paragraph, Eligible Accounts shall be deemed to include only consumer
revolving credit card accounts or other consumer revolving credit accounts which
are of a type included as Initial Accounts or which have previously been
included in any Addition which has been effected in accordance with all of the
conditions specified in paragraph ( ) below.
(i) The Depositor shall not be permitted to designate Automatic
Additional Accounts pursuant to clause (i) above with respect to any of the
three consecutive Monthly Periods commencing in January, April, July and
October of each calendar year, unless on or before the first Business Day
of such three consecutive Monthly Periods, the Depositor shall have
requested Standard & Poor's to notify, and Standard & Poor's shall have
notified in writing, the Depositor, the Servicer and the Trustee of the
limitations (other than the limitations described in this Agreement), if
any, to the right of the Depositor to designate Automatic Additional
Accounts during such three consecutive Monthly Periods. Unless Standard &
Poor's otherwise consents, the number of Automatic Additional Accounts plus
the number of Accounts added pursuant to Section 2.08(a), without the prior
notice of Standard & Poor's as described under Section 2.08(d)(v), shall
not at any time exceed the Aggregate Addition Limit; provided, however, if
-------- -------
the Aggregate Addition Limit is exceeded for purposes of Section 2.08(a),
the Depositor shall have delivered written notice to Moody's of any such
addition. Unless Moody's otherwise consents, the number of Automatic
Additional Accounts added pursuant to Section 2.08(c), without prior notice
of Moody's as described under 2.08(d) (v), shall not at any time exceed the
Aggregate Addition Limit.
(ii) On or before June 30 and December 31 of each calendar year,
commencing on December 31,1994, the Depositor shall deliver to the Trustee,
each Rating Agency and any Series Enhancer entitled thereto pursuant to the
relevant Supplement an
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<PAGE>
Opinion of Counsel in accordance with Section 13.02(d), with respect to the
Automatic Additional Accounts included as Accounts during the preceding
six-month period confirming the validity and perfection of each transfer of
such Automatic Additional Accounts; provided, however, if the long-term
-------- -------
unsecured debt rating or certificate of deposit rating of the Depositor is
reduced below AA- but is maintained at a level of A- or higher, by Standard
& Poor's, (and only for so long as such rating is below AA- but is
maintained at a level of A-or higher by Standard & Poor's) the Depositor
shall deliver to the Trustee, each Rating Agency and any Series Enhancer
entitled thereto pursuant to the relevant Supplement an Opinion of Counsel
in accordance with Section 13.02(d) on or before March 31, June 30,
September 30 and December 31 of each calendar year, commencing on the first
such date to occur after such reduction occurs, with respect to the
Automatic Additional Accounts included as Accounts during the preceding
three-month period confirming the validity and perfection of each
transfer of such Automatic Additional Accounts; provided further, if the
-------- -------
long-term unsecured debt rating of the Depositor is withdrawn or reduced
below A- by Standard & Poor's (and only for so long as such rating is below
A- by Standard & Poor's), the Depositor shall deliver to the Trustee, each
Rating Agency and any Series Enhancer entitled thereto pursuant to the
relevant Supplement an Opinion of Counsel in accordance with Section
13.02(d) on or before the last Business Day of each calendar month,
commencing on the last Business Day of the calendar month immediately
following the month in which such withdrawal or reduction occurs, with
respect to the Automatic Additional Accounts included as Accounts during
the preceding one-month period confirming the validity and perfection of
each transfer of such Automatic Additional Accounts. If such Opinion of
Counsel with respect to any Automatic Additional Accounts is not so
received, the ability of the Depositor to designate Automatic Additional
Accounts will be suspended until such time as each Rating Agency otherwise
consents in writing or such Automatic Additional Accounts are removed from
the Trust. If the Depositor is unable to deliver such Opinion of Counsel
with respect to any Additional Account which has been the subject of an
Automatic Addition, such inability shall be deemed to be breach of the
representation in Section 2.04(a)(viii) with respect to the Receivables in
such Additional Account for purposes of Section 2.05.
(h) Conditions to Addition. On the Addition Date with respect to any
----------------------
Additional Accounts or Participation Interests, the Trust shall purchase the
Receivables in such Additional Accounts (and such Additional Accounts shall be
deemed to be Accounts for purposes of this Agreement) or shall purchase such
Participation Interests, in each case as of the close of business on the
applicable Additional Cut-Off Date, subject to the satisfaction of the following
conditions (provided, however, that the conditions set forth in clauses (i),
-------- -------
(v), (vi) and (vii) shall not apply to the transfer to the Trust of Receivables
in Automatic Additional Accounts which are governed by Section 2.08(c)):
(i) on or before the fifth Business Day immediately preceding
the Addition Date, the Depositor shall have given the Trustee, the
Servicer, each Rating Agency and any Series Enhancer entitled thereto
pursuant to the relevant Supplement written notice that the Additional
Accounts or Participation Interests will be included and specifying the
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<PAGE>
applicable Addition Date, the Additional Cut-Off Date, the approximate
number of accounts or other assets expected to be added and the approximate
aggregate balances expected to be outstanding in the accounts or other
assets to be added;
(ii) in the case of Additional Accounts, the Depositor shall
have delivered to the Trustee copies of UCC-1 financing statements covering
such Additional Accounts, if necessary to perfect the Trust's interest in
the Receivables arising therein;
(iii) in the case of Additional Accounts, to the extent required
by Section 4.03, the Depositor shall have deposited in the Collection
Account all Collections with respect to such Additional Accounts since the
Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the Depositor shall have occurred
nor shall the transfer of the Receivables arising in the Additional
Accounts or of the Participation Interests to the Trust have been made in
contemplation of the occurrence thereof;
(v) except in the case of an Addition pursuant to Section
2.08(a), the Depositor shall have received written notice from each Rating
Agency that such Addition will not have a Ratings Effect and shall have
delivered copies of each such written notice to the Servicer and the
Trustee and in the case of an Addition pursuant to Section 2.08(a) which
would exceed the Aggregate Addition Limit, the Depositor shall have
provided Standard & Poor's at least 15 days prior written notice of such
Addition and at or prior to the end of such 15-day period, the Depositor
shall not have received a notice in writing from Standard & Poor's that
such Addition will have a Ratings Effect;
(vi) the Depositor shall have delivered to the Trustee, each
Rating Agency and any Series Enhancer entitled thereto pursuant to the
relevant Supplement an Opinion of Counsel that for Federal income and Ohio
income and franchise tax purposes, such Addition will not cause a taxable
event to the holders of the Certificates;
(vii) the Depositor shall have delivered to the Trustee, each
Rating Agency and any Series Enhancer entitled thereto pursuant to the
relevant Supplement an Opinion of Counsel, dated the Addition Date, in
accordance with Section 13.02(d);
(viii) the Depositor shall have delivered to the Trustee and any
Series Enhancer entitled thereto pursuant to the relevant Supplement an
Officer's Certificate of the Depositor, dated the Addition Date, to the
effect that the Depositor reasonably believes that such Addition will not,
based on the facts known to such officer at the time of such certification,
then cause a Pay Out Event or any event that, after the giving of notice or
the lapse of time, would constitute a Pay Out Event to occur with respect
to any Series; and
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<PAGE>
(ix) within ten Business Days of the Addition Date, the Depositor
shall have delivered to the Trustee a written assignment and a computer
file or a microfiche list containing a true and complete list of the
related Additional Accounts or Participation Interests specifying for each
such Account its account number, the collection status, the aggregate
amount outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account or comparable information in the
case of Participation Interests.
Section 2.10. Removal of Accounts. On any day of any Monthly
-------------------
Period the Depositor shall have the right to require the reassignment to it or
its designee of all the Trust's right, title and interest in, to and under the
Receivables then existing and thereafter created, all moneys due or to become
due and all amounts received with respect thereto and all proceeds thereof in or
with respect to the Accounts owned and designated by the Depositor (the "Removed
Accounts"), upon satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding the
Removal Date (the "Removal Notice Date"), the Depositor shall have given
the Trustee, the Servicer, each Rating Agency and any Series Enhancer
entitled thereto pursuant to the relevant Supplement written notice of such
removal and specifying the date for removal of the Removed Accounts (the
"Removal Date");
(ii) on or prior to the date that is 10 Business Days after the
Removal Date, the Depositor shall have amended Schedule 1 by delivering to
the Trustee a computer file or microfiche list containing a true and
complete list of the Removed Accounts specifying for each such Account, as
of the Removal Notice Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account;
(iii) the Depositor shall have represented and warranted as of
the Removal Date that the list of Removed Accounts delivered pursuant to
paragraph (ii) above, as of the Removal Date, is true and complete in all
material respects and further, that no selection procedure was utilized by
the Depositor that would result in a selection of Removed Accounts that
would be materially adverse to the Certificate holders of any Series as of
the Removal Date;
(iv) the Depositor shall have received written notice form each
Rating Agency that such removal will not have a Ratings Effect and shall
have delivered copies of each such written notice to the Servicer and the
Trustee;
(v) as of the Removal Notice Date, either (A) the Receivables in
the Accounts are not more than 15% delinquent by estimated principal amount
and the weighted average delinquency of such Receivables is not more than
60 days or (B) the Receivables in the Accounts are not more than 7%
delinquent by estimated principal
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<PAGE>
amount and the weighted average delinquency of such Receivables does not
exceed 90 days;
(vi) the Depositor shall have delivered to the Trustee and any
Series Enhancer entitled thereto pursuant to the relevant Supplement an
Officer's Certificate of the Depositor, dated the Removal Date, to the
effect that the Depositor reasonably believes that such removal will not,
based on the facts known to such officer at the time of such certification,
then cause a Pay Out Event or any event that, after the giving of notice or
the lapse of time, would constitute a Pay Out Event to occur with respect
to any Series; and
(vii) the aggregate amount of Principal Receivables to be
removed shall not equal or exceed 5% of the aggregate amount of Principal
Receivables in the Trust.
(a) Notwithstanding Section 2.09(a) of this Agreement, on any day of
any Monthly Period the Depositor shall have the right to require the
reassignment to it or its designee of all the Trust's right, title and interest
in, to and under the Receivables then existing and thereafter created, all
moneys due or to become due and all amounts received with respect thereto and
all proceeds thereof in or with respect to the Accounts owned and designated by
the Depositor without the satisfaction of the conditions set forth in Section
2.09(a); provided, that, (i) on or before the Removal Notice Date, the Depositor
--------
shall have given each Rating Agency written notice specifying the Removal Date,
(ii) the balance of all receivables included in such Accounts is reflected on
the books and records of the Depositor as "zero" and (iii) for the twelve
Monthly Periods preceding such designation, there have been no charges with
respect to such Accounts. For purposes of this Agreement, accounts designated by
the Depositor in accordance with this Section 2.09(b) shall constitute Removed
Accounts.
Upon satisfaction of the above conditions, the Trustee shall execute
and deliver to the Depositor a written reassignment in substantially the form of
Exhibit C (the "Reassignment") and shall, without further action, be deemed to
sell, transfer, assign, set over and otherwise convey to the Depositor or its
designee, effective as of the Removal Date, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to the
Receivables arising in the Removed Accounts and all proceeds thereof. In
addition, the Trustee shall execute such other documents and instruments of
transfer or assignment and take such other actions as shall reasonably be
requested by the Depositor to effect the conveyance of Receivables pursuant to
this Section.
Section 2.11. Account Allocations. In the event that the Depositor
-------------------
is unable for any reason to transfer Receivables to the Trust in accordance with
the provisions of this Agreement, including by reason of the application of the
provisions of Section 9.02 or any binding order of any Governmental Authority (a
"Transfer Restriction Event"), then, in any such event, (a) the Depositor and
the Servicer agree (except as prohibited by any such order) to allocate and pay
to the Trust, after the date of such inability, all Collections, including
Collections of Receivables transferred to the Trust prior to the occurrence of
such event, and all amounts which
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<PAGE>
would have constituted Collections but for the Depositor's inability to transfer
Receivables (up to an aggregate amount equal to the amount of Receivables in the
Trust on such date), (b) the Depositor and the Servicer agree that such amounts
will be applied as Collections in accordance with Article IV and the terms of
each Supplement and (c) for so long as the allocation and application of all
Collections and all amounts that would have constituted Collections are made in
accordance with clauses (a) and (b) above, Principal Receivables and all amounts
which would have constituted Principal Receivables but for the Depositors's
inability to transfer Receivables to the Trust and Principal Receivables and all
amounts which would have constituted Principal Receivables as aforesaid that are
written off as uncollectible in accordance with this Agreement shall continue to
be allocated in accordance with Article IV and the terms of each Supplement. For
the purpose of the immediately preceding sentence, the Depositor and the
Servicer shall treat the first received Collections with respect to the Accounts
as allocable to the Trust until the Trust shall have been allocated and paid
Collections in an amount equal to the aggregate amount of Principal Receivables
in such Account as of the date of the occurrence of such event. If the
Depositor or the Servicer is unable pursuant to any Requirements of Law to
allocate Collections as described above, the Depositor and the Servicer agree
that, after the occurrence of such event, payments on each Account with respect
to the principal balance of such Account shall be allocated first to the oldest
principal balance of such Account and shall have such payments applied as
Collections in accordance with Article IV and the terms of each Supplement. The
parties hereto agree that Finance Charge Receivables, whenever created, accrued
in respect of Principal Receivables which have been conveyed to the Trust shall
continue to be a part of the Trust notwithstanding any cessation of the transfer
of additional Principal Receivables to the Trust and Collections with respect
thereto shall continue to be allocated and paid in accordance with Article IV
and the terms of each Supplement.
Section 2.12. Discount Option. (a) The Depositor shall have the
---------------
option to designate at any time a percentage, which may be a fixed percentage or
a variable percentage based on a formula (the "Discount Percentage"), of the
amount of Receivables arising in the Accounts on or after the date such
designation becomes effective that would otherwise constitute Principal
Receivables to be treated as Finance Charge Receivables ("Discount Option
Receivables"). The Depositor shall also have the option of reducing or
withdrawing the Discount Percentage, at any time and from time to time, on and
after the date such designation becomes effective. The Depositor shall provide
to the Servicer, the Trustee, any Series Enhancer and each Rating Agency 30 days
prior written notice of such designation (or reduction or withdrawal), and such
designation (or reduction or withdrawal) shall become effective on the date
designated therein only if (i) the Depositor shall have delivered to the Trustee
and each Series Enhancer entitled thereto pursuant to the relevant Supplement an
Officer's Certificate of the Depositor stating that the Depositor reasonably
believes that such designation (or reduction or withdrawal) will not, based on
the facts known to such officer at the time of such certification, then cause a
Pay Out Event or any event that, after the giving of notice or the lapse of
time, would constitute a Pay Out Event to occur with respect to any Series, (ii)
the Depositor shall have received written notice form each Rating Agency that
such designation (or reduction or withdrawal) will not have a Ratings Effect and
shall have delivered copies of each such written notice to the Servicer and the
Trustee and (iii) in the case of a reduction or withdrawal, the Depositor shall
have delivered to
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the Trustee an Officer's Certificate to the effect that, in the reasonable
belief of the Depositor, such reduction or withdrawal shall not have adverse
regulatory implications for the Depositor.
(b) On each Date of Processing after the date on which the Depositor's
exercise of its discount option takes effect, the Depositor shall, to the extent
required by Section 4.03, (i) deposit into the Collection Account in immediately
available funds an amount equal to the product of (a) the aggregate Floating
Allocation Percentages with respect to all Series and (b) the aggregate amount
of the Discount Option Receivable Collections processed on such day and (ii) pay
to the Holder of the Depositor's Certificate the balance of such Discount Option
Receivables Collections. The deposit made by the Depositor into the Collection
Account under the preceding sentence shall be considered a payment of such
Discount Option Receivables and shall be applied as Finance Charge Receivables
in accordance with Article IV and the terms of each Supplement.
ARTICLE III
Administration and Servicing
----------------------------
of Receivables
--------------
Section 3.01. Acceptance of Appointment and Other Matters Relating to
-------------------------------------------------------
the Servicer. (a) [Servicer Name] agrees to act as the Servicer under this
- ------------
Agreement and the Certificateholders by their acceptance of Certificates consent
to [Servicer Name] acting as Servicer.
(b) The Servicer shall service and administer the Receivables, shall
collect payments due under the Receivables and shall charge off as uncollectible
Receivables, all in accordance with its customary and usual servicing procedures
for servicing consumer credit card and other consumer revolving credit
receivables comparable to the Receivables and in accordance with the Lending
Guidelines. The Servicer shall have full power and authority, acting alone or
through any Person properly designated by it hereunder, to do any and all things
in connection with such servicing and administration which it may deem necessary
or desirable. Without limiting the generality of the foregoing, subject to
Section 10.01 and provided [Servicer Name] is the Servicer, the Servicer or its
designee (other than the Trustee) is hereby authorized and empowered (i) to make
withdrawals and payments or to instruct the Trustee to make withdrawals and
payments from the Collection Account and any Series Account, as set forth in
this Agreement or any Supplement under any Series Account, as set forth in this
Agreement or any Supplement, and (ii) to take any action required or permitted
under any Series Enhancement, as set forth in this Agreement or any Supplement.
Without limiting the generality of the foregoing and subject to Section 10.01,
the Servicer or its designee is hereby authorized and empowered to make any
filings, reports, notices, applications and registrations with, and to seek any
consents or authorizations from, the Securities and Exchange Commission (the
"Commission") and any state securities authority on behalf of the Trust as may
be necessary or advisable to comply with any Federal or state securities laws or
reporting requirements. The Trustee shall furnish, within a reasonable period
of time, the Servicer with any powers of attorney or other documents requested
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by the Servicer and reasonably necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.
(c) The Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by the Servicer in
connection with servicing other credit card and consumer revolving credit
receivables.
(d) The Servicer shall comply with and perform its servicing
obligations with respect to the Accounts and Receivables in accordance with the
Credit Card Agreements, applicable rules and regulations of VISA, MasterCard and
any other similar entity or organization relating to any other type of revolving
credit card accounts included as Accounts, except insofar as any failure to so
comply or perform would not materially and adversely affect the Trust or the
Investor Certificateholders.
(e) The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with the Trust and the
servicing activities hereunder including expenses related to enforcement of the
Receivables, fees and disbursements of the Trustee, any Paying Agent and any
Transfer Agent and Registrar (including the reasonable fees and expenses of its
counsel) in accordance with Section 11.05, fees and disbursements of independent
accountants and all other fees and expenses, including the costs of filing UCC
continuation statements and the costs and expenses relating to obtaining and
maintaining the listing of any Investor Certificates on any stock exchange, that
are not expressly stated in this Agreement to be payable by the Trust or the
Depositor (other than Federal, state, local and foreign income, franchise and
other taxes, if any, or any interest or penalties with respect thereto, assessed
on the Trust).
(f) The Servicer agrees that upon a request by the Depositor it will
use its reasonable efforts to obtain and maintain the listing of the Investor
Certificates of any Series or Class on any specified securities exchange. If
any such request is made, the Servicer shall give notice to the Depositor and
the Trustee on the date on which such Investor Certificates are approved for
such listing and within three Business Days following receipt of written notice
by the Servicer of any actual, proposed or contemplated delisting of such
Investor Certificates by any such securities exchange. The Trustee or the
Servicer, each in its sole discretion, may terminate any listing on any such
securities exchange at any time subject to the notice requirements set forth in
the preceding sentence.
Section 3.02. Servicing Compensation. As full compensation for its
----------------------
servicing activities hereunder and as reimbursement for any expense incurred by
it in connection therewith, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") with respect to each Monthly Period, payable
monthly on the related Distribution Date, in an amount equal to one-twelfth of
the product of (a) the weighted average of the Servicing Fee Rates with respect
to each outstanding Series (based upon the Servicing Fee Rate for each Series
and the outstanding Principal amount of each Series) and (b) the amount of
Principal Receivables on the last day of
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the prior Monthly Period. The share of the Servicing Fee allocable to (i) the
Certificateholders' Interest of a particular Series with respect to any Monthly
Period (the "Monthly Servicing Fee") and (ii) the Enhancement Invested Amount,
if any, of a particular Series with respect to any Monthly Period will each be
determined in accordance with the relevant Supplement. The portion of the
Servicing Fee with respect to any Monthly Period not so allocated to the
Certificateholders' Interest or the Enhancement Invested Amount, if any, of a
particular Series shall be paid by the Depositor or the related Distribution
Date and in no event shall the Trust, the Trustee, the Investor
Certificateholders of any Series or any Series Enhancer be liable for the share
of the Servicing Fee with respect to any Monthly Period to be paid by the
Depositor.
Section 3.03. Representations, Warranties and Covenants of the
------------------------------------------------
Servicer. [Servicer Name], as initial Servicer, hereby makes, and any Successor
- --------
Servicer by its appointment hereunder shall make, on each Closing Date (and on
the date of any such appointment), the following representations, warranties and
covenants:
(a) Organization and Good Standing. The Servicer is a state banking
------------------------------
corporation, a state banking association, a national banking association or a
corporation validly existing under the laws of its jurisdiction of incorporation
and has, in all material respects, full power and authority to execute, deliver
and perform its obligations under this Agreement and each Supplement and to own
its properties and conduct its consumer revolving lending business as such
properties are presently owned and as such business is presently conducted.
(b) Due Qualification. The Servicer is duly qualified to do business
-----------------
and is in good standing as a foreign corporation (or is exempt form such
requirements), and has obtained all necessary licenses and approvals in each
jurisdiction in which the servicing of the Receivables as required by the
Agreement requires such qualification except where failure to so qualify or to
obtain such licenses and approvals should not have a material adverse effect on
its ability to perform its obligation hereunder or under any Supplement.
(c) Due Authorization. The execution, delivery, and performance of
-----------------
this Agreement, each Supplement and the other agreements and instruments
executed or to be executed by the Servicer as contemplated hereby, have been
duly authorized by the Servicer by all necessary corporate action on the part of
the Servicer and this Agreement and each Supplement will remain, from the time
of its execution, an official record of the Servicer.
(d) Binding Obligation. This Agreement and each Supplement
------------------
constitutes a legal, valid and binding obligation of the Servicer, enforceable
against the Servicer in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship or other similar laws now or hereinafter in
effect, affecting the enforcement of creditors' rights in general and, if
applicable, the rights of creditors of state banking corporations, state banking
associations or national banking associations, and except as such enforceability
may be limited by general principles of equity (whether considered in a suit at
law or in equity).
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(e) No Conflict and no Violation. The execution and delivery of this
----------------------------
Agreement and each Supplement by the Servicer, and the performance of the
transactions contemplated by this Agreement and each Supplement and the
fulfillment of the terms hereof and thereof applicable to the Servicer, will not
conflict with or violate or result in any breach of, or constitute (with or
without notice or lapse of time or both) a material default under, any material
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it or any of its properties are bound.
The execution and delivery of this Agreement by the Servicer, the performance by
the Servicer of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof applicable to the Servicer will not conflict
with or violate any Requirements of Law applicable to the Servicer.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the best knowledge of the Servicer, threatened against the
Servicer before any Governmental Authority seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions contemplated by
this Agreement or any Supplement, or seeking any determination or ruling that,
in the reasonable judgement of the Servicer would materially and adversely
affect the performance by the Servicer of its obligations under this Agreement
or any Supplement.
(g) Compliance with requirements of Law. The Servicer shall duly
-----------------------------------
satisfy all obligations on its part to be fulfilled under or in connection with
the Receivables and the related Accounts, will maintain in effect all
qualifications required under Requirements of Law in order to properly service
the Receivables and the related Accounts and will comply in all material
respects with all other Requirements of Law in connection with servicing the
Receivables and the related Accounts, the failure to comply with which would
have a material adverse effect on the interests of the Certificateholders.
(h) No Rescission or Cancellation. The Servicer shall not permit any
-----------------------------
rescission or cancellation of a Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority or in accordance with the
Lending Guidelines.
(i) Protection of Certificateholders' Rights. The Servicer shall take
----------------------------------------
no action which, nor omit to take any action the omission of which, would
substantially impair the rights of Certificateholders in any Receivable or
Account, nor shall it, except in the ordinary course of its business and in
accordance with the Lending Guidelines, reschedule, revise or defer Collections
due on the Receivables.
(j) Receivables Not To Be Evidenced by Promissory Notes. The Servicer
---------------------------------------------------
will take no action to cause or permit any Receivable to be evidenced by any
instrument or chattel paper (as defined in the UCC) and, if any Receivable is so
evidenced it shall be deemed to be an Ineligible Receivable and shall be
reassigned or assigned to the Servicer as provided in this Section; provided,
--------
however, that Receivables evidenced by notes taken from Obligors in the ordinary
- -------
course of the Servicer's collection efforts shall not be deemed Ineligible
Receivables solely as a result thereof.
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(k) All Consents. All approvals, authorizations, consents, orders or
------------
other actions of any Person or of any Governmental Authority required to be
obtained by the Servicer in connection with the execution and delivery by the
Servicer of this Agreement and each Supplement, the performance by the Servicer
of the transactions contemplated by this Agreement and each Supplement and the
fulfillment by the Servicer of the terms hereof and thereof, have been obtained.
For purposes of the representation and warranties set forth in this
Section 3.03, each reference to a Supplement shall be deemed to refer only to
those Supplements in effect as of the relevant Closing Date or the date of
appointment of a Successor Servicer, as applicable.
In the event any of the representations, warranties or covenants of
the Servicer contained in paragraph (g), (h), (i) or (j) with respect to any
Receivable or the related Account is breached, and such breach has a material
adverse effect on the Certificateholders' Interest of all Series in the
Receivables (which determination shall be made without regard to the
availability of funds under any Series Enhancement) and remains uncured for 60
days (or for such longer period, not in excess of 150 days, as may be reasonably
necessary to remedy such breach; provided that such breach is capable of remedy
within 150 days or less and the Servicer delivers an Officer's Certificate to
the Trustee to the effect that the Servicer has commenced, or will promptly
commence and diligently pursue, all reasonable efforts to remedy such breach)
from the earlier to occur of the discovery of such event by the Servicer, or
receipt by the Servicer of written notice of such event given by the Trustee,
all Receivables in the Account or Accounts to which such event relates shall be
reassigned or assigned to the Servicer on the terms and conditions set forth
below; provided, however, that such Receivables will not be reassigned or
-------- -------
assigned to the Servicer if, on any day prior to the end of such 60-day or
longer period, (i) the relevant representation and warranty shall be true and
correct, or the relevant covenant shall have been complied with, in all material
respects and (ii) the Servicer shall have delivered to the Trustee an Officer's
Certificate describing the nature of such breach and the manner in which such
breach was cured.
If [Servicer Name] is the Servicer, such reassignment or assignment
shall be accomplished in the manner set forth in Section 2.05(b) as if the
reassigned or assigned Receivables were Ineligible Receivables (including the
requirement, if applicable, to reduce the aggregate amount of Principal
Receivables used to calculate the Depositor's Amount, the Depositor's Interest,
the Floating Allocation Percentage and the Principal Allocation Percentage
applicable to any Series and to make deposits into the Excess Funding Account
and the Collection Account) and any amounts deposited into the Excess Funding
Account and the Collection Account in connection with such reassignment or
assignment pursuant to this Section shall be considered a Transfer Deposit
Amount and shall be applied in accordance with Article IV and the terms of each
Supplement. If [Servicer Name] is not the Servicer, the Servicer shall effect
such assignment by making a deposit into the Excess Funding Account and the
Collection Account in immediately available funds on the Transfer Date following
the Monthly Period in which such assignment obligation arises in an amount equal
to the amount of such Receivables, which deposit shall be
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considered a Transfer Deposit Amount and shall be applied in accordance with
Article IV and the terms of each Supplement.
Upon each such reassignment or assignment to the Servicer, the Trustee
on behalf of the Trust, shall automatically and without further action be deemed
to sell, transfer, assign, set over and otherwise convey to the Servicer,
without recourse, representation or warranty, all right, title and interest of
the Trust in and to such Receivables, all moneys due to become due and all
amounts received with respect thereto and all proceeds thereof. The Trustee
shall execute such documents and instruments of transfer or assignment and take
such other actions as shall be reasonably requested by the Servicer to effect
the transfer of any such Receivables pursuant to this Section. The obligation
of the Servicer to accept reassignment or assignment and transfer of any such
Receivables, and to make the deposits, if any, required to be made to the
Collection Account as provided in the preceding paragraph, shall constitute the
sole remedy respecting the event giving rise to such obligation available to
Investor Certificateholders (or the Trustee on behalf of Certificateholders) or
any Series Enhancer, except as provided in Section 8.04.
Section 3.04. Reports and Records for the Trustee.
-----------------------------------
(a) Daily or Monthly Records. On each day on which the Servicer is
------------------------
required to make deposits in the Collection Account pursuant to Section 4.03,
the Servicer shall make or cause to be made available at the office of the
Servicer during normal business hours for inspection by the Trustee upon request
a record setting forth (i) the Collections in respect of Principal Receivables
and in respect of Finance Charge Receivables processed by the Servicer on the
second preceding Business Day in respect of the Accounts and (ii) the amount of
Receivables as of the close of business on the second preceding Business Day in
each Account. The Servicer shall, at all times, maintain its computer files
with respect to the Accounts in such a manner so that the Accounts may be
specifically identified and shall make available to the Trustee at the office of
the Servicer on any Business Day during normal business hours any computer
programs necessary to make such identification.
(b) Monthly Servicer's Certificate. Not later than the third Business
------------------------------
Day preceding each Distribution Date, the Servicer shall, with respect to each
outstanding Series, deliver to the Trustee, the Paying Agent, each Rating Agency
and each Series Enhancer entitled thereto pursuant to the relevant Supplement a
certificate of a Servicing Officer in substantially the form set forth in the
related Supplement.
(c) Related Accounts. The Servicer covenants and agrees hereby to
----------------
deliver to the Trustee, within a reasonable time period after any Related
Account is created, but in any event not later than 15 days after the end of the
month within which the Related Account was created, a notice specifying the new
account numbers of all Accounts and the account numbers of all Additional
Accounts for the Related Period.
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(d) Addition Discount Receivables. On or prior to each Determination
-----------------------------
Date, the Servicer shall deliver to the Trustee a certificate of a Servicing
Officer setting forth (or shall set forth in the Monthly Servicer's Certificate)
(a) the amount of Addition Discount Receivables to be included as Collection of
Finance charge Receivables with respect to the preceding Monthly Period, as
calculated in accordance with the formula set forth in the applicable Assignment
of Receivables in Additional Accounts or accretion designation letter delivered
to the Trustee and (b) the portion of such Addition Discount Receivables which
have not been treated as Collections of Finance Charge Receivables with respect
to the preceding Monthly Period.
Section 3.05. Annual Certificate of Servicer. The Servicer shall
------------------------------
deliver to the Trustee, each Rating Agency and each Series Enhancer entitled
thereto pursuant to the relevant Supplement, on or before May 31 of each
calendar year, an Officer's Certificate (with appropriate insertions)
substantially in the form of Exhibit D.
Section 3.06. Annual Servicing Report of Independent Public
---------------------------------------------
Accountants; Copies of Reports Available. (a) On or before May 31 of each
- ----------------------------------------
calendar year, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Depositor) to furnish a report (addressed to the Trustee) to the
Trustee, the Servicer and each Rating Agency to the effect that they have
examined certain documents and records relating to the servicing of Accounts
under this Agreement and each Supplement and compared the information contained
in the Servicer's certificates delivered pursuant to Section 3.04(b) during the
period covered by such report with such documents and records and that, on the
basis of such examination, nothing has come to the attention of such accountants
that caused them to believe that the servicing has not been conducted in
compliance with the terms and conditions set forth in Sections 3.02, 3.04, 3.09,
4.02, 4.03, 4.04, 4.05 and 8.08 of this Agreement and the applicable provisions
of each Supplement, except for such exceptions as they believe to be immaterial
and such other exceptions as shall be set forth in such statement. A copy of
such report shall be delivered by the Servicer to each Series Enhancer entitled
thereto pursuant to the relevant Supplement.
(b) On or before May 31 of each calendar year, the Servicer shall
cause a firm of nationally recognized independent public accounts (who may also
render other services to the Servicer or the Depositor) to furnish a report to
the Trustee, the Servicer and each Rating Agency to the effect that they have
applied certain procedures agreed upon with the Servicer to compare the
mathematical calculations of certain amounts set forth in the Servicer's
certificates delivered pursuant to Section 3.04(b) during the period covered by
such report with the Servicer's computer reports which were the source of such
amounts and that on the basis of such agreed upon procedures and comparison,
nothing has come to the attention of such accountants that caused them to
believe that such amounts are not in agreement, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set forth in
such statement. A copy of such report shall be delivered by the Servicer to
each Series Enhancer entitled thereto pursuant to the relevant Supplement.
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(c) A copy of each certificate and report provided pursuant to Section
3.04(b), 3.05 or 3.06 may be obtained by any Investor Certificateholder or
Certificate Owner (at the reasonable expense of such Certificate Owner who can
establish ownership interest in the Trust) by a request to the Trustee addressed
to the Corporate Trust Office.
Section 3.07. Tax Treatment. The Depositor has entered into this
-------------
Agreement, and the Certificates will be issued, with the intention that, for
Federal, state and local income and franchise tax purposes only, the Investor
Certificates of each Series which are characterized as indebtedness at the time
of their issuance will qualify as indebtedness of the Depositor secured by the
Receivables. The Depositor, by entering into this Agreement, and each
Certificateholder, by the acceptance of any such Certificate (and each
Certificate Owner, by its acceptance of an interest in the applicable
Certificate), agree to treat such Investor Certificates for Federal, state and
local income and franchise tax purposes as indebtedness of the Depositor.
Section 3.08. Notices to the [Servicer Name]. In the event that
------------------------------
[Servicer Name] is no longer acting as Servicer, any Successor Servicer shall
deliver to [Servicer Name] each certificate and report required to be provided
thereafter pursuant to Section 3.04(b), 3.05 or 3.06.
Section 3.09. Adjustments. (a) If the Servicer adjusts downward
-----------
the amount of any Principal Receivable (other than any Ineligible Receivable to
be reassigned or assigned to the Depositor or the Servicer pursuant to this
Agreement) because of a rebate, refund, unauthorized charge or billing error to
an accountholder, or because such Principal Receivable was created in respect of
merchandise which was refused or returned by an accountholder, or if the
Servicer otherwise adjusts downward the amount of any Principal Receivable
without receiving Collections therefor or charging off such amount as
uncollectible, then, in any such case, the amount of Principal receivables used
to calculate the Depositor's Amount, the Depositor's Interest and the Floating
Allocation Percentage and the Principal Allocation Percentage applicable to any
Series will be reduced by the amount of the adjustment. Similarly, the amount
of Principal Receivables used to calculate the Depositor's Amount, the
Depositor's Interest and the Floating Allocation Percentage and the Principal
Allocation Percentage applicable to any Series will be reduced by the amount of
any Principal Receivable which was discovered as having been created through a
fraudulent or counterfeit charge. Any adjustment required pursuant to either of
the two preceding sentences shall be made on or prior to the end of the Monthly
Period in which such adjustment obligation arises. In the event that, following
the exclusion of such Principal Receivables from the calculation of the
Depositor's Amount, the Depositor's Amount would be a negative number, not later
than 12:00 noon, New York City time, on the Transfer Date immediately preceding
the Distribution date following the Monthly Period in which such adjustment
obligation arises, the Depositor shall make a deposit into the Collection
Account in immediately available funds in an amount equal to the amount by which
the Depositor's Amount would be below zero (up to the amount of such Principal
Receivables). Any amount deposited into the Collection Account pursuant to the
preceding sentence shall be considered an "Adjustment Payment" and shall be
applied in accordance with Article IV and the terms of each Supplement.
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(b) If (i) the Servicer makes a deposit into the collection Account
in respect of a Collection of a Receivable and such Collection was received by
the Servicer in the form of a check which is not honored for any reason or (ii)
the Servicer makes a mistake with respect to the amount of any Collection and
deposits an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently
deposited in to the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received
shall be deemed not to have been paid.
Section 3.10. Reports to the Commission. The Servicer shall, on
-------------------------
behalf of the Trust, cause to be prepared and filed with the Commission any
periodic reports required to be filed under the provisions of the Exchange Act
and the rules and regulations of the Commission thereunder. The Depositor, if
[Servicer Name] is not the Servicer, shall, at the expense of the Servicer,
cooperate in any reasonable request of the Servicer in connection with such
filings.
ARTICLE IV
Rights of Certificateholders and
--------------------------------
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Rights of Certificateholders. The Investor
-----------------------------
Certificates shall represent fractional undivided interests in the Trust, which,
with respect to each Series, shall consist of the right to receive, to the
extent necessary to make the required payments with respect to such Series at
the times and in the amounts specified in the related Supplement, the portion of
Collections allocable to such Series pursuant to this Agreement and such
Supplement, funds on deposit in the Collection Account or the Excess Funding
Account allocable to such Series pursuant to this Agreement and such Supplement,
funds on deposit in any related Series Account and funds available pursuant to
any related Series Enhancement (collectively, with respect to all Series, the
"Certificateholders' Interest"), it being understood that the Investor
Certificates of any Series or Class shall not represent any interest in any
Series Account or Series Enhancement for the benefit of any other Series or
Class. The Depositor's Certificate shall represent the ownership interest in
the remainder of the Trust Assets not allocated pursuant to this Agreement or
any Supplement to the Certificateholders' Interest including the right to
receive Collections with respect to the Receivables and other amounts at the
times and in the amounts specified in this Agreement or any Supplement to be
paid to the Depositor on behalf of all holders of the Depositor's Certificate
(the "Depositor's Interest"); provided, however, that the Depositor's
-------- -------
Certificate shall not represent any interest in the Collection Account, the
Excess Funding Account, any Series Account or any Series Enhancement, except as
specifically provided in this Agreement or any Supplement; provided further that
----------------
the foregoing shall not be construed to limit the Trustee's obligations to make
payments to the Depositor and the Servicer as and when required under this
Agreement and any Supplement.
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Section 4.02. Establishment of Collection Account and Excess Funding
------------------------------------------------------
Account. The Servicer, for the benefit of the Certificateholders, shall
- -------
establish and maintain in the name of the Trustee, on behalf of the Trust, an
Eligible Deposit Account bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders (the
"Collection Account"). The Collection Account shall initially be established
with [Servicer Name]. The Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Collection Account and in all
proceeds thereof. The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Certificateholders. Except as
expressly provided in this Agreement, the Servicer agrees that it shall have no
right of setoff or banker's lien against, and no right to otherwise deduct from,
any funds held in the Collection Account for any amount owed to it by the
Trustee, the Trust, any Certificateholder or any Series Enhancer. If, at any
time, the Collection Account ceases to be an Eligible Deposit Account, the
Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Collection Account meeting the conditions specified
above, transfer any cash and/or investments to such new collection account and
from the date such new Collection Account is established, it shall be the
"Collection Account".
Unless otherwise agreed by each Rating Agency, if at any time neither
[Servicer Name] nor any other Affiliate of [Servicer Name] is the Servicer, the
Collection Account will be moved from [Servicer Name] if then maintained there.
Funds on deposit in the Collection Account (other than amounts
deposited pursuant to Section 2.06, 9.02, 10.01 or 12.02) shall at the direction
of the Servicer be invested by the Trustee in Eligible Investments selected by
the Servicer. Notwithstanding any other provision herein to the contrary, for
purposes of the investment of funds in the Collection Account (but only in an
amount up to 20% of the outstanding principal balance of each Series outstanding
as of the dates of investment), "highest investment category" as used in the
definition of "Eligible Investments" shall mean, in the case of Standard &
Poor's, A-1, A-1+, AAA, AAAm or AAAm-G. All such Eligible Investments shall be
held by the Trustee for the benefit of the Certificateholders. The Trustee or
its custodian shall maintain for the benefit of the Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Eligible Investments. Investments of funds representing Collections collected
during any Monthly Period shall be invested in Eligible Investments that will
mature so that all funds will be available at the close of business on the
Transfer Date following such Monthly Period. No Eligible Investment shall be
disposed of prior to its maturity; provided, however, that the Trustee may sell,
-------- -------
liquidate or dispose of an Eligible Investment before its maturity, if so
directed by the Servicer, the Servicer having reasonably determined that the
interests of the Investor Certificateholders may be adversely affected if such
Eligible Investment is held to its maturity. Unless directed by the Servicer,
funds deposited in the Collection Account on a Transfer Date with respect to the
next following Distribution Date are not required to be invested overnight. On
each Distribution Date, all interest and other investment earnings (net of
losses and investment expenses) on funds on deposit in the Collection Account
shall be paid to or at the direction of the Depositor, except as
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otherwise specified in any Supplement. For purposes of determining the
availability of funds or the balances in the Collection Account for any reason
under this Agreement, all investment earnings' net of investment expenses and
losses on such funds shall be deemed not to be available or on deposit.
The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee, on behalf of the Trust, an
Eligible Deposit Account bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders (the
"Excess Funding Account"). The Excess Funding Account will initially be
established with [Servicer Name]. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Excess Funding
Account and in all proceeds thereof. The Excess Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of the
Certificateholders. Except as expressly provided in this Agreement, the
Servicer agrees that it shall have no right of setoff or banker's lien against,
and no right to otherwise deduct from, any funds held in the Excess Funding
Account for any amount owed to it by the Trustee, the Trust, any
Certificateholder or any Series Enhancer. If, at any time, the Excess Funding
Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer
on its behalf) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Excess Funding Account meeting the conditions specified above, transfer any
cash and/or any investment to such new Excess Funding Account and from the date
such new Excess Funding Account is established, it shall be the "Excess Funding
Account".
Unless otherwise agreed by each Rating Agency, if at any time neither
[Servicer Name] nor any other Affiliate of [Servicer Name] is the Servicer, the
Excess Funding Account will be moved from [Servicer Name] if then maintained
there. Funds on deposit in the Excess Funding Account shall at the direction of
the Servicer be invested by the Trustee in Eligible Investments selected by the
Servicer. All such Eligible Investments shall be held by the Trustee for the
benefit of the Certificateholders. The Trustee or its custodian shall maintain
for the benefit of the Certificateholders possession of the negotiable
instruments or securities, if any, evidencing such Eligible Investments. Funds
on deposit in the Excess Funding Account on any Distribution Date will be
invested in Eligible Investments that will mature so that all funds will be
available at the close of business on the Transfer Date following such Monthly
Period. No Eligible Investment shall be disposed of prior to its maturity;
provided, however, that the Trustee may sell, liquidate or dispose of an
- -------- -------
Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interests of the Investor
Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. Unless directed by the Servicer, funds deposited in the Excess
Funding Account on a Transfer Date with respect to the next following
Distribution Date are not required to be invested overnight. On each
Distribution Date, all interest and other investment earnings (net of losses and
investment expenses) on funds on deposit in the Excess Funding Account shall be
treated as Collections of Finance Charge Receivables with respect to the last
day of the related Monthly Period. Funds on deposit in the Excess Funding
Account will be withdrawn and paid to the Depositor on any Distribution Date
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to the extent the (i) the Depositor's Amount exceeds the Required Depositor's
Interest and (ii) the Required Principal Balance (as defined in any Series
Supplement) is not less than the aggregate amount of Principal Receivables
(determined after giving effect to any Principal Receivables transferred to the
Trust on such date); provided, however, that, if an Accumulation Period,
-------- -------
Controlled Amortization Period or Early Amortization Period has commenced and is
continuing with respect to one or more outstanding Series, any funds on deposit
in the Excess Funding Account shall be treated as Shared Principal Collections
and shall be allocated and distributed in accordance with Section 4.04 and the
terms of the Supplements for the Principal Sharing Series. For purposes of
determining the availability of funds or the balances in the Excess Funding
Account for any reason under this Agreement, all investment earnings' net of
investment expenses and losses on such funds shall be deemed not to be available
or on deposit.
Section 4.03. Collections and Allocations. (a) The Servicer will
---------------------------
apply or will instruct the Trustee to apply all funds on deposit in the
Collection Account as described in this Article IV and in each Supplement.
Except as otherwise provided below, the Servicer shall deposit Collections into
the Collection Account no later than the second Business Day following the Date
of Processing of such Collections or, in the case of any Collections consisting
of Interchange, not later than 12:00 noon, New York City time, on each
Distribution Date. Subject to the express terms of any Supplement, but
notwithstanding anything else in this Agreement to the contrary, for so long as
[Servicer Name] remains the Servicer and (x) maintains a certificate of deposit
rating of A-1 or better by Standard & Poor's and P-1 by Moody's, or (y)
[Servicer Name] has provided to the Trustee a letter of credit covering
collection risk of the Servicer acceptable to each Rating Agency (as evidenced
by a letter from each Rating Agency), the Servicer need not make the daily
deposits of Collections into the Collection Account as provided in the preceding
sentence, but may make a single deposit in the Collection Account in immediately
available funds not later than 12:00 noon, New York City time, on the Transfer
Date immediately preceding each Distribution Date or, in the case of any
Collections consisting of Interchange, not later than 12:00 noon, New York City
time, on each Distribution Date. Subject to the first provision Section 4.04,
but notwithstanding anything else in this Agreement to the contrary, with
respect to any Monthly Period, whether the Servicer is required to make deposits
of Collections pursuant to the first or the second preceding sentence, (i) the
Servicer will only be required to deposit Collections into the Collection
Account up to the aggregate amount of Collections required to be deposited into
any Series Account or, without duplication, distributed on or prior to the
related Distribution Date to Investor Certificateholders or to any Series
Enhancer pursuant to the terms of any Supplement or Enhancement Agreement and
(ii) if at any time prior to such Distribution, Date the amount of Collections
deposited in the Collection Account exceeds the amount required to be deposited
pursuant to clause (i) above, the Servicer will be permitted to withdraw the
excess from the Collection Account.
(b) (i) Collections of Finance Charge Receivables will be allocated
to the Certificateholders' Interest of a Series in an amount equal to the
product of the amount of such Collections and the Floating Allocation Percentage
of such Series, (ii) the Defaulted Amount will be allocated to the
Certificateholders' Interest of a Series in an amount equal to the product of
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such Defaulted Amount and the Floating Allocation Percentage of such Series,
(iii) Collections of Principal Receivables will be allocated to the
Certificateholders' Interest of such Series in an amount equal to the product of
the amount of such Collections and the Principal Allocation Percentage of such
Series and (iv) Miscellaneous Payments will be allocated to the
Certificateholders' Interest of such Series in an amount equal to the product of
the amount of such Miscellaneous Payments and a fraction the numerator of which
is the Invested Amount and Enhancement Invested Amount, if any, of such Series
and the denominator of which is the sum of the Invested Amounts and the
Enhancement Invested Amount, if any, for all outstanding Series, in each case
for such Monthly Period. Subject to Sections 4.03(c) and 4.04, amounts not
allocated to the Certificateholders' Interest of any Series will be allocated to
the Depositor's Interest.
(c) On the earlier of (A) the second Business Day after the Date of
Processing and (B) the day on which the Servicer actually deposits any
Collections into the Collection Account or, in the case of any Collections
consisting of Interchange, not later than 12:00 noon, New York City time, on
each Distribution Date, the Servicer will pay to the Depositor (i) the
Depositor's allocable portion of Collections of Finance Charge Receivables and
(ii) the Depositor's allocable portion of Collections of Principal Receivables;
provided, however, that, in the case of Collections of Principal Receivables
- -------- -------
allocated to the Depositor's Interest and any Shared Principal Collections that
would otherwise be paid to the Depositor pursuant to Section 4.04, such amounts
shall be paid to the Depositor only if the Depositor's Amount (determined after
giving effect to any Principal Receivables transferred to the Trust on such
date) exceeds zero. The amount held in the Collection Account as a result of
the proviso in the preceding sentence ("Unallocated Principal Collections")
shall be paid to the Depositor at the time the Depositor's Amount exceeds zero;
provided, however, that any Unallocated Principal Collections on deposit in the
- -------- -------
Collection Account at any time during which any Principal Sharing Series is in
its Accumulation Period, Amortization Period or Early Amortization Period shall
be deemed to be Shared Principal Collections and shall be allocated and
distributed in accordance with Section 4.04 and the terms of each Supplement.
The payments to be made to the Depositor pursuant to this Section
4.03(c) do not apply to deposits to the Collection Account or other amounts that
do not represent Collections, including Miscellaneous Payments, payment of the
purchase price for Receivables pursuant to Section 2.06 or 10.01, proceeds from
the sale, disposition or liquidation of Receivables pursuant to Section 9.02 or
12.02 or payment of the purchase price for the Certificateholders' Interest of a
specific Series pursuant to the related Supplement.
(d) If the Depositor so designates, the Principal Receivables in
Additional Accounts added during any Monthly Period having an Additional Cut-Off
Date as of any day during the preceding Monthly Period shall be treated as
Principal Receivables outstanding on and after such Additional Cut-Off Date for
purposes of calculating the Floating Allocation Percentage and Principal
Allocation Percentage for the Monthly Period in which such Additional Accounts
are added. Any such recalculation of the Floating Allocation Percentage and
Principal Allocation
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Percentage for a Monthly Period shall be effective only on and after the
Addition Date, but the Servicer shall determine the amounts of Collections and
the Defaulted Amounts which would have been allocated to the Certificateholders'
Interest of each Series for the portion of such Monthly Period preceding such
Addition Date as if such recalculated Floating Allocation Percentage and
Principal Allocation Percentage had been in effect and shall adjust the amounts
to be allocated for the remainder of such Monthly Period so that the amounts
allocated to the Certificateholders' Interest of each Series and the Depositor's
Interest are equal to the amounts which would have been allocated to them if
such recalculated percentages had been in effect for the entire Monthly Period.
Section 4.04. Shared Principal Collections. On each Distribution
-----------------------------
Date, (a) the Servicer shall allocate Shared Principal Collections to each
Principal Sharing Series, pro rata, in proportion to the Principal Shortfalls,
if any, with respect to each such Series and (b) the Servicer shall withdraw
from the Collection Account or the Excess Funding Account and pay to the
Depositor an amount equal to the excess, if any, of (x) the aggregate amount for
all outstanding Series of Collections of Principal Receivables and Miscellaneous
Payments which the related Supplements or this Agreement specify are to be
treated as "Shared Principal Collections" for such Distribution Date over (y)
the aggregate amount for all outstanding Principal Sharing Series which the
related Supplements specify are "Principal Shortfalls" for such Distribution
Date; provided, however, that, if, on any Distribution Date, either (i) the
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Depositor's Amount (determined after giving effect to any Principal Receivables
transferred to the Trust on such date) is less than or equal to the Required
Depositor's Interest, or (ii) the aggregate amount of Principal Receivables in
the Trust (determined after giving effect to any Principal Receivables
transferred to the Trust on such date) is less than the Required Principal
Balance, the Servicer will not distribute to the Depositor any Shared Principal
Collections then on deposit in the Collection Account that otherwise would be
distributed to the Depositor, but shall deposit such funds in the Excess Funding
Account.
Section 4.05. Excess Finance Charges. On each Distribution Date, (a)
-----------------------
the Servicer shall allocate Excess Finance Charges with respect to the Series in
a Group to each Series in such Group, pro rata, in proportion to the Finance
Charge Shortfalls, if any, with respect to each such Series and (b) the Servicer
shall withdraw (or shall instruct the Trustee to withdraw) from the Collection
Account and pay to the Depositor an amount equal to the excess, if any, of (x)
the aggregate amount for all outstanding Series in a Group of the amounts which
the related Supplements specify are to be treated as "Excess Finance Charges"
for such Distribution Date over (y) the aggregate amount for all outstanding
Series in such Group which the related Supplements specify are "Finance Charge
Shortfalls" for such Distribution Date; provided, however, that, if, on any
-------- -------
Distribution Date, either (i) the Depositor's Amount for such Distribution Date
(determined after giving effect to any Principal Receivables transferred to the
Trust on such date and Shared Principal Collections deposited in the Excess
Funding Account on such date) is less than or equal to the Required Depositor's
Interest, or (ii) the aggregate amount of Principal Receivables in the Trust
(determined after giving effect to any Principal Receivables transferred to the
Trust on such date and any Shared Principal Collections deposited in the Excess
Funding
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Account on such Date) is less than the Required Principal Balance, the Servicer
will not distribute to the Depositor any Excess Finance Charges then on deposit
in the Collection Account that otherwise would be distributed to the Depositor,
but shall deposit such funds in the Excess Funding Account; provided further,
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however, that the sharing of Excess Finance Charges among Series in a Group will
- -------
continue only until such time, if any, at which the Depositor shall deliver to
the Trustee an Officer's Certificate to the effect that, in the reasonable
belief of the Depositor, the continued sharing of Excess Finance Charges among
Series in any Group would have adverse regulatory implications with respect to
the Depositor. Following the delivery by the Depositor of such an Officer's
Certificate to the Trustee there will not be any further sharing of Excess
Finance Charges among Series in any Group.
ARTICLE V
Distributions and Reports to
----------------------------
Certificateholders
------------------
Distributions shall be made to, and reports shall be provided to,
Certificateholders as set forth in the applicable Supplement.
ARTICLE VI
The Certificates
----------------
Section 6.01. The Certificates. The Investor Certificates of any
----------------
Series or Class may be issued in bearer form ("Bearer Certificates") with
attached interest coupons and any other applicable coupon (collectively, the
"Coupons") or in fully registered form ("Registered Certificates") and shall be
substantially in the form of the exhibits with respect thereto attached to the
applicable Supplement. The Depositor's Certificate will be issued in registered
form, substantially in the form of Exhibit A and shall upon issue, be executed
and delivered by the Depositor to the Trustee for authentication and redelivery
as provided in Section 6.02. Except as otherwise provided in Section 6.03 or in
any Supplement, Bearer Certificates shall be issued in minimum denominations of
$1,000 and Registered Certificates shall be issued in minimum denominations of
$1,000 and in integral multiples of $1,000 in excess thereof. If specified in
any Supplement, the Investor Certificates of any Series or Class shall be issued
upon initial issuance as a single certificate evidencing the aggregate original
principal amount of such Series or Class as described in Section 6.13. The
Depositor's Certificate shall be a single certificate and shall initially
represent the entire Depositor's Interest. Each Certificate shall be executed
by manual or facsimile signature of behalf of the Depositor by its respective
President or any Vice President. Certificates bearing the manual or facsimile
signature on an individual who was, at the time when such signature was affixed,
authorized to sign on behalf of the Depositor shall not be rendered invalid,
notwithstanding that such individual ceased to be so authorized prior to the
authentication and delivery of such Certificates or does not hold such office at
the date of such Certificates. No
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Certificates 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 or on
behalf of the Trustee by the manual signature of a duly authorized signatory,
and such certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder. Bearer Certificates shall be dated the Series Issuance Date. All
Registered Certificates and the Depositor's Certificate shall be dated the date
of their authentication.
Section 6.02. Authentication of Certificates. The Trustee shall
------------------------------
authenticate and deliver the Investor Certificates of each Series and Class that
are issued upon original issuance to or upon the order of the Depositor against
payment to the Depositor of the purchase price therefor. The Trustee shall
authenticate and deliver the Depositor's Certificate to the Depositor
simultaneously with its delivery of the Investor Certificates of the first
Series to be issued hereunder. If specified in the related Supplement for any
Series or Class, the Trustee shall authenticate and deliver outside the United
States the Global Certificate that is issued upon original issuance thereof.
Section 6.03. New Issuances. (a) The Depositor may from time to
-------------
time direct the Trustee, on behalf of the Trust, to authenticate one or more new
Series of Investor Certificates. The Investor Certificates of all outstanding
Series shall be equally and ratably entitled as provided herein to the benefits
of this Agreement without preference, priority or distinction, all in accordance
with the terms and provisions of this Agreement and the applicable Supplement
except, with respect to any Series or Class, as provided in the related
Supplement.
(b) On or before the Series Issuance Date relating to any new Series,
the parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series. The terms of such Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series. The
obligation of the Trustee to authenticate the Investor Certificates of such new
Series and to execute and deliver the related Supplement is subject to the
satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding the
Series Issuance Date, the Depositor shall have given the Trustee, the
Servicer, each Rating Agency and any Series Enhancer entitled thereto
pursuant to the relevant Supplement notice of such issuance and the Series
Issuance Date;
(ii) the Depositor shall have delivered to the Trustee the related
Supplement, in form and substance satisfactory to the Trustee, executed by
each party hereto other than the Trustee;
(iii) the Depositor shall have delivered to the Trustee any related
Enhancement Agreement executed by each of the parties thereto, other than
the Trustee;
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(iv) the Depositor shall have received written notice from each Rating
Agency that such issuance will not have a Ratings Effect and shall have
delivered copies of each such written notice to the Servicer and the
Trustee;
(v) the Depositor shall have delivered to the Trustee and any Series
Enhancer entitled thereto pursuant to the relevant Supplement an Officer's
Certificate of the Depositor, dated the Series Issuance Date, to the effect
that the Depositor reasonably believes that such issuance will not, based
on the facts known to such officer at the time of such certification, then
cause a Pay Out Event or any event that, after the giving of notice or the
lapse of time, would constitute a Pay Out Event to occur with respect to
any Series;
(vi) the Depositor shall have delivered to the Trustee, each Rating
Agency and any Series Enhancer entitled thereto pursuant to the relevant
Supplement a Tax Opinion, dated the Series Issuance Date, with respect to
such issuance; and
(vii) the Depositor shall have delivered to the Trustee and any Series
Enhancer entitled thereto pursuant to the relevant Supplement an Officer's
Certificate of the Depositor, dated the Series Issuance Date to the effect
that the Depositor's Amount (excluding the interest represented by any
Supplemental Certificate) shall not be less than the Specified Percentage
of the total amount of Principal Receivables, in each case as of the Series
Issuance Date, and after giving effect to such issuance.
Upon satisfaction of the above conditions, the Trustee shall execute the
Supplement and authenticate the Investor Certificates of such Series upon
execution thereof by the Depositor.
(c) The Depositor may surrender the Depositor's Certificate to the
Trustee in exchange for a newly issued Depositor's Certificate and one or more
additional certificates (each a "Supplemental Certificate"), the terms of which
shall be defined in a Supplement (which Supplement shall be subject to Section
13.01(a) to the extent that it amends any of the terms of this Agreement), to be
delivered to or upon the order of the Depositor (or the holder of a Supplemental
Certificate, in the case of the transfer of exchange thereof, as provided
below), upon satisfaction of the following conditions:
(i) the Depositor shall have received written notice from each Rating
Agency that such exchange (or transfer or exchange as provided below) will
not have a Ratings Effect and shall have delivered copies of each such
written notice to the Servicer and the Trustee; and
(ii) the Depositor shall have delivered to the Trustee, each Rating
Agency and any Series Enhancer entitled thereto pursuant to the relevant
Supplement a Tax Opinion, dated the date of such exchange (or transfer or
exchange as provided in the next sentence), with respect thereto.
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Any Supplemental Certificate may be transferred or exchanged only upon
satisfaction of the conditions set forth in clauses (i) and (ii) above.
Section 6.04. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall cause to be kept at the Corporate Trust Office to be
maintained in accordance with the provisions of Section 11.16 a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, a transfer agent and registrar (which may be the Trustee) (the
"Transfer Agent and Registrar") shall provide for the registration of the
Registered Certificates and of transfers and exchanges of the Registered
Certificates as herein provided. The Transfer Agent and Registrar shall
initially be the Trustee, and any co-transfer agent and co-registrar chosen by
the Depositor and acceptable to the Trustee, including, if and so long as any
Series or Class is listed on a European stock exchange (including the Luxembourg
Stock Exchange) and such exchange shall so require, a co-transfer agent and co-
registrar in the city of such exchange. So long as any Investor Certificates
are outstanding, the Depositor shall maintain a co-transfer agent and co-
registrar in New York City. Any reference in this Agreement to the Transfer
Agent and Registrar shall include any co-transfer agent and co-registrar unless
the context requires otherwise.
The Trustee may revoke such appointment and remove any Transfer Agent
and Registrar if the Trustee determines in its sole discretion that such
Transfer Agent and Registrar failed to perform its obligations under this
Agreement in any material respect. Any Transfer Agent and Registrar shall be
permitted to resign as Transfer Agent and Registrar upon 30 days' written notice
to the Depositor, the Trustee and the Servicer; provided, however, that such
-------- -------
resignation shall not be effective and such Transfer Agent and Registrar shall
continue to perform its duties as Transfer Agent and Registrar until the
Depositor has appointed a successor Transfer Agent and Registrar reasonably
acceptable to the Trustee.
Subject to paragraph (c) below, upon surrender for registration of
transfer of any Registered Certificate at any office or agency of the Transfer
Agent and Registrar maintained for such purpose, one or more new Registered
Certificates (of the same Series and Class) in authorized demoninations of like
aggregate fractional undivided interests in the Certificateholders' Interest
shall be executed, authenticated and delivered, in the name of the designated
transferee or transferees.
At the option of a Registered Certificateholder, Registered
Certificates (of the same Series and Class) may be exchanged for other
Registered Certificates of authorized denominations of like aggregate fractional
undivided interests in the Certificateholders' Interest, upon surrender of the
Registered Certificates to be exchanged at any such office or agency; Registered
Certificates, including Registered Certificates received in exchange for Bearer
Certificates, may not be exchanged for Bearer Certificates. At the option of
the Holder of a Bearer Certificate, subject to applicable laws and regulations,
Bearer Certificates may be exchanged for other Bearer Certificates or Registered
Certificates (of the same Series and Class) of authorized denominations of like
aggregate fractional undivided interests in the Certificateholders' Interest
upon surrender
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of the Bearer Certificates to be exchanged at an office or agency of the
Transfer Agent and Registrar located outside the United States. Each Bearer
Certificate surrendered pursuant to this Section shall have attached thereto all
unmatured Coupons; provided that any Bearer Certificate, so surrendered after
--------
the close of business on the Record Date preceding the relevant payment date or
distribution date after the expected final payment date need not have attached
the Coupon relating to such payment date or distribution date (in each case, as
specified in the applicable Supplement).
Whenever any Investor Certificates are so surrendered for exchange,
the Depositor shall execute, the Trustee shall authenticate and the Transfer
Agent and Registrar shall deliver (in the case of Bearer Certificates, outside
the United States) the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory
to the Trustee or the Transfer Agent and Registrar duly executed by the Investor
Certificateholder or the attorney-in-fact thereof duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any such transfer or exchange.
All Investor Certificates (together with any Coupons) surrendered for
registration of transfer and exchange or for payment shall be canceled and
disposed of in a manner customary and satisfactory to the Trustee. The Trustee
shall cancel and destroy any Global Certificate upon its exchange in full for
Definitive Euro-Certificates and shall deliver a certificate of destruction to
the Depositor. Such certificate shall also state that a certificate or
certificates of a Foreign Clearing Agency to the effect referred to in Section
6.13 was received with respect to each portion of the Global Certificate
exchanged for Definitive Euro-Certificates.
The Depositor shall execute and deliver to the Trustee Bearer
Certificates and Registered Certificates in such amounts and at such times as
are necessary to enable the Trustee to fulfill its responsibilities under this
Agreement, each Supplement and the Certificates.
(b) The Transfer Agent and Registrar will maintain at the Transfer
Agent and Registrar's expense (or at the co-transfer agent and co-registrar's
expense) in each of the Borough of Manhattan, The City of New York, and if and
so long as any Series or Class is listed on a European stock exchange (including
the Luxembourg Stock Exchange), then in the city of such exchange, an office or
agency where Investor Certificates may be surrendered for registration of
transfer or exchange (except that Bearer Certificates may not be surrendered for
exchange at any such office or agency in the United States).
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(c) (i) Registration of transfer of Investor Certificates containing a
legend substantially to the effect set forth on Exhibit E-1 shall be effected
only if such transfer (x) is made pursuant to an effective registration
statement under the Act, or is exempt from the registration requirements under
the Act, and (y) is made to a Person which is not an employee benefit plan,
trust or account, including an individual retirement account, that is subject to
ERISA or that is described in Section 4975(e)(1) of the Code or an entity whose
underlying assets include plan assets by reason of a plan's investment in such
entity (a "Benefit Plan"). In the event that registration of a transfer is to
be made in reliance upon an exemption from the registration requirements under
the Act, the transferor or the transferee shall deliver, at its expense, to the
Depositor, the Servicer and the Transfer Agent and Registrar an investment
letter from the transferee, substantially in the form of the investment and
ERISA representation letter attached hereto as Exhibit E-2, and no registration
of transfer shall be made until such letter is so delivered.
Investor Certificates issued upon registration or transfer of, or
Investor Certificates issued in exchange for, Investor Certificates bearing the
legend referred to above shall also bear such legend unless the Depositor, the
Servicer, the Trustee and the Transfer Agent and Registrar receive an Opinion of
Counsel, satisfactory to each of them, to the effect that such legend may be
removed.
Whenever an Investor Certificate containing the legend referred to
above is presented to the Transfer Agent and Registrar for registration of
transfer, the Transfer Agent and Registrar shall promptly seek instructions from
the Servicer regarding such transfer and shall be entitled to receive
instructions signed by a Servicing Officer prior to registering any such
transfer. The Depositor hereby agrees to indemnify the Transfer Agent and
Registrar and the Trustee and to hold each of them harmless against any loss,
liability or expense incurred without negligence or bad faith on their part
arising out of or in connection with actions taken or omitted by them in
relation to any such instructions furnished pursuant to this clause (i).
(ii) Registration of transfer of Investor Certificates containing a
legend to the effect set forth on Exhibit E-3 shall be effected only if such
transfer is made to a Person which is not a Benefit Plan. By accepting and
holding any such Investor Certificate, an Investor Certificateholder shall be
deemed to have represented and warranted that it is not a Benefit Plan. By
acquiring any interest in a Book-Entry Certificate which contains such legend, a
Certificate Owner shall be deemed to have represented and warranted that it is
not a Benefit Plan.
(iii) If so requested by the Depositor, the Trustee will make
available to any prospective purchaser of Investor Certificates who so requests,
a copy of a letter provided to the Trustee by or on behalf of the Depositor
relating to the transferability of any Series or Class to a Benefit Plan.
Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons (if any) appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer
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Agent and Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate and (b) there is delivered to the Transfer
Agent and Registrar, the Depositor, the Servicer and the Trustee such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Trustee that such Certificate has been acquired by
a bona fide purchaser, the Depositor shall execute, the Trustee shall
authenticate and the Transfer Agent and Registrar shall deliver (in the case of
Bearer Certificates, outside the United States), in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like tenor and aggregate fractional undivided interest. In connection with the
issuance of any new Certificate under this Section, the Trustee or the Transfer
Agent and Registrar may require the payment by the Certificate, older 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 Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time and any holder of the lost, stolen, or destroyed Certificate shall no
longer be entitled to any of the rights or benefits hereunder.
Section 6.06. Persons Deemed Owners. The Trustee, the Paying
---------------------
Agent, the Depositor, the Servicer, the Transfer Agent and Registrar and any
agent of any of them may (a) prior to due presentation of a Registered
Certificate for registration of transfer, treat the Person in whose name any
Registered Certificate is registered as the owner of such Registered Certificate
for the purpose of receiving distributions pursuant to the terms of the
applicable Supplement and for all other purposes whatsoever, and (b) treat the
bearer of a Bearer Certificate or Coupon as the owner of such Bearer Certificate
or Coupon for the purpose of receiving distributions pursuant to the terms of
the applicable Supplement and for all other purposes whatsoever; and, in any
such case, neither the Trustee, the Paying Agent, the Depositor, the Servicer,
the Transfer Agent and Registrar nor any agent of any of them shall be affected
by any notice to the contrary. Notwithstanding the foregoing, in determining
whether the Holders of the requisite Investor Certificates have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Depositor, the Servicer, any other holder of the
Depositor's Certificate, the Trustee or any Affiliate thereof, shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Certificates so owned which have been pledged in good faith shall
not be disregarded and may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Certificates and that the pledgee is not the Depositor, the Servicer, any
other holder of the Depositor's Certificate or any Affiliate thereof.
Section 6.07. Appointment of Paying Agent. The Paying Agent
---------------------------
shall make distributions to Investor Certificateholders from the Collection
Account or any applicable Series Account pursuant to the provisions of the
applicable Supplement and shall report he amounts of such distributions to the
Trustee. Any Paying Agent shall have the revocable power to withdraw
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funds from the Collection Account or any applicable Series Account for the
purpose of making the distributions referred to above. The Trustee may revoke
such power and remove the Paying Agent if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement or any Supplement in any material respect. The Paying
Agent shall initially be the Trustee and any co-paying agent chosen by the
Depositor and acceptable to the Trustee, including, if and so long as any Series
or Class is listed on a European stock exchange (including the Luxembourg Stock
Exchange) and such exchange so requires, a co-paying agent in the city exchange
or another western European city. Any Paying Agent shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Trustee and the Depositor.
In the event that any Paying Agent shall resign, the Depositor shall appoint a
successor to act as Paying Agent, reasonably acceptable to the Trustee. The
initial and each successor or additional Paying Agent shall execute and deliver
to the Trustee an instrument in which such successor or additional Paying Agent
shall agree with the Trustee that (i) it will hold all sums, if any, held by it
for payment to the Investor Certificateholders in trust for the benefit of the
Investor: Certificateholders entitled thereto until such sums shall be paid to
such Investor Certificateholders and (ii) during the continuance of any Pay-Out
Event or Servicer Default, upon the written request of the Trustee, it will
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Investor Certificates. The Paying Agent shall return
all unclaimed funds to the Trustee and upon removal shall also return all funds
in its possession to the Trustee. If and for so long as the Trustee shall act
as Paying Agent, the provisions of Sections 11.01, 11.02, 11.03 and 11.05 shall
apply to the Trustee also in its role as Paying Agent. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
Section 6.08. Access to List of Registered Certificateholders
-----------------------------------------------
Names and Addresses. The Trustee will furnish or cause to be furnished by the
- -------------------
Transfer Agent and Registrar to the Servicer or the Paying Agent, within five
Business Days after receipt by the Trustee of a request therefor, a list in such
form as the Servicer or the Paying Agent may reasonably enquire, of the names
and addresses of the Registered Certificateholders. If any Holder or group of
Holders of Investor Certificates of any Series or all outstanding Series, as the
case may be, evidencing not less than 33% of the aggregate unpaid principal
amount of such Series or all outstanding Series, as applicable (the
"Applicants"), apply to the Trustee, and such application states that the
Applicants desire to communicate with other Investor Certificateholders with
respect to their rights under this Agreement or any Supplement or under the
Investor Certificates and is accompanied by a copy of the communication which
such Applicants propose to transmit, then the Trustee after having been
adequately indemnified by such Applicants for its costs and expenses, shall
afford or shall cause the Transfer Agent and Registrar to afford such Applicants
access during normal business hours to the most recent list of Registered
Certificateholders of such Series or all outstanding Series, as applicable, held
by the Trustee, within five Business Days after the receipt of such application.
Such list shall be as of a date no more than 45 days prior to the date of
receipt of such Applicants request.
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Every Registered Certificateholder, by receiving and holding a
Registered Certificate, agrees with the Trustee that neither the Trustee, the
Depositor, the Servicer, the Transfer Agent and Registrar, nor any of their
respective agents, shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Registered
Certificateholders hereunder, regardless of the sources from which such
information was derived.
Section 6.09. Authenticating Agent. (a) The Trustee may appoint one
--------------------
or more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in this Agreement to
the authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be reasonably acceptable to the Depositor and the
Servicer.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any power or any further act on the part of the Trustee
or such authenticating agent. An authenticating agent may at any time resign by
giving written notice of resignation to the Trustee and to the Depositor. The
Trustee may at any time terminate the agency of an authenticating agent by
giving written notice of termination to such authenticating agent and to the
Depositor. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee or the Depositor, the Trustee promptly may appoint a
successor authenticating agent. Any successor authenticating agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. No successor authenticating agent
shall be appointed unless acceptable to the Trustee and the Depositor. The
Depositor agrees to pay to each authenticating agent from time to time
reasonable compensation for its services under this Section. The provisions of
Sections 11.0l, 11.02 and 11.03 shall be applicable to any authenticating agent.
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(c) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the Certificates described in the Pooling and Servicing
Agreement.
__________________________________
__________________________________
as Authenticating Agent
for the Trustee,
by _______________________________
Authorized Officer
Section 6.10. Book-Entry Certificates. Unless otherwise specified in
-----------------------
the related Supplement for any Series or Class, the Investor Certificates, upon
original issuance, shall be issued in the form of one or more typewritten
Investor Certificates representing the Book-Entry Certificates, to be delivered
to the Clearing Agency, by, or on behalf of, the Depositor. The Investor
Certificates shall initially be registered on the Certificate Register in the
name of the Clearing Agency or its nominee, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the Investor Certificates, except as provided in Section 6.12. Unless and
until definitive, fully registered Investor Certificates ("Definitive
Certificates") have been issued to the applicable Certificate Owners pursuant to
Section 6.12 or as otherwise specified in any such Supplement:
(a) the provisions of this Section shall be in full force and effect;
(b) the Depositor, the Servicer and the Trustee may deal with the
Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions) as the authorized representatives
of the respective Certificate Owners;
(c) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control; and
(d) the rights of the respective Certificate Owners shall be exercised
only through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency and/or the Cleaning Agency
Participants. Pursuant to the Depositary Agreement, unless and until
Definitive Certificates are issued pursuant to Section 6.12, the Clearing
Agency will make book-entry transfers, the Clearing Agency Participants and
receive and transmit distributions of and interest on the related Investor
Certificates to such Clearing Agency Participants.
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For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Investor
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of Investor Certificates, such direction or consent may be
given by Certificate Owners (acting through the Clearing Agency and the Clearing
Agency Participants) owning Investor Certificates evidencing the requisite
percentage of principal amount of Investor Certificates.
Section 6.11. Notices to Clearing Agency. Whenever any notice or
--------------------------
other communication is required to be given to Investor Certificateholders of
any Series or Class with respect to which Book-Entry Certificates have been
issued, unless and until Definitive Certificates shall have been issued to the
related Certificate Owners, the Trustee shall give all such notices and
communications to the applicable Clearing Agency.
Section 6.12. Definitive Certificates. If Book-Entry
-----------------------
Certificates have been issued with respect to any Series or Class and (a) the
Depositor advises the Trustee that the Clearing Agency is no longer willing or
able to discharge properly its responsibilities under the Depositary Agreement
with respect to such Series or Class and the Trustee or the Depositor is unable
to locate a qualified successor, (b) the Depositor, at its option, advises the
Trustee that it elects to terminate the book-entry system with respect to such
Series or Class through the Clearing Agency or (c) after the occurrence of a
Servicer Default, Certificate Owners of such Series or Class evidencing more
than 50% of the aggregate unpaid principal amount of such Series or Class advise
the Trustee and the Clearing Agency through the Clearing Agency Participants
that the continuation of a book-entry system with respect to the Investor
Certificates of such Series or Class through the Clearing Agency is no longer in
the best interests of the Certificate Owners with respect to such Certificates,
then the Trustee shall notify all Certificate Owners of such Certificates,
through the Clearing Agency, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trustee of any such Certificates by the Clearing
Agency, accompanied by registration instructions from the Clearing Agency for
registration, the Depositor shall execute and the Trustee shall authenticate and
deliver such Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of such Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates and the Trustee shall recognize the
Holders of such Definitive Certificates as Investor Certificateholders
hereunder.
Section 6.13. Global Certificate; Exchange Date. (a) If specified in
---------------------------------
the related Supplement for any Series or Class, the Investor Certificates for
such Series or Class will initially be issued in the form of a single temporary
global Certificate (the "Global Certificate") in bearer form, without interest
coupons, in the denomination of the entire aggregate principal amount of such
Series or Class substantially in the form set forth in the exhibit with respect
thereto attached to the related Supplement. The Global Certificate will be
executed by the Depositor and
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authenticated by the Trustee upon the same conditions, in substantially the same
manner and with the same effect as the Definitive Certificates. The Global
Certificate may be exchanged as described below for Bearer or Registered
Certificates in definitive form (the "Definitive Euro-Certificates").
(b) The Manager shall, upon its determination of the date of
completion of the distribution of the Investor Certificates of such Series or
Class, so advise the Trustee, the Depositor, the Depositaries, and each Foreign
Clearing Agency forthwith. Without unnecessary delay, but in any event not
prior to the Exchange Date, the Depositor will execute and deliver to the
Trustee at its London office or its designated agent outside the United States
definitive Bearer Certificates in an aggregate principal amount equal to the
entire aggregate principal amount of such Series or Class. All Bearer
Certificates so issued and delivered will have Coupons attached. The Global
Certificate may be exchanged for an equal aggregate principal amount of
Definitive Euro-Certificates only on or after the Exchange Date. An
institutional investor that is a U.S. Person may exchange the portion of the
Global Certificate beneficially owned by it only for an equal aggregate
principal amount of Registered Certificates bearing the applicable legend set
forth in the form of Registered Certificate attached to the related Supplement
and having a minimum denomination of $500,000, which may be in temporary form if
the Depositor so elects. The Depositor may waive the $500,000 minimum
denomination requirement if it so elects. Upon any demand for exchange for
Definitive Euro-Certificates in accordance with this paragraph, the Depositor
shall cause the Trustee to authenticate and deliver the Definitive Euro-
Certificates to the Holder (x) outside the United States, in the case of Bearer
Certificates, and (y) according to the instructions of the Holder, in the case
of Registered Certificates, but in either case only upon presentation to the
Trustee of a written statement. Substantially in the form of Exhibit G-1 with
respect to the Global Certificate or portion thereof being exchanged signed by a
Foreign Clearing Agency and dated on the Exchange Date or a subsequent date, to
the effect that it has received in writing or by tested telex a certification
substantially in the form of (i) in the case of beneficial ownership of the
Global Certificate or a portion thereof being exchanged by a United States
institutional investor pursuant to the second preceding sentence, the
certificate in the form of Exhibit G-2 by the Manager which sold the relevant
Certificates or (ii) in all other cases, the certificate in the form of Exhibit
G-3, the certificate referred to in this clause (ii) being dated on the earlier
of the first actual payment of interest in respect of such Certificates and the
date of the delivery of such Certificate in definitive form. Upon receipt of
such certification, the Trustee shall cause the Global Certificate to be
endorsed in accordance with paragraph (d) below. Any exchange as provided in
this Section shall be made free of charge to the holders and the beneficial
owners of the Global Certificate and to the beneficial owners of the Definitive
Euro-certificates issued in exchange, except that a person receiving Definitive
Euro-certificates must bear the cost of insurance, postage, transportation and
the like in the event that such person does not receive such Definitive Euro-
Certificates in person at the offices of a Foreign Clearing Agency.
(c) The delivery to the Trustee by a Foreign Clearing Agency of any
written statement referred to above may be relied upon by the Depositor and the
Trustee as conclusive
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evidence that a corresponding certification or certifications has or have been
delivered to such Foreign Clearing Agency pursuant to the terms of this
Agreement.
(d) Upon any such exchange of all or a portion of the Global
Certificate for a Definitive Euro-Certificate or Certificates, such Global
Certificate shall be endorsed by or on behalf of the Trustee to reflect the
reduction of its principal amount by an amount equal to the aggregate principal
amount of such Definitive Euro-Certificate or Certificates. Until so exchanged
in full, such Global Certificate shall in all respects be entitled to the same
benefits under this Agreement as Definitive Euro-Certificates authenticated and
delivered hereunder except that the beneficial owners of such Global Certificate
shall not be entitled to receive payments of interest on the Certificates until
they have exchanged their beneficial interests in such Global Certificate for
Definitive Euro-Certificates.
Section 6.14. Meetings of Certificateholders. (a) If at the time
------------------------------
any Bearer Certificates are issued and outstanding with respect to any Series or
Class to which any meeting described below relates, the Servicer or the Trustee
may at any time call a meeting of Investor Certificateholders of any Series or
Class or of all Series, to be held at such time and at such place as the
Servicer or the Trustee, as the case may be, shall determine, for the purpose of
approving a modification of or amendment to, or obtaining a waiver of any
covenant or condition set forth in, this Agreement, any Supplement or the
Investor Certificates or of taking any other action permitted to be taken by
Investor Certificateholders hereunder or under any Supplement. Notice of any
meeting of Investor Certificateholders, setting forth the time and place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given in accordance with Section 13.05(b), the first mailing and
publication to be not less than 20 nor more than 180 days prior to the date
fixed for the meeting. To be entitled to vote at any meeting of Investor
Certificateholders a person shall be (i) a Holder of one or more Investor
Certificates of the applicable Series or Class or (ii) a person appointed by an
instrument in writing as proxy by the Holder of one or more such Investor
Certificates. The only persons who shall be entitled to be present or to speak
at any meeting of Investor Certificateholders shall be the persons entitled to
vote at such meeting and their counsel and any representatives of the Depositor,
the Servicer and the Trustee and their respective counsel.
(b) At a meeting of Investor Certificateholders, persons entitled to
vote Investor Certificates evidencing a majority of the aggregate unpaid
principal amount of the applicable Series or Class or all outstanding Series, as
the case may be, shall constitute a quorum. No business shall be transacted in
the absence of a quorum, unless a quorum is present when the meeting is called
to order. In the absence of a quorum at any such meeting, the meeting may be
adjourned for a period of not less than 10 days; in the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further adjourned for
a period of not less than 10 days; at the reconvening of any meeting further
adjourned for lack of a quorum, the persons entitled to vote Investor
Certificates evidencing at least 25% of the aggregate unpaid principal amount of
the applicable Series or Class or all outstanding Series, as the case may be,
shall constitute a quorum for the taking of any action set forth in the notice
of the original meeting. Notice of the
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reconvening of any adjourned meeting shall be given as provided above except
that such notice must be given not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of
an adjourned meeting shall state expressly the percentage of the aggregate
principal amount of the outstanding applicable Investor Certificates which shall
constitute a quorum.
(c) Any Investor Certificateholder who has executed an instrument in
writing appointing a person as proxy shall be deemed to be present for the
purposes of determining a quorum and be deemed to have voted; provided that such
--------
Investor Certificateholder shall be considered as present or voting only with
respect to the matters covered by such instrument in writing. Subject to the
provisions of Section 13.01, any resolution passed or decision taken at any
meeting of Investor Certificateholders duly held in accordance with this Section
shall be binding on all Investor Certificateholders whether or not present or
represented at the meeting.
(d) The holding of Bearer Certificates shall be proved by the
production of such Bearer Certificates or by a certificate, satisfactory to the
Servicer, executed by any bank, trust company or recognized securities dealer,
wherever situated, satisfactory to the Servicer. Each such certificate shall be
dated and shall state that on the date thereof a Bearer Certificate bearing a
specified serial number was deposited with or exhibited to such bank, trust
company or recognized securities dealer by the person named in such certificate.
Any such certificate may be issued in respect of one or more Bearer Certificates
specified therein. The holding by the person named in any such certificate of
any Bearer Certificate specified therein shall be presumed to continue for a
period of one year from the date of such certificate unless at the time of any
determination of such holding (i) another certificate bearing a later date
issued in respect of the same Bearer Certificate shall be produced, (ii) the
Bearer Certificate specified in such certificate shall be produced by some other
person or (iii) the Bearer Certificate specified in such certificate shall have
ceased to be outstanding. The appointment of any proxy shall be proved by
having the signature of the person executing the proxy guaranteed by any bank,
trust company or recognized securities dealer satisfactory to the Trustee.
(e) The Trustee shall appoint a temporary chairman of the meeting. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the holders of Investor Certificates evidencing a majority of the
aggregate unpaid principal amount of Investor Certificates of the applicable
Series or Class or all outstanding Series, as the case may be, represented at
the meeting. No vote shall be cast or counted at any meeting in respect of any
Investor Certificate challenged as not outstanding and ruled by the chairman of
the meeting to be not outstanding. The chairman of the meeting shall have no
right to vote except as an Investor Certificateholder or proxy. Any meeting of
Investor Certificateholders duly called at which a quorum is present may be
adjourned from time to time, and the meeting may be held as so adjourned without
further notice.
(f) The vote upon any resolution submitted to any meeting of Investor
Certificateholders shall be by written ballot on which shall be subscribed the
signatures of Investor
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Certificateholders or proxies and on which shall be inscribed the serial number
or numbers of the Investor Certificates held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Investor Certificateholders shall be prepared
by the secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
published as provided above. The record shall be signed and verified by the
permanent chairman and secretary of the meeting and one of the duplicates
delivered to the Servicer and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.
ARTICLE VII
Other Matters Relating to the Depositor
---------------------------------------
Section 7.01. Liability of the Depositor. The Depositor shall be
--------------------------
liable in all respects for the obligations, covenants, representations and
warranties of the Depositor arising under or related to this Agreement or any
Supplement. The Depositor shall be liable only to the extent of the obligations
specifically undertaken by it in its capacity as Depositor.
Section 7.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Depositor. (a) The Depositor shall not consolidate with or
- -----------------------------
merge into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person unless:
(i) (x) the corporation formed by such consolidation or into
which the Depositor is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Depositor
substantially as an entirety shall be, if the Depositor is not the
surviving entity, a corporation, banking corporation or banking
association organized and existing under the laws of the United States
and, if the Depositor is not the surviving entity, such corporation,
banking corporation or banking association shall expressly assume, by
an agreement supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the
performance of every covenant and obligation of the Depositor
hereunder, including its obligations under Section 7.04; and (y) the
Depositor has delivered to the Trustee an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with
this Section, that such supplemental agreement is a legal, valid and
binding obligation of such surviving entity enforceable against such
surviving entity in accordance with its terms, except as
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such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship
or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general, and if applicable, the
rights of creditors of state banking corporations or associations or
national banking associations, and except as such enforceability may
be limited by general principles of equity (whether considered in a
suit at law or in equity), and an Officer's Certificate stating that
all conditions precedent herein provided for relating to such
transaction have been complied with;
(ii) if the surviving entity is a Non-Code Entity, the Depositor
shall have delivered written notice of such consolidation, merger
conveyance or transfer to each Rating Agency or, if the surviving
entity is not a Non-Code Entity, the Depositor shall have received
written notice from each Rating Agency that such consolidation,
merger, conveyance or transfer will not have a Ratings Effect and
shall have delivered copies of each such written notice to the
Servicer and the Trustee; and
(iii) the Depositor shall have delivered to the Trustee, each
Rating Agency and any Series Enhancer entitled thereto pursuant to the
relevant Supplement a Tax Opinion, dated the date of such
consolidation, merger, conveyance or transfer, with respect thereto.
(b) The obligations of the Depositor hereunder shall not be assignable
nor shall any Person succeed to the obligations of the Depositor hereunder
except in each case in accordance with the provisions of the foregoing
paragraph.
Section 7.03. Limitations on Liability of the Depositor. Subject to
-----------------------------------------
Sections 7.01 and 7.04, neither the Depositor nor any of the directors,
officers, employees or agents of the Depositor acting in their capacities as
Depositor shall be under any liability to the Trust, the Trustee, the
Certificateholders, any Series Enhancer or any other Person for any action taken
or for refraining from the taking of any action in good faith in their
capacities as Depositor pursuant to this Agreement; provided, however, that this
-------- -------
provision shall not protect the Depositor or any such Person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor and any director,
officer, employee or agent of the Depositor may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Depositor) respecting any matters arising hereunder.
Section 7.04. Liabilities. Notwithstanding Section 7.03 (and
-----------
notwithstanding Sections 8.03 and 8.04), by entering into this Agreement, the
Depositor agrees to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities (other than those incurred
by an Investor Certificateholder in the capacity of an investor in the
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Investor Certificates or those which arise from any action by any Investor
Certificateholder) arising out of or based on the arrangement created by this
Agreement and the actions of the Servicer taken pursuant hereto as though this
Agreement created a partnership under the New York Uniform Partnership Act in
which the Depositor was a general partner. In the event of the appointment of a
Successor Servicer, the Successor Servicer will (from its own assets and not
from the assets of the Trust) indemnify and hold harmless the Depositor against
and from any losses, claims, damages and liabilities of the Depositor as
described in this Section arising from the actions or omissions of such
Successor Servicer.
ARTICLE VIII
Other Matters Relating to the Servicer
--------------------------------------
Section 8.01.Servicer. The Servicer shall be liable under this
--------
Article only to the extent of the obligations specifically undertaken by the
Servicer in its capacity as Servicer.
Section 8.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
- ----------------------------
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) (i) the corporation formed by such consolidation or into which
the Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Servicer substantially as an
entirety shall be, if the Servicer is not the surviving entity, a
corporation, banking corporation or banking association organized and
existing under the laws of the United States and, if the Servicer is not
the surviving entity, such corporation, banking corporation or banking
association shall expressly assume, by an agreement supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to
the Trustee, the performance of every covenant and obligation of the
Servicer hereunder;
(ii) the Servicer had delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental agreement comply with
this Section, that such supplemental agreement is a legal, valid and
binding obligation of such surviving entity enforceable against such
surviving entity in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and, if applicable, the rights of creditors of state
banking corporations or associations or national banking associations, and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity), and an Officer's
Certificate stating that all conditions precedent herein provided for
relating to such transaction have been complied with;
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(b) if the surviving entity is a Non-Code Entity, the Depositor shall
have delivered written notice of such consolidation, merger conveyance or
transfer to each Rating Agency or, if the surviving entity is not a Non-
Code Entity, the Depositor shall have received written notice from each
Rating Agency that such assignment and succession will not have a Ratings
Effect and shall have delivered copies of each such notice to the Depositor
and the Trustee; and
(c) the corporation formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be an Eligible Servicer.
Section 8.03. Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Except as provided in Section 8.04, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer in its capacity as
Servicer shall be under any liability to the Trust, the Trustee, the
Certificateholders, any Series Enhancer or any other person for any action taken
or for refraining from the taking of any action in good faith in its capacity as
Servicer pursuant to this Agreement; provided, however, that this provision
-------- -------
shall not protect the Servicer or any such Person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person (other than the
Servicer) respecting any matters arising hereunder. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its duties as Servicer in accordance with this Agreement and
which in its reasonable judgment may require it to incur any expense or
liability. The Servicer may, in its sole discretion, undertake any such legal
action which it may deem necessary or desirable for the benefit of the
Certificateholders with respect to this Agreement and the rights and duties of
the parties hereto and the interests of the Certificateholders hereunder.
Section 8.04. Servicer Indemnification of the Trust and the Trustee.
-----------------------------------------------------
The Servicer shall indemnify and hold harmless the Trustee and its directors,
officers, employees, and agents against any loss, liability or expense incurred
by it in connection with the administration of the Trust and the performance of
its duties under this Agreement and any Supplement, including those arising from
acts of omissions of the Servicer pursuant to this Agreement, and including but
not limited to any judgement, award, settlement reasonable attorney's fees and
other costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided, however, that the Servicer
-------- -------
shall not indemnify the Trustee or its directors, officers, employees or agents
if such acts, omission or alleged acts or omissions constitute fraud, negligence
or willful misconduct by the Trustee. Indemnification pursuant to this Section
shall not be payable from the Trust Assets.
Section 8.05. The Servicer Not To Resign. The Servicer shall not
--------------------------
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance
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of its duties hereunder is no longer permissible under Requirements of the Law
(other than the charter and by-laws of the Servicer) and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under such Requirements of Law (other than the
charter and bylaws of the Servicer)or (b) upon the assumption, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, of the obligations and duties of the Servicer hereunder by any
of its Affiliates or by any other entity the appointment of which shall have
satisfied the Rating Agency Condition and, in either case, qualifies as an
Eligible Servicer. Any determination permitting the resignation of the Servicer
shall be evidenced by an Officer's Certificate and an Opinion of Counsel to such
effect delivered to the Trustee. No resignation shall become effective until
the Trustee or a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 10.02. If within 120
days of the date of the determination that the Servicer may no longer act as
Servicer and the Trustee is unable to appoint a Successor Servicer, the Trustee
shall serve as Successor Servicer. Notwithstanding the foregoing, the Trustee
shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any established institution having a net worth of not
less than $50,000,000 and whose regular business includes the servicing of
credit card accounts and who has the ability to service the Receivables as the
Successor Servicer hereunder. The Trustee shall give prompt written notice of
such appointment to each Rating Agency and each Series Enhancer entitled hereto
under the terms of the applicable supplement upon the appointment of a Successor
Servicer.
Section 8.06.Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Receivables. The Servicer shall provide to the Trustee access to the
- ---------------
documentation regarding the Accounts and the Receivables in such cases where the
Trustee is required in connection with the enforcement of the rights of
Certificateholders or by Requirements of Law to review such documentation, such
access being afforded without charge but only (a) upon reasonable request, (b)
during normal business hours, (c) subject to the Servicer's normal security and
confidentiality procedures and (d) at the Servicer's principal office or at the
Servicer's office in the continental United States where the documentation
regarding the Accounts and the Receivables normally is kept. Nothing in this
Section shall derogate from the obligation of the Depositor, the Trustee and the
Servicer to observe any Requirements of Law prohibiting disclosure of
information regarding the Obligors and the failure of the Servicer to provide
access as provided in this Section as a result of such Requirements of Law shall
not constitute a breach of this Section.
Section 8.07. Delegation of Duties. In the ordinary course of
--------------------
business, the Servicer may at any time delegate any duties hereunder to any
Person who agrees to conduct such duties in accordance with the Lending
Guidelines; provided, however, that in the case of significant delegation to a
-------- -------
Person other than any Affiliate of the Depositor, (i) at least 30 days prior
written notice shall be given to the Trustee, each Rating Agency and each Series
Enhancer entitled thereto pursuant to the relevant Supplement, of such
delegation and (ii) at or prior to the end of such 30-day period the Servicer
shall not have received a notice in writing from a Rating Agency that such
delegation will have a Ratings Effect. Any such delegation shall not relieve
the
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Servicer of its liability and responsibility with respect to such duties, and
shall not constitute a resignation within the meaning of Section 8.05 hereof.
Section 8.08. Examination of Records. The Depositor and the Servicer
----------------------
shall clearly and unambiguously indicate in their computer files or other
records that the Receivables arising in the Accounts have been conveyed to the
Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit of
the Certificateholders. The Depositor and the Servicer shall, prior to the sale
or transfer to a third party of any receivable held in its custody, examine its
computer and other records to determine that such receivable is not a
Receivable.
ARTICLE IX
Pay Out Events
--------------
Section 9.01. Pay Out Events. If any one of the following
--------------
events shall occur with respect to any Series:
(a) the Depositor shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to the Depositor or of or relating to all or substantially all of its
property, or a decree order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Depositor;
or the Depositor 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 any assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations (any such event, an "Insolvency Event");
(b) the Trust shall become an "investment company" within the meaning
of the Investment Company Act; or
(c) any event specified in the relevant Supplement as a Pay Out Event
with respect to such Series;
then, in the case of any such event, a Pay Out Event shall occur with respect to
such Series without any notice or other action on the part of the Trustee or the
Investor Certificateholders, immediately upon the occurrence of such event.
Section 9.02. Additional Rights upon the Occurrence of Certain
------------------------------------------------
Events. (a) If an Insolvency Event occurs with respect to the Depositor or the
- ------
Depositor violates Section 2.07(c) for any reason, the Depositor shall on the
day any such Insolvency Event or violation occurs (the
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"Appointment Date"), immediately cease to transfer Principal Receivables to the
Trust and shall promptly give notice to the Trustee thereof. Notwithstanding
any cessation of the transfer to the Trust of additional Principal Receivables,
Principal Receivables transferred to the Trust prior to the occurrence of such
Insolvency Event and Collection in respect of such Principal Receivables and
Finance Charge Receivables whenever created, accrued in respect of such
Principal Receivables, shall continue to be a part of the Trust. Within 15 days
after receipt of such notice by the Trustee of the occurrence of such Insolvency
Event or violation of Section 2.07(c), the Trustee shall (i) publish a notice in
an Authorized Newspaper that an Insolvency Event or violation has occurred and
that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables on commercially reasonable terms and in a commercially reasonable
manner and (ii) give notice to Investor Certificateholders and each Series
Enhancer entitled thereto pursuant to the relevant Supplement describing the
provisions of this Section and requesting instructions from such Holders.
Unless the Trustee shall have received instructions within 90 days from the date
notice pursuant to clause (i) above is first published from (x) Holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid principal
amount of each Series or, with respect to any Series with two or more Classes,
of each Class, to the effect that such Investor Certificateholders disapprove of
the liquidation of the Receivables and wish to continue having Principal
Receivables Transferred to the Trust as before such Insolvency Event or
violation, (y) to the extent provided in the relevant Supplement, the Series
Enhancer with respect to such Series, to such effect, and (z) each holder (other
than the Depositor with respect to which the Insolvency Event occurred) of the
Depositor's Certificate to such effect, the Trustee shall promptly sell, dispose
of or otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms, which shall include the solicitation of
competitive bids. The Trustee may obtain and conclusively rely upon a prior
determination from any such conservator, receiver or liquidator that the terms
and manner of any proposed sale, disposition or liquidation are commercially
reasonable. The provisions of Section 9.01 and 9.02 shall not be deemed to be
mutually exclusive. References to the Depositor in this Section 9.02 include
any Additional Depositor.
(a) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to paragraph (a) ("Insolvency Proceeds") shall be
immediately deposited in the Collection Account. The Trustee shall determine
conclusively the amount of the Insolvency Proceeds which are deemed to be
Finance Charge Receivables and Principal Receivables. The Insolvency Proceeds
shall be allocated and distributed to Investor Certificateholders in accordance
with Article IV and the terms of each Supplement and the Trust shall terminate
immediately thereafter.
ARTICLE X
Servicer Defaults
-----------------
Section 10.01. Servicer Defaults. If any one of the following events
-----------------
(a "Servicer Default") shall occur and be continuing:
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(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee pursuant to the
terms of this Agreement or any Supplement on or before the date, occurring
ten Business Days after the date such payment, transfer or deposit or such
instruction or notice is required to be made or given, as the case may be,
under the terms of this Agreement or any Supplement;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in this Agreement or any Supplement which has a material adverse
effect on the interests hereunder of the Investor Certificateholders of any
Series or Class (which determination shall be made without regard to
whether funds are then available pursuant to any Series Enhancement) and
which continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by Holders of Investor Certificates evidencing not less than 33% of
the aggregate unpaid principal amount of all Investor Certificates (or,
with respect to any such failure that does not relate to all Series, 33% of
the aggregate unpaid principal amount of all Series to which such failure
relates); or the Servicer shall delegate its duties under this Agreement
except as permitted by Section 8.02 and 8.07, a Responsible officer,of the
Trustee as actual knowledge of such delegation and such delegation
continues unremedied for 15 days after the date on which written notice
thereof, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by Holders of
Investor Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of all Investor Certificates;
(c) any representation, warranty or certification made by the Servicer
in this Agreement or any Supplement or in any certificate delivered
pursuant to this Agreement or any Supplement shall prove to have been
incorrect in any material respect when made, which has a material adverse
effect on the rights of the Investor Certificateholders of any Series or
Class (which determination shall be made without regard to whether funds
are then available pursuant to any Series Enhancement) and which continues
to be incorrect in any material respect for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates,
evidencing not less than 33% of the aggregate unpaid principal amount of
all Investor Certificates (with respect to any such representation,
warranty or certification that does not relate to all Series, 33% of the
aggregate unpaid principal amount of all Series to which such
representation, warranty or certification relates); or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property, or
a decree or order of a court or agency or supervisory authority
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having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, shall have been entered against the Servicer,
and such decree or order shall have remained in force undischarged or
unstayed for a period of 90 days; or the Servicer shall admit in writing
its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations;
then, in the event of any Servicer Default, so long as the Servicer
Default shall not have been remedied, either the Trustee, or the Holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid principal
amount of all outstanding Series, by written notice then given to the Servicer
(and to the Trustee and any Series Enhancer entitled thereto pursuant to the
relevant Supplement if given by the Investor Certificateholders) (a "Termination
Notice"), may terminate all but not less than all the rights and obligations of
the Servicer as Servicer under this Agreement and in and to the Receivables and
the proceeds thereof; provided, however, that if within 60 days of receipt of a
-------- -------
Termination Notice the Trustee does not receive any bids from Eligible Servicers
in accordance with Section 10.02(c) to act as a Successor Servicer and receives
an Officer's Certificate of the Servicer or the Depositor, to the effect that
the Servicer cannot in good faith cure the Servicer Default which gave rise to
the Termination Notice, the Trustee shall grant a right of first refusal to the
Depositor which would permit the Depositor to purchase the Certificateholders
Interest on the Distribution Date in the next calendar month. The Trustee shall
first solicit bids from unaffiliated third parties and, if at least two bids are
obtained, the Trustee will offer the right of first refusal to the Depositor at
a purchase price equal to the higher of such bids so long as such purchase price
is at least equal to the sum of the amounts specified therefor with respect to
each outstanding Series in the related Supplement. If the Depositor does not
exercise its right of first refusal, the Trustee may sell the
Certificateholders' Interest to the highest bidder, so long as the purchase
price is at least equal to the amount described in the preceding sentence. The
Depositor shall notify the Trustee prior to the Record Date for the Distribution
Date of the purchase if it is exercising such right. If it exercises such
right, the Depositor shall deposit the purchase price into the Collection
Account not later than 12:00 noon New York City time, on the Transfer Date
immediately preceding such Distribution Date in immediately available funds.
The purchase price shall be allocated and distributed to Investor
Certificateholders in accordance with Article IV and the terms of each
Supplement.
After receipt by the Servicer of such Termination Notice, and on the
date that a Successor Servicer shall have been appointed by the Trustee pursuant
to Section 10.02, all authority and power of the Servicer under this Agreement
shall pass to and be vested in a Successor Servicer (a "Service Transfer") and,
without limitation, the Trustee is hereby authorized and empowered (upon the
failure of the Servicer to cooperate) to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer
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of servicing rights. The Servicer agrees to cooperate with the Trustee and such
Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing hereunder including the transfer to
such Successor Servicer of all authority of the Servicer to service the
Receivables provided for under this Agreement, including all authority over all
Collections which shall on the date of transfer be held by the Servicer for
deposit, or which have been deposited by the Servicer, in the Collection
Account, or which shall thereafter be received with respect to the Receivables,
and in assisting the Successor Servicer and in enforcing all rights to Insurance
Proceeds. The Servicer shall promptly transfer its electronic records relating
to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and documents necessary for
the continued servicing of the Receivables in the manner and as such times as
the Successor Servicer shall reasonably request. To the extent that compliance
with this Section 10.01 shall require the Servicer to disclose to the Successor
Servicer Information of any kind which the Servicer reasonably deems to be
confidential, the Successor Servicer shall be required to enter into such
customary licensing and confidentiality agreements as the Servicer shall been
necessary to protect its interests.
Notwithstanding the foregoing, any delay in or failure of performance
under Section 10.01(a) for a period of five Business Days or under Section
10.01(b) or (c) or a period of 90 days (in addition to any period provided in
Section 10.01(a), (b) or (c)) shall not constitute a Servicer Default until the
expiration of such additional five Business Days or 90 days, respectively, if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using its best efforts to perform its respective obligations
in a timely manner in accordance with the terms of this Agreement and any
Supplement and the Servicer shall provide the Trustee, each Rating Agency, any
Series Enhancer entitled thereto pursuant to the relevant Supplement, each
Holder of the Depositor's Certificate and the Investor Certificateholders with
an Officer's Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts, to so perform its obligations.
Section 10.02. Trustee To Act; Appointment of Successor. (a) On and
----------------------------------------
after the receipt by the Servicer of a Termination Notice pursuant to
Section 10.01, the Servicer shall continue to perform all servicing functions
under this Agreement until the date specified in the Termination Notice or
otherwise specified by the Trustee or until a date mutually agreed upon by the
Servicer and Trustee. The Trustee shall as promptly as possible after the
giving of a Termination Notice appoint an Eligible Servicer ad a successor
service (the "Successor Servicer"), and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee. In the
event that a Successor Servicer has not been appointed or has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Trustee
without further action shall automatically be appointed the Successor Servicer.
The Trustee may delegate any of its servicing obligations to an Affiliate of the
Trustee or agent in accordance with
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Sections 3.01(b) and 8.07. Notwithstanding the foregoing, the Trustee shall, if
it is legally unable so to act, petition a court of competent jurisdiction to
appoint any established institution having a net worth of not less than
$50,000,000 and whose regular business includes the servicing of credit card
receivables and who has the ability to service the Receivables as the Successor
Servicer hereunder. The Trustee shall give prompt notice of such appointment to
each Rating Agency and each Series Enhancer entitled thereto pursuant to the
applicable Supplement upon the appointment of a Successor Servicer.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer.
(c) In connection with any Termination Notice, the Trustee will
solicit bids from Eligible Servicers and shall be permitted to appoint any
Eligible Servicer submitting such a bid as a Successor Servicer for servicing
compensation not in excess of the aggregate Servicing Fees for all Series;
provided, however, that the Depositor shall be responsible for payment of that
- -------- -------
Depositor's portion of such aggregate Servicing Fees and that no such monthly
compensation paid out of Collections shall be in excess of such aggregate
Servicing Fees. Each holder of the Depositor's Certificate agrees that, if
[Servicer Name] (or any Successor Servicer) is terminated as Servicer hereunder,
the portion of the Collections in respect of Finance Charge Receivables that the
Depositor is entitled to receive pursuant to this Agreement or any Supplement
shall be reduced by an amount sufficient to pay the Depositor's share
(determined by reference to the Supplements with respect to any outstanding
Series) of the compensation of the Successor Servicer.
(d) All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.01 and shall pass to and be vested in the Depositor
and, without limitation, the Depositor is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Successor Servicer agrees to cooperate with
the Depositor in effecting the termination of the responsibilities and rights of
the Successor Servicer to conduct servicing on the Receivables. The Successor
Servicer shall transfer its electronic records relating to the Receivables to
the Depositor in such electronic form as the Depositor may reasonably request
and shall transfer all other records, correspondence and documents to the
Depositor in the manner and at such times as the Depositor shall reasonably
request. To the extent that compliance with this Section 10.02 shall require
the Successor Servicer to disclose to the Depositor information of any kind
which the Successor Servicer reasonably deems to be confidential, the Depositor
shall be required to enter into such customary licensing and confidentiality
agreements as the Successor Servicer shall deem reasonably necessary to protect
its interests.
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Section 10.03. Notification to Certificateholders. Within two
----------------------------------
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give notice thereof to the Trustee, each Rating Agency and any
Series Enhancer entitled thereto pursuant to the relevant Supplement and the
Trustee shall give notice to the Investor Certificateholders. Upon any
termination or appointment of a Successor Servicer pursuant to this Article, the
Trustee shall give prompt notice thereof to the investor Certificateholders.
ARTICLE XI
The Trustee
-----------
Section 11.01. Duties of Trustee. (a) The Trustee, prior to the
-----------------
occurrence of a Servicer Default and after the curing of all Servicer Defaults
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If a Servicer Default has
occurred (which has not been cured or waived) the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of such man's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. The Trustee shall give prompt
written notice to the Certificateholders of any material lack of conformity of
any such instrument to the applicable requirements of this Agreement discovered
by the Trustee which would entitle a specified percentage of the
Certificateholders to take any action pursuant to this Agreement.
(c) Subject to Section 11.01(a), no provision or this Agreement shall
be construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own wilful misconduct; provided,
--------
however, that:
- -------
(i) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) 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 written direction of the Holders of Investor
Certificates evidencing more than 50% of the aggregate unpaid principal
amount of all Investor Certificates (or, with respect to any such action
that does not relate to all Series, more than 50% of the aggregate unpaid
principal amount of the Investor Certificates of all Series to which such
action relates) relating to the time, method
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and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Agreement; and
(iii) the Trustee shall not be charged with knowledge of any failure
by the Servicer referred to in clauses (a) and (b) of Section 10.01 unless
a Responsible Officer of the Trustee obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
Servicer, any Holders of Investor Certificates evidencing not less than 33%
of the aggregate unpaid principal amount of all Investor Certificates (or,
with respect to any such failure that does not relate to all Series, not
less than 33% of the aggregate unpaid principal amount of all Investor
Certificates of all Series to which such failure relates, or the Series
Enhancers for all Series to which such failure relates).
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers hereunder or
thereunder, if there is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it, and none of the provisions contained in this Agreement
shall in any event require the Trustee to perform, or be responsible for the
manner of performance of, any of the obligations of the 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 in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to (i) impair the interests of
the Trust in any Receivable now existing or hereafter created or (ii) impair the
value of any Receivable now existing or hereafter created.
(f) The Trustee shall have no power to vary the corpus of the
Trust, except as expressly provided in this Agreement.
(g) Subject to Section 11.01(d), in the event that the Paying Agent
or the Transfer Agent and Registrar shall fail to perform any obligation, duty
or agreement in the manner or on the day required to be performed by the Paying
Agent or the Transfer Agent and Registrar, as the case may be, under this
Agreement, the Trustee shall be obligated as soon as possible upon knowledge of
a Responsible officer, thereof and receipt of appropriate records, if any, to
perform such obligation, duty or agreement in the manner so required.
(h) If the Depositor has agreed to transfer any of its receivables
(other than the Receivables) to another Person, upon the written request of the
Depositor, the Trustee will enter into such intercreditor agreement with the
transferee of such receivables as are customary and necessary to separately
identify the rights of the Trust and such other Person in the Depositor's
receivables; provided that the Trustee shall not be required to enter into any
-------- ----
intercreditor agreement which could adversely affect the interests of the
Certificateholders and, upon the
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request of the Trustee, the Depositor will deliver an Opinion of Counsel on any
matters relating to such intercreditor agreement, reasonably requested by the
Trustee.
Section 11.02. Certain Matters Affecting theTrustee. Except as
------------------------------------
otherwise provided in Section 11.01:
(a) the Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and
to have been signed or presented to it pursuant to this Agreement by the
proper party or parties;
(b) the Trustee may consult with counsel, and any advice of such
counsel, or 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 advice or opinion of
Counsel;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Enhancement
Agreement, or to institute, conduct or defend any litigation hereunder or
thereunder or in relation to this Agreement or any Enhancement Agreement,
at the request, order or direction of any of the Certifiateholders,
pursuant to the provisions of this Agreement or any Enhancement 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; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence of any Servicer
Default (which has not been cured) to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care
and skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(e) the Trustee shall not be bound to make any investigation into
the facts of 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 so to do by
Holders of Investor Certificates evidencing more than 33% of the aggregate
unpaid principal amount of all Investor Certificates (or, with respect to
any such matters that do not relate to all Series, 33% of the aggregate
unpaid principal amount of the Investor Certificates of all series to which
such matters relate);
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(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder or any Supplement either directly or by or
through agents or attorneys or a custodian, and the Trustee shall not be
responsible for the supervision of, or any misconduct or negligence on the
part of any such agent, attorney or custodian appointed with due care by it
hereunder;
(g) except as may be required by subsection 11.01(a) hereof, the
Trustee shall not be required to make any initial or periodic examination
of any documents or records related to the Receivables or the Accounts for
the purpose of establishing the presence or absence of defects, the
compliance by the Depositor with its representations and warranties or for
any other purpose; and
(h) in the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections afforded
to the Trustee pursuant to this Article XI shall also be afforded to the
Trustee when acting as Paying Agent or Transfer Agent and Registrar.
Section 11.03. Trustee Not Liable for Recitals in Certificates. The
-----------------------------------------------
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or any
Supplement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee
shall not be accountable for the use or application by the Depositor of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the holders of the Depositor's
Certificate in respect of the Receivables or deposited in or withdrawn from the
Collection Account, any Series Accounts or any other accounts hereafter
established to effectuate the transactions contemplated by this Agreement and in
accordance with the terms of this Agreement.
Section 11.04. Trustee May Own Certificates. Subject to Section
----------------------------
6.06, the Trustee in its individual or any other capacity may become the owner
or pledgee of Investor Certificates with the same rights as it would have if it
were not the Trustee.
Section 11.05. The Servicer To Pay Trustee's Fees and Expenses. The
-----------------------------------------------
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to receive, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Servicer will pay or reimburse the
Trustee (without reimbursement from the Collection Account or otherwise) upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Agreement
or any Enhancement Agreement (including the reasonable fees and expenses of its
agents, any co-trustee and counsel) except any such expense, disbursement or
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advance as may arise from its own negligence or bad faith and except as provided
in the following sentence. If the Trustee is appointed Successor Servicer
pursuant to Section 10.02, the provisions of this Section 11.05 shall not apply
to expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Servicer.
The obligations of the Servicer under Section 8.04 and this Section
11.05 shall survive the termination of the Trust and the resignation or removal
of the Trustee.
Section 11.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a bank or a corporation organized and doing
business under the laws of the United States of America or any state thereof
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by Federal or state authority and maintain any credit or deposit
rating required by any Rating Agency (as of the date hereof Baa3 for Moody 's).
If such bank or corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 11.06, the combined capital and
surplus of such bank or corporation shall be deemed to be its confined capital
and surplus as set forth in interest recent report of condition so published.
In case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 11.06, the Trustee shall resign immediately in
the manner and with the effect specified in Section 11.07.
Section 11.07. Resignation or Removal of Trustee. (a) The Trustee
---------------------------------
may at any the resign and be discharged from the trust hereby created by giving
written notice thereof to the Depositor and the Servicer. Upon receiving such
notice of resignation, the Depositor shall promptly appoint a successor trustee
by written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.06 and shall fail to resign after
written request therefor by the Servicer or the Depositor, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, the Servicer shall remove the Trustee and promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
installment shall be delivered to the Trustee so removed and one copy to the
successor trustee, provided however, that the Trustee shall not be liable for
-------- -------
any damages solely attributable to the acts or omissions of any Successor
Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.07 shall
not become effective until
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acceptance of appointment by the successor trustee as provided in Section 11.08
and any liability of the Trustee arising hereunder shall survive such
appointment of a successor trustee.
Section 11.08. Successor Trustee. (a) Any successor trustee
-----------------
appointed as provided in Section 11.07 shall execute, acknowledge and deliver to
the Depositor, to the Servicer and to its predecessor Trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver to the successor trustee all 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 fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.06.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section, such successor trustee shall provide notice of such succession
hereunder to all Investor Certificateholders and the Servicer shall provide such
notice each Rating Agency and any Series Enhancer entitled thereto pursuant to
the relevant Supplement.
Section 11.09. Merger or Consolidation of Trustee. Any Person into
----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 11.06, 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 11.10. Appointment of Co-Trustee or Separate Trustee. (a)
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time any legal
requirements of any jurisdiction in which any part of the Trust may at the time
be located, the Trustee shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or co-
trustees, or separate trustee or separate trustees, of all or any part of the
Trustee and to vest in such Person or Persons in such capacity and for the
benefit of the certificateholders, such title to the Trust, or any part he other
provisions of this thereof, and, subject to Section 11-10, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable; provided, however, that the Trustee shall exercise due care in the
-------- -------
appointment of any co-trustee. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 11.06 and no notice to
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Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 11.08.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and be 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 laws 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
Trustee or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the 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 XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Depositor and the Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to 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.
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Section 11.11. Tax Returns. In the event the Trust shall be required
-----------
to file tax returns, the servicer shall prepare or shall cause to be prepared
any tax returns required to be filed by the Trust and shall remit such returns
to the Trustee for signature at least five days before such returns are due to
be filed; the Trustee shall promptly sign such returns and deliver such returns
after signature to the Servicer and such returns shall be filed by the Servicer.
The Servicer in accordance with the terms of each Supplement shall also prepare
or shall cause to be prepared such tax information as is required by United
States law to be distributed to Investor Certificateholders. The Trustee, upon
request, will furnish the Servicer with all such information known to the
Trustee as may be reasonably required in connection with the preparation of all
tax returns of the Trust. In no event shall the Trustee or the Servicer (except
as provided in Section 8.04) be liable for any liabilities, costs or expenses of
the Trust or the Investor Certificateholders arising under any tax law,
including Federal, state, local or foreign income or excise taxes or any other
tax imposed on or measured by income (or any interest or penalty with respect
thereto or arising from a failure to comply therewith).
Section 11.12. Trustee May Enforce Claims without Possession of
---------------------------------- -------------
Certificates. All rights of action and claims under this Agreement or the
- ------------
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.13. Suits for Enforcement. (a) If a Servicer Default shall
---------------------
occur and be continuing, the Trustee, in its discretion may, subject to the
provisions of Sections 10.01 and 11.14, proceed to protect and enforce its
rights and.the rights of the Certificateholders under this Agreement by a suit,
action or proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant agreement contained in this Agreement or in aid of
the execution of any power granted in this Agreement or for the enforcement of
any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee or the Certificateholders.
(b) If the FDIC, the RTC or any equivalent government agency or
instrumentality or any designee of any of them shall have been appointed as
receiver, conservator, assignee, trustee in bankruptcy or reorganization,
liquidator, sequestrator or custodian with respect to the Depositor (the
"receiver"), the Trustee shall, irrespective of whether the principal of any
Series or Class of Investor Certificates shall then be due and payable:
(i) unless prohibited by applicable law or regulation or unless under
FIRREA the receiver is required to participate in the process as a
defendant or otherwise, promptly take or cause to be taken any and all
necessary or advisable commercially reasonable action as a secured creditor
on behalf of the Certificateholders to recover, repossess,
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collect or liquidate the Receivables or any other Trust Assets on a "self-
help basis or otherwise and exercise any rights or remedies of a secured
party under the applicable UCC and take any other appropriate action to
protect and enforce the rights and remedies of the Trustee and the
Certificateholders;
(ii) promptly, and in any case within any applicable claims bar period
specified under FIRREA or otherwise, file and prove a claim or claims under
FIRRFA or otherwise, by filing proofs of claim, protective proofs of claim
or otherwise, for the whole amount of unpaid principal and interest in
respect of the Investor Certificates and to file such other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee and the Certificateholders allowed in any judicial,
administrative, corporate or other proceedings relating to the Depositor,
its creditors or its property, including any actions relating to the
preservation of deficiency claims or for the protection against loss of any
claim in the event the Trustee's or the Certificateholders status as
secured creditors are successfully challenged; and
(iii) Collect and receive any moneys or other property payable or
deliverable on any such claims and distribute all amounts with respect to
the claims of the Certificateholders to the Certificateholders as their
interests may appear.
(c) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Certificateholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Investor Certificates or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Certificateholder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Investor
-------- -------
Certificateholders, vote for the election of a trustee in bankruptcy or similar
official and be a member of a creditor's or other similar committee.
Section 11.14. Rights of Certificateholders to Direct Trustee.
----------------------------------------------
Holders of Investor Certificates evidencing more than 50% of the aggregate
unpaid principal amount of all investor Certificates (or, with respect to any
remedy, trust or power that does not relate to all Series, 50% of the aggregate
unpaid principal amount of the Investor Certificates of all Series to which such
remedy, trust or power relates) shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee relating to such
proceeding; provided, however, that, subject to Section 11.01, the Trustee shall
-------- -------
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Certificateholders not parties to such direction; and provided,
--------
further, that nothing in this Agreement shall impair the right of the Trustee to
- -------
take any action deemed proper by the Trustee and which is not inconsistent with
such direction.
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Section 11.15. Representations and Warranties of Trustee. The
--------------------------------- -------
Trustee represents and warrants as of each Closing Date that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the State of New York;
(b) the Trustee has full power, authority and right to execute,
deliver and perform this Agreement and such Supplement, and has taken all
necessary action to authorize the execution, delivery and performance by it
of this Agreement and each Supplement; and
(c) this Agreement and each Supplement has been duly executed and
delivered by the Trustee.
Section 11.16. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain at its expense an office or agency (the "Corporate
Trust Office") where notices and demands to or upon the Trustee in respect of
the Certificates and this Agreement may be served (a) in the Borough of
Manhattan, The City of New York, in the case of Registered Certificates and
Holders thereof, and (b) in London or Luxembourg, in the case of Bearer
Certificates and Holders thereof, if and for so long as any Bearer Certificates
are outstanding. The Corporate Trust Office shall initially be located at Four
Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency
Group. The Trustee will give prompt notice to the Depositor, the Servicer and
to Investor certificateholders of any change in the location of the Certificate
Register or any such office or agency.
Section 11.17. Confidentiality. Information provided by the
---------------
Depositor to the Trustee related to the transaction effected hereunder,
including all information related to the Obligors with respect to the
Receivables and any computer software provided to the Trustee in connection with
the transaction effected hereunder or under any Supplement, in each case whether
in the form of documents, reports, lists, tapes, discs or any other form, shall
be "Confidential Information." The Trustee and its agents, representatives or
employees shall at all times maintain the confidentiality of all Confidential
Information and shall not, without the prior written consent of the Depositor,
disclose to third parties (including Certificateholders) or use such
information, in any manner whatsoever, in whole or in part, except as expressly
permitted under this Agreement or under any Supplement or as required to fulfill
an obligation of the Trustee under this Agreement or under any Supplement, in
which case such Confidential Information shall be revealed only to the extent
expressly permitted or only to the Trustee's agents, representatives and
employees who need to know such Confidential Information to the extent required
for the purpose of fulfilling an obligation of the Trustee under this Agreement
or under any Supplement. Notwithstanding the above, Confidential Information may
be disclosed to the extent required by law, legal process or as provided under
this Agreement, provided that the Trustee when possible gives prior written
notice to the Depositor of the nature and scope of such disclosure and affords
the Depositor an opportunity to contest such disclosure through any legal means
available.
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ARTICLE XII
Termination
-----------
Section 12.01. Termination of Trust. The Trust and the respective
--------------------
obligations and responsibilities of the Depositor, the Servicer and the Trustee
created hereby (other than the obligation of the Trustee to make payments to
Investor Certificateholders as hereinafter set forth) shall terminate, except
with respect to the duties described in Sections 7.04, 8.04 and 12.02(b), upon
the earlier of (i) [ ], (ii) the day following the Distribution Date on
which the Invested Amount and Enhancement Invested Amount for each Series is
zero and (iii) the time provided in Section 9.02(b).
Section 12.02. Final Distribution. (a) The Servicer shall give the
------------------
Trustee at least 30 days prior notice of the Distribution Date on which the
Investor Certificateholders of any Series or Class may surrender their Investor
Certificates for payment of the final distribution on and cancellation of such
Investor Certificates (or, in the event of a final distribution resulting from
the application of Section 2.06, 9.02 or 10.01, notice of such Distribution Date
promptly after the Servicer has determined that a final distribution will occur,
if such determination is made less than 30 days prior to such Distribution
Date). Such notice shall be Accompanied by an Officer's Certificate setting
forth the information specified in Section 3.05 covering the period during the
then current calendar year through the date of such notice. Not later than the
fifth day of the month in which the final distribution in respect of such Series
or Class is payable to Investor Certificateholders the Trustee shall provide
notice to Investor Certificateholders of such Series or class specifying (i) the
date upon which final payment of such series or Class will be made upon
presentation and surrender of Investor Certificates of such Series or Class at
the office or offices therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such payment date
is not applicable, payments being made upon presentation and surrender of such
Investor certificates at the office or offices therein specified (which, in the
case of Bearer Certificate, shall be outside the United States). The Trustee
shall give such notice to the Transfer Agent and Registrar and the Paying Agent
at the time such notice is given to Investor Certificateholders.
(b) Notwithstanding a final distribution to the Investor
Certificateholders of any Series or Class (or the termination of the Trust),
except as otherwise provided in this paragraph, all funds then on deposit in the
Collection Account and any Series Account allocated to such Investor
Certificateholders shall continue to be held in trust for the benefit of such
Investor Certificateholders and the Payment or the Trustee shall pay such funds
to such Investor Certificateholders upon surrender of their Investor
Certificates (and any excess shall be paid in accordance with the terms of any
relevant Enhancement Agreement). In the event that all such Investor
Certificateholders shall not surrender their Investor Certificates for
cancellation within six months after the date specified in the notice from the
Trustee described in paragraph (a), the Trustee shall give a second notice to
the remaining such Investor Certificateholders to surrender
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their Investor Certificates for cancellation and receive the final distribution
with respect thereto (which surrender and payment, in the case of Bearer
Certificates, shall be outside the United States). If within one year after the
second notice all such Investor Certificates shall not have been surrendered for
cancellation, the Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining such investor
Certificateholders concerning surrender of their Investor Certificates and the
cost thereof shall be paid out of the funds in the Collection Account or any
Series Account held for the benefit of such Investor Certificateholders. The
Trustee and the Paying Agent shall pay to the Depositor any moneys held by them
for the payment of principal or interest that remains unclaimed for two years.
After such payment to the Depositor, Investor Certificateholders entitled to the
money must look to the Depositor for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) In the event that the Invested Amount (or Enhancement Invested
Amount) with respect to any Series is greater than zero on the related Series
Termination Date or such earlier date as is specified in the related Supplement
(after giving effect to deposits and distributions otherwise to be made on such
date), the Trustee will sell or cause to be sold on such Series Termination
Date, in accordance with the procedures and subject to the conditions described
in such Supplement, Principal Receivables and the related Finance Charge
Receivables (or interests therein) in an amount equal to the Invested Amount and
the Enhancement Invested Amount, if any, with respect to such Series on such
date (after giving effect to such deposits and distributions; provided, however,
-------- -------
that in no event shall such amount exceed such Series' allocable share of
Receivables on such Series Termination Date). The proceeds from any such sale
shall be allocated and distributed in accordance with the terms of the
applicable Supplement.
Section 12.03. Depositor's Termination Rights. Upon the termination
------------------------------
of the Trust pursuant to Section 12.01 and the surrender of the Depositor's
Certificate, the Trustee shall sell, assign and convey to the Depositor or its
designee, without recourse, representation or warranty, all right, title and
interest of the Trust in the Receivables, whether then existing or thereafter
created, all moneys due or to become due and all amounts received with respect
thereto and all proceeds thereof, except for amounts held by the Trustee
pursuant to Section 12.02(b). The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as shall
be reasonably requested by the Depositor to vest in the Depositor or its
designee all right, title and interest which the Trust had in the Receivables
and such other related assets.
ARTICLE XIII
Miscellaneous Provisions
------------------------
Section 13.01. Amendment; Waiver of Past Defaults. (a) This
----------------------------------
Agreement or any Supplement may be amended from time to time (including in
connection with (w) the issuance of a Supplemental Certificate (x) the addition
of Participation Interests to the Trust, (y) the designation of an Additional
Depositor, or (z) the provision of additional Series Enhancement for
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the benefit of Certificateholders of any Series) by the Servicer, the Depositor
and the Trustee without the consent of any of the Certificateholders, provided
that (i) the Depositor shall have received written notice from each Rating
Agency that such amendment will not have a Ratings Effect and shall have
delivered copies of each such written notice to the Servicer and the Trustee and
(ii) if such amendment realities to the provision of additional Series
Enhancement or any Series, the Depositor shall have delivered to the Trustee and
each provider of Series Enhancement an Officer's Certificate of the Depositor
stating that the Depositor reasonably believes that such amendment will not,
based on the facts known to such officer at the time of such certification, have
a material adverse effect on the interests of the Certificateholders.
Notwithstanding the foregoing, this Agreement may be amended without the consent
of Certificateholders, any Series Enhancer and without the approval of any
Rating Agency, for the purpose of correcting typographical errors, clarifying
ambiguities and other similar modifications.
(b) This Agreement or any Supplement may also be amended from time to
time by the Servicer, the Depositor and the Trustee, with the consent of the
Holders of Investor Certificates evidencing more than 50% of the aggregate
unpaid principal amount of the Investor Certificates of all adversely affected
Series, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or any Supplement 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 any distributions to be made to Investor Certificateholders or
deposits of amounts to be so distributed or the amount available under any
Series Enhancement without the consent of each affected Certificateholder, (ii)
change the definition of or the manner of calculating the interest of any
Investor Certificateholder without the consent of each affected Investor
Certificateholder, (iii) reduce the aforesaid percentage required to consent to
any such amendment without 6. the consent of each Investor Certificateholder or
(iv) adversely affect the rating of any Series or Class by any Rating Agency
without the consent of the Holders of Investor Certificates of such Series or
Class evidencing more than 50% of the aggregate unpaid principal amount of the
Investor Certificates of such Series or Class. Any amendment to be effected
pursuant to this paragraph shall be deemed to adversely affect all outstanding
Series, other than any Series with respect to which such action shall not, as
evidenced by an Opinion of Counsel for the Depositor, addressed and delivered to
the Trustee, adversely affect in any material respect the interests of any
Investor Certificateholder of such Series. The Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Trustee's rights,
duties or immunities under this Agreement or otherwise.
(c) Promptly after the execution of any such amendment or consent
(other than an amendment pursuant to paragraph (a)), the Trustee shall furnish
notification of the substance of such amendment to each Investor
Certificateholder, and the Servicer shall furnish notification of the substance
of such amendment to each Rating Agency and each Series Enhancer entitled
thereto pursuant to the relevant Supplement.
(d) It shall be necessary for the consent of Investor
Certificateholders under this Section to approve the particular form of any
propose, amendment, but it shall be sufficient if
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such consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Investor Certificateholders shall be subject to such reasonable requirements as
the Trustee may prescribe.
(e) Any Supplement executed in accordance with the provisions of
Section 6.03 shall not be considered an amendment to this Agreement for the
purposes of this Section.
(f) The Holders of Investor Certificates evidencing more than 50% of
the aggregate unpaid principal amount of the Investor Certificates of each
Series or, with respect to any Series with two or more Classes, of each Class
(or, with respect to any default that does not relate to all Series, 50% of the
aggregate unpaid principal amount of the Investor Certificates of each Series to
which such default relates or, with respect to any such Series with two or more
classes, of each Class) may, on behalf of all Certificateholders, waive any
default by the Depositor or the Servicer in the performance of their obligations
hereunder and its consequences, except the failure to make any distributions
required to be made to Investor Certificateholders or to make any required
deposits of any amounts to be so distributed. Upon any such waiver of a past
default, such default shall cease to exist, and any 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 except to the extent expressly so waived.
Section 13.02. Protection of Right, Title and Interest to Trust. (a)
------------------------------------------------
The Servicer shall cause this Agreement, all amendments and supplements hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders, and the Trustee's right,
title and interest in the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders and the Trustee hereunder to
all property compromising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Depositor shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this paragraph.
(b) Within 30 days after the Depositor makes any change in its name,
identity, or corporate structure which would make any financing statement or
continuation statement filed in accordance with paragraph (a) seriously
misleading within the meaning of Section 9-402(7) (or any comparable provision)
of the UCC, the Depositor shall give the Trustee notice of any such change and
shall file such financing statements or amendments as may be necessary to
continue the perfection of the Trust's security interest in the Receivables and
the proceeds thereof.
(c) The Depositor and the Servicer will give the Trustee prompt notice
of any relocation of any office from which it services Receivables or keeps
records concerning the Receivables or of its principal executive office and
whether, as a result of such relocation, the
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applicable provisions of the UCC would require the filing of any amendment of
any previously file financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to perfector to continue the perfection of the Trust's security
interest in the Receivables and the proceeds thereof. The Depositor and the
Servicer will at all times maintain each office from which it services
Receivables and its principal executive offices within the United States.
(d) The Servicer will deliver to the Trustee and any Series Enhancer
entitled thereto pursuant to the relevant Supplement: (i) upon the execution had
delivery of each amendment of this Agreement or any Supplement, an Opinion of
Counsel to the effect specified in Exhibit H-1; (ii) on each Addition Date on
which any Additional Accounts (other than Automatic Additional Accounts) are to
be designated as Accounts pursuant to Section 2.08(a) or (b) .and on each date
specified in Section 2.08(c)(iii) with respect to the inclusion of Automatic
Additional Accounts as Accounts, an Opinion of Counsel substantially in the form
of Exhibit H-2, and on each Addition Date on which any Participation Interests
are to be included in the Trust pursuant to Section 2.08(a) or (b), an Opinion
of Counsel covering the same substantive legal issues addressed by Exhibit H-2
but conformed to the extent appropriate to relate to Participation Interests;
and (iii) on or before April 30 of each year, an Opinion of Counsel
substantially in the form of Exhibit H-2.
Section 13.03. Limitation on Rights of Certificateholders. (a) The
------------------------------------------
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall such death or incapacity entitle such
Certificateholders' legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote (except
as expressly provided in this Agreement; or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Investor Certificateholders
from time to time as partners or members of an association, nor shall any
Investor 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.
(c) No Investor Certificateholder shall have any right by virtue of
any provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Investor Certificateholder previously shall have made, and unless the Holders of
Investor Certificates evidencing more than 50% of the aggregate unpaid principal
amount of all Investor Certificates (or, with respect to any such action, suit
or proceeding that does not relate to all Series, 50% of the aggregate unpaid
principal amount of the Investor Certificates of all Series to which such
action, suit or proceeding relates) shall have made, a request to the Trustee to
institute such action, suit or proceeding in its own name as
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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 such request and
offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding it; being understood and intended, and being
expressly covenanted by each Investor Certificateholder with every other
Investor Certificateholder and the Trustee, that no one or more Investor
Certificateholders shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the holders of any other of the Investor
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Investor Certificateholder, or to enforce any right under this
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all Investor Certificateholders except as otherwise expressly
provided in this Agreement. For the protection and enforcement of the
provisions of this Section, each and every Investor Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 13.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.05. Notices; Payments. (a) All demands, notices,
-----------------
instructions, directions and communications (collectively, "Notices") under this
Agreement shall be in writing and shall be deemed to have been duly given if
personally delivered at, mailed by registered mail, return receipt requested, or
sent by facsimile transmission:
(i) in the case of the Depositor, to:
Asset Backed Securities Corporation
Park Avenue Plaza
New York, New York
(212) 909-2000
Attention: [Department]
(ii) in the case of the Servicer, to:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
(iii) in the case of the Trustee, to:
-------------------------------
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-------------------------------
-------------------------------
-------------------------------
(iv) in the case of Moody's, to:
99 Church Street,
New York, New York 10007,
Attention: ABS Monitoring Department 4th Floor (facsimile no.
212-553-4600);
(v) in the case of Standard & Poor's, to:
26 Broadway,
New York, New York 10004,
Attention: Asset Backed Group, 15th Floor
(facsimile no. (212-412-0323); and
(vi) to any other Person as specified in any Supplement; or, as to
each party, at such other address or facsimile number as shall be
designated by such party in a written notice to each other party.
(b) Any Notice required or permitted to be given to a Holder of
Registered Certificates shall be given by first-class mail, postage prepaid, at
the address of such Holder as shown in the Certificate Register. No Notice
shall be required to be mailed to a Holder of Bearer Certificates or Coupons but
shall be given as provided below. Any Notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Investor Certificateholder receives such Notice. In
addition, (a) if and so long as any Series or Class is listed on a European
stock exchange (including the Luxembourg Stock Exchange), and such exchange
shall so require, any Notice to Investor Certificateholders shall be published
in an Authorized Newspaper in the city of such exchange, within the time period
prescribed in this Agreement and (b) in the case of any Series or Class with
respect to which any Bearer Certificates are outstanding, any Notice required or
permitted to be given to Investor Certificateholders of such Series or Class
shall be published in an Authorized Newspaper within the time period prescribed
in this Agreement.
Section 13.06. Rule 144A Information. For so long as any of the
---------------------
Investor Certificates of any Series or Class are "restricted securities" within
the meaning of Rule 144(a)(3) under the Act, the Depositor, the Trustee, the
Servicer and any Series Enhancer agree to cooperate with each other to provide
to any Investor Certificateholders of such Series or Class and to any
prospective purchaser of Certificates designated by such an Investor
Certificateholder, upon the request of such Investor Certificateholder or
prospective purchaser, any information required to be provided to such holder or
prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4)
under the Act.
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Section 13.07. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no way
affect the validity or enforceability of the remaining provisions of this
Agreement or of the Certificates or the rights of the Certificateholders.
Section 13.08. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Section 8.02, this Agreement may not be
assigned by the Servicer without the prior consent of Holders of Investor
Certificates evidencing more than 50% of the aggregate unpaid principal amount
of all outstanding Investor Certificates.
Section 13.09. Certificates Nonassessable and Fully Paid. It is the
-----------------------------------------
intention of the parties to this Agreement that the Certificateholders shall not
be personally liable for obligations of the Trust, that the interests in the
Trust represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever and that Certificates upon
authentication thereof by the Trustee pursuant to Section 6.02 are and shall be
deemed fully paid.
Section 13.10. Further Assurances. The Depositor and the Servicer
------------------
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including the execution of any
financing statements or continuation statements relating to the Receivables for
filing under the provisions of the UCC of any applicable jurisdiction.
Section 13.11. Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Agreement, the Servicer, the Trustee, the Depositor, each
Series Enhancer and each holder of a Supplemental Certificate shall not, prior
to the date which is one year and one day after the termination of this
Agreement with respect to the Trust, acquiesce, petition or otherwise invoke or
cause the Trust to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against the Trust under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignment, trustee, custodian, sequestrator or other similar
official of the Trust or any substantial part of its property or ordering the
winding-up or liquidation of the affairs of the Trust.
Section 13.12. No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Trustee or the
Certificateholders, any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right remedy, power or
privilege. The rights, remedies, powers and Privileges provided under this
Agreement are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
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Section 13.13. Counterparts. This Agreement may be executed in two or
------------
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
Section 13.14. Third-Party Beneficiaries. This Agreement will inure
-------------------------
to the benefit of and be binding upon the parties hereto, the
Certificateholders, any Series Enhancer (to the extent provided in this
Agreement and the related Supplement) and their respective successors and
permitted assigns. Except as otherwise expressly provided in this Agreement, no
other Person will have any right or obligation hereunder.
Section 13.15. Actions by Certificateholders. (a) Wherever in this
-----------------------------
Agreement a provision is made that an action may be taken or a Notice given by
Certificateholders, such action or Notice may be taken or given by any
Certificateholder, unless such provision requires a specific percentage of
Certificateholders.
(b) Any Notice, request, authorization, direction, consent, waiver or
other act by the Holder of a Certificate shall bind such Holder and every
subsequent Holder of such Certificate and of any Certificate issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or omitted to be done by the Trustee or the Servicer in
reliance thereon, whether or not notation of such action is made upon such
Certificate.
Section 13.16. Merger and Integration. Except as specifically stated
----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 13.17. Headings. The headings herein are for purposes of
--------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 13.18. Agreement to Constitute Security Agreement. The
------------------------------------------
Depositor hereby grants to the Trustee a security interest for the benefit of
(i) the Certificateholders and (ii) any Series Enhancer to the extent of the
Enhancement Invested Amount, if any, provided for in the relevant Supplement
(which interest, in the case of any Series Enhancer, will be subordinated to the
interest of the Certificateholders of such Series in accordance with the
relevant Supplement), in all of the Depositor's right, title and interest in, to
and under the Receivables now existing and hereafter created, all moneys due or
to become due and all amounts received with respect thereto and all "proceeds"
thereof and any other Trust Assets, to secure all the Depositor's and Servicer's
obligations hereunder, including the Depositor's obligation to sell or transfer
Receivables hereafter created to the Trust. This Agreement shall constitute a
security agreement under applicable law.
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IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
ASSET BACKED SECURITIES CORPORATION
Depositor
by: __________________________
Name:
Title:
[SERVICER NAME]
Servicer
by: __________________________
Name:
Title:
[TRUSTEE NAME]
Trustee,
by: __________________________
Name:
Title:
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EXHIBIT A
FORM OF BANK CERTIFICATE
THIS BANK CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. NEITHER THIS BANK CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS.
THIS BANK CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED,
EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
No. R- One Unit
CSFB CARD ACCOUNT MASTER TRUST
BANK CERTIFICATE
THIS CERTIFICATE REPRESENTS AN INTEREST
IN CERTAIN ASSETS OF THE
CSFB CARD ACCOUNT MASTER TRUST
Evidencing an interest in a trust, the corpus of which consists primarily of
receivables generated from time to time in the ordinary course of business in a
portfolio of revolving credit card accounts and other revolving credit accounts
transferred by Asset Backed Securities Corporation (the "Depositor").
(Not an interest in or obligation of the Depositor
or any affiliate thereof)
This certifies that Asset Backed Securities Corporation is the
registered owner of a fractional interest in the assets of a trust (the "Trust")
not allocated to the Certificateholders' Interest or the interest of any holder
of a Supplemental Certificate pursuant to the Pooling and Servicing Agreement
dated as of [ ], 199[ ] (as amended and supplemented, the
"Agreement"), between Asset Backed Securities Corporation, a Delaware
corporation, as Depositor, and [Trustee Name], a [ ] corporation, as trustee
(the "Trustee"). The corpus of the Trust consists of (i) a portfolio of all
receivables (the "Receivables") existing in the consumer revolving credit card
accounts and other consumer revolving credit accounts identified under the
Agreement from time to time (the "Accounts"), (ii) all Receivables generated
under the Accounts from time to time thereafter, (iii) funds collected or to be
collected from accountholders in respect
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of the Receivables, (iv) all funds which are from time to time on deposit in the
Collection Account and in the Series Accounts, (v) the benefits of any Series
Enhancements issued and to be issued by Series Enhancers with respect to one or
more Series of Investor Certificates and (vi) all other assets and interests
constituting the Trust. Although a summary of certain provisions of the
Agreement is set forth below, this Certificate does not purport to summarize the
Agreement and reference is made to the Agreement for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and obligations of the Trustee. A copy of the
Agreement may be requested from the Trustee by writing to the Trustee at the
Corporate Trust Office. To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the Agreement.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended and
supplemented from time to time, the Depositor by virtue of the acceptance hereof
assents and is bound.
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to cardholders as
cash advances and Finance Charge Receivables which arise generally from Periodic
Finance Charges.
This Certificate is the Depositor's Certificate, which represents the
Depositor's Interest in certain assets of the Trust, including the right to
receive a portion of the Collections and other amounts at the times and in the
amounts specified in the Agreement. The aggregate interest represented in the
Depositor's Certificate at any time in the Receivables in the Trust shall not
exceed the Depositor's Interest at such time. In addition to the Depositor's
Certificate, (i) Investor Certificates will be issued to investors pursuant to
the Agreement, which will represent the Certificateholders' Interest, and (ii)
Supplemental Certificates may be issued pursuant to the Agreement, which will
represent that portion of the Depositor's Interest not allocated to the
Depositor. This Depositor's Certificate shall not represent any interest in the
Collection Account or the Series Accounts, except as expressly provided in the
Agreement, or any Series Enhancements.
The Depositor has entered into the Agreement, and this Certificate is
issued, with the intention that, for Federal, state and local income and
franchise tax purposes only, the Investor Certificates will qualify as
indebtedness of the Depositor secured by the Receivables. The Depositor, by
entering into the Agreement and by the acceptance of this Certificate, agrees to
treat the Investor Certificates for Federal, state and local income and
franchise tax purposes as indebtedness of the Depositor.
Subject to certain conditions and exceptions specified in the
Agreement, the obligations created by the Agreement and the Trust created
thereby shall terminate upon the earlier of (i) [ ], (ii) the
day following the Distribution Date on which the Invested Amount and Enhancement
Invested Amount, if any, for each Series is zero and (iii) the time provided in
Section 9.02(b) of the Agreement.
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Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Depositor has caused Certificate to be duly
executed.
ASSET BACKED SECURITIES
CORPORATION
by__________________________
Name:
Title:
Dated: [ ], 199[ ]
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Depositor's Certificate described in the within-mentioned Agreement
and Series Supplement.
as Trustee,
By:_________________________
Authorized Officer
or
By:
as Authenticating Agent
for the Trustee,
By:_________________________
Authorized Officer
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EXHIBIT B
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Section 2.08 of
the Pooling and Servicing Agreement)
ASSIGNMENT No. OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated as of
, /**///, by and between ASSET BACKED SECURITIES CORPORATION, as Depositor (the
--
"Depositor"), and [Trustee Name], a [ ] corporation, as trustee (the
"Trustee"), pursuant to the Pooling and Servicing Agreement referred to below.
WITNESSETH
WHEREAS the Depositor and the Trustee are parties to the Pooling and
Servicing Agreement dated as of [ ], 199[ ] (as amended and
supplemented, the "Agreement");
WHEREAS, pursuant to the Agreement, the Depositor wishes to designate
Additional Accounts owned by the Depositor to be included as Accounts and to
convey the Receivables of such Additional Accounts, whether now existing or
hereafter created, to the Trust as part of the corpus of the Trust (as each such
term is defined in the Agreement); and
WHEREAS the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Depositor and the Trustee hereby agree as follows:
1. Defined Terms. All capitalized terms used herein shall have the meanings
-------------
ascribed to them in the Agreement unless otherwise defined herein.
"Addition Date" shall mean, with respect to the Additional Accounts
designated hereby, [ ], 19[ ].
"Additional Cut-Off Date" shall mean, with respect to the Additional
Accounts designated hereby, [ ], 199[ ].
- ----------
/**// To be dated as of the applicable Document Delivery Date.
--
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2. Designation of Additional Accounts. On or before the Document Delivery
----------------------------------
Date, the Depositor will deliver to the Trustee a computer file or a microfiche
list containing a true and complete list of the related Additional Accounts or
Participation Interests specifying (i) for each Additional Account, as of the
Additional Cut-Off Date, its account number, the collection status, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account, which computer file or
microfiche list shall supplement Schedule I to the Agreement (in the case of
Additional Accounts) and (ii) for each Participation Interest, as of the
Additional Cut-Off Date, information comparable to the information referred to
in clause (i) above.
3. Conveyance of Receivables. The Depositor does hereby sell, transfer,
-------------------------
assign, set over and otherwise convey to the Trustee, on behalf of the Trust,
for the benefit of the Certificateholders, all its right, title and interest in,
to and under the Receivables of such Additional Accounts existing at the opening
of business on the Additional Cut-Off Date and thereafter created from time to
time until the termination of the Trust, all moneys due or to become due and all
amounts received with respect thereto and all proceeds (including "proceeds" as
defined in the UCC, and Recoveries but excluding Insurance Proceeds) thereof,
and all of its right, title and interest in, to and under the Interchange
payable pursuant to Section 2.07(i) of the Agreement. The foregoing does not
constitute and is not intended to result in the creation or assumption by the
Trust, the Trustee, any Investor Certificateholder or any Series Enhancer of any
obligation of the Servicer, the Depositor or any other Person in connection with
the Accounts or the Receivables or under any agreement or instrument relating
thereto, including any obligation to Obligors, merchant banks, merchants
clearance systems, VISA, MasterCard or insurers.
a. The Depositor agrees to record and file, at its own expense, financing
statements (and continuation statements when applicable) with respect to the
Receivables now existing thereafter created in such Additional Accounts, meeting
the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect, and maintain the perfection of, the
sale and assignment of such Receivables to the Trust, and to deliver a file
stamped copy of each such financing statement or other evidence of such filing
(which, for purposes of this Section 3(b), consists of telephone confirmation of
such filing) to the Trustee on or prior to the Addition Date. The Trustee shall
be under no obligation whatsoever to file such financing or continuation
statements or to make any other filing under the UCC in connection with such
sale and assignment.
b. In connection with such sale, the Depositor further agrees, at its own
expense, on or prior to the date of this Assignment, to indicate clearly and
unambiguously in the appropriate computer files that Receivables created in
connection with the Additional Accounts designated hereby (other than Removed
Accounts) have been conveyed to the Trust pursuant to the Agreement and this
Assignment for the benefit of the Certificateholders.
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<PAGE>
c. The Depositor does hereby grant to the Trustee a security interest in all
of its right, title and interest in, to and under the Receivables now existing
and hereafter created in the Additional Accounts designated, all moneys due or
to become due and all amounts received with respect thereto and all "proceeds"
(including "proceeds" as defined in the UCC and Recoveries, but excluding
Insurance Proceeds) thereof, and all of its right, title and interest in, to and
under the Interchange payable pursuant to Section 2.07(i) of the Agreement. This
Assignment constitutes a security agreement under the UCC.
4. Acceptance by Trustee. The Trustee hereby acknowledges its
---------------------
acceptance on behalf of the Trust of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Trust pursuant to
Section 3(a) of this Assignment, and declares that it shall maintain such right,
title and interest, upon the trust set forth in the Agreement for the benefit of
all Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Assignment, the Depositor
delivered to the Trustee the computer file or microfiche list described in
Section 2 of this Assignment.
5. Representations and Warranties of the Depositor. The Depositor hereby
-----------------------------------------------
represents and warrants to the Trustee, on behalf of the Trust, as of the date
of this Assignment and as of the Addition Date that:
a. Legal Valid And Binding Obligation. This Assignment constitutes a legal,
----------------------------------
valid and binding obligation of the Depositor enforceable against the
Depositor in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and, if applicable, the rights of creditors of a state banking
corporation, state balking association or national banking association, and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity);
b. Eligibility of Accounts. Each Additional Account designated hereby is an
-----------------------
Eligible Account;
c. Insolvency. As of each of the Additional Cut-Off Date and the Addition
----------
Date, no Insolvency Event with respect to [any Account Owner, as applicable
or the] Depositor has occurred and the transfer by the Depositor of
Receivables arising in the Additional Accounts to the Trust has not been
made in contemplation of the occurrence thereof;
d. Pay Out Event. The Depositor reasonably believes that the addition of the
-------------
Receivables arising in the Additional Accounts will not, based on the facts
known to the Depositor, then cause a Pay Out Event or any event that, after
giving of notice or the lapse of time, would constitute a Pay Out Event to
occur with respect to any Series;
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<PAGE>
e. Security Interest. Subject, in each case pertaining to proceeds, to
-----------------
Section 9-306 of the UCC, and further subject to any Liens permitted under
Section 2. 07(b) of the Agreement, this Assignment constitutes a valid
sale, transfer and assignment to the Trust of all right, title and interest
of the Depositor in the Receivables now existing or hereafter created in
the Additional Accounts designated by the Depositor, all moneys due or to
become due and all amounts received with respect thereto and the "proceeds"
(including "proceeds" as defined in the UCC, and Recoveries but excluding
Insurance Proceeds) thereof, and all of its right, title and interest in,
to and under the Interchange payable pursuant to Section 2.07(i) of the
Agreement, relating thereto or, if this Assignment does not constitute a
sale of such property, it constitutes a grant of a "security interest" (as
defined in the UCC), in such property to the Trust, which, in the case of
existing Receivables and the proceeds thereof, is enforceable upon
execution and delivery of this Assignment, and which will be enforceable
with respect to such Receivables hereafter created and the proceeds thereof
upon such creation. Upon the filing of the financing statements described
in Section 3 of this Assignment and, in the case of the Receivables
hereafter created and the proceeds thereof, upon the creation thereof, the
Trust shall have a first priority perfected security or ownership interest
in such property and proceeds except for Liens permitted under subsection
2.07(b);
f. No Conflict. The execution and delivery by the Depositor of this
-----------
Assignment, the performance of the transactions contemplated by this
Assignment and the fulfillment of the terms hereof applicable to the
Depositor, will not conflict with or violate the articles of association or
by-laws of the Depositor or result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a material default under, any material indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it or any of its properties are bound;
g. No Proceedings. There are no proceedings or investigations, pending or, to
--------------
the best knowledge of the Depositor, threatened against the Depositor,
before any Governmental Authority (i) asserting the invalidity of this
Assignment, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Assignment, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Depositor,
would materially and adversely affect the performance by the Depositor of
its obligations under this Assignment or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Assignment; and
h. All Consents. All authorizations, consents, orders or other actions of
------------
any Person or of any Governmental Authority required to be obtained by the
Depositor in connection with the execution and delivery of this Assignment
by the Depositor and the performance of the transactions contemplated by
this Assignment by the Depositor have been obtained.
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<PAGE>
6. Ratification of Agreement. As supplemented by this Assignment, the
-------------------------
Agreement is in all respects ratified and confirmed and the Agreement as so
supplemented by this Assignment shall be read, taken and construed as one and
the same instrument.
7. Counterparts. This Assignment may be executed in two or more
------------
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which shall constitute one and the same
instrument.
8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
-------------
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Depositor and the Trustee have caused this
Assignment to be duly executed by their respective officers as of the day and
year first above written.
ASSET BACKED SECURITIES CORP.,
Depositor,
by__________________________
Name:
Title:
[TRUSTEE NAME]
Trustee,
by__________________________
Name:
Title:
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<PAGE>
[Manufactured Homes]
------------------------------------------------------------
-----------------------------------------------
ASSET BACKED SECURITIES CORPORATION,
DEPOSITOR
[NAME OF MASTER SERVICER],
MASTER SERVICER
and
[NAME OF TRUSTEE],
TRUSTEE
-------------------------
STANDARD TERMS AND PROVISIONS
OF
POOLING AND SERVICING AGREEMENT
Dated as of ______ __, 199_
-------------------
CONDUIT MANUFACTURED HOUSING CONTRACT PASS-THROUGH
CERTIFICATES
-----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS............................. 6
ARTICLE II. CONVEYANCE OF CONTRACTS;
REPRESENTATIONS AND WARRANTIES......... 21
SECTION 2.01. Conveyance of Contracts......... 21
SECTION 2.02. Acceptance by Trustee........... 24
SECTION 2.03. Representations, Warranties
and Covenants of the Master
Servicer ....................... 26
SECTION 2.05. Representations and Warranties
of the [Depositor] Regarding
the Contracts in the
Aggregate....................... 33
SECTION 2.06. Representations and Warranties
of the [Depositor] Regarding
the Contract Files.............. 34
SECTION 2.07. Repurchases of Contracts for Breach
of Representations and Warranties
[by the Depositor].............. 34
SECTION 2.09. Assignment of Rights under
Warranty and Servicing
Agreements...................... 38
ARTICLE III. ADMINISTRATION AND SERVICING OF
CONTRACTS............................ 38
SECTION 3.01. Master Servicer to Act as
Servicer........................ 38
SECTION 3.02. Enforcement of the Obligations
of Servicers.................... 40
SECTION 3.03. Successor Services.............. 41
SECTION 3.04. Termination of the Rights of
Servicers....................... 41
SECTION 3.05. Liability of the Master
Servicer........................ 42
SECTION 3.06. Rights of the Depositor and
the Trustee In Respect of the
Master Servicer................. 42
SECTION 3.07. Trustee to Act as Servicer...... 43
SECTION 3.08. Collection of Contract
Payments; Certificate Account... 43
SECTION 3.09. Servicing Accounts.............. 46
SECTION 3.10. Collection of Taxes
Assessments and Similar Items;
Escrow Accounts................. 47
SECTION 3.11. Access to Certain
Documentation and Information
Regarding the Contracts......... 48
SECTION 3.12. Permitted Withdrawals from the
Certificate Account............. 48
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<PAGE>
SECTION 3.13. Maintenance of the Pool
Insurance Policy and Primary
Credit Insurance Policies;
Collection Thereunder........... 50
SECTION 3.14. Maintenance of Hazard
Insurance, the Special Hazard
Insurance Policy and Other
Insurance....................... 52
SECTION 3.15. Enforcement of Due-On-Sale
Clauses; Assumption
Agreements...................... 54
SECTION 3.16. Realization Upon Defaulted
Contracts....................... 56
SECTION 3.17. Trustee to Cooperate; Release
of Contract Files............... 57
SECTION 3.18. Documents, Records and Funds
in Possession of Master
Servicer to be Held for the
Depositor and the Trustee....... 59
SECTION 3.19. Servicing Compensation;
Retained Yield.................. 59
SECTION 3.20. Reports to the Trustee and the
Depositor; Certificate Account
Statements...................... 60
SECTION 3.21. Annual Statement as to
Compliance...................... 60
SECTION 3.22. Annual Independent Public
Accountant's Servicing Report... 61
SECTION 3.23. Letters of Credit............... 61
SECTION 3.24. Reserve Fund.................... 62
SECTION 3.25. Administration of Buydown
Funds........................... 63
ARTICLE IV. ADVANCES BY THE MASTER SERVICER;
PERFORMANCE BOND..................... 64
SECTION 4.01. Monthly Advance................. 64
SECTION 4.02. Advances for Attorneys' Fees.... 65
SECTION 4.03. Advances for Amounts Collected
by Servicer but Not Remitted.... 65
SECTION 4.04. Nonrecoverable Advances......... 65
SECTION 4.05. Advances for Additional
Interest in Connection with
Principal Payments.............. 66
SECTION 4.06. Performance Bond................ 66
ARTICLE V. THE CERTIFICATES..................... 68
SECTION 5.01. The Certificates................ 68
SECTION 5.02. Registration of Transfer and
Exchange of Certificates........ 69
SECTION 5.03. Mutilated Destroyed, Lost or
Stolen Certificates............. 70
SECTION 5.04. Persons Deemed Owners........... 70
-ii-
<PAGE>
SECTION 5.05. Access to List of
Certificateholders' Names and
Addresses....................... 70
SECTION 5.06. Maintenance of Office or
Agency.......................... 71
ARTICLE VI. THE DEPOSITOR AND THE MASTER
SERVICER............................. 71
SECTION 6.01. Respective Liabilities of the
Depositor and the Master
Servicer........................ 71
SECTION 6.02. Merger or Consolidation of the
Depositor and the Master
Servicer........................ 71
SECTION 6.03. Limitation on Liability of the
Depositor, the Master Servicer
and Others...................... 72
SECTION 6.04. Master Servicer Not to Resign... 73
SECTION 6.05. Errors and Omissions
Insurance; Fidelity Bonds....... 74
ARTICLE VII. DEFAULT.............................. 74
SECTION 7.01. Events of Default............... 74
SECTION 7.02. Trustee to Act; Appointment of
Successor....................... 76
SECTION 7.03. Notification to
Certificateholders.............. 77
ARTICLE VIII. CONCERNING THE TRUSTEE............... 77
SECTION 8.01. Duties of Trustee............... 77
SECTION 8.02. Certain Matters Affecting the
Trustee......................... 78
SECTION 8.03. Trustee Not Liable for
Contracts....................... 79
SECTION 8.04. Trustee May Own Certificates.... 79
SECTION 8.05. Master Servicer to Pay
Trustee's Fees and Expenses..... 79
SECTION 8.06. Eligibility Requirements for
Trustee......................... 80
SECTION 8.07. Resignation and Removal of the
Trustee......................... 80
SECTION 8.08. Successor Trustee............... 81
SECTION 8.09. Merger or Consolidation of
Trustee......................... 81
SECTION 8.10. Appointment of Authenticating
Agent........................... 82
SECTION 8.11. Appointment of Co-Trustee or
Separate Trustee................ 83
SECTION 8.12. Tax Returns..................... 85
SECTION 8.13. Appointment of Custodians....... 85
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<PAGE>
ARTICLE IX. TERMINATION.......................... 86
SECTION 9.01. Termination upon Repurchase of
Contracts....................... 86
SECTION 9.02. Final Distribution on the
Certificates.................... 86
ARTICLE X. MISCELLANEOUS PROVISIONS............. 87
SECTION 10.01. Amendment....................... 87
SECTION 10.02. Recordation of Agreement;
Counterparts.................... 87
SECTION 10.03. Governing Law................... 88
[SECTION 10.04.Intention of Parties ........... 88
SECTION 10.05. Notices......................... 88
SECTION 10.06. Severability of Provisions...... 88
SECTION 10.07. Assignment...................... 89
SECTION 10.08. Limitation on Rights of
Certificateholders.............. 89
SECTION 10.09. Inspection and Audit Rights..... 90
SECTION 10.10. Certificates Nonassessable and
Fully Paid...................... 90
-iv-
<PAGE>
THESE STANDARD TERMS AND PROVISIONS OF POOLING AND SERVICING AGREEMENT, are
dated as of ________ __, 199 , among ASSET BACKED SECURITIES CORPORATION, as
depositor (the "Depositor"), [ ], as master servicer (the "Master
Servicer") and [ ], as trustee (the "Trustee") and are
incorporated by reference in the Reference Agreement (as hereinafter defined),
to the extent set forth therein. Upon execution of the Reference Agreement,
this document, as amended and supplemented by the Reference Agreement,
represents the agreement of the parties with respect to the sale and servicing
of the Contracts to the Trust named in such Reference Agreement.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree, in addition to the matters
set forth in the Reference Agreement, as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Administrative Fee: With respect to any Contract, the percentage rate
------------------
per annum of the Principal Balance of each Contract that is payable to the
Depositor out of each payment on account of interest of such Contract, exclusive
of any Retained Yield, Servicing Fee and servicing compensation payable to the
Servicer of such Contract. The Administrative Fee is reserved for the
administration of the Trust Fund, and may be fixed or variable, as specified in
the Reference Agreement.
Agreement: This Standard Terms and Provisions of Pooling and
---------
Servicing, together with the Reference Agreement with respect to a Series, and
all amendments or supplements hereto or thereto.
Alternative Credit Support: Any method of credit support, other than
--------------------------
the methods of Credit Support specified herein and other than Subordinated
Certificates, as provided for in the applicable Reference Agreement.
[Appraised Value: In the case of a Manufactured Home that is new and
---------------
was purchased by the Obligor 18 months or less after the date of manufacture of
such Financed Property, the Appraised Value shall be the purchase price of the
Financed Property to the Obligor plus sales tax, if any. In the case of (a) a
previously occupied Financed Property or (b) a Financed Property that is new but
was purchased by the Obligor more than 18 months after the date of manufacture
of such Financed
-1-
<PAGE>
property, the Appraised Value shall be (i) if the Financed Property is not
located on a retailer's premises, the lesser of (a) the purchase price paid by
the Obligor, plus sales tax, if any, or (b) the on-site value of the Financed
Property as determined by an independent appraiser certified by NADA and
approved by the [Master Servicer], plus an amount equal to the amount of sales
tax, if any, which would be payable on such on-site value, or (ii) if the
Financed Property is part of a retailer's inventory, the lesser of (a) the
purchase price paid by the Obligor plus sales tax, if any, or (b) book value
(including specific value additions) published by NADA for the unit, plus filing
and recording fees and an amount equal to the amount of sales tax, if any, which
would be payable on such book value.]
APR: The annual percentage rate of interest borne by a Contract,
---
which may be fixed or variable, as specified in the related Reference Agreement.
Authenticating Agent: The Authenticating Agent appointed pursuant to
--------------------
Section 8.10 hereof and identified in the Reference Agreement, which is
authorized by the Trustee to act on behalf of the Trustee to authenticate the
Certificates. The Authenticating Agent may be the Depositor or any Person
directly or indirectly controlling or controlled by or under common control with
the Depositor.
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which banking institutions in [ ], New York or [ ] are
authorized or obligated by law or executive order to be closed.
[Buydown Funds: Any amount contributed by the seller of a
-------------
Manufactured Home, the Depositor, or another source in order to enable the
Obligor to reduce the payments required to be made by the Obligor from the
Obligor's funds in the early years of a Contract.]
[Buydown Contract: Any Contract as to which a specified amount of
----------------
interest is paid out of related Buydown Funds in accordance with a buydown
agreement.]
Certificate: Any one of the certificates executed by the Depositor
-----------
and authenticated by or on behalf of the Trustee in substantially the form or
forms attached as Exhibits to the Reference Agreement. The Certificates may be
issued in such Classes or Subclasses and with such characteristics as are
specified in the applicable Reference Agreement.
Certificate Account: The non-interest-bearing deposit account or
-------------------
accounts created and maintained by the Master Servicer pursuant to Section 3.08,
in the name of the Trustee for the benefit of Certificateholders for deposit of
payments and
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<PAGE>
collections in respect of the Contracts pursuant to Section 3.08 hereof, which
account or accounts must be an Eligible Account or Accounts.
Certificate Register and Certificate Registrar: Respectively, the
----------------------------------------------
register maintained pursuant to Section 5.02 hereof and the registrar appointed
and identified in the Reference Agreement.
Certificateholder or Holder: The person in whose name a Certificate
----------------- ------
is registered in the Certificate Register, except that, solely for the purposes
of giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor or the Master Servicer or any affiliate thereof shall
be deemed not to be outstanding and the interest evidenced thereby shall not be
taken into account in determining whether the requisite percentage of
Certificates necessary to effect any such consent has been obtained.
Class: With respect to a Series of Certificates, all of the
-----
Certificates of such Series designated in the applicable Reference Agreement as
a class.
Code: The Internal Revenue Code of 1986, including any successor
----
or amendatory provisions.
Contract File: The documents listed in Section 2.01 hereof pertaining
-------------
to a particular Contract and any additional documents required to be added to
the Contract File pursuant to this Agreement.
[Contract Schedule: The list of Contracts transferred to the Trustee
-----------------
as part of the Trust Fund for the Certificates and from time to time subject to
this Agreement, as from time to time amended by the Trustee (or by a Custodian
as the duly appointed agent of the Trustee) to reflect the addition of
Replacement Contracts and the deletion of Contracts pursuant to the provisions
of this Agreement and the Reference Agreement), attached to the Reference
Agreement. Such schedule will set forth the following information with respect
to each Contract:
(i) the loan number;
(ii) the street address of the Manufactured Home;
(iii) the APR;
(iv) the original term;
(v) the original Principal Balance;
(vi) the first payment date;
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<PAGE>
(vii) the current monthly payment in effect as of the
Cut-off Date;
(viii) the Principal Balance as of the Cut-off Date;
(ix) the Loan-to-Value Ratio at origination; and
(x) the Retained Yield.]
Such schedule shall also set forth the total of the amounts described under
(viii) above for all of the Contracts, together with the aggregate principal
balance as of the Cut-off Date of the Buy-Down Contracts, and any additional
information required by the Reference Agreement. Such schedule may be in the
form of more than one list collectively setting forth all of the information
required.
Contracts. either a conditional sales contract or installment loan
---------
agreement secured by a first lien on a single-family (one- to four-family)
residential manufactured home transferred and assigned to the Trustee pursuant
to the provisions hereof and of the Reference Agreement as from time to time are
held as part of the Trust Fund; the Contracts so held being identified in the
Contract Schedule attached as a Schedule to the Reference Agreement.
Corporate Trust Office: The principal office of the Trustee in the
----------------------
[ ] at which at any particular time its corporate business shall be
administered which office at the date of the execution of this Agreement is
located at ____________.
Credit Support: The Pool Insurance Policy, Primary Credit Insurance
--------------
Policy, Special Hazard Insurance Policy, Letters of Credit, the Reserve Fund or
the Alternative Credit Support specified in the Reference Agreement.
Custodial Account: If so specified in the Reference Agreement with respect
-----------------
to a Series, the non-interest-bearing deposit account or accounts created and
maintained by the Master Servicer pursuant to Section 3.08 in lieu of the
Certificate Account in the name of the Trustee for the benefit of the
Certificateholders, which account or account must be an Eligible Account or
Accounts. Amounts in such Custodial Account will be remitted, net of amounts
withdrawn pursuant to Section 3.12, to a Certificate Account maintained by the
Trustee pursuant to such Reference Agreement.
Custodial Agreement: The Custodial Agreement, if any, from time to time in
-------------------
effect, among the Master Servicer, the Trustee and the Custodian named therein
(if the Trustee is not the Custodian) in substantially the form set forth as an
Exhibit to the Reference Agreement.
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<PAGE>
Custodian: The Custodian or Custodians identified in the Reference
---------
Agreement and named pursuant to one or more Custodial Agreements as may from
time to time be in effect, or its successor in interest. The Custodian may be
the Trustee or any person directly or indirectly controlling or controlled by or
under common control with the Trustee, or an independent entity.
Cut-off-Date: The first day of the month of the initial issuance of a
------------
Series of Certificates, as specified in the related Reference Agreement.
Deleted Contract: With respect to a Series of Certificates, a Contract
----------------
replaced or to be replaced by a Replacement Contract.
Delivery Date: The date of settlement of the sale of the Certificates to
-------------
the original purchasers thereof, as specified in the Reference Agreement with
respect to a Series of Certificates.
Depositor: First Boston Mortgage Securities Corp., a Delaware corporation,
---------
or its successor in interest.
Determination Date: Unless otherwise specified in the related Reference
------------------
Agreement, the 20th day (or if such 20th day is not a Business Day, the Business
Day immediately preceding such 20th day) of the month of the related
Distribution Date.
Distribution Date: Unless otherwise specified in the related Reference
-----------------
Agreement, the 25th day of each calendar month after the initial issuance of the
Series of Certificates, or if such 25th day is not a Business Day, the next
succeeding Business Day.
Due Date: Unless otherwise specified in the Reference Agreement, the first
--------
day of the month in which the related Distribution Date occurs.
Eligible Account: An account (i) that is maintained with a depository
----------------
institution or trust company incorporated under the laws of the United States or
of any state thereof and the amounts deposited therein shall be held in the form
of Eligible Investments or (ii) meeting the requirements established for a
Servicing Account.
Eligible Investments: Unless otherwise specified in the Reference
--------------------
Agreement with respect to a Series, at any time, any one or more of the
following obligations, instruments and securities:
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<PAGE>
(i) obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia receiving one of the two highest
ratings of the Rating Agency, or such lower ratings as will not result in the
downgrading or withdrawal of the ratings then assigned to the Certificates by
the Rating Agency;
(iii) commercial or finance company paper which is then rated in the
highest commercial or finance company paper rating categories of the Rating
Agency, or such lower category as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agency;
(iv) certificates of deposit, demand or time deposits, federal funds or
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term debt
obligations of such depository institution or trust company (or in the case of
the principal depository institution in a holding company system, the commercial
paper or long term debt obligations of such holding company) are then rated in
the highest rating categories of each of the Rating Agencies, in the case of
commercial paper, or in the second highest category in the case of long term
debt obligations, or such lower categories as will not result in the downgrading
or withdrawal of the rating then assigned to the Certificates by the Rating
Agency;
(v) demand or time deposits or certificates of deposit issued by any bank
or trust company or savings and loan association and fully insured by the FDIC
or the FSLIC;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation acceptable to the Rating Agency at the time of the
issuance or investing in such guaranteed reinvestment agreements;
(vii) repurchase obligations with respect to any security described in (i)
and (ii) above or any other security issued or guaranteed by an agency or
instrumentality of the United States, in either case entered into with a
depository institution or trust company (acting as principal) described in (iv)
above;
(viii) securities bearing interest or sold at a discount issued by any
corporation incorporated under the
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<PAGE>
laws of the United States or any state thereof which, at the time of such
investment or contractual commitment providing for such investment are then
rated in one of the two highest categories of the Rating Agency, or in such
lower rating category as will not result in the downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating Agency; and
(ix) such other investments acceptable to the Rating Agency with respect
to manufactured housing pass-through certificates rated by the Rating Agency in
the same rating category as the Certificates of the related Series.
Event of Default: As defined in Section 7.01 hereof.
----------------
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
----
FHA: The Federal Housing Administration, or any successor thereto.
---
FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
-----
thereto.
FNMA: The Federal National Mortgage Association, a federally chartered and
----
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.
FSLIC: The Federal Savings and Loan Insurance Corporation, or any
-----
successor thereto.
Guarantee Amount: The amount of the Limited Guarantee as specified in the
----------------
related Reference Agreement.
Insurance Policy: With respect to any Contract included in the Trust Fund
----------------
for a Series, any Primary Credit Insurance Policy, any Pool Insurance Policy or
Special Hazard Insurance Policy, including all riders and endorsements thereto,
as specified in the Reference Agreement with respect to such Series.
Insurance Proceeds: Amounts paid pursuant to any Primary Credit Insurance
------------------
Policy or the Pool Insurance Policy, with respect to a Series and amounts paid
pursuant to such Series, when the related property has not been restored, and
amounts paid by any insurer pursuant to any other insurance policy covering a
Contract.
Insured Expenses: Expenses covered by the Pool Insurance Policy, any
----------------
Primary Credit Insurance Policy or the Special Hazard Insurance Policy, any
replacement insurance policy or policies for any of the foregoing insurance
policies for any
-7-
<PAGE>
of the foregoing insurance policies, or any other insurance policy with respect
to the Contract.
L/C Bank: The issuer, if any, of the Letter of Credit with respect to a
--------
Series of Certificates, as specified in the related Reference Agreement.
Letter of Credit: If so specified in the Reference Agreement with respect
----------------
to a Series of Certificates, the irrevocable stand-by letter of credit issued by
the L/C Bank in favor of the Trustee for the benefit of the Certificateholders,
terms of which, to the extent not specified herein, shall be as specified in
such Letter of Credit and in the Reference Agreement with respect to such
Series.
Limited Guarantee: The limited guarantee issued by the Limited Guarantor
-----------------
as described in the related Reference Agreement in favor of the Trustee for the
benefit of Certificateholders of a Series pursuant to the related Reference
Agreement.
Limited Guarantee Fee: The fee specified in the related Reference
---------------------
Agreement payable to the Limited Guarantor.
Limited Guarantor: The issuer of the Limited Guarantee as specified in the
-----------------
related Reference Agreement.
Liquidating Contract: A Contract (including a contract formerly held in
--------------------
the Trust Fund which has been assigned to the L/C Bank in considerations of
payments under the Letter of Credit) as to which, as of the close of business on
the Business Day next preceding the Due Date, the outstanding principal balance
has been accelerated (and as to which any applicable rights of any Person having
and interest in the Manufactured Home to reinstate the Contract shall have
expired) and, with respect to which, for satisfaction of such accelerated
balance, the holder thereof has a claim to liquidated proceeds of the security
for such Contract, including (without limitation) (a) from Repossession or other
realization as provided by applicable law, (b) from claims under related private
credit insurance or hazard insurance, and/or (c) from claims against any public
or governmental authority on account of a taking or condemnation of any such
property.
Liquidation Expenses: Expenses incurred by the Master Servicer (or the
--------------------
related Servicer) in connection with the liquidation of any defaulted Contract
and not recovered by the Master Servicer (or the related Servicer) under the
Pool Insurance Policy, if any, with respect to a Series or any Primary Credit
Insurance Policy for reasons other than the Master Servicer's failure to comply
with Section 3.13 hereof, or under any Alternative Credit Support, or with
respect to a Series of Certificates as to which credit support is provided by a
Letter of Credit, expenses incurred by the L/C Bank, such expenses
-8-
<PAGE>
including, without limitation, legal fees and expenses, any unreimbursed amount
expended by the Master Servicer pursuant to Section 3.14 hereof respecting the
related Contract and any related and unreimbursed expenditures for Taxes, for
rental payments due for the site on which the Manufactured Home is located or
for property restoration or preservation to the extent not previously reimbursed
under any (hazard) insurance policy or under the Special Hazard Insurance
Policy, if any, with respect to a Series, for reasons other than the Master
Servicer's failure to comply with Section 3.14 hereof.
Liquidation Proceeds: Amounts (other than Insurance Proceeds, payments
--------------------
under the Letter of Credit or the proceeds of any Alternative Credit Support)
received in connection with the liquidation of defaulted Contracts, whether
through trustee's sale, foreclosure sale or otherwise or amounts received in
connection with any condemnation or partial release of a Manufactured Home.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a
-------------------
percentage, the numerator of which is the current principal balance of the
related Contract at the date of determination and the denominator of which is
the Appraised Value of the related Manufactured Home.
Manufactured Home: The unit of manufactured housing, together with all
-----------------
accessions thereto, securing the indebtedness of the Obligor under the related
Contract.
Master Servicer:
---------------
[ ], a [ ] corporation, or its successor in
interest, or any successor master servicer appointed as herein provided.
Monthly Advance: The aggregate of (i) the advances made by the Master
---------------
Servicer on any Distribution Date pursuant to Section 4.01 or 4.03 hereof, the
amount of any such advances being equal to the aggregate of payments of
principal and interest on the Contracts [(in the case of Buydown Contracts,
exclusive of any such payments required by such Buydown Contract to be made out
of Buydown Funds)] that were due on the Due Date and delinquent as of the close
of business on the Business Day next preceding the related Distribution Date and
as to which the related Servicer, if any, has made no advance, after adjustment
or any delinquent interest payment to interest at the Pass-Through Rate [(after
giving effect to the application of any Buydown Funds)], less the aggregate
amount of any such delinquent payments that the Master Servicer has determined
would constitute a Nonrecoverable Advance if made and (ii) any advances made by
the Master Servicer on any Distribution Date pursuant to Section 4.05.
-9-
<PAGE>
NADA: National Automobile Dealers Association.
----
Nonrecoverable Advance: Any portion of the Monthly Advance previously made
----------------------
or proposed to be made by the Master Servicer (other than that portion of a
Monthly Advance made pursuant to Section 4.05 hereof) that, in the good faith
judgment of the Master Servicer, will not or, in the case of a current
delinquency, would not be, ultimately recoverable by the Master Servicer from
Insurance Proceeds, Liquidation Proceeds, payments under a Letter of Credit,
amounts in the Reserve Fund, or from proceeds of any Alternative Credit Support,
or otherwise. The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed advance, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by an Officers' Certificate of the
Master Servicer delivered to the Trustee and the Depositor, setting forth the
reasons for such determination as specified in Section 4.04 hereof.
Nonsubserviced Contract: Any Contract that is not subject to a Servicing
-----------------------
Agreement on the date of issuance of a Series of Certificates or thereafter.
Obligor: The person or persons obligated to make payments required by the
-------
Contract.
Officers' Certificate: A certificate signed by the Chairman of the Board,
---------------------
the Vice Chairman of the Board, the President or a Vice President or Assistant
Vice President, and by the Treasurer, the Secretary, or one of the Assistant
Treasurers or Assistant Secretaries of the Depositor or the Master Servicer, as
the case may be, and delivered to the Trustee, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
------------------
the Depositor or the Master Servicer, acceptable to the Trustee.
Pass-Through Rate: As to each Contract, the annual rate of interest, which
-----------------
may be fixed or variable, as specified in the related Reference Agreement, to be
distributed to the Certificateholders in the manner specified in such Reference
Agreement. Any regular monthly remittance or accrual of interest shall be based
upon annual interest at such rate on the Principal Balance of such Contract
divided by twelve.
Paying Agent: The Paying Agent identified in the Reference Agreement with
------------
respect to a Series, authorized to make distributions on behalf of the Trustee.
Performance Bond: With respect to a Series of Certificates, the bond,
----------------
guaranty or similar form of insurance coverage obtained by the Master Servicer
pursuant to Section 4.06
-10-
<PAGE>
hereof providing a guaranty of the performance of the Master Servicer's
obligations under this Agreement.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Pool Insurance Policy: If so specified in the Reference Agreement with
---------------------
respect to a Series of Certificates for which credit support is provided by a
Pool Insurance Policy, the policy of contract pool guaranty insurance obtained
pursuant to Section 3.13 [, a form of which is attached as an Exhibit to such
Reference Agreement,] or any replacement insurance policy obtained pursuant to
Section 3.13 hereof.
Pool Insurer: With respect to a Series of Certificates for which credit
------------
support is provided by a Pool Insurance Policy, the insurer specified in the
Reference Agreement with respect to a Series, or any successor thereto or the
named insurer in any replacement policy obtained pursuant to Section 3.13
hereof.
Primary Credit Insurance Policy: Each primary policy of credit insurance
-------------------------------
with respect to a Contract, or any replacement policy therefor [covering losses
up to ___% of the outstanding Principal Balance of the related Contract existing
from time-to-time and having such terms and conditions as are customary in the
manufactured housing finance industry].
Principal Balance: As of the time of any determination, the principal
-----------------
balance of a Contract remaining to be paid by the Obligor [or from any Buydown
Funds], after deduction of all payments due on or before the Cut-off Date,
reduced by all amounts distributed or advanced to the Certificateholders or, if
so specified in the related Reference Agreement, remitted or advanced to the
Trustee and reported as allocable to principal.
Principal Prepayment: Any Obligor payment or other recovery of principal
--------------------
on a Contract that is received in advance of its scheduled Due Date and is not
accompanied by an amount as to interest representing scheduled interest due on
any dates in any month or months subsequent to the month of prepayment.
Purchase Price: Unless otherwise specified in the Reference Agreement,
--------------
with respect to any Contract required to be purchased pursuant to the applicable
provisions of this Agreement, an amount equal to the sum of (i) the lesser of
(a) 100% of the Principal Balance of such Contract and (b) in the event that the
Depositor elects to treat the Trust Fund with respect to the related Series of
Certificates as a REMIC under the Code and payment of such amount results in a
prohibited transaction tax, the adjusted basis (as defined in the Code) of
-11-
<PAGE>
the Trust Fund in such Contract as of the date of purchase, plus (ii) one
month's interest on such Principal Balance at the Pass-Through Rate (so long as
advances on account of interest have been made on account of such Contract,
otherwise, accrued and unpaid interest on the Contract at the Pass-Through Rate
to the first day of the month following repurchase), plus (iii) if such purchase
is being made by a Servicer and advances on account of interest have been made
on account of such Contract, the sum of all advances made with respect to such
Contract by the Master Servicer for which the Master Servicer has not been
reimbursed.
Purchase Year: With respect to a Series of Certificates to which the
-------------
provisions of Section 2.03(b) are applicable, as specified in the Reference
Agreement with respect to such Series, the fiscal year ending on the date
specified in the Reference Agreement commencing with the year next succeeding
the year of the initial issuance of such Certificates.
Qualified Insurer: A credit insurance company duly qualified as such under
-----------------
the laws of the state of its principal place of business and each other state
having jurisdiction over such insurer in connection with the insurance policy
issued by such insurer, duly authorized and licensed by the insurance regulatory
authority of the state of its principal place of business and, to the extent
required by applicable law, each such other state, to transact a mortgage
guaranty insurance business in such state and each such other state and to write
the insurance provided by the insurance policy issued by it [and approved as an
insurer by FHLMC or FNMA] and whose claims-paying ability is acceptable to the
Rating Agency.
Rating Agency: Any nationally recognized statistical rating organization,
-------------
or any successor thereto, that rated the Certificates of a Series at the request
of the Depositor at the time of their initial issuance. If such organization or
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization or other comparable Person designated
by the Depositor, notice of which designation shall be given to the Trustee and
Master Servicer.
[Registrar of Titles: The agency, department or office having the
--------------------
responsibility for maintaining records of titles in the jurisdiction in which a
particular Manufactured Home is located.]
REMIC: A real estate mortgage investment conduit, as defined in the Code.
-----
Replacement Contract: A Contract substituted by the Depositor or the
--------------------
related Servicer for a Deleted Contract which must, on the date of such
substitution, meet the requirements specified in the related Reference
Agreement. Such substitution
-12-
<PAGE>
must take place within the time period specified in the Reference Agreement and
must satisfy the terms and conditions for substitution set forth therein.
Repossession: Any action taken or to be taken pursuant to the UCC or other
------------
applicable laws in connection with recovery on a defaulted Contract, including
repossession of the related Manufactured Home with or without judicial
proceedings, sale of such Manufactured Home at public or private sale, retention
of such Manufactured Home in satisfaction of the Obligor's obligations under the
defaulted Contract, or a levy on and sheriff's sale of the related Manufactured
Home in enforcement of a judgment on the defaulted Contract or by voluntary
surrender or otherwise.
Required Insurance Policy: With respect to any Contract, any insurance
-------------------------
policy that is required to be maintained from time to time under this Agreement
or the related Warranty and Servicing Agreement in respect of such Contract.
Reserve Fund: If provided for in the Reference Agreement with respect to a
------------
Series, the fund established and maintained pursuant to Section 3.25 hereof and
such Reference Agreement.
Responsible Officer: When used with respect to the Trustee, the Chairman
-------------------
or Vice Chairman of the Board of Directors or Trustees, the Chairman or Vice
Chairman of the Executive or Standing Committee of the Board of Directors or
Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, the Assistant Trust Officer,
the Controller and any Assistant Controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and 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.
Retained Yield: As set forth in the Reference Agreement, the portion of
--------------
all interest accrued at the applicable APR (which may differ among Contracts, as
specified in such Reference Agreement) or the outstanding principal balance of
each Contract from time to time outstanding that is retained by the Depositor
hereunder, which is payable to the Depositor out of the interest portion of all
payments or collections received on or with respect to the Contract and, as the
context requires, any similar amounts payable to a Servicer.
Series: A separate series of Certificates issued pursuant to this
------
Agreement, which Certificates may, as provided in the related Reference
Agreement, be divided into one or more
-13-
<PAGE>
Classes or Subclasses with the characteristics specified in such Reference
Agreement.
Servicer: With respect to any Contract, the Master Servicer if no person
--------
executed a Warranty and Servicing Agreement applicable to such Contract;
otherwise any Person who executed a Warranty and Servicing Agreement applicable
to such Contract.
Servicer Advance: The meaning specified in Section 3.09 hereof.
----------------
Servicer Remittance Date: The 18th day of each month, or if such day is
------------------------
not a Business Day, the Business Day immediately preceding such 18th day.
Servicing Account: A custodial demand deposit account or accounts
-----------------
established by the Servicer pursuant to Section 3.09 hereof with (i) a
depository institution the long term unsecured debt obligation of which are
rated by the rating agency in one of its two highest rating categories at the
time of any deposit therein, or (ii) the deposits in which are fully insured by
the FDIC or the FSLIC, or (iii) in a depository institution in which such
accounts are insured by the FDIC or the FSLIC (to the limits established by the
FDIC or the FSLIC) the uninsured deposits in which are otherwise several such
that, as evidenced by an Opinion of Counsel, delivered to the Trustee, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first security interest against any collateral (which shall be limited
to Eligible Investments) securing such funds that is similar to claims of any
other depositors or creditors of the depository institution with which such
account is maintained or (iv) any other account or accounts acceptable to the
Rating Agency rating the Certificates of the related Series.
Servicing Fee: With respect to each interest payment on a Contract, the
-------------
amount of each interest payment in excess of the Pass-Through Rate, after
deduction of the Administrative Fee, the Retained Yield, and any servicing
compensation payable to the related Servicer pursuant to the related Warranty
and Servicing Agreement, as the case may be or, in the case of a Nonsubserviced
Contract, to the Master Servicer.
Servicing Officer: Any officer of the Master Servicer involved in or
-----------------
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Trustee by the Master
Servicer pursuant to Section 2.03, as such list may from time to time be
amended.
Single Certificate: A Certificate in the denomination and representing the
------------------
interest in the Trust Fund specified in the Reference Agreement.
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<PAGE>
Special Hazard Insurance Policy: If so specified in the Reference
-------------------------------
Agreement, credit support which is provided by a Special Hazard Insurance Policy
[, a specimen of which is attached as an Exhibit to the Reference Agreement, or
any replacement policy obtained pursuant to Section 3.14 hereof].
Special Hazard Insurer: With respect to a Series of Certificates for which
----------------------
credit support is provided by a Special Hazard Insurance Policy the insurer
named in the related Reference Agreement, or any successor thereto, or the named
insurer in any replacement policy obtained pursuant to Section 3.14 hereof.
Subordinated Certificates: Any Certificates of a Series, the rights of the
-------------------------
holders of which to receive distributions on or with respect to the Contracts in
the Trust Fund for such Series are subordinated to the rights of the holders of
one or more Classes or Subclasses of such Series to receive such distributions,
as set forth in the related Reference Agreement.
Taxes: Motor vehicle registration fees or taxes, real estate, personal
-----
property or other ad valorem taxes, and all other similar fees and taxes imposed
-- -------
by a governmental unit with respect to the ownership or use of a Manufactured
Home.
Title Documents: With respect to any Manufactured Home, the certificate of
---------------
title for, or other evidence of ownership of, such Manufactured Home issued by
the Registrar of Titles in the jurisdiction in which such Manufactured Home is
located.
Trust Fund: With respect to a Series of Certificates the corpus of the
----------
trust created by this Agreement consisting of the Contracts and other property
specified in the related Reference Agreement.
Trust Receipt: The meaning specified in Section 3.17 hereof.
-------------
Trustee: [ ], a [ ] corporation, not in
-------
its individual capacity, but solely as trustee under this Agreement, and any
successor thereto, as provided herein.
Uninsured Cause: With respect to any Series of Certificates for which
---------------
credit support is provided by a Special Hazard Insurance Policy, any cause of
damage to a Manufactured Home is not fully reimbursable by the hazard insurance
policies or by the Special Hazard Insurance Policy required to be maintained
pursuant to Section 3.14 hereof.
-15-
<PAGE>
UCC: The Uniform Commercial Code (or in the case of the State of
---
Louisiana, other laws providing for the perfection and enforcement of security
interests in manufactured housing) as in effect in the relevant jurisdiction.
VA: The United States Veterans Administration, or any successor thereto.
--
Voting Rights: The portion of the aggregate voting rights evidenced by the
-------------
Certificates of a Series that is allocated to any particular Certificate, as
specified in the Reference Agreement.
Warranty and Servicing Agreement: A Master Seller's Warranty and Servicing
--------------------------------
Agreement, providing for the origination, sale and servicing of Contracts in
such form as has been approved by the Depositor, each containing representations
and warranties in respect of the Contracts sold and serviced thereunder.
The meaning of certain defined terms used in this Agreement shall, when
applied to a particular Series of Certificates and certain defined terms
applicable to such Series. In the event of a conflict or ambiguity created by
the terms defined herein and the terms defined in the related Reference
Agreement, the terms defined in the Reference Agreement shall control.
ARTICLE II.
CONVEYANCE OF CONTRACTS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Contracts.
-----------------------
The Depositor, concurrently with the execution and delivery of a Reference
Agreement, shall, in the manner specified below and in such Reference Agreement
sell, transfer, assign, set over and otherwise convey to the Trustee, without
recourse, all the right, title and interest of the Depositor in and to the
Contracts listed on the Contract Schedule attached to such Reference Agreement,
including all interest and principal received or receivable by the Depositor on
or with respect to the Contracts after the Cut-off Date, but not including
payments of principal and interest due and payable on the Contracts on or before
the Cut-Off Date and other than with respect to any Retained Yield specified in
the Reference Agreement together with all its right, title and interest in and
to the proceeds of any related Insurance Policies under which the Trustee is not
named as loss payee and any other insurance policies with respect to the
Contracts.
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<PAGE>
In connection with any such transfer and assignment, the Depositor shall
deliver to, and deposit with, the Trustee, or to any Custodian appointed by the
Trustee pursuant to this Agreement as the agent of the Trustee, the following
documents or instruments with respect to each Contract so assigned:
[(i) the Contract, endorsed without recourse by the Depositor to
order of the Trustee, as trustee for the benefit of the Certificateholders
of the related Series, signed in the name of the Depositor by an Authorized
Officer, with all intervening endorsements showing a complete chain of title
from the originator thereof to the Depositor; and if the Contract or any
other material document or instrument relating to the Contract has been
signed on behalf of the Mortgagor by another person, the original power of
attorney or other instrument that authorized and empowered such person to
sign; or, if a copy of the original power of attorney or other instrument
certified by the public recording office in these instances where the public
recording office retains the original;]
(ii) the original Title Documents, as recorded, with evidence of
recording indicated thereon, or a copy of the Mortgage certified by the public
recording office in those instances where the public recording office retains
the original;
(iii) evidence that the security interest granted under the Contract has
been perfected under applicable state law (except for any Title Documents or UCC
financing statements not returned from the applicable public office, in which
case, the Depositor will delivery a copy of such Title Documents or UCC
financing statements together with its certificate indicating that the originals
of such Title Documents and UCC financing statements were delivered to such
public office, and shall promptly upon receipt of the originals of such Title
Documents and UCC financing statements from such public office deliver such
originals to the Trustee (or, the Custodian); and
(iv) a power of attorney, if any executed by the Obligor under a Contract
authorizing the Depositor to execute an assignment of the Obligor's interest in
the related property in the event of a default under the Contract.
(v) an assignment (which may be included in a blanket assignment) of
each Contract in recordable form to the Trustee, as trustee for the benefit of
the Certificateholders of the related Series;
(vi) any Insurance Policies;
-17-
<PAGE>
(vii) the original assignment or assignments of the Contract,
together with originals or all intervening assignments, with evidence or
recording thereon;
(viii) the original copy of all assumption and modification
agreements, if any, with respect to such Contract;
(ix) the original commitment or certificate of Primary Credit
Insurance Policy, if any;
(x) any Letters of Credit;
(xi) any Alternative Credit Support.
In the event that, in connection with any Contract, the Depositor cannot
deliver the original recorded [Title Documents] or an original recorded
assignment of the [Title Documents] with evidence of recording thereon
concurrently with the execution and delivery of the Reference Agreement solely
because of a delay caused by the public recording office where such [Title
Documents] has been delivered for recordation, the Depositor shall deliver, or
cause the related Servicer to deliver, to the Trustee (or to a Custodian on
behalf of the Trustee), an Officers' Certificate or a certificate of the related
Servicer, with a photocopy of such [Title Documents] or assignment of the [Title
Documents] attached thereto, stating that such [Title Documents] or assignment
of the [Title Documents] has been delivered to the appropriate public recording
official for recordation. The Depositor shall promptly deliver, or cause the
related Servicer to deliver, to the Trustee (or to a Custodian on behalf of the
Trustee) such [Title Documents] or assignment of the [Title Documents] with
evidence of recording indicated thereon upon receipt thereof from the public
recording official or from the related Servicer. From time to time the
Servicers or the Master Servicer may forward to the Trustee (or to a Custodian
on behalf of the Trustee) additional original documents evidencing an assumption
or modification of a Contract.
[The Trustee (or a Custodian on behalf of the Trustee) shall cause to be
recorded in the appropriate public office each assignment referred to in this
Section 2.01. If any assignment is returned unrecorded to the Trustee (or to
such Custodian) because of any defect therein, the Trustee shall promptly notify
the Master Servicer and the Depositor. The Master Servicer shall promptly
notify the related Servicer of such defect and request that such Servicer cure
or correct such defect and cause such assignment to be recorded in accordance
with this paragraph or, if such Servicer does not cure or correct such defect of
in the event such defect cannot be cured, be cured, that such Servicer either
(a) substitute a replacement Contract or Contracts for the related Contract,
which substitution must occur within the time period specified in the Reference
Agreement and which shall be
-18-
<PAGE>
subject to the conditions set forth in Section 2.04 and terms and conditions
with respect to substitution in the Reference Agreement; or (b) repurchase such
contract at the Purchase Price therefor, in the manner provided in Section 2.02
hereof.]
In the case of Contracts that have been prepaid in full after the Cut-off
Date and prior to the date of execution and delivery of the Reference Agreement,
the Depositor, in lieu of delivering the above documents to the Trustee, will
deposit in the Certificate Account the amount with respect to such payment that
is required to be deposited in the Certificate Account pursuant to Section 3.08
hereof.
All original documents relating to the Contracts that are not delivered to
the Trustee or the respective Custodian, if any, are and shall be held in trust
for the benefit of the Trustee on behalf of the Certificateholders.
SECTION 1.022. Acceptance by Trustee.
---------------------
The Trustee (or the respective Custodian as the duly appointed agent of the
Trustee) will hold the documents referred to in Section 2.01 above and the other
documents constituting a part of the Contract Files delivered to it (or to such
Custodian) with respect to a Series in trust for the use and benefit of all
present and future Certificateholders of such Series. Upon request by any
Holder of a Certificate of such Series, the Trustee will provide an initial
certification acknowledging receipt of the proper number of Contract Files and
that they appear regular on their face on and as of the state of this Agreement.
The Trustee shall, for the benefit of the Holders of the Certificates of such
Series, review, or cause a Custodian on its behalf to review, each Contract File
within 60 days after the execution and delivery of the related Reference
Agreement, to ascertain that all required documents have been executed, received
and recorded, if applicable, and that such documents relate to the Contracts
identified in the Contract Schedule attached to such Reference Agreement. If,
in the course of such review, the Trustee (or any such Custodian) finds any
document or documents constituting a part of a Contract File to be defective in
any material respect, the Trustee shall promptly so notify the Master Servicer
and the Depositor. The Master Servicer shall promptly notify the related
Servicer of such defect and request that such Servicer correct or cure such
defect within 60 days from the date the Master Servicer was notified of such
defect and, if such Servicer does not correct or cure such defect within such
period, that such Servicer, if and to the extent that such Servicer is obligated
to do so under the related Warranty and Servicing Agreement, either (a)
substitute for the related Contract a Replacement Contract or Contracts, which
substitution shall be accomplished within the time period specified in the
Reference Agreement, in the manner and subject to the conditions set forth in
this Section and in the Reference Agreement; or
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<PAGE>
(b) purchase such Contract from the Trustee within 90 days from the date the
Master Servicer was notified or such defect at the Purchase Price of such
Contract. The Purchase Price for any such Contract shall be deposited by such
Servicer in the Certificate Account maintained by the Master Servicer pursuant
to Section 3.08 hereof and, upon receipt by the Trustee of written notification
of such deposit signed by a Servicing Officer, the Trustee shall release, or
shall cause the related Custodian to release, the related Contract File to such
Servicer, and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be necessary to vest in such
Servicer or its designee title to any Contract released pursuant hereto. It is
understood and agreed that the obligation of the Servicer to substitute for or
to purchase any Contract as to which a material defect in a constituent document
exists shall constitute the sole remedy respecting such defect available to the
Trustee on behalf of the Certificateholders, except as set forth below.
If so specified in the Reference Agreement, in the event that a Servicer
fails to repurchase any Contract that it is required to purchase pursuant to
this Section 2.02, the Master Servicer shall purchase such Contract at the
Purchase Price and in the manner set forth above, within five Business Days of
the Master Servicer's receipt of written demand therefor from the Trustee. Upon
receipt by the Trustee of written notification of the deposit of the Purchase
Price pursuant to Section 3.08 hereof, signed by a Servicing Officer, the
Trustee shall release, or shall cause the Custodian to release, the related
Contract File to the Master Servicer, and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Master Servicer or its designee title to any
Contract purchased pursuant hereto. Notwithstanding anything contained herein or
in such Reference Agreement to the contrary, the Master Servicer shall not be
entitled to substitute a Replacement Contract or Contracts in satisfaction of
such repurchase obligation.
The Trustee shall retain (or to cause a Custodian to retain) possession and
custody of each Contract File in accordance with and subject to the terms and
conditions set forth herein. The Master Servicer shall promptly deliver to the
Trustee, upon the execution or receipt thereof, the originals of any Special
Hazard Insurance Policy, any Pool Insurance Policy, any Performance Bond, any
Alternative Credit Support and any certificates of renewal thereof, and such
other documents or instruments that constitute part of the Contract File that
come into the possession of the Master Servicer from time to time.
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<PAGE>
SECTION 2.03. Representations, Warranties and Covenants of the Master Servicer
----------------------------------------------------------------
.
(a) The Master Servicer hereby represents, warrants and covenants to the
Depositor and the Trustee that, as of the date of the Reference Agreement:
(i) the Master Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
authorized and qualified to transact any and all business contemplated by this
Agreement and is, or will be, in compliance with the laws of any state in which
a Manufactured Home is located or is otherwise not required under applicable law
to effect such qualification and, in any event, is, or will be, in compliance
with the laws of any such state, to the extent necessary to ensure the
enforceability of each Contract and the servicing of the Contracts in accordance
with the terms of this Agreement;
(ii) the Master Servicer has the full corporate power and authority to
service each Contract, and to execute, deliver and perform, and to enter into
and consummate the transactions contemplated by this Agreement and has duly
authorized the execution, delivery and performance of this Agreement; and this
Agreement, assuming the due authorization, execution and delivery thereof by the
Depositor and the Trustee, constitutes a legal, valid and binding obligation of
the Master Servicer, enforceable against the Master Servicer in accordance with
its terms, except that (a) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws relating
to creditors' rights and (b) the remedy of specific performance and injunctive
and other forms of equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought;
(iii) neither the execution and delivery of this Agreement by the Master
Servicer, the servicing of the Contracts by the Master Servicer hereunder, the
consummation of any other of the transactions herein contemplated, nor the
fulfillment of or compliance with the terms hereof, will (A) result in a
material breach of any term or provision of the certificate of incorporation or
by-laws of the Master Servicer or (B) conflict with, result in a material
breach, violation or acceleration of, or result in a default under, the terms of
any other agreement or instrument to which the Master Servicer is a party or by
which it may be bound, or any statute, order or regulation applicable to the
Master Servicer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Master Servicer; and the Master
Servicer is not a party to, bound by, or in breach or violation of any indenture
or
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other agreement or instrument, or subject to or in violation of any statute,
order or regulation or any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and adversely
affects, or may in the future materially and adversely affect, (x) the ability
of the Master Servicer to perform its obligations under this Agreement or (y)
the business, operations, financial condition, properties or assets of the
Master Servicer;
(iv) the Master Servicer is, and will remain, subject to supervision and
examination by any state or federal authority as may be applicable and will
remain in good standing and qualified to do business where so required by
applicable law;
(v) no litigation is pending or, to the best of the Master Servicer's
knowledge, threatened, against the Master Servicer that, if determined adversely
to the Master Servicer, would adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Master Servicer to
service the Contracts or to perform any of its other obligations hereunder in
accordance with the terms hereof or that would have a material adverse effect on
the financial condition of the Master Servicer;
(vi) the Master Servicer will at all times comply with all reasonable rules
and requirements of the insurer under each Required Insurance Policy;
(vii) no information, certificate of an officer, statement furnished in
writing or report delivered to the Depositor, any affiliate of the Depositor or
the Trustee by the Master Servicer will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
information, certificate, statement or report not misleading;
(viii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Master Servicer of, or compliance by the Master Servicer
with, this Agreement or the consummation of the transactions contemplated
hereby;
(ix) in the performance of its servicing obligations hereunder, the Master
Servicer will not, by act or omission, materially impair the value of any
Contract; and
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(x) the Master Servicer has examined each existing, and will examine each
new Warranty and Servicing Agreement, and is, or will be, familiar with the
terms thereof. The terms of each existing Warranty and Servicing Agreement and
each Servicer thereunder are acceptable to the Master Servicer and any new
Warranty and Servicing Agreements or Servicers will comply with the provisions
of Sections 3.02 hereof.
(b) With the provisos and limitations as to remedies set forth in this
Section 2.03(b), if so specified in the Reference Agreement, the Master Servicer
hereby represents and warrants to the Depositor and the Trustee with respect to
each Contract that no action has been taken or failed to be taken, no event has
occurred and no state of facts exists or has existed on or prior to the Delivery
Date pursuant to the Reference Agreement (whether or not known to the Master
Servicer on or prior to such date) that has resulted, or that will result, in an
exclusion from denial of, or defense to coverage under a Primary Credit
Insurance Policy for any Contract, the Pool Insurance Policy or the Special
Hazard Insurance Policy (including, without limitation, any exclusions, denials
or defenses that would limit or reduce the availability of the timely payment of
the full amount of the loss otherwise due thereunder to the insured, whether
arising out of actions, representations, errors, omissions, negligence, or fraud
of the Master Servicer, a Servicer of such Contract, the related Obligor or any
party involved in the application for such coverage, including the appraisal,
plans and specifications and other exhibits or documents submitted therewith to
the insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason of such
insurer's breach of such insurance policy or such insurer's financial inability
to pay or by reason of a determination that the loss suffered was a loss not
insured by the terms and provisions of such insurance policy), and covenants
that within 90 days of its discovery or its receipt of notice of breach of this
representation and warranty as provided in Section 2.03(c) hereof, the Master
Servicer shall cure such breach in all material respects or, subject to the
limitations set forth in the next following paragraph, shall purchase the
Contract from Trustee; provided, however, that: (1) any such purchase by the
-------- -------
Master Servicer shall be at the Purchase Price and be accomplished in the manner
set forth in Section 2.03(d) hereof; (2) no such purchase shall be required so
long as the Master Servicer either (i) is diligently pursuing remedies against
the appropriate insurer or insurers or against the Servicer of the related
Contract or is contesting in good faith the denial of liability by the
appropriate insurer or insurers and either (A) the related Contract is not in
default with regard to payments due thereunder or (B) delinquent payments of
principal and interest under the related Contract and any premiums on any
applicable Primary Credit Insurance Policy and any related escrow
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<PAGE>
payments in respect of such Contract are being advanced on a current basis by
the Master Servicer or the Servicer of the related Contract, or (ii) pays to the
appropriate payee the amount in respect of such Contract that the insurer under
any applicable Primary Credit Insurance Policy, the Pool Insurer, under the Pool
Insurance Policy and the Special Hazard Insurer under the Pool Insurance Policy
would, in the aggregate, be liable to pay, absent a denial of liability by any
of them; (3) any payment made by the Master Servicer pursuant to clause (ii)
above shall be counted as an amount paid by the Master Servicer to purchase
Contracts in determining the limitations stated in the next paragraph of this
Section 2.03(b); and (4) the obligations of the Master Servicer to purchase any
Contract as to which such a breach has occurred and is continuing shall be
subject to the limitations set forth in the next paragraph and shall constitute
the sole remedy against the Master Servicer respecting such breach available to
Certificateholders or the Trustee on behalf of Certificateholders.
In respect of Contracts that the Master Servicer becomes obligated to
purchase solely because of a breach of the representation and warranty set forth
in this Section 2.03(b), the Master Servicer's obligation to purchase shall be
limited to (X) in the first Purchase Year, the purchase of Contract having an
aggregate Net Purchase Price (as defined below) not exceeding an amount equal to
3% of the aggregate Principal Balance of the Contracts as of the Cut-off Date
specified in the Reference Agreement, (Y) in the second Purchase Year, the
purchase of Contracts having an aggregate Net Purchase Price not exceeding an
amount equal to the lesser of (i) 2% of the aggregate Principal Balance of the
Contracts as of the Cut-off Date and (ii) the excess of the maximum amount set
forth in clause (X) above over the aggregate Net Purchase Price of the Contracts
that the Master Servicer has become obligated to purchase during the first
Purchase Year and has purchased and (Z) in the third through fifth Purchase
Years, inclusive and on a cumulative basis, the purchase of Contracts having an
aggregate Net Purchase Price not exceeding an amount equal to the lesser of (i)
1% of the aggregate Principal Balance of the Contracts as of the Cut-off Date
and (ii) the excess of the maximum amount set forth in clause (Y) above over the
aggregate Ne Purchaser Price of the Contracts that the Master Servicer has
become obligated to purchase during the second Purchase Year and has purchased.
After the fifth Purchase Year, the Master Servicer shall not be obligated to
purchase any Contracts solely because of a breach of the representation and
warranty set forth in this Section 2.03(b). The Net Purchase Price of such a
Contract shall be the Purchase Price less the amount of Liquidation Proceeds, if
any, realized by the Master Servicer from any source (including, without
limitation, any insurer or the related Servicer) in the disposition of such
Contract net of related Liquidation Expenses incurred by the Master Servicer.
For the purpose of determining the Purchase Year in which the Master Servicer is
or is not, as
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the case may be, obligated to purchase a Contract in accordance with this
paragraph and for the purpose of determining the aggregate Net Purchase Price of
Contracts to be purchased in a Purchase Year or Purchase Years, as the case may
be, in accordance with this paragraph (the purchase of a particular Contract
being at the Purchase Price and being accomplished in the manner set forth in
Section 2.03(d) hereof), the date of a purchase and the date on which
Liquidation Proceeds are realized by the Master Servicer in the disposition of a
Contract shall be deemed to be the date on which the Master Servicer received
notice of or discovered the related breach of the representation or warranty set
forth in this Section 2.03(b).
(c) Upon discovery by the Depositor, the Master Servicer or the Trustee of
a breach of the representation and warranty set forth in Section 2.03(a) or
2.03(b) here of that materially and adversely affects the interests of the
Certificateholders in the related Contract, the party discovering such breach
shall give prompt written notice to the other parties.
(d) The Purchase Price for any Contract purchased by the Master Servicer
pursuant to Section 2.03(a) or 2.03(b) hereof shall be deposited by the Master
Servicer in the Certificate Account pursuant to Section 3.08 hereof, and, upon
receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee shall release (or shall cause the applicable
Custodian to release) the related Contract File to the Master Servicer and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest title in the Master Servicer or
its designee, as the case may be, in any Contract released pursuant thereto.
Notwithstanding anything contained herein or in the Reference Agreement to the
contrary, the Master Servicer shall not be entitled to substitute a Replacement
Contract or Contracts in satisfaction of such repurchase obligation.
(e) The representations and warranties set forth in Section 2.03(a) or
2.03(b) hereof shall survive delivery of the respective Contract Files to the
Trustee, or to a Custodian, as the duly appointed agent of the Trustee.
[SECTION 2.04. Representations, Warranties, and Covenants of the [Depositor] as
----------------------------------------------------------------
to the Contracts
----------------
The [Depositor] hereby represents and warrants to the Trustee with respect
to each Contract as of the date of the Reference Agreement, unless otherwise
specified in such Reference Agreement, that:
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(i) as of the Cut-off Date specified in the Reference Agreement, no
Contract is more than 30 days delinquent in payment of principal and interest;
(ii) the information set forth in Contract Schedule attached to the
Reference Agreement is true and correct in all material respects at the date or
dates respecting which such information is furnished;
(iii) the terms of the Contract have not been waived, altered or modified
in any respect, except by instruments or documents identified in the Contract
File;
(iv) the Contract is the legal, valid and binding obligation of the Obligor
thereunder and is enforceable in accordance with its terms (except as such
enforceability may be limited by laws affecting the enforcement of creditors'
rights generally);
(v) the Contract is not subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, except for any right of
set-off provided to the Obligor as a matter of applicable state and federal law
or regulation, nor will the operation of any of the terms of the contract, or
the exercise of any right thereunder, render the Contract either unenforceable,
in whole or in part, or subject to any right of rescission or set-off, except as
stated above, counterclaim or defense, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto as of the date of
this Agreement;
(vi) the Manufactured Home securing the Contract is covered by a [ ]
Insurance Policy in the amount required by Section [ ]. All premiums now
due on such insurance have been paid in full,
(vii) the Contract was originated by a manufactured housing dealer in the
regular course of its business and was purchased by [ ] in the regular
course of its business, or the Contract was originated by the [ ] in
the regular course of its business;
(viii) the Contract was not originated in and is not subject to the laws
of any jurisdiction whose laws would make the transfer of the Contract from the
Depositor to the Trustee or under this Agreement or pursuant to transfers of
Certificates unlawful;
(ix) all requirements of any federal, state or local law, including,
without limitation, usury, truth in lending and equal credit opportunity laws,
applicable to the Contract have been complied with;
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<PAGE>
(x) the Contract has not been satisfied or subordinated in whole or in part
or rescinded, and the Manufactured Home securing the Contract has not been
released from the lien of the Contract in whole or in part;
(xi) the Contract creates a valid, subsisting and enforceable first
priority security interest in favor of the Depositor in the Manufactured Home
covered thereby, such security interest has been assigned by the Company to the
Trust, and the Trustee will have a valid and perfected first priority security
interest in such Manufactured Home. The Company will maintain such first
priority security interest so long as such Contract is the property of the
Trust;
(xii) all parties to the Contract had capacity to execute the Contract;
(xiii) the [Depositor] purchased the Contract for value and took
possession thereof in the ordinary course of its business, without knowledge
that the Contract was subject to a security interest. No Contract has been
sold, assigned or pledged by the [Depositor] to any other person, and
immediately prior to the transfer of the Contract to the Trust by the
[Depositor], the [Depositor] had good and marketable title thereto free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest and was the sole owner thereof with full right to transfer the Contract
to the Trust;
(xiv) as of the Cut-off Date, there was no default, breach, violation or
event permitting acceleration existing under the Contract and no event which,
with notice and the expiration of any grace or cure period, would constitute
such a default, breach, violation or event permitting acceleration under such
Contract [except any payment delinquencies permitted by clause (b) above), and
the [Depositor] has not waived any such default, breach, violation or event
permitting acceleration except any payment delinquencies permitted by clause (b)
above;
(xv) as of the Closing Date there are, to the best of the [Depositor's]
knowledge, no liens or claims which have been filed for work, labor or materials
affecting the Manufactured Home securing the Contract which are or may be liens
prior to, or equal or coordinate with, the lien of the Contract;
(xvi) the Contract contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the collateral of the benefits of the security;
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(xvii) there is only one original executed Contract, which has been
endorsed in blank and delivered to the Trustee on or before the Closing Date;
(xviii) at the time of origination of the Contract, the related
Manufactured Home was such Obligor's primary residence;
(xix) the related Manufactured Home is not considered or classified as
part of the real estate on which it is located under the laws of the
jurisdiction in which it is located and, as of the Closing Date, such
Manufactured Home is, to the best of the Company's knowledge, free of damage and
in good repair;
(xx) if the related Manufactured Home is located in a state in which
notation of a security interest on the title document is required or permitted
to perfect such security interest, the Title Documents show, or if a new or
replacement title document with respect to such Manufactured Home is being
applied for such Title Document will be issued within 180 days and will show,
the [Depositor] as the holder of a first priority security interest in such
Manufactured Home. If the related Manufactured Home is located in a state in
which the filing of a financing statement or the making of a future filing under
the UCC is required to perfect a security interest in manufactured housing, such
filings or recordings have been duly made and show the [Depositor] as secured
party. In either case, the Trustee has the same rights as the secured party of
record would have (if such secured party were still the owner of the Contract
against all Persons claiming an interest in such Manufactured Home; and
(xxi) each Contract is a "qualified mortgage" under Section 850G9(a)(3) of
the Code.]
SECTION 2.05. Representations and Warranties of the [Depositor] Regarding the
---------------------------------------------------------------
Contracts in the Aggregate.
--------------------------
The [Depositor] represents and warrants that:
(i) the Contracts have the following characteristics as of the Cut-off
Date: (i) not more than ___% of the Contracts by remaining principal balance are
located in any one state; (ii) no contract has a remaining maturity of less than
____ months or more than ___ months; (iii) the final Due Date on the Contract
with the latest maturity is in _________, _____; (iv) approximately ___% of the
Principal Balance of the Contracts as of the Cut-off Date is attributable to
loans for purchases of new Manufactured Homes and approximately ___% is
attributable to
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loans for purchases of used Manufactured Homes; and (v) no Contract was
originated before __________, _____;
(ii) the Computer Tape made available by the [ ] as of the close of
business on ___________________ was complete and accurate as of its date and
includes a description of the same Contracts that are described in the Contract
Schedule;
(iii) By the Closing Date, the Company has caused the portions of its
records relating to the Contracts constituting part of the Trust to be clearly
and unambiguously marked to indicate that such Contracts constitute part of the
Trust Fund;
(iv) No adverse selection procedures have been employed in selecting the
Contracts.]
SECTION 2.06. Representations and Warranties of the [Depositor] Regarding the
---------------------------------------------------------------
Contract Files.
--------------
The [Depositor] represents and warrants that:
(i) immediately prior to the Closing Date, the [Depositor] will have
possession of each original Contract and the related Contract File, and there
are and there will be no custodial agreements in effect materially and adversely
affecting the rights of the [Depositor] or the [Depositor] to make, or cause to
be made, any delivery required hereunder;
(ii) the transfer, assignment and conveyance of the Contracts and the
Contract Files by [ ] to the [Depositor] and by the [Depositor] pursuant to
this Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.]
SECTION 2.07. Repurchases of Contracts for Breach of Representations and
----------------------------------------------------------
Warranties [by the Depositor].
-----------------------------
It is understood and agreed that the representations and warranties set
forth in Section[s] 2.04 [2.05 and 2.06] shall survive delivery of the
respective Contract Files to the Trustee or to a custodian, as the duly
appointed agent of the Trustee.
Upon discovery by the Depositor, the Master Servicer or the Trustee (or
upon notice thereof from any Certificateholder) of a breach or breaches of any
of the representations and warranties set forth in Section[s] 2.04[, 2.05 and
2.06] that materially and adversely affects, in the reasonable judgment of the
Trustee, the interests of the Certificateholders in the
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related contract, the party discovering such breach or breaches shall give
prompt written notice to the other parties. The Master Servicer shall promptly
notify the related Servicer of such breach and request that such Servicer
correct or cure such breach within 60 days from the date the Master Servicer was
notified of such breach and, if such Servicer does not correct or cure such
breach with such period, or if such breach cannot be so cured, that such
Servicer, if and to the extent that such Servicer is obligated to do so under
the related Warranty and Servicing Agreement, either (a) remove such Contract (a
"Deleted Contract") from the Trust Fund and substitute in its place a
Replacement Contract or Contracts, which substitution shall be accomplished
within the time period specified in the Reference Agreement, in the manner and
subject to the conditions set forth in this Section and in the Reference
Agreement; or (b) repurchase the affected Contract or Contracts from the
Trustee. Any such purchase by such Servicer shall be at the Purchase Price and
be accomplished in the manner set forth in Section 2.02 hereof. Any such
substitution shall be accomplished in the manner set forth in the following
paragraph, subject to the terms and conditions set forth in the Reference
Agreement with respect to such substitution.
Subject to the terms and conditions set forth in the Reference Agreement
with respect to such substitution, as to any Replacement Contract or Contracts,
the related Servicer shall deliver to the Trustee (or to a Custodian, as the
duly appointed agent of the Trustee) for such Replacement Contract or Contracts,
the Title Documents, the related assignment of the contract, and such other
documents and agreements as are required by Section 2.01, with the title
Documents endorsed as required by Section 2.01. No substitution will be made in
any calendar month after the Distribution Date for such month. Monthly payments
due with respect to Replacement Contracts in the month of substitution shall not
be part of the related Trust Fund and will be retained by the Master Servicer
and remitted by the Master Servicer to the related Servicer on the next
succeeding Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on such Deleted contract
for such month and thereafter such Servicer shall be entitled to retain all
amounts received in respect of such Deleted Contract. The Trustee (or the
related Custodian, as the duly appointed agent of the Trustee) shall amend the
Contract Schedule to reflect the removal of such Deleted Contract and the
substitution of the Replacement Contract or Contracts. Upon such substitution,
the Replacement Contract or Contracts shall be subject to the terms of this
Agreement and the related Warranty and Servicing Agreement in all respects, the
Servicer shall be deemed to have made the representations and warranties with
respect to such Contract contained in the related Warranty and Servicing
Agreements and the Depositor and the Master Servicer shall be deemed to have
made with respect to such Replacement Contract or Contracts, as of the date of
substitution, the
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covenants, representations and warranties set forth in this section as to the
Depositor and Section 2.03 as to the Master Servicer. Upon any such
substitution, the Trustee shall release, or shall cause the applicable Custodian
to release, the Contract File relating to such Deleted Contract to the related
Servicer and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be necessary to vest title
in such Servicer or its designee, as the case may be, to any Deleted Contract
substituted for pursuant to Section 2.07.
Subject to the terms and conditions set forth in the Reference Agreement
with respect to such substitution, for any month in which a Servicer substitutes
one or more Replacement Contracts for one or more Deleted Contracts, as of the
date of substitution is less than the aggregate Principal Balance of all such
Deleted Contracts (after application of scheduled principal portion of the
monthly payments due in the month of substitution). The amount of such shortage
shall be deposited into the Certificate Account by such Servicer in the month of
substitution pursuant to Section 3.08, without any reimbursement therefor.
In the event that a Servicer shall have repurchased a Contract, upon
receipt by the Trustee of written notification of the deposit of the Purchase
Price pursuant to Section 3.08, signed by a Servicing Officer, the Trustee shall
release, or shall cause the Custodian to release, the related Contract File to
such Servicer and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest title in such Servicer or its designee, as the case may be, to any contract
purchased pursuant to Section 2.07. In the event that the related Servicer does
not repurchase or substitute for a Contract as to which a breach has occurred
and is continuing, the Depositor shall either repurchase such Contract or
substitute a Replacement Contract, in the manner specified in Section 2.07. It
is understood and agreed that the obligation of the related Servicer or the
Depositor to repurchase any Contract as to which a breach has occurred and is
continuing shall constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on behalf of Certificateholders, except as
provided in Section 2.03(b).
SECTION 2.08. Representation and Warranties of Servicers.
------------------------------------------
(a) Upon the discovery by the Depositor, the Master Servicer or the Trustee
of a breach or breaches of any of the representations and warranties made in a
Warranty and Servicing Agreement in respect of any Contract, which breach or
breaches, individually or in the aggregate, materially and adversely affect, in
the reasonable judgment of the Trustee, the interests of the Certificateholders,
the party discovering such breach
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shall give prompt written notice to the other parties. The Master Servicer shall
promptly notify the related Servicer of such breach and request that such
Servicer cure such breach within 90 days from the date the Master Servicer
discovers, or was notified of, such breach, and if such Servicer does not cure
such breach in all material respects, that such Servicer, if and to the extent
that such Servicer is obligated to do so under the related Warranty and
Servicing Agreement, either (a) substitute a Replacement Contract or Contracts
for the related Contract, which substitution must occur within the time period
specified in the Reference Agreement and shall be subject to the conditions set
forth in section 2.07 and the terms and conditions with respect to such
substitution set forth in the Reference Agreement, or (b) purchase such Contract
from the Trustee of written notification of the deposit of the Purchase Price
pursuant to Section 3.08 by the Servicer signed by a Servicing Officer, the
Trustee shall release or shall cause the Custodian to release the related
Contract File to such Servicer and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest title to any Contract purchased pursuant to this Section 2.08(a) in such
Servicer or its respective designees. Except as set forth in 2.039b) hereof, it
is understood and agreed that the obligation of such Servicer to substitute for
or to purchase any Contract as to which such breach (or breaches) has occurred
and is continuing shall constitute the sole remedy respecting such breach or
breaches available to the Trustee on behalf of the Certificateholders.
(b) In the case of a Contract that the Master Servicer becomes obligated to
purchase pursuant to Section 2.03(b) hereof and a Servicer becomes obligated to
purchase pursuant to Section 2.08(a) hereof, the Master Servicer shall, so long
as all advances are being made in respect of such Contract pursuant to Section
3.09, Section 4.01 or Section 4.03 hereof, first require the Servicer to
substitute for or to purchase such Contract pursuant to Section 2.08(a) hereof,
second, if such Servicer has defaulted in its obligation to substitute for or to
purchase such Contract (but without relieving it of its obligation to make such
purchase), present claims under the relevant Required Insurance Policies to the
extent the Master Servicer believes any such Required Insurance Policy may cover
the loss in respect of such Contract is not fully covered by the Required
Insurance Policies, subject to the limitations set forth in Section 2.03(b)
hereof, purchase such Contract in accordance with Sections 2.03(b) and 2.03(b)
hereof. If all advances are not being made in respect of such Contract pursuant
to Section 3.09, Section 4.01 or Section 4.03 hereof, the Servicer or Seller
does not substitute for or purchase such Contract pursuant to Section 2.08(a)
hereof within seven days after such request and any claims presented under any
Required Insurance Policies in accordance with the next preceding sentence are
not paid in full within 14 days after such request,
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the Master Servicer shall, hereof, purchase such Contract in accordance with
Sections 2.03(b) and 2.03(d) hereof.
SECTION 2.09. Assignment of Rights under Warranty and Servicing Agreements.
------------------------------------------------------------
The Depositor hereby assigns to the Trustees all its rights, title and
interest in respect of each Warranty and Servicing Agreement applicable to a
Contract identified in the Contract Schedule attached to the Reference Agreement
insofar as such Warranty and Servicing Agreement relates to the representations
and warranties made by the related Servicer in respect of such Contract and any
remedies provided thereunder for any breach of such representations and
warranties, as well as insofar as the provisions of such Warranty and Servicing
Agreement relate to the administration and servicing of the Contracts serviced
thereunder, which right, title and interest may be enforced by the Master
Servicer on behalf of the Depositor, the Trustee and the Certificateholders.
The Master Servicer shall enforce the provisions of the Warranty and Servicing
Agreements relating to the administration and servicing of the Contracts
serviced thereunder in accordance with the provisions of Article III.
ARTICLE III.
ADMINISTRATION AND SERVICING
OF CONTRACTS
SECTION 3.01. Master Servicer to Act as Servicer.
----------------------------------
For and on behalf of the Trustee and the Certificateholders, the Master
Servicer shall service and administer the Contracts in accordance with prudent
servicing standards and procedures generally accepted in the manufactured home
finance industry, except as otherwise expressly provided in this Agreement. In
connection with such servicing and administration, the Master Servicer, subject
to the immediately preceding sentence shall have full power and authority,
acting alone and/or through Servicers as provided in Section 3.02 hereof, to do
or cause to be done any and all things that it may deem necessary or desirable
in connection with such servicing and administration, including but not limited
to the power and authority, subject to the terms hereof (i) to execute and
deliver, on behalf of the Certificateholders and the Trustee, customary consents
or waivers and others instruments and documents, (ii) to consent to transfers of
any Manufactured Home and assumptions of the Contracts, (iii) to collect any
Insurance Proceeds and Liquidation Proceeds, and (iv) to effectuate foreclosure
or other conversion of the ownership of the Manufactured Home securing any
Contract; provided that the Master Servicer shall take no action that is
inconsistent with or
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prejudices the interests of the Trustee or the Certificateholders in any
Contract or the rights and interests of the Depositor, the Trustee and the
Certificateholders under this Agreement. Without limiting the generality of the
foregoing, the Master Servicer, in its own name or in the name of the Depositor
and the Trustee, is hereby authorized and empowered by the Depositor and the
Trustee, when the Master Servicer believes it appropriate in its best judgment,
to execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Contracts, and with respect to the
Manufactured Homes. The Depositor and the Trustee shall furnish the Master
Servicer with any powers of attorney and other documents necessary to service
and administer the Contracts.
In accordance with the standards of the preceding paragraph, the Master
Servicer, with respect to any Nonsubserviced Contract and otherwise, to the
extent the related Servicer does not do so, shall advance or cause to be
advanced funds as necessary for the purpose of effecting the timely payment of
taxes and assessments on the Manufactured Homes, which advances shall be
reimbursable in the first instance from related collections from the Obligors
pursuant to Section 3.08 hereof, and further as Liquidation Expenses as provided
in Section 3.16 hereof and may be withdrawn from the Certificate Account
pursuant to Section 3.12 hereof. All costs incurred by the Master Servicer or
by the related Servicers in effecting the timely payment of taxes and
assessments on the Manufactured Homes shall not, for the purpose of calculating
monthly distributions to the Certificateholders, be added to the Principal
Balance under the related Contracts, notwithstanding that the terms of such
Contracts so permit.
In the event that the Depositor elects to treat the related Trust Fund as a
REMIC as defined in the Code in the Reference Agreement the Master Servicer
shall (unless otherwise specified in such Reference Agreement) act as agent on
behalf of the Trust and that in such capacity it shall: (a) prepare and file,
or cause to be prepared and filed, a federal tax return using a calendar year as
the taxable year for the Trust Fund when and as required by the applicable
provisions of the Code; (b) make an election, on behalf of the Trust Fund, to be
treated as a REMIC on the federal tax return of the Trust Fund for its first
taxable year, in accordance with the applicable provisions of the Code; (c)
prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the applicable provisions of the Code; (d) conduct
the affairs of the Trust Fund so as to maintain the status thereof as a REMIC
under the applicable provisions of the Code; (e) not knowingly or intentionally
take any action or omit to take any action that would cause the termination of
the REMIC status of the Trust
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Fund; and (f) pay the amount of the any federal income tax, including prohibited
transaction penalty taxes, imposed on the Trust Fund when and as the same shall
be due and payable.
SECTION 3.02. Enforcement of the Obligations of Servicers.
-------------------------------------------
(a) For purposes of this Agreement, the Master Servicer shall be deemed to
have received the payments on the Contracts referred to in Sections 3.08, 3.09
and 3.10 hereof when the related Servicer has received such payments and shall
remain obligated to deposit such payments in accordance with Section 3.08, 3.09
and 3.10 hereof, regardless of whether such payments are remitted by the
Servicer to the Master Servicer, subject to the provisions of Section 4.03. The
Master Servicer and the Servicer may enter into amendments to the Warranty and
Servicing Agreements; provided, however, that any such amendments shall be
otherwise consistent and shall not violate the provisions of this Agreement; and
provided further, that the substance of any such material amendment or material
change shall be transmitted promptly to the Trustee.
(b) As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the Depositor, the Trustee and the Certificateholders, shall
supervise, administer, monitor and oversee the servicing of the Contracts that
are not serviced by it directly, and shall enforce the obligations of each
Servicer under the related Warranty and Servicing Agreement, including, without
limitation, the obligation of the Servicer to make advances in respect of
delinquent payments as required by a Warranty and Servicing Agreement,
including, without limitation, the obligation of the Servicer to make advances
in respect of delinquent payments as required by Warranty and Servicing
Agreement, to purchase a Contract on account of defective documentation, as
described in Section 2.02 hereof, or on account of a breach of a representation
or warranty, as described in Section 2.05(a) hereof. Such enforcement, shall
include, without limitation, the legal prosecution of claims, termination of
Warranty and Servicing Agreement, as appropriate, and the pursuit of other
appropriate remedies, and shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Contracts. The Master
Servicer shall pay the costs of such enforcement at its own expense, but shall
be reimbursed therefor only (i) from a general recovery resulting from such
enforcement only to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Contracts or (ii) from a specific recovery of
costs, expenses or attorneys fees against the party against whom such
enforcement is directed.
(c) During the term of the Reference Agreement, the Master Servicer shall
consult fully with each of the Servicers as may be necessary from time to time
to perform and carry out the
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Master Servicer's obligations hereunder and receive, review and evaluate all
reports, information and other data that are provided to the Master Servicer by
each Servicer and otherwise exercise reasonable efforts to cause each Servicer
to perform and observe the covenants, obligations and conditions to be performed
or observed by it under its Warranty and Servicing Agreement. If any Servicer
materially breaches or fails to perform or observe any material obligations or
conditions of its Warranty and Sub-servicing Agreement, the Master Servicer
shall promptly deliver to the Depositor and to the Trustee and Officers'
Certificate certifying that such Servicer is in default and describing the
events and circumstances giving rise to the default and what action (if any) has
been, or is to be, taken by the Servicer to cure the default and setting forth
the action to be taken by the Master Servicer.
SECTION 3.03. Successor Services.
------------------
Upon the request of a Servicer, the Master Servicer or the related Servicer
shall be entitled to terminate or assign the rights of the Servicer under the
related Warranty and Servicing Agreement in accordance with the terms and
conditions of such Warranty and Servicing Agreement. The Master Servicer will
not unreasonably withhold its consent to the transfer of the servicing
obligations and without any limitation by virtue of this Agreement; provided,
however, that in the event of termination or assignment of the rights of the
Servicer under any Warranty and Servicing Agreement by the Master Servicer or
the Servicer, the Master Servicer shall act in accordance with Section 3.04; and
provided, further that no assignment of the Servicer's rights and obligations
under a Warranty and Servicing Agreement may be effected without the consent of
the Trustee. No such termination shall effect the right of a Servicer to
receive any retained yield provided for in the Warranty and Servicing Agreement.
SECTION 3.04. Termination of the Rights of Servicers.
--------------------------------------
If the Master Servicer terminates the rights of a Servicer under any
Warranty and Servicing Agreement, the Master Servicer shall assume the
obligations of the related Servicer under the terminated Warranty and Servicing
Agreement, or at the Master Servicer's election, enter into a substitute
servicing agreement with another manufacture housing finance service company
acceptable to the Trustee and the Master Servicer under which such manufacture
housing finance service company shall assume, satisfy, perform and carry out all
liabilities, duties, responsibilities and obligations that are to be, or
otherwise were to have been, satisfied, performed and carried out by the
terminated Servicer, regardless of whether such liabilities, duties,
responsibilities or obligations shall have accrued before or after the
termination of the rights of such Servicer, including but not limited to, the
Servicer's obligations to
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purchase certain Contracts and any other liabilities or obligations of the
Servicer arising from the breach of any representations and warranties contained
in the related Warranty and Servicing Agreement; provided, however, that any
such substitute servicer and any such substitute servicing shall satisfy the
requirements of Section 3.02. If the Master Servicer does not elect to enter
into a substitute servicing agreement with a successor servicer, the Master
Servicer shall nevertheless assume, satisfy, perform and carry out all
liabilities, duties, responsibilities and obligations which otherwise were to
have been satisfied, performed and carried out by the servicer under such
terminated Warranty and Servicing Agreement until a substitute Servicer has been
appointed and designated and a substitute servicing agreement has been entered
into by the Master Servicer and such substitute Servicer.
SECTION 3.05. Liability of the Master Servicer.
--------------------------------
Notwithstanding the provisions of any Warranty and Servicing Agreement, any
of the provisions of this Agreement relating to agreements or arrangements
between the Master Servicer or a Servicer or reference to actions taken through
a Servicer or otherwise, the Master Servicer shall remain obligated and liable
to the Depositor, the Trustee and the Certificateholders of the related Series
for the servicing and administering of the Contracts included in the Trust Fund
for such Series in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue of such Warranty and
Servicing Agreements or agreements or arrangements or by virtue of
indemnification from the Servicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Contracts. The Master Servicer shall be entitled to enter
into any agreement with the Depositor or a Servicer for indemnifica tion of the
Master Servicer and nothing contained in this Agreement shall be deemed to limit
or modify such indemnification.
SECTION 3.06. Rights of the Depositor and the Trustee In Respect of the Master
----------------------------------------------------------------
Servicer.
--------
The Master Servicer shall afford the Depositor and the Trustee, upon
reasonable notice, during normal business hours, access to all records
maintained by the Master Servicer in respect of its rights and obligations
hereunder and access to officers of the Master Servicer responsible for such
obligations. The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder or exercise the rights of the Master Servicer hereunder; provided that
the Master Servicer shall not be relieved of any of its obligations hereunder by
virtue of such performance by the Depositor or its
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designee. The Depositor shall not have any responsibility or liability for any
action or failure to act by the Master Servicer and is not obligated to
supervise the performance of the Master Servicer hereunder or otherwise.
SECTION 3.07. Trustee to Act as Servicer.
--------------------------
In the event that the Master Servicer shall for any reason no longer be the
Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its designee shall thereupon assume all of the rights and obligations
of the Master Servicer under each Warranty and Servicing Agreement that may have
been assigned to the Trustee pursuant to Section 2.06 hereof or any substitute
servicing agreement that may have been entered into by the Master Servicer
pursuant to Section 3.04 hereof. The Trustee, its designee or any successor
master servicer shall be deemed to have assumed all of the Master Servicer's
interest therein and to have replaced the Master Servicer under each Warranty
and Servicing Agreement or substitute servicing agreement, except that the
Master Servicer shall not thereby be relieved of any liability or obligations
under the Warranty and Servicing Agreement or substitute servicing agreement.
The Master Servicer shall, upon request of the Trustee, but at the expense
of the Master Servicer, deliver to the assuming party all documents and records
relating to each Warranty and Servicing Agreement or substitute servicing
agreement and the Contracts then being serviced thereunder and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of the Warranty and Servicing Agreement or
substitute servicing agreement to the assuming party.
SECTION 3.08. Collection of Contract Payments; Certificate Account.
----------------------------------------------------
The Master Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Contracts and shall, to the
extent such procedures shall be consistent with this Agreement and the terms and
provisions of the Pool Insurance Policy, the Special Hazard Insurance Policy,
any related Primary Credit Insurance Policy, Letters of Credit or any
Alternative Credit Support, follow such collection procedures as it follows with
respect to installment sales contracts or installment loan agreements comparable
to the Contracts and held in its own portfolio and serviced by the Master
Servicer. Consistent with the foregoing, the Master Servicer may at its
discretion (i) waive any late payment charge or any prepayment charge or penalty
interest in connection with the prepayment of a Contract and (ii) only upon
determining that the coverage of such Mortgage Loan by the Pool Insurance
Policy, the Special Hazard Insurance Policy, any related Primary Credit
Insurance Policy, Letter of Credit or Alternative Credit Support, will not be
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affected, extend the due dates for payments due on a Contract for a period not
greater than 125 days. In the event of any such arrangement, the Master
Servicer shall make timely advances on the related Contract during the scheduled
period in accordance with the amortization schedule of such Contract without
modification thereof by reason of such arrangements.
The Master Servicer shall establish and maintain, in the name of the
Trustee on behalf of the Certificateholders, the Certificate Account, in which
the Master Servicer, except as otherwise set forth in the Reference Agreement,
shall deposit on a daily basis, or as and when received from the Servicers
except as otherwise specifically provided herein, the following payments and
collections received or made by it subsequent to the Cut-off Date (other than in
respect of principal of and interest on the Contracts due on or before the Cut-
off Date):
(i) all payments on account of principal, including Principal Prepayments,
on the Contracts;
(ii) all payments on account of interest (net of any portion thereof
retained by the related Servicer, if any, as servicing compensation and any
retained yield payable to the Servicer) on the Contracts;
(iii) all Insurance Proceeds and Liquidation Proceeds, other than proceeds
to be applied to the restoration or repair of the Manufactured Homes or released
to the Obligor in accordance with the Master Servicer's normal servicing
procedures;
(iv) all amounts required to be deposited therein from the Reserve Fund
pursuant to Section 3.25 and the Reference Agreement;
(v) all payments received by the Trustee under any Letter of Credit and any
payments under any Alternative Credit Support;
(vi) all Monthly Advances made by the Master Servicer pursuant to Sections
4.01, 4.03 or 4.05 hereof and all Servicer Advances, as described in Section
3.09 hereof;
(vii) any amount required to be deposited by the Master Servicer pursuant
to the second succeeding paragraph of this Section 3.08 in connection with any
losses on Eligible Investments;
(viii) any amounts required to be deposited by the Master Servicer
pursuant to Sections 3.13, 3.14 and 3.23 hereof;
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(ix) all proceeds of any Contracts or property acquired in respect of the
Contracts purchased pursuant to Sections 2.02, 2.07, 2.08, 3.15 or 9.01 hereof
and all amounts required to be deposited in connection with the substitution of
Replacement Contracts pursuant to Sections 2.02, 2.07 or 2.08 hereof; and
(x) any Buydown Funds and _______ required to be deposited by the Master
Servicer in the Certificate Account pursuant to Section 3.26 hereof.
The foregoing requirements for deposit by the Master Servicer in the Certificate
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of prepayment
or late payment charges or assumption fees need not be deposited by the Master
Servicer in the Certificate Account. In the event that the Master Servicer
shall deposit in the Certificate Account any amount not required to be deposited
therein, it may at any time withdraw such amount from the Certificate Account,
any provision herein to the contrary notwithstanding. Such withdrawal may be
accomplished by delivering an Officers' Certificate to the Trustee which
describes the amounts deposited in error in the Certificate Account. If the
facts set forth on the face of such Officer's Certificate indicate that amounts
deposited were not required to be deposited under the terms of this Section
3.08, the Trustee shall, in writing, authorize the Master Servicer to withdraw
such amount from the Certificate Account. All funds deposited by the Master
Servicer in the Certificate Account shall be held by the Master Servicer in
trust for the Certificateholders until disbursed in accordance with the
Reference Agreement or withdrawn in accordance with Section 3.12.
The Master Servicer may cause the institution maintaining the Certificate
Account to invest the funds in the Certificate Account in Eligible Investments,
which shall mature not later than the Business Day next preceding the
Distribution Date next following the date of such investment (except that if
such Eligible Investment is an obligation of the institution that maintains the
Certificate Account, then such Eligible Investment shall mature not later than
such Distribution Date) and shall not be sold or disposed of prior to its
maturity. All such Eligible Investments shall be made in the name of the
Trustee (in its capacity as such) or its nominee. All income and gain realized
from any such investment shall be for the benefit of the Master Servicer and
shall be subject to its withdrawal or order from time to time. The amount of
any losses incurred in respect of any such investments shall be deposited in the
Certificate Account by the Master Servicer out of its own funds immediately as
realized.
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The Master Servicer shall give notice to the Trustee and the Depositor of
the location of the Certificate Account, and of any change thereof, prior to the
use thereof.
If so specified in the Reference Agreement with respect to a Series,
amounts to be deposited in the Certificate Account pursuant to this Section 3.08
shall instead be deposited by the Master Servicer in a Custodial Account and
remitted, net of amounts withdrawn pursuant to Section 3.12 hereof, by wire
transfer of immediately available funds to the Certificate Account established
by the Trustee pursuant to the Reference Agreement on the date specified in such
Reference Agreement.
SECTION 3.09. Servicing Accounts.
------------------
In those cases where a Servicer is servicing a Contract pursuant to a
Warranty and Servicing Agreement, the Servicer will, pursuant to the Warranty
and Servicing Agreement, be required to establish and maintain one or more
Servicing Accounts. The Servicer will be required thereby to deposit into the
Servicing Account on a daily basis all proceeds of Contracts received by the
Servicer, subject to withdrawal to the extent permitted by such Warranty and
Servicing Agreement. All amounts held in the Servicing Accounts shall be held
in trust for the Trustee for the benefit of the Certificateholders. On the
Servicer Remittance date, the Servicer will, pursuant to the related Warranty
and Servicing Agreement, be required to remit to the Master Servicer for deposit
in the Certificate Account an amount equal to the sum of (i) all amounts
received by the Servicer with respect to the Contracts serviced by it as of the
Servicer Remittance Date, except (a) any monthly payment prepaid for a Due Date
subsequent to the month in which the Servicer Remittance Date occurs, (b) any
amounts received by such Servicer with respect to such Contracts that constitute
a late recovery with respect to an advance previously made by such Servicer with
respect to such Contracts, and (c) any Retained Yield payable to such Servicer
under the terms of such Warranty and Servicing Agreement; (ii) all partial
Principal Prepayments received in the calendar month prior to the month of the
Servicer Remittance Date or applied as of the Due Date in the month of the
Servicer Remittance Date; (iii) all Principal Prepayments in full received in
the calendar month prior to the month of the Servicer Remittance Date, in each
case together with a full month's interest thereon at the APR (net of the
related servicing compensation and any Retained Yield payable to such Servicer
under the terms of such Warranty and Servicing Agreement) whether or not
received from the Obligor; (iv) all Insurance Proceeds and Liquidation Proceeds
(net of Liquidation Expenses) received in the calendar month prior to the month
of the Servicer Remittance Date; and (v) with respect to each Contract for which
the monthly payment due on the immediately preceding Due Date was delinquent as
of the Servicer Remittance Date, an amount equal to such payment net of the
servicing compensation and any Retained
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Yield payable to such Servicer (a "Servicer Advance"). The Servicer may deduct
from each remittance, as provided above, an amount equal to the servicing fee to
which it is then entitled pursuant to the Servicing Agreement, to the extent not
previously paid to or retained by it. Any installments as to which the Servicer
has not made an advance will be subject to the Master Servicer's obligation to
advance set forth herein.
SECTION 3.10. Collection of Taxes Assessments and Similar Items; Escrow
---------------------------------------------------------
Accounts.
--------
In addition to the Certificate Account, the Master Servicer shall, and,
pursuant to the Warranty and Servicing Agreements, the Servicers will be
required to, establish and maintain one or more custodial accounts (each, an
"Escrow Account") and deposit and retain therein all collections from the
Obligors (or advances by Servicers or the Master Servicer) for the payment of
Taxes, assessments, hazard insurance premiums, Primary Credit Insurance Policy
premiums, if applicable, or comparable items for the account of the Obligors.
Escrow Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from the Escrow Accounts may be made
only to effect timely payment of Taxes, assessments, hazard insurance premiums,
Primary Credit Insurance Policy, or comparable items, to reimburse the Master
Servicer or Servicer out of related collections for any payments made pursuant
to Section 3.01 hereof (with respect to the Taxes and assessments), 3.13 hereof
(with respect to the Primary Insurance Policy) and 3.14 hereof (with respect to
hazard insurance), to refund to any Obligors any sums as may be determined to be
overages, to pay interest, if required, to Obligors on balances in the Escrow
Account or to clear and terminate the Escrow Account as the termination of this
Agreement in accordance with Section 9.01 hereof. As part of its servicing
duties, the Master Servicer shall, and the Servicers will, pursuant to the
Warranty and Servicing Agreements, be required to, pay to the Obligors interest
on funds in the Escrow Account, to the extent required by law.
The Master Servicer shall, with respect to each Nonsubserviced Contract and
with respect to each Contract serviced under a Warranty and Servicing Agreement,
to the extent the related Servicer does not do so, advance the payments referred
to in the preceding paragraph that are not timely paid by the Obligors;
provided, however, that the Master Servicer shall be required to so advance only
to the extent that such advances, in the good faith judgement of the Master
Servicer, will be recoverable by the Master Servicer out of Insurance Proceeds,
Liquidation Proceeds or otherwise; and provided, further, that such payments
shall be advanced when the Tax, premium or other cost for which such payment is
intended is due.
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SECTION 3.11. Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Contracts.
---------
[In order to permit Certificateholders to comply with Section 171 and 1276
of the Code, the Master Servicer shall, upon request of any Certificateholder,
furnish such Certificateholder with a statement setting forth the number and
principal balance of Contracts that were originated before July 18, 1984 and
before September 27, 1985.]
The Master Servicer shall provide the Depositor and the Trustee access to
all records and documentation regarding the Contracts and all accounts,
insurance policies and other matters relating to this Agreement, such access
being afforded without charge, but only upon reasonable request and during
normal business hours at the offices of the Master Servicer designated by it.
SECTION 3.12. Permitted Withdrawals from the Certificate Account.
--------------------------------------------------
The Master Servicer may, from time to time, make withdrawals from the
Certificate Account for the following purposes, and for such other purposes as
are set forth in the related Reference Agreement:
(i) to pay to itself as servicing compensation that portion of any payment
as to interest that equals the Servicing Fee with respect to such Contract for
the period with respect to which such interest payment was made, and, as
additional servicing compensation, earnings on the amounts in the Certificate
Account credited to the Certificate Account, and to pay any Retained Yield and
the Administrative Fee to the Depositor (for disbursement in accordance with
Section 3.19 hereof).
(ii) to reimburse itself for advances made pursuant to Sections 3.09, 3.10,
and Sections 4.01, 4.02 and 4.03 hereof, such right of reimbursement pursuant to
this subclause (ii) being limited to amounts received on particular Contracts
(including, for this purpose, Insurance Proceeds, Liquidation Proceeds, amounts
representing proceeds of other insurance policies, if any, covering the related
Manufactured Home, which represent (a) late recoveries of payments of principal
and/or interest respecting which any such advance was made in the case of
advances pursuant to Sections 3.09, 4.01, 4.02 and 4.03 hereof, and (b) late
recoveries of the payments for which such advances were made in the case of
advances pursuant to Section 3.10 hereof;
(iii) to reimburse itself for any Nonrecoverable Advances;
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(iv) to reimburse itself from Insurance Proceeds and Liquidation Proceeds
for amount expended by it pursuant to Section 3.16 hereof in good faith in
connection with the restoration of property damaged by an Uninsured Cause;
(v) to reimburse itself from Insurance Proceeds for Insured Expenses and
to pay any unpaid servicing compensation to itself, any Retained Yield and any
Administrative Fee to the Depositor from Insurance Proceeds, such payment of
servicing compensation, Retained Yield and Administrative Fee to be made in
accordance with Section 3.19 hereof and being limited to the amount, if any, by
which the aggregate of Liquidation Proceeds and Insurance Proceeds received in
connection with the liquidation of a defaulted Contract is, after the deduction
of Insured Expenses, servicing compensation payable to the Servicer of such
Contract, if any, and any amounts deducted pursuant to subclause (iv) above in
excess of the Principal Balance of such Contract, together with accrued and
unpaid interest thereon at the Pass-Through Rate;
(vi) to reimburse itself from Liquidation Proceeds for Liquidation
Expenses and, to the extent that Liquidation Proceeds after such reimbursement,
and any other reimbursement pursuant to subclause (iv) above are in excess of
the Principal Balance of the related Contract together with accrued and unpaid
interest thereon at the Pass-Through Rate, to pay out of such excess the amount
of any unpaid servicing compensation with respect to the related Contract to
itself and any Retained Yield and the Administrative Fee to the Depositor (for
disbursement in accordance with Section 3.19 hereof);
(vii) to pay to itself, a Servicer or the Depositor, as the case may be,
with respect to each Contract or property acquired in respect thereof that has
been purchased pursuant to Section 2.02, 2.04, 2.05, 3.15, or 9.01 hereof, all
amounts received thereon and not taken into account in determining the related
Principal Balance of such repurchased Contract;
(viii) to reimburse itself or the Depositor for expenses incurred by and
reimbursable to it or the Depositor pursuant to Section 6.03 hereof;
(ix) to make deposits into the Reserve Fund, as required by the
Reference Agreement;
(x) to make payments to the Certificateholders, or remittances to the
Trustee in the amounts, and in the manner, specified in the Reference Agreement;
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(xi) to pay to itself any interest earned on or investment income with
respect to funds in Certificate Account (all such interest or income to be
withdrawn monthly on such Distribution Date); and
(xii) to clear and terminate the Certificate Account upon termination of
this Agreement pursuant to Section 9.01 hereof.
The Master Servicer shall keep and maintain separate accounting, on a
Contract by Contract basis, for the purpose of justifying any withdrawal from
the Certificate Account pursuant to such subclauses (i), (ii), (iv), (v), and
(vi).
SECTION 3.13. Maintenance of the Pool Insurance Policy and Primary Credit
-----------------------------------------------------------
Insurance Policies; Collection Thereunder.
-----------------------------------------
If so specified in the Reference Agreement, the Master Servicer shall
exercise its best reasonable efforts to maintain the Pool Insurance Policy in
full force and effect throughout the terms of this Agreement, unless coverage
thereunder has been exhausted through payment of claims. The Master Servicer
shall pay the premiums for the Pool Insurance Policy on a timely basis. In the
event that the Pool Insurer shall cease to be a Qualified Insurer because it
shall not be qualified to transact a mortgage guaranty insurance business under
the laws of the state of its principal place of business or any other state that
has jurisdiction over the Pool Insurer in connection with the Pool Insurance
Policy or if the Pool Insurance Policy is cancelled or terminated for any reason
(other than the exhaustion of the total coverage), the Master Servicer shall
exercise its best reasonable efforts to obtain from another Qualified Insurer a
replacement policy comparable to the Pool Insurance Policy with a total coverage
that is equal to the then existing coverage of the Pool Insurance Policy;
provided, however, that if the cost of any such replacement policy shall be
greater than the cost of the Pool Insurance Policy, the amount of coverage of
such replacement policy shall, unless the Depositor consents to coverage at a
higher level, be reduced to a level such that the premium rate therefor shall
not exceed the premium rate on such Pool Insurance Policy. In the event the
Pool Insurer shall cease to be a Qualified Insurer, the Master Servicer agrees
to review, not less often than monthly, the financial condition of the Pool
Insurer with a view towards determining whether recoveries under the Pool
Insurance Policy are jeopardized for reasons related to the financial condition
of the Pool Insurer. If the Master Servicer determines that recoveries are so
jeopardized, it shall exercise its best reasonable efforts to obtain, from
another Qualified Insurer, a replacement pool insurance policy, subject to the
cost limitation set forth above. Prior to obtaining any replacement pool
insurance policy, the Master Servicer shall notify the Depositor of the
replacement pool insurance policy the Master
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Servicer intends to obtain and, if the Depositor so directs, obtain a
replacement pool insurance policy approved by the Depositor.
The Master Servicer shall not take, or permit any Servicer to take, any
action that would result in loss of coverage under any applicable Primary Credit
Insurance Policy of any loss which, but for the actions of the Master Servicer
or Servicer, would have been covered thereunder. The Master Servicer shall use
its best reasonable efforts to keep in full force and effect such Primary Credit
Insurance Policy applicable to a Nonsubserviced Contract, and shall use its best
reasonable efforts to cause each Servicer to keep in full force and effect, each
Primary Credit Insurance Policy applicable to a Contract being serviced by it,
until, in the case of a Primary Credit Insurance Policy, [(i) the principal
balance of the related Contract is reduced to [80%] or less of the Appraised
Value, in the case of a Contract having a Loan-to-Value Ratio at origination in
excess of [80%], and (ii) the principal balance of the related Contract is
reduced to [75%] or less of its Appraised Value. The Master Servicer agrees to
pay, with respect to each Nonsubserviced Contract, and otherwise, to the extent
the related Servicer does not do so, the premiums for each Primary Credit
Insurance Policy on a timely basis and shall use its best reasonable efforts to
cause itself or the Servicer to be named as loss payee. In the event that the
insurer under any Primary Credit Insurance Policy shall cease to be qualified to
transact a [manufactured housing] insurance business under the laws of the state
of its organization or any other state that has jurisdiction over such insurer
(or if such insurer's claims paying ability shall cease to be acceptable to the
Rating Agency) or such Primary Credit Insurance Policy is cancelled or
terminated for any reason, the Master Servicer shall exercise its best
reasonable efforts to obtain, or to cause the related Servicer to obtain, from
another Qualified Insurer, a replacement policy comparable to such Primary
Credit Insurance Policy with a total coverage that is equal to the then existing
coverage of such Primary Credit Insurance Policy. The Master Servicer shall not
cancel or refuse to renew any such Primary Credit Insurance Policy with respect
to a Nonsubserviced Contract, or consent to the cancellation or refusal to renew
any such Primary Credit Insurance Policy applicable to any other Contract, which
is in effect at the date of the initial issuance of the Certificates pursuant to
the Reference Agreement and is required to be kept in force hereunder unless the
replacement Primary Credit Insurance Policy for such cancelled or non-renewed
policy is maintained with an insurer whose claims-paying ability is acceptable
to the Rating Agency. In connection with any assumption and modification
agreement entered into by the Master Servicer or a Servicer pursuant to Section
3.15, the Master Servicer shall promptly notify the insurer under the related
Primary Credit Insurance Policy. If such Primary Credit Insurance Policy is
terminated as a result of such assumption, the Master Servicer
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shall obtain a replacement primary Credit Insurance Policy, as provided above.
In connection with its activities as administrator and servicer of the
Contracts, the Master Servicer agrees to present, on behalf of itself, the
Depositor, the Trustee and the Certificateholders, claims to the Pool Insurer
under the Pool Insurance Policy, to the insurer under any Primary Credit
Insurance Policies, to take such reasonable action as shall be necessary to
permit recovery under the Pool Insurance Policy or any Primary Credit Insurance
Policies respecting defaulted Contracts. Pursuant to Section 3.08 hereof, any
amounts collected by the Master Servicer under the Pool Insurance Policy or any
Primary Credit Insurance Policy shall be deposited in the Certificate Account,
subject to the withdrawal pursuant to Section 3.12 hereof. In those cases in
which a Contract is serviced by a Servicer, the Servicer, on behalf of itself,
the Master Servicer, the Depositor, the Trustee, and the Certificateholders,
will, pursuant to the related Warranty and Servicing Agreement, be required to
present claims to the insurer under the Primary Credit Insurance Policy and
deposit all collection thereunder in the related Service Account for deposit in
the Certificate Account.
SECTION 3.14. Maintenance of Hazard Insurance, the Special Hazard Insurance
-------------------------------------------------------------
Policy and Other Insurance.
--------------------------
The Master Servicer shall, with respect to Nonsubserviced Contracts and,
with respect to any other Contract, to the extent that the related Servicer does
not do so, cause to be maintained for each Contract, hazard insurance with
extended coverage in an amount that is at least equal to the maximum insurable
value of the Manufactured Home securing such Contract or its Principal Balance,
whichever is less. Such insurance shall also cover losses arising from direct
and sudden accidental loss to any transportable Manufactured Home caused by
collision when such Manufactured Home is being transported and losses arising
from alteration, conversion or concealment of any Manufactured Home. The Master
Servicer shall also, with respect to Nonsubserviced Contracts and, with respect
to any other Contract, to the extent that the related Servicer does not do so,
cause to be maintained on property acquired upon repossession or voluntary
surrender, hazard insurance with extended coverage in an amount that is at least
equal to the maximum insurable value of the Manufactured Homes that are a part
of such property and in compliance with the requirements of the Special Hazard
Insurance Policy, liability insurance and, to the extent described below, flood
insurance. Pursuant to Section 3.08 hereof, any amounts collected by the Master
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Manufactured Home or property thus acquired
or amounts released to the Obligor in accordance with the Master Servicer's
normal servicing procedures) shall be deposited in the
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Certificate Account, subject to withdrawal pursuant to Section 3.12 hereof. Any
cost incurred by the Certificateholders or the related Servicer in maintaining
any such insurance shall not, for the purpose of calculating monthly
distributions to the Master Servicer or remittances to the Trustee, be added to
the Principal Balance of the Contract, notwithstanding that the terms of the
Contract so permit. Such costs shall be recoverable by the Master Servicer out
the related Servicer or of late payments by the related Obligor or out of
Insurance Proceeds or Liquidation Proceeds to the extent permitted by the
applicable Warranty and Servicing Agreement and by Section 3.12 hereof. It is
understood and agreed that no earthquake or other additional insurance is to be
required of any Obligor or maintained on any Manufactured Home acquired in
respect of a Contract other than pursuant to such applicable laws and
regulations as shall at any time be in force an as shall require such additional
insurance. If the Manufactured Home is located at the time of origination of the
Contract in a federally designated special flood hazard area, the Master
Servicer shall cause flood insurance to be maintained with respect to a
Nonsubserviced Contract and, with respect to any other Contract, shall cause
such flood insurance to be maintained, in the event the related Servicer shall
fail to do so. Such flood insurance shall be in an amount equal to the lesser of
(i) the unpaid Principal Balance of the related Contract and (ii) the maximum
amount of such insurance available for the related Manufactured Home under the
national flood insurance program, if the area in which such Manufactured Home is
located is participating in such program.
In the event that the Master Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on all of the Contracts, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section 3.14, it being understood and agreed that such
policy may contain a deductible clause, in which case the Master Servicer shall,
in the event that there shall not have been maintained on the related
Manufactured Home a policy complying with the first sentence of this Section
3.14, and there shall have been a loss that would have been covered by such
policy, deposit in the Certificate Account the amount not otherwise payable
under the blanket policy because of such deductible clause. In connection with
its activities as administrator and servicer of the Contracts, the Master
Servicer agrees to present, on behalf of itself, the Depositor, the Trustee and
the Certificateholders, claims under any such blanket policy.
As long as the Pool Insurance Policy is in effect, the Master Servicer
covenants and agrees to exercise its best reasonable efforts to maintain the
Special Hazard Insurance Policy in full force and effect, unless coverage
thereunder has been exhausted through payment of claims, and to pay the premium
for the Special Hazard Insurance Policy on a timely basis. In the event that
the Special Hazard Insurance Policy shall be
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cancelled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer shall exercise its best reasonable efforts
to obtain from another insurer, the claims-paying ability of which shall be
acceptable to the Rating Agency, a replacement policy comparable to the Special
Hazard Insurance Policy with a total coverage that is equal to the then existing
coverage of the Special Hazard Insurance Policy; provided, however, that if the
cost of any replacement policy shall be greater than the cost of the Special
Hazard Insurance Policy, the amount of coverage of such replacement policy
shall, unless the Depositor consents to coverage at a higher level, be reduced
to a level such that the cost of such replacement policy shall not exceed the
cost of the Special Hazard Insurance Policy. Prior to obtaining any replacement
Special Hazard Insurance Policy, the Master Servicer shall notify the Depositor
of the replacement Special Hazard Insurance Policy the Master Servicer intends
to obtain and, if the Depositor so directs, obtain a replacement Special Hazard
Insurance Policy approved by the Depositor. In connection with its activities as
administrator and servicer of the Contracts, the Master Servicer agrees to
present, on behalf of itself, the Depositor, the Trustee and the
Certificateholders, claims to the Special Hazard Insurer under the Special
Hazard Insurance Policy and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under the Special Hazard Insurance Policy
the Master Servicer intends to obtain and, if the Depositor so directs, obtain a
replacement Special Hazard Insurance Policy approved by the Depositor. In
connection with its activities as administrator and servicer of the Contracts,
the Master Servicer agrees to present, on behalf of itself, the Depositor, the
Trustee and the Certificateholders, claims to the Special Hazard Insurer under
the Special Hazard Insurance Policy and, in this regard, to take such reasonable
action as shall be necessary to permit recovery under the Special Hazard
Insurance Policy defaulted Contracts. Pursuant to Section 3.08 hereof, any
amounts collected by the Master Servicer under the Special Hazard Insurance
Policy that are in the nature of Insurance Proceeds shall be deposited in the
Certificate Account, subject to withdrawal pursuant to Section 3.12 hereof. Any
other amounts collected by the Master Servicer under the Special Hazard
Insurance Policy shall be applied by it towards the restoration of the related
property to a condition requisite to the presentation of claims on the related
Contracts to the Pool Insurer under the Pool Insurance Policy.
SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.
---------------------------------------------------------
(a) When any property subject to a Contract has been conveyed by the
Obligor, the Master Servicer shall, with respect to Nonsubserviced Contracts
and, with respect to any other Contracts, to the extent the related Servicer
does not do so, to the extent that it has knowledge of such conveyance, enforce
any due-on-sale clause contained in any Contract, to the extent
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permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage
under any Required Insurance Policy. In the event that the Master Servicer or
the related Servicer is prohibited by law from enforcing any such due-on-sale
clause, or if coverage under any Required Insurance Policy would be adversely
effected, the Master Servicer is authorized subject to Section 3.15(b), to take
or enter into an assumption and modification agreement from or with the person
to whom such property has been or is about to be conveyed, pursuant to which
such person becomes liable under the Contract and, unless prohibited by
applicable state law, the Obligor remains liable thereon, provided that the
Contract shall continue to be covered (if so covered before the Master Servicer
enters such agreement) by the applicable Required Insurance Policies. The Master
Servicer, subject to Section 3.15(b), is also authorized with the prior approval
of the insurers under any Required Insurance Policies to enter into a
substitution of liability agreement with such person, pursuant to which the
original Obligor is released from liability and such person is substituted as
Obligor and becomes liable under the Contract. Notwithstanding the foregoing,
(i) the Master Servicer shall not be deemed to be in default under this Section
3.15 (a) by reason of any transfer or assumption which the Master Servicer is
restricted by law from preventing, for any reason whatsoever.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale clause
to the extent set forth in Section 3.15(a) hereof and to such other limitations
or conditions specified in the related Warranty and Servicing Agreement, if any,
in any case in which a Manufactured Home has been conveyed to a Person by an
Obligor, and such Person is to enter into an assumption agreement or
modification agreement or supplement to the Contract that requires the signature
of the Trustee, or if an instrument of release signed by the Trustee is required
releasing the Obligor from liability on the Contract, the Master Servicer shall
deliver or cause to be delivered to the Trustee for signature the assumption
agreement with the Person to whom the Manufactured Home is to be conveyed and
such modification agreement or supplement to the Contract or other instruments
as are reasonable or necessary to carry out the terms of the Contract or
otherwise to comply with any applicable laws regarding assumptions or the
transfer of the Manufactured Home to such Person. The Master Servicer shall
also deliver or cause to be delivered to the Trustee with the foregoing
documents a letter explaining the nature of such documents and the reason or
reasons why the Trustee's signature is required. With such letter, the Master
Servicer shall deliver to the Trustee a certificate of a Servicing Officer
certifying that: (i) a Servicing Officer has examined and approved such
documents as to form and substance, (ii) the Trustee's execution and delivery
thereof will not conflict with or violate any terms of this Agreement or cause
the unpaid balance and interest on the Contract to be uncollectible
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in whole or in party, (iii) any required consents of insurers under any Required
Insurance Policies have been obtained and (iv) subsequent to the closing of the
transaction involving the assumption or transfer (A) the Contract will continue
to be secured by a first mortgage lien pursuant to the terms of the Contract,
(B) such transaction will not adversely affect the coverage under any Required
Insurance Policies, (C) the Contract will fully amortize over the remaining term
thereof, (D) the interest rate payable under the Contract will not be altered
nor will the term of the Contract be increased and (E) if the seller/transferor
of the Manufactured Home is to be released from liability on the Contract, such
release will not (based on the Master Servicer's good faith determination)
adversely affect the collectibility of the Contract. Upon receipt of such
certificate, the Trustee shall execute any necessary instruments for such
assumption or substitution of liability. Upon the closing of the transactions
contemplated by such document, the Master Servicer shall cause the originals of
the assumption agreement, the release (if any), or the modification or
supplement to the Contract to be delivered to the Trustee (or the related
Custodian, as the duly appointed agent of the Trustee) and deposited with the
Contract File for such Contract. Any fee collected by the Master Servicer for
entering into an assumption or substitution of liability agreement will be
retained by the Master Servicer as additional servicing compensation.
In the event that the Master Servicer, in connection with any such
assumption or modification agreement or supplement to the Contract, is unable to
deliver the certificate of the Servicing Officer set forth above, the Master
Servicer shall purchase, or cause the related Servicer to purchase the related
Contract in the manner, and at the Purchase Price, set forth in Section 2.03
hereof.
SECTION 3.16. Realization Upon Defaulted Contracts.
------------------------------------
In the event that a Contract comes into and continues in default and no
satisfactory arrangement can be made for collection of delinquent payments
pursuant to Section 3.06 hereof, the Master Servicer shall take all steps
necessary for Repossession. In connection with such Repossession, the Master
Servicer shall, consistent with Section 3.13 hereof, follow such practices and
procedures as shall be normal and usual in its general servicing of installment
sales contacts and installment loan agreements for manufactured housing. The
foregoing is subject to the provision that the Master Servicer shall not be
required to expend its own funds in connection with any Repossession or like
procedure or towards the restoration of any property unless it shall determine
(i) that such restoration and/or Repossession will increase the proceeds of
liquidation of the Contract to Certificateholders after reimbursements to itself
for such expenses and (ii) that such expenses will be recoverable to it either
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Certificate Account pursuant to Section 3.12
hereof) or through Insurance Proceeds (respecting which it
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shall have similar priority). The Master Servicer shall be responsible for all
other costs and expenses incurred by it in any such proceedings; provided,
however, that it shall be entitled to reimbursement thereof from the proceeds of
liquidation of the related Manufactured Home, as contemplated in Section 3.12
hereof. Notwithstanding the foregoing, the Master Servicer shall not be entitled
to recover legal expenses incurred in connection with any Repossession or like
procedure where the Contract is reinstated and such Repossession or like
procedure where the Contract is reinstated and such repossession or like
procedure is terminated prior to completion, other than from sums received from
the Obligor with respect to such expenses. The decision of the Master Servicer
to repossess a defaulted Contract shall be subject to instructions from the
Trustee not to repossess upon such Contract, upon a determination by the Trustee
that the proceeds of such Repossession would not exceed the costs and expenses
of bringing such a proceeding.
SECTION 3.17. Trustee to Cooperate; Release of Contract Files.
-----------------------------------------------
Upon the payment in full of any Contract, or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Trustee 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 Certificate Account pursuant
to Section 3.08 hereof have been or will be so deposited) of a Servicing Officer
and shall request delivery to it of the Contract File. Upon receipt of such
certification and request, the Trustee shall promptly release (or shall cause
the related Custodian to release) the related Contract File to the Master
Servicer, and the Depositor and the Trustee shall execute and deliver to the
Master Servicer the request for reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Contract. No expenses
incurred in connection with any instrument of satisfaction shall be chargeable
to the Certificate Account or the related Servicing Account. From time to time
and as shall be appropriate for the servicing or Repossession of any Contract,
including for such purpose, collection under the Pool Insurance Policy, The
Special Hazard Insurance Policy, any Primary Credit Insurance Policy or any
policy of flood insurance, any fidelity bond or errors or omissions policy, or
for the purposes of effecting a partial release of any Manufactured Home from
the lien of the Contract or the making of any corrections to the Contract or any
of the other documents included in the Contract File, the Trustee shall, upon
request of the Master Servicer and the delivery to the Trustee of a receipt
signed by a Servicing Officer (the "Trust Receipt"), release (or cause the
related
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Custodian to release) the Contract File to the Master Servicer, or to the
related Servicer if the Master Servicer so requests. Subject to the further
limitations set forth below, the Master Servicer shall cause the Contract File
or documents so released to be returned to the Trustee, or the Custodian, as the
case may be, when the need therefor by the Master Servicer or Servicer no longer
exists, unless the Contract is liquidated and the proceeds thereof are deposited
in the Certificate Account, in which case the Trustee shall, upon the Trustee's
receipt of a certification (which certification shall include a statement to
such effect), deliver the Trust Receipt to the Master Servicer. If a Servicer or
the Master Servicer at any time seeks to initiate a Repossession in respect of
any Manufactured Home as authorized by the related Warranty and Servicing
Agreement, or this Agreement, as the case may be, the Master Servicer shall
deliver or cause to be delivered to the Depositor and the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such Repossession or any legal action
brought to obtain judgment against the Obligor on the Contract or to obtain a
deficiency judgement or to enforce any other remedies or rights provided by the
Contract or otherwise available at law or in equity. Together with such
documents or pleadings, the Master Servicer shall deliver to the Depositor and
the Trustee a certificate of a Servicing Officer requesting that such pleadings
or documents to be executed by the Trustee and a Servicing officer shall certify
as to the reason such documents or pleadings are required and that the execution
and delivery thereof by the Trustee will not invalidate the insurance coverage
under any Required Insurance Policy or invalidate or otherwise affect the lien
of the Contract except for the termination of such lien upon completion of
Repossession. Notwithstanding the foregoing, the Master Servicer shall cause
possession of any Contract File or of the documents therein that shall have been
released by the Trustee, or the Custodian, as the case may be, to be returned to
the Trustee or Custodian within 21 calendar days after possession thereof shall
have been released by the Trustee or Custodian unless (i) the Contract has been
liquidated and the Insurance Proceeds or Liquidation Proceeds relating to the
Contract have been deposited in the Certificate Account, and the Master Servicer
shall have delivered to the Trustee a certificate of a Servicing Officer
certifying to such effect or (ii) the Contract File or document shall have been
delivered to an attorney or to a public trustee or other public official as
required by law for purposes of initiating or pursuing legal action or other
proceedings for the Repossession of the Manufactured Home and the Master
Servicer shall have delivered to the Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which the
Contract File or the documents therein were delivered and the purpose or
purposes of such delivery.
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SECTION 3.18. Documents, Records and Funds in Possession of Master Servicer
-------------------------------------------------------------
to be Held for the Depositor and the Trustee.
--------------------------------------------
Notwithstanding any other provisions of this Agreement, the Master Servicer
shall transmit to the Trustee as required by this Agreement all documents and
instruments coming into the possession of the Master Servicer from time to time
and shall account fully to the Trustee for any funds received by the Master
Servicer or which otherwise are collected by the Master Servicer as Liquidation
proceeds or Insurance Proceeds in respect of any Contract. All Contract Files
and funds collected or held by, or under the control of, the Master Servicer in
respect of any contracts, whether from the collection of principal and interest
payments or from Liquidation Proceeds or Insurance Proceeds, including but not
limited to, any funds on deposit in the Certificate Account, shall be held by
the Master Servicer for and on behalf of the Depositor, the Trustee and the
Certificateholders and shall be and remain the sole and exclusive property of
the Trustee, subject to the applicable provisions of this Agreement. The Master
Servicer also agrees that it shall not create, incur or subject any Contract
File or any funds that are deposited in the Certificate Account or any Servicing
or Escrow Account, or any funds that otherwise become due or payable to the
Trustee, to any claim, lien, security interest, judgment, levy, writ of
attachment or other encumbrance, or assert by legal action or otherwise any
claim or right of set-off against any Contract File or any funds collected on,
or in connection with, a Contract, except, however, that the Master Servicer
shall be entitled to set-off against and, deduct from any such funds any amounts
that are properly due and payable to the Master Servicer under this Agreement.
SECTION 3.19. Servicing Compensation; Retained Yield.
--------------------------------------
As compensation for its activities hereunder,the Master Servicer shall be
entitled to withdraw from the Certificate Account the amounts specified in sub-
clauses (i), (v) and (vi) of Section 3.12 hereof and in the related Reference
Agreement as payable to it. The Depositor (or at its direction, its designee)
shall be entitled to receive the Retained Yield and the Adminis trative Fee
specified and in such subclauses and in the Reference Agreement.
Additional servicing compensation in the form of prepayment charges,
assumption fees, late payment charges or otherwise shall be retained by the
Master Servicer or the related Servicer, as the case may be, to the extent not
required to be deposited in the Certificate Account pursuant to Section 3.08
hereof or in the Servicing Account pursuant to the related Servicing Agreement.
The Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including payment of
premiums for Primary
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Credit Insurance Policies, to the extent such premiums are not required to be
paid by the related Obligors or the related Servicer, payment of any premiums
for hazard insurance, as required by Section 3.14 hereof, payment of the
premiums for the Pool Insurance Policy, as required by Section 3.13 hereof and
maintenance of the other forms of insurance coverage required by Section 3.14
hereof) and shall be entitled to reimbursement therefore except as specifically
provided in Section 3.12, 3.16 and 4.04 hereof.
SECTION 3.20. Reports to the Trustee and the Depositor; Certificate Account
-------------------------------------------------------------
Statements.
----------
On each Distribution Date, the Master Servicer shall forward to the
Trustee and the Depositor a statement, certified by a Servicing Officer, setting
forth the status of the Certificate Account as of the close of business on such
Distribution Date and showing, for the period covered by such statement, the
aggregate of deposits in or withdrawals from the Certificate Account for each
category of deposit specified in Section 3.08 hereof and each category of
withdrawal specified in Section 3.12 hereof.
SECTION 3.21. Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustee on
or before April 30 of each year, commencing on April 30 not less than nine
months after the Delivery Date specified in the Reference Agreement, an
Officers' Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
the performance of the Master Servicer under this Agreement has been made under
such officer's supervision, (ii) to the best of such officer's knowledge, based
on such review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof, (iii) a Servicing Officer has
conducted an examination of the activities of each Servicer during the
immediately preceding year and its performance under the related Warranty and
Servicing Agreement, and (iv) to the best of such Servicing Officer's knowledge,
based on such examination, each Servicer has performed and fulfilled its duties,
responsibilities and obligations under the related Warranty and Servicing
Agreement in all material respects throughout such year, or if there has been a
default in the performance or fulfillment of any, such duties, responsibilities
or obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof.
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SECTION 3.22. Annual Independent Public Accountant's Servicing Report.
-------------------------------------------------------
On or before April 30 of each year, commencing on April 30 not less
than nine months after the Delivery Date specified in the Reference Agreement,
the Master Servicer, at its expense, shall cause a firm of independent public
accountants that is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Depositor and the Trustee to the
effect that such firm has examined certain documents and records relating to the
servicing of the Contracts and that, on the basis of an examination conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers, with respect to the servicing of installment loan agreements and
installment sales contracts, such servicing has been conducted in compliance
with such agreements except for such significant exceptions or errors in records
that, in the opinion of such firm, the Uniform Single Audit Program for Mortgage
Bankers requires it to report. In rendering such statement, such firm may
rely, as to matters relating to direct servicing of Contracts by Servicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Audit Program for Mortgage Bankers, with respect to the
servicing of installment loan agreements and installment sales contracts
(rendered within one year of such statement) of independent public accountants
with respect to the related Servicer.
SECTION 3.23. Letters of Credit.
-----------------
If so specified in the Reference Agreement, the Depositor shall
obtain, in favor of the Trustee on behalf of the Certificateholders, such
irrevocable, stand-by Letters of Credit, with such terms and provisions, as are
set forth in the Related Reference Agreement. In the event that an L/C Bank
shall be required to make any payments under a Letter of Credit, the Master
Servicer shall be required to make any payments under a Letter of Credit, the
Master Servicer shall notify the Trustee, no later than the Determination Date
next preceding the related Distribution Date, such notice specifying the amount
of such required payment. Unless otherwise set forth in the related Reference
Agreement, not later than the close of business on the Business Day preceding
the Distribution Date, the Trustee shall draw upon the Letter of Credit in the
amount of such required payment to the extent of the amount available thereunder
and deposit in the Certificate Account, in immediately available funds, the
amount drawn under the Letter of Credit.
If at any time an L/C Bank makes a payment covering the amount of the
outstanding principal balance of a Liquidating Contract, the Trustee shall
release (or shall cause the related Custodian to release) the related Contract
File to such L/C Bank or its designee and shall execute and deliver such
instruments of
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transfer or assignment, in each case without recourse, as shall be necessary to
vest in such L/C Bank or its designee all right, title and interest in such
Contract, and the L/C Bank or its designee will thereupon acquire such
Liquidating Contract, together with related security interests and documents,
free of any further obligation to the Trustee or the Certificateholders of such
Series with respect thereto except as may be provided in such Letter of Credit
and in the related Reference Agreement.
The Depositor shall have the power to substitute for any Letter of
Credit another irrevocable standby letter of credit, provided that no such
substitution shall be made unless the substitute letter of credit contains
provisions that are in all material respects the same as, or more favorable to
the Certificateholders than, the original Letter of Credit and provided further
that such substitution will not result in a reduction of the then outstanding
rating of the Certificates, or the withdrawal of such rating, by the Rating
Agency rating such Certificates, as evidenced by written confirmation to that
effect by such Rating Agency.
Any replacement of a Letter of Credit pursuant to this Section 3.23
shall be accompanied by a written Opinion of Counsel to the issuer of such
substitute letter of credit, addressed to the Master Servicer and the Trustee,
to the effect that such substitute letter of credit constitutes a legal, valid
and binding obligation of the issuer thereof, enforceable in accordance with its
terms (subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium and other similar laws from time to time in effect
relating to creditors' rights generally) and concerning such other matters as
the Master Servicer and the Trustee shall reasonably request.
SECTION 3.24. Reserve Fund.
------------
If so specified in the Reference Agreement, the Master Servicer shall
establish and maintain with the Trustee, in the manner specified in the
Reference Agreement a separate investment account (the "Reserve Fund"). The
Reserve Fund will not be included in the Trust Fund. All amounts shall be
deposited into, withdrawn and distributed from the Reserve Fund in accordance
with the provisions of the Reference Agreement.
The Master Servicer, on behalf of the Holders of the Subordinated
Certificates, will cause a valid and perfected first priority security interest
under the Uniform Commercial Code, as in effect in the [State of __________]
from time to time to be maintained in the Reserve Fund, the amounts deposited
therein and the investments thereof (other than any income from the investment
of funds in the Reserve Fund) in order to secure the full and timely performance
with respect to the subordination of the Subordinated Certificates pursuant to
the provisions of the Reference Agreement.
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Amounts held in the Reserve Fund from time to time shall continue to
be the property of the Holders of the Subordinated Certificates until withdrawn
from the Reserve Fund in accordance with the provisions of the Reference
Agreement. Amounts held in the Reserve Fund shall be invested by the Trustee at
the direction of the Master Servicer for the benefit of the Holders of the
Subordinated Certificates in one or more Eligible Investments in the manner set
forth in the related Reference Agreement.
SECTION 3.25. Administration of Buydown Funds.
-------------------------------
With respect to each Buydown Contract included in the Trust Fund, the
related Servicer shall deposit Buydown Funds in an account that satisfies the
requirements for a Servicing Account (the "Buydown Account"). On each Servicer
Remittance Date, such Servicer will, as to each Buydown Contract serviced by it,
withdraw from the Buydown Account in an amount equal to an aggregate amount of
payments that, when added, as required by such buydown plan, to the amount
required to be paid by the related obligor on each Due Date in accordance with
such related obligor on each Due Date in accordance with such buydown plan, is
equal to the full monthly payment due on such Due Date and deposit that amount
in the Certificate Account, for distribution in accordance with the provisions
of Section 3.08 and Section 3.12.
If the Obligor on a Buydown Contract prepays such loan in its entirety
during the period (the "Buydown Period") when Buydown Funds are required to be
applied to such Buydown Contract, the Servicer shall withdraw from the Buydown
Account and remit to the Master Servicer for deposit in the Certificate Account
the Buydown Funds such Buydown Contract remaining in the Buydown Account, for
distribution in accordance with the provisions of Section 3.08 and Section 3.12.
If the Mortgagor on a Buydown Contract defaults on such loan during the Buydown
Period and the property securing such Buydown Contract is sold in the
liquidation thereof (either by the Master Servicer, the Pool Insurer or the
insurer under any related Primary Credit Insurance Policy), the Servicer shall
withdraw from the Buydown Account and remit to the Master Servicer or deposit in
the Certificate Account or, if so instructed by the Master Servicer pay to (i)
the Pool Insurer if the Manufactured Home has been transferred to the Pool
Insurer pursuant to the Pool Insurance Policy and 100% of the related claim
under the Pool Insurance Policy is paid or (ii) the insurer under any related
Primary Credit Insurance Policy if the Manufactured Home is transferred to such
insurer and such insurer pays all of the loss incurred in respect of such
default, the Buydown Funds for such Buydown Contract still held in the Buydown
Account. Any amount remitted pursuant to the preceding sentence will reduce the
amount owed on the Contract for purposes of calculating Liquidation Proceeds.]
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ARTICLE IV.
ADVANCES BY THE MASTER SERVICER; PERFORMANCE BOND
SECTION 4.01. Monthly Advance.
---------------
Subject to the conditions of this Article IV, the Master Servicer, as
required below, shall make a monthly Advance to the Certificate Account, in the
amount, if any, of the aggregate scheduled installments of principal and
interest, after adjustment of such interest payment to the Pass-Through Rate for
such Contract, on the Contracts that were due on the Due Date but which were not
received or advanced by the Servicers (including the Master Servicer, in its
capacity as Servicer of Nonsubserviced Contracts) and remitted to the
Certificate Account on or prior to the Servicer Remittance Date. Each Monthly
Advance shall be remitted to the Certificate Account no later than the close of
business on the Business Day immediately preceding the related Distribution Date
in immediately available funds. The Master Servicer shall be obligated to make
any such Monthly Advance only to the extent that such advance, in the good faith
judgement of the Master Servicer, is reimbursable from Insurance Proceeds,
Liquidation Proceeds payments under a Letter of Credit or under any Alternative
Credit Support, or otherwise. On the Determination Date immediately preceding
the related Distribution Date, the Master Servicer shall determine whether and
to what extent any Servicers have failed to make any advances of principal or
any interest in respect of scheduled installments of principal and interest that
were due on the Due Date and whether such deficiencies, if advanced by the
Master Servicer, would be reimbursable from Insurance Proceeds, Liquidation
Proceeds or otherwise. If the Master Servicer shall have determined that it is
not obligated to make the entire Monthly Advance because all of a lesser portion
of such Monthly Advance would not be reimbursable from Insurance Proceeds,
Liquidation Proceeds or otherwise, the Master Servicer shall promptly deliver to
the Trustee an Officer's Certificate setting forth the reasons for the Master
Servicer's determination.
In lieu of making all or a portion of such Monthly Advance, the Master
Servicer may cause to be made an appropriate entry in its records relating to
the Certificate Account that funds in such account being held for future
distribution or withdrawal have been used by the Master Servicer in discharge of
its obligation to make any such Monthly Advance. Any funds being held in the
Certificate Account for future distribution to the Certificateholders shall be
replaced by the Master Servicer by deposit, in the manner set forth above, in
the Certificate Account no later than the close of business on the Business Day
immediately preceding the related Distribution Date, to the extent that funds in
the Certificate Account on such Distribution Date are less than the amounts
required to be distributed to the Certificateholders on such Distribution Date.
The Master
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Servicer shall be entitled to be reimbursed from the Certificate Account for all
Monthly Advances made pursuant to this Section as provided in Section 3.12.
SECTION 4.02. Advances for Attorneys' Fees.
----------------------------
The Master Servicer shall, with respect to any Nonsubserviced Contract, and
otherwise, to the extent not made by the related Servicer, make advances from
time to time for attorneys' fees and court costs incurred, or which reasonably
can be expected to be incurred, for the Repossession of any Manufactured Home,
unless the Master Servicer has made a good faith determination that such
advances are not recoverable from Insurance Proceeds or Liquidation Proceeds
relating to the Contract, payments under the Letter of Credit or under any
Alternative Credit Support or otherwise. If the Master Servicer shall make a
good faith determination that such advances are not so reimbursable, the Master
Servicer shall promptly deliver to the Trustee an Officers' Certificate setting
forth the reasons for such determination. The Master Servicer shall be entitled
to reimbursement for any such advance as provided in Section 3.12 hereof.
SECTION 4.03. Advances for Amounts Collected by Servicer but Not Remitted.
-----------------------------------------------------------
In the event that any Servicer fails to remit to the Certificate Account on
the Servicer Remittance Date the full amount of the funds in the custody or
under the control of the Servicer that the Servicer is required to remit under
the terms of the related Warranty and Servicing Agreement, then the Master
Servicer, upon and subject to the terms of this Article IV, shall advance and
remit to the Certificate Account, no later than the close of business on the
Business Day immediately preceding the related Distribution Date,in the manner
specified in Section 4.01 hereof, an amount equal to the portion of the required
remittance that was not so remitted. The Master Servicer shall be obligated to
make such advance only the extent that such advance in the good faith judgement
of the Master Servicer is reimbursable from Insurance Proceeds, Liquidation
Proceeds, or otherwise. If the Master Servicer at any time makes a
determination that such advance is not or would not be so reimbursable, the
Master Servicer shall promptly deliver to the Trustee an Officer's Certificate
setting forth the reasons for such determination. The Master Servicer shall be
entitled to reimbursement for any such advance as provided in Section 3.12.
SECTION 4.04. Nonrecoverable Advances.
-----------------------
Any Monthly Advance or other advance previously made by the Master Servicer
under Sections 4.01, 4.02 and 4.03 of this Agreement that the Master Servicer
shall ultimately determine in its good faith judgment to be not recoverable from
Insurance
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Proceeds, Liquidation Proceeds, payments under the Letter of Credit or
under any Alternative Credit Support, or otherwise, shall be a Nonrecoverable
Advance. The determination by the Master Servicer that it has made a
Nonrecoverable Advance shall be evidenced by an Officers' Certificate of the
Master Servicer promptly delivered to the Trustee setting forth the reasons for
such determination. Following the Trustee's receipt of the Officers'
Certificate, the Master Servicer shall be entitled to reimbursement for such
Nonrecoverable Advance as provided in Section 3.12 hereof.
SECTION 4.05. Advances for Additional Interest in Connection with Principal
-------------------------------------------------------------
Payments.
--------
In the event that any Contract is the subject of a full or partial
Principal Prepayment and such full or partial Principal Prepayment does not
include interest on the Principal Balance through and including the last day of
the month during which such Principal Prepayment is made, the Master Servicer
shall, with respect to each Nonsubserviced Contract, and otherwise to the extent
that such interest shall not have been paid by the Servicer and deposited in the
Certificate Account on or before the Servicer Remittance Date next succeeding
the date of such full or partial Principal Prepayment, advance and deposit into
the Certificate Account, on or before the close of business on the Business Day
immediately preceding the related Distribution Date, an amount equal to such
additional interest, adjusted to the Pass-Through Rate. Such advance shall be
made regardless of whether the Contract requires the payment of such interest or
whether such amount is recoverable from Liquidation Proceeds, Insurance
Proceeds, payments under the Letter of Credit or under any Alternative Credit
Support, or otherwise or whether the Master Servicer shall have determined that
such advance, if made, would be Nonrecoverable Advance; and in case of such
advance, the Master Servicer shall not be entitled to any recovery or
reimbursement from the Depositor, the Trustee or the Certificateholders, but may
seek and obtain recovery from the Servicer that failed to make the advance,
through legal action or otherwise, to the extent provided in the related
Warranty and Servicing Agreement. Notwithstanding anything to the contrary
contained herein, the Master Servicer shall have no entitlement hereunder to any
retained yield payable to such Servicer with respect to any Contract serviced by
it hereunder.
SECTION 4.06. Performance Bond.
----------------
The performance of the obligations of the Master Servicer under this
Agreement are Guaranteed by the Performance Bond. In the event the
creditworthiness of the obligor under the Performance Bond is impaired such that
the Rating Agency advises the Depositor or the Trustee that the outstanding
rating of the Certificates would be lowered by the Rating Agency, the Master
Servicer shall secure as soon as practicable (and, in any event,
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within 30 days) a substitute guaranty or similar form of insurance coverage in
an amount equal to _____% of the outstanding Principal Balance of the Contracts
and issued by an entity the creditworthiness of which is determined by the
Rating Agency to be sufficient to maintain the outstanding rating of the
Certificates. Upon delivery of such substitute guaranty or similar form of
insurance coverage, all obligations under the Performance Bond shall be
discharged. Unless the Rating Agency confirms within such 30-day period that,
after giving effect to such substitution, it will not lower the outstanding
rating of the Certificates, the Master Servicer shall deposit cash with the
Trustee in a separate account (the "Guaranty Fund") in an amount equal to _____%
of the then outstanding Principal Balance of the Contracts. The amount so
deposited shall be held by the Trustee as security for the Certificates and
shall be invested by the Trustee in Eligible Investments. Upon such deposit, any
obligation under the Performance Bond or any substitute guaranty or similar form
of insurance coverage shall be discharged. In the event that the Master Servicer
fails to make any Monthly Advance required by the terms of this Agreement, the
Trustee shall withdraw the amount of such Monthly Advance from the Guaranty Fund
and deposit the amount so withdrawn in the Certificate Account. Any such
withdrawal shall not result in any waiver of the Trustee's rights hereunder with
respect to any Event of Default resulting from the Master Servicer's failure to
make such required payment. Earnings from the investment of any amounts
deposited with the Trustee pursuant to this Section 4.06 shall be for the
account of the Master Servicer. The amount of any losses incurred in respect of
any such investment shall be deposited by the Master Servicer into the Guaranty
Fund immediately, as realized.
The obligations of the Master Servicer under Section 2.03(b) hereof
are further guaranteed by the Performance Bond. In the event that the
outstanding credit rating of the commercial paper obligations of the obligor
under the Performance Bond is reduced by the Rating Agency with the result that
the outstanding rating of the Certificates would be reduced by the Rating
Agency, the Master Servicer shall secure as soon as practicable a substitute
guaranty or similar form of insurance coverage, which shall be (a) in an amount
equal to the amount of the Master Servicer's outstanding obligations under
Section 2.03(b) hereof and (b) issued by an entity that has an outstanding
commercial paper rating sufficient to maintain the outstanding rating of the
Certificates. If a substitute guaranty or other form of insurance coverage has
not been issued to the Trustee within thirty days after the Rating Agency
notifies the Depositor or the Trustee of its intent to lower the rating of the
Certificates, the Master Servicer shall deposit and maintain with the Trustee
cash in an amount equal to the amount of its outstanding obligations under
Section 2.03(b) hereof. The amount so deposited shall be held by the Trustee in
a separate account as security for the Certificates (the "Repurchase Fund") and
shall
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be invested by the Trustee at the direction of the Master Servicer in Eligible
Investments. In the event that the Master Servicer fails to make any payment
required to be made pursuant to Section 2.03(b), the Trustee shall withdraw the
amount of such required payment from the Repurchase Fund and deposit the amount
so withdrawn in the Certificate Account. Any such withdrawal shall not result in
a waiver of the Trustee's rights with respect to any Event of Default resulting
from the Master Servicer's failure to make any such required payment. The Master
Servicer may withdraw any amounts on deposit with the Trustee in excess of its
outstanding obligations under Section 2.03(b) hereof and shall deposit cash in
the amount necessary to satisfy any deficiency in the Repurchase Fund upon
receipt of the Trustee's demand therefor. Earnings from the investment of any
amounts so deposited with the Trustee shall be for the account of the Master
Servicer. The amount of any losses incurred in respect of any such investment
shall be deposited by the Master Servicer into the Repurchase Fund immediately,
as realized.
ARTICLE V.
THE CERTIFICATES
SECTION 5.01. The Certificates.
----------------
The Certificates shall be substantially in the forms set forth in the
Reference Agreement. A Single Certificate shall evidence the interest in the
Trust Fund specified in the Reference Agreement. The Certificates may be issued
in one or more Classes and such Classes may be divided into one or more
Subclasses as provided in the Reference Agreement. One or more of such Classes
or Subclasses may be subordinated to any other one or more of such Classes or
Subclasses as provided in the Reference Agreement. One or more or such Classes
or Subclasses may receive unequal amounts of the principal and/or interest
payments made from the Contracts as specified in the Reference Agreement. The
timing of payments to any one or more of such Classes or Subclasses may be made
on a sequential or pro rata basis as provided in the Reference Agreement. The
Certificates shall be executed by manual or facsimile signature on behalf of the
Depositor by its President or one of its Executive Vice Presidents, Senior Vice
Presidents or First Vice Presidents under its seal imprinted thereon and
attested by the manual or facsimile signature of its Secretary or one of its
Assistant Secretaries. Certificates bearing the manual or facsimile signatures
of individuals who were, at the time when such signatures were affixed,
authorized to sign on behalf of the Depositor shall bind the Depositor,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificate. No Certificate shall be
entitled to any benefit under this
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Agreement, or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form set forth in Section
8.10 executed by the Trustee by manual signature, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 5.02. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
The Trustee shall maintain, or cause to be maintained in accordance with
the provisions of Section 5.06 hereof, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Certificate Registrar
named in the Reference Agreement shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate, the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in like aggregate interest in the
Trust Fund and of the same Class.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same aggregate interest in the Trust Fund and of the
same Class, upon surrender of the Certificates to be exchanged at any such
office or agency. Whenever any Certificates are so surrendered for exchange, the
Depositor shall execute and the Trustee shall authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and subsequently destroyed by the Trustee or, at its
direction, by the Certificate Registrar.
Unless otherwise specified in the Reference Agreement, the Certificate
Registrar will provide the Master Servicer not later than the 15th Business Day
next preceding the Distribution Date the names and addresses of the
Certificateholders as of the Record Date and the interest of each of them in the
Trust Fund.
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SECTION 5.03. Mutilated Destroyed, Lost or Stolen Certificates.
------------------------------------------------
If (a) 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 (b) there is delivered to
the Master Servicer, the Certificate Registrar and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Certificate Registrar or the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
interest in the Trust Fund. In connection with the issuance of any new
Certificate under this Section 5.03, the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 5.03 shall constitute
complete and indefeasible evidence of ownership in the Trust Fund, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of transfer,
the Master Servicer, the Trustee, the Certificate Registrar and any agent of the
Master Servicer, the Trustee or the Certificate Registrar may treat the person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions as provided in the Reference Agreement
and for all other purposes whatsoever, and neither the Master Servicer, the
Trustee, the Certificate Registrar nor any agent of the Master Servicer, the
Trustee or the Certificate Registrar shall be affected by any notice to the
contrary.
SECTION 5.05. Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
If the Trustee is not the Certificate Registrar and at any time requests
the Certificate Registrar in writing to provide a list of the names and
addresses of Certificateholders, the Certificate Registrar will furnish to the
Trustee, within 15 days after receipt of a request, such list as of the most
recent Record Date, in such form as the Trustee may reasonably require. If three
or more Certificateholders (a) request such information in writing from the
Trustee, (b) state that such Certificateholders desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and (c) provide a copy of the
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communication which such Certificateholders propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such request,
afford such Certificateholders access during normal business hours to the most
recent list held by the Trustee, if any. If such list is as of a date more than
90 days prior to the date of receipt of such Certificateholders' request, the
Trustee shall promptly request from the Certificate Registrar a current list and
shall afford such Certificateholders access to such list promptly upon its
receipt by the Trustee. Every Certificateholder, by receiving and holding a
Certificate, agrees that neither the Certificate Registrar nor the Trustee shall
be held accountable by reason of the disclosure of any such information as to
the list of the Certificateholders hereunder, regardless of the source from
which such information was derived.
SECTION 5.06. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at their expense an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustee in respect of the Certificates and this Agreement may be
served. The Trustee initially appoints the Certificate Registrar designated in
the Reference Agreement for transfer and exchange of Certificates and designates
the office described in the Reference Agreement as its office for purposes of
receipt of such notices and demands. The Trustee will give prompt written
notice to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
ARTICLE VI.
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the Depositor and the Master Servicer.
---------------------------------------------------------------
The Depositor and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.
SECTION 6.02. Merger or Consolidation of the Depositor and the Master
-------------------------------------------------------
Servicer.
--------
The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the State of
Delaware, and will each obtain and preserve its qualification to do business as
a foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability
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of this Agreement, or any of the Contracts and to perform its respective duties
under this Agreement.
Any person into which the Depositor or the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger or consolidation to
which the Depositor or the Master Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to sell manufactured housing installment
sales contracts or installment loan agreements to, and to service manufactured
housing installment sales contracts or installment loan agreements on behalf of
FNMA.
Notwithstanding anything else in this Section 6.02 or in Section 6.04
hereof to the contrary, the Master Servicer may assign its rights and delegate
its duties and obligations under this Agreement in connection with a sale or
transfer of a substantial portion of its manufactured housing installment sales
contract or installment loan agreement portfolio; provided that such purchaser
or transferee accepting such assignment or delegation shall be a Person
qualified to service manufactured housing installment sales contracts or
installment loan agreements on behalf of FNMA, is reasonably satisfactory to the
Trustee and the Depositor, is willing to service the Contracts and executes and
delivers to the Depositor and the Trustee an agreement, in form and substance
reasonably satisfactory to the Depositor and 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 Master Servicer
under this Agreement and a guaranty of the performance of such Person's
obligations under this Agreement, and provided further that the Rating Agency's
rating of the Certificates in effect immediately prior to such assignment, sale
or transfer will not be impaired as a result of such assignment, sale or
transfer, as evidenced by a letter from the Rating Agency to such effect. In
the case of any such assignment and delegation, the Master Servicer shall be
released from its obligations under this Agreement, except that the Master
Servicer shall remain liable for all liabilities and obligations incurred by it
as Master Servicer hereunder prior to the satisfaction of the conditions to such
assignment and delegation set forth in the preceding sentence.
SECTION 6.03. Limitation on Liability of the Depositor, the Master Servicer
-------------------------------------------------------------
and Others.
----------
Neither the Depositor, the Master Servicer nor any of the directors,
officers, employees or agents of the Depositor or
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the Master Servicer shall be under any liability to 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, the Master Servicer or any such
person against any breach of representations or warranties made by it herein or
protect the Depositor, the Master Servicer or any such person from any liability
which would otherwise be imposed by reasons of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor, the Master Servicer and any
director, officer, employee or agent of the Depositor or the Master Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer shall be indemnified by the Trust Fund and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense related to any specific Contract or Contracts (except
as any such loss, liability or expense shall be otherwise reimbursable pursuant
to this Agreement) and any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Depositor nor the Master Servicer shall be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to their respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that either the
Depositor or the Master Servicer may in its discretion undertake any such action
that it may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and the interests of the Trustee and 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 and the Master Servicer shall
be entitled to be reimbursed therefor out of the Certificate Account as provided
by Section 3.12 hereof.
SECTION 6.04. Master Servicer Not to Resign.
-----------------------------
The Master Servicer shall not resign from the obligations and duties
imposed upon it hereunder except upon determination that such obligations and
duties hereunder are no longer permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No
such resignation by the Master Servicer shall become effective until the Trustee
or a successor servicer shall
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have assumed the Master Servicer's responsibilities and obligations in
accordance with Section 7.02 hereof.
SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall, for so long as it acts as servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as servicer
hereunder, and (b) a fidelity bond in respect of its officer, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of FNMA for persons performing servicing for
mortgage loans purchased by FNMA. In the event that any such policy or bond
ceases to be in effect, the Master Servicer shall obtain a comparable
replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.
ARTICLE VII.
DEFAULT
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the following
events (whatever reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) any failure by the Master Servicer to remit to the
Certificateholders or to the Trustee any payment (other than a payment required
to be made under Article IV hereof) required to be made under the terms of this
Agreement, which failure shall continue unremedied for a period of five days
after the date upon which written notice of such failure shall have been given
to the Master Servicer by the Trustee or the Depositor or to the Master Servicer
and the Trustee by the Holders of Certificates not less than 25% of the Voting
Rights evidenced by the Certificates; or
(ii) any failure by the Master Servicer to observe or perform in any
material respect any other of the covenants or agreements on the part of the
Master Servicer in this Agreement contained and such failure shall continue
unremedied for a period of 60 days (except that such number of days shall be 15
in the case of a failure to pay the premium for any Required Insurance Policy)
after the date on which written notice of such failure shall have been given to
the Master Servicer by the Trustee or the Depositor, or to the Master Servicer
and the Trustee by the Holders of
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Certificates evidencing not less than 25% of the Voting Rights evidenced by the
Certificates; or
(iii) if a representation or warranty set forth in Section 2.03(a)
hereof shall prove to be incorrect as of the time made in any respect that
materially and adversely affects the interests of the Certificateholders, and
the circumstances or condition in respect of which such representation or
warranty was incorrect shall not have been eliminated or cured within 30 days
after the date on which written notice thereof shall have been given to the
Master Servicer by the Trustee or the Depositor; or
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master Servicer
and such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or
(v) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Master Servicer or of or relating to all or substantially all of the
property of the Master Servicer; or
(vi) the Master Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of, or
commence a voluntary case under, any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
(vii) any Rating Agency shall lower, or threaten to lower, the
outstanding rating of the Certificates because the existing or prospective
financial condition or manufactured housing installment sales contracts or
installment loan agreement servicing capability of the Master Servicer is
insufficient to maintain such outstanding rating.
If an Event of Default shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, either the
Trustee, the Holders of Certificates evidencing not less than twenty-five
percent 25% of the Voting Rights evidenced by the Certificates, or the
Depositor, with the prior written approval of the Trustee, by notice in writing
to the Master Servicer, may terminate all of
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the rights and obligations of the Master Servicer under this Agreement and in
and to the Contracts and the proceeds thereof. On or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer hereunder, whether with respect to the Contracts or otherwise, shall
pass to and be vested in the Trustee or, if the Depositor so notifies the
Trustee and the Master Servicer, to the Depositor or its designee, pursuant to
and under this Section; and, without limitation, the Trustee, the Depositor and
any such designee of the Depositor is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Contracts and related documents, or otherwise. Unless expressly provided in
such written notice, no such termination shall affect any obligation of the
Master Servicer pursuant to Section 2.03 to pay damages as a result of a Default
under this Article VII, to make payment under any Credit Support, or to pay
amounts owed pursuant to Article VIII. The Master Servicer agrees to cooperate
with the Trustee, the Depositor and any such designee of the Depositor in
effecting the termination of the Master Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Trustee or the
Depositor or its designee, as the case may be, for administration by it of all
cash amounts which shall at the time be credited to the Certificate Account or
thereafter be received with respect to the Contracts.
SECTION 7.02. Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall be the successor
in all respects to the Master Servicer in its capacity as master servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof (except that if
the Trustee is acting as successor to the Master Servicer and is prohibited by
law from obligating itself to make advances regarding delinquent Contracts, then
the Trustee shall not be obligated to make advances pursuant to Section 3.01 and
Article IV hereof). As compensation therefor, the Trustee shall be entitled to
all funds relating to the Contracts that the Master Servicer would have been
entitled to charge to the Certificate Account if the Master Servicer had
continued to act hereunder. Notwithstanding the foregoing, if the Trustee has
become the successor to the Master Servicer in accordance with Section 7.01
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it is
unable to so act (exclusive of the obligations with respect to advances set
forth in Article IV hereof), appoint, or petition a court of
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competent jurisdiction to appoint, any established housing and home finance
servicing institution having a net worth of not less than that required by the
Rating Agency as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from so
acting, shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Master Servicer hereunder. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
Any successor to the Master Servicer as servicer shall during the term
of its service as servicer maintain in force the policy or policies that the
Master Servicer is required to maintain pursuant to Section 6.05.
SECTION 7.03. Notification to Certificateholders.
----------------------------------
(a) Upon any termination or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
ARTICLE VIII.
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the conduct of
such investor's own affairs.
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The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that 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 personally liable except for the
performance of such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this Agreement
against the Trustee and, in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders holding Certificates
aggregating not less than 25% of the interest in the Trust Fund evidenced by
each Class of 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.
SECTION 8.02. Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 8.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or
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document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in accordance
with such Opinion of Counsel;
(iii) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(iv) prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default that may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by Holders of Certificates aggregating not less
than 25% of the interest in the Trust Fund evidenced by each Class of
Certificates; and
(v) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys.
SECTION 8.03. Trustee Not Liable for Contracts.
--------------------------------
The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Agreement or of any Contract or related
document. The Trustee shall not be accountable for the use or application by
the Depositor or the Master Servicer of any funds paid to the Depositor or the
Master Servicer in respect of the Contracts or deposited in or withdrawn from
the Certificate Account by the Depositor or the Master Servicer.
SECTION 8.04. Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 8.05. Master Servicer to Pay Trustee's Fees and Expenses.
--------------------------------------------------
The Master Servicer covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to,
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reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee, and
the Master Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, bad faith or willful misconduct.
SECTION 8.06. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of such state or the United States of America,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal or state authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 8.06 the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07 hereof.
SECTION 8.07. Resignation and Removal of the Trustee.
--------------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by (1) giving written notice of resignation to the Depositor and
by mailing notice of resignation by first class mail, postage prepaid, to the
Certificateholders at their addresses appearing on the Certificate Register, the
Certificate Registrar (if other than the Trustee) and any coregistrar, not less
than 60 days before the date specified in such notice when, subject to Section
8.08, such resignation is to take effect, and (2) appointing a successor trustee
in accordance with Section 8.08 and meeting the qualifications set forth in
Section 8.06.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or
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any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor may remove the Trustee and appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor trustee.
The trustee may also be removed at any time by the Holders of Certificates
evidencing not less than 50% of the Voting Rights evidenced by the Certificates.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08. Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee an instrument accepting such appointment hereunder and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The Depositor, the Master Servicer 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 hereof.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Master Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Master Servicer fails to mail such
notice within 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
(Master Servicer).
SECTION 8.09. Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to
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the 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 hereof without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 8.10. Appointment of Authenticating Agent.
-----------------------------------
At any time when any of the Certificates remain outstanding, the
Trustee may appoint an Authenticating Agent or Agents which shall be authorized
to act on behalf of the Trustee to authenticate Certificates, and Certificates
so authenticated shall be entitled to the benefits of this Agreement and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Agreement to the authentication
and delivery of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Depositor and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $15,000,000, authorized under such laws to do trust
business and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 8.10, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section 8.10, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section 8.10.
Any corporation into which an 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 such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 8.10, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
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An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Depositor. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Depositor. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.10, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Depositor and shall mail
written notice of such appointment by first-class mail postage prepaid to all
Certificateholders as their names and addresses appear in the Certificate
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 8.10.
Any reasonable compensation paid to an Authenticating Agent for its
services under this Section 8.10 shall be a reimbursable expense pursuant to
Section 8.05 if paid by the Trustee.
If an appointment is made pursuant to this Section 8.10, the
Certificates may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate certificate of authentication in the following
form:
"This is one of the Certificates referred to in the within-mentioned
Agreement.
___________________________________
As Trustee
By: ___________________________________
Authenticating Agent
By: ___________________________________
Authorized Officer
SECTION 8.11. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Contract may at the time be
located, the Master Servicer and the Trustee acting jointly shall have the power
and
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shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 8.11, such powers,
duties, obligations, rights and trusts as the Master servicer and the Trustee
may consider necessary or desirable. If the Master Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
to do so, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Trust Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate trustee
or co-trustee, but solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or co-trustee.
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
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this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.
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 8.12. Tax Returns.
-----------
The Trustee, upon request, will furnish the Master Servicer with all
such information as may be reasonably required in connection with the
preparation by the Master Servicer of all tax returns of the Trust Fund, and the
Trustee shall, upon request, execute such returns.
SECTION 8.13. Appointment of Custodians.
-------------------------
The Trustee may, with the consent of the Depositor and the Master
Servicer, appoint one or more custodians to hold all or a portion of the
Contract Files as agent for the Trustee, by entering into a Custodial Agreement.
Subject to Article VIII, the Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders. Each Custodian shall be a
depository institution subject to supervision by federal or state authority,
shall have combined capital and surplus of at least $10,000,000 and shall be
qualified to do business in the jurisdiction in which it holds any Contract
File. Each Custodial Agreement may be amended only as provided in Section 10.01
or as provided in the Reference Agreement.
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ARTICLE IX.
TERMINATION
SECTION 9.01. Termination upon Repurchase of Contracts.
----------------------------------------
The obligations and responsibilities of the Depositor and the Trustee
created hereby and the Trust fund created hereby shall terminate upon the
earlier of (a) the repurchase by the Depositor (or by such other party specified
in the related Reference Agreement) of all Contracts and all property acquired
in respect of any Contract remaining in the Trust Fund at a price equal to the
price specified in the Reference Agreement, and unreimbursed Monthly Advances or
(b) the later of (i) the maturity or other liquidation (or any advance with
respect thereto) of the last Contract remaining in the Trust Fund and the
disposition of all property acquired upon Repossession and (ii) the distribution
to Certificateholders of all amounts in the Certificate Account required to be
distributed to them pursuant to this Agreement; provided, however, that in no
-------- -------
event shall the trust created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Mr. Joseph P. Kennedy,
former Ambassador of the United States to Great Britain, living on the date of
execution of this Agreement. The right of the Depositor to repurchase all
Contracts pursuant to clause (a) above shall be conditioned upon the unpaid
Principal Balances of such Contracts, at the time of any such repurchase,
aggregating less than an amount equal to the percentage of the aggregate unpaid
Principal Balance of the Contracts constituting the Trust Fund on the Cut-off
Date set forth in the Reference Agreement.
SECTION 9.02. Final Distribution on the Certificates.
--------------------------------------
Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates for payment of the final
distribution and cancellation, shall be given promptly by the Master Servicer by
letter to Certificateholders mailed not earlier than the date specified in the
Reference Agreement. Any such notice shall specify (a) the Distribution Date
upon which final distribution of the Certificates will be made upon presentation
and surrender of Certificates at the office therein designated, (b) the amount
of such final distribution and (c) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. If applicable, the Master Servicer will give such notice to the
Certificate Registrar and the Custodian at the time such notice is given to
Certificateholders. In the event such notice is given, the Master Servicer
shall deposit in the Certificate Account on the applicable Distribution Date an
amount equal to the final distribution in respect of the Certificates. Upon
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certification to the Trustee by a Servicing Officer following such final
deposit, the Trustee shall promptly release or shall cause the applicable
Custodian to release to the Master Servicer in accordance with the reason for
the final distribution, the Contract Files for the Contracts.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Master Servicer shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice all the Certificates
shall not have been surrendered for cancellation, the Master Servicer may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
---------
This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein, or to make such other provisions with respect to matters or
questions arising under this Agreement as shall not be inconsistent with any
other provisions herein; provided that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder. This Agreement may also be amended with the consent of
Certificateholders in the manner set forth in the Reference Agreement.
SECTION 10.02. Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for records in all the counties or other comparable jurisdictions in
which any or all of the Manufactured Homes are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at its expense or direction by the Trustee, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of Certificateholders.
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For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 10.03. Governing Law.
-------------
This Agreement shall be construed in accordance with and governed by
the substantive laws of the [State of __________] applicable to agreements made
and to be performed in the (State of ____________) and the obligations, rights
and remedies of the parties hereto and the Certificateholders shall be
determined in accordance with such laws.
[SECTION 10.04. Intention of Parties.
--------------------
The execution and delivery of this Agreement shall constitute an
acknowledgment by the Depositor and the Trustee on behalf of the
Certificateholders that they intend hereby to establish (for federal income tax
purposes) a trust rather than an association taxable as a corporation. The
powers granted an obligations undertaken in this Agreement shall be construed so
as to further such intent.]
SECTION 10.05. Notices.
-------
All demands and notices hereunder shall be given in writing and shall
be deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, to (a) in the case of the Depositor, Asset
Backed Securities Corporation., __________________________, Attention:
____________, (b) in the case of the Master Servicer, [_____________________]
Attention: [________________] or such other address as may be hereafter
furnished to the Depositor and the Trustee by the Master Servicer in writing,
(c) in the case of the Trustee, [_____________________] Attention: ____________
[ ], or such other address as may hereafter be furnished to the Depositor and
the Master Servicer in writing by the Trustee.
SECTION 10.06. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
-83-
<PAGE>
SECTION 10.07. Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02 and 6.04, this Agreement may not be assigned by the
Master Servicer without the prior written consent of the Trustee and the
Depositor.
SECTION 10.08. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement of the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein or in the Reference Agreement 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 Certificateholder from time to
time as partners or members of an association; nor shall any Certificateholder
be under any liability to any third party by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein before
provided, and unless the Holders of Certificates evidencing not less than 25% of
the Voting Rights evidenced by the Certificates shall also 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 being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
-84-
<PAGE>
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 10.08, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 10.09. Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit any representative of the Depositor or the Trustee during the Master
Servicer's normal business hours, to examine all the books of account, records,
reports and other papers of the Master Servicer relating to the Contracts, to
make copies and extracts therefrom, to cause such books to be audited by
independent certified public accountants selected by the Depositor or the
Trustee and to discuss its affairs, finances and accounts relating the Contracts
with its officers, employees and independent public accountants (and by this
provision the Master Servicer hereby authorizes said accountants to discuss with
such representative such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 10.09
shall be borne by the Depositor or the Trustee, provided that if an audit is
made during the existence of an Event of Default, the expense incident to such
audit shall be borne by the Master Servicer.
SECTION 10.10. Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is the intention of the Trustee that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.
-85-
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
ASSET BACKED SECURITIES
CORPORATION, as Depositor
By ______________________________
Title
[Seal]
Attest:____________________
Secretary
[NAME OF MASTER SERVICER],
as Master Servicer
By ______________________________
Title
[Seal]
Attest:____________________
Assistant Secretary
[NAME OF TRUSTEE], as Trustee
By ______________________________
Title
[Seal]
Attest:____________________
Assistant Secretary
-86-
<PAGE>
State of New York )
) ss.:
County of New York )
On this ____the day of ________, 199_ before me, a notary public in and for said
State, appeared _________________, known to me to be an ________________ of
Asset Backed Securities Corporation, one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
______________________________
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On this ____the day of ________, 199_ before me, a notary public in and for said
State, appeared _________________, known to me to be an
of State [ ], the [ ] corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
______________________________
Notary Public
[Notarial Seal]
-87-
<PAGE>
State of New York )
) ss.:
County of New York )
On this ____the day of ________, 199_ before me, a notary public in and for said
State, personally appeared _________________, known to me to be an
of [_______________], one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
______________________________
Notary Public
[Notarial Seal]
-88-
<PAGE>
EXHIBIT 4.2.4
ASSET BACKED SECURITIES CORPORATION,
DEPOSITOR
[Name of Master Servicer],
MASTER SERVICER
and
[Name of Trustee],
TRUSTEE
STANDARD TERMS AND PROVISIONS
OF
POOLING AND SERVICING AGREEMENT
Dated as of , 199_
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATES
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Administrative Fee.............................. 1
Agreement....................................... 1
Alternative Credit Support...................... 1
Appraised Value................................. 1
Authenticating Agent............................ 1
Business Day.................................... 2
Buydown Funds................................... 2
Buydown Mortgage Loan........................... 2
Certificate..................................... 2
Certificate Account............................. 2
Certificate Register and Certificate Registrar.. 2
Certificateholder or Holder..................... 2
Class........................................... 3
Code............................................ 3
Corporate Trust Office.......................... 3
Credit Support.................................. 3
Custodial Account............................... 3
Custodial Agreement............................. 3
Custodian....................................... 3
Cut-off Date.................................... 3
Deleted Mortgage Loan........................... 3
Delivery Date................................... 3
Depositor....................................... 4
Determination Date.............................. 4
Distribution Date............................... 4
Due Date........................................ 4
Eligible Account................................ 4
Eligible Investments............................ 4
Event of Default................................ 5
FDIC............................................ 5
FHA............................................. 5
FHA Certificate of Mortgage Insurance........... 5
FHA Loan........................................ 6
FHA Regulations................................. 6
FHLMC........................................... 6
FNMA............................................ 6
FSLIC........................................... 6
Insurance Policy................................ 6
Insurance Proceeds.............................. 6
Insured Expenses................................ 6
L/C Bank........................................ 7
Letter of Credit................................ 7
Liquidating Loan................................ 7
Liquidation Expenses............................ 7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Liquidation Proceeds............................ 8
Loan-to-Value Ratio............................. 8
Master Servicer................................. 8
Monthly Advance................................. 8
Mortgage........................................ 8
Mortgage File................................... 8
Mortgage Loan Schedule.......................... 8
Mortgage Loans.................................. 9
Mortgage Note................................... 10
Mortgage Rate................................... 10
Mortgaged Property.............................. 10
Mortgagor....................................... 10
Mortgagor Bankruptcy Bond....................... 10
Nonrecoverable Advance.......................... 10
Nonsubserviced Mortgage Loan.................... 10
Officers' Certificate........................... 10
Opinion of Counsel.............................. 10
Pass-Through Rate............................... 11
Paying Agent.................................... 11
Performance Bond................................ 11
Person.......................................... 11
Pool Insurance Policy........................... 11
Pool Insurer.................................... 11
Primary Mortgage Insurance Policy............... 11
Principal Balance............................... 11
Principal Prepayment............................ 11
Purchase Price.................................. 12
Purchase Year................................... 12
Qualified Insurer............................... 12
Rating Agency................................... 12
REMIC........................................... 13
Replacement Mortgage Loan....................... 13
Required Insurance Policy....................... 13
Reserve Fund.................................... 13
Responsible Officer............................. 13
Retained Yield.................................. 13
Series.......................................... 13
Servicer........................................ 14
Servicer Advance................................ 14
Servicer Remittance Date........................ 14
Servicing Account............................... 14
Servicing Fee................................... 14
Servicing Officer............................... 14
Single Certificate.............................. 14
Special Hazard Insurance Policy................. 15
Special Hazard Insurer.......................... 15
Subordinated Certificates....................... 15
Trust Fund...................................... 15
Trust Receipt................................... 15
Trustee......................................... 15
Uninsured Cause................................. 15
VA.............................................. 15
VA Loan......................................... 15
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
VA Loan Guaranty Certificate............... 15
VA Regulations............................. 16
Voting Rights.............................. 16
Warranty and Servicing Agreement........... 16
<CAPTION>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 2.01 Conveyance of Mortgage Loans............... 16
SECTION 2.02 Acceptance by Trustee...................... 19
SECTION 2.03 Representations, Warranties and
Covenants of the Master Servicer........... 20
SECTION 2.04 Representations, Warranties and
Covenants of the Depositor as to the
Mortgage Loans............................. 25
SECTION 2.05 Representations and Warranties of Servicers 28
SECTION 2.06 Assignment of Rights under Warranty
and Servicing Agreements................... 30
<CAPTION>
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
<S> <C> <C>
SECTION 3.01 Master Servicer to Act as Master Servicer... 30
SECTION 3.02 Enforcement of the Obligations
of Servicers................................ 32
SECTION 3.03 Successor Servicers......................... 33
SECTION 3.04 Termination of the Rights of Servicers...... 33
SECTION 3.05 Liability of the Master Servicer............ 34
SECTION 3.06 Rights of the Depositor and the Trustee
In Respect of the Master Servicer........... 34
SECTION 3.07 Trustee to Act as Servicer.................. 35
SECTION 3.08 Collection of Mortgage Loan Payments;
Certificate Account......................... 35
SECTION 3.09 Servicing Accounts.......................... 38
SECTION 3.10 Collection of Taxes, Assessments and Similar
Items; Escrow Accounts...................... 39
SECTION 3.11 Access to Certain Documentation and
Information Regarding the Mortgage Loans.... 40
SECTION 3.12 Permitted Withdrawals from the Certificate
Account..................................... 40
SECTION 3.13 Maintenance of the Pool Insurance Policy,
Primary Mortgage Insurance Policies,
FHA Insurance and VA Loan Guarantees;
Collections Thereunder...................... 42
SECTION 3.14 Maintenance of Hazard Insurance, the
Special Hazard Insurance Policy and
Other Insurance............................. 44
SECTION 3.15 Enforcement of Due-on-Sale Clauses;
Assumption Agreements....................... 47
SECTION 3.16 Realization Upon Defaulted Mortgage Loans... 49
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.17 Trustee to Cooperate; Release of Mortgage
Files........................................ 49
SECTION 3.18 Documents, Records and Funds in Possession
of Master Servicer to be Held for the
Depositor and the Trustee.................... 51
SECTION 3.19 Servicing Compensation; Retained Yield....... 52
SECTION 3.20 Reports to the Trustee and the Depositor;
Certificate Account Statements............... 52
SECTION 3.21 Annual Statement as to Compliance............ 52
SECTION 3.22 Annual Independent Public Accountants'
Servicing Report............................. 53
SECTION 3.23 Maintenance of the Mortgagor Bankruptcy Bond;
Collections Thereunder....................... 54
SECTION 3.24 Letter of Credit............................. 54
SECTION 3.25 Reserve Fund................................. 55
SECTION 3.26 Administration of Buydown Funds.............. 56
<CAPTION>
ARTICLE IV
ADVANCES BY THE MASTER SERVICER; PERFORMANCE BOND
<S> <C> <C>
SECTION 4.01 Monthly Advances............................ 57
SECTION 4.02 Advances for Attorneys' Fees................ 58
SECTION 4.03 Advances for Amounts Collected by Servicer
but Not Remitted............................ 58
SECTION 4.04 Nonrecoverable Advances..................... 59
SECTION 4.05 Advances for Additional Interest In
Connection with Principal Prepayments....... 59
SECTION 4.06 Performance Bond............................ 60
<CAPTION>
ARTICLE V
THE CERTIFICATES
<S> <C> <C>
SECTION 5.01 The Certificates............................ 61
SECTION 5.02 Registration of Transfer and Exchange of
Certificates................................ 62
SECTION 5.03 Mutilated, Destroyed, Lost or Stolen
Certificates................................ 63
SECTION 5.04 Persons Deemed Owners....................... 63
SECTION 5.05 Access to List of Certificateholders' Names
and Addresses............................... 64
SECTION 5.06 Maintenance of Office or Agency............. 64
<CAPTION>
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
<S> <C> <C>
SECTION 6.01 Respective Liabilities of the Depositor
and the Master Servicer..................... 65
SECTION 6.02 Merger or Consolidation of the Depositor
and the Master Servicer..................... 65
SECTION 6.03 Limitation on Liability of the Depositor,
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C> <C>
the Master Servicer and Others............. 66
SECTION 6.04 Master Servicer Not to Resign.............. 67
SECTION 6.05 Errors and Omissions Insurance; Fidelity
Bonds...................................... 67
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C>
SECTION 7.01 Events of Default.......................... 67
SECTION 7.02 Trustee to Act; Appointment of Successor... 69
SECTION 7.03 Notification to Certificateholders......... 70
<CAPTION>
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
SECTION 8.01 Duties of Trustee.......................... 71
SECTION 8.02 Certain Matters Affecting the Trustee...... 72
SECTION 8.03 Trustee Not Liable for Mortgage Loans...... 73
SECTION 8.04 Trustee May Own Certificates............... 73
SECTION 8.05 Master Servicer to Pay Trustee's Fees and
Expenses................................... 73
SECTION 8.06 Eligibility Requirements for Trustee....... 73
SECTION 8.07 Resignation and Removal of the Trustee..... 74
SECTION 8.08 Successor Trustee.......................... 74
SECTION 8.09 Merger or Consolidation of Trustee......... 75
SECTION 8.10 Appointment of Authenticating Agent........ 75
SECTION 8.11 Appointment of Co-Trustee or Separate
Trustee.................................... 77
SECTION 8.12 Tax Returns................................ 78
SECTION 8.13 Appointment of Custodians.................. 79
<CAPTION>
ARTICLE IX
TERMINATION
<S> <C> <C>
SECTION 9.01 Termination upon Repurchase by the
Depositor................................. 79
SECTION 9.02 Final Distribution on the Certificates...... 80
<CAPTION>
ARTICLE X
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 10.01 Amendment................................. 80
SECTION 10.02 Recordation of Agreement; Counterparts.... 81
SECTION 10.03 Governing Law............................. 81
SECTION 10.04 Intention of Parties...................... 81
SECTION 10.05 Notices................................... 81
SECTION 10.06 Severability of Provisions................ 82
SECTION 10.07 Assignment................................ 82
SECTION 10.08 Limitation on Rights of Certificateholders 82
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 10.09 Inspection and Audit Rights............... 83
SECTION 10.10 Certificates Nonassessable and Fully Paid. 84
</TABLE>
-vi-
<PAGE>
THESE STANDARD TERMS AND PROVISIONS OF POOLING AND SERVICING
AGREEMENT, are dated as of ________, 199_, among ASSET BACKED SECURITIES
CORPORATION, as depositor (the "Depositor"), [Name of Master Servicer], as
master servicer (the "Master Servicer") and [Name of Trustee], as trustee (the
"Trustee") and are incorporated by reference in the Reference Agreement (as
hereinafter defined), to the extent set forth therein. Upon execution of the
Reference Agreement, this document, as amended and supplemented by the Reference
Agreement, represents the agreement of the parties with respect to the sale and
servicing of the Mortgage Loans to the Trust named in such Reference Agreement.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree, in addition to the matters
set froth in the Reference Agreement, as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Administrative Fee: With respect to any Mortgage Loan, the
------------------
percentage rate per annum of the Principal Balance of each Mortgage Loan that is
payable to the Depositor out of each payment on account of interest of such
Mortgage Loan, exclusive of any Retained Yield, Servicing Fee and servicing
compensation payable to the Servicer of such Mortgage Loan. The Administrative
Fee is reserved for the administration of the Trust Fund, and may be fixed or
variable, as specified in the Reference Agreement.
Agreement: This Standard Terms and Provisions of Pooling and
---------
Servicing, together with the Reference Agreement with respect to a Series, and
any and all amendments or supplements hereto or thereto.
Alternative Credit Support: Any method of credit support, other than
--------------------------
the methods of Credit Support specified herein and other than Subordinated
Certificates, as provided for in the applicable Reference Agreement.
Appraised Value: The appraised value of the Mortgaged Property based
---------------
upon the appraisal made for the originator at the time of the origination of the
related Mortgage Loan, or the sales price of the Mortgaged Property at the time
of such origination, whichever is less.
<PAGE>
Authenticating Agent: The Authenticating Agent appointed pursuant to
--------------------
Section 8.10 hereof and identified in the Reference Agreement, which is
authorized by the Trustee to act on behalf of the Trustee to authenticate the
Certificates. The Authenticating Agent may be the Depositor or any Person
directly or indirectly controlling or controlled by or under common control with
the Depositor.
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which banking institutions in New York are authorized or obligated by
law or executive order to be closed.
Buydown Funds: Any amount contributed by the seller of a Mortgaged
-------------
Property, the Depositor, the Seller or another source in order to enable the
Mortgagor to reduce the payments required to be made by the Mortgagor from the
Mortgagor's funds in the early years of a Mortgage Loan.
Buydown Mortgage Loan: Any Mortgage Loan as to which a specified
---------------------
amount of interest is paid out of related Buydown Funds in accordance with a
buydown agreement.
Certificate: Any one of the certificates executed by the Depositor
-----------
and authenticated by or on behalf of the Trustee in substantially the form or
forms attached as Exhibits to the Reference Agreement. The Certificates may be
issued in such Classes or Subclasses and with such characteristics as are
specified in the applicable Reference Agreement.
Certificate Account: The non-interest-bearing deposit account or
-------------------
accounts created and maintained by the Master Servicer pursuant to Section 3.08,
in the name of the Trustee for the benefit of Certificateholders for deposit of
payments and collections in respect of the Mortgage Loans pursuant to Section
3.08 hereof, which account or accounts must be an Eligible Account or Accounts.
Certificate Register and Certificate Registrar: Respectively, the
----------------------------------------------
register maintained pursuant to Section 5.02 hereof, and the registrar appointed
and identified in the Reference Agreement.
Certificateholder or Holder: The person in whose name a Certificate
----------------- ------
is registered in the Certificate Register, except that, solely for the purposes
of giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor or the Master Servicer or any affiliate thereof shall
be deemed not to be outstanding and the interest evidenced thereby shall not be
taken into account in determining whether the requisite percentage of
Certificates necessary to effect any such consent has been obtained.
-2-
<PAGE>
Class: With respect to a Series of Certificates, all of the
-----
Certificates of such Series designated in the applicable Reference Agreement as
a class.
Code: The Internal Revenue Code of 1986, including any successor or
----
amendatory provisions.
Corporate Trust Office: The principal office of the Trustee in [name
----------------------
of state] at which at any particular time its corporate business shall be
administered, which office at the date of the execution of this Agreement is
located at [address].
Credit Support: The Pool Insurance Policy, the Special Hazard
--------------
Insurance Policy, the Letter of Credit, the Mortgagor Bankruptcy Bond, the
Reserve Fund or the Alternative Credit Support specified in the Reference
Agreement.
Custodial Account: If so specified in the Reference Agreement with
-----------------
respect to a Series, the non-interest-bearing deposit account or accounts
created and maintained by the Master Servicer pursuant to Section 3.08 in lieu
of the Certificate Account in the name of the Trustee for the benefit of the
Certificateholders, which account or accounts must be an Eligible Account or
Accounts. Amounts in such Custodial Account will be remitted, net of amounts
withdrawn pursuant to Section 3.12, to a Certificate Account maintained by the
Trustee pursuant to such Reference Agreement.
Custodial Agreement: The Custodial Agreement, if any, from time to
-------------------
time in effect, among the Master Servicer, the Trustee and the Custodian named
therein (if the Trustee is not the Custodian) in substantially the form set
forth as an Exhibit to the Reference Agreement.
Custodian: The Custodian or Custodians identified in the Reference
---------
Agreement and named pursuant to one or more Custodial Agreements as may from
time to time be in effect, or its successor in interest. The Custodian may be
the Trustee, or any Person directly or indirectly controlling or controlled by
or under common control with the Trustee, or an independent entity.
Cut-off Date: The first day of the month of the initial issuance of a
------------
Series of Certificates, as specified in the related Reference Agreement.
Deleted Mortgage Loan: With respect to a Series of Certificates, a
---------------------
Mortgage Loan replaced or to be replaced by a Replacement Mortgage Loan.
Delivery Date: The date of settlement of the sale of the Certificates
-------------
to the original purchasers thereof, as specified in the Reference Agreement with
respect to a Series of Certificates.
-3-
<PAGE>
Depositor: Asset Backed Securities Corporation, a Delaware
---------
corporation, or its successor in interest.
Determination Date: The 20th day (or if such 20th day is not a
------------------
Business Day, the Business Day immediately preceding such 20th day) of the month
of the related Distribution Date.
Distribution Date: The 25th day of each calendar month after the
-----------------
initial issuance of the Series of Certificates, or if the 25th day is not a
Business Day, the next succeeding Business Day, unless otherwise specified in
the applicable Reference Agreement.
Due Date: Unless otherwise specified in the Reference Agreement, the
--------
first day of the month in which the related Distribution Date occurs.
Eligible Account: An account (i) that is maintained with a depository
----------------
institution or trust company incorporated under the laws of the United States or
of any state thereof and the amounts deposited therein shall be held in the form
of Eligible Investments of (ii) meeting the requirements established for a
Servicing Account.
Eligible Investments: Unless otherwise specified in the Reference
--------------------
Agreement with respect to a Series, at any time, any one or more of the
following obligations, instruments and securities:
(i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed by any state of
the United States or the District of Columbia receiving one of the two highest
ratings of the Rating Agency, or such lower ratings as will not result in the
downgrading or withdrawal of the ratings then assigned to the Certificates by
the Rating Agency;
(iii) commercial or finance company paper which is then rated in the
highest commercial or finance company paper rating categories of the Rating
Agency, or such lower category as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agency;
(iv) certificates of deposit, demand or time deposits, federal funds
or bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term
-4-
<PAGE>
debt obligations of such depository institution or trust company (or in the case
of the principal depository institution in a holding company system, the
commercial paper or long term debt obligations of such holding company) are then
rated in the highest rating category of the Rating Agencies, in the case of
commercial paper, or in the second highest category in the case of long term
debt obligations, or such lower categories as will not result in the downgrading
or withdrawal of the rating then assigned to the Certificates by the Rating
Agency;
(v) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings and loan association and fully insured by the
FDIC or the FSLIC;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation acceptable to the Rating Agency at the time of the
issuance of or investing in such guaranteed reinvestment agreements;
(vii) repurchase obligations with respect to any security described
in (i) and (ii) above or any other security issued or guaranteed by an agency or
instrumentality of the United States, in either case entered into with a
depository institution or trust company (acting as principal) described in (iv)
above;
(viii) securities bearing interest or sold at a discount issued by
any corporation or sold at a discount issued by any corporation incorporated
under the laws of the Untied States or any state thereof which, at the time of
such investment or contractual commitment providing for such investment are then
rated in one of the two highest categories of the Rating Agency, or in such
lower rating category as will not result in the downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating Agency; and
(ix) such other investments acceptable to the Rating Agency with
respect to mortgage pass-through certificates rated by the Rating Agency in the
same rating category as the Certificates of the related Series.
Event of Default: As defined in Section 7.01 hereof.
----------------
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHA: The Federal Housing Authority of the United States Department of
---
Housing and Urban Development or any successor department or agency of the
United States of America.
FHA Certificate of Mortgage Insurance: A Mortgage Insurance
-------------------------------------
Certificate (FHA Form No. 9100-1) evidencing that the FHA has insured the holder
of the related Mortgage Loan against
-5-
<PAGE>
loss sustained by reason of a default by the Mortgagor in the payment of
principal and interest thereon, or any other form of certificate hereafter
issued by the FHA evidencing similar coverage.
FHA Loan: A Mortgage Loan covered by a FHA Certificate of Mortgage
--------
Insurance.
FHA Regulations: The regulations promulgated by the FHA from time to
---------------
time establishing the conditions to the issuance of an FHA Certificate of
Mortgage Insurance and the requirements for maintaining the insurance evidenced
by such certificate in effect and for the filing and payment of claims thereon.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FNMA: The Federal National Mortgage Association, a federally
----
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
FSLIC: The Federal Savings and Loan Insurance Corporation, or any
-----
successor thereto.
Insurance Policy: With respect to any Mortgage Loan included in the
----------------
Trust Fund for a Series, any Primary Mortgage Insurance Policy, Pool Insurance
Policy, Special Hazard Insurance Policy, FHA Certificate of Mortgage Insurance,
VA Loan Guaranty Certificate or Mortgagor Bankruptcy Bond, including all riders
and endorsements thereto, as specified in the Reference Agreement with respect
to such Series.
Insurance Proceeds: Amounts paid pursuant to any Primary Mortgage
------------------
Insurance Policy, FHA Certificate of Mortgage Insurance, VA Loan Guaranty
Certificate, or the Pool Insurance Policy, Mortgagor Bankruptcy Bond, if any,
with respect to a Series and amounts paid pursuant to the Special Hazard
Insurance Policy with respect to such Series, when the related property has not
been restored, and amounts paid by any insurer pursuant to any other insurance
policy covering a Mortgage Loan.
Insured Expenses: Expenses covered by the Pool Insurance Policy, any
----------------
Primary Insurance Policy, the Mortgagor Bankruptcy Bond or the Special Hazard
Insurance Policy, any replacement insurance policy or policies for any of the
foregoing insurance policies, or any other insurance policy with respect to the
Mortgage Loans.
-6-
<PAGE>
L/C Bank: The issuer, if any, of the Letter of Credit with respect to
--------
a Series of Certificates, as specified in the related Reference Agreement.
Letter of Credit: If so specified in the Reference Agreement with
----------------
respect to a Series of Certificates, the irrevocable stand-by letter of credit
issued by the L/C Bank in favor of the Trustee for the benefit for the
Certificateholders, terms of which, to the extent not specified herein, shall be
as specified in such Letter of Credit and in the Reference Agreement with
respect to such Series.
Liquidating Loan: A Mortgage Loan (including a mortgage loan formerly
----------------
held in the Trust Fund which has been assigned to the L/C Bank in consideration
of payments under the Letter of Credit) as to which, as of the close of business
on the Business Day next preceding the Due Date, the outstanding principal
balance under the related Mortgage Note has been accelerated (and as to which
any applicable rights of any Person having an interest in the Mortgaged Property
to reinstate the Mortgage Loan shall have expired ) and, with respect to which,
for satisfaction of such liquidated proceeds of the security for such Mortgage
Loan, including (without limitation) (a) from deed in lieu of foreclosure, sale
in foreclosure, trustee's sale or other realization as provided by applicable
law of real property subject to the related Mortgage and any security
agreements, (b) from claims under related private mortgage insurance or hazard
insurance, and/or (c) from claims against any public or governmental authority
on account of a taking or condemnation of any such property.
Liquidation Expenses: Expenses incurred by the Master Servicer (or
--------------------
the related Servicer) in connection with the liquidation of any defaulted
Mortgage Loan and not recovered by the Master Servicer (or the related Servicer)
under an FHA Certificate of Mortgage Insurance or VA Loan Guaranty Certificate
for reasons other than the failure of the Master Servicer (or the related
Servicer) to comply with FHA Regulations or VA Regulations, as the case may be,
the Pool Insurance Policy, if any, with respect to a Series or any Primary
Insurance Policy for reasons other than the Master Servicer's failure to comply
with Section 3.13 hereof, or under any Alternative Credit Support, or with
respect to a Series of Certificates as to which credit support is provided by a
Letter of Credit, expenses incurred by the L/C Bank, such expenses including,
without limitation, legal fees and expenses, any unreimbursed amount expended by
the Master Servicer pursuant to Section 3.14 hereof in respect of the related
Mortgage and any related and unreimbursed expenditures for real estate property
taxes or for property restoration or preservation to the extent not previously
reimbursed under any hazard insurance policy or under the Special Hazard
Insurance Policy, if any, with respect to a Series, for reasons other than the
Master Servicer's failure to comply with Section 3.14 hereof.
-7-
<PAGE>
Liquidation Proceeds: Amounts (other than Insurance Proceeds,
--------------------
payments under the Letter of Credit or the proceeds of any Alternative Credit
Support) received in connection with the liquidation of defaulted Mortgage
Loans, whether through trustee's sale, foreclosure sale or otherwise, or amounts
received in connection with any condemnation or partial release of a Mortgaged
Property.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a
-------------------
percentage, the numerator of which is the current principal balance of the
related Mortgage Loan at the date of determination and the denominator of which
is the Appraised Value of the related Mortgaged Property.
Master Servicer: [Name of Master Servicer], a [ ] corporation,
---------------
or its successor in interest, or any successor master servicer appointed as
herein provided.
Monthly Advance: The aggregate of (i) the advances made by the Master
---------------
Servicer on any Distribution Date pursuant to Section 4.01 or 4.03 hereof, the
amount of any such advances being equal to the aggregate of payments of
principal and interest on the Mortgage Loans (in the case of Buydown Mortgage
Loans, exclusive of any such payments required by such Buydown Mortgage Loan to
be made out of Buydown Funds) that were due on the Due Date and delinquent as of
the close of business on the Business Day next preceding the related
Distribution Date and as to which the related Servicer, if any, has made no
advance, after adjustment of any delinquent interest payment to interest at the
Pass-Through Rate (after giving effect to the application of any Buydown Funds),
less the aggregate amount of any such delinquent payments that the Master
Servicer has determined would constitute a Nonrecoverable Advance if made and
(ii) any advances made by the Master Servicer on any Distribution Date pursuant
to Section 4.05.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first lien on an estate in fee simple interest in real property securing a
Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.01 hereof
-------------
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: The list of Mortgage Loans transferred to the
----------------------
Trustee as part of the Trust Fund for the Certificates and from time to time
subject to this Agreement, as from time to time amended by the Trustee (or by a
Custodian as the duly appointed agent of the Trustee) to reflect the addition of
Replacement Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant
to the provisions of this Agreement and the Reference Agreement), attached to
the Reference Agreement.
-8-
<PAGE>
Such schedule will set forth the following information with respect to each
Mortgage Loan:
(i) the loan number;
(ii) the street address of the Mortgaged Property;
(iii) the Mortgage Rate:
(iv) the original term;
(v) the original principal balance;
(vi) the first payment date;
(vii) the current monthly payment in effect as of the
Cut-off Date;
(viii) the principal balance as of the Cut-off Date;
(ix) the Loan-to-Value Ratio at origination;
(x) a code indicating whether the residential dwelling at the
time of origination was represented to be a primary residence, a second or
vacation home, or an investment property;
(xi) a code indicating whether the residential dwelling is a
single family dwelling, a two-to-four family dwelling, or a condominium
unit in a high-rise or low-rise development;
(xii) a code indicating the number of units in the residential
dwelling; and
(xiii) the Retained Yield.
Such schedule shall also set forth the total of the amounts described under
(viii) above for all of the Mortgage Loans, together with the aggregate
principal balance as of the Cut-Off Date of the Buy-Down Mortgage Loans, if any,
included in the related Trust Fund, and any additional information required by
the Reference Agreement. Such schedule may be in the form of more than one list
collectively setting forth all of the information required.
Mortgage Loans: Such of the mortgage loans transferred and assigned
--------------
to the Trustee pursuant to the provisions hereof and of the Reference Agreement
as from time to time are held as a part of the Trust Fund, the Mortgage Loans so
held being
-9-
<PAGE>
identified in the Mortgage Loan Schedule attached as Schedule I to the Reference
Agreement.
Mortgage Note: The originally executed note or other evidence of
-------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note,
-------------
which may be fixed or variable, as specified in the related Reference Agreement.
Mortgaged Property: The underlying property securing a Mortgage
------------------
Loan.
Mortgagor: The obligor on a Mortgage Note.
---------
Mortgagor Bankruptcy Bond: If so provided for in the applicable
-------------------------
Reference Agreement, the bankruptcy bond obtained pursuant to Section 3.23.
Nonrecoverable Advance: Any portion of the Monthly Advance previously
----------------------
made or proposed to be made by the Master Servicer (other than that portion of a
Monthly Advance made pursuant to Section 4.05 hereof) that, in the good faith
judgment of the Master Servicer, will not or, in the case of a current
delinquency, would not be, ultimately recoverable by the Master Servicer from
Insurance Proceeds, Liquidation Proceeds, payments under the Letter of Credit,
amounts in the Reserve Fund, or from proceeds of any Alternative Credit Support,
or otherwise. The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed advance, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by an Officers' Certificate of the
Master Servicer delivered to the Trustee and the Depositor, setting forth the
reasons for such determination as specified in Section 4.04 hereof.
Nonsubserviced Mortgage Loan: Any Mortgage Loan that is not subject
----------------------------
to a Servicing Agreement on the date of issuance of a Series of Certificates or
thereafter.
Officers' Certificate: A certificate signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President or a Vice President or
Assistant Vice President, and by the Treasurer, the Secretary or one of the
Assistant Treasurers or Assistant Secretaries of the Depositor or the Master
Servicer, as the case may be, and delivered to the Trustee, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Master Servicer, acceptable to the Trustee.
-10-
<PAGE>
Pass-Through Rate: As to each Mortgage Loan, the annual rate of
-----------------
interest, which may be fixed or variable, as specified in the related Reference
Agreement, to be distributed to the Certificateholders in the manner specified
in such Reference Agreement. Any regular monthly remittance or accrual of
interest shall be based upon annual interest at such rate on the Principal
Balance of such Mortgage Loan divided by twelve.
Paying Agent: The Paying Agent identified in the Reference Agreement
------------
with respect to a Series, authorized to make distributions on behalf of the
Trustee.
Performance Bond: With respect to a Series of Certificates, the bond,
----------------
guaranty or similar form of insurance coverage obtained by the Master Servicer
pursuant to Section 4.06 hereof providing a guaranty of the performance of the
Master Servicer's obligations under this Agreement.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Pool Insurance Policy: If so specified in the Reference Agreement
---------------------
with respect to a Series of Certificates for which credit support is provided by
a Pool Insurance Policy, the policy of mortgage pool guaranty insurance obtained
pursuant to Section 3.13, a form of which is attached as an Exhibit to such
Reference Agreement, or any replacement insurance policy obtained pursuant to
Section 3.13 hereof.
Pool Insurer: With respect to a Series of Certificates for which
------------
credit support is provided by a Pool Insurance Policy, the insurer specified in
the Reference Agreement with respect to a Series, or any successor thereto or
the named insurer in any replacement policy obtained pursuant to Section 3.13
hereof.
Primary Mortgage Insurance Policy: Each primary policy of mortgage
---------------------------------
guaranty insurance with respect to a Mortgage Loan, or any replacement policy
therefor.
Principal Balance: As of the time of any determination, the principal
-----------------
balance of a Mortgage Loan remaining to be paid by the Mortgagor or from any
Buydown Funds, after deduction of all payments due on or before the Cut-off
Date, reduced by all amounts distributed or advanced to the Certificateholders
or, if so specified in the related Reference Agreement, remitted or advanced to
the Trustee and reported as allocable to principal.
Principal Prepayment: Any Mortgagor payment or other recovery of
--------------------
principal on a Mortgage Loan that is received in advance of its scheduled Due
Date and is not accompanied by an
-11-
<PAGE>
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment.
Purchase Price: Unless otherwise specified in the Reference
--------------
Agreement, with respect to any Mortgage Loan required to be purchased pursuant
to the applicable provisions of this Agreement, an amount equal to the sum of
(i) the lesser of (a) 100% of the Principal Balance of such Mortgage Loan and
(b) in the event that the Depositor elects to treat the Trust Fund with respect
to the related Series of Certificates as a REMIC under the Code, the adjusted
basis (as defined in the Code) of the Trust Fund in such Mortgage Loan as of the
date of purchase, plus (ii) one month's interest on such Principal Balance at
the Pass-Through Rate (so long as advances on account of interest have been made
on account of such Mortgage Loan, otherwise, accrued and unpaid interest on the
Mortgage Note at the Pass-Through Rate to the first day of the month following
repurchase), plus (iii) if such purchase is being made by a Servicer and
advances on account of interest have been made on account of such Mortgage Loan,
the sum of all advances made with respect to such Mortgage Loan by the Master
Servicer for which the Master Servicer has not been reimbursed.
Purchase Year: With respect to a Series of Certificates to which the
-------------
provisions of Section 2.03(b) are applicable, as specified in the Reference
Agreement with respect to such Series, the fiscal year ending on the date
specified in the Reference Agreement commencing with the year next succeeding
the year of the initial issuance of such Certificates.
Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of business
and each other state having jurisdiction over such insurer in connection with
the insurance policy issued by such insurer, duly authorized and licensed by the
insurance regulatory authority of the state of its principal place of business
and, to the extent required by applicable law, each such other state, to
transact a mortgage guaranty insurance business in such state and each other
state and to write the insurance provided by the insurance policy issued by it
and approved as an insurer by FHLMC or FNMA and whose claims-paying ability is
acceptable to the Rating Agency.
Rating Agency: Any nationally recognized statistical rating
-------------
organization, or any successor thereto, that rated the Certificates of a Series
at the request of the Depositor at the time of their initial issuance. If such
organization or successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical rating organization or other comparable
Person designated by the Depositor, notice of which designation shall be given
to the Trustee and Master Servicer.
-12-
<PAGE>
REMIC: A real estate mortgage investment conduit, as
-----
defined in the Code.
Replacement Mortgage Loan: A Mortgage Loan substituted by the
-------------------------
Depositor or the related Servicer for a Deleted Mortgage Loan which must, on the
date of such substitution, meet the requirements specified in the related
Reference Agreement. Such substitution must take place within the time period
specified in the Reference Agreement and must satisfy the terms and conditions
for substitution set forth therein.
Required Insurance Policy: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under this
Agreement or the related Warranty and Servicing Agreement in respect of such
Mortgage Loan.
Reserve Fund: If provided for in the Reference Agreement with respect
------------
to a Series, the fund established and maintained pursuant to Section 3.25 hereof
and such Reference Agreement.
Responsible Officer: When used with respect to the Trustee, [the
-------------------
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters,] any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant
Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any
Assistant Controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
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.
Retained Yield: As set forth in the Reference Agreement, the portion
--------------
of all interest accrued at the applicable Mortgage Rate (which may differ among
Mortgage Loans, as specified in such Reference Agreement) of the outstanding
principal balance of each Mortgage Loan from time to time outstanding that is
retained by the Depositor hereunder, which is payable to the Depositor out of
the interest portion of all payments or collections received on or with respect
to the Mortgage Loan and, as the context requires, any similar amounts payable
to a Servicer under the terms of the related Warranty and Servicing Agreement.
Series: A separate series of Certificates issued pursuant to this
------
Agreement, which Certificates may, as provided in the related Reference
Agreement, be divided into one or more
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<PAGE>
Classes or Subclasses with the characteristics specified in such Reference
Agreement.
Servicer: With respect to any Mortgage Loan, any Person who executed
--------
a Warranty and Servicing Agreement applicable to such Mortgage Loan.
Servicer Advance: The meaning specified in Section 3.09
----------------
hereof.
Servicer Remittance Date: The __th day of each month, or if such day
------------------------
is not a Business Day, the Business Day immediately preceding such __th day.
Servicing Account: A custodial demand deposit account or accounts
-----------------
established by the Servicer pursuant to Section 3.09 hereof with (i) a
depository institution the long term unsecured debt obligations of which are
rated by the Rating Agency in one of its two highest rating categories at the
time of any deposit therein, or (ii) the deposits in which are fully insured by
the FDIC, or the FSLIC, or (iii) a depository institution in which such accounts
are insured by the FDIC or the FSLIC (to the limits established by the FDIC or
the FSLIC) the uninsured deposits in which are otherwise several such that, as
evidenced by an Opinion of Counsel, delivered to the Trustee, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first security interest against any collateral (which shall be limited
to Eligible Investments) securing such funds that is similar to claims of any
other depositors or creditors of the depository institution with which such
account is maintained or (iv) any other account or accounts acceptable to the
Rating Agency rating the Certificates of the related Series.
Servicing Fee: With respect to each interest payment on a Mortgage
-------------
Loan, the amount of each interest payment in excess of the Pass-Through Rate,
after deduction of the Administrative Fee, the Retained Yield, and any servicing
compensation payable to the related Servicer (or, in the case of a
Nonsubserviced Loan, to the Master Servicer) pursuant to the related Warranty
and Servicing Agreement, as the case may be.
Servicing Officer: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished to the Trustee by the
Master Servicer pursuant to Section 2.03, as such list may from time to time be
amended.
Single Certificate: A Certificate in the denomination and
------------------
representing the interest in the Trust Fund specified in the Reference
Agreement.
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<PAGE>
Special Hazard Insurance Policy: If so specified in the Reference
-------------------------------
Agreement, credit support which is provided by a special hazard insurance
policy, a specimen of which is attached as an Exhibit to the Reference
Agreement, or any replacement policy obtained pursuant to Section 3.14 hereof.
Special Hazard Insurer: With respect to a Series of Certificates for
----------------------
which credit support is provided by a Special Hazard Insurance Policy, the
insurer named in the related Reference Agreement, or any successor thereto, or
the named insurer in any replacement policy obtained pursuant to Section 3.14
hereof.
Subordinated Certificates: Any Certificates of a Series, the rights
-------------------------
of the holders of which to receive distributions on or with respect to the
Mortgage Loans in the Trust Fund for such Series are subordinated to the rights
of the holders of one or more Classes or Subclasses of such Series to receive
such distributions, as set forth in the related Reference Agreement.
Trust Fund: With respect to a Series of Certificates the corpus of
----------
the trust created by this Agreement consisting of the Mortgage Loans and other
property specified in the related Reference Agreement.
Trust Receipt: The meaning specified in Section 3.17 hereof.
-------------
Trustee: [Name of Trustee], a [ ] corporation, not in its
-------
individual capacity, but solely as trustee under this Agreement, and any
successor thereto, as provided herein.
Uninsured Cause: With respect to any Series of Certificates for which
---------------
credit support is provided by a Special Hazard Insurance Policy, any cause of
damage to Mortgaged Property such that the complete restoration of such
Mortgaged Property is not fully reimbursable by the hazard insurance policies or
by the Special Hazard Insurance Policy required to be maintained pursuant to
Section 3.14 hereof.
VA: The Veterans Administration, an agency of the United
--
States of America, or any successor department or agency.
VA Loan: A Mortgage Loan covered by a VA Loan Guaranty
-------
Certificate.
VA Loan Guaranty Certificate: A loan guaranty certificate (VA Form
----------------------------
No. 26-1866a) or any similar certificate or instrument issued by the VA pursuant
to VA Regulations, evidencing that the VA has guaranteed the payment of a
portion of the principal and interest on a VA Loan.
-15-
<PAGE>
VA Regulations: The regulations promulgated by the VA from time to
--------------
time establishing the conditions to the issuance of a VA Loan Guaranty
Certificate and the requirements for maintaining the guaranty evidenced by such
certificate in effect for the filing and payment of claims thereon.
Voting Rights: The portion of the aggregate voting rights evidenced
-------------
by the Certificates of a Series that is allocated to any particular Certificate,
as specified in the Reference Agreement.
Warranty and Servicing Agreement: A Master Seller's Warranty and
--------------------------------
Servicing Agreement, providing for the origination, sale and servicing of
Mortgage Loans in such form as has been approved by the Depositor, each
containing representations and warranties in respect of the Mortgage Loans sold
and serviced thereunder.
The meaning of certain defined terms used in this Agreement shall,
when applied to a particular Series of Certificates and certain defined terms
applicable to such Series, be as defined in the Reference Agreement with
respect to such Series.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Conveyance of Mortgage Loans.
----------------------------
The Depositor, concurrently with the execution and delivery of a
Reference Agreement, shall, in the manner specified below and in such Reference
Agreement sell, transfer, assign, set over and otherwise convey to the Trustee,
without recourse, all the right, title and interest of the Depositor in and to
the Mortgage Loans listed on the Mortgage Loan Schedule attached to such
Reference Agreement, including all interest and principal received or receivable
by the Depositor on or with respect to the Mortgage Loans after the Cut-off
Date, but not including payments of principal and interest due and payable on
the Mortgage Loans on or before the Cut-off Date and other than with respect to
any Retained Yield specified in the Reference Agreement together with all its
right, title and interest in and to the proceeds of any related Insurance
Policies under which the Trustee is not named as loss payee and any other
insurance policies with respect to the Mortgage Loans.
In connection with any such transfer and assignment, the Depositor
shall deliver to, and deposit with, the Trustee, or to any Custodian appointed
by the Trustee pursuant to this
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<PAGE>
Agreement as the agent of the Trustee, the following documents or instruments
with respect to each Mortgage Loan so assigned:
(i) the Mortgage Note, endorsed without recourse by the Depositor
to order of the Trustee, as trustee for the benefit of the
Certificateholders of the related Series, signed in the name of the
Depositor by an Authorized Officer, with all intervening endorsements
showing a complete chain of title from the originator thereof to the
Depositor; and if the Mortgage Note or Mortgage or any other material
document or instrument relating to the Mortgage Loan has been signed on
behalf of the Mortgagor by another person, the original power of attorney
or other instrument that authorized and empowered such person to sign, or,
a copy of the original power of attorney or other instrument certified by
the public recording office in those instances where the public recording
office retains the original;
(ii) the original Mortgage, as recorded, with evidence of
recording indicated thereon, or a copy of the Mortgage certified by the
public recording office in those instances where the public recording
office retains the original;
(iii) an assignment (which may be included in a blanket
assignment) of the Mortgage in recordable form to the Trustee, as trustee
for the benefit of the Certificateholders of the related Series;
(iv) any Insurance Policies;
(v) the original policy of title insurance or, if such policy has
not been delivered to the Depositor prior to the Delivery Date, an original
binder of title insurance;
(vi) the original assignment or assignments of the Mortgage,
together with originals of all intervening assignments, with evidence of
recording thereon;
(vii) the original copy of all assumption and modification
agreements, if any, with respect to such Mortgage Loan;
(viii) the original commitment or certificate of Primary
Mortgage Insurance Policy, if any;
(ix) the Letter of Credit, if any; and
(x) any Alternative Credit Support.
-17-
<PAGE>
In the event that, in connection with any Mortgage Loan, the Depositor
cannot deliver the original recorded Mortgage or an original recorded assignment
of the Mortgage with evidence of recording thereon concurrently with the
execution and delivery of the Reference Agreement solely because of a delay
caused by the public recording office where such Mortgage has been delivered for
recordation, the Depositor shall deliver, or cause the related Servicer to
deliver, to the Trustee (or to a Custodian on behalf of the Trustee), an
Officers' Certificate or a certificate of the related Servicer, with a photocopy
of such Mortgage or assignment of the Mortgage attached thereto, stating that
such Mortgage or assignment of the Mortgage has been delivered to the
appropriate public recording official for recordation. The Depositor shall
promptly deliver, or cause the related Servicer to deliver, to the Trustee (or
to a Custodian on behalf of the Trustee) such Mortgage or assignment of the
Mortgage with evidence of recording indicated thereon upon receipt thereof from
the public recording official or from the related Servicer. From time to time
the Servicers or the Master Servicer may forward to the Trustee (or to a
Custodian on behalf of the Trustee) additional original documents evidencing an
assumption or modification of a Mortgage Loan.
The Trustee (or a Custodian on behalf of the Trustee) shall cause to
be recorded in the appropriate public office for real property records each
assignment referred to in this Section 2.01. If any assignment is returned
unrecorded to the Trustee (or to such Custodian) because of any defect therein,
the Trustee shall promptly notify the Master Servicer and the Depositor. The
Master Servicer shall promptly notify the related Servicer of such defect and
request that such Servicer cure or correct such defect and cause such assignment
to be recorded in accordance with this paragraph or, if such Servicer does not
cure or correct such defect or in the event such defect cannot be so cured, that
such Servicer either (a) substitute a Replacement Mortgage Loan or Loans for the
related Mortgage Loan, which substitution must occur within the time period
specified in the Reference Agreement and which shall be subject to the
conditions set forth in Section 2.04 and terms and conditions with respect to
substitution in the Reference Agreement; or (b) repurchase such Mortgage Loan at
the Purchase Price therefor, in the manner provided in Section 2.02 hereof.
In the case of Mortgage Loans that have been prepaid in full after the
Cut-off Date and prior to the date of execution and delivery of the Reference
Agreement, the Depositor, in lieu of delivering the above documents to the
Trustee, will deposit in the Certificate Account the amount with respect to such
payment that is required to be deposited in the Certificate Account pursuant to
Section 3.08 hereof.
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<PAGE>
All original documents relating to the Mortgage Loans that are not
delivered to the Trustee or the respective Custodian, if any , are and shall be
held in trust for the benefit of the Trustee on behalf of the
Certificateholders.
SECTION 2.02 Acceptance by Trustee.
---------------------
The Trustee (or the respective Custodian as the duly appointed agent
of the Trustee) will hold the documents referred to in Section 2.01 above and
the other documents constituting a part of the Mortgage Files delivered to it
(or to such Custodian) with respect to a Series in trust for the use and benefit
of all present and future Certificateholders of such Series. Upon request by
any Holder of a Certificate of such Series, the Trustee will provide an initial
certification acknowledging receipt of the proper number of Mortgage Files and
that they appear regular on their face on and as of the date of this Agreement.
The Trustee shall, for the benefit of the Holders of the Certificates of such
Series, review, or cause a Custodian on its behalf to review, each Mortgage File
within 60 days after the execution and delivery of the related Reference
Agreement, to ascertain that all required documents have been executed, received
and recorded, if applicable, and that such documents relate to the Mortgage
Loans identified in the Mortgage Loan Schedule attached to such Reference
Agreement. If, in the course of such review, the Trustee (or any such
Custodian) finds any document or documents constituting a part of a Mortgage
File to be defective in any material respect, the Trustee shall promptly so
notify the Master Servicer and the Depositor. The Master Servicer shall
promptly notify the related Servicer of such defect and request that such
Servicer correct or cure such defect within 60 days from the date the Master
Servicer was notified of such defect and, if such Servicer does not correct or
cure such defect within such period, that such Servicer, if and to the extent
that such Servicer is obligated to do so under the related Warranty and
Servicing Agreement, either (a) substitute for the related Mortgage Loan a
Replacement Mortgage Loan or Loans, which substitution shall be accomplished
within the time period specified in the Reference Agreement, in the manner and
subject to the conditions set forth in this Section and in the Reference
Agreement; or (b) purchase such Mortgage Loan from the Trustee within 90 days
from the date the Master Servicer was notified of such defect at the Purchase
Price of such Mortgage Loan. The Purchase Price for any such Mortgage Loan
shall be deposited by such Servicer in the Certificate Account maintained by the
Master Servicer pursuant to Section 3.08 hereof and, upon receipt by the Trustee
of written notification of such deposit signed by a Servicing Officer, the
Trustee shall release, or shall cause the related Custodian to release, the
related Mortgage File to such Servicer, and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in such Servicer or its designee title to any Mortgage Loan
released pursuant hereto. It is understood and
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agreed that the obligation of the Servicer to substitute for or to purchase any
Mortgage Loan as to which a material defect in a constituent document exists
shall constitute the sole remedy respecting such defect available to the Trustee
on behalf of the Certificateholders, except as set forth below.
If so specified in the Reference Agreement, in the event that a
Servicer fails to repurchase any Mortgage Loan that it is required to purchase
pursuant to this Section 2.02, the Master Servicer shall purchase such Mortgage
Loan at the Purchase Price and in the manner set forth above, within five
Business Days of the Master Servicer's receipt of written demand therefor from
the Trustee. Upon receipt by the Trustee of written notification of the deposit
of the Purchase Price pursuant to Section 3.08 hereof, signed by a Servicing
Officer, the Trustee shall release, or shall cause the Custodian to release, the
related Mortgage File to the Master Servicer and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Master Servicer or its designee title to any
Mortgage Loan purchased pursuant hereto. Notwithstanding anything contained
herein or in such Reference Agreement to the contrary, the Master Servicer shall
not be entitled to substitute a Replacement Mortgage Loan or Loans in
satisfaction of such repurchase obligation.
The Trustee shall retain (or cause a Custodian to retain) possession
and custody of each Mortgage File in accordance with and subject to the terms
and conditions set forth herein. The Master Servicer shall promptly deliver to
the Trustee, upon the execution or receipt thereof, the originals of any Special
Hazard Insurance Policy, any Pool Insurance Policy, any Mortgagor Bankruptcy
Bond, any Performance Bond, any Alternative Credit Support and any certificates
of renewal thereof, and such other documents or instruments that constitute part
of the Mortgage File that come into the possession of the Master Servicer from
time to time.
SECTION 2.03 Representations, Warranties and Covenants of the Master Servicer.
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(a) The Master Servicer hereby represents, warrants and covenants to
the Depositor and the Trustee that, as of the date of the Reference Agreement:
(i) the Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of [ ] and is
duly authorized and qualified to transact any and all business contemplated
by this Agreement and is, or will be, in compliance with the laws of any
state in which a Mortgaged Property is located or is otherwise not required
under applicable law to effect such qualification and, in any event, is, or
will be, in
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compliance with the laws of any such State, to the extent necessary to
ensure the enforceability of each Mortgage Loan and the servicing of the
Mortgage Loans in accordance with the terms of this Agreement;
(ii) the Master Servicer has the full corporate power and
authority to service each Mortgage Loan, and to execute, deliver and
perform, and to enter into and consummate the transactions contemplated by
this Agreement and has duly authorized the execution, delivery and
performance of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery hereof by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of the Master
Servicer, enforceable against the Master Servicer in accordance with its
terms, except that (a) the enforceability hereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws
relating to creditors' rights and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought;
(iii) neither the execution and delivery of this Agreement by
the Master Servicer, the servicing of the Mortgage Loans by the Master
Servicer hereunder, the consummation of any other of the transactions
herein contemplated, nor the fulfillment of or compliance with the terms
hereof, will (A) result in a material breach of any term or provision of
the certificate of incorporation or by-laws of the Master Servicer or (B)
conflict with, result in a material breach, violation or acceleration of,
or result in a default under, the terms of any other agreement or
instrument to which the Master Servicer is a party or by which it may be
bound, or any statute, order or regulation applicable to the Master
Servicer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Master Servicer; and the
Master Servicer is not a party to, bound by, or in breach or violation of
any indenture or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory
body, administrative agency or governmental body having jurisdiction over
it, which materially and adversely affects, or may in the future materially
and adversely affect, (x) the ability of the Master Servicer to perform its
obligations under this Agreement or (y) the business, operations, financial
condition, properties or assets of the Master Servicer;
(iv) the Master Servicer is, and will remain, subject to
supervision and examination by any state or federal authority as may be
applicable and will remain in
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good standing and qualified to do business where so required by applicable
law and is, and will remain, an approved servicer of conventional mortgage
loans for FNMA or FHLMC;
(v) no litigation is pending or, to the best of the Master
Servicer's knowledge, threatened, against the Master Servicer that, if
determined adversely to the Master Servicer, would adversely affect the
execution, delivery or enforceability of this Agreement or the ability of
the Master Servicer to service the Mortgage Loans or to perform any of its
other obligations hereunder in accordance with the terms hereof or that
would have a material adverse effect on the financial condition of the
Master Servicer;
(vi) the Master Servicer will at all times comply in the
performance of its obligations under this Agreement with FHA Regulations
and VA Regulations, as applicable, and with all reasonable rules and
requirements of the insurer under each Required Insurance Policy;
(vii) no information, certificate of an officer, statement
furnished in writing or report delivered to the Depositor, any affiliate of
the Depositor or the Trustee by the Master Servicer will contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the information, certificate, statement or report not misleading;
(viii) no consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Master Servicer of, or compliance by the Master Servicer
with, this Agreement or the consummation of the transactions contemplated
hereby;
(ix) in the performance of its servicing obligations hereunder,
the Master Servicer will not, by act or omission, materially impair the
value of any Mortgage Loan; and
(x) the Master Servicer has examined each existing, and will
examine each new Warranty and Servicing Agreement, and is, or will be,
familiar with the terms thereof. The terms of each existing Warranty and
Servicing Agreement and each Servicer thereunder are acceptable to the
Master Servicer and any new Warranty and Servicing Agreements or Servicers
will comply with the provisions of Section 3.02 hereof.
(b) With the provisos and limitations as to remedies set forth in this
Section 2.03(b), if so specified in the Reference agreement, the Master Servicer
hereby represents and warrants to the Depositor and the Trustee with respect to
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each Mortgage Loan that no action has been taken or failed to be taken, no event
has occurred and no state of facts exists or has existed on or prior to the
Delivery Date pursuant to the Reference Agreement (whether or not known to the
Master Servicer on or prior to such date) that has resulted, or that will
result, in an exclusion from, denial of, or defense to coverage under a Primary
Mortgage Insurance Policy for any Mortgage Loan, the Pool Insurance Policy, the
Special Hazard Insurance Policy or the Mortgagor Bankruptcy Bond (including,
without limitation, any exclusions, denials or defenses that would limit or
reduce the availability of the timely payment of the full amount of the loss
otherwise due thereunder to the insured, whether arising out of actions,
representations, errors, omissions, negligence, or fraud of the Master Servicer,
a Servicer of such Mortgage Loan, the related Mortgagor or any party involved in
the application for such coverage, including the appraisal, plans and
specifications and other exhibits or documents submitted therewith to the
insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason of such
insurer's financial inability to pay or by reason of a determination that the
loss suffered was a loss not insured by the terms and provisions of such
insurance policy), and covenants that within 90 days of its discovery or its
receipt of notice of breach of this representation and warranty as provided in
Section 2.03(c) hereof, the Master Servicer shall cure such breach in all
material respects or, subject to the limitations set forth in the next following
paragraph, shall purchase the Mortgage Loan from the Trustee; provided, however,
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that: (1) any such purchase by the Master Servicer shall be at the Purchase
Price and be accomplished in the manner set forth in Section 2.03(d) hereof; (2)
no such purchase shall be required so long as the Master Servicer either (i) is
diligently pursuing remedies against the appropriate insurer or insurers or
against the Servicer of the related Mortgage Loan or is contesting in good faith
the denial of liability by the appropriate insurer or insurers and either (A)
the related Mortgage Loan is not in default with regard to payments due
thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any premiums on any applicable Primary Mortgage
Insurance Policy and any related escrow payments in respect of such Mortgage
Loan are being advanced on a current basis by the Master Servicer or the
Servicer of the related Mortgage Loan, or (ii) pays to the appropriate payee the
amount in respect of such Mortgage Loan that the insurer under any applicable
Primary Mortgage Insurance Policy, the Pool Insurer under the Pool Insurance
Policy, the Special Hazard Insurer under the Special Hazard Insurance Policy and
the issuer of the Mortgagor Bankruptcy Bond would, in the aggregate, be liable
to pay, absent a denial of liability by any of them; (3) any payment made by the
Master Servicer pursuant to clause (ii) above shall be counted as an amount paid
by the Master Servicer to purchase Mortgage Loans in determining the limitations
stated in the next paragraph of this Section 2.03(b);
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and (4) the obligations of the Master Servicer to purchase any Mortgage Loan as
to which such a breach has occurred and is continuing shall be subject to the
limitations set forth in the next paragraph and shall constitute the sole remedy
against the Master Servicer in respect of such breach available to
Certificateholders or the Trustee on behalf of Certificateholders.
[In respect of Mortgage Loans that the Master Servicer becomes
obligated to purchase solely because of a breach of the representation and
warranty set forth in this Section 2.03(b), the Master Servicer's obligation to
purchase shall be limited to (X) in the first Purchase Year, the purchase of
Mortgage Loans having an aggregate Net Purchase Price (as defined below) not
exceeding an amount equal to [3%] of the aggregate Principal Balance of the
Mortgage Loans as of the Cut-off Date specified in the Reference Agreement, (Y)
in the second Purchase Year, the purchase of Mortgage Loans having an aggregate
Net Purchase Price not exceeding an amount equal to the lesser of (i) [2%] of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
(ii) the excess of the maximum amount set forth in clause (X) above over the
aggregate Net Purchase Price of the Mortgage Loans that the Master Servicer has
become obligated to purchase during the first Purchase Year and has purchased
and (Z) in the third through fifth Purchase Years, inclusive and on a cumulative
basis, the purchase of Mortgage Loans having an aggregate Net Purchase Price not
exceeding an amount equal to the lesser of (i) [1%] of the aggregate Principal
Balance of the Mortgage Loans as of the Cut-off Date and (ii) the excess of the
maximum amount set forth in clause (Y) above over the aggregate Net Purchase
Price of the Mortgage Loans that the Master Servicer has become obligated to
purchase during the second Purchase Year and has purchased. After the fifth
Purchase Year, the Master Servicer shall not be obligated to purchase any
Mortgage Loans solely because of a breach of the representation and warranty set
forth in this Section 2.03(b). The Net Purchase Price of such a Mortgage Loan
shall be the Purchase Price less the amount of Liquidation Proceeds, if any,
realized by the Master Servicer from any source (including, without limitation,
any insurer or the related Servicer) in the disposition of such Mortgage Loan
net of related Liquidation Expenses incurred by the Master Servicer. For the
purpose of determining the Purchase Year in which the Master Servicer is or is
not, as the case may be, obligated to purchase a Mortgage Loan in accordance
with this paragraph and for the purpose of determining the aggregate Net
Purchase Price of Mortgage Loans to be purchased in a Purchase Year or Purchase
Years, as the case may be, in accordance with this paragraph (the purchase of a
particular Mortgage Loan being at the Purchase Price and being accomplished in
the manner set forth in Section 2.03(d) hereof), the date of a purchase and the
date on which Liquidation Proceeds are realized by the Master Servicer in the
disposition of a Mortgage Loan shall be deemed to
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be the date on which the Master Servicer received notice of or discovered the
related breach of the representation or warranty set forth in this Section
2.03(b).]
(c) Upon discovery by the Depositor, the Master Servicer or the
Trustee of a breach of the representation and warranty set forth in Section
2.03(a) or 2.03(b) hereof that materially and adversely affects the interests of
the Certificateholders in the related Mortgage Loan, the party discovering such
breach shall give prompt written notice to the other parties.
(d) The Purchase Price for any Mortgage Loan purchased by the Master
Servicer pursuant to Section 2.03(a) or 2.03(b) hereof shall be deposited by the
Master Servicer in the Certificate Account pursuant to Section 3.08 hereof, and,
upon receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee shall release (or shall cause the applicable
Custodian to release) the related Mortgage File to the Master Servicer and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest title in the Master Servicer or
its designee, as the case may be, in any Mortgage Loan released pursuant hereto.
Notwithstanding anything contained herein or in the Reference Agreement to the
contrary, the Master Servicer shall not be entitled to substitute a Replacement
Mortgage Loan or Loans in satisfaction of such repurchase obligation.
(e) The representations and warranties set forth in Section 2.03(a) or
2.03(b) hereof shall survive delivery of the respective Mortgage Files to the
Trustee, or to a Custodian, as the duly appointed agent of the Trustee.
SECTION 2.04 Representations, Warranties and Covenants of the Depositor as to
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the Mortgage Loans.
------------------
The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date of the Reference Agreement, unless
otherwise specified in such Reference Agreement, that:
(i) as of the Cut-off Date specified in the Reference Agreement,
no Mortgage Loan is more than 30 days delinquent in payment of principal
and interest;
(ii) the information set forth in the Mortgage Loan Schedule
attached to the Reference Agreement is true and correct in all material
respects at the date or dates in respect of which such information is
furnished;
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(iii) as of the date of the initial issuance of the Certificates
pursuant to the Reference Agreement, if such Mortgage Loan is secured by a
Mortgaged Property that is a vacation or second home, such Mortgage Loan is
the subject of a Primary Mortgage Insurance Policy that insures at least
25% of the principal balance thereof; if such Mortgage Loan had a Loan-to-
Value Ratio at origination in excess of 80%, such Mortgage Loan is the
subject of a Primary Mortgage Insurance Policy that insures that portion of
the principal balance thereof that exceeds the amount equal to 75% of the
Appraised Value of the related Mortgaged Property; and such Mortgage Loan
does not have an initial Loan-to-Value Ratio in excess of 95%;
(iv) the Mortgaged Property consists of a single parcel of real
property with a detached single-family residence erected thereon, or a two-
to-four-family dwelling or an individual condominium unit that conforms
with applicable FNMA requirements regarding such dwellings; and the
residence or dwelling is not a mobile home or a manufactured dwelling;
(v) No Buydown Mortgage Loan involves Buydown Funds in excess of
20% of its Principal Balance at the Cut-off Date specified in the Reference
Agreement, and Buydown Mortgage Loans, if included in the Trust Fund, in
the aggregate do not represent in excess of 5% of the aggregate Principal
Balance of the Mortgage Loans at the Cut-off Date; and
(vi) as of the date of the initial issuance of the Certificates
pursuant to the Reference Agreement, the Depositor has good title to each
Mortgage Loan and each such Mortgage Loan is free of offsets, defenses or
counterclaims;
It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee or to a Custodian, as the duly appointed agent of the
Trustee.
Upon discovery by the Depositor, the Master Servicer or the Trustee
(or upon notice thereof from any Certificateholder) of a breach or breaches of
any of the representations and warranties set forth in this Section 2.04 that
materially and adversely affects, in the reasonable judgment of the Trustee, the
interests of the Certificateholders in the related Mortgage Loan, the party
discovering such breach or breaches shall give prompt written notice to the
other parties. The Master Servicer shall promptly notify the related Servicer
of such breach and request that such Servicer correct or cure such breach within
60 days from the date the Master Servicer was notified of such breach and, if
such Servicer does not correct or cure such breach within such period, or if
such breach cannot be so cured, that such
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Servicer, if and to the extent that such Servicer is obligated to do so under
the related Warranty and Servicing Agreement, either (a) remove such Mortgage
Loan (a "Deleted Mortgage Loan") from the Trust Fund and substitute in its place
a Replacement Mortgage Loan or Loans, which substitution shall be accomplished
within the time period specified in the Reference Agreement, in the manner and
subject to the conditions set forth in this Section and in the Reference
Agreement; or (b) repurchase the affected Mortgage Loan or Mortgage Loans from
the Trustee. Any such purchase by such Servicer shall be at the Purchase Price
and be accomplished in the manner set forth in the following paragraph, subject
to the terms and conditions set forth in the Reference Agreement with respect to
such substitution.
Subject to the terms and conditions set forth in the Reference
Agreement with respect to such substitution, as to any Replacement Mortgage Loan
or Loans, the related Servicer shall deliver to the Trustee (or to a Custodian,
as the duly appointed agent of the Trustee) for such Replacement Mortgage Loan
or Loans, the Mortgage Note, the Mortgage, the related assignment of the
Mortgage, and such other documents and agreements as are required by Section
2.01. No substitution will be made in any calendar month after the
Determination Date for such month. Monthly payments due with respect to
Replacement Mortgage Loans in the month of substitution shall not be part of the
related Trust Fund and will be retained by the Master Servicer and remitted by
the Master Servicer to the related Servicer on the next succeeding Distribution
Date. For the month of substitution, distributions to Certificateholders will
include the monthly payment due on such Deleted Mortgage Loan for such month and
thereafter such Servicer shall be entitled to retain all amounts received in
respect of such Deleted Mortgage Loan. The Trustee (or the related Custodian,
as the duly appointed agent of the Trustee) shall amend the Mortgage Loan
Schedule to reflect the removal of such Deleted Mortgage Loan and the
substitution of the Replacement Mortgage Loan or Loans. Upon such substitution,
the Replacement Mortgage Loan or Loans shall be subject to the terms of this
Agreement and the related Warranty and Servicing Agreement in all respects, the
Servicer shall be deemed to have made the representations and warranties with
respect to such Replacement Mortgage Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in this
Section as to the Depositor and Section 2.03 as to the Master Servicer. Upon
any such substitution, the Trustee shall release, or shall cause the applicable
Custodian to release, the Mortgage File relating to such Deleted Mortgage Loan
to the related Servicer and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest title in such Servicer or its designee, as the case may be, to any Deleted
Mortgage Loan substituted for pursuant to this Section 2.04.
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Subject to the terms and conditions set forth in the Reference
Agreement with respect to such substitution, for any month in which a Servicer
substitutes one or more Replacement Mortgage Loans for one or more Deleted
Mortgage Loans, the Master Servicer will determine the amount (if any) by which
the aggregate principal balance of all such Replacement Mortgage Loans as of the
date of substitution is less than the aggregate Principal Balance of all such
Deleted Mortgage Loans (after application of the scheduled principal portion of
the monthly payments due in the month of substitution). The amount of such
shortage shall be deposited into the Certificate Account by such Servicer in the
month of substitution pursuant to Section 3.08, without any reimbursement
therefor.
In the event that a Servicer shall have repurchased a Mortgage Loan,
upon receipt by the Trustee of written notification of the deposit of the
Purchase Price pursuant to Section 3.08, signed by a Servicing Officer, the
Trustee shall release, or shall cause the Custodian to release, the related
Mortgage File to such Servicer and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest title in such Servicer or its designee, as the case may be,
to any Mortgage Loan purchased pursuant to this Section 2.04. In the event that
the related Servicer does not repurchase or substitute for a Mortgage Loan as to
which a breach has occurred and is continuing, the Depositor shall either
repurchase such Mortgage Loan or substitute a Replacement Mortgage Loan, in the
manner specified in this Section 2.04. It is understood and agreed that the
obligation of the related Servicer or the Depositor to repurchase any Mortgage
Loan as to which a breach has occurred and is continuing shall constitute the
sole remedy with respect to such breach available to Certificateholders or the
Trustee on behalf of Certificateholders, except as provided in Section 2.03(b).
SECTION 2.05 Representations and Warranties of Servicers.
-------------------------------------------
(a) Upon the discovery by the Depositor, the Master Servicer or the
Trustee of a breach or breaches of any of the representations and warranties
made in a Warranty and Servicing agreement in respect of any Mortgage Loan,
which breach or breaches, individually or in the aggregate, materially and
adversely affect, in the reasonable judgment of the Trustee, the interests of
the Certificateholders, the party discovering such breach shall give prompt
written notice to the other parties. The Master Servicer shall promptly notify
the related Servicer of such breach and request that such Servicer cure such
breach within 90 days from the date the Master Servicer discovers, or was
notified of, such breach, and if such Servicer does not cure such breach in all
material respects, that such Servicer, if and to the extent that such Servicer
is obligated to do so under the related Warranty and Servicing Agreement, either
(a) substitute a
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Replacement Mortgage Loan or Loans for the related Mortgage Loan, which
substitution must occur within the time period specified in the Reference
Agreement and shall be subject to the conditions set forth in Section 2.04 and
the terms and conditions with respect to such substitution set forth in the
Reference Agreement, or (b) purchase such Mortgage Loan from the Trustee at the
Purchase Price and in the manner set forth in Section 2.02 hereof. Upon receipt
by the Trustee of written notification of the deposit of the Purchase Price
pursuant to Section 3.08 by the Servicer signed by a Servicing Officer, the
Trustee shall release or shall cause the Custodian to release the related
Mortgage File to such Servicer and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest title to any Mortgage Loan purchased pursuant to this Section 2.05(a) in
such Servicer or its respective designees. Except as set forth in 2.03(b)
hereof, it is understood and agreed that the obligation of such Servicer to
substitute for or to purchase any Mortgage Loan as to which such breach (or
breaches) has occurred and is continuing shall constitute the sole remedy with
respect to such breach or breaches available to the Trustee on behalf of the
Certificateholders.
(b) In the case of a Mortgage Loan that the Master Servicer becomes
obligated to purchase pursuant to Section 2.03(b) hereof and a Servicer becomes
obligated to purchase pursuant to Section 2.05(a) hereof, the Master Servicer
shall, so long as all advances are being made in respect of such Mortgage Loan
pursuant to Section 3.09, Section 4.01 or Section 4.03 hereof, first require the
Servicer to substitute for or to purchase such Mortgage Loan pursuant to Section
2.05(a) hereof, second, if such Servicer has defaulted in its obligation to
substitute for or to purchase such Mortgage Loan (but without relieving it of
its obligation to make such purchase), present claims under the relevant
Required Insurance Policies to the extent the Master Servicer believes any such
Required Insurance Policy may cover the loss in respect of such Mortgage Loan,
and, third, if any loss in respect of such Mortgage Loan is not fully covered by
the Required Insurance Policies, subject to the limitations set forth in Section
2.03(b) hereof, purchase such Mortgage Loan in accordance with Sections 2.03(b)
and 2.03(d) hereof. If all advances are not being made in respect of such
Mortgage Loan pursuant to Section 3.09, Section 4.01 or Section 4.03 hereof, the
Servicer or Seller does not substitute for or purchase such Mortgage Loan
pursuant to Section 2.05(a) hereof within seven days after such request and any
claims presented under any Required Insurance Policies in accordance with the
next preceding sentence are not paid in full within 14 days after such request,
the Master Servicer shall, subject to the limitations set forth in Section
2.03(b) hereof, purchase such Mortgage Loan in accordance with Sections 2.03(b)
and 2.03(d) hereof.
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SECTION 2.06 Assignment of Rights under Warranty and Servicing Agreements.
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The Depositor hereby assigns to the Trustee all its right, title and
interest in respect of each Warranty and Servicing Agreement applicable to a
Mortgage Loan identified in the Mortgage Loan Schedule attached to the Reference
Agreement insofar as such Warranty and Servicing Agreement relates to the
representations and warranties made by the related Servicer in respect of such
Mortgage Loan and any remedies provided thereunder for any breach of such
representations and warranties, as well as insofar as the provisions of such
Warranty and Servicing Agreement relate to the administration and servicing of
the Mortgage Loans serviced thereunder, which right, title and interest may be
enforced by the Master Servicer on behalf of the Depositor, the Trustee and the
Certificateholders. The Master Servicer shall enforce the provisions of the
Warranty and Servicing Agreements relating to the administration and servicing
of the Mortgage Loans serviced thereunder in accordance with the provisions of
Article III.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01 Master Servicer to Act as Master Servicer.
-----------------------------------------
For and on behalf of the Trustee and the Certificateholders, the
Master Servicer shall service and administer the Mortgage Loans in accordance
with prudent mortgage loan servicing standards and procedures generally accepted
in the mortgage banking industry and generally in accordance with FNMA
guidelines, except as otherwise expressly provided in this Agreement. Each FHA
Loan and VA Loan at any time subject to this Agreement shall be serviced and
administered by the Master Servicer in accordance with applicable FHA and VA
Regulations, respectively. In connection with such servicing and
administration, the Master Servicer, subject to the immediately preceding
sentence, shall have full power and authority, acting alone and/or through
Servicers as provided in Section 3.02 hereof, to do or cause to be done any and
all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement and applicable FHA and VA Regulations),
(iii) to collect any Insurance Proceeds and Liquidation Proceeds, and (iv) to
effectuate foreclosure or other
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conversion of the ownership of the Mortgaged Property securing any Mortgage
Loan; provided that the Master Servicer shall take no action that is
inconsistent with or prejudices the interests of the Trustee or the
Certificateholders under this Agreement. Without limiting the generality of the
foregoing, the Master Servicer, in its own name or in the name of the Depositor
and the Trustee, is hereby authorized and empowered by the Depositor and the
Trustee, when the Master Servicer believes it appropriate in its best judgment,
to execute and deliver , on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties. The Depositor and the Trustee shall furnish the
Master Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer to service and administer the Mortgage
Loans.
In accordance with the standards of the preceding paragraph, the
Master Servicer, with respect to any Nonsubserviced Mortgage Loan and otherwise,
to the extent the related Servicer does not do so, shall advance or cause to be
advanced funds as necessary for the purpose of effecting the timely payment of
taxes and assessments on the Mortgaged Property, which advances shall be
reimbursable in the first instance from related collections from the Mortgagors
pursuant to Section 3.08 hereof, and further as Liquidation Expenses as provided
in Section 3.16 hereof and may be withdrawn from the Certificate Account
pursuant to Section 3.12 hereof. All costs incurred by the Master Servicer or
by the related Servicers in effecting the timely payment of taxes and
assessments on the Mortgaged Properties shall not, for the purpose of
calculating monthly distributions to the Certificateholders, be added to the
Principal Balance under the related Mortgage Loans, notwithstanding that the
terms of such Mortgage Loans so permit.
In the event that the Depositor elects to treat the related Trust Fund
as a REMIC (as defined in the Code) in the Reference Agreement, the Master
Servicer shall (unless otherwise specified in such Reference Agreement) act as
agent on behalf of the Trust Fund and that in such capacity it shall: (a)
prepare and file, or cause to be prepared and filed, a federal tax return using
a calendar year as the taxable year for the Trust Fund when and as required by
the applicable provisions of the Code; (b) make an election, on behalf of the
Trust Fund, to be treated as a REMIC on the federal tax return of the Trust Fund
for its first taxable year, in accordance with the applicable provisions of the
Code; (c) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the applicable provisions of the Code; (d) conduct
the affairs of the Trust Fund so as to maintain the status thereof as a REMIC
under the applicable provisions of the Code; (e) not knowingly or
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intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust Fund; and (f) pay the amount of any
federal income tax, including prohibited transaction penalty taxes, imposed on
the Trust Fund when and as the same shall be due and payable.
SECTION 3.02 Enforcement of the Obligations of Servicers.
-------------------------------------------
(a) For purposes of this Agreement, the Master Servicer shall be
deemed to have received the payments on the Mortgage Loans referred to in
Sections 3.08, 3.09 and 3.10 hereof when the related Servicer has received such
payments and shall remain obligated to deposit such payments in accordance with
Section 3.08, 3.09 and 3.10 hereof, regardless of whether such payments are
remitted by the Servicer to the Master Servicer, subject to the provisions of
Section 4.03. The Master Servicer and the Servicer may enter into amendments to
the Warranty and Servicing Agreements; provided, however, that any such
amendments shall be otherwise consistent with and shall not violate the
provisions of this Agreement; and provided further, that the substance of any
such material amendment or material change shall be transmitted promptly to the
Trustee.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Depositor, the Trustee and the
Certificateholders, shall supervise, administer, monitor and oversee the
servicing of the Mortgage Loans that are not serviced by it directly, and shall
enforce the obligations of each Servicer under the related Warranty and
Servicing Agreement, including, without limitation, the obligation of the
Servicer to make advances in respect of delinquent payments as required by a
Warranty and Servicing Agreement, to purchase a Mortgage Loan on account of
defective documentation, as described in Section 2.02 hereof, or on account of a
breach of a representation or warranty, as described in Section 2.05(a) hereof.
Such enforcement, shall include, without limitation, the legal prosecution of
claims, termination of Warranty and Servicing Agreements, as appropriate, and
the pursuit of other appropriate remedies, and shall be in such form and carried
out to such an extent and at such time as the Master Servicer, in its good faith
business judgement, would require were it the owner of the related Mortgage
Loans. The Master Servicer shall pay the costs of such enforcement at its own
expense, but shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement only to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Mortgage Loans or (ii) from a
specific recovery of costs, expenses or attorneys' fees against the party
against whom such enforcement is directed.
(c) During the term of the Reference Agreement, the Master Servicer
shall consult fully with each of the Servicers as may be necessary from time to
time to perform and
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carry out the Master Servicer's obligations hereunder and receive, review and
evaluate all reports, information and other data that are provided to the Master
Servicer by each Servicer and otherwise exercise reasonable efforts to cause
each Servicer to perform and observe the covenants, obligations and conditions
to be performed or observed by it under its Warranty and Servicing Agreement.
If any Servicer materially breaches or fails to perform or observe any material
obligations or conditions of its Warranty and Servicing Agreement, the Master
servicer shall promptly deliver to the Depositor and to the Trustee an Officers'
Certificate certifying that such Servicer is in default and describing the
events and circumstances giving rise to the default and what action (if any) has
been, or is to be, taken by the Servicer to cure the default and setting forth
the action to be taken by the Master Servicer.
SECTION 3.03 Successor Servicers.
-------------------
Upon the request of a Servicer, the Master Servicer or the related
Servicer shall be entitled to terminate or assign the rights of the Servicer
under the related Warranty and Servicing Agreement in accordance with the terms
and conditions of such Warranty and Servicing Agreement. The Master Servicer
will not unreasonably withhold its consent to the transfer of the servicing
obligations; provided, however, that in the event of termination or assignment
of the rights of the Servicer under any Warranty and Servicing Agreement by the
Master Servicer or the Servicer, the Master Servicer shall act in accordance
with Section 3.04; and provided, further that no assignment of the Servicer's
rights and obligations under a Warranty and Servicing Agreement may be effected
without the consent of the Trustee. No such termination shall effect the right
of a Servicer to receive any retained yield provided for in the Warranty and
Servicing Agreement.
SECTION 3.04 Termination of the Rights of Servicers.
--------------------------------------
If the Master Servicer terminates the rights of a Servicer under any
Warranty and Servicing Agreement, the Master Servicer shall assume the
obligations of the related Servicer under the terminated Warranty and Servicing
Agreement, or at the Master Servicer's election, enter into a substitute
servicing agreement with another mortgage loan service company acceptable to the
Trustee and the Master Servicer under which such mortgage loan service company
shall assume, satisfy, perform and carry out all liabilities, duties,
responsibilities and obligations that are to be, or otherwise were to have been,
satisfied, performed and carried out by the terminated Servicer, regardless of
whether such liabilities, duties, responsibilities or obligations shall have
accrued before or after the termination of the rights of such Servicer,
including but not limited to, the Servicer's obligations to purchase certain
Mortgage Loans and any other liabilities or obligations of the Servicer arising
from the
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breach of any representations and warranties contained in the related Warranty
and Servicing Agreement; provided, however that any such substitute servicing
shall satisfy the requirements of Section 3.02. If the Master Servicer does not
elect to enter into a substitute servicing agreement with a successor servicer,
the Master Servicer shall nevertheless assume, satisfy, perform and carry out
all liabilities, duties, responsibilities and obligations which otherwise were
to have been satisfied, performed and carried out by the Servicer under such
terminated Warranty and Servicing Agreement until a substitute Servicer has been
appointed and designated and a substitute servicing agreement has been entered
into by the Master Servicer and such substitute servicer.
SECTION 3.05 Liability of the Master Servicer.
--------------------------------
Notwithstanding the provisions of any Warranty and Servicing
Agreement, any of the provisions of this Agreement relating to agreements or
arrangements between the Master Servicer or a Servicer or reference to actions
taken through a Servicer or otherwise, the Master Servicer shall remain
obligated and liable to the Depositor, the Trustee and the Certificateholders of
the related Series for the servicing and administering of the Mortgage Loans
included in the Trust Fund for such Series in accordance with the provisions of
this Agreement without diminution of such obligation or liability by virtue of
such Warranty and Servicing Agreements or agreements or arrangements or by
virtue of indemnification from the Servicer and to the same extent and under the
same terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to
enter into any agreement with the Depositor or a Servicer for indemnification of
the Master Servicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
SECTION 3.06 Rights of the Depositor and the Trustee in Respect of the Master
----------------------------------------------------------------
Servicer.
--------
The Master Servicer shall afford the Depositor and the Trustee, upon
reasonable notice, during normal business hours, access to all records
maintained by the Master Servicer in respect of its rights and obligations
hereunder and access to officers of the Master Servicer responsible for such
obligations. The Depositor may, but is not obligated to, enforce the
obligations of the Master Servicer hereunder and may, but is not obligated to,
perform, or cause a designee to perform, any defaulted obligation of the Master
Servicer hereunder or exercise the rights of the Master Servicer hereunder;
provided that the Master Servicer shall not be relieved of any of its
obligations hereunder by virtue of such performance by the Depositor or its
designee. The Depositor shall not have any responsibility or
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liability for any action or failure to act by the Master Servicer and is not
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
SECTION 3.07 Trustee to Act as Servicer.
--------------------------
In the event that the Master Servicer shall for any reason no longer
be the Master Servicer hereunder (including by reason of an Event of Default),
the Trustee or its designee shall thereupon assume all of the rights and
obligations of the Master Servicer under each Warranty and Servicing Agreement
that may have been assigned to the Trustee pursuant to Section 2.06 hereof or
any substitute servicing agreement that may have been entered into by the Master
Servicer pursuant to Section 3.04 hereof. The Trustee, its designee or any
successor master servicer shall be deemed to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer under each
Warranty and Servicing Agreement or substitute servicing agreement, except that
the Master Servicer shall not thereby be relieved of any liability or
obligations under the Warranty and Servicing Agreement or substitute servicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents and
records relating to each Warranty and Servicing Agreement or substitute
servicing agreement and the Mortgage Loans then being serviced thereunder and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Warranty and
Servicing Agreement or substitute servicing agreement to the assuming party.
SECTION 3.08 Collection of Mortgage Loan Payments; Certificate Account.
---------------------------------------------------------
The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of the Pool Insurance Policy, the Mortgagor Bankruptcy
Bond, the Special Hazard Insurance Policy, any FHA Certificate of Mortgage Loan
Insurance or VA Loan Guaranty Certificate (and applicable FHA and VA Regulations
relating thereto), the Letter of Credit or any Alternative Credit Support,
follow such collection procedures as it follows with respect to mortgage loans
comparable to the Mortgage Loans and held in its own portfolio and serviced by
the Master Servicer. Consistent with the foregoing, the Master Servicer may in
its discretion (i) waive any late payment charge or any prepayment charge or
penalty interest in connection with the prepayment of a Mortgage Loan and (ii)
only upon determining that the coverage of such Mortgage Loan by the Pool
Insurance Policy, the Mortgagor Bankruptcy Bond, the Special Hazard Insurance
Policy, any related Primary Mortgage Insurance Policy,
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FHA Certificate of Mortgage Loan Insurance or VA Loan Guaranty Certificate,
Letter of Credit or Alternative Credit Support, will not be affected, extend the
due dates for payments due on a Mortgage Note for a period not greater than 125
days. In the event of any such arrangement, the Master Servicer shall make
timely advances on the related Mortgage Loan during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements.
The Master Servicer shall establish and maintain, in the name of the
Trustee on behalf of the Certificateholders, the Certificate Account, in which
the Master Servicer shall deposit on a daily basis, or as and when received from
the Servicers except as otherwise specifically provided herein, the following
payments and collections received or made by it subsequent to the Cut-off Date
(other than in respect of principal of and interest on the Mortgage Loans due on
or before the Cut-off Date):
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of any portion
thereof retained by the related Servicer, if any, as servicing compensation
and any retained yield payable to the Servicer) on the Mortgage Loans;
(iii) all Insurance Proceeds and Liquidation Proceeds, other
than proceeds 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;
(iv) all amounts required to be deposited therein from the
Reserve Fund pursuant to Section 3.25 and the Reference Agreement;
(v) all payments received by the Trustee under the Letter of
Credit and any payments under any Alternative Credit Support;
(vi) all Monthly Advances made by the Master Servicer pursuant to
Sections 4.01, 4.03 or 4.05 hereof and all Servicer Advances, as described
in Section 3.09 hereof;
(vii) any amount required to be deposited by the Master Servicer
pursuant to the second succeeding paragraph of this Section 3.08 in
connection with any losses on Eligible Investments;
(viii) any amounts required to be deposited by the Master
Servicer pursuant to Sections 3.13, 3.14 and 3.23 hereof;
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(ix) all proceeds of any Mortgage Loans or property acquired in
respect of the Mortgage Loans purchased pursuant to Sections 2.02, 2.04,
2.05, 3.15 or 9.01 hereof and all amounts required to be deposited in
connection with the substitution of Replacement Mortgage Loans pursuant to
Sections 2.02, 2.04 or 2.05 hereof;
(x) any Buydown Funds required to be deposited by the Master
Servicer in the Certificate Account pursuant to Section 3.26 hereof.
The foregoing requirements for deposit by the Master Servicer in the Certificate
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of prepayment
or late payment charges or assumption fees need not be deposited by the Master
Servicer in the Certificate Account. In the event that the Master Servicer
shall deposit in the Certificate Account any amount not required to be deposited
therein, it may at any time withdraw such amount from the Certificate Account,
any provision herein to the contrary notwithstanding. Such withdrawal may be
accomplished by delivering an Officers' Certificate to the Trustee which
describes the amounts deposited in error in the Certificate Account. If the
facts set forth on the face of such Officers' Certificate indicate that amounts
deposited were not required to be deposited under the terms of this Section
3.08, the Trustee shall, in writing, authorize the Master Servicer to withdraw
such amount from the Certificate Account. All funds deposited by the Master
Servicer in the Certificate Account shall be held by the Master Servicer in
trust for the Certificateholders until disbursed in accordance with the
Reference Agreement or withdrawn in accordance with Section 3.12.
The Master Servicer may cause the institution maintaining the
Certificate Account to invest the funds in the Certificate Account in Eligible
Investments, which shall mature not later than the Business Day next preceding
the Distribution Date next following the date of such investment (except that if
such Eligible Investment is an obligation of the institution that maintains the
Certificate Account, then such Eligible Investment shall mature not later than
such Distribution Date) and shall not be sold or disposed of prior to its
maturity. All such Eligible Investments shall be made in the name of the
Trustee (in its capacity as such) or its nominee. All income and gain realized
from any such investment shall be for the benefit of the Master Servicer and
shall be subject to its withdrawal or order from time to time. The amount of
any losses incurred in respect of any such investments shall be deposited in the
Certificate Account by the Master Servicer out of its own funds immediately as
realized.
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The Master Servicer shall give notice to the Trustee and the Depositor
of the location of the Certificate Account, and of any change thereof, prior to
the use thereof.
If so specified in the Reference Agreement with respect to a Series,
amounts to be deposited in the Certificate Account pursuant to this Section 3.08
shall instead be deposited by the Master Servicer in a Custodial Account and
remitted, net of amounts withdrawn pursuant to Section 3.12 hereof, by wire
transfer of immediately available funds to the Certificate Account established
by the Trustee pursuant to the Reference Agreement on the date specified in such
Reference Agreement.
SECTION 3.09 Servicing Accounts.
------------------
In those cases where a Servicer is servicing a Mortgage Loan pursuant
to a Warranty and Servicing Agreement, the Servicer will, pursuant to the
Warranty and Servicing Agreement, be required to establish and maintain one or
more Servicing Accounts. The Servicer will be required thereby to deposit into
the Servicing Account on a daily basis all proceeds of Mortgage Loans received
by the Servicer, subject to withdrawal to the extent permitted by such Warranty
and Servicing Agreement. All amounts held in the Servicing Accounts shall be
held in trust for the Trustee for the benefit of the Certificateholders. On the
Servicer Remittance Date, the Servicer will, pursuant to the related Warranty
and Servicing Agreement, be required to remit to the Master Servicer for deposit
in the Certificate Account an amount equal to the sum of (i) all amounts
received by the Servicer with respect to the Mortgage Loans serviced by it as of
the Servicer Remittance Date, except (a) any monthly payment prepaid for a Due
Date subsequent to the month in which the Servicer Remittance Date occurs, (b)
any amounts received by such Servicer with respect to such Mortgage Loans that
constitute a late recovery with respect to an advance previously made by such
Servicer with respect to such Mortgage Loans, and (c) any Retained Yield payable
to such Servicer under the terms of such Warranty and Servicing Agreement; (ii)
all partial Principal Prepayments received in the calendar month prior to the
month of the Servicer Remittance Date or applied as of the Due Date in the month
of the Servicer Remittance Date; (iii) all Principal Prepayments in full
received in the calendar month prior to the month of the Servicer Remittance
Date, in each case together with a full month's interest thereon at the Mortgage
Rate (net of the related servicing compensation and any Retained Yield payable
to such Servicer under the terms of such Warranty and Servicing Agreement)
whether or not received from the Mortgagor; (iv) all Insurance Proceeds and
Liquidation Proceeds (net of Liquidation Expenses) received in the calendar
month prior to the month of the Servicer Remittance Date; and (v) with respect
to each Mortgage Loan for which the monthly payment due on the immediately
preceding Due Date was delinquent as of the Servicer Remittance Date, an amount
equal to such payment net of the
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servicing compensation and any Retained Yield payable to such Servicer (a
"Servicer Advance"). The Servicer may deduct from each remittance, as provided
above, an amount equal to the servicing fee to which it is then entitled
pursuant to the Warranty and Servicing Agreement, to the extent not previously
paid to or retained by it. Any installments as to which the Servicer has not
made an advance will be subject to the Master Servicer's obligation to advance
set forth herein.
SECTION 3.10 Collection of Taxes, Assessments and Similar Items; Escrow
----------------------------------------------------------
Accounts.
--------
In addition to the Certificate Account, the Master Servicer shall,
and, pursuant to the Warranty and Servicing Agreements, the Servicers will be
required to, establish and maintain one or more custodial accounts (each, an
"Escrow Account") and deposit and retain therein all collections from the
Mortgagors (or advances by Servicers or the Master Servicer) for the payment of
taxes, assessments, hazard insurance premiums, Primary Mortgage Insurance Policy
premiums, if applicable, or comparable items for the account of the Mortgagors.
Escrow Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, Primary Mortgage Insurance Policy, or FHA Certificate of Mortgage Loan
Insurance, if applicable, or comparable items, to reimburse the Master Servicer
or Servicer out of related collections for any payments made pursuant to
Sections 3.01 hereof (with respect to taxes and assessments), 3.13 hereof (with
respect to the Primary Insurance Policy) and 3.14 hereof (with respect to hazard
insurance), to refund to any Mortgagors any sums as may be determined to be
overages, to pay interest, if required, to Mortgagors on balances in the Escrow
Account or to clear and terminate the Escrow Account at the termination of this
Agreement in accordance with Section 9.01 hereof. As part of its servicing
duties, the Master Servicer shall, and the Servicers will, pursuant to the
Warranty and Servicing Agreements, be required to, pay to the Mortgagors
interest on funds in the Escrow Account to the extent required by law.
The Master Servicer shall, with respect to each Nonsubserviced
Mortgage Loan and with respect to each Mortgage Loan serviced under a Warranty
and Servicing Agreement, to the extent the related Servicer does not do so,
advance the payments referred to in the preceding paragraph that are not timely
paid by the Mortgagors; provided, however, that the Master Servicer shall be
required to so advance only to the extent that such advances, in the good faith
judgment of the Master Servicer, will be recoverable by the Master Servicer out
of Insurance Proceeds,
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Liquidation Proceeds or otherwise; and provided, further, that such payments
shall be advanced when the tax, premium or other cost for which such payment is
intended is due.
SECTION 3.11 Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Mortgage Loans.
--------------
In order to permit Certificateholders to comply with Sections 171 and
1276 of the Code, the Master Servicer shall, upon request of any
Certificateholder, furnish such Certificateholder with a statement setting forth
the number and principal balance of Mortgage Loans that were originated before
[July 18, 1984] and before [September 27, 1985.]
The Master Servicer shall provide the Depositor and the Trustee access
to all records and documentation regarding the Mortgage Loans and all accounts,
insurance policies and other matters relating to this Agreement, such access
being afforded without charge, but only upon reasonable request and during
normal business hours at the offices of the Master Servicer designated by it.
SECTION 3.12 Permitted Withdrawals from the Certificate Account.
--------------------------------------------------
The Master Servicer may, from time to time, make withdrawals from the
Certificate Account for the following purposes:
(i) to pay to itself as servicing compensation that portion of
any payment as to interest that equals the Servicing Fee with respect to
such Mortgage Loan for the period with respect to which such interest
payment was made, and, as additional servicing compensation, earnings on
the amounts in the Certificate Account credited to the Certificate Account,
and to pay any Retained Yield and the Administrative Fee to the Depositor
(for disbursement in accordance with Section 3.19 hereof);
(ii) to reimburse itself for advances made pursuant to Sections
3.09, 3.10, 4.01, 4.02 and 4.03 hereof, such right of reimbursement
pursuant to this subclause (ii) being limited to amounts received on
particular Mortgage Loans (including, for this purpose, Insurance Proceeds,
Liquidation Proceeds, amounts representing proceeds of other insurance
policies, if any) covering the related Mortgaged Property, which represent
(a) late recoveries of payments of principal and/or interest in respect of
which any such advance was made in the case of advances pursuant to
Sections 3.09, 4.01, 4.02 and 4.03 hereof, and (b) late recoveries of the
payments for which such advances were made in the case of advances pursuant
to Section 3.10 hereof;
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(iii) to reimburse itself for any Nonrecoverable Advances;
(iv) to reimburse itself from Insurance Proceeds and Liquidation
Proceeds for amounts expended by it pursuant to Section 3.16 hereof in good
faith in connection with the restoration of property damaged by an
Uninsured Cause;
(v) to reimburse itself from Insurance Proceeds for Insured
Expenses and to pay any unpaid servicing compensation to itself, any
Retained Yield and any Administrative Fee to the Depositor from Insurance
Proceeds, such payment of servicing compensation, Retained Yield and
Administrative Fee to be made in accordance with Section 3.19 hereof and
being limited to the amount, if any, by which the aggregate of Liquidation
Proceeds and Insurance Proceeds received in connection with the liquidation
of a defaulted Mortgage Loan is, after the deduction of Insured Expenses,
servicing compensation payable to the Servicer of such Mortgage Loan, if
any, and any amounts deducted pursuant to subclause (iv) above, in excess
of the Principal Balance of such Mortgage Loan, together with accrued and
unpaid interest thereon at the Pass-Through Rate;
(vi) to reimburse itself from Liquidation Proceeds for
Liquidation Expenses and, to the extent that Liquidation Proceeds after
such reimbursement, and any other reimbursement pursuant to subclause (iv)
above are in excess of the Principal Balance of the related Mortgage Loan
together with accrued and unpaid interest thereon at the Pass-Through Rate,
to pay out of such excess the amount of any unpaid servicing compensation
with respect to the related Mortgage Loan to itself and any Retained Yield
and the Administrative Fee to the Depositor (for disbursement in accordance
with Section 3.19 hereof);
(vii) to pay to itself, a Servicer or the Depositor, as the case
may be, with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased pursuant to Section 2.02, 2.04, 2.05, 3.15
or 9.01 hereof, all amounts received thereon and not taken into account in
determining the related Principal Balance of such repurchased Mortgage
Loan;
(viii) to reimburse itself or the Depositor for expenses
incurred by and reimbursable to it or the Depositor pursuant to Section
6.03 hereof;
(ix) to make deposits into the Reserve Fund, as required by the
Reference Agreement;
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(x) to make payments to the Certificateholders, or remittances to
the Trustee in the amounts, and in the manner, specified in the Reference
Agreement;
(xi) to pay to itself any interest earned on or investment income
with respect to funds in the Certificate Account (all such interest or
income to be withdrawn monthly on such Distribution Date); and
(xii) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Section 9.01 hereof.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Certificate Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi).
SECTION 3.13 Maintenance of the Pool Insurance Policy, Primary Mortgage
----------------------------------------------------------
Insurance Policies, FHA Insurance and VA Loan Guarantees;
---------------------------------------------------------
Collections Thereunder.
----------------------
If so specified in the Reference Agreement, the Master Servicer shall
exercise its reasonable best efforts to maintain the Pool Insurance Policy in
full force and effect throughout the term of this Agreement, unless coverage
thereunder has been exhausted through payment of claims. The Master Servicer
shall pay the premiums for the Pool Insurance Policy on a timely basis. In the
event that the Pool Insurer shall cease to be a Qualified Insurer because it
shall not be qualified to transact a mortgage guaranty insurance business under
the laws of the state of its principal place of business or any other state that
has jurisdiction over the Pool Insurer in connection with the Pool Insurance
Policy or if the Pool Insurance Policy is cancelled or terminated for any reason
(other than the exhaustion of the total coverage), the Master Servicer shall
exercise its reasonable best efforts to obtain from another Qualified Insurer a
replacement policy comparable to the Pool Insurance Policy with a total coverage
that is equal to the then existing coverage of the Pool Insurance Policy;
provided, however, that if the cost of any such replacement policy shall be
greater than the cost of the Pool Insurance Policy, the amount of coverage of
such replacement policy shall, unless the Depositor consents to coverage at a
higher level, be reduced to a level such that the premium rate therefor shall
not exceed the premium rate on such Pool Insurance Policy. In the event the
Pool Insurer shall cease to be a Qualified Insurer because it is approved as an
insurer by neither FHLMC nor FNMA, the Master Servicer agrees to review, not
less often than monthly, the financial condition of the Pool Insurer. If the
Master Servicer determines that recoveries are so jeopardized, it shall exercise
its reasonable best efforts to obtain, from another Qualified Insurer, a
replacement pool insurance policy, subject to the cost limitation set forth
above.
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Prior to obtaining any replacement pool insurance policy, the Master Servicer
shall notify the Depositor of the replacement pool insurance policy the Master
Servicer intends to obtain and, if the Depositor so directs, obtain a
replacement pool insurance policy approved by the Depositor.
The Master Servicer shall not take, or permit any Servicer to take,
any action that would result in loss of coverage under any applicable Primary
Mortgage Insurance Policy, FHA Certificate of Mortgage Loan Insurance or VA Loan
Guaranty Certificate of any loss which, but for the actions of the Master
Servicer or Servicer, would have been covered thereunder. The Master Servicer
shall use its reasonable best efforts to keep in full force and effect each such
Primary Mortgage Insurance Policy, FHA Certificate of Mortgage Loan Insurance or
VA Loan Guaranty Certificate applicable to a Nonsubserviced Mortgage Loan, and
shall use its reasonable best efforts to cause each Servicer to keep in full
force and effect, each Primary Mortgage Insurance Policy applicable to a
Mortgage Loan being serviced by it, until, in the case of a Primary Mortgage
Insurance Policy, (i) the principal balance of the related Mortgage Loan is
reduced to 80% or less of the Appraised Value, in the case of a Mortgage Loan
having a Loan-to-Value Ratio at origination in excess of 80%, and (ii) the
principal balance of the related Mortgage Loan is reduced to 75% or less of its
Appraised Value, and, in the case of an FHA Certificate of Mortgage Loan
Insurance or VA Loan Guaranty Certificate, until the related Mortgage Loan is
fully paid. The Master Servicer agrees to pay, with respect to each
Nonsubserviced Mortgage Loan, and otherwise, to the extent the related Servicer
does not do so, the premiums for each Primary Mortgage Insurance Policy or FHA
Certificate of Mortgage Loan Insurance on a timely basis and shall use its
reasonable best efforts to cause itself or the Servicer to be named as loss
payee. In the event that the insurer under any Primary Mortgage Insurance
Policy shall cease to be qualified to transact a mortgage guaranty insurance
business under the laws of the state of its organization or any other state that
has jurisdiction over such insurer (or if such insurer's claims-paying ability
shall cease to be acceptable to the Rating Agency) or such Primary Mortgage
Insurance Policy is cancelled or terminated for any reason, the Master Servicer
shall exercise its reasonable best efforts to obtain, or to cause the related
Servicer to obtain, from another Qualified Insurer, a replacement policy
comparable to such Primary Mortgage Insurance Policy with a total coverage that
is equal to the then existing coverage of such Primary Mortgage Insurance
Policy. The Master Servicer shall not cancel or refuse to renew any such
Primary Mortgage Insurance Policy with respect to a Nonsubserviced Mortgage
Loan, or consent to the cancellation or refusal to renew any such Primary
Mortgage Insurance Policy applicable to any other Mortgage Loan, which is in
effect at the date of the initial issuance of the Certificates pursuant to the
Reference Agreement and is required to be kept in force hereunder unless the
replacement Primary Mortgage Insurance
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Policy for such cancelled or non-renewed policy is maintained with an insurer
whose claims-paying ability is acceptable to the Rating Agency. In connection
with any assumption and modification agreement entered into by the Master
Servicer or a Servicer pursuant to Section 3.15, the Master Servicer shall
promptly notify the insurer under the related Primary Mortgage Insurance Policy.
If such Primary Mortgage Insurance Policy is terminated as a result of such
assumption, the Master Servicer shall obtain a replacement Primary Mortgage
Insurance Policy as provided above.
In connection with its activities as administrator and servicer of the
Mortgage Loans, the Master Servicer agrees to present, on behalf of itself, the
Depositor, the Trustee and the Certificateholders, claims to the Pool Insurer
under the Pool Insurance Policy, to the insurer under any Primary Mortgage
Insurance Policies, to FHA and the VA, as applicable, and, in this regard, to
permit recovery under the Pool Insurance Policy, any Primary Mortgage Insurance
Policies and any FHA Certificate of Mortgage Loan Insurance or any VA Loan
Guaranty Certificate with respect to defaulted Mortgage Loans. Pursuant to
Section 3.08 hereof, any amounts collected by the Master Servicer under the Pool
Insurance Policy, any Primary Mortgage Insurance Policy, any FHA Certificate of
Mortgage Loan Insurance or any VA Loan Guaranty Certificate shall be deposited
in the Certificate Account, subject to withdrawal pursuant to Section 3.12
hereof. If the Master Servicer is required to receive FHA debentures as the
method of payment on an FHA insurance claim, the Master Servicer shall deposit
cash into the Certificate Account in an amount equal to the face value of such
FHA debentures, whereupon such FHA debentures will become the property of the
Master Servicer. In those cases in which a Mortgage Loan is serviced by a
Servicer, the Servicer, on behalf of itself, the Master Servicer, the Depositor,
the Trustee and the Certificateholders, will, pursuant to the related Warranty
and Servicing Agreement, be required to present claims to the insurer under the
Primary Mortgage Insurance Policy and to FHA and the VA, as applicable, and
deposit all collections thereunder (including, in the case of the payment of an
FHA insurance claim in FHA debentures, cash in an amount equal to the face value
of such FHA debentures) in the related Servicing Account for deposit in the
Certificate Account.
SECTION 3.14 Maintenance of Hazard Insurance, the Special Hazard Insurance
-------------------------------------------------------------
Policy and Other Insurance.
--------------------------
The Master Servicer shall, with respect to Nonsubserviced Mortgage
Loans and, with respect to any other Mortgage Loan, to the extent that the
related Servicer does not do so, cause to be maintained for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the maximum insurable value of improvements securing such Mortgage Loan or its
Principal Balance, whichever is less. Each such policy of standard hazard
insurance shall contain, or
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have an accompanying endorsement that contains, a standard mortgagee clause
complying in form and substance to applicable FNMA guidelines or FHA or VA
Regulations, as the case may be. The Master Servicer shall also, with respect
to Nonsubserviced Mortgage Loans and, with respect to any other Mortgage Loan,
to the extent that the related Servicer does not do so, cause to be maintained
on property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan, hazard insurance with extended coverage in an amount that is at
least equal to the maximum insurable value of the improvements that are a part
of such property and in compliance with the requirements of the Special Hazard
Insurance Policy, liability insurance and, to the extent described below, flood
insurance. Pursuant to Section 3.08 hereof, any amounts collected by the Master
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Mortgaged Property or property thus
acquired or amounts released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures) shall be deposited in the Certificate
Account, subject to withdrawal pursuant to Section 3.12 hereof. Any cost
incurred by the Master Servicer or the related Servicer in maintaining any such
insurance shall not, for the purpose of calculating monthly distributions to the
Certificateholders or remittances to the Trustee, be added to the Principal
Balance of the Mortgage Loan, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs shall be recoverable by the Master Servicer or the
related Servicer out of late payments by the related Mortgagor or out of
Insurance Proceeds or Liquidation Proceeds to the extent permitted by the
applicable Warranty and Servicing Agreement and by Section 3.12 hereof. It is
understood and agreed that no earthquake or other additional insurance is to be
required of any Mortgagor or maintained on property acquired in respect of a
Mortgage other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. If the
Mortgaged Property is located at the time of origination of the Mortgage Loan in
a federally designated special flood hazard area, the Master Servicer shall
cause flood insurance to be maintained with respect to a Nonsubserviced Mortgage
Loan and, with respect to any other Mortgage Loan, shall cause such flood
insurance to be maintained, in the event the related Servicer shall fail to do
so. 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 available for the related Mortgaged Property under the
national flood insurance program, if the area in which such Mortgaged Property
is located is participating in such program.
In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.14, it being understood and agreed that
such
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policy may contain a deductible clause, in which case the Master Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section 3.14, and
there shall have been a loss that would have been covered by such policy,
deposit in the Certificate Account the amount not otherwise payable under the
blanket policy because of such deductible clause. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Depositor, the Trustee and
the Certificateholders, claims under any such blanket policy.
As long as the Pool Insurance Policy is in effect, the Master Servicer
covenants and agrees to exercise its reasonable best efforts to maintain the
Special Hazard Insurance Policy in full force and effect, unless coverage
thereunder has been exhausted through payment of claims, and to pay the premium
for the Special Hazard Insurance Policy on a timely basis. In the event that
the Special Hazard Insurance Policy shall be cancelled or terminated for any
reason (other than the exhaustion of total policy coverage), the Master Servicer
shall exercise its reasonable best efforts to obtain from another insurer, the
claims-paying ability of which shall be acceptable to the Rating Agency, a
replacement policy comparable to the Special Hazard Insurance Policy with a
total coverage that is equal to the then existing coverage of the Special Hazard
Insurance Policy; provided, however, that if the cost of any replacement policy
shall be greater than the cost of the Special Hazard Insurance Policy, the
amount of coverage of such replacement policy shall, unless the Depositor
consents to coverage at a higher level, be reduced to a level such that the cost
of such replacement policy shall not exceed the cost of the Special Hazard
Insurance Policy. Prior to obtaining any replacement Special Hazard Insurance
Policy, the Master Servicer shall notify the Depositor of the replacement
Special Hazard Insurance Policy the Master Servicer intends to obtain and, if
the Depositor so directs, obtain a replacement Special Hazard Insurance Policy
approved by the Depositor. In connection with its activities as administrator
and servicer of the Mortgage Loans, the Master Servicer agrees to present, on
behalf of itself, the Depositor, the Trustee and the Certificateholders, claims
to the Special Hazard Insurer under the Special Hazard Insurance Policy and, in
this regard, to take such reasonable action as shall be necessary to permit
recovery under the Special Hazard Insurance Policy with respect to defaulted
Mortgage Loans. Pursuant to Section 3.08 hereof, any amounts collected by the
Master Servicer under the Special Hazard Insurance Policy that are in the nature
of Insurance Proceeds shall be deposited in the Certificate Account, subject to
withdrawal pursuant to Section 3.12 hereof. Any other amounts collected by the
Master Servicer under the Special Hazard Insurance Policy shall be applied by it
towards the restoration
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of the related property to a condition requisite to the presentation of claims
on the related Mortgage Loan to the Pool Insurer under the Pool Insurance
Policy.
SECTION 3.15 Enforcement of Due-on-Sale Clauses; Assumption Agreements.
---------------------------------------------------------
(a) When any property subject to a Mortgage has been conveyed by the
Mortgagor, the Master Servicer shall, with respect to Nonsubserviced Mortgage
Loans and, with respect to any other Mortgage Loans, to the extent the related
Servicer does not do so, to the extent that it has knowledge of such conveyance,
enforce any due-on-sale clause contained in any Mortgage Note or Mortgage, to
the extent permitted under applicable law and governmental regulations, but only
to the extent that such enforcement will not adversely affect or jeopardize
coverage under any Required Insurance Policy. In the event that the Master
Servicer or the related Servicer is prohibited by law from enforcing any such
due-on-sale clause, or if coverage under any Required Insurance Policy would be
adversely affected, the Master Servicer is authorized subject to Section
3.15(b), to take or enter into an assumption and modification agreement from or
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable thereon,
provided that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by the applicable Required
Insurance Policies. The Master Servicer, subject to Section 3.15(b), is also
authorized with the prior approval of the insurers under any Required Insurance
Policies to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Master Servicer shall not be deemed to be in
default under this Section 3.15(a) by reason of any transfer or assumption which
the Master Servicer is restricted by law from preventing for any reason
whatsoever.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.15(a) hereof and to such other
limitations or conditions specified in the related Warranty and Servicing
Agreement, if any, in any case in which a Mortgaged Property has been conveyed
to a Person by a Mortgagor, and such Person is to enter into an assumption
agreement or modification agreement or supplement to the Mortgage Note or
Mortgage that requires the signature of the Trustee, or if an instrument of
release signed by the Trustee is required releasing the Mortgagor from liability
on the Mortgage Loan, the Master Servicer shall deliver or cause to be delivered
to the Trustee for signature the assumption agreement with the Person to whom
the Mortgaged Property is to be conveyed and such
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modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
The Master Servicer shall also deliver or cause to be delivered to the Trustee
with the foregoing documents a letter explaining the nature of such documents
and the reason or reasons why the Trustee's signature is required. With such
letter, the Master Servicer shall deliver to the Trustee a certificate of a
Servicing Officer certifying that: (i) a Servicing Officer has examined and
approved such documents as to form and substance, (ii) the Trustee's execution
and delivery thereof will not conflict with or violate any terms of this
Agreement or cause the unpaid balance and interest on the Mortgage Loan to be
uncollectible in whole or in part, (iii) any required consents of insurers under
any Required Insurance Policies have been obtained and (iv) subsequent to the
closing of the transaction involving the assumption or transfer (A) the Mortgage
Loan will continue to be secured by a first mortgage lien pursuant to the terms
of the Mortgage, (B) such transaction will not adversely affect the coverage
under any Required Insurance Policies, (C) the Mortgage Loan will fully amortize
over the remaining term thereof, (D) the interest rate on the Mortgage Loan will
not be altered nor will the term of the Mortgage Loan be increased and (E) if
the seller/transferor of the Mortgaged Property is to be released from liability
on the Mortgage Loan, such release will not (based on the Master Servicer's good
faith determination) adversely affect the collectibility of the Mortgage Loan.
Upon receipt of such certificate, the Trustee shall execute any necessary
instruments for such assumption or substitution of liability. Upon the closing
of the transactions contemplated by such documents, the Master Servicer shall
cause the originals of the assumption agreement, the release (if any), or the
modification or supplement to the Mortgage Note or Mortgage to be delivered to
the Trustee (or the related Custodian, as the duly appointed agent of the
Trustee) and deposited with the Mortgage File for such Mortgage Loan. Any fee
collected by the Master Servicer for entering into an assumption or substitution
of liability agreement will be retained by the Master Servicer as additional
servicing compensation.
In the event that the Master Servicer, in connection with any such
assumption or modification agreement or supplement to the Mortgage Note, is
unable to deliver the certificate of the Servicing Officer set forth above, the
Master Servicer shall purchase, or cause the related Servicer to purchase the
related Mortgage Loan in the manner, and at the Purchase Price, set forth in
Section 2.03 hereof.
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SECTION 3.16 Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
The Master Servicer shall foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.06 hereof, or
shall cause the related Servicer to do so, as provided in the related Warranty
and Servicing Agreement. In connection with such foreclosure or other
conversion, the Master Servicer shall, consistent with Section 3.13 hereof,
follow such practices and procedures as it shall deem necessary or advisable, as
shall be normal and usual in its general mortgage servicing activities and as
are in accordance with applicable FNMA guidelines, FHA or VA Regulations, as
applicable, and the requirements of the insurers under any other Required
Insurance Policy; provided, however, that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the restoration of any property unless it shall determine (i) that such
restoration and/or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to the Certificateholders after reimbursement to itself of such
expenses and (ii) that such expenses will be recoverable to it either through
Liquidation Proceeds with respect to which it shall have priority for purposes
of withdrawals from the Certificate Account pursuant to Section 3.12 hereof) or
through Insurance Proceeds (with respect to which it shall have similar
priority). The Master Servicer shall be responsible for all other costs and
expenses incurred by it in any such proceedings; provided, however, that it
shall be entitled to reimbursement thereof from the proceeds of liquidation of
the related Mortgaged Property, as contemplated in Section 3.12 hereof.
Notwithstanding the foregoing, the Master Servicer shall not be entitled to
recover legal expenses incurred in connection with foreclosure proceedings where
the Mortgage Loan is reinstated and such foreclosure proceedings are terminated
prior to completion, other than from sums received from the Mortgagor with
respect to such expenses. The decision of the Master Servicer to foreclose on a
defaulted Mortgage Loan shall be subject to instructions from the Trustee not to
foreclose upon such Mortgage Loan, upon a determination by the Trustee that the
proceeds of such foreclosure would not exceed the costs and expenses of bringing
such a proceeding.
SECTION 3.17 Trustee to Cooperate; Release of Mortgage Files.
-----------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Trustee 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 Certificate Account pursuant
to Section 3.08 hereof have
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been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Trustee shall promptly release (or shall cause the related Custodian to release)
the related Mortgage File to the Master Servicer, and the Depositor and the
Trustee shall execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage, together with the Mortgage
Note with written evidence of cancellation thereon. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Certificate Account or the related Servicing Account. From
time to time and as shall be appropriate for the servicing or foreclosure of any
Mortgage Loan, including for such purpose, collection under the Pool Insurance
Policy, the Mortgagor Bankruptcy Bond, the Special Hazard Insurance Policy, any
Primary Mortgage Insurance Policy or any policy of flood insurance, any fidelity
bond or errors or omissions policy, or for the purposes of effecting a partial
release of any Mortgaged Property from the lien or the Mortgage or the making of
any corrections to the Mortgage Note or the Mortgage or any of the other
documents included in the Mortgage File, the Trustee shall, upon request of the
Master Servicer and the delivery to the Trustee of a receipt signed by a
Servicing Officer substantially in the form of Exhibit B hereto (the "Trust
Receipt"), release (or cause the related Custodian to release) the Mortgage File
to the Master Servicer, or to the related Servicer if the Master Servicer so
requests. Subject to the further limitations set forth below, the Master
Servicer shall cause the Mortgage File or documents so released to be returned
to the Trustee, or the Custodian, as the case may be, when the need therefor by
the Master Servicer or Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Certificate Account, in
which case the Trustee shall, upon the Trustee's receipt of a certification
(which certification shall include a statement to such effect), deliver the
Trust Receipt to the Master Servicer. If a Servicer or the Master Servicer at
any time seeks to initiate a foreclosure proceeding in respect of any Mortgaged
Property as authorized by the related Warranty and Servicing Agreement, or this
Agreement, as the case may be, the Master Servicer shall deliver or cause to be
delivered to the Depositor and the Trustee, for signature, as appropriate, any
court pleadings, requests for Trustee's sale or other documents necessary to
effectuate such foreclosure or any legal action brought to obtain judgment
against the Mortgagor on the Mortgage Note or the Mortgage or to obtain a
deficiency judgment or to enforce any other remedies or rights provided by the
Mortgage Note or the Mortgage or otherwise available at law or in equity.
Together with such documents or pleadings, the Master Servicer shall deliver to
the Depositor and the Trustee a certificate of a Servicing Officer requesting
that such pleadings or documents to be executed by the Trustee and a Servicing
Officer shall certify as to the reason such documents
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or pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate the insurance coverage under any Required Insurance
Policy or invalidate or otherwise affect the lien of the Mortgage except for the
termination of such lien upon completion of the foreclosure. Notwithstanding
the foregoing, the Master Servicer shall cause possession of any Mortgage File
or of the documents therein that shall have been released by the Trustee, or the
Custodian, as the case may be, to be returned to Trustee or Custodian within 21
calendar days after possession thereof shall have been released by the Trustee
or Custodian unless (i) the Mortgage Loan has been liquidated and the Insurance
Proceeds or Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Certificate Account, and the Master Servicer shall have
delivered to the Trustee a certificate of a Servicing Officer certifying to such
effect or (ii) the Mortgage File or document shall have been delivered to an
attorney or to a public trustee or other public official as required by law for
purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property and the Master Servicer shall have
delivered to the Trustee a certificate of a Servicing Officer certifying as to
the name and address of the Person to which the Mortgage File or the documents
therein were delivered and the purpose or purposes of such delivery.
SECTION 3.18 Documents, Records and Funds in Possession of Master Servicer to
----------------------------------------------------------------
be Held for the Depositor and the Trustee.
-----------------------------------------
Notwithstanding any other provisions of this Agreement, the Master Servicer
shall transmit to the Trustee as required by this Agreement all documents and
instruments coming into the possession of the Master Servicer from time to time
and shall account fully to the Trustee for any funds received by the Master
Servicer or which otherwise are collected by the Master Servicer as Liquidation
Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All Mortgage
Files and funds collected or held by, or under the control of, the Master
Servicer in respect of any Mortgage Loans, whether from the collection of
principal and interest payments or from Liquidation Proceeds or Insurance
Proceeds, including but not limited to, any funds on deposit in the Certificate
Account, shall be held by the Master Servicer for and on behalf of the
Depositor, the Trustee and the Certificateholders and shall be and remain the
sole and exclusive property of the Trustee, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Certificate Account or any Servicing or Escrow Account, or any funds that
otherwise are or may become due or payable to the Trustee, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance, or
assert by legal action or otherwise any claim or right of setoff against any
Mortgage File or any funds collected on, or in
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connection with, a Mortgage Loan, except, however, that the Master Servicer
shall be entitled to set-off against and deduct from any such funds any amounts
that are properly due and payable to the Master Servicer under this Agreement.
SECTION 3.19 Servicing Compensation; Retained Yield.
--------------------------------------
As compensation for its activities hereunder, the Master Servicer
shall be entitled to withdraw from the Certificate Account the amounts specified
in subclauses (i), (v) and (vi) of Section 3.12 hereof as payable to it. The
Depositor (or at its direction, its designee) shall be entitled to receive the
Retained Yield and the Administrative Fee specified in such subclauses in the
Reference Agreement.
Additional servicing compensation in the form of prepayment charges,
assumption fees, late payment charges or otherwise shall be retained by the
Master Servicer or the related Servicer, as the case may be, to the extent not
required to be deposited in the Certificate Account pursuant to Section 3.08
hereof or in the Servicing Account pursuant to the related Servicing Agreement.
The Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including payment of
premiums for Primary Mortgage Insurance Policies, FNMA Certificates of Mortgage
Loan Insurance or VA Loan Guaranty Certificates, if any, to the extent such
premiums are not required to be paid by the related Mortgagors or the related
Servicer, payment of any premiums for hazard insurance, as required by Section
3.14 hereof, payment of the premiums for the Pool Insurance Policy, as required
by Section 3.13 hereof, payment of the premiums for the Mortgagor Bankruptcy
Bond, as required by Section 3.23 hereof and maintenance of the other forms of
insurance coverage required by Section 3.14 hereof) and shall not be entitled to
reimbursement therefor except as specifically provided in Sections 3.12, 3.16
and 4.04 hereof.
SECTION 3.20 Reports to the Trustee and the Depositor; Certificate Account
-------------------------------------------------------------
Statements.
----------
On each Distribution Date, the Master Servicer shall forward to the
Trustee and the Depositor a statement, certified by a Servicing Officer, setting
forth the status of the Certificate Account as of the close of business on such
Distribution Date and showing, for the period covered by such statement, the
aggregate of deposits in or withdrawals from the Certificate Account for each
category of deposit specified in Section 3.08 hereof and each category of
withdrawal specified in Section 3.12 hereof.
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SECTION 3.21 Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustee on
or before April 30 of each year, commencing on April 30 not less than nine
months after the Delivery Date specified in the Reference Agreement, an
Officers' Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
the performance of the Master Servicer under this Agreement has been made under
such officer's supervision, (ii) to the best of such officer's knowledge, based
on such review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof, (iii) a Servicing Officer is
conducting an examination of the activities of each Servicer during the
immediately preceding year and its performance under the related Warranty and
Servicing Agreement, and (iv) to the best of such Servicing Officer's knowledge,
based on such examination, each Servicer has performed and fulfilled its duties,
responsibilities and obligations under the related Warranty and Servicing
Agreement in all material respects throughout such year, or if there has been a
default in the performance or fulfillment of any such duties, responsibilities
or obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof.
SECTION 3.22 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
On or before April 30 of each year, commencing on April 30 not less
than nine months after the Delivery Date specified in the Reference Agreement,
the Master Servicer, at its expense, shall cause a firm of independent public
accountants that is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Depositor and the Trustee to the
effect that such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans and that, on the basis of an examination
conducted substantially in compliance with the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
servicing has been conducted in compliance with such agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Audit Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC requires it to report. In rendering such
statement, such firm may rely, as to matters relating to direct servicing of
Mortgage Loans by Servicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Audit Program for
Mortgage Bankers or the Audit
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Program for Mortgages serviced for FHLMC (rendered within one year of such
statement) of independent public accountants With respect to the related
Servicer.
SECTION 3.23 Maintenance of the Mortgagor Bankruptcy Bond; Collections
---------------------------------------------------------
Thereunder.
----------
If so specified in the Reference Agreement, the Master Servicer shall
exercise its reasonable best efforts to maintain and keep the Mortgagor
Bankruptcy Bond in full force and effect throughout the term of this Agreement,
unless coverage has been exhausted through payment of claims, and to pay the
premiums for the Mortgagor Bankruptcy Bond on a timely basis. At the request of
the Depositor, coverage under the Mortgagor Bankruptcy Bond shall be cancelled
or reduced by the Master Servicer to the extent permitted by the Rating Agency,
provided the outstanding rating of the Certificates by the Rating Agency at the
time of such cancellation or reduction is not reduced.
In connection with its activities as administrator and servicer of the
Mortgage Loans, the Master Servicer agrees to present, on behalf of itself, the
Depositor, the Trustee and the Certificateholders, claims to the issuer of the
Mortgagor Bankruptcy Bond and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under the Mortgagor Bankruptcy Bond.
Pursuant to Section 3.08 hereof, any amounts collected by the Master Servicer
under the Mortgagor Bankruptcy Bond shall be deposited in the Certificate
Account, subject to withdrawal pursuant to Section 3.12 hereof.
SECTION 3.24 Letter of Credit.
----------------
If so specified in the Reference Agreement, the Depositor shall
obtain, in favor of the Trustee on behalf of the Certificateholders, an
irrevocable, stand-by Letter of Credit, the terms and provisions of which are as
set forth in the Reference Agreement. In the event that the L/C Bank shall be
required to make any payments under the Letter of Credit, the Master Servicer
shall notify the Trustee, no later than the Determination Date next preceding
the related Distribution Date, such notice specifying the amount of such
required payment. Not later than the close of business on the Business Day
preceding the Distribution Date, the Trustee shall draw upon the Letter of
Credit in the amount of such required payment to the extent of the amount
available thereunder and deposit in the Certificate Account, in immediately
available fluids, the amount drawn under the Letter of Credit.
If at any time the L/C Bank makes a payment covering the amount of the
outstanding principal balance of a Liquidating Loan, the Trustee shall release
(or shall cause the related Custodian to release) the related Mortgage File to
the L/C Bank or its designee and shall execute and deliver such instruments of
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transfer or assignment, in each case without recourse, as shall be necessary to
vest in the L/C Bank or its designee all right, title and interest in such
Mortgage Loan, and the L/C Bank or its designee will thereupon acquire such
Liquidating Loan, together with related security interests and documents, free
of any further obligation to the Trustee or the Certificateholders of such
Series with respect thereto except as may be provided in such Letter of Credit
and in the Reference Agreement.
The Depositor shall have the power to substitute for any Letter of
Credit another irrevocable standby letter of credit, provided that no such
substitution shall be made unless the substitute letter of credit contains
provisions that are in all material respects the same as, or more favorable to
the Certificateholders than, the original Letter of Credit and provided further
that such substitution will not result in a reduction of the then outstanding
rating of the Certificates, or the withdrawal of such rating, by the Rating
Agency rating such Certificates, as evidenced by written confirmation to that
effect by such Rating Agency.
Any replacement of the Letter of Credit pursuant to this Section 3.24
shall be accompanied by a written Opinion of Counsel to the issuer of such
substitute letter of credit, addressed to the Master Servicer and the Trustee,
to the effect that such substitute letter of credit constitutes a legal, valid
and binding obligation of the issuer thereof, enforceable in accordance with its
terms (subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium and other similar laws from time to time in effect
relating to creditors' rights generally) and concerning such other matters as
the Master Servicer and the Trustee shall reasonably request.
SECTION 3.25 Reserve Fund.
------------
If so specified in the Reference Agreement, the Master Servicer shall
establish and maintain with the Trustee, in the manner specified in the
Reference Agreement, a separate investment account (the "Reserve Fund"). The
Reserve Fund will not be included in the Trust Fund. All amounts shall be
deposited into, withdrawn and distributed from the Reserve Fund in accordance
with the provisions of the Reference Agreement.
The Master Servicer, on behalf of the Holders of the Subordinated
Certificates, will cause a valid and perfected first priority security interest
under the Uniform Commercial Code as in effect in the [ ] from
time to time to be maintained in the Reserve Fund, the amounts deposited therein
and the investments thereof (other than any income from the investment of funds
in the Reserve Fund) in order to secure the
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full and timely performance with respect to the subordination of the
Subordinated Certificates for the benefit of the Holders of the Subordinated
Certificates pursuant to the provisions of the Reference Agreement.
Amounts held in the Reserve Fund from time to time shall continue to
be the property of the Holders of the Subordinated Certificates until withdrawn
from the Reserve Fund in accordance with the provisions of the Reference
Agreement. Amounts held in the Reserve Fund shall be invested by the Trustee at
the direction of the Master Servicer for the benefit of the Holders of the
Subordinated Certificates in one or more Eligible Investments in the manner set
forth in the related Reference Agreement.
SECTION 3.26 Administration of Buydown Funds.
-------------------------------
With respect to each Buydown Mortgage Loan included in the Trust Fund,
the related Servicer shall deposit Buydown Funds in an account that satisfies
the requirements for a Servicing Account (the "Buydown Account"). On each
Servicer Remittance Date, such Servicer will, as to each Buydown Mortgage Loan
serviced by it, withdraw from the Buydown Account in an amount equal to an
aggregate amount of payments that, when added, as required by such buydown plan,
to the amount required to be paid by the related mortgagor on each Due Date in
accordance with such buydown plan, is equal to the full monthly payment due on
such Due Date and deposit that amount in the Certificate Account for
distribution in accordance with the provisions of Section 3.08 and Section 3.12.
If the Mortgagor on a Buydown Mortgage Loan prepays such loan in its
entirety during the period (the "Buydown Period") when Buydown Funds are
required to be applied to such Buydown Mortgage Loan, the Servicer shall
withdraw from the Buydown Account and remit to the Master Servicer for deposit
in the Certificate Account the Buydown Funds remaining in the Buydown Account
for distribution in accordance with the provisions of Section 3.08 and Section
3.12. If the Mortgagor on a Buydown Mortgage Loan defaults on such loan during
the Buydown Period and the property securing such Buydown Mortgage Loan is sold
in the liquidation thereof (either by the Master Servicer, the Pool Insurer or
the insurer under any related Primary Mortgage Insurance Policy), the Servicer
shall withdraw from the Buydown Account and remit to the Master Servicer or
deposit in the Certificate Account or, if so instructed by the Master Servicer
pay to (i) the Pool Insurer if the Mortgaged Property has been transferred to
the Pool Insurer pursuant to the Pool Insurance Policy and 100% of the related
claim under the Pool Insurance Policy is paid or (ii) the insurer under any
related Primary Mortgage Insurance Policy if the Mortgaged Property is
transferred to such insurer and such insurer pays all of the loss incurred in
respect of such default, the Buydown Funds for such
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Buydown Mortgage Loan still held in the Buydown Account. Any amount remitted
pursuant to the preceding sentence will reduce the amount owed on the Mortgage
Loan for purposes of calculating Liquidation Proceeds.
ARTICLE IV
ADVANCES BY THE MASTER SERVICER; PERFORMANCE BOND
SECTION 4.01 Monthly Advances.
----------------
Subject to the conditions of this Article IV, the Master Servicer, as
required below, shall make a Monthly Advance to the Certificate Account, in the
amount, if any, of the aggregate scheduled installments of principal and
interest, after adjustment of such interest payment to the Pass-Through Rate for
such Mortgage Loan on the Mortgage Loans that were due on the Due Date but which
were not received or advanced by the Servicers (including the Master Servicer,
in its capacity as Servicer of Nonsubserviced Mortgage Loans) and remitted to
the Certificate Account on or prior to the Servicer Remittance Date. Each
Monthly Advance shall be remitted to the Certificate Account no later than the
close of business on the Business Day immediately preceding the related
Distribution Date in immediately available funds. The Master Servicer shall be
obligated to make such Monthly Advance only to the extent that such advance, in
the good faith judgment of the Master Servicer, is reimbursable from Insurance
Proceeds, Liquidation Proceeds, payments under the Letter of Credit or under any
Alternative Credit Support, or otherwise. On the Determination Date immediately
preceding the related Distribution Date, the Master Servicer shall determine
whether and to what extent any Servicers have failed to make any advances of
principal or any interest in respect of scheduled installments of principal and
interest that were due on the Due Date and whether such deficiencies, if
advanced by the Master Servicer, would be reimbursable from Insurance Proceeds,
Liquidation Proceeds or otherwise. If the Master Servicer shall have determined
that it is not obligated to make the entire Monthly Advance because all or a
lesser portion of such Monthly Advance would not be reimbursable from Insurance
Proceeds, Liquidation Proceeds or otherwise, the Master Servicer shall promptly
deliver to the Trustee an Officer's Certificate setting forth the reasons for
the Master Servicer's determination.
In lieu of making all or a portion of such Monthly Advance, the Master
Servicer may cause to be made an appropriate entry in its records relating to
the Certificate Account that funds in such account being held for future
distribution or withdrawal have been used by the Master Servicer in discharge of
its obligation to make any such Monthly Advance. Any funds being held in the
Certificate Account for future distribution to the Certificateholders shall be
replaced by the Master Servicer by
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deposit, in the manner set forth above, in the Certificate Account no later than
the close of business on the Business Day immediately preceding the related
Distribution Date, to the extent that funds in the Certificate Account on such
Distribution Date are less than the amounts required to be distributed to the
Certificateholders on such Distribution Date. The Master Servicer shall be
entitled to be reimbursed from the Certificate Account for all Monthly Advances
made pursuant to this Section as provided in Section 3.12.
SECTION 4.02 Advances for Attorneys' Fees.
----------------------------
The Master Servicer shall, with respect to any Nonsubserviced Mortgage
Loan, and otherwise, to the extent not made by the related Servicer, make
advances from time to time for attorneys' fees and court costs incurred, or
which reasonably can be expected to be incurred, for the foreclosure of any
Mortgage Loan or for any transaction in which the Trustee is expected to receive
a deed-in-lieu of foreclosure, unless the Master Servicer has made a good faith
determination that such advances are not recoverable from Insurance Proceeds or
Liquidation Proceeds relating to the Mortgage Loan, payments under the Letter of
Credit or under any Alternative Credit Support or otherwise. If the Master
Servicer shall make a good faith determination that such advances are not so
reimbursable, the Master Servicer shall promptly deliver to the Trustee an
Officers' Certificate setting forth the reasons for such determination. The
Master Servicer shall be entitled to reimbursement for any such advance as
provided in Section 3.12 hereof.
SECTION 4.03 Advances for Amounts Collected by Servicer but Not Remitted.
-----------------------------------------------------------
In the event that any Servicer fails to remit to the Certificate
Account on the Servicer Remittance Date the full amount of the funds in the
custody or under the control of the Servicer that the Servicer is required to
remit under the terms of the related Warranty and Servicing Agreement, then the
Master Servicer, upon and subject to the terms of this Article IV, shall advance
and remit to the Certificate Account, no later than the close of business on the
Business Day immediately preceding the related Distribution Date, in the manner
specified in Section 4.01 hereof, an amount equal to the portion of the required
remittance that was not so remitted. The Master Servicer shall be obligated to
make such advance only to the extent that such advance in the good faith
judgment of the Master Servicer is reimbursable from Insurance Proceeds,
Liquidation Proceeds, or otherwise. If the Master Servicer at any time makes a
determination that such advance is not or would not be so reimbursable, the
Master Servicer shall promptly deliver to the Trustee an Officer's Certificate
setting forth the reasons for such determination. The Master Servicer shall be
entitled to reimbursement for any such advance as provided in Section 3.12.
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SECTION 4.04 Nonrecoverable Advances.
-----------------------
Any Monthly Advance or other advance previously made by the Master
Servicer under Sections 4.01, 4.02 and 4.03 of this Agreement that the Master
Servicer shall ultimately determine in its good faith judgment to be not
recoverable from Insurance Proceeds, Liquidation Proceeds, payments under the
Letter of Credit or under any Alternative Credit Support, or otherwise, shall be
a Nonrecoverable Advance. The determination by the Master Servicer that it has
made a Nonrecoverable Advance shall be evidenced by an Officer's Certificate of
the Master Servicer promptly delivered to the Trustee setting forth the reasons
for such determination. Following the Trustee's receipt of the Officer's
Certificate, the Master Servicer shall be entitled to reimbursement for such
Nonrecoverable Advance as provided in Section 3.12 hereof.
SECTION 4.05 Advances for Additional Interest in Connection with Principal
-------------------------------------------------------------
Prepayments.
-----------
In the event that any Mortgage Loan is the subject of a full or
partial Principal Prepayment and such full or partial Principal Prepayment does
not include interest on the Principal Balance through and including the last day
of the month during which such Principal Prepayment is made, the Master Servicer
shall, with respect to each Nonsubserviced Mortgage Loan, and otherwise to the
extent that such interest shall not have been paid by the Servicer and deposited
in the Certificate Account on or before the Servicer Remittance Date next
succeeding the date of such full or partial Principal Prepayment, advance and
deposit into the Certificate Account, on or before the close of business on the
Business Day immediately preceding the related Distribution Date, an amount
equal to such additional interest, adjusted to the Pass-Through Rate. Such
advance shall be made regardless of whether the Mortgage Note or Mortgage
requires the payment of such interest or whether such amount is recoverable from
Liquidation Proceeds, Insurance Proceeds, payments under the Letter of Credit or
under any Alternative Credit Support, or otherwise or whether the Master
Servicer shall have determined that such advance, if made, would be a
Nonrecoverable Advance; and in case of such advance, the Master Servicer shall
not be entitled to any recovery or reimbursement from the Depositor, the Trustee
or the Certificateholders, but may seek and obtain recovery from the Servicer
that failed to make the advance, through legal action or otherwise, to the
extent provided in the related Warranty and Servicing Agreement.
Notwithstanding anything to the contrary contained herein, the Master Servicer
shall have no entitlement hereunder to any retained yield payable to such
Servicer with respect to any Mortgage Loan serviced by it hereunder.
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SECTION 4.06 Performance Bond.
----------------
The performance of the obligations of the Master Servicer under this
Agreement are guaranteed by the Performance Bond. In the event the
creditworthiness of the obligor under the Performance Bond is impaired such that
the Rating Agency advises the Depositor or the Trustee that the outstanding
rating of the Certificates would be lowered by the Rating Agency, the Master
Servicer shall secure as soon as practicable (and, in any event, within 30 days)
a substitute guaranty or similar form of insurance coverage in an amount equal
to ____% of the outstanding Principal Balance of the Mortgage Loans and issued
by an entity the creditworthiness of which is determined by the Rating Agency to
be sufficient to maintain the outstanding rating of the Certificates. Upon
delivery of such substitute guaranty or similar form of insurance coverage, all
obligations under the Performance Bond shall be discharged. Unless the Rating
Agency confirms within such 30-day period that, after giving effect to such
substitution, it will not lower the outstanding rating of the Certificates, the
Master Servicer shall deposit cash with the Trustee in a separate account (the
"Guaranty Fund") in an amount equal to ___% of the then outstanding Principal
Balance of the Mortgage Loans. The amount so deposited shall be held by the
Trustee as security for the Certificates and shall be invested by the Trustee in
Eligible Investments. Upon such deposit, any obligations under the Performance
Bond or any substitute guaranty or similar form of insurance coverage shall be
discharged. In the event that the Master Servicer fails to make any Monthly
Advance required by the terms of this Agreement, the Trustee shall withdraw the
amount of such Monthly Advance from the Guaranty Fund and deposit the amount so
withdrawn in the Certificate Account. Any such withdrawal shall not result in
any waiver of the Trustee's rights hereunder with respect to any Event of
Default resulting from the Master Servicer's failure to make any such required
payment. Earnings from the investment of any amounts deposited with the Trustee
pursuant to this Section 4.06 shall be for the account of the Master Servicer.
The amount of any losses incurred in respect of any such investments shall be
deposited by the Master Servicer into the Guaranty Fund immediately, as
realized.
The obligations of the Master Servicer under Section 2.03(b) hereof
are further guaranteed by the Performance Bond. In the event that the
outstanding credit rating of the commercial paper obligations of the obligor
under the Performance Bond is reduced by the Rating Agency with the result that
the outstanding rating of the Certificates would be reduced by the Rating
Agency, the Master Servicer shall secure as soon as practicable a substitute
guaranty or similar form of insurance coverage, which shall be (a) in amount
equal to the amount of the Master Servicer's outstanding obligations under
Section 2.03(b) hereof and (b) issued by an entity that has an outstanding
commercial paper rating sufficient to maintain the outstanding rating of the
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Certificates. If a substitute guaranty or other form of insurance coverage has
not been issued to the Trustee within thirty days after the Rating Agency
notifies the Depositor or the Trustee of its intent to lower the rating of the
Certificates, the Master Servicer shall deposit and maintain with the Trustee
cash in an amount equal to the amount of its outstanding obligations under
Section 2.03(b) hereof. The amount so deposited shall be held by the Trustee in
a separate account as security for the Certificates (the "Repurchase Fund") and
shall be invested by the Trustee at the direction of the Master Servicer in
Eligible Investments. In the event that the Master Servicer fails to make any
payment required to be made pursuant to Section 2.03(b), the Trustee shall
withdraw the amount of such required payment from the Repurchase Fund and
deposit the amount so withdrawn in the Certificate Account. Any such withdrawal
shall not result in a waiver of the Trustee's rights with respect to any Event
of Default resulting from the Master Servicer's failure to make any such
required payment. The Master Servicer may withdraw any amounts on deposit with
the Trustee in excess of its outstanding obligations under Section 2.03(b)
hereof and shall deposit cash in the amount necessary to satisfy any deficiency
in the Repurchase Fund upon receipt of the Trustee's demand therefor. Earnings
from the investment of any amounts so deposited with the Trustee shall be for
the account of the Master Servicer. The amount of any losses incurred in
respect of any such investment shall be deposited by the Master Servicer into
the Repurchase Fund immediately, as realized.
ARTICLE V
THE CERTIFICATES
SECTION 5.01 The Certificates.
----------------
The Certificates shall be substantially in the forms set forth in the
Reference Agreement. A Single Certificate shall evidence the interest in the
Trust Fund specified in the Reference Agreement. The Certificates may be issued
in one or more Classes and such Classes may be divided into one or more
Subclasses as provided in the Reference Agreement. One or more of such Classes
or Subclasses may be subordinated to any other one or more of such Classes or
Subclasses as provided in the Reference Agreement. One or more of such Classes
or Subclasses may receive unequal amounts of the principal and/or interest
payments made from the Mortgage Loans as specified in the Reference Agreement.
The timing of payments to any one or more of such Classes or Subclasses may be
made on a sequential or pro rata basis as provided in the Reference Agreement.
The Certificates shall be executed by manual or facsimile signature on behalf of
the Depositor by its President or one of its Executive Vice Presidents, Senior
Vice Presidents or First Vice Presidents under its seal imprinted thereon and
attested by the
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manual or facsimile signature of its Secretary or one of its Assistant
Secretaries. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Depositor shall bind the Depositor, notwithstanding
that such individuals or any of them have ceased to be so authorized prior to
the authentication and delivery of such Certificates or did not hold such
offices at the date of such Certificate. No Certificate shall be entitled to
any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in the
form set forth in Section 8.10 executed by the Trustee by manual signature, and
such certificate of authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 5.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.06 hereof, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar named in the Reference Agreement shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate, the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in like aggregate interest in the
Trust Fund and of the same Class.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same aggregate interest in the Trust Fund and of
the same Class, upon surrender of the Certificates to be exchanged at any such
office or agency. Whenever any Certificates are so surrendered for exchange,
the Depositor shall execute and the Trustee shall authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
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All Certificates surrendered for registration of transfer and exchange
shall be cancelled and subsequently destroyed by the Trustee or, at its
direction, by the Certificate Registrar.
Unless otherwise specified in the Reference Agreement, the Certificate
Registrar will provide the Master Servicer not later than the 15th Business Day
next preceding the Distribution Date the names and addresses of the
Certificateholders as of the Record Date and the interest of each of them in the
Trust Fund.
SECTION 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) 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 (b) there is delivered to
the Master Servicer, the Certificate Registrar and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Certificate Registrar or the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
interest in the Trust Fund. In connection with the issuance of any new
Certificate under this Section 5.03, the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 5.03 shall constitute
complete and indefeasible evidence of ownership in the Trust Fund, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 5.04 Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of
transfer, the Master Servicer,the Trustee, the Certificate Registrar and any
agent of the Master Servicer, the Trustee or the Certificate Registrar may treat
the person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions as provided in the
Reference Agreement and for all other purposes whatsoever, and neither the
Master Servicer, the Trustee, the Certificate Registrar nor any agent of the
Master Servicer, the Trustee or the Certificate Registrar shall be affected by
any notice to the contrary.
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SECTION 5.05 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
If the Trustee is not the Certificate Registrar and at any time
requests the Certificate Registrar in writing to provide a list of the names and
addresses of Certificateholders, the Certificate Registrar will furnish to the
Trustee, within 15 days after receipt of a request, such list as of the most
recent Record Date, in such form as the Trustee may reasonably require. If
three or more Certificateholders (a) request such information in writing from
the Trustee, (b) state that such Certificateholders desire to communicate with
other Certificateholders with respect to their rights under this Agreement or
under the Certificates and (c) provide a copy of the communication which such
Certificateholders propose to transmit, then the Trustee shall, within five
Business Days after the receipt of such request, afford such Certificateholders
access during normal business hours to the most recent list held by the Trustee,
if any. If such list is as of a date more than 90 days prior to the date of
receipt of such Certificateholders' request, the Trustee shall promptly request
from the Certificate Registrar a current list and shall afford such
Certificateholders access to such list promptly upon its receipt by the Trustee.
Every Certificateholder, by receiving and holding a Certificate, agrees that
neither the Certificate Registrar nor the Trustee shall be held accountable by
reason of the disclosure of any such information as to the list of the
Certificateholders hereunder, regardless of the source from which such
information was derived.
SECTION 5.06 Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustee in respect of the Certificates and this Agreement may be
served. The Trustee initially appoints the Certificate Registrar designated in
the Reference Agreement for transfer and exchange of Certificates and designates
the office described in the Reference Agreement as its office for purposes of
receipt of such notices and demands. The Trustee will give prompt written
notice to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01 Respective Liabilities of the Depositor and the Master Servicer.
---------------------------------------------------------------
The Depositor and the Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by them herein.
SECTION 6.02 Merger or Consolidation of the Depositor and the Master Servicer.
----------------------------------------------------------------
The Depositor and the Master Servicer will each keep in full effect
its existence, rights and franchises as a corporation under the laws of the
State of [Delaware], and will each obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its respective duties under this Agreement.
Any person into which the Depositor or the Master Servicer may be
merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder,without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.
Notwithstanding anything else in this Section 6.02 or in Section 6.04
hereof to the contrary, the Master Servicer may assign its rights and delegate
its duties and obligations under this Agreement in connection with a sale or
transfer of a substantial portion of its mortgage servicing portfolio; provided
that such purchaser or transferee accepting such assignment or delegation shall
be a Person qualified to service mortgage loans on behalf of FNMA or FHLMC, is
reasonably satisfactory to the Trustee and the Depositor, is willing to service
the Mortgage Loans and executes and delivers to the Depositor and the Trustee an
agreement, in form and substance reasonably satisfactory to the Depositor and
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 Master Servicer under this Agreement and a guaranty of the
performance of such Person's obligations under this Agreement,
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and provided further that the Rating Agency's rating of the Certificates in
effect immediately prior to such assignment, sale or transfer will not be
impaired as a result of such assignment, sale or transfer. In the case of any
such assignment and delegation, the Master Servicer shall be released from its
obligations under this Agreement, except that the Master Servicer shall remain
liable for all liabilities and obligations incurred by it as Master Servicer
hereunder prior to the satisfaction of the conditions to such assignment and
delegation set forth in the preceding sentence.
SECTION 6.03 Limitation on Liability of the Depositor, the Master Servicer and
-----------------------------------------------------------------
Others.
------
Neither the Depositor, the Master Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Master Servicer shall be
under any liability to 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 judgement; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such person against
any breach of representations or warranties made by it herein or protect the
Depositor, the Master Servicer or any such person from any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Depositor, the Master Servicer and any director,
officer, employee or agent of the Depositor or the Master Servicer may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person in respect of any matters arising hereunder. The
Depositor, the Master Servicer and any director, officer, employee or agent of
the Depositor or the Master Servicer shall be indemnified by the Trust Fund and
held harmless against any loss, liability or expense incurred in connection with
any legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not incidental to their respective duties hereunder and which in its
opinion may involve it in any expense or liability; provided, however, that
either the Depositor or the Master Servicer may in its discretion undertake any
such action that it may deem necessary or desirable in respect of this Agreement
and the rights and duties of the parties hereto and the interests of the Trustee
and the Certificateholder hereunder. In such event, the legal expenses and
costs of such action and any liability
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resulting therefrom shall be expenses, costs and liabilities of the Trust Fund,
and the Depositor and the Master Servicer shall be entitled to be reimbursed
therefor out of the Certificate Account as provided by Section 3.12 hereof.
SECTION 6.04 Master Servicer Not to Resign.
-----------------------------
The Master Servicer shall not resign from the obligations and duties
imposed upon it hereunder except upon determination that such obligations and
duties hereunder are no longer permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No
such resignation by the Master Servicer shall become effective until the Trustee
or a successor servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 7.02 hereof.
SECTION 6.05 Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall, for so long as it acts as servicer under
this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
servicer hereunder, and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or polices and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the
event that any such policy or bond ceases to be in effect, the Master Servicer
shall obtain a comparable replacement policy or bond from an insurer or issuer
meeting the requirements set forth above as of the date of such replacement.
ARTICLE VII
DEFAULT
SECTION 7.01 Events of Default.
-----------------
"Event of Default" wherever used herein, means any one of the
following events (whatever reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) any failure by the Master Servicer to remit to the
Certificateholders or to the Trustee any payment (other than a payment
required to be made under Article IV hereof) required to be made under the
terms of this Agreement, which failure shall continue unremedied for a
period of 5 days after the date upon which written notice of
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such failure shall have been given to the Master Servicer by the Trustee or
the Depositor or to the Master Servicer and the Trustee by the Holders of
Certificates evidencing not less than 25% of the Voting Rights evidenced by
the Certificates; or
(ii) any failure by the Master Servicer to observe or preform in
any material respect any other of the covenants or agreement on the part of
the Master Servicer in this Agreement contained and such failure shall
continue unremedied for a period of 60 days (except that such number of
days shall be 15 in the case of a failure to pay a premium for any Required
Insurance Policy) after the date on which written notice of such failure
shall have been given to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer and the Trustee by the Holders of
Certificates evidencing not less than 25% of the Voting Rights evidenced by
the Certificates; or
(iii) if a representation or warranty set forth in Section
2.03(a) hereof shall prove to be incorrect as of the time made in any
respect that materially and adversely affects the interest of the
Certificateholders, and the circumstances or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or cured within 30 days after the date on which written notice
thereof shall have been given to the Master Servicer by the Trustee or the
Depositor; or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 days; or
(v) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or substantially
all of the property of the Master Servicer; or
(vi) the Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable insolvency
or reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations; or
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(vii) any Rating Agency shall lower, or threaten to lower, the
outstanding rating of the Certificates because the existing or prospective
financial condition or mortgage loan servicing capability of the Master
Servicer is insufficient to maintain such outstanding rating.
If an Event of Default shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, either the
Trustee, the Holders of Certificates evidencing not less than twenty-five
percent (25%) of the Voting Rights evidenced by the Certificates, or the
Depositor, with the prior written approval of the Trustee, by notice in writing
to the Master Servicer, may terminate all of the rights and obligations of the
Master Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof. On or after the receipt by the Master Servicer of such
written notice, all authority and power for the Master Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee or, if the Depositor so notifies the Trustee and the
Master Servicer, to the Depositor or its designee, pursuant to and under this
Section and, without limitation, the Trustee, the Depositor and any such
designee of the Depositor are hereby authorized and empowered to execute and
deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. Unless expressly
provided in such written notice, no such termination shall affect any obligation
of the Master Servicer pursuant to Section 2.03 to pay damages as a result of a
Default under this Article VII, to make payment under any Credit Support, or to
pay amounts owed pursuant to Article VIII. the Master Servicer agrees to
cooperate with the Trustee, the Depositor and any such designee of the Depositor
in effecting the termination of the Master Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the Trustee or
the Depositor or its designee, as the case may be, for administration by it of
all cash amounts which shall at the time be credited to the Certificate Account
or thereafter be received with respect to the Mortgage Loans.
SECTION 7.02 Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall be the successor
in all respects to the Master Servicer in its capacity as master servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof (except that if
the Trustee is acting as
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successor to the Master Servicer and is prohibited by law from obligating itself
to make advances regarding delinquent Mortgage Loans, then the Trustee shall not
be obligated to make advances pursuant to Section 3.01 and Article IV hereof).
As compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to charge
to the Certificate Account if the Master Servicer had continued to act
hereunder. Notwithstanding the foregoing, if the Trustee has become the
successor to the Master Servicer in accordance with Section 7.01 hereof, the
Trustee may, if it shall be unwilling to so act, or shall,if it is unable to so
act (exclusive of the obligations with respect to advances set forth in Article
IV hereof), appoint, or petition a court of competent jurisdiction to appoint,
any established mortgage loan servicing institution having a net worth of not
less than that required by the Rating Agency as the successor to the Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder. Pending appointment of
a successor to the Master Servicer hereunder, the Trustee, unless the Trustee is
prohibited by law from so acting, shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Any successor to the Master Servicer as servicer shall during term of
its service as servicer maintain in force the policy or policies that the Master
Servicer is required to maintain pursuant to Section 6.05.
SECTION 7.03 Notification to Certificateholders.
----------------------------------
(a) Upon any termination or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01 Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the conduct of
such investor's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that 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 personally liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders holding Certificates
aggregating not
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less than 25% of the interest in the Trust Fund evidenced by each Class of
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.
SECTION 8.02 Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 8.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(iii) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it in good
faith to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(iv) prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default that may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing so to do by Holders of
Certificates aggregating not less than 25% of the interest in the Trust
Fund evidenced by each Class of Certificates; and
(v) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys.
SECTION 8.03 Trustee Not Liable for Mortgage Loans.
-------------------------------------
The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Agreement or of any Mortgage Loan or
related document. The Trustee shall not be accountable for
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the use or application by the Depositor or the Master Servicer of any funds paid
to the Depositor or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Certificate Account by the Depositor or the
Master Servicer.
SECTION 8.04 Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 8.05 Master Servicer to Pay Trustee's Fees and Expenses.
--------------------------------------------------
The Master Servicer covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Master Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, bad faith or willful misconduct.
SECTION 8.06 Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of such state or the United States of America,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 8.06 the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07 hereof.
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SECTION 8.07 Resignation and Removal of the Trustee.
--------------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by (1) giving written notice of resignation to the Depositor and
by mailing notice of resignation by first class mail, postage prepaid, to the
Certificateholders at their addresses appearing on the Certificate Register, the
Certificate Registrar (if other than the Trustee) and any co-registrar, not less
than 60 days before the date specified in such notice when, subject to Section
8.08, such resignation is to take effect, and (2) appointing a successor trustee
in accordance with Section 8.08 and meeting the qualifications set forth in
Section 8.06.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy of the successor trustee. The Trustee may also
be removed at any time by the Holders of Certificates evidencing not less than
50% of the Voting Rights evidenced by the Certificates.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08 Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee an instrument accepting such appointment hereunder and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The Depositor, the Master Servicer 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.
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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 hereof.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Master Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Master Servicer fails to mail such
notice within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Depositor.
SECTION 8.09 Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the 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, hereof, without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.
SECTION 8.10 Appointment of Authenticating Agent.
-----------------------------------
At any time when any of the Certificates remain outstanding, the
Trustee may appoint an Authenticating Agent or Agents which shall be authorized
to act on behalf of the Trustee to authenticate Certificates, and Certificates
so authenticated shall be entitled to the benefits of this Agreement and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Whenever reference is made in this Agreement to the authentication
and delivery of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Depositor and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $15,000,000, authorized under such laws to do trust
business and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 8.10, the combined
capital and
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surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section 8.10, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 8.10.
Any corporation into which an 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 such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 8.10, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Depositor. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Depositor. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.10, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Depositor and shall mail
written notice of such appointment by first-class mail, postage prepaid to all
Certificateholders as their names and addresses appear in the Certificate
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section 8.10.
Any reasonable compensation paid to an Authenticating Agent for its
services under this Section 8.10 shall be a reimbursable expense pursuant to
Section 8.05 if paid by the Trustee.
If an appointment is made pursuant to this Section 8.10, the
Certificates may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate certificate of authentication in the following
form:
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"This is one of the Certificates referred to in the within-mentioned
Agreement.
______________________________
As Trustee
By: ______________________________
Authenticating Agent
By: ______________________________
Authorized Officer
SECTION 8.11 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at any
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 8.11, such powers,
duties, obligations, rights and trusts as the Master Servicer and the Trustee
may consider necessary or desirable. If the Master Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
to do so, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Master Servicer hereunder), the Trustee shall be
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incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust Fund or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by
reason of an act or omission of any other trustee hereunder; and
(iii) The Master Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or co-
trustee.
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. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.
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 8.12 Tax Returns.
-----------
The Trustee, upon request, will furnish the Master Servicer with all
such information as may be reasonably required in connection with the
preparation by the Master Servicer of all tax returns of the Trust Fund, and the
Trustee shall, upon request, execute such returns.
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SECTION 8.13 Appointment of Custodians.
-------------------------
The Trustee may, with the consent of the Depositor and the Master
Servicer, 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.
Subject to Article VIII, the Trustee agrees to comply with 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 combined capital and
surplus of at least $10,000,000 and shall be qualified to do business in the
jurisdiction in which it holds any Mortgage File. Each Custodial Agreement may
be amended only as provided in Section 10.01 or as provided in the Reference
Agreement.
ARTICLE IX
TERMINATION
SECTION 9.01 Termination upon Repurchase by the Depositor.
--------------------------------------------
The obligations and responsibilities of the Depositor and the Trustee
created hereby and the Trust Fund created hereby shall terminate upon the
earlier of (a) the repurchase by the Depositor of all Mortgage Loans and all
property acquired in respect of any Mortgage Loan remaining in the Trust Fund at
a price equal to the price specified in the Reference Agreement, and
unreimbursed Monthly Advances or (b) the later of (i) the maturity or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all property acquired upon
foreclosure or by deed in lieu of foreclosure of any Mortgage Loan and (ii) the
distribution to Certificateholders of all amounts in the Certificate Account
required to be distributed to them pursuant to this Agreement; provided,
--------
however, that in no event shall the trust created hereby continue beyond the
- -------
expiration of 21 years from the death of the last survivor of the descendants of
Mr. Joseph P. Kennedy, former Ambassador of the United States to Great Britain,
living on the date of execution of this Agreement. The right of the Depositor
to repurchase all Mortgage Loans pursuant to clause (a) above shall be
conditioned upon the unpaid Principal Balances of such Mortgage Loans, at the
time of any such repurchase, aggregating less than an amount equal to the
percentage of the aggregate unpaid Principal Balance of the Mortgage Loans
constituting the Trust Fund on the Cut-off Date set forth in the Reference
Agreement.
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SECTION 9.02 Final Distribution on the Certificates.
--------------------------------------
Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates for payment of the final
distribution and cancellation, shall be given promptly by the Master Servicer by
letter to Certificateholders mailed not earlier than the date specified in the
Reference Agreement. Any such notice shall specify (a) the Distribution Date
upon which final distribution of the Certificates will be made upon presentation
and surrender of Certificates at the office therein designated, (b) the amount
of such final distribution and (c) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. If applicable, the Master Servicer will give such notice to the
Certificate Registrar and the Custodian at the time such notice is given to
Certificateholders. In the event such notice is given, the Master Servicer
shall deposit in the Certificate Account on the applicable Distribution Date an
amount equal to the final distribution in respect of the Certificates. Upon
certification to the Trustee by a Servicing Officer following such final
deposit, the Trustee shall promptly release or shall cause the applicable
Custodian to release to the Master Servicer in accordance with the reason for
the final distribution, the Mortgage Files for the Mortgage Loans.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Master Servicer shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice all the Certificates
shall not have been surrendered for cancellation, the Master Servicer may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 Amendment.
---------
This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein, or to make such other provisions with respect to matters or
questions arising
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under this Agreement as shall not be inconsistent with any other provisions
herein; provided that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder. This Agreement may also be amended with the consent of
Certificateholders in the manner set forth in the Reference Agreement.
SECTION 10.02 Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer at its expense or
direction by the Trustee, but only upon direction of the Trustee accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 10.03 Governing Law.
-------------
This Agreement shall be construed in accordance with and governed by
the substantive laws of the [State of New York] applicable to agreements made
and to be performed in the [State of New York] and the obligations, rights and
remedies of the parties hereto and the Certificateholders shall be determined in
accordance with such laws.
SECTION 10.04 Intention of Parties.
--------------------
The execution and delivery of this Agreement shall constitute an
acknowledgement by the Depositor and the Trustee on behalf of the
Certificateholders that they intend hereby to establish (for federal income tax
purposes) a trust rather than an association taxable as a corporation. The
powers granted and obligations undertaken in this Agreement shall be construed
so as to further such intent.
SECTION 10.05 Notices.
-------
All demands and notices hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, to (a) in the case of the Depositor, Asset
Backed Securities Corporation, Park Avenue Plaza, 55 East 52nd Street, New York,
-81-
<PAGE>
New York 10055, Attention: [ ], (b) in the case of the Master Servicer,
[name and address of Master Servicer], Attention: [ ], or such other
address as may be hereafter furnished to the Depositor and the Trustee by the
Master Servicer in writing, (c) in the case of the Trustee, [name and address of
Trustee], Attention: [ ], or such other address as may
hereafter be furnished to the Depositor and the Master Servicer in writing by
the Trustee.
SECTION 10.06 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.07 Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.02 and 6.04, this Agreement may not be assigned by the
Master Servicer without the prior written consent of the Trustee and the
Depositor.
SECTION 10.08 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 representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein or in the Reference Agreement) 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 any association; nor shall any
Certificateholder be under any liability to any third party by reason of any
action taken by the parties of this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an
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<PAGE>
Event of Default and of the continuance thereof, as herein before provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates shall also 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 being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to effect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 10.08, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 10.09 Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit any representative of the Depositor or the Trustee during the Master
Servicer's normal business hours, to examine all the books of account, records,
reports and other papers of the Master Servicer relating to the Mortgage Loans,
to make copies and extracts therefrom, to cause such books to be audited by
independent certified public accountants selected by the Depositor or the
Trustee and to discuss its affairs, finances and accounts relating the Mortgage
Loans with its officers, employees and independent public accountants (and by
this provision the Master Servicer hereby authorizes said accountants to discuss
with such representative such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Depositor or the Trustee of any right under this
Section 10.09 shall be borne by the Depositor or the Trustee, provided that if
an audit is made during the existence of an Event of Default, the expense
incident to such audit shall be borne by the Master Servicer.
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<PAGE>
SECTION 10.10 Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is the intention of the Trustee that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.
-84-
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused their names to be signed hereto to their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
ASSET BACKED SECURITIES CORPORATION, as Depositor
By:
--------------------------------
Title
[Seal]
Attest:
----------------------
Secretary
[
], as Master Servicer
By:
--------------------------------
Title
[Seal]
Attest:
----------------------
Assistant Secretary
[ ], as Trustee
By:
--------------------------------
Title
[Seal]
Attest:
----------------------
Assistant Secretary
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<PAGE>
State of New York
ss.:
County of New York
On this _____ day of _________________ before me, a notary public in and for
said State, appeared ___________________, known to be to be an
____________________ of Asset Backed Securities Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed by official seal the
day and year in this certificate first above written.
-------------------------------
Notary Public
[Notarial Seal]
State of
ss.:
County of
On this _____ day of _________________ before me, a notary public in and for
said State, appeared ___________________, known to be to be an
____________________ of [ ], the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed by official seal the
day and year in this certificate first above written.
-------------------------------
Notary Public
[Notarial Seal]
-86-
<PAGE>
State of
ss.:
County of
On this _____ day of _________________ before me, a notary public in and for
said State, appeared ___________________, known to be to be an
____________________ of [
], one of the corporations that executed the within instrument, and also known
to me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed by official seal the
day and year in this certificate first above written.
-------------------------------
Notary Public
[Notarial Seal]
-87-
<PAGE>
EXHIBIT 4.3.1
================================================================================
FORM OF SERIES 199[ ]-[ ] SUPPLEMENT
Dated as of [ ], 199[ ]
to
POOLING AND SERVICING AGREEMENT
Dated as of [ ], 199[ ]
$[ ]
CSFB CARD ACCOUNT MASTER TRUST
SERIES 199[ ]-[ ]
among
ASSET BACKED SECURITIES CORPORATION,
Depositor
[SERVICER NAME],
Servicer
and
[TRUSTEE NAME],
Trustee
on behalf of the Series 199[ ]-[ ] Certificateholders
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
CREATION OF THE SERIES 199 - CERTIFICATES............1
Section 1.01. Designation................................1
ARTICLE II
DEFINITIONS...........................................2
Section 2.01. Definitions.................................2
ARTICLE III
SERVICER AND TRUSTEE.................................22
Section 3.01. Servicing Compensation.....................22
ARTICLE IV
RIGHTS OF SERIES 1999_-_ CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS............23
Section 4.01. Collections and Allocations................23
Section 4.02. Determination of Monthly Interest
[; Interest Funding Account]...............23
Section 4.03. Determination of Monthly Principal
[; Principal Funding Account; Class A
Accumulation Period.]......................26
Section 4.04. Required Amount............................29
Section 4.05. Application of Class A Available Funds,
Class B Available Funds and Available
Principal Collections......................30
Section 4.06. Defaulted Amounts; Investor Charge-Offs....32
Section 4.07. Excess Spread; Excess Finance Charge
Collections................................34
Section 4.08. Reallocated Principal Collections..........36
Section 4.09. Excess Finance Charge Collections..........37
Section 4.09A. Reallocated Investor Finance Charge
Collections................................37
Section 4.10. Shared Principal Collections...............38
Section 4.11. Reserve Account............................39
Section 4.12. Establishment of Credit Enhancement. ......40
Section 4.13. Cash Collateral Account. .................43
Section 4.14. [Determination of Index....................47
Section 4.15. Pre-Funding Account........................47
Section 4.16. Changes in Invested Amount.................49
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
SERIES 199_-_ CERTIFICATEHOLDERS.....................49
i
<PAGE>
Section 5.01. Distributions..............................49
Section 5.02. Reports and Statements to Series 199 -
Certificateholders.........................50
ARTICLE VI.....................................................51
Section 6.01. [Reinvestment] [Pay Out] Events...........51
ARTICLE VII
OPTIONAL PURCHASE; SERIES TERMINATION...........52
Section 7.01. Optional Repurchase........................52
Section 7.02. Series Termination.........................53
ARTICLE VIII
FINAL DISTRIBUTIONS.............................53
Section 8.01. Sale of Receivables Certificateholders'
Interest pursuant to Section 2.06 or 10.01 of
the Agreement and Section 7.01 or 7.02 of this
Supplement........................................53
Section 8.02. Distribution of Proceeds of Sale,
Distribution or Liquidation of the Receivables
pursuant to Section 9.02 of the Agreement.........54
ARTICLE IX
MISCELLANEOUS PROVISIONS.............................56
Section 9.01. Ratification of Agreement..................56
Section 9.02. Counterparts...............................56
Section 9.03. Governing Law..............................56
ARTICLE X
INTERCHANGE..........................................57
Section 10.01. Interchange...............................57
ii
<PAGE>
SERIES 199[ ]-[ ] SUPPLEMENT, dated as of [ ], 199[ ] (the
"Supplement"), between ASSET BACKED SECURITIES CORPORATION, a Delaware
corporation, as Depositor, [SERVICER NAME], as Servicer, and [TRUSTEE NAME], a
[jurisdiction] [form of organization], as Trustee.
Pursuant to the Pooling and Servicing Agreement dated as of [
], 199[] (as amended and supplemented, the "Agreement"), among the Depositor,
the Servicer and the Trustee, the Depositor has created the CSFB Card Account
Master Trust (the "Trust"). Section 6.03 of the Agreement provides that the
Depositor may from time to time direct the Trustee to authenticate one or more
new Series of Investor Certificates representing fractional undivided interests
in the Trust. The Principal Terms of any new Series are to be set forth in a
Supplement to the Agreement.
Pursuant to this Supplement, the Depositor and the Trustee shall
create a new Series of Investor Certificates and specify the Principal Terms
thereof.
ARTICLE I
CREATION OF THE SERIES 199 - CERTIFICATES
------------------------------------------
Section 1.01. Designation.
-----------
(a) There is hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Supplement to be known as "CSFB Card
Account Master Trust, Series 199__-__". The Series 199__-__ Certificates shall
be issued in two Classes, the first of which shall be known as the "Class A
Series 199__-__ [______%] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates" and the second of which shall be known as the "Class
B Series 199__-__ [______%] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates." [In addition, there is hereby created a third Class
of uncertificated interests in the Trust which, except as expressly provided
herein, shall be deemed to be "Investor Certificates" for all purposes under the
Agreement and this Supplement and which shall be known as the "Collateral
Interest, Series 199__-__". The Collateral Interest Holder shall deemed to be
the Series Enhancer for all purposes under the Agreement and this Supplement.]
(b) Series 199__-__ shall [be included in Group [______] and shall]
[not] be a Principal Sharing Series. [Group [_____] [shall] [shall not] be a
Reallocation Group.] Series 199__-__ shall [not] be subordinated to [Series
199__-__] [any other Series]. Describe terms of subordination, if applicable.]
Notwithstanding any provision in the Agreement or in this Supplement to the
contrary, the first Distribution Date with respect to Series 199__-__ shall be
the [________] 199__ Distribution Date [and the first Monthly Period shall be
the period from the Closing Date until ________ __, 199__].
-1-
<PAGE>
[(c) Except as expressly provided herein, the provisions of Article
VI and Article XII of the Agreement relating to the registration,
authentication, delivery, presentation, cancellation and surrender of Registered
Certificates shall not be applicable to the Collateral Interest.]
ARTICLE II
DEFINITIONS
-----------
Section 2.01. Definitions.
-----------
(a) Whenever used in this Supplement, the following words and
phrases shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
["Accumulation Period" shall mean the Class A Accumulation Period and
------------ ------
the Class B Accumulation Period.]
"Additional Interest" means, with respect to any Distribution Date,
-------------------
the Class A Additional Interest and the Class B Additional Interest for such
Distribution Date.
["Adjusted Invested Amount" shall mean, with respect to any date of
------------------------
determination, an amount equal to the Invested Amount less the Principal Funding
Account Balance on such date of determination.]
["Available Cash Collateral Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Cash
Collateral Account on such date (before giving effect to any deposit to, or
withdrawal from, the Cash Collateral Account to be made with respect to such
date) and (b) the [Initial] [Required] Cash Collateral Amount.]
["Available Collateral Amount" shall mean, with respect to any date of
---------------------------
determination, the lesser of (a) the sum of the amount on deposit in the Cash
Collateral Account and the Collateral Invested Amount and (b) the Required
Collateral Amount.]
["Available Credit Enhancement Amount" shall mean, with respect to any
-----------------------------------
date of determination, [___________].]
"Available Principal Collections" shall mean, with respect to any
-------------------------------
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
Principal Allocation Percentage of all Collections in respect of Principal
Receivables received during such Monthly Period minus (ii) the amount of
-----
Reallocated Principal Collections with respect to such Monthly Period which
pursuant to Section 4.08(a) or (b) are required to fund any deficiency in the
amount to be distributed pursuant to Sections 4.05(a)(i), (ii) and (iii) or
(b)(i), (ii) or (iii) for the related Distribution Date, (b) [any
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<PAGE>
Shared Principal Collections with respect to other Series that are allocated to
Series 199__-__ in accordance with Section 4.04 of the Agreement and Section
4.10 hereof (c)] any other amounts which pursuant to Section 4.07 hereof are to
be treated as Available Principal Collections with respect to the related
Distribution Date [and (d) describe other amounts, if applicable].
["Available Reserve Account Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (before giving effect to any deposit to be made to the
Reserve Account on such date) and (b) the Required Reserve Account Amount.]
["Available Shared Collateral Amount" shall mean, with respect to any
----------------------------------
date of determination, the lesser of (a) the [Initial] [Required] Shared
Collateral Amount and (b) the excess, if any, of the Available Cash Collateral
Amount on such date over the Initial Class B Collateral Amount.]
"Base Rate" shall mean, with respect to any Monthly Period, the
---------
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of the Class A Monthly Interest, the Class B Monthly Interest [,
Collateral Monthly Interest] and the Monthly Servicing Fee with respect to the
related Distribution Date and the denominator of which is the Invested Amount as
of the last day of the preceding Monthly Period.
["Cash Collateral Account" shall have the meaning specified in Section
--------------- -------
4.12(a).]
["Cash Collateral Account Investments" shall mean Eligible
-----------------------------------
investments.]
["Cash Collateral Account Surplus" shall mean, as of any date of
-------------------------------
determination, the amount, if any, by which the amount on deposit in the Cash
Collateral Account exceeds the [[lesser of the] Initial Cash Collateral Amount
[and the Adjusted Investor Interest]] [the Required Cash Collateral Amount].]
["Cash Collateral Depositor" shall mean the financial institution or
-------------------------
institutions that are party to the Loan Agreement, such financial institution or
institutions to be selected by the Depositor on or prior to the Closing Date to
make a deposit in the Cash Collateral Account on the Closing Date, or any
successors thereto appointed as provided in the Loan Agreement.]
["Class A Accumulation Period" shall mean, unless a Pay Out Event
---------------------------
shall have occurred prior thereto, the period commencing at the close of
business on [_____________], 199__ [or such later date as is determined in
accordance with Section 4.03(e)] and ending on the first to occur of (a) the
commencement of the Rapid Amortization Period or (b) the payment in full to
Class A Certificateholders of the Class A Invested Amount.]
["Class A Accumulation Period Length" shall have the meaning specified
----------------------------------
in Section 4.03(e).
-3-
<PAGE>
["Class A Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(e).
["Class A Adjusted Invested Amount" shall mean, with respect to any
--------------------------------
date of determination, an amount equal to the Class A Invested Amount less the
Principal Funding Account Balance on such date.]
"Class A Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the sum of [(a) if such Monthly Period Relates to a
Distribution Date with respect to the Class A Accumulation Period [or an Early
Accumulation Period], the amount of Principal Funding Investment Proceeds, if
any, with respect to such Distribution Date, (b) the Class A Floating Percentage
of the [Investor Finance Charge Collections] [Reallocated Investor Finance
Charge Collections] [, (c) the amount of funds, if any, to be withdrawn from the
Reserve Account which, pursuant to Section 4.11(d), are required to be included
in Class A Available Funds with respect to such Distribution Date] [, (d) [the
Class A Floating Percentage of] any investment earnings (net of investment
losses and expenses) transferred from the Pre-Funding Account to the Collection
Account on the related Distribution Date] [, (e) the amount of Interest Funding
Investment Proceeds, if any, with respect to the related Distribution Date] [and
(f) describe other amounts, if applicable].
"Class A Certificate Rate" shall mean, with respect to the Class A
------------------------
Certificates, [___% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months] [[___]% with respect to the initial Interest
Period, and for each Interest Period thereafter, a per annum rate of [_____]%
[above] [below] [times] [Index] determined on the related Rate Determination
Date, [but in no event in excess of [_______]% per annum], each calculated on
the basis of actual days elapsed and a 360-day year].
"Class A Certificateholder" shall mean the Person in whose name a
-------------------------
Class A Certificate in registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates executed
--------------------
by the Depositor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-1.
"Class A Controlled Amortization Period" shall mean, unless a Pay-Out
--------------------------------------
Event shall have occurred prior thereto, the period commencing on the close of
business [____________], 199_, and ending on the first to occur of (a) the
commencement of the Rapid Amortization Period, (b) the payment in full to Class
A Certificateholders of the Class A Invested Amount or (c) the Termination
Date.]
["Class A Expected Final Payment Date" shall mean the [_____________]
-----------------------------------
199_ Distribution Date.]
"Class A Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100% of a
fraction, the numerator of which is equal to the Class A [Adjusted] Invested
Amount as of the close of business on the last day
-4-
<PAGE>
of the preceding Monthly Period and the denominator of which is equal to the
[Adjusted] Invested Amount as of such day; provided, however, that with respect
-------- -------
to the first Monthly Period, the Class A Floating Percentage shall mean the
percentage equivalent of a fraction, the numerator of which is the Class A
Initial Invested Amount of the denominator of which is the Initial Invested
Amount.
"Class A Initial Invested Amount" shall mean [the portion of the
-------------------------------
initial principal amount of the Class A Certificates that is invested in
Principal Receivables on the Closing Date, which is] $______________.
"Class A Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.02(a).
"Class A Invested Amount" shall mean, on the date of determination, an
-----------------------
amount equal to (a) the Class A Initial Invested Amount, [plus (b) the [amount]
----
[Class A Floating Percentage] of any withdrawals from the Pre-Funding Account in
connection with the purchase of an additional interest in Principal Receivables
pursuant to Section 4.15,] minus (c) the aggregate amount of principal payment
-----
made to the Class A Certificateholders on or prior to such date [other than any
payments of principal to the Class A Certificateholders from the Pre-Funding
Account], minus (d) the excess, if any, of the aggregate amount of Class A
-----
Investor Charge-Offs for all prior Distribution Dates over Class A Investor
----
Charge-Offs reimbursed pursuant to Section 4.06(a) prior to such date.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.06(a).
"Class A Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class A Floating Percentage
for such Monthly Period.
"Class A Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(a).
"Class A Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(a).
["Class A Principal Draw Amount" shall have the meaning specified in
-----------------------------
Section 4.12(i).]
"Class A Principal Percentage" shall mean, with respect to any Monthly
----------------------------
Period (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class A Invested Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Invested Amount as of such day and
(ii) during the [Accumulation Period] [Controlled Amortization Period] or the
Rapid Amortization Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is the Class A Invested
Amount as of the end of the Revolving Period, and the denominator of which is
the Invested Amount as of the end of the Revolving Period; provided, however,
-------- -------
that with respect to the first Monthly Period, the Class A Principal Percentage
shall mean the percentage equivalent of a fraction, the numerator of which is
the Class A Initial
-5-
<PAGE>
Invested Amount and denominator of which is the Initial Invested Amount.
["Class A Required Amount" shall have the meaning specified in Section
-----------------------
4.04.]
"Class A Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
["Class B Accumulation Period" shall mean the period commencing on the
---------------------------
Class B Principal Commencement Date and ending on the first to occur thereafter
of (a) the commencement of the Rapid Amortization Period, (b) the payment in
full to the Class B Certificateholders of the Class B Invested Amount or (c) the
Termination Date.]
"Class B Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(b).
["Class B Adjusted Invested Amount" shall mean, with respect to any
--------------------------------
date of determination, an amount equal to the Class B Invested Amount less the
Principal Funding Account Balance on such date.]
"Class B Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the sum of (a) if such Monthly Period relates to a
Distribution Date that occurs on or after the Class B Principal Commencement
Date, the amount of Principal Funding Investment Proceeds [and Interest Funding
Investment Proceeds], if any, with respect to such Distribution Date, (b)] the
Class B Floating Percentage of the [Investor Finance Charge Collections]
[Reallocated Investor Finance Charge Collections] [, (c) the amount of funds, if
any, to be withdrawn from the Reserve Account which pursuant to Section 4.11(d)
are required to be included in Class B Available Funds with respect to such
Distribution Date] [, (d) [the Class B Floating Percentage of] any investment
earnings (net of investment losses and expenses) transferred from the Pre-
Funding Account to the Collection Account on the related Distribution Date] [and
(e) describe other amounts, if applicable].
"Class B Certificate Rate" shall mean, with respect to the Class B
------------------------
Certificate, [[____]% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months] [[____]% with respect to the initial
Interest Period, and for each Interest Period thereafter, a per annum rate of
[____]% [above] [below] [times] [Index] determined on the related Rate
Determination Date, [but in no event in excess of [______]% per annum,] each
calculated on the basis of actual days elapsed and a 360-day year].
"Class B Certificateholder" shall mean the Person in whose name a
-------------------------
Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed
--------------------
by the Depositor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-2.
["Class B Controlled Amortization Period" shall mean the period
--------------------------------------
commencing on the Class B Principal Commencement Date and ending on the first to
occur thereafter of (a) the
-6-
<PAGE>
commencement of the Rapid Amortization Period, (b) the payment in full to the
Class B Certificateholders of the Class B Invested Amount or (c) the Termination
Date.]
["Class B Expected Final Payment Date" shall mean the [___________,]
-----------------------------------
199__ Distribution Date.]
"Class B Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B [Adjusted] Invested
Amount as of the close of business on the last day of the preceding Monthly
Period and the denominator of which is equal to the [Adjusted] Invested Amount
as of the close of business on such day; provided, however, that with respect to
-------- -------
the first Monthly Period, the Class B Floating Percentage shall mean the
percentage equivalent of a fraction, the numerator of which is the Class B
Initial Invested Amount and the denominator of which is the Initial Invested
Amount.
"Class B Initial Invested Amount" shall mean [the portion of the
-------------------------------
initial principal amount of the Class B Certificates that is invested in
Principal Receivables on the Closing Date, which is] $___________.
"Class B Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.02(b).
"Class B Invested Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) [the sum of] the Class B Initial Invested Amount [and the
[amount] [Class B Floating Percentage] of any withdrawals from the Pre-Funding
Account in connection with the purchase of an additional interest in Principal
Receivables pursuant to Section 4.15], minus (b) the aggregate amount of
-----
principal payments made to the Class B Certificateholders prior to such date
[(other than (any principal payments made to Class B Certificateholders from the
proceeds of a Reimbursement Draw Amount pursuant to Section 4.12 [(c)] [(g)]
(and) [any payments of principal to the Class B Certificateholders from the Pre-
Funding Account])], minus (c) the aggregate amount of Class B Investor Charge-
-----
Offs for all prior Distribution Dates, minus (d) the amount of Reallocated
-----
Principal Collections allocated on all prior Distribution Dates pursuant to
Section 4.06(a) [(excluding any Reallocated Principal Collections that have
resulted in a reduction in [the Enhancement Invested Amount pursuant to Section
4-06(c))] (the Collateral Invested Amount pursuant to Section 4.08]], minus (e)
-----
an amount equal to the amount by which the Class B Invented Amount has been
reduced on all prior Distribution Dates pursuant to Section 4.06(a) and plus (f)
----
the amount of Excess Spread and Excess Finance Charge Collections] allocated and
available on all prior Distribution Dates pursuant to Section 4.07(f) for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e).
"Class B Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.06(b).
"Class B Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period
-7-
<PAGE>
and (ii) the Class B Floating Percentage for such Monthly Period.
"Class B Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(b).
"Class B Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(b).
"Class B Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class A Invested Amount is paid in full or, if the Class A Invested
Amount is paid in full [on the Class A Expected Final Payment Date] [during the
Class A Controlled Amortization Period] and the Rapid Amortization Period has
not commenced, the Distribution Date following the Class A Expected Final
Payment Date.
["Class B Principal Draw Amount" shall have the meaning specified in
----------------------------
Section 4.12 (i).]
"Class B Principal Percentage" shall mean, with respect to any Monthly
----------------------------
Period (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class B Invested Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Invested Amount as of such day and
(ii) during the [Class B Accumulation Period] [Class B Amortization Period] or
the Rapid Amortization Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is the Class B invested
Amount as of the end of the Revolving Period, and the denominator of which is
the Class B Invested Amount as of the end of the Revolving Period; provided,
--------
however, that with respect to the first Monthly Period the Class B Principal
- -------
Percentage shall mean the percentage equivalent of a fraction, the numerator of
which is the Class B Initial Invested Amount and the denominator of which is the
Initial Invested Amount.
["Class B Required Amount" shall have the meaning set forth in Section
-----------------------
4.04.]
"Class B Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Closing Date" shall mean [_______________], 199_.
------------
["Collateral Additional Interest" shall have the meaning specified in
------------------------------
subsection 4.02(e).]
["Collateral Amount" shall mean, for any date of determination, the
-----------------
sum of (a) the Collateral Invested Amount and (b) the aggregate amount of funds
on deposit in the Cash Collateral Account, in each case on such date.]
["Collateral Available Funds" shall mean with respect to any
--------------------------
Distribution Date, the Collateral Invested Percentage of [Reallocated] Investor
Finance Charge Collections with respect to the preceding Monthly Period.]
-8-
<PAGE>
["Collateral Cash Surplus" shall mean, as of any date of
-----------------------
determination, the lesser of (a) the Collateral Surplus and (b) the amount on
deposit in the Cash Collateral Account.]
["Collateral Charge-Offs" shall have the meaning specified in Section
----------------------
4.06(c).]
["Collateral Default Amount" shall mean, with respect to any
-------------------------
Distribution Date, the product of the Investor Default Amount for the related
Monthly Period and the Collateral Invested Percentage.]
["Collateral Initial Invested Amount shall mean $[_______________].]
----------------------------------
["Collateral Interest" shall mean a fractional undivided interest in
-------------------
the Trust which shall consist of the right to receive, to the extent necessary
to make the required payments to the Collateral Interest Holder under this
Supplement, the portion of Collections allocable thereto under the Agreement and
this Supplement, funds on deposit in the Collection Account allocable thereto
pursuant to the Agreement and this Supplement and, subject to the rights of the
Investor Certificateholders with respect thereto, funds on deposit in the Cash
Collateral Account.]
["Collateral Interest Holder" shall mean the entity so designated in
--------------------------
the Loan Agreement.]
["Collateral Interest Shortfall" shall have the meaning specified in
-----------------------------
Section 4.02(e).]
["Collateral Invested Amount" shall mean, when used with respect to
--------------------------
any date, an amount equal to (a) the Collateral Initial Invested Amount, minus
-----
(b) the aggregate amount of payments made to the Cash Collateral Depositor
pursuant to Section 4. 11 (d) (iii) prior to such date, minus (c) the aggregate
-----
amount of Collateral Charge-Offs for all prior Distribution Dates pursuant to
Section 4.06(c), minus (d) the aggregate amount of Reallocated Principal
-----
Collections allocated on all prior Distribution Dates pursuant to Section 4.08
allocable to the Collateral Invested Amount, minus (e) an amount equal to the
-----
amount by which the Collateral Invested Amount has been reduced on all prior
Distribution Dates pursuant to Sections 4.06 (a) and (b), and plus the amount
----
allocated and available on all prior Distribution Dates pursuant to Section
4.07(h-5), for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e) ; provided, however, that the Collateral
-------- -------
Invested Amount may not be reduced below zero.]
["Collateral Invested Percentage" shall mean, with respect to any
------------------------------
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Collateral Invested Amount as of the last day of the second
preceding Monthly Period and the denominator of which is the Invested Amount as
of such last day.]
["Collateral Monthly Interest" shall mean the monthly interest
---------------------------
distributable in respect of the Collateral Invested Amount as calculated in
accordance with subsection 4.02(e).]
-9-
<PAGE>
["Collateral Monthly Principal" shall mean the monthly principal
----------------------------
distributable in respect of the Collateral Invested amount as calculated in
accordance with subsection 4.03(b-1).]
["Collateral Rate" shall mean, for any Interest Period, a per annum
---------------
rate equal to LIBOR for such Interest Period plus [_______]%.]
----
["Collateral Servicing Fee" shall have the meaning set forth in
------------------------
Section 3.01.]
["Collateral Surplus" shall mean, with respect to any Distribution
------------------
Date, the excess, if any, of (a) the amount on deposit in the Cash Collateral
Account plus the Collateral Invested Amount over (b) the greater of (x) the
----
Required Collateral Amount or (y) at any time the Class B Invested Amount is
greater than zero and as long As a Rapid Amortization (or Early Accumulation)
Period is not in effect, at the option of the Seller (as evidenced by written
instructions to the Servicer and the Trustee), such higher amount as the Seller
shall specify, from time to time, in such instructions.]
["Controlled Accumulation Amount" shall mean (a) for any Distribution
------------------------------
Date with respect to the Class A Accumulation Period, $[______________][;
provided, however, that, if the Class Accumulation Period Length is determined
- -------- -------
to be less than [____] months, the Controlled Accumulation Amount for each
Distribution Date with respect to the Class A Accumulation Period will be equal
to (x) the Class A [Initial] [Series] Invested Amount divided by (y) the number
of Distribution Dates from, and including, the first Distribution Date with
respect to the Class A Accumulation Period to, and including, the Class A
Expected Final Payment Date]; and (b) for any Distribution Date with respect to
the Class B Accumulation Period, $[_________].]
["Controlled Amortization Amount" shall mean (a) for any Distribution
------------------------------
Date with respect to the Class A Controlled Amortization Period, $[______]; and
(b) for any Distribution Date with respect to the Class B Controlled
Amortization Period $[_________].]
["Controlled Amortization Period" shall mean the Class A Controlled
------------------------------
Amortization Period and the Class B Controlled Amortization Period.]
["Controlled Deposit Amount" shall mean, for any Distribution Date
-------------------------
with respect to the Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.]
["Controlled Distribution Amount" shall mean, for any Distribution
------------------------------
Date with respect to the Controlled Amortization Period, an amount equal to the
sum of the Controlled Amortization Amount for such Distribution Date and any
Deficit Controlled Amortization for the immediately preceding Distribution
Date.]
["Covered Amount" shall mean (a) for any Distribution Date with
--------------
respect to the Class A Accumulation Period or the first Special Payment Date, if
such Special Payment Date occurs prior
-10-
<PAGE>
to the Class B Principal Commencement Date, an amount equal to [one-twelfth of
the product of (i) the Class A Certificate Rate and (ii) the Principal Funding
Account Balance, if any, as of the preceding Distribution Date] [the product of
(i) (A) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (B) the Class
A Certificate Rate in effect during such Interest Period, and (ii) the Principal
Funding Account Balance, if any, as of the preceding Distribution Date, and (b)
for any Distribution Date with respect to the Class B Accumulation Period or the
first Special Payment Date, if such Special Payment Date occurs on or after the
Class B Principal Commencement Date, an amount equal to [one-twelfth of the
product of (i) the Class B Certificate Rate and (ii) the Principal Funding
Account Balance, if any, as of the preceding Distribution Date] [the product of
(i) (A) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (B) the Class
B Certificate Rate in effect during such Interest Period, and (ii) the Principal
Funding Account Balance, if any, as of the preceding Distribution Date].]
["Credit Enhancement" shall mean [___________], up to the Available
------------------
Credit Enhancement Amount.]
["Credit Enhancement Agreement" shall mean the [_____________________]
----------------------------
agreement among the Depositor, the Servicer and the Credit Enhancement Provider,
dated as of ______________, 199_, as amended or modified from time to time.]
["Credit Enhancement Provider" shall mean [_____________________].]
---------------------------
["Default Draw Amount" shall have the meaning specified in Section
-------------------
4.12(f).]
["Deficit Controlled Accumulation Amount" shall mean (a) on the first
--------------------------------------
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the Controlled Accumulation Amount
for such Distribution Date over the amount distributed from the Collection
Account as Class A Monthly Principal or Class B Monthly Principal, as the case
may be, for such Distribution Date and (b) on each subsequent Distribution Date
with respect to the Class A Accumulation Period or the Class B Accumulation
Period, the excess, if any, of the Controlled Deposit Amount for such subsequent
Distribution Date plus any Deficit Controlled Accumulation Amount for the prior
Distribution Date over the Amount distributed from the Collection Account as
Class A Monthly Principal or Class B Monthly Principal, as the case may be, for
such subsequent Distribution Date.]
["Early Accumulation Period" shall mean [, unless a Pay Out Event
-------------------------
shall have occurred prior thereto,] the period commencing at the closing of
business on the Business Day" immediately preceding the day on which a
Reinvestment Event with respect to Series 199_-_ is deemed to have occurred and
ending on [the first to occur of (a) the commencement of the Rapid Amortization
Period or (b) the payment in full to the Class A Certificateholders and the
Class B Certificateholders of the Class A Invested Amount and the Class B
Invested Amount, respectively.]
-11-
<PAGE>
["Economic Pay-Out Event" shall mean a Pay Out Event set forth in
----------------------
Section 6.011(f)] or [ ].]
["Economic Special Payment Date" shall mean the special Payment Date
-----------------------------
falling in the Monthly following the Monthly Period in which an Economic Pay-Out
Event is deemed to have occurred.)
["Enhancement Initial Investment Amount" shall mean the aggregate
-------------------------------------
amount withdrawn from the Cash Collateral Account and applied to the payment of
principal of the Series 199_-_ Certificates with respect to the Economic Special
Payment Date, if any, pursuant to Section 4.12 (j) (E) and (F).]
["Enhancement Invested Amount" shall mean, when used with respect to
---------------------------
any date, an amount equal to (a) the Enhancement Initial Invented Amount, minus
-----
(b) the aggregate amount of principal payments made to the Cash Collateral
Depositor pursuant to Section 4.05(d) (iii) prior to such date, minus (c) an
-----
amount equal to the amount by which the Enhancement Invested Amount has been
reduced on all prior Distribution Dates pursuant to Section 4.06, and plus (d)
----
the aggregate amount of [Excess Finance Charge Collections and] Excess Spread
allocated and available on all prior Distribution Dates pursuant to Section
4.07(h) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clause (c); provided, however, that (i) unless and until a withdrawal
-------- -------
is made from the Cash Collateral Account and applied to the payment of principal
of the Series 199 -Certificates with respect to the Economic Special Payment
Date, if any, pursuant to Section 4.12(j)(E) and (F), the Enhancement Invested
Amount shall be zero, and (ii) the Enhancement Invested Amount may not be
reduced below zero.]
"Excess Spread" shall mean, with respect to any Distribution Date, the
-------------
sum of the amounts, if any specified pursuant to Sections 4.05(a)(iv) and
4.05(b)(iv) with respect to such Distribution Date [plus Collateral Available
Funds as of such Distribution Date].
["Finance Charge Shortfall" shall have the meaning specified in
------------------------
Section 4.09.]
"Floating Allocation Percentage" shall mean, with respect to any
------------------------------
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is [the sum of] the [Adjusted]
invested Amount [and the Enhancement Invested Amount, if any,] as of the last
day of the preceding Monthly Period (or with respect to the first Monthly
Period, the initial Invested Amount) and the denominator of which is the product
of (x) the Series 199[-] Allocation Percentage with respect to such Monthly
Period and (y) [the sum of (i)] the total amount of Principal Receivables in the
Trust as of such day (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust on the Closing Date) [and (ii) the
principal amount on deposit in the Special Funding Account as of such last day];
provided, however, that with respect to any Monthly Period in which an Addition
- -------- -------
Date or a Removal Date occurs the denominator in (x) (i) above shall be the
Series 1991 Allocation Percentage of (1) the aggregate amount of Principal
Receivables in the Trust at the end of the day on the last day of the prior
Monthly Period for the
-12-
<PAGE>
period from and including the first day of such Monthly Period to but excluding
the related Addition Date or Removal Date and (2) the aggregate amount of
Principal Receivables in the Trust at the end of the day on the related Addition
Date or Removal Date for the period from and including the related Addition Date
or Removal Date to and including the last day of such Monthly Period [; provided
--------
further, however, that with respect to any Monthly Period in which the Invested
- ------- -------
Amount is increased pursuant to Section 4.15, the numerator above will be (1)
the Invested Amount as of the last day of the prior Monthly Period for the
period from and including the first day of such Monthly Period to but excluding
the day the Invested Amount is increased and (2) the Invested Amount as of the
end of the day on which the Invested Amount is increased for the period from and
including such day to and including the last day of such Monthly Period.
["Full Invested Amount" shall mean $[__________].]
--------------------
["Funding Period" shall mean the period beginning on and including the
--------------
Closing Date to but excluding the earliest to occur of (x) the day on which the
Invested Amount equals the Full Invested Amount, (y) the commencement of the
Rapid Amortization Period and (z) the ___________, 199_ Distribution Date.]
["Group [ ]" shall mean Series 199_-_ and each other Series
----------------
specified in the related Supplement to be included in Group [______].]
"Group [__] Investor Additional Amounts" shall mean, with respect to
--------------------------------------
any Distribution Date, the sum of (a) Series 199_-_ Additional Amounts for
such Distribution Date and (b) for all other Series included in Group [ ], the
sum of (i) the aggregate net amount by which the Invested Amounts of such Series
have been reduced as a result of investor charge-offs, subordination of
principal collections and funding the investor default amounts in respect of any
Class or Series Enhancement interests of such Series as of such Distribution
Date and (ii) if the applicable Supplements so provide, the aggregate unpaid
amount of interest at the applicable certificate rates that has accrued on the
amounts described in the preceding clause (i) for such Distribution Date.
"Group [__] Investor Default Amount" shall mean, with respect to any
----------------------------------
Distribution Date, the sum of (a) the Investor Default Amount for such
Distribution Date and (b) the aggregate amount of the investor default amounts
for all other Series included in Group [ ] for such Distribution Date.
"Group [ ] Investor Finance Charge and Administrative Collections"
-----------------------------------------------------------------
shall mean, with respect to any Distribution Date, the sum of (a) Investor
Finance Charge Collections for such Distribution Date and (b) the aggregate
amount of the investor finance charge collections for all other Series included
in Group [_______] for such Distribution Date.
"Group [ ] Investor Monthly Fees" shall mean with respect to any
--------------------------------
Distribution Date, the sum of (a) Series 199_-_ Monthly Fees for such
Distribution Date and (b) the aggregate amount of the servicing fees, investor
fees, fees payable to any Series Enhancer and any other similar fees,
-13-
<PAGE>
which are payable out of reallocated investor finance charge collections
pursuant to the related Supplements, for all other Series included in Group [__]
for such Distribution Date.
"Group [ ] Investor Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the sum of (a) series 1995_-_ Monthly Interest for such
Distribution Date and (b) the aggregate amount of monthly interest, including
overdue monthly interest and interest on such overdue monthly interest, if
applicable, for all other Series included in Group [_____] for such Distribution
Date.
["Index" shall mean [__________].]
-----
["Initial Cash Collateral Amount" shall mean $[________].]
------------------------------
["Initial Class B Collateral Amount" shall mean $[___________].]
---------------------------------
["Initial Shared Collateral Amount" shall mean $1[__________].]
--------------------------------
"Initial Invested Amount" shall mean [the portion of the initial
-----------------------
principal amount of the Series 199_-_ Certificates that is invested in Principal
Receivables on the Closing Date, which is] [the sum of the Class A Initial
Invested amount, the Class B Initial Invested Amount and the Collateral Initial
Invested Amount] $____________.
["Initial Pre-Funding Amount" shall mean $_____.]
--------------------------
["Interest Draw Amount" shall have the meaning specified in Section
--------------------
4.12 [(b)][(d)].
["Interest Funding Account" shall have the meaning set forth in
------------------------
Section 4.02(c)(i).]
["Interest Funding Investment Proceeds" shall have the meaning
------------------------------------
specified in Section 4.02(c)(ii).]
"Interest Payment Date" shall mean [the [____]th day of each month]
---------------------
[each [___________], [___________], [___________] and [___________]] [each
[___________] and [___________] [other] (or, if any such day is not a Business
Day, the next succeeding Business Day), [and the Class A Expected Final Payment
Date and the Class B Expected Final Payment Date] commencing [_________], 199_.
["Interest Period" shall mean, with respect to any Interest Payment
---------------
Date, the period from and including the Interest Payment Date immediately
preceding such Interest Payment Date (or, in the case of the first Interest
Payment Date, from and including the Closing Date) to but excluding such
interest Payment Date.]
"Invested Amount" shall mean, as of any date of determination, an
---------------
amount equal to the sum of (a) the Class A Invested Amount as of such date and
(b) the Class B Invested Amount as
-14-
<PAGE>
of such date [and (c) the Collateral Invested Amount as of such date].
"Investor Charge-Offs" shall mean Class A Investor Charge-offs and
--------------------
Class B Investor Charge-Offs [and Collateral Charge-Offs].
"Investor Default Amounts" shall mean, with respect to any
------------------------
Distribution Date, an amount equal to the product of (a) the Defaulted Amount
for the related Monthly Period and (b) the Floating Allocation Percentage for
such Monthly Period.
"Investor Finance Charge Collections" shall mean with respect to any
-----------------------------------
Distribution Date, an amount equal to the product of (a) the Floating Allocation
Percentage for the related Monthly Period and (b) Series 199_-_ Allocable
Finance Charge Collections deposited in the Collection Account for the related
Monthly Period.
["Loan Agreement" shall mean the agreement among the Depositor, the
--------------
Trustee and the [Cash Collateral Depositor] [Collateral Interest Holder], dated
as of the date hereof.]
["Monthly Cash Collateral Fee" shall have the meaning specified in
---------------------------
Section 4.07(g).)
"Monthly Credit Enhancement Fee" shall have the meaning specified in
------------------------------
Section 4.07(g)]
"Monthly Interest" means, with respect to any Distribution Date, the
----------------
Class A Monthly Interest and the Class B Monthly Interest and the Collateral
Monthly Interest) for such Distribution Date.
"Monthly Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
["Net Servicing Fee Rate" shall mean [_____]%.]
----------------------
"Payment Date" shall mean any Interest Payment Date and any Special
------------
Payment Date.
["Pay Out Event" shall mean any Pay Out Event specified in Section
-------------
6.01.]
["Portfolio Adjusted Yield" shall mean, with respect to any
------------------------
Distribution Date, the average of the percentages obtained for each of the three
preceding Monthly Periods by subtracting the Bass Rate from the Portfolio Yield
for such Monthly Period and deducting [__]% from the result for each monthly
Period.]
"Portfolio Yield" shall mean, with respect to any Monthly Period, the
---------------
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) the Floating Allocation Percentage with respect to such Monthly Period of
[Investor] [Reallocated Investor] Finance Charge Collections with respect to
such Monthly Period [plus (b) the amount of any Principal Funding
-15-
<PAGE>
Investment Proceeds for the related Distribution Date] [plus (c) the amount of
any interest Funding investment Proceeds for the related Distribution Date,]
(plus (d) any Excess Finance Charge Collections that are allocated to Series
199_-_ with respect to such Monthly Period) (plus (e) the amount of funds, if
any, withdrawn from the Reserve Account which pursuant to Section 4.11(d) are
required to be included as Class A Available Funds or Class B Available Funds
for the Distribution Date with respect to such Monthly Period) minus (f) the
-----
Investor Default Amount for the Distribution Date with respect to such Monthly
Period, and the denominator of which is the Invested Amount as of the last day
of the preceding Monthly Period.
["Pre-Funding Account" shall have the meaning specified in Section
-------------------
4.14(a).)
["Pre-Funding Amount" shall mean the amount on deposit in the Pre-
------------------
Funding Account.]
"Principal Allocation Percentage" shall mean, with respect to any day
-------------------------------
during a Monthly Period, the percentage equivalent (which percentage shall never
exceed 100) of a fraction, the numerator of which is [the sum, of] (a) during
the Revolving Period, the Series Adjusted Invested Amount as of the last day of
the immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Initial Invested Amount) and (b) during the [Accumulation Period]
[Early Accumulation Period] [Controlled Amortization Period] or the Rapid
Amortization Period, the Series Adjusted Invested Amount as of the last day of
the Revolving Period [and the Enhancement Investment Amount, if any,] and the
denominator of which is the product of (x) (i) the total amount of Principal
Receivables in the Trust as of the last day of the immediately preceding Monthly
Period (or with respect to the first Monthly Period, the total amount of
Principal Receivables in the Trust as of the Closing Date) [and the principal
amount on deposit in the Special Funding Account as of such last day] and (y)
the Series 199_-_ Allocation Percentage with respect to the Monthly Period in
respect of which the Principal Allocation Percentage is being determined;
provided, however, that with respect to any Monthly Period in which an Addition
- -------- -------
Date or a Removal Date occurs, the denominator in (x)(i) above shall be the
Series 199_-_ Allocation Percentage of (1) the aggregate amount of principal
Receivables in the Trust at the end of the day on the last day of the prior
Monthly Period f or the period f rom and including the first day of such Monthly
Period to but excluding the related Addition Date or Removal Date and (2) the
aggregate amount of Principal Receivables in the Trust at the end of the day on
the related Addition Date or Removal Date for the period from and including the
related Addition Date or Removal Date to and including the last day of such
Monthly Period [; provided, further, however, that with respect to any Monthly
-------- ------- -------
Period in which the Invested Amount is increased pursuant to Section 4.15, the
numerator in (a) above will be (1) the Invested Amount as of the last day of the
prior Monthly Period for the period from and including the first day of such
Monthly Period to but excluding the day the Invested Amount is increased and (2)
the Invested Amount as of the end of the day on which the Invested Amount is
increased for the period from and including such day to and including the last
day of such Monthly Period] [; provided further, however, that if after the
-------- ------- -------
commencement of the [Accumulation Period] [Early Accumulation Period]
[Controlled Amortization Period] or the Rapid Amortization Period, a Pay Out
Event occurs with respect to another Series that was designated in the
Supplement therefor as a Series that is a "Paired
-16-
<PAGE>
Series" with respect to Series 199_-_ , the Depositor may, by written notice
delivered to the Trustee and the Servicer, designate a different numerator for
the foregoing fraction, provided that (x) such numerator is not less than the
[Adjusted] Invested Amount for such Paired Series as of the last day of the
Monthly Period preceding such Pay-Out Event and (y) the Depositor shall have
received written notice from each Rating Agency that such designation will not
have a Ratings Effect and shall have delivered copies of each such written
notice to the Servicer and the Trustee.]
["Principal Funding Account" shall have the meaning specified in
-------------------------
Section 4.03(c)(i).]
["Principal Funding Account Balance" shall mean, with respect to any
---------------------------------
date of determination during the Accumulation Period, the principal amount, if
any, on deposit in the Principal Funding Account on such date of determination.]
["Principal Binding Investment Proceeds" shall have the meaning
-------------------------------------
specified in Section 4.03(c)(ii).]
["Principal Funding Investment Shortfall" shall mean, with respect to
--------------------------------------
each [Interest] [Monthly] Period during the Accumulation Period, the amount, if
any, by which the Principal Funding Investment Proceeds are less than the
Covered Amount.]
["Principal Shortfall" shall have the meaning specified in Section
-------------------
4.10.]
"Rapid Amortization Period" shall mean the period commencing at the
-------------------------
close of business on the Business Day immediately preceding the day on which a
Pay-Out Event with respect to Series 199_-_ is deemed to have occurred, and
ending on the first to occur of (i) the payment in full to the Class A
Certificateholders and the Class B Certificateholders of the Class A Invested
Amount and the Class B Invested Amount, respectively [, and the payment in full
to the Cash Collateral Depositor of the Enhancement Invested Amount, if any,] or
(ii) the Termination Date.
["Rate Determination Date" shall mean [__________, 199__] for the
-----------------------
period from [__________, 199__] through [__________, 199__], and thereafter,
[__________].]
"Reallocated Investor Finance Charge Collections" shall mean that
-----------------------------------------------
portion of Group [__] Investor Finance charge Collections allocated to Series
199_-_ [pursuant to Section 4.09A plus any Collections of Finance Charge
Receivables allocated to any Series expressly subordinated to Series 199_-_
which are available for application pursuant to Sections 4.05 and 4.07.]
["Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Monthly Period, the product of (a) the Principal Allocation Percentage of the
aggregate amount of Collections in respect of Principal Receivables deposited in
the Collection Account for such Monthly Period and (b) the [sum of the] Class B
Principal Percentage [and the Collateral Principal Percentage], with respect to
the [Accumulation Period] [Controlled Amortization Period] [early Accumulation
Period] or the Rapid Amortization Period.
-17-
<PAGE>
"Reassignment Amount" shall mean, with respect to any Distribution
-------------------
Date, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (i) the [Adjusted] Invested Amount on such
Distribution Date, [plus (ii) the Enhancement Invested Amount, if any, on such
Distribution Date,] plus (iii) monthly Interest for such Distribution Date and
any Monthly Interest previously due but not distributed to the Series 199_-_
Certificateholders (or deposited to the Interest Funding Account on a prior
Distribution Date, plus (iv) the amount of Additional Interest, if any, or such
Distribution Date and any Additional Interest previously due but not distributed
to the Series 199_-_ Certificateholders [or deposited to the Interest Funding
Account] on a prior Distribution Date.
"Reimbursement Draw Amount" shall have the meaning specified in
-------------------------
Section 4.12[(c)] [(g)].)
["Reinvestment Event" shall mean any Reinvestment Event specified in
------------------
Section 6.01.]
"Required Amount" shall have the meaning specified in Section 4.04.
---------------
["Required Cash Collateral Amount" shall mean (i) and (ii) on any
-------------------------------
Distribution Date thereafter, ___% the Invested Amount as of the last day of the
Monthly Period preceding such Distribution Date, but not less than $_________;
provided, however, that if either (a) there is a withdrawal from the Cash
- -------- -------
Collateral Account pursuant to Section 4.12(c), (d), (e), (f) or (g) [or any
reduction in the Collateral Invested Amount pursuant to clauses (c), (d) or (e)
of the definition thereof] during the Controlled [Amortization] [Accumulation]
Period or (b) a Pay-Out Event [or a Reinvestment Event] with respect to the
Series Certificates 199_-_ Certificates has occurred, the Required [Cash]
Collateral Amount for any Distribution Date thereafter shall equal the Required
[Cash] Collateral Amount for the Distribution Date immediately preceding such
withdrawal or Pay-Out Event [or Reinvestment Event].]
"Required Draw Amount" shall have the meaning specified in Section
--------------------
4.12(c)-l
["Required Reserve Account Amount" shall mean, with respect to any
-------------------------------
Distribution Date on or after the Reserve Account Funding Date, an amount equal
to (1) [______]% of the Invested Amount as of the preceding Distribution Date
(after giving effect to all changes therein on such date) or (2) any other
amount designated by the Depositor, provided that the Depositor shall have
received written notice from each Rating Agency that such designation will not
have a Ratings Effect and shall have delivered copies of each such written
notice to the Servicer and the Trustee.]
["Reserve Account" shall have the meaning specified in Section
---------------
4.11(a).]
["Reserve Account Funding Date" shall mean (1) the Distribution Date
----------------------------
with respect to the Monthly Period which commences [_____] months prior to the
commencement of the Class A Accumulation Period; provided, that the Depositor
--------
may delay the Reserve Account Funding Date to
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<PAGE>
the Distribution Date which occurs not later than the earliest of (a) the
Distribution Date with respect to the Monthly Period which commences [__] months
prior to the commencement of the Class A Accumulation Period, (b) the first
Distribution Date for which the Portfolio Adjusted Yield is less than [ ]
but in such event the Reserve Account Funding Date shall not be required to
occur earlier than the Distribution Date with respect to the Monthly Period
which commences [_____] months prior to the commencement of the Class A
Accumulation Period, (c) the first Distribution Date for which the Portfolio
Adjusted Yield is less than [__]%, but in such event the Reserve Account Funding
Date shall not be required to occur earlier than the Distribution Date which
commences [_____] months prior to the commencement of the Class A Accumulation
Period, or (d) the first Distribution Date for which the Portfolio Adjusted
Yield is less than [_____]%, but in such event the Reserve Account Funding Date
shall not be required to occur earlier than the Distribution Date which
commences [____] months prior to the commencement of the Class A Accumulation
Period or (2) any other date designated by the Depositor; provided, that the
--------
Depositor shall have received written notice from each Rating Agency that such
designation will not have a Ratings Effect and shall have delivered copies of
each such written notice to the Servicer and the Trustee.]
["Reserve Account Surplus" shall mean, as of any date of
-----------------------
determination, the amount, if any, by which the amount on deposit in the Reserve
Account exceeds the Required Reserve Account Amount.]
["Reserve Draw Amount" shall have the meaning specified in Section
-------------------
4.11(c).]
"Revolving Period" shall mean the period beginning at the close of
----------------
business on the Series Cut-Off Date and ending on the earlier of (a) the close
of business on the day immediately preceding the day the [Class A Accumulation
Period] [Class A Controlled Amortization Period] commences and (b) the close of
business on the day immediately preceding the day the Early Amortization
[Accumulation] Period commences.
"Series Cut-Off Date" shall mean the close of business on
-------------------
[__________________ __], 199[ ].
"Series 199[ -] " shall mean the Series of Certificates the terms of
--------------
which are specified in this Supplement.
"Series 199[ - ] Additional Amounts" shall mean, with respect to any
----------------------------------
Distribution Date, the sum of the amounts determined pursuant to Sections
4.07(b), (f) and (h-5) for such Distribution Date.
"Series 199[ - ] Allocable Finance Charge Collections" shall mean the
----------------------------------------------------
Series Allocable Finance Charge Collections with respect to Series 199[__-__].
"Series 199[ - ] Allocation Percentage" shall mean the Series
-------------------------------------
Allocation Percentage with respect to Series 199[ - ].
-19-
<PAGE>
"Series 199[ - ] Certificate" shall mean a Class A Certificate or a
---------------------------
Class B Certificate [or the Collateral Interest].
"Series 199[ - ] Certificateholder" shall mean a Class A
---------------------------------
Certificateholder or a Class B Certificateholder [or the Collateral Interest
Holder].
"Series 199[ - ] Certificateholders' Interest" shall mean the Class
--------------------------------------------
Certificateholders' Interest and the Class B Certificateholders' Interest [and
the Collateral Interest].
"Series 199[ - ] Monthly Fees" shall mean, with respect to any
----------------------------
Distribution Date, the amount determined pursuant to Section 4.05(a)(ii) and
(b)(ii) and Section 4.07(h-2)].
"Series 199[ - ] Monthly Interest" shall mean the amounts determined
--------------------------------
pursuant to Sections 4.02(a), (b) and (e); provided, however, that for purposes
-------- -------
of Section 4.09A the amount Determined pursuant to subsection 4.02(e) shall be
determined based on the lesser of the Collateral Rate and [____]% per annum.
"Series 199[ - ] Principal Shortfall" shall have the meaning specified
-----------------------------------
in Section 4.10.
"Series Invested Amount" shall mean [the Initial Invested Amount] [the
----------------------
Initial Invested Amount plus the amount of any withdrawals from the Pre-Funding
Account in connection with the purchase of an additional interest in Principal
Receivables pursuant to Section 4.15] [other formula].
"Series Required Seller Amount" shall mean an amount equal to [__]% of
-----------------------------
the Initial Invested Amount.
["Series Interchange" shall mean, for any Monthly Period, the product
------------------
of (a) the Floating Allocation Percentage for such Monthly Period and (b) the
portion of Series 199[__] Allocable Finance Charge Collections with respect to
such Monthly Period that is attributable to Interchange; provided, however, that
-------- -------
Servicer Interchange for a Monthly Period shall not exceed one-twelfth of the
product of (i) the sum of the Invested Amount [and the Enhancement Invested
Amount, if any,] as of the last day of such Monthly Period and (ii) [___]%.]
["Servicing Base Amount" shall have the meaning specified in Section
---------------------
3.01.]
["Servicing Draw Amount" shall have the meaning specified in Section
---------------------
4.12(e).]
"Servicing Fee Rate" shall mean [____]%.
------------------
["Servicing Draw Amount" shall have the meaning specified in Section
---------------------
4.12[(d)][(h)].]
"Special Payment Date" shall mean each Distribution Date with respect
--------------------
to the Rapid
-20-
<PAGE>
Amortization Period.
"Subordinated Series" shall mean any Series which, pursuant to the
-------------------
terms of the related Supplement, is subordinated in any manner to the Series
199[_-_] Certificates.
"Subordinated Series Reallocated Principal Collections" shall mean,
-----------------------------------------------------
with respect to any Distribution Date, that portion of Collections of Principal
Receivables allocable to a Subordinated Series which, pursuant to the terms of
the related Supplement, are to be reallocated to Series 199[_-_] and treated as
a portion of Available Principal Collections for such Distribution Date.
["Total Draw Amount" shall have the meaning specified in Section
-----------------
4.12[(e)] [(j)].]
"Termination Date" mean the [_________] Distribution Date.
----------------
"Depositor Percentage" shall mean 100% minus (a) the Floating
-------------------- -----
Allocation Percentage, when used at any time with respect to Finance Charge
Receivables and Defaulted Receivables, (b) the Floating Allocation Percentage,
when used with respect to Principal Receivables during the Revolving Period and
(c) the Principal Allocation Percentage, when used with respect to Principal
Receivables during the Controlled [Amortization] [Accumulation] Period and the
Rapid Amortization Period [and any Early Accumulation Period].
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, the term "Rating Agency" shall mean, whenever used in this
Supplement or the Agreement with respect to Series 199_-_, [Moody's] [Standard &
Poor's] [other Rating Agency]. As used in this Supplement and in the Agreement
with respect to Series 199_-_, "highest investment category" shall mean (i) in
the case of Standard & Poor's, [_____] or [_____], as applicable, and (ii) in
the case of Moody's, [_____] or [_____] as applicable[; provided, however, that
-------- -------
notwithstanding any other provision of the Agreement or this Supplement to the
contrary, for purposes of the investment of funds in the Cash Collateral Account
(but only to the extent such funds exceed the Available Shared Collateral Amount
on any date) and, on and after the Class B Principal Commencement Date, the
Principal Funding Account and the Reserve Account, "highest investment category"
as used in the definition of "Eligible Investments" shall mean (i) in the case
of Standard & Poor's, [_____] or [_____], as applicable, and (ii) in the case of
Moody's, [_____] or [_____], as applicable.]
(c) Each capitalized term defined herein shall relate to the Series
199_-_ Certificates and no other Series of Certificates issued by the Trust.
All capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to them in the Agreement. In the event that any term or
provision contained herein shall conflict with or be inconsistent with any term
or provision contained in the Agreement, the terms and provisions of this
Supplement shall govern.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; references to any
Article, Section or Exhibit are references to Articles,
-21-
<PAGE>
Sections and Exhibits in or to this Supplement unless otherwise specified; and
the term "including" means "including without limitation."
ARTICLE III
SERVICER AND TRUSTEE
--------------------
Section 3.01. Servicing Compensation. The share of the Servicing Fee
----------------------
allocable to the Series 199__-__ Certificateholders with respect to any
Distribution Date (the "Monthly Servicing Fee") shall be equal to one-twelfth of
the product of (a) the Servicing Fee Rate and (b)(i) the sum of the [Adjusted]
Invested Amount [and the Enhancement Invested Amount, if any,] as of the last
day of the Monthly Period preceding such Distribution Date, minus (ii) the
product of the amount, if any, on deposit in the Special Funding Account as of
the last day of the Monthly Period preceding such Distribution Date and the
Floating Allocation Percentage with respect to such Monthly Period (the amount
calculated pursuant to this clause (b) is referred to as the "Servicing Base
Amount"); provided, however, that with respect to the first Distribution Date,
-------- -------
the Monthly Servicing Fee shall be equal to $[__________]. [On each
Distribution Date, Servicer Interchange with respect to the related Monthly
Period that is on deposit in the Collection Account shall be withdrawn from the
Collection Account and paid to the Servicer in payment of a portion of the
Monthly Servicing Fee with respect to such Monthly Period. In the case of any
insufficiency of Servicer Interchange on deposit in the Collection Account, a
portion of the Monthly Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency of Servicer Interchange.] The
share of the Monthly Servicing Fee allocable to the Class A Certificateholders
[(after giving effect to the distribution of Servicer Interchange, if any, to
the Servicer)] with respect to any Distribution Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Percentage, (b) the [Net] Servicing Fee Rate and (c) the Servicing Base Amount;
provided, however, that with respect to the first Distribution Date, the Class A
- -------- -------
Servicing Fee shall be equal to $[__________]. The share of the Monthly
Servicing Fee allocable to the Class B Certificateholders [(after giving effect
to the distribution of Servicer Interchange, if any, to the Servicer)] with
respect to any Distribution Date (the "Class B Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Class 13 Floating Percentage, (b) the
[Net] Servicing Fee Rate and (c) the Servicing Base Amount; provided, however,
-------- -------
that with respect to the first Distribution Date, the Class B Servicing Fee
shall be equal to $[__________]. [The share of the Monthly Servicing Fee
allocable to the Collateral Interest [(after giving effect to the distribution
of Servicer Interchange, if any, to the Servicer)] with respect to any
Distribution Date (the "Collateral Servicing Fee") shall be equal to one-twelfth
of the product of the (a) Collateral Invested Percentage (b) the [Net] Servicing
Fee Rate and (c) the Servicing Base Amount; provided, however, that with respect
-------- -------
to the first Distribution Date, the Collateral Servicing Fee shall be equal to
[__________].] The remainder of the Servicing Fee shall be paid by the Holder
of the Depositor Certificate or the Certificateholders of other Series (as
provided in the related Supplements) and in no event shall the Trust, the
Trustee, the Series 199__-__ Certificateholders or the [Cash Collateral
Depositor] [Credit Enhancement Provider] be liable for the share of the
Servicing Fee to be paid by the Holder of the Depositor Certificate or the
Certificateholders of any other Series. The (i) Class A Servicing Fee shall be
payable to the Servicer
-22-
<PAGE>
solely to the extent amounts are available for distribution in respect thereof
pursuant to Section 4.05(a)(ii), 4.07(a), 4.08(a) or 4.12(c)]; and the Class B
Servicing Fee shall be payable solely to the extent amounts are available for
distribution in respect thereof pursuant to Section 4.05(b) (ii), 4.07(d) for
4.12(e) [and (iii) the Collateral Servicing Fee shall be payable solely to the
extent amounts are available for distribution with respect thereto pursuant to
Section 4.05[(b-1)(i)], 4.05(b)(ii) [or 4.07(h-2)].
ARTICLE IV
RIGHTS OF SERIES 1999_-_ CERTIFICATEHOLDERS AND
-----------------------------------------------
ALLOCATION AND APPLICATION OF COLLECTIONS
-----------------------------------------
Section 4.01. Collections and Allocations.
---------------------------
(a) Allocations. Collections of Finance Charge Receivables and
-----------
Principal Receivables and Defaulted Receivables allocated to Series 199[ -_]
pursuant to Article IV of the Agreement (and, as described herein, Collections
of Finance Charge Receivables reallocates from other Series in Group [__]) shall
be allocated and distributed or reallocated as set forth in this Article.
(b) Payments to the Depositor. The Servicer shall on Deposit Dates
-------------------------
withdraw from the Collection Account and pay to the Depositor, the following
amounts:
(i) an amount equal to the Depositor's Percentage for the related Due
Period of Series 199[_-_] Allocable Finance Charge Collections to the extent
such amount is deposited in the Collection Account; and
(ii) an amount equal to the Transferror's Percentage for the related
Due Period of Series Allocable Principal Collections deposited in the Collection
Account, if the Depositor Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on such Deposit Date) exceeds
zero.
The withdrawals to be made from the Collection Account pursuant to
this Section 4.01(b) do not apply to deposits into the Collection Account that
do not represent Collections, including payment of the purchase price for the
Certificateholders, Interest pursuant to Section 2.06 or 10.01 of the Agreement,
payment of the purchase price for the Series 199[_-_] Certificateholders'
Interest pursuant to Section 2.06 or 10.01 of this Supplement and proceeds from
the sale, disposition or liquidation of Receivables pursuant to Section 9.01 or
12.02 of the Agreement.
Section 4.02. Determination of Monthly Interest [; Interest Funding
-----------------------------------------------------
Account]
- --------
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to [one-twelfth
of] the product of (i) [(A) a fraction, the numerator of which in the
-23-
<PAGE>
actual number of days in the related Interest Period and the denominator of
which is 360, times (B)] the Class A Certificate Rate and (ii) [the sum of (A)]
the Class A Invested Amount [and (B) [the product of the Class A Floating
Percentage and] the Pre-Funding Amount, each] as of close of business on the
last day of the preceding Monthly Period; provided, however, with respect to the
-------- -------
first Distribution Date, Class A Monthly Interest shall be equal to
$[__________]. [Class A Monthly Interest shall be calculated on the basis of a
360-day year of twelve 30-day months.]
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class A Interest Shortfall"),
of (x) the Class A Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class A Monthly
Interest on such Distribution Date (after giving effect to any withdrawal from
the [Cash Collateral Account][Credit Enhancement] with respect to such
Distribution Date). If the Class A Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("Class A
Additional Interest") equal to [one-twelfth) of the product of (i) [(A) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, times (B)] the Class A
Certificate Rate and (ii) such Class A Interest Shortfall (or the portion
thereof which has not been paid to the Class A Certificateholders [or deposited
to the Interest Funding Account]) shall be payable as provided herein with
respect to the Class A Certificates on each Distribution Date following such
Distribution Date to and including the Distribution Date on which a Class A
Interest Shortfall is paid to the Class A Certificateholders. Notwithstanding
anything to the contrary herein, Class A Additional Interest shall be payable or
distributed to the Class A Certificateholders only to the extent permitted by
applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to [one-twelfth
of] the product of (i) [(A) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, times (B)] the Class B Certificate Rate and (ii) [the sum of (A)] the Class
B Invested Amount [and (B) [the product of the Class B Floating Percentage and]
the Pre-Funding Amount, each] as of the close of business on the last day of the
preceding Monthly Period; provided, however, with respect to the first
-------- -------
Distribution Date, Class B Monthly Interest shall be equal to $[__________].
[Class B Monthly Interest shall be calculated on the basis of a 360-day year of
twelve 30-day months.]
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class B Interest Shortfall"),
of (x) the Class B Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class B Monthly
Interest on such Distribution Date (after giving effect to any withdrawal from
the [Cash Collateral Account] [Credit Enhancement] with respect to such
Distribution Date) . If the Class B Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("Class B
Additional Interest") equal to [one-twelfth of] the product of (i) [(A) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, times (B)] the Class B
Certificate Rate and (ii) such Class B Interest Shortfall (or
-24-
<PAGE>
the portion thereof which has not been paid to the Class B Certificateholders
[or deposited to the Interest Funding Account]) shall be payable as provided
herein with respect to the Class B Certificates on each Distribution Date
following such Distribution Date to and including the Distribution Date on which
such Class B Interest Shortfall is paid to the Class B Certificateholders.
Notwithstanding anything to the contrary herein, Class B Additional Interest
shall be payable or distributed to the Class B Certificateholders only to the
extent permitted by applicable law.
(c) Interest Funding Account.
------------------------
(i) The Servicer, for the benefit of the Series 199_-_
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Interest Funding
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 199_-_ Certificateholders. The
Interest Funding Account shall initially be established with [the Trustee].
(ii) At the direction of the Servicer, funds on deposit in the
Interest Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments shall be
held by the Trustee for the benefit of the Series 199_-_ Certificateholders;
provided, that on each Distribution Date any interest and other investment
- --------
income (net of losses and investment expenses) (Interest Funding Investment
Proceeds") on funds on deposit therein shall be applied as set forth in
paragraph (iii) below. Funds on deposit in the Interest Funding Account shall
be invested in Eligible Investments that will mature so that such funds will be
available at the close of business on the Transfer Date preceding the following
Distribution Date. Unless the Servicer directs otherwise, funds deposited in
the Interest Funding Account on a Transfer Date (which immediately precedes a
Payment Date) upon the maturity of any Eligible Investments are not required to
be invested overnight.
(iii) On each Distribution Date, the Servicer shall direct the
Trustee to withdraw from the Interest Funding Account and [deposit into the
Collection Account] [pay to the Depositor] all Interest Funding Investment
Proceeds then on deposit in the Interest Funding Account [and such Interest
Funding Investment Proceeds shall be treated as a portion of (x) prior to the
Class B Principal Commencement Date, Class A Available Funds and (y) thereafter,
Class B Available Funds, in each case for such Distribution Date].
(iv) Reinvested interest and other investment income on funds
deposited in the Interest Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Supplement.
(d) Control of Interest Funding Account.
-----------------------------------
(i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Interest Funding Account and in all
proceeds thereof. The Interest Funding Account shall be under the sole dominion
and control of the Trustee for the benefit
-25-
<PAGE>
of the Series 199_-_ Certificateholders. If, at any time, the Interest Funding
Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer
on its behalf) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Interest Funding Account meeting the conditions specified in paragraph
(c)(i). above as an Eligible Deposit Account and shall transfer any cash or any
investments to such new Interest Funding Account.
(ii) Pursuant to the authority granted to the Servicer in Section
3.01(b) of the Agreement, the Servicer shall have the power, revocable by the
Trustee, to make withdrawals and payments or to instruct the Trustee to make
withdrawals and payments from the Interest Funding Account for the purposes of
carrying out the Servicer's or Trustee's duties hereunder. Pursuant to the
authority granted to the Paying Agent in Section 5.01 of this Supplement and
Section 6.07 of the Agreement, the Paying Agent shall have the power, revocable
by the Trustee, to withdraw funds from the Interest Funding Account for the
purpose of making distributions to the Series 199_-_ Certificateholders.
(e) [The amount of monthly interest ("Collateral Monthly Interest")
distributable from the Collection Account with respect to the Collateral
Invested Amount on any Distribution Date shall be an amount equal to the product
of (i) the Collateral Rate in effect with respect to the applicable Interest
Period, (ii) the Collateral Invested Amount as of the close of business on the
preceding Distribution Date (after giving effect to any increase or decrease in
the Collateral Invested Amount on such preceding Distribution Date); provided
--------
that in the case of the first Distribution Date Collateral Monthly Interest
shall be equal to $[____________].
On the Determination Date preceding each Distribution Date, the
Servicer shall determine an amount (the "Collateral Interest Shortfall") equal
to (x) the aggregate Collateral Monthly Interest for the Interest Period
applicable to such Distribution Date minus (y) the amount which will be on
-----
deposit in the Collection Account and allocable to the Collateral Invested
Amount on such Distribution Date. If the Collateral Interest Shortfall with
respect to any Distribution Date is greater than zero, on each subsequent
Distribution Date until such Collateral Interest Shortfall is fully paid, an
additional amount ("Collateral Additional Interest") shall be payable as
provided herein with respect to the Collateral Invested Amount on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Collateral Interest Shortfall is paid to the
Collateral Interest Holder, equal to the product of (i) the Collateral Rate in
effect with respect to the applicable Interest Period, (ii) such Collateral
Interest Shortfall (or the portion thereof which has not been paid to the
Collateral Interest Holder) and (iii) a fraction the numerator of which is the
actual number of days in the Interest Period ending immediately prior to such
Distribution Date and the denominator of which is 360. Notwithstanding anything
to the contrary herein, Collateral Additional Interest shall be payable or
distributed to the Collateral Interest Holder only to the extent permitted by
applicable law.)
Section 4.03. Determination of Monthly Principal [; Principal Funding
-------------------------------------------------------
Account; Class A Accumulation Period.]
- ------------------------------------
-26-
<PAGE>
(a) The amount of monthly principal ("Class A Monthly Principal")
distributable from the Collection Account with respect to the Class A
Certificates on each Distribution Date, beginning with the first to occur of (i)
the first Special Payment Date, if any, and (ii) the first Distribution Date
with respect to the [Class A Accumulation Period] [Class A Controlled
Amortization Period] [Early Accumulation Period], shall be equal to the least of
(x) the Available Principal Collections on deposit in the Collection Account
with respect to such Distribution Date, (y) for each Distribution Date with
respect to the [Class A Accumulation Period] [Class A Controlled Amortization
Period], the [Controlled Deposit Amount] [Controlled Distribution Amount] for
such Distribution Date and (z) the Class A [Adjusted] Invested Amount on such
Distribution Date.
(b) The amount of monthly principal ("Class B Monthly Principal")
distributable from the Collection Account with respect to the Class B
Certificates on each Distribution Date, beginning with the Class B Principal
Commencement Date [or during an Early Accumulation Period], shall be equal to
the least of (x) the Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date (minus the portion of
such Available Principal Collections applied to Class A Monthly Principal on
such Distribution Date), (y) for each Distribution Date with respect to the
[Class B Accumulation Period] [Class B Controlled Amortization Period] the
[Controlled Deposit Amount] [Controlled Distribution Amount] for such
Distribution Date and (z) the Class B [Adjusted] Invested Amount on such
Distribution Date.
[(b-1 The amount of monthly principal ("Collateral Monthly
Principal") distributable from the Collection Account to the Collateral Interest
Holder with respect to the Collateral Interest on each Distribution Date shall
be an amount equal to the lesser of (A) the excess, if any, of the Collateral
Invested Amount (after taking into account adjustments to be made on such
Distribution Date pursuant to Sections 4.06.and 4.08) over the Required
Collateral Amount on such Distribution Date or (B) the Available Principal
Collections on such Distribution Date.]
(c) Principal Funding Account.
-------------------------
(i) The Servicer, for the benefit of the Series 199_-_
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Principal Funding
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 199_-_ Certificateholders. The
Principal Funding Account shall initially be established with [the Trustee].
(ii) At the direction of the Servicer, funds on deposit in the
Principal Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments shall be
held by the Trustee for the benefit of the Series 199_-_ Certificateholders;
provided, that on each Distribution Date all interest and other investment
- --------
income (net of losses and investment expenses) ("Principal Funding Investment
Proceeds") on funds on deposit therein shall be applied as set forth in
paragraph (iii) below. Funds on deposit in the Principal Funding Account shall
be invested in Eligible Investments that will
-27-
<PAGE>
mature so that such funds will be available at the close of business on the
Transfer Date preceding the following Distribution Date. Unless the Servicer
directs otherwise, funds deposited in the Principal Funding Account on a
Transfer Date (which immediately precedes a Payment Date) upon the maturity of
any Eligible Investments are not required to be invested overnight.
(iii) On each Distribution Date with respect to [the Accumulation
Period] [an Early Accumulation Period], the Servicer shall direct the Trustee to
withdraw from the Principal Funding Account and deposit into the Collection
Account all Principal Funding Proceeds then on deposit in the Principal Funding
Account and such Principal Funding Investment Proceeds shall be treated as a
portion of (x) prior to the Class B Principal Commencement Date, Class A
Available Funds and (y) thereafter, Class B Available Funds, in each case for
such Distribution Date.
(iv) Reinvested interest and other investment income on funds
deposited in the Principal Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Supplement.
(c) Control of Principal Funding Account.
------------------------------------
(i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Funding Account and in all
proceeds thereof. The Principal Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of the Series 199_-_
Certificateholders. If, at any time, the Principal Funding Account ceases to be
an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new Principal Funding
Account meeting the conditions specified in paragraph (c)(i) above as an
Eligible Deposit Account and shall transfer any cash or any investments to such
new Principal Funding Account.
(ii) Pursuant to the authority granted to the Servicer in Section
3.01(b) of the Agreement, the Servicer shall have the power, revocable by the
Trustee, to make withdrawals and payments or to instruct the Trustee to make
withdrawals and payments from the Principal Funding Account for the purposes of
carrying out the Servicer's or Trustee's duties hereunder. Pursuant to the
authority granted to the Paying Agent in Section 5.01 of this Supplement and
Section 6.07 of the Agreement, the Paying Agent shall have the power, revocable
by the Trustee, to withdraw funds from the Principal Funding Account for the
purpose of making distributions to the Series 199_-_ Certificateholders.]
[ (d) The Class A Accumulation Period is scheduled to commence at
the close of business on the last Business Day of [_____]; provided, however,
-------- -------
that if the Class A Accumulation Period Length (determined as described below)
is less than [____] months, the date on which the Class A Accumulation Period
actually commences will be delayed to the last Business Day of the month
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that is the number of months prior to [_____], equal to the Class A Accumulation
Period Length and, as a result, the number of Monthly Periods in the Class A
Accumulation Period will equal the Class A Accumulation Period Length. On the
Determination Date immediately preceding the [_____] Distribution Date, the
Servicer will determine the "Class A Accumulation Period Length" which will be
equal to the product, rounded upwards to the nearest whole number, of (a)
[_____] months and (b) a fraction, the numerator of which is equal to the sum of
(i) the Series Invested Amount, (ii) the series invested amounts of all then
outstanding Series which are not scheduled to be in their revolving periods for
the entire period from [_____] to the last Business Day of [_____], (iii) the
series invested amounts of any other Series which are not Principal Sharing
Series and (iv) the series invested amounts of any other Series designated by
the Depositor in a written notice delivered to the Servicer on or prior to such
Determination Date, and the denominator of which is equal to the series invested
amounts of all then outstanding Series (including Series 199_-_).
Notwithstanding the foregoing, unless a Pay Out Event occurs with respect to
Series 199_-_, the Class A Accumulation Period will commence on the last
Business Day of [_____] if, prior to such date, a Pay out Event shall have
occurred with respect to any other Series (other than a Series designated
pursuant to clause (iii) or (iv) above). In addition, if the Class A
Accumulation Period Length shall have been determined to be less than [ ] months
and, after the date on which such determination is made, a Pay Out Event shall
occur with respect to any outstanding Series other than Series 199_-_, the Class
A Accumulation Period will commence on the earlier of (i) the first day of the
Monthly Period immediately succeeding the date that such Pay Out Event shall
have occurred with respect to such Series and (ii) the date on which the Class A
Accumulation Period is then scheduled to commence.]
Section 4.04. Required Amount. With respect to each Distribution
---------------
Date, on the related Determination Date, the Servicer shall determine the amount
(the "Class A Required Amount"), if any, by which (a) the sum of (i) Class A
Monthly Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders [or deposited to
the Interest Funding Account] on a prior Distribution Date, (iii) any Class A
Additional interest previously due but not paid to the Class A
Certificateholders [or deposited to the Interest Funding Account] on a prior
Distribution Date, (iv) the Class A Servicing Fee for such Distribution Date,
(v) any Class A Servicing Fee previously due but not paid to the Servicer, and
(vi) the Class A Investor Default Amount, if any, for such Distribution Date
exceeds (b) the Class A Available Funds. In the event that the [Class A]
Required Amount for such Distribution Date is greater than zero, the Servicer
shall give written notice to the Trustee of such positive Required Amount on the
date of computation.
[(b) With respect to each Distribution Date, on the related
Determination Date, the Servicer shall determine the amount (the "Class B
Required Amount"), if any, by which (a) the sum of (i) Class B Monthly Interest
for such Distribution Date, (ii) any Class B Monthly Interest previously due but
not paid to the Class B Certificateholders, (iii) Class B Additional Interest,
if any, for such Distribution Date and (iv) the Class B Investor Default Amount,
if any, (v) the Class B Servicing Fee for such Distribution Date and (vi) any
Class A Servicing Fee previously due but not paid to the Servicer exceeds (b)
the amounts available therefor pursuant to subsections 4.05(b)(i), (ii) and
(iii) and 4.07(c), (d) or (e) plus any other funds available to the Trust to
----
cover the amounts
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referred to in clauses (i) through (vi) above. In the event that the Class B
Required Amount for such Distribution Date is greeter than zero, the Servicer
shall give written notice to the Trustee of such positive Class B Required
Amount on the date of computation.]
Section 4.05. Application of Class A Available Funds, Class B
-----------------------------------------------
Available Funds and Available Principal Collections. The Servicer shall apply,
- ---------------------------------------------------
or shall cause the Trustee to apply, on each Distribution Date, Class A
Available Funds, Class B Available Funds and Available Principal Collections on
deposit in the Collection Account with respect to such Distribution Date to make
the following distributions:
(a) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed in
the following priority:
[(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest previously
----
due but not distributed to Class A Certificateholders [or deposited to the
Interest Funding Account] on a prior Distribution Date, plus the amount of any
----
Class A Additional Interest for such Distribution Date and any Class A
Additional Interest previously due but not distributed to Class A
Certificateholders [or deposited to the Interest Funding Account] on a prior
Distribution Date, shall be [distributed to the Paying Agent for payment to the
Class A Certificateholders] [deposited in the Interest Funding Account for
distribution to the Paying Agent for payment to Class A Certificateholders on
the applicable Payment Date];
(ii) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer (unless such amount has been netted against deposits
to the Collection Account in accordance with Section 4.03 of the Agreement);
(iii) an amount equal to the Class A Investor Default Amount for
such Distribution Date shall be treated as a portion of Available Principal
Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as set forth in Section 4.07.
(b) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed in
the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution
Date, plus the amount of any Class B Monthly Interest previously due but not
distributed to Class B Certificateholders [or deposited to the Interest Funding
Account] on a prior Distribution Date, plus the amount of any Class B Additional
Interest for such Distribution Date and any Class B Additional Interest
previously due but not distributed to Class B Certificateholders
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[or deposited to the Interest Funding Account] on a prior Distribution Date,
shall be [distributed to the Paying Agent for payment to the Class B
Certificateholders] [deposited in the Interest Funding Account for distribution
to the Paying Agent for payment to Class B Certificateholders on the applicable
Payment Date];
(ii) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer (unless such amount has been netted against deposits
to the Collection Account in accordance with Section 4.03 of the Agreement);
(iii) an amount equal to the Class B Investor Default Amount for
such Distribution Date shall be treated as a portion of Available Principal
Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as set forth in Section 4.07.
(c) On each Distribution Date with respect to the Revolving Period,
an amount equal to the Available Principal Collections deposited in the
Collection Account for the related Monthly Period shall be [treated as Shared
Principal Collections and applied in accordance with Section 4.04 of the
Agreement] [paid to the Holder of the Depositor Certificate only if the
Depositor Amount on such date is greater than the Required Depositor Amount
[after giving effect to the inclusion in the Trust of all Principal Receivables
created on such date and thereafter shall be deposited in the Special Funding
Account] [paid to the Collateral Interest Holder for application in accordance
with the Loan Agreement to the extent of Collateral Monthly Principal for such
Distribution Date].
(d) On each Distribution Date with respect to the [Accumulation
Period] [Controlled Amortization Period] [Early Accumulation Period] or the
Rapid Amortization Period, an amount equal to the Available Principal
Collections deposited in the Collection Account for the related Monthly Period
will be distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date, up to the Class A [Adjusted] Invested Amount, on such
Distribution Date, shall be [distributed to the Paying Agent for payment to the
Class A Certificateholders] [deposited in the Principal Funding Account];
(ii) for each Distribution Date [beginning on the Class B Principal
Commencement Date] [during an Early Accumulation Period], an amount equal to
Class B Monthly Principal for such Distribution Date, up to the Class B
Adjusted] Invested Amount on such Distribution Date, shall be [distributed to
the Paying Agent for payment to the Class B Certificateholders] [deposited in
the Principal Funding Account];
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(iii) for each Distribution Date with respect to the Rapid
Amortization Period, beginning with the Distribution Date on which the Invested
Amount is paid in full, after giving effect to the distributions referred to
above, an amount equal to the balance, if any, of such Available Principal
Collections then on deposit in the Collection Account, to the extent of the
Enhancement Invested Amount, if any, shall be distributed to the Cash Collateral
Depositor for application in accordance with the Loan Agreement;] and
(iv) for each Distribution Date, after giving effect to paragraphs
(i), (ii) [and (iii)] above, an amount equal to the balance, if any, of such
Available Principal Collections then on deposit in the Collection Account [up to
an amount equal to Collateral Monthly Principal for such Distribution Date shall
be distributed to the Collateral Interest Holder for application in accordance
with the Loan Agreement and the remainder of such Collections] shall be [treated
as Shared Principal Collections and applied in accordance with Section 4.04 of
the Agreement] [paid to the Holder of the Depositor Certificate only if the
Depositor Amount on such date is greater than the Required Depositor Amount
(after giving effect to the inclusion in the Trust of all Principal Receivables
created on such date) and thereafter shall be deposited in the Special Funding
Account].
[(e) On the Distribution Date immediately following the end of the
Funding Period, an amount equal to the amount specified in Section 4.14(b) shall
be withdrawn from the Pre-Funding Account and distributed to the Paying Agent
for payment to the [Class A Certificateholders] [and] [the Class B
Certificateholders] [and the Collateral Interest Holder] [pro rata based on the
--- ----
ratio of the Class A Invested Amount and the Class B Invested Amount [and the
Collateral Interest], respectively, to the Invested Amount as of the last day of
the related Monthly Period].
Section 4.06. Defaulted Amounts; Investor Charge-Offs. (a) On each
---------------------------------------
Determination Date, the Servicer shall calculate the Class A Investor Default
Amount, if any, for the related Distribution Date. If, on any Distribution
Date, the [Class A] Required Amount for the related Monthly Period exceeds the
sum of (x) the amount of Reallocated Principal Collections with respect to such
Monthly Period, (y) the amount of Excess Spread [and the Excess Finance Charge
Collections allocable to Series 199_-_] with respect to such Monthly Period [and
(z) the [Available Shared Collateral Amount] [Available Credit Enhancement
Amount] with respect to such Distribution Date, then [the [Enhancement]
[Collateral] Invested Amount, if any, will be reduced by the amount of such
excess, but not by more than the Class A Investor Default Amount for such
Distribution Date. In the event that such reduction would cause the
[Enhancement] [Collateral] Investment Amount to be a negative number, then the
[Enhancement] [Collateral] Invested Amount will be reduced to zero and] the
Class B Invested Amount shall be reduced by the amount [of such excess] [by
which the [Enhancement] [Collateral] Invested Amount would have been reduced
below zero,] but not by more than [the excess, if any, of] the Class A Investor
Default Amount for such Distribution Date [over the amount of such reduction, if
any, of the [Enhancement] [Collateral] Invested Amount with respect to such
Distribution Date]. In the event that such reduction would cause the Class B
Invested Amount to be a negative number, then the Class B Invested Amount shall
be reduced to zero, and
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<PAGE>
the Class A Invested Amount shall be reduced by the amount by which the Class B
Invested Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Investor Default Amount for such Distribution
Date over the [aggregate] amount of the reductions, if any, of [the
[Enhancement] [Collateral] Invested Amount and] the Class B Invested Amount for
such Distribution Date (a "Class A Investor Charge-Off). Class A Investor
Charge-Offs shall thereafter be reimbursed and the Class A Invested Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class A
Investor Charge-Offs) on any Distribution Date by the amount of Excess Spread
[and Excess Finance Charge Collections] allocated and available for that purpose
pursuant to Section 4.07(b).
(b) On each Determination Date, the Servicer shall calculate the Class
B Investor Default Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of Class B Available Funds, Excess Spread [and
Excess Finance Charge Collections] with respect to the related Monthly Period
which are allocated and available to pay such amount pursuant to Section 4.05(b)
(iii) or 4.07(e) and (y) the portion, if any, of the [Available Shared
Collateral Amount] [Available Credit Enhancement Amount] with respect to such
Distribution Date [(after giving effect to any withdrawal from the Cash
Collateral Account to fund the Required Draw Amount with respect to such
Distribution Date)], then [the [Enhancement) [Collateral] Invested Amount shall
be reduced by the amount of such excess. In the event that such reduction would
cause the [Enhancement] [Collateral] Invested Amount to be a negative number,
then the [Enhancement] [Collateral] Invested Amount shall reduced to zero, and]
the Class B Invested Amount shall be reduced by the amount [of such excess] [by
which the [Enhancement] [Collateral] Invested Amount would have been reduced
below zero,] but not by more than the Class B Investor Default Amount for such
Distribution Date (a "Class B Investor Charge-Off"). Class B Investor Charge-
Offs shall thereafter be reimbursed and the Class B Invested Amount increased
(but not by an amount in excess of the aggregate unreimbursed Class B Investor
Charge-Offs) on any Distribution Date by the amount of Excess Spread [and Excess
Finance Charge Collections] allocated and available for that purpose pursuant to
Section 4.07(f).
(c) If on any Distribution Date Reallocated Principal Collections for
such Distribution Date are applied pursuant to Section 4.08(a), then [the
[Enhancement] [Collateral] Invested Amount shall be reduced by the amount of
such Reallocated Principal Collections. In the event that such reduction would
cause the [Enhancement] [Collateral] Invested Amount to be a negative number,
then the [Enhancement] [Collateral] Invested Amount shall be reduced to zero,
and] the Class B Invested Amount shall be reduced by the amount [of such
Reallocated Principal Collections] [by which the [Enhancement] [Collateral]
Invested Amount would have been reduced below zero]. [On each Determination
Date, the Servicer shall calculate the Collateral Default Amount. If on any
Distribution Date the Collateral Default Amount for the previous Monthly Period
exceeds the amount of Collateral Available Funds, Excess Spread [and Excess
Finance Charge Collections] with respect to the related Monthly Period which are
allocated and available to pay such amount pursuant to Section 4.07(h-3), then
the Collateral Interest will be reduced by the amount of such excess but not by
more than the lesser of the Collateral Default Amount and the Collateral
Interest for such Distribution Date (a "Collateral Charge-Off"). The Collateral
Interest will after any
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<PAGE>
reduction pursuant to this Section 4.06 be reimbursed on any Distribution Date
by the amount of Excess Spread [and Excess Finance Charge Collections] allocated
and available on such Distribution date for that purpose as described under
Section 4.07(h-4).]
Section 4.07. Excess Spread; Excess Finance Charge Collections. The
------------------------------------ -----------
Servicer shall apply, or shall cause the Trustee to apply, on each Distribution
Date, Excess Spread [and Excess Finance Charge Collections allocated to Series
199_-_] with respect to the related monthly Period, to make the following
distributions in the following order of priority:
(a) an amount equal to the [Class A] Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to fund
any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii); provided, that
--------
in the event the Required Amount for such Distribution Date exceeds the amount
of Excess Spread [and Excess Finance Charge Collections allocated to Series 199-
_-], then such Excess Spread [and Excess Finance Charge Collections] shall be
applied first to pay amounts due with respect to such Distribution Date pursuant
to Section 4.05(a)(i), second to pay the Class A Servicing Fee pursuant to
Section 4.05(a)(ii) and third to pay the Class A Investor Default Amount for
such Distribution Date pursuant to Section 4.05(a)(iii);
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed as provided in Section
4.06(a) (after giving effect to the allocation on such Distribution Date of any
amount for that purpose pursuant to Section 4.06(a)) shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(c) an amount equal to the sum of (i) any Class B Monthly Interest due
but not distributed to the Class B Certificateholders [or deposited to the
Interest Funding Account] either on such Distribution Date or a prior
Distribution Date and (ii) the amount of any Class B Additional Interest
previously due but not distributed to the Class B Certificateholders [or
deposited to the Interest Funding Account] either on such Distribution Date or a
prior Distribution Date, after giving effect to the allocation in section
4.05(b)(i), shall be [distributed to the Paying Agent for payment to the Class B
Certificateholders] [deposited in the Interest Funding Account for distribution
to the Paying Agent for payment to Class B Certificateholders on the applicable
Payment Date];
(d) an amount equal to any Class B Servicing Fees due but not paid to
the Servicer either on such Distribution Date or a prior Distribution Date,
after giving effect to the allocation in Section 4.05(b)(iii), shall be paid to
the Servicer;
(e) an amount equal to the remaining Class B Investor Default Amount
for such Distribution Date, after giving effect to the allocation in Section
4.05(b)(iii), shall be treated as a portion of Available Principal Collections
for such Distribution Date;
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<PAGE>
(f) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of the
definition of "Class B Invested Amount" in Section 2.01 of this Supplement (but
not in excess of the aggregate amount of such reductions which have not been
previously reimbursed) shall be treated as a portion of Available Principal
Collections for such Distribution Date;
(g) [an amount equal to the "Monthly Cash Collateral Fee" (as defined
in the Loan Agreement) for such Distribution Date shall be distributed to the
Cash Collateral Depositor for application in accordance with the Loan Agreement]
[an amount equal to the "Monthly Credit Enhancement Fee" (as defined in the
Credit Enhancement Agreement) shall be distributed to the Credit Enhancement
Provider];
[(h-1) an amount equal to Collateral Monthly Interest for the related
Distribution Date, plus the amount of any Collateral Monthly Interest previously
----
due but not distributed to the Collateral Interest Holder on a prior
Distribution Date, plus the amount of any Collateral Additional Interest for
----
such Distribution Date and any Collateral Additional Interest previously due but
not distributed to the Collateral Interest Holder on a prior Distribution Date,
shall be distributed to the Collateral Interest Holder for application in
accordance with the Loan Agreement;]
[(h-2) an amount equal to the Collateral Servicing Fee for such
Distribution Date and any Collateral Servicing Fee due but not paid to the
Servicer on a prior Distribution Date shall be paid to the Servicer;]
[(h-3) an amount equal to the Collateral Default Amount, if any, for
the prior Monthly Period shall be treated as a portion of Available Principal
Collections for such Distribution Date;]
[(h-4) an amount equal to the aggregate amount by which the
[Enhancement] [Collateral] Invested Amount has been reduced pursuant to clause
(c) of the definition of "[Enhancement] [Collateral] Invested Amount" (but not
in excess of the aggregate amount of such reductions which have not been
previously reimbursed) shall be treated as a portion of Available Principal
Collections with respect to such Distribution Date;]
[(i) [prior to the occurrence of an Economic Early Amortization
Event,] an amount up to the excess, if any, of the [Initial] [Required] Cash
Collateral Amount over the Available Cash Collateral Amount shall be deposited
into the Cash Collateral Account in accordance with the Loan Agreement;]
[(j) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account terminates as
described in Section 4.11(f), an amount up to the excess, if any, of the
Required Reserve Account Amount over the Available Reserve Account Amount shall
he deposited into the Reserve Account;]
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<PAGE>
[(k) an amount equal to the aggregate of any other amounts then due to
the [Cash Collateral Depositor] [Credit Enhancement Provider] pursuant to the
[Loan Agreement] [Credit Enhancement Agreement] (to the extent such amounts are
payable pursuant to the [Loan Agreement] [Credit Enhancement Agreement] out of
Excess Finance Charge Collections and Excess Spread) shall be distributed to the
[Cash Collateral Depositor] [Credit Enhancement Provider] for application in
accordance with the [Loan Agreement] [Credit Enhancement Agreement];] and
[(l) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group [ ] or to the Depositor as described in
Section 4.05 of the Agreement.]
Section 4.08. Reallocated Principal Collections. The Servicer shall
---------------------------------
apply, or shall cause the Trustee to apply, on each Distribution Date
Reallocated Principal Collections with respect to such Distribution Date, to
make the following distributions in the following order of priority:
(a) an amount equal to the excess, if any, of (i) the [Class A]
Required Amount, if any, with respect to such Distribution Date over (ii) [the
sum of (x)] the amount of Excess Spread [and Excess Finance Charge Collections
allocated to Series 199_-_] with respect to the related Monthly Period [and (y)
the [Available Shared Collateral Amount] [Available Credit Enhancement Amount]
with respect to such Distribution Date,] shall be distributed by the Trustee to
fund any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii); and
[(b) an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii) the
amount of Excess Spread [and Excess Finance Charge Collections] allocated and
available to the Class B Certificates pursuant to subsection 4.07(c), (d) and
(e) on such Distribution Date shall be applied pursuant to subsections
4.05(b)(i), (ii) and (iii)].
(c) the balance, if any, shall be treated as a portion of Available
Principal Collections for such Distribution Date.
On each Distribution Date, the Collateral Interest shall be reduced by
the amount of Reallocated Principal Collections for such Distribution Date. In
the event that such reduction would cause the Collateral Interest (after giving
to any Collateral Charge-Offs for such Distribution Date) to be a negative
number, then the Collateral Interest (after giving effect to any Collateral
Charge-Offs for such Distribution Date) shall be reduced to zero and the Class B
Investor Interest shall be reduced by the amount by which the Collateral
Interest would have been reduced below zero. In the event that the reallocation
of Reallocated Principal Collections would cause the Class B Investor Interest
(after giving effect to any Class B Investor Charge-Offs for such Distribution
Date) to be a negative number on any Distribution Date, then Reallocated
Principal Collections shall be reallocated on such Distribution Date in an
aggregate amount not to exceed the amount which would cause the Class B Investor
Interest (after giving to any Class B Investor Charge-Offs for such Distribution
Date) to be
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<PAGE>
reduced to zero. References to "negative numbers" above shall be determined
without regard to the requirement that the Invested Amount of a Class not be
reduced below zero.)
[ Section 4.09. Excess Finance Charge Collections. Series 199_-_
---------------------------------
shall be included in Group [ ]. Subject to Section 4.05 of the Agreement,
Excess Finance Charge Collections with respect to the Series in Group [ ] for
any Distribution Date will be allocated to Series 199_-_ in an amount equal to
the product of (x) the aggregate amount of Excess Finance Charge Collections
with respect to all the Series in Group [ ] for such Distribution Date and
(y) a fraction, the numerator of which is the Finance Charge Shortfall for
Series 199_-_ for such Distribution Date and the denominator of which is the
aggregate amount of Finance Charge Shortfalls for all the Series in Group [ ]
for such Distribution Date. The "Finance Charge Shortfall" for Series 199_-_
for any Distribution Date will be equal to the excess, if any, of (a) the full
amount required to be paid, without duplication, pursuant to Sections 4.05(a),
4.05(b) and 4.07 on such Distribution Date over (b) the sum of (i) the Floating
Allocation Percentage of Collections of Finance Charge Receivables with respect
to the related Monthly Period (including any investment earnings that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement), [(ii) if such Monthly Period relates to a Distribution Date with
respect to the Accumulation Period [or an Early Accumulation Period], the amount
of Principal Funding Investment Proceeds and Interest Funding Investment
Proceeds, if any, with respect to such Distribution Date, [(iii) the amount of
funds, if any, to be withdrawn from the Reserve Account which, pursuant to
Section 4.11(d), are required to be included in Class A Available Funds or Class
B Available Funds with respect to such Distribution Date,] [(d) any investment
earnings (net of investment losses and expenses) transferred from the Pre-
Funding Account to the Collection Account on the related Distribution Date] [and
(e) describe other amounts].
[ Section 4.09A. Reallocated Investor Finance Charge Collections.
-----------------------------------------------
(a) That portion of Group [____] Investor Finance Charge Collections
for any Distribution Date equal to the amount of Reallocated Investor Finance
Charge Collections for such Distribution Date will be allocated to Series 199[_-
_] and will be distributed as set forth in this Supplement.]
(b) Reallocated Investor Finance Charge and Administrative
Collections, with respect to any Distribution Date shall equal the sum of (i)
the aggregate amount of Series 199[ - ] Monthly Interest, Investor Default
Amount, Series 199[ - ] Monthly Fees and Series 199[ - ] Additional Amounts for
such Distribution Date and (ii) that portion of excess Group [____] Investor
Finance Charge Collections to be included in Reallocated Investor Finance Charge
Collections pursuant to subsection (c) hereof; provided, however, that if the
-------- -------
amount of Group [____] Investor Finance Charge Collections for such Distribution
Date is less than the sum of (w) Group [____] Investor Monthly Interest, (x)
Group [____] Investor Default Amount, (y) Group [____] Investor Monthly Fees and
(z) Group [____] Investor Additional Amounts, then Reallocated Investor Finance
Charge Collections shall equal the sum of the following amounts for such
Distribution Date:
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<PAGE>
(A) The product of (I) Group [____] Investor Finance Charge
Collections (up to the amount of Group [____] Investor Monthly Interest) and
(II) a fraction, the numerator of which is Series 199[_-_] Monthly Interest and
the denominator of which is Group [____] Investor Monthly Interest;
(B) the product of (I) Group [____] Investor Finance Charge
Collections less the amount of Group [____] Investor Monthly Interest (up to the
Group [____] Investor Default Amount) and (II) a fraction, the numerator of
which is the Investor Default Amount and the denominator of which is the Group
[____] Investor Default Amount;
(C) the product of (I) Group [____] Investor Finance Charge
Collections less the amount of Group [____] Investor Monthly Interest and the
Group [____] Investor Default Amount (up to Group [____] Investor Monthly Fees)
and (II) a fraction, the numerator of which is Series 199[_-_] Monthly Fees and
the denominator of which is Group [____] Investor Monthly Fees; and
(D) the product of (I) Group [____] Investor Finance Charge
Collections less the sum of (i) Group [____] Investor Monthly Interest, (ii) the
Group [____] Investor Default Amount and (iii) Group [____] Investor Monthly
Fees and (II) a fraction, the numerator of which is Series 199[_-_] Additional
Amounts and the denominator of which is Group [____] Investor Additional
Amounts.
(c) If the amount of Group [____] Investor Finance Charge Collections
for such Distribution Date exceeds the sum of (i) Group [____] Investor Monthly
Interest, (ii) Group [____] Investor Default Amount, (iii) Group [____] Investor
Monthly Fees and (iv) Group [____] Investor Additional Amounts, then Reallocated
Investor Finance Charge Collections for such Distribution Date shall include an
amount equal to the product of (x) the amount of such excess and (y) a fraction,
the numerator of which is the Invested Amount as of the last day of the second
preceding Due Period and the denominator of which is the sum of such Invested
Amount and the aggregate invested amounts for all other Series included in Group
[____] as of such last day.
[ Section 4.10. Shared Principal Collections. Subject to Section
----------------------------
4.04 of the Agreement, Shared Principal Collections for any Distribution Date
will be allocated to Series 199[_-_] in an amount equal to the product of (x)
the aggregate amount of Shared Principal Collections with respect to all
Principal Sharing Series for such Distribution Date and (y) a fraction, the
numerator of which is the Principal Shortfall for Series 199_-_ for such
Distribution Date and the denominator of which is the aggregate amount of
Principal Shortfalls for all the Series which are Principal Sharing Series for
such Distribution Date. The Principal Shortfall for Series 199_-_ will be equal
to (a) for any Distribution Date with respect to the Revolving Period, zero, (b)
for any Distribution Date with respect to the [Accumulation Period] [Controlled
Amortization Period], the excess, if any, of the [Controlled Deposit Amount]
[Controlled Distribution Amount] with respect to such Distribution Date over the
amount of Available Principal Collections for such Distribution Date (excluding
any portion thereof attributable to Shared Principal Collections) and (c) for
any Distribution Date with
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respect to the [Rapid Amortization] [Early Accumulation] Period, the excess, if
any, of [the sum of] the Invested Amount [and the Enhancement Invested Amount,
if any,] over the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections).]
Section 4.11. Reserve Account.
---------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Series 199_-_
Certificateholders, an Eligible Deposit Account (the "Reserve Account") bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Series 199_-_ Certificateholders. The Reserve Account shall
initially be established with [the Trustee]. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of the Trustee for the benefit of the Series 199_-
_ Certificateholders. If at any time the Reserve Account ceases to be an
Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency shall consent) establish a new Reserve Account
meeting the conditions specified above as an Eligible Deposit Account, and shall
transfer any cash or any investments to such new Reserve Account. The Trustee,
at the direction of the Servicer, shall (i) make withdrawals from the Reserve
Account from time to time in an amount up to the Available Reserve Account
Amount at such time, for the purposes set forth in this Supplement, and (ii) on
each Distribution Date (from and after the Reserve Account Funding Date) prior
to the termination of the Reserve Account make a deposit into the Reserve
Account in the amount specified in, and otherwise in accordance with, Section
4.07(j).
(b) Funds on deposit in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Eligible Investments. Funds on
deposit in the Reserve Account on any Transfer Date, after giving effect to any
withdrawals from the Reserve Account on such Transfer Date, shall be invested in
such investments that will mature so that such funds will be available for
withdrawal on or prior to the following Transfer Date. The Trustee shall
maintain for the benefit of the Series 199--_ Certificateholders possession of
the negotiable instruments or securities, if any, evidencing such Eligible
Investments. No Eligible Investment shall be disposed of prior to its maturity;
provided, however, that the Trustee may sell, liquidate or dispose of an
- -------- -------
Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interests of the Series 199_-_
Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. On each Distribution Date, all interest and earnings (net of
losses and investment expenses) accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account shall be retained in the Reserve Account
(to the extent that the Available Reserve Account Amount is less than the
Required Reserve Account Amount) and the balance, if any, shall be distributed
to [the Cash Collateral Depositor for application in accordance with the Loan
Agreement] [the Depositor]. For purposes of determining the availability of
funds or the balance in the Reserve Account for any reason under this
Supplement, except as otherwise provided in the preceding sentence, investment
earnings on such funds shall be deemed not to be available or on
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deposit.
(c) On the Determination Date preceding each Distribution Date with
respect to the Accumulation Period and the first Special Payment Date, the
Servicer shall calculate the "Reserve Draw Amount" which shall be equal to the
excess, if any, of the Covered Amount with respect to such Distribution Date or
Special Payment Date over the Principal Funding Investment Proceeds with respect
to such Distribution Date or Special Payment Date; provided, that such amount
--------
will be reduced to the extent that funds otherwise would be available for
deposit in the Reserve Account under Section 4.07(j) with respect to such
Distribution Date or Special Payment Date.
(d) In the event that for any Distribution Date the Reserve Draw
Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on the
related Transfer Date by the Trustee (acting in accordance with the instructions
of the Servicer), deposited into the Collection Account and included in (i)
prior to the Class B Principal Commencement Date, Class A Available Funds and
(ii) thereafter, the Class B Available Funds, in each case for such Distribution
Date.
(e) In the event that the Reserve Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Reserve Account, and pay to [the Cash Collateral Depositor for
application in accordance with the Loan Agreement] [the Depositor], an amount
equal to such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the day on which the Invested
Amount is paid in full to the Series 199_-_ Certificateholders, (ii) if the
Accumulation Period has not commenced, the occurrence of a Pay Out Event with
respect to Series 199_-_ and (iii) if the Accumulation Period has commenced, the
earlier of the first Special Payment Date and the Class B Expected Final Payment
Date, the Trustee, acting in accordance with the instructions of the Servicer,
after the prior payment of all amounts owing to the Series 199_-_
Certificateholders which are payable from the Reserve Account as provided
herein, shall withdraw from the Reserve Account and pay to [the Depositor] [the
Cash Collateral Depositor for application in accordance with the Loan
Agreement,] all amounts, if any, on deposit in the Reserve Account and the
Reserve Account shall be deemed to have terminated for purposes of this
Supplement.]
Section 4.12. Establishment of Credit Enhancement.
-----------------------------------
(a) The Servicer shall:
(i) [obtain] [establish] the Credit Enhancement [for the account] [in
the name of] of the Trustee and solely for the benefit of the Class B
Certificateholders,
(ii) enter into the Credit Enhancement Agreement which provides for [
], and
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(iii) ensure that the Credit Enhancement will permit the Trustee (or
the Servicer on its behalf) to make withdrawals from time to time in an amount
up to the Available Credit Enhancement Amount at such times and for the purposes
set forth in this Supplement.
Such withdrawals shall be made in the priority set forth below and the Available
Credit Enhancement Amount will be reduced by the amount of each such withdrawal
as provided in the definition thereof set forth in Section 2.01 of this
Supplement. The Credit Enhancement Provider shall not be entitled to
reimbursement for any withdrawals, interest or fees with respect to the Credit
Enhancement from the corpus of the Trust except as specifically provided herein.
(b) On each Determination Date, the Servicer shall calculate the
amount (the "Required Draw Amount") (determined after giving effect to any
distribution to be made pursuant to Section 4.05(a) on the related Distribution
Date) equal to the excess, if any, of (i) the Required Amount, if any, with
respect to such Distribution Date over (ii) the amount of Excess Spread [and
Excess Finance Charge Collections allocated to Series 199_-_] to be allocated
and available pursuant to Section 4.07(a) to fund such Required Amount on such
Distribution Date.
(c) On each Determination Date, the Servicer shall calculate the
amount (the "Interest Draw Amount") (determined after giving effect to any
distribution to be made pursuant to Section 4.05(b)(i) and Section 4.07(c) on
the related Distribution Date) of (i) any Class B Monthly Interest due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding Account] on such Distribution Date pursuant to Section 4.05(b)(i) or
Section 4.07(c), (ii) any Class B Monthly Interest previously due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or
Section 4.07(c) or this paragraph (d) and (iii) any Class B Additional Interest
due but not to be distributed to the Class B Certificateholders [or deposited in
the Interest Funding Account] on such Distribution Date and any Class B
Additional Interest previously due but not distributed to the Class B
Certificateholders [or deposited in the Interest Funding Account] on a prior
Distribution Date pursuant to Section 4.05(b)(i) or Section 4.07(c) or this
paragraph (d).
(d) On each Determination Date, the Servicer shall calculate the
amount (the "Servicing Draw Amount") equal to the excess, if any, of (i) the
Class B Servicing Fee for the related Distribution Date over (ii) the amount of
Available Class B Funds, Excess Spread [and Excess Finance Charge Collections
allocated to Series 199_-_] to be allocated and available pursuant to Section
4.05(b)(ii) and Section 4.07(d) to fund such Class B Servicing Fee on such
Distribution Date.
(e) On each Determination Date, the Servicer shall calculate the
amount (the "Default Draw Amount") equal to the excess, if any, of (i) the Class
B Investor Default Amount for the related Distribution Date over (ii) the amount
of Class B Available Funds, Excess Spread [and Excess Finance Charge Collections
allocated to Series 199_-_] to be allocated and available pursuant to Section
4.05(b)(iii) and Section 4.07(e) to fund such Class B Investor Default Amount on
such Distribution Date.
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<PAGE>
(f) On each Determination Date (commencing with the Determination
Date preceding the Class B Principal Commencement Date), the Servicer shall
calculate the amount (the "Reimbursement Draw Amount") equal to the excess, if
any, of (i) the Class B Initial Invested Amount minus the sum of the aggregate
amount of principal payments previously distributed to Class B
Certificateholders [or deposited to the Principal Funding Account in respect to
the Class B Certificates] over (ii) the Class B Invested Amount on the last day
of the related Monthly Period (determined after giving effect to any change to
be made in the Class B Invested Amount pursuant to clause (c), (d), (e) or (f)
of the definition of "Class B Invested Amount" on the following Distribution
Date).
(g) Notwithstanding Section 4.12(f), if either (i) the
Certificateholders' Interest in the Receivables is reassigned to the Depositor
pursuant to Section 2.06 of the Agreement, (ii) Receivables are sold, disposed
of or otherwise liquidated pursuant to Section 9.02 or Section 12.02(c) of the
Agreement or (iii) the Certificateholders' Interest in the Receivables is
purchased by the Depositor pursuant to Section 10.01 of the Agreement or the
Series 199_-_ Certificateholders' Interest is purchased by the Depositor
pursuant to Section 7.01 of this Supplement, the Servicer shall not calculate
the Reimbursement Draw Amount with respect to the relevant Distribution Date,
but shall calculate the amount (the "Special Draw Amount") equal to the
aggregate amount of all reductions of the Class B Invested Amount occurring
under clauses (c), (d) or (e) of the definition of "Class E Invested Amount"
which have not been reimbursed prior to such Distribution Date under clause (f)
thereof.
(h) In the event that for any Distribution Date the sum of any
Required Draw Amount, Interest Draw Amount, Servicing Draw Amount, Default Draw
Amount, Reimbursement Draw Amount, Special Draw Amount (such sum being referred
to as the "Total Draw Amount"), is greater than zero, the Servicer shall give
written notice to the Trustee and the Credit Enhancement Provider, in
substantially the form of Exhibit B, of such positive Total Draw Amount on the
related Determination Date. On the related Transfer Date, the Trustee (or the
Servicer on its behalf) shall make a proper demand as required under the Credit
Enhancement Agreement for the Total Draw Amount (but not in excess of the
Available Credit Enhancement Amount) and upon receipt thereof, the Trustee shall
allocate such amount as follows:
(A) the portion of the Total Draw Amount allocable to the Required
Draw Amount, if any, up to the Available Credit Enhancement Amount, shall be
demanded from the Credit Enhancement Provider on the related Transfer Date and
distributed first to fund any deficiency pursuant to Section 4.05(a)(i), second
to fund any deficiency in the Class A Monthly Servicing Fee pursuant to Section
4.05(a)(ii) and third to pay the Class A Investor Default Amount, if any, for
such Distribution Date pursuant to Section 4.05(a)(iii);
(B) the portion of the Total Draw Amount allocable to the Interest
Draw Amount, if any, up to the Available Credit Enhancement Amount (determined
after giving effect to any withdrawal pursuant to clause (A)), shall be demanded
from the Credit Enhancement Provider
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<PAGE>
on the related Transfer Date and distributed to fund any deficiency pursuant to
Section 4.07(c);
(C) the portion of the Total Draw Amount allocable to the Servicing
Draw Amount, if any, up to the Available Credit Enhancement Amount (determined
after giving effect to any withdrawal pursuant to clauses (A) and (B)), shall be
demanded from the Credit Enhancement Provider and used to pay the Class B
Servicing Fee for such Distribution Date pursuant to Section 4.07(d);
(D) the portion of the Total Draw Amount allocable to the Default
Draw Amount, if any, up to the Available Credit Enhancement Amount (determined
after giving effect to any withdrawal pursuant to clauses (A), (B) and (C)),
shall be demanded from the Credit Enhancement Provider on the related Transfer
Date and used to pay the Class B Investor Default Amount for such Distribution
Date pursuant to Section 4.07(e);
[ (E) the remainder of the Total Draw Amount, if any, up to the
Available Credit Enhancement Amount (determined after giving effect to any
withdrawal pursuant to clauses (A) through (D), shall be demanded from the
Credit Enhancement Provider on the related Transfer Date and immediately
deposited by the Trustee into [the Collection Account for distribution to the
Class B Certificateholders on such Distribution Date] [the Principal Funding
Account in respect of the Class B Certificates].]
Section 4.13. Cash Collateral Account.
-----------------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Series 199_-_
Certificateholders and the Cash Collateral Depositor, as their interests appear
herein, a "Cash Collateral Account" which shall be an Eligible Deposit Account,
bearing designations clearly indicating that the funds deposited therein are
held for the benefit of the Series 199_-_ Certificateholders and the Cash
Collateral Depositor. The Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Cash Collateral Account and in
all proceeds thereof. The Cash Collateral Account shall be under the sole
dominion and control of the Trustee for the benefit of the Series 199_-_
Certificateholders and the Cash Collateral Depositor as their interests appear
herein. The interest of the Cash Collateral Depositor in the Cash Collateral
Account shall be subordinated to the interests of the Series 199_-_ Certificate
holders as provided herein and in the Loan Agreement. If at any time the Cash
Collateral Account ceases to be an Eligible Deposit Account, the Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency shall consent)
establish a new Cash Collateral Account meeting the conditions specified above
as an Eligible Deposit Account, and shall transfer any cash or any investments
to such new Cash Collateral Account. The Trustee, at the direction of the
Servicer, shall (i) on the Closing Date, deposit in the Cash Collateral Account
the proceeds of the advance to be made on such date by the Cash Collateral
Depositor under the Loan Agreement, (ii) make withdrawals from the Cash
Collateral Account from time to time in an amount up to the Available Cash
Collateral Amount at such time,
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<PAGE>
for the purposes set forth in paragraphs (c) through (i) below, and (iii) on
each Distribution Date prior to the termination of the Cash Collateral Account
make a deposit into the Cash Collateral Account in the amount specified in, and
otherwise in accordance with, Section 4.07(i). All withdrawals from the Cash
Collateral Account shall be made in the priority set forth below. The Cash
Collateral Depositor shall not be entitled to reimbursement from the Trust
Assets for any withdrawals from the Cash Collateral Account except as
specifically provided in this Supplement.
(b) Funds on deposit in the Cash Collateral Account shall be invested
at the direction of the Servicer (or the Cash Collateral Depositor, as provided
in the Loan Agreement) by the Trustee in Cash Collateral Account Investments.
Funds on deposit in the Cash Collateral Account on any Transfer Date, after
giving effect to any withdrawals from the Cash Collateral Account on such
Transfer Date, shall be invested in such investments that will mature so that
such funds will be available for withdrawal on or prior to the following
Transfer Date. The proceeds of any such investments shall be invested in such
investments that will mature so that such funds will be available for withdrawal
on or prior to the Transfer Date immediately following the date of such
investment. The Trustee shall maintain for the benefit of the Series 199_-_
Certificateholders and the Cash Collateral Depositor possession of the
negotiable instruments or securities, if any, evidencing the Cash Collateral
Account Investments. On each Transfer Date, all interest and earnings (net of
losses and investment expenses) accrued since the preceding Transfer Date on
funds on deposit in the Cash Collateral Account shall be applied in accordance
with the Loan Agreement. For purposes of determining the availability of funds
or the balances in the Cash Collateral Account for any reason under this
Supplement, all investment earnings on such funds shall be deemed not to be
available or on deposit.
(c) On each Determination Date, the Servicer shall calculate the
amount (the "Required Draw Amount") (determined after giving effect to any
distribution to be made pursuant to Section 4.05(a) on the related Distribution
Date) equal to the excess, if any, of (i) the Required Amount, if any, with
respect to such Distribution Date over (ii) the amount of Excess Spread [and
Excess Finance Charge Collections allocated to Series 199_-_] to be allocated
and available pursuant to Section 4.07(a) to fund such Required Amount on such
Distribution Date.
(d) On each Determination Date, the Servicer shall calculate the
amount (the "Interest Draw Amount") (determined after giving effect to any
distribution to be made pursuant to Section 4.05(b)(i) and Section 4.07(c) on
the related Distribution Date) of (i) any Class B Monthly Interest due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding Account] on such Distribution Date pursuant to Section 4.05(b)(i) or
Section 4.07(c), (ii) any Class B Monthly Interest previously due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding Account] on a prior Distribution Date pursuant to Section 4.05(b)(i) or
Section 4.07(c) or this paragraph (d) and (iii) any Class B Additional Interest
due but not to be distributed to the Class B Certificateholders [or deposited in
the Interest Funding Account] on such Distribution Date and any Class B
Additional Interest previously due but not distributed to the Class B
Certificateholders [or deposited in the Interest Funding Account] on a prior
Distribution Date pursuant to Section 4.05(b)(i) or Section 4.05(c) or this
paragraph (d).
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<PAGE>
(e) On each Determination Date, the Servicer shall calculate the
amount (the "Servicing Date Amount") equal to the excess, if any, of (i) the
Class B Servicing Fee for the related Distribution Date over (ii) the amount of
Available Class B Funds, Excess Spread [and Excess Finance Charge Collections
allocated to Series 199_-_] to be allocated and available pursuant to Section
4.05(b)(ii) and Section 4.07(d) to fund such Class B Servicing Fee on such
Distribution Date.
(f) On each Determination Date, the Servicer shall calculate the
amount (the "Default Draw Amount") equal to the excess, if any, of (i) the Class
B Investor Default Amount for the related Distribution Date over (ii) the amount
of Class B Available Funds, Excess Spread [and Excess Finance Charge Collections
allocated to Series 199_-_] to be allocated and available pursuant to Section
4.05(b)(iii) and Section 4.07(e) to fund such Class B Investor Default Amount on
such Distribution Date.
(g) On each Determination Date (commencing with the Determination
Date preceding the Class B Principal Commencement Date), the Servicer shall
calculate the amount (the "Reimbursement Draw Amount") equal to the excess, if
any, of (i) the Class B Initial Invested Amount minus the sum of the aggregate
amount of principal payments previously distributed to Class 3
Certificateholders [or deposited to the Principal Funding Account in respect of
the Class B Certificates) over (ii) the Class B Invested Amount on the last day
of the related Monthly Period (determined after giving effect to any change to
be made in the Class B Invested Amount pursuant to clause (c), (d), (e) or (f)
of the definition of "Class B Invested Amount" on the following Distribution
Date).
(h) Notwithstanding Section 4.12(g), if either (i) the
Certificateholders' Interest in the Receivables is reassigned to the Depositor
pursuant to Section 2.06 of the Agreement, (ii) the Receivables are sold,
disposed of or otherwise liquidated pursuant to Section 9.02 or Section 12.02(c)
of the Agreement or (iii) the Certificateholders' Interest in the Receivables is
purchased by the Depositor pursuant to Section 10.01 of the Agreement or the
Series 199_-_ Certificateholders' Interest is purchased by the Depositor
pursuant to Section 7.01 of this Supplement, the Servicer shall not calculate
the Reimbursement Draw Amount with respect to the relevant Distribution Date,
but calculate the amount (the "Special Draw Amount") equal to the aggregate
amount of all reductions of the Class B Invested Amount occurring under clauses
(c), (d) or (e) of the definition of "Class B Invested Amount" which have not
been reimbursed prior to such Distribution Date under clause (f) thereof.
[(i) Notwithstanding Sections 4.12(g) and (h), on the Determination
Date preceding the Economic Special Payment Date, the Servicer shall not
calculate the Reimbursement Draw Amount or the Special Draw Amount with respect
to such Special Payment Date, but shall calculate (i) the amount (the "Class A
Principal Draw Amount") (determined after giving effect to any deposit or
distribution to be made pursuant to Sections 4.05(d)(i) and 5.01(b) on such
Special Payment Date) equal to the outstanding principal amount of the Class A
Certificates [(less the Principal Funding Account Balance, if any)] and (ii) the
amount (the "Class B Principal Draw
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Amount") (determined after giving effect to any deposit or distribution to be
made pursuant to Sections 4.05(d)(ii) and 5.01(d) on such Special Payment Date)
equal to the outstanding principal amount of the Class B Certificates [(less the
Principal Funding Account Balance, if any)];]
(j) In the event that for any Distribution Date the sum of any
Required Draw Amount, Interest Draw Amount, Servicing Draw Amount, Default Draw
Amount, Reimbursement Draw Amount, Special Draw Amount, [Class A Principal Draw
Amount and Class B Principal Draw Amount] (such sum being referred to as the
"Total Draw Amount"), is greater than zero, the Servicer shall give written
notice to the Trustee and the Cash Collateral Depositor, in substantially the
form of Exhibit B, of such positive Total Draw Amount on the related
Determination Date. On the related Transfer Date, withdrawals will be made from
the Cash Collateral Account as follows:
(A) the portion of the Total Draw Amount allocable to the Required
Draw Amount, if any, up to the Available Shared Collateral Amount, shall be
withdrawn from the Cash Collateral Account on the related Transfer Date and
distributed first to fund any deficiency pursuant to Section 4.05(a)(i), second
to fund any deficiency in the Class A Monthly Servicing Fee pursuant to Section
4.05(a)(ii) and third to pay the Class A Investor Default Amount, if any, for
such Distribution Date pursuant to Section 4.05(a)(iii);
(B) the portion of the Total Draw Amount allocable to the Interest
Draw Amount, if any, up to the Available Shared Collateral Amount (determined
after giving effect to any withdrawal pursuant to clause (A)), shall be
withdrawn from the Cash Collateral Account on the related Transfer Date and
distributed to fund any deficiency pursuant to Section 4.07(c);
(C) the portion of the Total Draw Amount allocable to the Servicing
Draw Amount, if any, up to the Available Shared Collateral Amount (determined
after giving effect to any withdrawal pursuant to clauses (A) and (B)), shall be
withdrawn from the Cash Collateral Account and used to pay the portion of the
Class B Servicing Fee for such Distribution Date not paid pursuant to Section
4.07(d);
(D) the portion of the Total Draw Amount allocable to the Default
Draw Amount, if any, up to the Available Shared Collateral Amount (determined
after giving effect to any withdrawal pursuant to clauses (A) , (B) and (C)),
shall be withdrawn from the Cash Collateral Account on the related Transfer Date
and used to pay the portion of the Class B Investor Default Amount for such
Distribution Date not paid pursuant to Section 4.07(e);
[(E) the portion of the Total Draw Amount allocable to the Class A
Principal Draw Amount, if any, up to the Available Shared Collateral Amount
(determined after giving effect to any withdrawal pursuant to clauses (A), (B),
(C) and (D)), shall be withdrawn from the Cash Collateral Account on the related
Transfer Date and immediately deposited by the Trustee into the Principal
Funding Account; and
(F) the remainder of the Total Draw Amount, if any, up to the
Available Cash
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Collateral Amount (determined after giving effect to any withdrawal pursuant to
classes (A) through (E), shall be withdrawn from the Cash Collateral Account on
the related Transfer Date and immediately deposited by the Trustee into [the
Collection Account for distribution to the Class B Certificateholders on such
Distribution Date] [the Principal Funding Account in respect of the Class B
Certificates].]
(k) In the event that the Cash Collateral Account Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account with respect to such Distribution Date, is greater
than zero, the Trustee, acting in accordance with the instructions of the
Servicer, shall withdraw from the Cash Collateral Account, and apply in
accordance with the Loan Agreement, an amount equal to such Cash Collateral
Account Surplus.
(l) Upon the earliest to occur of (i) the Termination Date, (ii) the
day on which the Class A Invested Amount and the Class B Invested Amount are
paid in full to the Class A Certificateholders and the Class B
Certificateholders [and (iii) the day on which all withdrawals from the Cash
Collateral Account pursuant to Section 4.12(j) with respect to the Economic
Special Payment Date have been made], the Trustee, acting in accordance with the
instructions of the Servicer, after the prior payment of all amounts owing to
the Class A Certificateholders and the Class B Certificateholders which are
payable from the Cash Collateral Account as provided herein, shall withdraw from
the Cash Collateral Account for application in accordance with the Loan
Agreement all amounts, if any, on deposit in the Cash Collateral Account and the
Cash Collateral Account shall be deemed to have terminated for purposes of this
Supplement.]
Section 4.14. [Determination of Index.
-----------------------
(a) On each Rate Determination Date the Trustee shall determine the
[Index] on the basis of [_________].
(b) The [Class A] [Class B] Certificate Rate applicable to the then
current and the immediately preceding Interest Period may be obtained by any
Series 199_-_ Certificateholder by telephoning the Trustee at its Corporate
Trust Office at [_____].
(c) On each Rate Determination Date, the Trustee shall send to the
Servicer, by facsimile, notification of the [Index] for the following Interest
Period.]
Section 4.15. Pre-Funding Account.
-------------------
(a) Establishment of the Pre-Funding Account. The Trustee, for the
----------------------------------------
benefit of the [Series 199_-_] [Class A] [Class B] Certificateholders, shall
establish and maintain in the name of the Trustee, a segregated trust account
(the "Pre-Funding Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the [Series 199_-_] [Class
A] [Class B] Certificateholders. The Depositor does hereby transfer, assign,
set over and otherwise convey to the Trustee for the benefit of the [Series
199_-_] [Class A] [Class B] Certificateholders,
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without recourse, all of its right, title and interest in, to and under the Pre-
Funding Account, all amounts on deposit therein, all Eligible Investments
credited to the Pre-Funding Account, and any proceeds of the foregoing.
The Pre-Funding Account shall be under the sole dominion and control
of the Trustee for the benefit of the [Series 199_-_] [Class A] [Class B]
Certificateholders. On the Closing Date, the Depositor shall cause to be
deposited in the Pre-Funding Account an amount equal to the Initial Pre-Funding
Amount. Pursuant to the authority granted to the Servicer in the Agreement, the
Servicer shall have the power, revocable by the Trustee, to instruct the Trustee
to make withdrawals and payments from the Pre-Funding Account for the purposes
of carrying out the Servicer's or Trustee's duties hereunder.
(b) Administration Pre-Funding Account. On each Determination Date,
----------------------------------
the Servicer shall instruct the Trustee to withdraw on the related Distribution
Date from the Pre-Funding Account and deposit in the Collection Account all
interest and other investment income and earnings (net of losses and investment
expenses) on all funds in the Pre-Funding Account, for application as
Collections of Finance Charge Receivables allocable to the [Series 199_-_]
[Class A] [Class B] Certificates. Except as provided in the immediately
preceding sentence, interest (including reinvested interest) and other
investment income and earnings on funds on deposit in the Pre-Funding Account
shall be deemed not to be on deposit therein for purposes of this Supplement.
Funds on deposit in the Pre-Funding Account shall be withdrawn by the Trustee
and paid to the Depositor to the extent of any increases in the Invested Amount
pursuant to Section 4.15. On the Determination Date immediately preceding the
last day of the Funding Period, the Servicer shall instruct the Trustee to
distribute to the Paying Agent the remaining Pre-Funding Amount, if any, on
deposit in the Pre-Funding Account for distribution as payment of principal to
the [Series 199_-_] [Class A] [Class B] Certificateholders on the related
Distribution Date pursuant to Section 4.05(e); provided, however, that if during
-------- -------
the period beginning on such Transfer Date and ending on or before such
Distribution Date, the Depositor increases the Invested Amount in accordance
with the provisions of Section 4.15, then that portion of the Pre-Funding Amount
equal to the amount by which the Invested Amount was increased during such
period shall not be paid to the [Series 199_-_] [Class A] [Class B]
Certificateholders, but rather shall be paid to the Depositor. The Servicer
shall furnish or cause to be furnished to the Trustee a monthly statement
reporting all activity with respect to the Pre-Funding Account.
(c) Investment of Funds in Pre-Funding Account. Funds on deposit in
------------------------------------------
the Pre-Funding Account shall be invested in [Eligible Investments] [a
guaranteed investment agreement] by the Servicer (or, at the direction of the
Servicer, by the Trustee on behalf of the Servicer). [Funds on deposit in the
Pre-Funding Account on any Distribution Date and any proceeds of any investments
thereof, after giving effect to any withdrawals from the Pre-Funding Account,
shall be invested in [Eligible Investments that will mature [overnight] [as
specified by the Servicer] so that such funds will be available for withdrawal
on or prior to the following Transfer Date] [a guaranteed investment agreement].
-48-
<PAGE>
Section 4.16. Changes in Invested Amount. The Depositor may on any
--------------------------
Business Day during the Funding Period determine to increase the [Class A]
[Class B] Invested Amount to an amount not to exceed [, when added to the [Class
A] [Class B] Invested Amount,] the Full Invested Amount to the extent there are
sufficient Principal Receivables in the Trust (including Principal Receivables
in Additional Accounts designated pursuant to Section 2.06 of the Agreement) to
permit any such increase in the [Class A] [Class B] Invested Amount without
causing a Pay Out Event to occur with respect to any outstanding Series. Upon
determining to increase the [Class A] [Class B] Invested Amount pursuant to this
Section 4.15, the Depositor shall deliver to the Servicer, the Trustee, the
[Credit Enhancement Provider] [Cash Collateral Depositor] and each Rating Agency
an officer's Certificate specifying the amount of the increase in the [Class A]
[Class B] Invested Amount the Depositor has determined to make and certifying
that the Depositor reasonably believes that such increase in the [Class A]
[Class B] Invested Amount will not, based on the facts known to such officer at
the time of such certification, cause a Pay Out Event, or an event that, after
giving of notice or the lapse of time, would constitute a Pay Out Event, to
occur with respect to any Series. Upon receipt of such Officer's Certificate by
the Trustee, the [Class A] [Class B] Invested Amount shall be increased by the
amount specified in such Officer's Certificate, whereupon the Servicer shall
instruct the Trustee to withdraw from the Pre-Funding Account and pay to the
Depositor an amount equal to the amount of such increase in the [Class A] [Class
B] Invested Amount. [Any such increase in the Invested Amount will increase the
Class A Invested Amount and the Class B Investment Amount pro rata based on the
--- ----
Class A Floating Percentage and the Class B Floating Percentage, respectively].]
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
----------------------------
SERIES 199_-_ CERTIFICATEHOLDERS
--------------------------------
Section 5.01. Distributions.
-------------
(a) On each Payment Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro
rata share of the amounts [on deposit in the Interest Funding Account or
otherwise held by the Paying Agent] that are allocated and available on such
Payment Date to pay interest on the Class A Certificates pursuant to this
Supplement.
(b) On each Special Payment Date [, each Interest Payment Date with
respect to the Class A Controlled Amortization Period] and on the Class A
Expected Final Payment Date, the Paying Agent shall distribute to each Class A
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata
share of the amounts [on deposit in the Principal Funding Account or otherwise
held by the Paying Agent] that are allocated and available on such date to pay
principal of the Class A Certificates pursuant to this Supplement up to a
maximum amount on any such date equal to the Class A Invested Amount on such
date (unless there has been an optional repurchase of the Series 199_-_
-49-
<PAGE>
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(c) On each Payment Date, the Paying Agent shall distribute to each
Class B Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro
rata share of the amounts [on deposit in the Interest Funding Account or
otherwise held by the Paying Agent] that are allocated and available on such
Payment Date to pay interest on the Class B Certificates pursuant to this
Supplement.
(d) On each Special Payment Date, [, each Interest Payment Date with
respect to the Class B Controlled Amortization Period] and on the Class B
Expected Final Payment Date, the Paying Agent shall distribute to each Class B
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata
share of the amounts [on deposit in the Principal Funding Account or otherwise
held by the Paying Agent] that are allocated and available on such date to pay
principal of the Class B Certificates pursuant to this supplement up to a
maximum amount on any such date equal to the Class B Invested Amount on such
date (unless there has been an optional repurchase of the Series 199_-_
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(e) The distributions to be made pursuant to this Section 5.01 are
subject to the provisions of Sections 2.06, 9.02, 10.01 and 12.02 of the
Agreement and Sections 8.01 and 8.02 of this Supplement.
(f) Except as provided in Section 12.02 of the Agreement with respect
to a final distribution, distributions to Series 199_-_ Certificateholders
hereunder shall be made by check mailed to each Series 199_-_ Certificateholder
at such Series 199_-_ Certificateholder's address appearing in the Register
without presentation or surrender of any Series 199_-_ Certificate or the making
of any notation thereon; provided, however, that with respect to Series 199_-_
-------- -------
Certificates registered in the name of a Clearing Agency, such distributions
shall be made to such Clearing Agency in immediately available funds.
Section 5.02. Reports and Statements to Series 199 -
--------------------------------------
Certificateholders.
- ------------------
(a) On each Distribution Date, the Paying Agent, on behalf of the
Trustee, shall forward to each Class A Certificateholder a statement
substantially in the form of Exhibit C-1 prepared by the Servicer.
(b) On each Distribution Date, the Paying Agent, on behalf of the
Trustee, shall forward to each Class B Certificateholder a statement
substantially in the form of Exhibit C-2 prepared by the Servicer.
(c) Not later than each Determination Date, the Servicer shall
deliver to the
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<PAGE>
Trustee, the Paying Agent, each Rating Agency and the Cash Collateral Depositor
(i) statements substantially in the form of Exhibits C-1 and C-2 prepared by the
Servicer and (ii) a certificate of a Servicing officer substantially in the form
of Exhibit D.
[(d) A copy of each statement or certificate provided pursuant to
paragraph (a), (b) or (c) may be obtained by any Series 199_-_ Certificateholder
or any Certificate Owner thereof by a request in writing to the Servicer.]
(e) On or before January 31 of each calendar year, beginning with
calendar year 199_, the Paying Agent, on behalf of the Trustee, shall furnish or
cause to be furnished to each Person who at any time during the preceding
calendar year was a Series 199_-_ Certificateholder, a statement prepared by the
Servicer containing the information which is required to be contained in the
statement to Series 199_-_ Certificateholders, as set forth in paragraph (a) or
(b) above, as applicable, aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series 199_-_ Certificateholder,
together with other information as is required Certificateholder, together with
other information to be provided by an issuer of indebtedness under the internal
Revenue Code. Such obligation of the Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent pursuant to any requirements of the Internal
Revenue Code as from time to time in effect.
ARTICLE VI
Section 6.01. [Reinvestment] [Pay Out] Events. If any one of the
-------------------------------
following events shall occur with respect to the Series 199_-_ Certificates:
(a) failure on the part of the Depositor (i) to make any Payment or
deposit required by the terms of the Agreement or this Supplement on or before
the date occurring [ ] Business Days after the date such payment or deposit
is required to be made therein or herein or (ii) duly to observe or perform any
other covenants or agreements of the Depositor set forth in the Agreement or
this Supplement, which failure has a material adverse effect on the Series 199_-
_ Certificateholders and which continues unremedied for a period of [ ] days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Depositor by the Trustee, or to the
Depositor and the Trustee by [any Holder of the Series 199_-_ Certificates];
(b) any representation or warranty made by the Depositor in the
Agreement or this Supplement, or any information contained in a computer file or
microfiche list required to be delivered by the Depositor pursuant to Section
2.01 or 2.08(f) of the Agreement shall prove to have been incorrect in any
material respect when made or when delivered, which continues to be incorrect in
any material respect for a period of [ ] days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Depositor by the Trustee, or to the Depositor and the Trustee by [any
Holder of the Series 199_-_ Certificates] and as a result of which
-51-
<PAGE>
the interests of the Series 199_-_ Certificateholders are materially and
adversely affected and continue to be materially and adversely affected for such
period; provided, however, that a Pay Out Event pursuant to this Section 6.01(b)
-------- -------
shall not be deemed to have occurred hereunder if IMSA has accepted reassignment
of the related Receivable, or all of such Receivables, if applicable, during
such period in accordance with the provisions of the Agreement;
(c) a failure by the Depositor to convey Receivables in Additional
Accounts or Participations to the Trust within [ ] Business Days after the day
on which it is required to convey such Receivables or Participations pursuant to
Section 2.08(a) of the Agreement;
(d) any Servicer Default shall occur;
(e) the Class B Invested Amount is reduced to less than $_________;]
[(f) the [average] Portfolio Yield for any [three] consecutive
Monthly Periods is reduced to a rate which is less than the [average] Base Rate
(for such period];]
[(g) the Class A Invested Amount shall not be paid in full on the
Class A Expected Final Payment Date or the Class B Invested Amount shall not be
paid in full on the Class B Expected Final Payment Date;]
then, in the case of any event described in subparagraph (a), (b) or (d), after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee or the Holders of Series 199_-_ Certificates evidencing more than 50% of
the aggregate unpaid principal amount of Series 199_-_ Certificates by notice
then given in writing to the Depositor and the Servicer (and to the Trustee if
given by the Series 199_-_ Certificateholders) may declare that a [Pay Out]
[Reinvestment] Event has occurred with respect to Series 199_-_ as of the date
of such notice, and, in the case of any event described in subparagraph (c),
(e), (f) or (g), a [Pay Out] [Reinvestment] Event shall occur with respect to
Series 199_-_ without any notice or other action on the part of the Trustee or
the Series 199_-_ Certificateholders immediately upon the occurrence of such
event.]
ARTICLE VII
OPTIONAL PURCHASE; SERIES TERMINATION
-------------------------------------
[ Section 7.01. Optional Repurchase.
-------------------
(a) On any day occurring on or after the date on which [the sum of]
the Invested Amount [and the Enhancement Invested Amount, if any,] is reduced to
[ ]% or less of the Series Invested Amount, the Depositor shall have the
option to purchase the Series 199_-_ Certificateholders' Interest, at a purchase
price equal to (i) if such day is a Distribution Date, the Reassignment Amount
for such Distribution Date or (ii) if such day is not a Distribution Date, the
Reassignment Amount for the Distribution Date following such day.
-52-
<PAGE>
(b) The Depositor shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Depositor intends to exercise
such purchase option. Not later than 12:00 noon, New York City time, on such
day the Depositor shall deposit the Reassignment Amount into the Collection
Account in immediately available funds. Such purchase option is subject to
payment in full of the Reassignment Amount. Following the deposit of the
Reassignment Amount into the Collection Amount in accordance with the foregoing,
the Invested Amount for Series 199_-_ [and the Enhancement Invested Amount]
shall [each] be reduced to zero and the Series 199_-_ Certificateholders [and
the Cash Collateral Depositor] shall have no further interest in the
Receivables. The Reassignment Amount shall be distributed as set forth in
Section 8.01(b).]
[ Section 7.02. Series Termination.
------------------
(a) If, on the [__________] Distribution Date, the Invested Amount
(after giving effect to all changes therein on such date) would be greater than
zero, the Servicer, on behalf of the Trustee, shall, within the 40-day period
which begins on such Distribution Date, solicit bids for the sale of Principal
Receivables and the related Finance Charge Receivables (or interests therein) in
an amount equal to [the sum of] the Invested Amount [and the Enhancement
Invested Amount, if any,] at the close of business on the last day of the
Monthly Period preceding the Termination Date (after giving effect to all
distributions required to be made on the Termination Date, except pursuant to
this Section 7.02). Such bids shall require that such sale shall (subject to
Section 7.02(b)) occur on the Termination Date. The Depositor and the [Cash
Collateral Depositor] [Credit Enhancer] shall be entitled to participate in, and
to receive from the Trustee a copy of each other bid submitted in connection
with, such bidding process.
(b) The Servicer, on behalf of the Trustee, shall sell such
Receivables (or interests therein) on the Termination Date to the bidder who
made the highest cash purchase offer. The proceeds of any such sale shall be
treated as Collections on the Receivables allocated to the Series 199_-_
Certificateholders pursuant to the Agreement and this Supplement; provided,
--------
however, that the Servicer shall determine conclusively the amount of such
- -------
proceeds which are allocable to Finance Charge Receivables and the amount of
such proceeds which are allocable to Principal Receivables. During the period
from the [ ] Distribution Date to the Termination Date, the Servicer shall
continue to collect payments on the Receivables and allocate Collections in
accordance with the provisions of the Agreement and the Supplements.]
ARTICLE VIII
FINAL DISTRIBUTIONS
-------------------
Section 8.01. Sale of Receivables Certificateholders' Interest
------------------------------------------------
pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.01 or 7.02 of
- ------------------------------------------------------------------------------
this Supplement.
- ---------------
(a) The amount to be paid by the Depositor with respect to Series
199_-_ in
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<PAGE>
connection with a reassignment of Receivables to the Depositor pursuant to
Section 2.06 of the Agreement shall equal the Reassignment Amount for the first
Distribution Date following the Monthly Period in which the reassignment
obligation arises under the Agreement.
(b) With respect to the Reassignment Amount deposited into the
Collection Account pursuant to Section 7.01 or any amounts allocable to the
Series 199_-_ Certificateholders' Interest deposited into the Collection Account
pursuant to Section 7.02, the Trustee shall, not later than 12:00 noon, New York
City time, on the related Distribution Date, make deposits or distributions of
the following amounts (in the priority set forth below and, in each case effect
to any deposits and distributions otherwise be made on such date) in immediately
available funds: (i)(x) the Class A Invested Amount on such Distribution Date
will be distributed to the Paying Agent for payment to the Class A
Certificateholders and (y) an amount equal to the sum of (A) Class A Monthly
Interest for such Distribution Date, (B) any Class A Monthly Interest previously
due but not distributed to the Class A Certificateholders [or deposited in the
Interest Funding Account] on a prior Distribution Date and (C) the amount of
Class A Additional Interest, if any, for such Distribution Date and any Class A
Additional Interest previously due but not distributed to the Class A
Certificate holders [or deposited in the Interest Funding Account] on any prior
Distribution Date, will be distributed to the Paying Agent for payment to the
Class A Certificateholders, (ii) (x) the Class B Invested Amount on such
Distribution Date will be distributed to the Paying Agent for payment to the
Class B Certificateholders and (y) an amount equal to the sum of (A) Class B
Monthly Interest for such Distribution Date, (B) any Class B Monthly Interest
previously due but not distributed to the Class B Certificateholders [or
deposited in the interest Funding Account] on a prior Distribution Date and (C)
the amount of Class B Additional Interest, if any, for such Distribution Date
and any Class B Additional Interest previously due but not distributed to the
Class B Certificateholders [or deposited in the Interest Funding Account] on any
prior Distribution Date, will be distributed to the Paying Agent for payment to
the Class B Certificateholders and (iii) the balance, if any, will be
distributed to the [[Cash Collateral Depositor] [Collateral Interest Holder] for
application in accordance with the Loan Agreement] [Credit Enhancement Provider
for application in accordance with the Credit Enhancement Agreement].
Notwithstanding anything to the contrary contained in this Supplement or the
Agreement, the amount of any excess determined pursuant to paragraph (a)(ii)(y)
shall be distributed to the Series 199_-_ Certificateholders.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to Section
8.01(b) for payment to the Series 199_-_ Certificateholders shall be deemed
distributed in full to the Series 199_-_ Certificateholders on the date on which
such funds are distribution to the Paying Agent pursuant to this section and
shall be deemed to be a final distribution pursuant to Section 12.02 of the
Agreement.
Section 8.02. Distribution of Proceeds of Sale, Distribution or
-------------------------------------------------
Liquidation of the Receivables pursuant to Section 9.02 of the Agreement.
- ------------------------------------------------------------------------
(a) Not later than 12:00 noon, New York City time, on the
Distribution Date following the date on which the Insolvency Proceeds are
deposited into the Collection Account
-54-
<PAGE>
pursuant to Section 9.02(b) of the Agreement, the Trustee shall (in the
following priority and, in each case, after giving effect to any deposits and
distributions otherwise to be made on such Distribution Date) (i) deduct an
amount equal to the Class A Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Collections of Principal
Receivables and distribute such amount to the Paying Agent for payment to the
Class A Certificateholders, provided that the amount of such distribution shall
not exceed the product of (x) the portion of the Insolvency Proceeds allocated
to Collections of Principal Receivables and (y) the Principal Allocation
Percentage with respect to the related Monthly Period, (ii) deduct an amount
equal to the Class B Invested Amount on such Distribution Date from the portion
of the Insolvency Proceeds allocated to Collections of Principal Receivables and
distribute such amount to the Paying Agent for payment to the Class B
Certificateholders, provided that the amount of such distribution shall not
exceed (x) the product of (A) the portion of such Insolvency Proceeds allocated
to Collections of Principal Receivables and (B) the Principal Allocation
Percentage with respect to the related Monthly Period minus (y) the amount
distributed to the Paying Agent pursuant to clause (i) of this sentence [and
(iii) deduct an amount equal to the [Enhancement] [Collateral] Invested Amount,
if any, on such Distribution Date from the portion of the Insolvency Proceeds
allocated to Collections of Principal Receivables and distribute such amount to
the [Cash Collateral Depositor] [Collateral Interest Holder] for application in
accordance with the Loan Agreement, provided that the amount of such
distribution shall not exceed (x) the product of (1) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (2)
the Principal Allocation Percentage with respect to such Monthly Period minus
(y) the amounts distributed to the Paying Agent pursuant to clauses (i) and (ii)
of this sentence]. To the extent that the product of (A) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (B)
the Principal Allocation Percentage with respect to the related Monthly Period
exceeds the aggregate amounts distributed to the Paying Agent [and the Cash
Collateral Depositor] pursuant to the preceding sentence, the excess shall be
allocated to the Depositor's Interest and shall be released to the Depositor on
such Distribution Date.
(b) Not later than 12:00 noon, New York City time, on such
Distribution Date, the Trustee shall (in the following priority and, in each
case, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date) (i) deduct an amount equal to the sum of (w) Class A
Monthly Interest for such Distribution Date, (x) any class A Monthly Interest
previously due but not distributed to the Class A Certificateholders [or
deposited in the Interest Funding Account] on a prior Distribution Date and (y)
the amount of Class A Additional Interest, if any, for such Distribution Date
and any Class A Additional Interest previously due but not distributed to the
Class A Certificateholders [or deposited in the interest Funding Account] on a
prior Distribution Date from the portion of the Insolvency Proceeds allocated to
Collections of Finance Charge Receivables and distribute such amount to the
Paying Agent for payment to the Class A Certificateholders, provided that the
amount of such distribution shall not exceed the product of, (x) the portion of
the Insolvency Proceeds allocated to Collections of Finance Charge Receivables,
(y) the Floating Allocation Percentage with respect to the related Monthly
Period and (z) the Class A Floating Percentage with respect to such Monthly
Period (ii) deduct an amount equal to the sum of (w) Class B Monthly Interest
for such Distribution Date, (x) Class B Monthly Interest previously due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding
-55-
<PAGE>
Account] and (y) the amount of Class B Additional Interest, if any, for such
Distribution Date and any Class B Additional interest previously due but not
distributed to the Class B Certificateholders [or deposited in the Interest
Funding Account] on a prior Distribution Date from the portion of the Insolvency
Proceeds allocated to Collections of Finance Charge Receivables and distribute
such amount to the Paying Agent for payment to the Class B Certificateholders,
provided that the amount of such distribution shall not exceed the product of
(x) the portion of the Insolvency Proceeds allocated to Collections of Finance
Charge Receivables, (y) the Floating Allocation Percentage with respect to the
related Monthly Period and (z) the Class B Floating Percentage with respect to
such Monthly Period. To the extent that the product of (A) the portion of the
Insolvency Proceeds allocated to Collections of Finance Charge Receivables and
(B) the Floating Allocation Percentage with respect to the related Monthly
Period exceeds the aggregate amount distributed to the Paying Agent pursuant to
the preceding sentence, the excess shall be released to the [[Cash Collateral
Depositor] [Collateral Interest Holder] for application by the [Cash Collateral
Depositor] [Collateral Holder] in accordance with the Loan Agreement] [Credit
Enhancement Provider for application by the Credit Enhancement Provider in
accordance with the Credit Enhancement Agreement].
(c) Notwithstanding anything to the contrary in this Supplement or
the Agreement, all amounts Distributed to the Paying Agent pursuant to this
Section for payment to the Series 199_-_ Certificateholders shall be distributed
in full to the Series 199_-_ Certificateholders on the date on which funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.02 of the Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
------------------------
Section 9.01. Ratification of Agreement. As supplemented by this
-------------------------
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
Section 9.02. Counterparts. This Supplement may be executed in two
------------
or more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 9.03. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
-56-
<PAGE>
ARTICLE X
INTERCHANGE
-----------
Section 10.01. Interchange. If Interchange is to be included in
-----------
Series 199_-_, provisions will be made to calculate the amount to be allocated
to Series 199_-_ and the manner in which it will be distributed.
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
ASSET BACKED SECURITIES CORPORATION.,
Depositor
By:__________________________
Name:
Title:
[SERVICER NAME],
Servicer
By:__________________________
Name:
Title:
[TRUSTEE NAME]
Trustee,
By:__________________________
Name:
Title:
-57-
<PAGE>
FORM OF CLASS A CERTIFICATE EXHIBIT A-1
REGISTERED $___________ /1/
No. R-___________ CUSIP No. [___________]
[Unless this Class A Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
---
to Asset Backed Securities Corporation or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an Authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
CSFB CARD ACCOUNT MASTER TRUST
Series 199[_-_]
CLASS A [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
Class A Expected Final Payment Date:
The [_______] [________] Distribution Date
Each $1,000 minimum denomination represents a
1/[________] undivided interest
in Class A of the
CARD ACCOUNT MASTER TRUST, SERIES 199[_-_]
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in the ordinary course of
business in a portfolio of consumer revolving credit card accounts serviced by
[SERVICER NAME]
and other assets and interests constituting the Trust under the Pooling and
Servicing Agreement referred to below.
- ----------------
/1/ Denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
A-1-1
<PAGE>
(Not an interest in or obligation of
Asset Backed Securities Corp.
or any affiliate thereof)
This certifies that [CEDE CO.] (the "Class A Certificateholder") is the
-------------------------
registered owner of a fractional undivided interest in certain assets of a trust
(the "Trust") created pursuant to the Pooling and Servicing Agreement, dated as
-----
of [__________], 199[ ] (as amended and supplemented, the "Agreement"), as
---------
supplemented by the Series [____] Supplement dated as of [________], [____] (as
amended and supplemented, the "Supplement"), among Asset Backed Securities
----------
Corp., as Depositor, [Servicer Name], as Servicer, and [Trustee Name] a
[jurisdiction] banking corporation, as trustee (the "Trustee"). The corpus of
-------
the Trust consists of (i) a portfolio of all receivables (the "Receivables")
-----------
existing in the consumer revolving credit card accounts identified under the
Agreement from time to time (the "Accounts"), (ii) all Receivables generated
--------
under the Accounts from time to time thereafter, (iii) funds collected or to be
collected from accountholders in respect of the Receivables, (iv) all funds
which are from time to time [on deposit in the Collection Account, the Pre-
Funding Account, the Special Funding Account and any other Series Accounts]
[available pursuant to Credit Enhancement], (v) the benefits of the [Cash
Collateral Account] [Credit Enhancement] and (vi) all other assets and interests
constituting the Trust. The Holder of this Certificate is entitled to the
benefits of [funds on deposit in a Cash Collateral Account] [Credit Enhancement]
to the extent provided in the Supplement. Although a summary of certain
provisions of the Agreement and the Supplement is set forth below and in the
Summary of Terms and Conditions attached hereto, and made a part hereof, this
Class A Certificate does not purport to summarize the Agreement and the
Supplement and reference is made to the Agreement and the Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Supplement (without schedules) may
be requested from the Trustee by writing to the Trustee at the Corporate Trust
Office. To the extent not defined herein, the capitalized terms used herein
have the meanings ascribed to them in the Agreement or the Supplement, as
applicable.
This Class A Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Supplement, to which
Agreement and Supplement, each as amended and supplemented from time to time,
the Class A Certificateholder by virtue of the acceptance hereof assents and is
bound.
It is the intent of the Depositor and the Class A Certificateholders
that, for federal, state and local income and franchise tax purposes only, the
Class A Certificates will qualify as indebtedness of the Holders of the
Depositor Certificate secured by the Receivables. The Class A
Certificateholder, by the acceptance of this Class A Certificate, agrees to
treat this Class A Certificate for federal, state and local income and franchise
tax purposes as debt.
[Provisions regarding payment of interest to be provided as
applicable.]
In general, payments of principal with respect to the Class A
Certificates are limited
A-1-2
<PAGE>
to the Class A Invested Amount, which may be less than the unpaid principal
balance of the Class A Certificates. The Class A Expected Final Payment Date is
the [______________] Distribution Date, but principal with respect to the Class
A Certificates may be paid earlier or later under certain circumstances
described in the Agreement and the Supplement. If for one or more months during
the [Class A Accumulation Period] [Class A Controlled Amortization Period] there
are not sufficient funds to pay the [Controlled Deposit Amount] [Controlled
Distribution Amount], then to the extent that excess funds are not available on
subsequent Distribution Dates with respect to the [Class A Accumulation Period]
[Class A Controlled Amortization Period] to make up for such shortfalls, the
final payment of principal of the Class A Certificates will occur later than the
Class A Expected Final Payment Date.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class A Certificate shall
not be entitled to any benefit under the Agreement or the Supplement or be valid
for any purpose.
IN WITNESS WHEREOF, the Depositor has caused
this class A Certificate to be duly executed.
ASSET BACKED SECURITIES CORP.
By:__________________________
Name:
Title:
Dated: [__________], [____]
A-1-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-mentioned
Agreement and Supplement.
[TRUSTEE NAME]
as Trustee,
By:__________________________
Authorized Officer
or
By:__________________________
as Authenticating Agent
for the Trustee,
By:__________________________
Authorized Officer
A-1-4
<PAGE>
CSFB CARD ACCOUNT MASTER TRUST
Series 199[_-_]
CLASS A [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
Summary of Terms and Conditions
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to accountholders
as cash advances and Finance Charge Receivables. This Class A Certificate is
one of a Series of Certificates entitled CSFB Card Account Master Trust, Series
199[__-__] (the "Series 199[_-_] Certificates"), and one of a class thereof
----------------------------
entitled Class A [___%] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset
Backed Certificates, Series 199[_-_] (the "Class A Certificates"), each of which
--------------------
represents a fractional, undivided interest in certain assets of the Trust. The
assets of the Trust are allocated in part to the certificateholders of all
outstanding Series (the "Certificateholders' Interest") with the remainder
----------------------------
allocated to the Holders of the Depositor Certificate. The aggregate interest
represented by the Class A Certificates at any time in the Trust shall not
exceed an amount equal to the Invested Amount at such time. The Class A Initial
Invested Amount is $[__________]. The Class A Invested Amount on any date will
be an amount equal to (a) the Class A initial Invested Amount, minus (b) the
-----
aggregate amount of principal payments made to the Class A Certificateholders on
or prior to such date [other than any payments of principal to the Class A
Certificateholders from the [Pre-Funding Account] [Special Funding Account]
[other Series Account] [Cash Collateral Account] [other Credit Enhancement]],
minus (c) the excess, if any, of the aggregate amount of Class A Investor
- -----
Charge-Offs for all prior Distribution Dates over Class A Investor Charge-Offs
reimbursed pursuant to Section 4.06(a) of the Supplement prior to such date.
Subject to the terms and conditions of the Agreement, the Depositor
may, from time to time, direct the Trustee, on behalf of the Trust, to issue one
or more new Series of Investor Certificates, which will represent fractional,
undivided interests in certain of the Trust Assets.
On each Distribution Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the last day of the preceding calendar
month (each a "Record Date") such Class A Certificateholder's pro rata share of
----------- --- ----
such amounts (including amounts) on deposit in the Collection Account [the
Principal Funding Account] [the Special Funding Account] as are payable to the
Class A Certificateholders pursuant to the Agreement and the Supplement.
Distributions with respect to this Class A Certificate will be made by the
Paying Agent by check mailed to the address of the Class A Certificateholder of
record appearing in the Certificate Register without the presentation or
surrender of this Class A Certificate or the making of any notation thereon
(except for the final distribution in respect of this Class A Certificate)
except that with respect to Class A Certificates Registered in the name of Cede
& Co., the nominee for The Depository Trust Company, distributions will be made
in the form of immediately available funds. Final payment of this Class A
A-1-5
<PAGE>
Certificate will be made only upon presentation and surrender of this Class A
Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee to the Series 199[__-__]
Certificateholders in accordance with the Agreement and the Supplement.
[On any day occurring on or after the day on which the Invested Amount
[and the Enhancement Invested Amount, if any,] is reduced to [_____]% or less of
the Series Invested Amount, the Depositor has the option to repurchase the
Series 199[__-__] Certificateholders' Interest in the Trust. The repurchase
price will be equal to (a) if such day is a Distribution Date, the Reassignment
Amount for such Distribution Date or (b) if such day it not a Distribution Date,
the Reassignment Amount for the Distribution Date following such day. Following
the deposit of the Reassignment Amount in the Collection Account, Series 199[_-
_] Certificateholders [and the Cash Collateral Depositor] [and the provider of
Credit Enhancement] will not have any interest in the Receivables and the Series
1999[__-__] Certificates will represent only the right to receive such
Reassignment Amount.]
THIS CLASS A CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, THE DEPOSITOR AND SERVICER OR ANY AFFILIATE THEREOF AND IN NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THIS CLASS A CERTIFICATE IS LIMITED IN
RIGHT OF PAYMENT TO CERTAIN COLLECTIONS WITH RESPECT TO THE RECEIVABLES (AND
CERTAIN OTHER AMOUNTS), ALL AS MORE SPECIFICALLY SET FORTH HEREINABOVE AND IN
THE AGREEMENT AND THE SUPPLEMENT.
The Class A Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class A
Certificate shall be registered in the Certificate Register upon surrender of
this Class A Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer, in a form satisfactory to the Trustee or the Transfer
Agent and Registrar, duly executed by the Class A Certificateholder or such
Class A Certificateholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class A Certificates of
authorized denominations and for the same aggregate fractional undivided
interest will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations
therein set forth, Class A Certificates are exchangeable for new Class A
Certificates evidencing like aggregate fractional, undivided interests as
requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them, shall be affected by notice to the
contrary
A-1-6
<PAGE>
except in certain circumstances described in the Agreement.
THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-1-7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee ________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints _______________, attorney, to transfer said certificate
on the books kept for registration thereof, with full power of substitution in
the premises.
Dated:__________________ _________________________./2/
Signature Guaranteed:
_______________________
- -------------------
/2/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate
in every particular, without alteration, enlargement or any change
whatsoever.
A-1-8
<PAGE>
[FORM OF CLASS B CERTIFICATE] EXHIBIT A-2
REGISTERED $_____________/1/
No. R-_____________ CUSIP No. [____________]
[Unless this Class B Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
---
to Asset Backed Securities Corp. or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC) , ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch
as the registered owner hereof, Cede & Co., has an interest herein.]
CSFB CARD ACCOUNT MASTER TRUST
SERIES 199[__-__]
CLASS B [_____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
Class B Expected Final Payment Date:
The [________] [________] Distribution Date
Each $1,000 minimum denomination represents a
1/[__________] undivided interest
in Class B of the
CSFB Card Account Master TRUST, SERIES 199[__-__]
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in the ordinary course of
business in a portfolio of consumer revolving credit card accounts serviced by
[SERVICER NAME]
and other assets and interests constituting the Trust under the Pooling and
Servicing Agreement referred to below.
- --------------
/1/ Denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
A-2-1
<PAGE>
(Not an interest in or obligation of
Asset Backed Securities Corp.,
or any affiliate thereof)
This certifies that [CEDE & CO.] (the "Class B Certificateholder") is the
-------------------------
registered owner of a fractional, undivided interest in certain assets of a
trust (the "Trust") created pursuant to the Pooling and Servicing Agreement,
-----
dated as of [________], 199[ ] (as amended and supplemented, the "Agreement"),
---------
as supplemented by the Series [_______] Supplement dated as of [________],
[_______] (as amended and supplemented, the "Supplement"), among Asset Backed
----------
Securities Corporation, as Depositor, [Servicer Name], as Servicer, and [Trustee
Name], a [jusrisdiction] banking corporation, as trustee (the "Trustee"). The
-------
corpus of the Trust consists of (i) a portfolio of all receivables (the
"Receivables") existing in the consumer revolving credit card accounts
- ------------
identified under the Agreement from time to time (the "Accounts"), (ii) all
--------
Receivables generated under the Accounts from time to time thereafter, (iii)
funds collected or to be collected from accountholders in respect of the
Receivables, (iv) all funds which are from time to time [on deposit in the
Collection Account, the Pre-Funding Account, the Special Funding Account, and
the other Series Accounts] [available pursuant to Credit Enhancement], (v) the
benefits, if any, of the [Cash Collateral Account] [Credit Enhancement] and (vi)
all other assets and interests constituting the Trust. The Holder of this
Certificate is entitled to the benefits of [funds on deposit in a Cash
Collateral Account] [Credit Enhancement] to the extent provided in the
Supplement. Although a summary of certain provisions of the Agreement and the
Supplement is set forth below and in the Summary of Terms and Conditions
attached hereto and made a part hereof, this Class B Certificate does not
purport to summarize the Agreement and the Supplement and reference is made to
the Agreement and the Supplement for information with respect to the interests,
rights, benefits, obligations, proceeds and duties evidenced hereby and the
rights, duties and obligations of the Trustee. A copy of the Agreement and the
Supplement (without schedules) may be requested from the Trustee by writing to
the Trustee at the Corporate Trust Office. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to then in the
Agreement or the Supplement, as applicable.
This Class B Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Supplement, to which
Agreement and Supplement, each as amended and supplemented from time to time,
the Class B Certificateholder by virtue of the acceptance hereof assents and is
bound.
THIS CLASS B CERTIFICATE IS SUBORDINATED TO THE EXTENT NECESSARY TO
PAYMENTS ON THE CLASS A CERTIFICATES TO THE EXTENT SPECIFIED IN THE SUPPLEMENT.
It is the intent of the Depositor and the Class B Certificateholders
that, for federal, state and local income and franchise tax purposes only, the
Class B Certificates will qualify as indebtedness of the Holders of the
Depositor Certificate secured by the Receivables. The Class B
Certificateholder, by the acceptance of this Class B Certificate, agrees to
treat this Class B Certificate for federal, state and local income and franchise
tax purposes as indebtedness of the Holders
A-2-2
<PAGE>
Depositor Certificate.
[Provisions regarding the payment of interest to be provided as
applicable]
In general, payments of principal with respect to the Class B
Certificates are limited to the Class B Invested Amount, which may be less then
the unpaid principal balance of the Class B Certificates. The Class B Expected
Final Payment Date is the [_____] [_____] Distribution Date, but principal with
respect to the Class B Certificates may be paid earlier or later under certain
circumstances described in the Agreement and the Supplement. If for one or more
months during the [Class B Accumulation Period] [Class B Amortization Period]
there are not sufficient funds to pay the [Controlled Deposit Amount]
[Controlled Distribution Amount], then to the extent that excess funds are not
available on subsequent Distribution Dates with respect to the [Class B
Accumulation Period] [Class B Amortization Period] to make up for such
shortfalls, the final payment of principal of the Class B Certificates will
occur later than the Class B Expected Final Payment Date.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class B Certificate shall
not be entitled to any benefit under the Agreement or the Supplement or be valid
for any purpose.
IN WITNESS WHEREOF, the Depositor has caused
this Class B Certificate to be duly executed.
ASSET BACKED SECURITIES CORP.
By:__________________________
Name:
Title:
Dated: [__________], [____]
A-2-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the within
mentioned Agreement and Supplement.
[TRUSTEE NAME]
as Trustee
By:__________________________
Authorized Signatory
A-2-4
<PAGE>
CSFB CARD ACCOUNT MASTER TRUST
SERIES 199[__-__]
CLASS B [____%] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
Summary of Terms and Conditions
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to accountholders
as cash advances and Finance Charge Receivables. This Class B Certificate is
one of a Series of Certificates entitled CSFB Card Account Master Trust, Series
199[__-__] (the "Series 199[__-__] Certificates" and one of a class thereof
------------------------------
entitled Class B [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed
Certificates, Series 199[__-__] (the "Class B Certificates"), each of which
--------------------
represents a fractional, undivided interest in certain assets of the Trust. The
assets of the Trust are allocated in part to the certificateholders of all
outstanding Series (the "Certificateholders' Interest") with the remainder
----------------------------
allocated to the Holders of the Depositor Certificate. The aggregate interest
represented by the Class B Certificates at any time in the Principal Receivables
in the Trust shall not exceed an amount equal to the Class B Invested Amount at
such time. The Class B Invested Amount on any date will be an amount equal to
(a) the Class B initial Invested Amount, minus (b) the aggregate amount of
-----
principal payments made to the Class B Certificateholders on or prior to such
date [other than principal payments made from amounts on deposit in the [Pre-
Funding Account] [Special Funding Account] [the Cash Collateral Account] [Other
Series Account] [other Credit Enhancement] for the purpose of reimbursing
previous reductions in the Class B Invested Amount [, minus (c) the aggregate
-----
amount of Class B Investor Charge-offs for all prior Distribution Dates [, minus
-----
(d) the amount of Reallocated Principal Collections for all prior Distribution
Dates which have been used to fund the Required Amount with respect to such
Distribution Dates, minus (e) an amount equal to the amount by which the Class B
-----
Invested Amount has been reduced to cover the Class A Investor Default Amount on
all prior Distribution Dates, and plus (f) the amount of Excess Spread and
----
Excess Finance Charge Collections allocated to Series 199[_-_] and applied on
all prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c), (d) and (e)].
Subject to the terms and conditions of the Agreement, the Depositor
may, from time to time, direct the Trustee, on behalf of the Trust, to issue one
or more new Series of Investor Certificates, which will represent fractional,
undivided interests in certain of the Trust Assets.
On each Distribution Date, the Paying Agent shall distribute to each
Class B Certificateholder of record on the last day of the preceding calendar
month (each a "Record Date") such Class B Certificateholder's pro rata share of
----------- --- ----
such amounts (including amounts on deposit in the Collection Account) as are
payable to the Class B Certificateholders pursuant to the Agreement and the
Supplement. Distributions with respect to this Class B Certificate will be made
by the Paying Agent by check mailed to the address of the Class B
Certificateholder of record appearing in the
A-2-5
<PAGE>
Certificate Register without the presentation or surrender of this Class B
Certificate or the making of any notation thereon (except for the final
distribution in respect of this Class B Certificate) except that with respect to
Class B Certificates registered in the name of Cede & Co., the nominee for The
Depository Trust Company, distributions will be made in the form of immediately
available funds. Final payment of this Class B Certificate will be made only
upon presentation and surrender of this Class B Certificate at the office or
agency specified in the notice of final distribution delivered by the Trustee to
the Series 199[_-_] Certificateholders in accordance with the Agreement and the
Supplement.
[On any day occurring on or after the day on which [the sum of] the
Invested Amount [and the Enhancement Invested Amount] is reduced to [___]% or
less of the Series Invested Amount, the Depositor has the option to repurchase
the Certificateholders' Interest in the Trust represented by the Series 199[__-
__] Certificates. The repurchase price will be equal to (a) if such day is a
Distribution Date, the Reassignment Amount for such Distribution Date or (b) if
such day is not a Distribution Date, the Reassignment Amount for the
Distribution Date next following such day. Following the deposit of the
Reassignment Amount in the Collection Account, Series 199[__-__]
Certificateholders [and the Cash Collateral Depositor] [and the provider of
Credit Enhancement] will not have any interest in the Receivables and the Series
199[__-__] Certificates will represent only the right to receive such
Reassignment Amount.]
THIS CLASS B CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, THE DEPOSITOR AND SERVICER OR ANY AFFILIATE THEREOF AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THIS CLASS B CERTIFICATE IS LIMITED IN
RIGHT OF PAYMENT TO CERTAIN COLLECTIONS WITH RESPECT TO THE RECEIVABLES (AND
CERTAIN OTHER AMOUNTS), ALL AS MORE SPECIFICALLY SET FORTH HEREIN AND IN THE
AGREEMENT AND THE SUPPLEMENT.
The Class B Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class B
Certificate shall be registered in the Certificate Register upon surrender of
this Class B Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer, in a form satisfactory to the Trustee or the Transfer
Agent and Registrar, duly executed by the Class B Certificateholder or such
Class B Certificateholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class B Certificates of
authorized denominations and for the same aggregate fractional undivided
interest will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations
therein set forth, Class B Certificates are exchangeable for new Class B
Certificates evidencing like aggregate fractional undivided interests as
requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
A-2-6
<PAGE>
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name is
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them, shall be affected by notice to the
contrary except in certain circumstances described in the Agreement.
THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-2-7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
_________________________________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints _______________, attorney, to transfer said certificate
on the books kept for registration thereof, with full power of substitution in
the premises.
Dated: _________________________/2/
Signature Guaranteed:
________________ ___________________________
/2/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate
in every particular, without alteration, enlargement or any change
whatsoever.
A-2-8
<PAGE>
EXHIBIT 4.3.2
VERSION A
---------
ASSET BACKED SECURITIES CORPORATION,
Depositor
[NAME OF MASTER SERVICER]
Master Servicer
and
[NAME OF TRUSTEE]
Trustee
__________________________________
REFERENCE AGREEMENT
incorporating by reference
CERTAIN STANDARD TERMS AND CONDITIONS
OF POOLING AND SERVICING
Dates as of , 199__
__________________________________
Conduit Manufactured Housing Contract
Pass-Through Certificates, Series ___
___% Pass-Through Rate
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE XI.
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
<TABLE>
<CAPTION>
<S> <C>..................................... <C>
SECTION 11.01. Designation............................. 2
SECTION 11.02. Conveyance of Trust Fund; Issuance of
Certificates............................ 2
SECTION 11.03. Delivery of Documents................... 3
SECTION 11.04. Denominations........................... 6
SECTION 11.05. Principal Balance....................... 6
SECTION 11.06. Distributions on the Certificates....... 7
SECTION 11.07. Place and Notice for Final Distribution
on Certificates......................... 7
SECTION 11.08. Pass-Through Rate....................... 7
SECTION 11.09. Distribution Dates...................... 7
SECTION 11.10. Record Dates............................ 7
SECTION 11.11. Contracts............................... 7
SECTION 11.12. Forms Generally......................... 7
[SECTION 11.13. Termination at Option of the
Depositor............................... 8
SECTION 11.14. Substitution............................ 8
SECTION 11.15. Wire Transfer Eligibility............... 8
SECTION 11.16. Required Rating......................... 8
SECTION 11.17. Pool Insurance Policy................... 8
SECTION 11.18. Special Hazard Insurance Policy......... 9
SECTION 11.19. Performance Bon......................... 9
SECTION 11.20. Warranty and Servicing Agreements....... 9
SECTION 11.21. Custodial Agreements.................... 9
SECTION 11.22. Retained Yield; Administrative Fee;
Servicing Compensation.................. 9
SECTION 11.23. Cut-off Date............................ 9
SECTION 11.24. Certificate Registrar................... 9
SECTION 11.25. Authenticating Agent.................... 10
SECTION 11.26. Paying Agent............................ 10
[SECTION 11.27. Limited Guarantor....................... 10
SECTION 11.28. Limited Guarantee and Guarantee Amount.. 10
SECTION 11.29. Limited Guarantee Fee................... 10
[SECTION 11.30. Applicability of Certain Provisions of
Standard Terms.......................... 10
</TABLE>
ARTICLE XII.
DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
APR................................................................ 10
Administrative Fee................................................. 10
Agreement.......................................................... 10
Authenticating Agent............................................... 11
Certificate........................................................ 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Certificate Registrar.............................................. 11
Certificateholder.................................................. 11
Contracts.......................................................... 11
Contract Schedule.................................................. 11
Deleted Contract................................................... 11
Delivery Date...................................................... 11
Denomination....................................................... 11
Distribution Date.................................................. 11
Due Date........................................................... 11
[Insurance Policy.................................................. 11
Insurer............................................................ 11
Optional Termination............................................... 11
Optional Termination Date.......................................... 11
Pass-Through Rate.................................................. 12
[Performance Bond.................................................. 12
Pool Insurance Policy.............................................. 12
Repurchase Price................................................... 12
Retained Yield..................................................... 12
Single Certificate................................................. 12
Special Hazard Insurance Policy.................................... 12
Special Hazard Insurer............................................. 12
Substitute Contract................................................ 12
Trust Fund......................................................... 13
Voting Rights...................................................... 13
</TABLE>
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 13.01. Certificate Account......................... 13
SECTION 13.02. Distributions............................... 13
SECTION 13.03. Monthly Statements to
Certificateholders.......................... 14
</TABLE>
ARTICLE XIV.
OPTIONAL TERMINATION
SECTION 14.01. Repurchase at the Option of the
[Depositor]........................................ 15
SECTION 14.02. Procedure Upon Optional Termination................ 16
ARTICLE XV.
MISCELLANEOUS
<TABLE>
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SECTION 15.01. Standard Terms................................... 17
SECTION 15.02. Ratification of Standard Terms................... 17
SECTION 15.03. Amendment........................................ 17
SECTION 15.04. Counterparts..................................... 18
SECTION 15.05. Governing Law.................................... 18
SECTION 15.06. Recordation of Agreement......................... 18
SECTION 15.07. Severability of Provisions....................... 19
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EXHIBITS
Form of Class A Certificate........................................ A-1
iii
<PAGE>
REFERENCE AGREEMENT, dated as of ___________, 199__ by and among ASSET
BACKED SECURITIES CORPORATION, a Delaware corporation, as Depositor (the
"Depositor"), [_____________________________________________________________], a
[___________________] corporation, as master servicer (the "Master Servicer"),
and [________________________], a ___________ corporation, as trustee (together
with its successors in trust thereunder as provided in the Agreement referred to
below, the "Trustee").
PRELIMINARY STATEMENT
The Depositor has duly authorized the execution and delivery of this
Reference Agreement and the incorporation herein, to the extent permitted
herein, of the Standard Terms and Provisions of Pooling and Servicing (the
"Standard Terms") attached hereto, to provide for the issuance of its Conduit
Manufactured Housing Contract Pass-Through Certificates, Series __, issued as
provided herein and delivered by the Trustee to the Depositor as provided
hereunder. The Reference Agreement, incorporating the Standard Terms, is
sometimes referred to herein as the Agreement. All references herein to
Sections or Articles of the Agreement shall be construed to mean Sections or
Articles of this Reference Agreement or of the Standard Terms as the Section
numbers and context may require, and capitalized terms used herein shall have
the meanings ascribed to them in the Standard Terms or this Reference Agreement.
The Depositor is the owner of the Contracts (as hereinafter defined) and the
other property being conveyed by it to the Trustee as part of the Trust Fund (as
hereinafter defined) and has duly authorized the execution and delivery of this
Agreement to provide for the conveyance to the Trustee of the Trust Fund. All
covenants and agreements made by the Depositor herein and in the Standard Terms
are for the benefit and security of the Certificateholders. The Depositor is
entering into this Reference Agreement and the Standard Terms, and the Trustee
is accepting the trusts created hereby and thereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
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ARTICLE XI.
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
SECTION 11.01. Designation.
-----------
The Certificates shall be designated generally as the Conduit
Manufactured Housing Contract Pass-Thorough Certificates, Series ____, ___%
Pass-Through Rate (the "Certificates").
SECTION 11.02. Conveyance of Trust Fund; Issuance of
-------------------------------------
Certificates.
------------
In exchange for the Certificates, the Depositor hereby sells,
transfers, assigns, delivers, sets over and otherwise conveys to the Trustee,
without recourse, for the benefit of all present and future Holders of the
Certificates, all of the Depositor's right, title and interest (other than with
respect to any Retained Yield specified in Section 11.22) in and to (a) the
Contracts listed in Schedule I to this Agreement, which the Depositor causes to
be delivered to the Trustee, together with the Contract Files relating to the
Contracts and the other property in respect of such Contracts, as specified in
Section 2.01, and the proceeds thereof payable after the Cut-off Date, net of
any amounts payable to the Servicers, the Master Servicer and the Depositor in
accordance with the provisions of the Standard Terms, (b) property that secured
a Contract and has been acquired by Repossession, (c) the Insurance Policies, if
any, relating to the Contracts, (d) [the Performance Bond and the proceeds
thereof, as provided in Section 3.17, (e)] the Depositor's rights under the
Warranty and Servicing Agreements with respect to the Contracts, (f) the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of the Agreement, net of amounts payable to the Servicers, the Master
Servicer and the Depositor, as provided in Sections 3.18 and 3.19, and net of
any Retained Yield and Administrative Fee payable to the Depositor, as specified
in Sections 3.19 and 11.22, and (g) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.
The Trustee acknowledges the transfer and assignment to it of the
Contracts and the delivery of the Contract Files to it (or, with respect to
Contracts subject to a Custodial Agreement, to the respective Custodian on its
behalf) and the other property included in the Trust Fund, all to the extent
provided above and in Section 2.01, and, concurrently with such delivery, has
delivered to or upon the order of the Depositor, in exchange for the Contracts,
Certificates duly authenticated and duly executed by the Trustee in authorized
Denominations evidencing the entire ownership of the Trust Fund. The Trustee
agrees to hold the Trust Fund and exercise the rights referred to above for the
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benefit of all present and future Holders of the Certificates and to perform the
duties set forth herein and in the Standard Terms to the best of its ability, to
the end that the interests of the Holders of the Certificates may be adequately
and effectively protected.
SECTION 11.03. Delivery of Documents.
---------------------
In connection with the foregoing conveyance, the creation of the Trust
Fund and the issuance of the Certificates pursuant to Sections 11.02 and 2.01,
the Depositor hereby delivers to and/or deposits with the Trustee the following
documents, instruments and property related to the Certificates:
(1) Opinion of Counsel. Opinion(s) of Counsel (in which such counsel
------------------
is entitled to rely upon certificates, opinions or representations as to matters
of fact by Authorized Officers of the Depositor or the Trustee and governmental
officials and, as to matters involving the laws of any state other than the
state in which such counsel is admitted to practice, upon an Opinion of Counsel
satisfactory to the Trustee) addressed to the Trustee to the effect that:
(a) 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 to own its properties, to conduct its business as now conducted
by it and to enter into and perform its obligations under this Agreement;
(b) assuming due execution and delivery thereof by the Trustee, this
Agreement, as executed and delivered by the Depositor, is the valid, legal and
binding obligation of the Depositor, enforceable in accordance with its terms
subject to bankruptcy, reorganization, insolvency and other laws affecting the
enforcement of creditors' rights generally and to general principles of equity;
(c) the Certificates, assuming that they have been duly and validly
authorized, executed, delivered and issued by the Trustee, will, when
authenticated by the Certificate Registrar pursuant to this Agreement and
delivered to or upon the order of the Depositor, be valid, legal and binding
instruments, entitled to the benefits of this Agreement;
(d) immediately prior to the conveyance thereof to the Trustee, the
Depositor had the corporate power and authority to convey the Contracts and
other property included in the Trust Fund to the Trustee pursuant to this
Agreement;
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(e) such action has been taken with respect to delivery of possession
of the Contracts and other property included in the Trust Fund on the Delivery
Date and with respect to the execution and delivery of all requisite documents
as is necessary to make effective the conveyance of such property to the
Trustee, with either the details of such action recited therein, or the absence
of any such action being necessary to make such conveyance effective stated
therein;
(f) the Depositor has effectively conveyed to the Trustee all of its
right, title and interest in and to the Contracts and other property included in
the Trust Fund on the Delivery Date;
(g) this Agreement is not required to be qualified under the Trust
Indenture Act of 1939; the Trust Fund created by this Agreement is not required
to be registered under the Investment Company Act of 1940, as amended; the
Registration Statement is effective under the Securities Act of 1933, as amended
(the "Securities Act"), and to the best of such counsel's knowledge, no stop
order suspending such effectiveness has been issued;
(h) no consent, approval, authorization or order of any state or
Federal court or governmental agency or body is required for the consummation by
the Depositor of the transactions contemplated herein, except such as may under
the blue sky laws of any jurisdiction in connection with the acquisition of
Certificates and such other approvals as have been obtained; and
(i) the issue and sale of the Certificates and the fulfillment of the
terms of this Agreement will not conflict with or result in a breach or
violation of, any term or provision of, or constitute a default under, the
certificate of incorporation or by-laws of the Depositor, or, to the knowledge
of such counsel, any indenture or other agreement or instrument to which the
Depositor is a party or by which it is bound, or any statute or regulation
applicable to the Depositor or, to the knowledge of such counsel, any order of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over the Depositor.
(2) The Contracts. The Contracts included in the Trust Fund, in the
-------------
manner specified in Section 2.01.
(3) Performance Bond, Special Hazard Insurance Policy and Pool
----------------------------------------------------------
Insurance Policy. The Performance Bond, the Special Hazard Insurance Policy and
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the Pool Insurance Policy.
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(4) Officers' Certificate of Insurers. An Officers' Certificate of
---------------------------------
the Pool Insurer, to the effect that the Pool Insurance Policy is in full force
and effect, subject to its terms and conditions, with respect to the Contracts
specified in such Officers' Certificate, an Officers' Certificate of the Special
Hazard Insurer, to the effect that the Insurance Policy issued by such Insurer
is in full force and effect, subject to its terms and conditions, with respect
to the Contracts and an Officers' Certificate of the issuer of the Performance
Bond to the effect that the Performance Bond is in full force and effect with
respect to the obligations of the Master Servicer under this Agreement.
(5) Opinion of Counsel for Insurers. An Opinion of Counsel for each
-------------------------------
Insurer dated the Delivery Date, to the effect that:
(a) the Insurer is duly organized, validly existing under the laws of
the state of its incorporation, is duly qualified to do business in all
jurisdictions where the nature of its operations as contemplated by the
Insurance Policy issued by such Insurer legally requires such qualification, and
has the power and authority (corporate and other) to issue, and to take all
action required of it under, such Insurance Policy;
(b) the execution, delivery and performance by the Insurer of the
Insurance Policy issued by such Insurer has been duly authorized by all
necessary corporate action on the part of the Insurer, and under present law
does not and will not contravene any law or governmental regulation or order
presently binding on the Insurer or the charter or the by-laws of the Insurer or
contravene any provision of or constitute a default under any indenture,
contract or other instrument to which the Insurer is a party or by which the
Insurer is bound;
(c) the execution, delivery and performance by the Insurer of the
Insurance Policy issued by such Insurer does not require the consent or approval
of, the giving of notice to, the registration with, or the taking of any other
action in respect of, any federal, state or other governmental agency or
authority that has not previously been effected; and
(d) the Insurance Policy issued by such Insurer has been duly issued
and constitutes a legal, valid and binding agreement of the Insurer, enforceable
against the Insurer in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
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(7) Opinion of Counsel to the Master Servicer. An Opinion of Counsel
-----------------------------------------
to the Master Servicer, dated not later than the Delivery Date, to the effect
that:
(a) the Master Servicer is a duly organized and validly existing
corporation in good standing under the laws of the State of ___________; the
Master Servicer is duly qualified to do business as a foreign corporation in
and is in good standing under the laws of each jurisdiction where the nature
of its operations as contemplated by this Agreement requires such
qualification;
(b) the Master Servicer has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby;
the execution, delivery and performance of this Agreement have been duly
authorized by all requisite corporate action on the part of the Master
Servicer and (i) do not conflict with or result in, or will not conflict
with or result in, a breach of the [certificate] [articles] of incorporation
or by-laws of the Master Servicer, or, to such counsel's knowledge, any of
the provisions of any indenture, mortgage, contract or other instrument to
which the Master Servicer is a party or by which it is bound or (ii) do not
result in the creation or imposition of any lien, charge or encumbrance upon
any of its property pursuant to the terms of any such indenture, mortgage,
contract or other instruments; an d
(c) this Agreement constitutes a legal, valid and binding agreement of
the Master Servicer, enforceable against the Master Servicer in accordance
with its terms, subject, as to enforceability, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and to principles of equity.
SECTION 11.04. Denominations.
-------------
A Single Certificate will be issued in a minimum denomination of
$____________. The Certificates will be issued in fully registered form only in
minimum Denominations of $__________ and integral multiples thereof [and one
Certificate may be issued in such denomination as may be necessary to represent
the remainder of the Principal Balance of the Contracts on the Cut-off Date.]
SECTION 11.05. Principal Balance.
-----------------
The Principal Balance of the Contracts on the Cut-off Date, exclusive
of principal payments due and payable on or before such date, is $__________.
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SECTION 11.06. Distributions on the Certificates.
---------------------------------
On each Distribution Date, the Master Servicer shall make
distributions to the Certificateholders in the amounts and in the manner
specified in Article XIII and in the forms of the Certificates.
SECTION 11.07. Place and Notice for Final Distribution on
------------------------------------------
Certificates.
------------
(a) The final distribution made on each Certificate on any
Distribution Date shall be distributable upon presentation and surrender thereof
at the office or agency of the Master Servicer maintained for such purpose in
the Borough of Manhattan, City and State of New York pursuant to Section 5.02.
(b) Notice of final distribution on any Certificate on any
Distribution Date or Optional Termination Date shall be mailed no later than the
tenth day prior to the applicable Distribution Date or Optional Termination
Date.
SECTION 11.08. Pass-Through Rate.
-----------------
The Pass-Through Rate is _____%.
SECTION 11.09. Distribution Dates.
------------------
The Distribution Dates for the Certificates are the ______ day of each
month, or, if such day is not a Business Day, the next succeeding Business Day,
commencing __________ ___, 199_.
SECTION 11.10. Record Dates.
------------
The Record Date for each Distribution Date will be the close of
business on the last day of the month preceding the month in which the
applicable Distribution Date occurs or, if such day is not a Business Day, the
next preceding Business Day.
SECTION 11.11. Contracts.
---------
The Contracts transferred and assigned to the Trustee by the Depositor
are the Contracts identified in the Contract Schedule attached hereto as
Schedule I.
SECTION 11.12. Forms Generally.
---------------
The Certificates and the Certificate Registrar's certificate of
authentication shall be in substantially the forms set forth in Exhibit A
hereto, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Agreement or as may in the
judgment of the Master Servicer, the Trustee or the Depositor be necessary,
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appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any securities exchange on which any of the Certificates may be
listed, or as may, consistently herewith, be determined by the officers
executing such Certificates, as evidenced by their execution thereof.
The definitive Certificates shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which any of the
Certificates may be listed, all as determined by the officers executing such
Certificates, as evidenced by their execution thereof.
[SECTION 11.13. Termination at Option of the Depositor.
--------------------------------------
The Depositor may, at its option, repurchase from the Trust Fund all
Contracts remaining outstanding on any Distribution Date on or after the date on
which the Principal Balance of such Contracts is less than __% of the Principal
Balance of the Contracts on the Cut-off Date in the manner and at the Repurchase
Price provided in Article XIV.]
SECTION 11.14. Substitution.
------------
The Depositor or the Servicer of a Contract may substitute for such
Contract a Substitute Contract or Contracts, pursuant to Section 2.02, 2.04 or
2.08, which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.07.
SECTION 11.15. Wire Transfer Eligibility.
-------------------------
The minimum Denomination eligible for wire transfer on each
Distribution Date is $____________.
SECTION 11.16. Required Rating.
---------------
The Certificates shall have been rated " " by
__________________________________.
SECTION 11.17. Pool Insurance Policy.
---------------------
A specimen of the Pool Insurance Policy with respect to the Contracts,
naming the Trustee as loss payee, is attached as hereto as Exhibit [ ]. The
Pool Insurer is _________________, a _______________ corporation.
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SECTION 11.18. Special Hazard Insurance Policy.
-------------------------------
A specimen of the Special Hazard Insurance Policy with respect to the
Contracts, naming the Trustee as loss payee, is attached as Exhibit [ ] hereto.
The Special Hazard Insurer is _______________________, a ____________
corporation.
SECTION 11.19. Performance Bond.
----------------
A specimen of the Performance Bond is attached as Exhibit [ ] hereto.
The Performance Bond has been issued by ____________________, a
_______________________ corporation.
SECTION 11.20. Warranty and Servicing Agreements.
---------------------------------
The Warranty and Servicing Agreements with respect to the Contracts
included in the Trust Fund are listed on Schedule [ ] hereto.
SECTION 11.21. Custodial Agreements.
--------------------
The Custodial Agreements with respect to the Contracts included in the
Trust Fund are listed on Schedule [ ] hereto.
SECTION 11.22. Retained Yield; Administrative Fee; Servicing
---------------------------------------------
Compensation.
------------
On each Distribution Date, the Master Servicer shall remit to the
Depositor, by wire transfer of immediately available funds, from payments of
interest and other collections with respect to interest on the Contracts
deposited in the Certificate Account a Retained Yield equal to ____% of the
Principal Balance of each Contract and an Administrative Fee equal to _____% of
the Principal Balance of each Contract as provided in Section 3.19. The Master
Servicer shall be entitled to retain an amount in respect of each interest
payment on a Contract equal to the excess of each interest payment on such
Contract over the sum of (i) the Retained Yield, (ii) the Administrative Fee and
(iii) the Pass-Through Rate, as provided in Section 3.19, and such other amounts
as provided in accordance with the provisions of the Standard Terms.
SECTION 11.23. Cut-off Date.
------------
The Cut-off Date is ___________, 199__.
SECTION 11.24. Certificate Registrar.
---------------------
The Certificate Registrar is the Trustee.
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SECTION 11.25. Authenticating Agent.
--------------------
The Authenticating Agent is the Trustee.
SECTION 11.26. Paying Agent.
------------
The Paying Agent is the Master Servicer.
[SECTION 11.27. Limited Guarantor.
-----------------
The Limited Guarantor is ____________________.
SECTION 11.28. Limited Guarantee and Guarantee Amount.
--------------------------------------
[Relevant description and amounts to be provided.]
SECTION 11.29. Limited Guarantee Fee.
---------------------
The Limited Guarantee Fee is ____________________.]
[SECTION 11.30. Applicability of Certain Provisions of
--------------------------------------
Standard Terms.
--------------
The provisions of Section 2.03(b) shall be applicable to the
Certificates; the provisions of Sections 3.23 and 3.24 shall not be applicable
to the Certificates.]
ARTICLE XII.
DEFINITIONS
Article One of the Standard Terms provides that the meaning of certain defined
terms used in this Agreement shall, when applied to a particular Series of
Certificates, be as defined herein. With respect to the Certificates, the
following definitions shall apply:
APR: The annual percentage rate of interest on a Contract.
---
Administrative Fee: The percentage rate per annum of the Principal
-------------------
Balance from time to time of each Contract that is payable to the Depositor out
of each interest payment on a Contract as compensation for the performance of
duties related to the administration of the Trust Fund, which percentage is set
forth in Article XI.
Agreement: The Standard Terms and Provisions of Pooling and
----------
Servicing together with this Reference Agreement, and all amendments and
supplements hereto.
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Authenticating Agent: The authenticating agent specified in Section
--------------------
11.26.
Certificate: Any one of the Certificates executed by or on behalf
------------
of the Depositor and authenticated by or on behalf of the Trustee in
substantially the form set forth in Exhibit A hereto.
Certificate Registrar: The registrar appointed and identified in
---------------------
Section 11.25.
Certificateholder: The registered holder of a Certificate.
-----------------
Contracts: The Contracts listed on the Contract Schedule attached
---------
hereto.
Contract Schedule: The list of Contracts transferred on the Delivery
-----------------
Date to the Trustee as part of the Trust Fund for the Certificates, which list
is attached hereto as Schedule I.
Deleted Contract: A Contract replaced or to be replaced by a
----------------
Substitute Contract.
Delivery Date: ________________________, 199__.
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Denomination: For each Certificate, the amount designated as such on
-------------
the face thereof, the aggregate of the Denominations of the Certificates being
equal to the aggregate of the Principal Balances of the Contracts on the Cut-off
Date, exclusive of principal payments due and payable on or before such date.
Distribution Date: The _______ day of each month, or if such day is
------------------
not a Business Day, the Business Day immediately following such day, commencing
____________ _____, 199__.
Due Date: The first day of the month in which the related Distribution
--------
Date occurs.
[Insurance Policy: Any one of the Pool Insurance Policy or Special
----------------
Hazard Insurance Policy.]
Insurer: Any one of the Pool Insurer, the Special Hazard Insurer and
--------
the issuer of the Performance Bond, as the context may require.
Optional Termination: The repurchase of the Contracts by the Depositor
--------------------
pursuant to Section 14.01.
Optional Termination Date: The Distribution Date fixed by the
--------------------------
Depositor for the repurchase of the Contracts pursuant to Article XIV.
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Pass-Through Rate: The annual rate of interest set forth on the face
------------------
of the Certificates. Any monthly remittance of interest at such rate shall be
based upon annual interest at such rate on the Principal Balance of the related
Contract divided by twelve.
[Performance Bond: The performance letter issued by __________, a
----------------
specimen of which is attached hereto as Exhibit ___.
Pool Insurance Policy: The policy of pool credit insurance, naming
----------------------
the Trustee as loss payee, a specimen of which is attached hereto as Exhibit ___
or any replacement policy therefor obtained pursuant to Section [3.13].
Repurchase Price: The price, calculated as set forth in Section
-----------------
14.01, to be paid by the Depositor in connection with the repurchase of the
Contracts pursuant to an Optional Termination.
Retained Yield: The percentage rate per annum of the Principal
---------------
Balance from time to time of each Contract that is retained by the Depositor and
payable out of each interest payment on a Contract, which percentage is set
forth in Article XI and in the Contract Schedule.
Single Certificate: A Certificate issued in a minimum Denomination of
------------------
$_________ as set forth in Section [11.04].
Special Hazard Insurance Policy: The policy of special hazard
--------------------------------
insurance, naming the Trustee as loss payee, a specimen of which is attached as
Exhibit ___ to this Agreement or any replacement policy obtained pursuant to
Section [3.14].
Special Hazard Insurer: The insurer named in Article XI or the named
-----------------------
insurer in any replacement policy obtained pursuant to Section [3.14].
Substitute Contract: A Contract substituted by the Depositor or the
--------------------
related Servicer for a Deleted Contract which must, on the date of such
substitution, (i) have an Outstanding Principal Balance, after deduction of the
principal portion of the monthly payment due in the month of substitution [or in
the case of a substitution of more than one Contract for a Deleted Contract, an
aggregate Outstanding Principal Balance], not in excess of the Outstanding
Principal Balance of the Deleted Contract [and not less than _____% of
Outstanding Principal Balance of the Deleted Contract] (the amount of any
shortage will be deposited by the Depositor or the Servicer in the Certificate
Account and distributed by the Master Servicer to Certificateholders in the
month of substitution); (ii) have an APR not less than the APR of the Deleted
Contract but not greater than ____% in excess of the APR of the Deleted
Contract; (iii) have a remaining term to maturity not greater than _____ years
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and not more than _____ years less than the remaining term of the Deleted
Contract; and (iv) comply with each representation and warranty set forth in
Section 2.04 or in the related Warranty and Servicing Agreement.
Trust Fund: The corpus of the trust created by this Agreement
-----------
consisting of (i) the Contracts described in the Contract Schedule, exclusive of
the Retained Yield, (ii) all distributions thereon payable after the Cut-off
Date, other than as provided herein, (iii) property that secured a Contract and
has been acquired by foreclosure or deed in lieu of foreclosure, (iv) amounts
remitted from time to time to the Master Servicer and held from time to time by
the Master Servicer in the Certificate Account, net of the amounts payable to
the Master Servicer, as provided in this Agreement, (v) the rights of the
Certificateholders in the Primary Credit Insurance Policies, the Pool Insurance
Policy, the Special Hazard Insurance Policy and any other insurance policies
with respect to the Contracts, (vi) the rights of the Certificateholders in the
Performance Bond and the proceeds thereof and (vii) the Depositor's rights under
the Warranty and Servicing Agreements with respect to the Contracts included in
the Trust Fund.
Voting Rights: The portion of the aggregate voting rights of all the
--------------
Certificates, evidenced by a Certificate, which is obtained by dividing the
Denomination of such Certificate by the aggregate Denominations of all of the
Certificates.
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS
SECTION 1.131. Certificate Account.
-------------------
The Master Servicer shall, prior to the Delivery Date, establish and
maintain, in the name of the Trustee on behalf of the Certificateholders, the
Certificate Account, into which the Master Servicer shall deposit not later than
each Distribution Date, the amounts specified in Section [3.08]. All
distributions to be made from time to time to the Certificateholders out of
funds in the Certificate Account shall be made by the Master Servicer.
SECTION 1.132. Distributions.
-------------
Subject to Sections [9.01 and 14.02] respecting the final
distribution, on each Distribution Date, the Master Servicer shall distribute
from the Certificate Account to each Certificateholder of record on the related
Record Date, the amount to be distributed to such Certificateholder pursuant to
the respective Certificate or Certificates held by such
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Certificateholder. Such distribution shall be made by check mailed on the
Distribution Date to the address of each Certificateholder appearing in the
Certificate Register, except that, with respect to any Holder eligible for wire
transfer, as provided in Section [11.15], distributions shall be made on the
Distribution Date by wire transfer in immediately available funds, provided that
such Certificateholder, not less than two Business Days prior to the related
Distribution Date, shall have furnished the Master Servicer with appropriate
wiring instructions. Distributions may also be made by such other means of
payment as to which each Certificateholder and the Master Servicer shall agree.
SECTION 13.03. Monthly Statements to
---------------------
Certificateholders.
------------------
Prior to or concurrently with each distribution from the Certificate
Account to the Certificateholders made on a Distribution Date, the Master
Servicer shall cause to be forwarded by mail to each Certificateholder and to
the Trustee a statement setting forth:
(i) the amount of such distribution representing principal on the
Contracts, separately identifying the aggregate amount of any Principal
Prepayments included therein, and the portion of such distribution, if any,
representing a Monthly Advance of principal;
(ii) the amount of such distribution representing interest on the
Contracts and the portion of such distribution, if any, representing a Monthly
Advance of interest;
(iii) the amount of servicing compensation received by the Servicers
and the Master Servicer with respect to the monthly period preceding the related
Distribution Date and such other customary information as the Master Servicer
deems necessary or desirable to enable Certificateholders to prepare their tax
returns;
(iv) the amount of Retained Yield and the Administrative Fee paid to
the Depositor;
(v) the aggregate Principal Balance of the Contracts on the Due Date
of the month of such distribution, after giving effect to payments on the
Contracts due on the Due Date and distributed to Certificateholders on the
Distribution Date;
(vi) the book value of any collateral acquired on behalf of
Certificateholders through Repossession or otherwise of any Manufactured Home;
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(vii) the number and aggregate Principal Balance of Contracts (1)
more than 30 days delinquent; (2) more than 60 days delinquent; and (3) in
foreclosure as of the close of business on a date not earlier than the Due Date;
and
(viii) the amount of coverage remaining under the Pool Insurance
Policy and the Special Hazard Insurance Policy after giving effect to any amount
with respect thereto distributed to Certificateholders on the Distribution Date.
In the case of information furnished pursuant to clauses (i) through
(iv) above, the amounts shall be expressed as a dollar amount per Single
Certificate.
Upon reasonable advance notice in writing, the Master Servicer shall
provide to each Certificateholder that is a savings and loan association, bank
or insurance company certain reports and access to information and documentation
regarding the Contracts sufficient to permit such Certificateholders to comply
with applicable regulations of the Federal Home Loan Bank Board or other
regulatory authorities with respect to their investment in the Certificates;
provided, however, that the Master Servicer shall be entitled to be reimbursed
- -------- -------
by such Certificateholders for the actual expenses incurred by the Master
Servicer in providing such reports and access.
Within a reasonable period of time after the end of each calendar
year, the Master Servicer shall cause to be furnished to each Person who at any
time during the calendar year was a Certificateholder, a statement containing
the information set forth in clauses (i) through (iv) of this Section 13.03
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder. Such obligation of the Master Servicer
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer pursuant to any
requirements of the Code as from time to time in effect.
ARTICLE XIV.
OPTIONAL TERMINATION
SECTION 14.04. Repurchase at the Option of
---------------------------
the [Depositor].
--------------
To the extent specified in Article XI, the Contracts included in the
Trust Fund shall be subject to repurchase at the option of the [Depositor] as
permitted herein on any Optional Termination Date at the Repurchase Price
specified herein.
-15-
<PAGE>
[The Repurchase Price for any such Optional Termination shall be equal
to the aggregate Principal Balance of the Contracts as of the date of
repurchase, together with accrued and unpaid interest thereon at the Pass-
Through Rate through the last day of the month of such repurchase, plus the
appraised value of any property acquired in respect thereof. The right of the
[Depositor] to repurchase the Contracts is conditioned on the [Depositor's]
having previously given notice of termination as required by Section 14.02]
SECTION 14.02. Procedure Upon Optional Termination.
-----------------------------------
(a) In case of any Optional Termination pursuant to Section 14.01, the
[Depositor] shall, at least 20 days prior to the date notice is to be mailed to
the Certificateholders (unless a shorter period shall be satisfactory to the
Master Servicer and the Trustee), notify the Master Servicer and the Trustee of
such Optional Termination Date, and of the Repurchase Price of the Contracts to
be repurchased.
(b) Any repurchase by the [Depositor] of the Contracts shall be made
on the Optional Termination Date by deposit of the Repurchase Price into the
Certificate Account on or before the Distribution Date on which such repurchase
is effected. Upon receipt by the Trustee of an Officers' Certificate of the
Master Servicer certifying as to the deposit of the Repurchase Price into the
Certificate Account, the Trustee and each co-trustee and separate trustee, if
any, then acting as such under this Agreement, shall, upon request of the
[Depositor] and at the expense of the [Depositor], execute and deliver all such
instruments of transfer or assignment, in each case without recourse, as shall
be reasonably requested by the [Depositor] to vest title in the Contracts so
repurchased to the [Depositor] and shall transfer or deliver or shall cause the
applicable Custodian to transfer or deliver to the [Depositor] or its designee
the repurchased Contracts. Any distributions on the Contracts received by the
Trustee or the Master Servicer subsequent to the Optional Termination Date shall
be promptly remitted by it to the [Depositor].
(c) Notice of any Optional Termination pursuant to the provisions of
this Article XIV, specifying the Distribution Date upon which the final
distribution shall be made, shall be given promptly by the Master Servicer by
first class mail to Holders of the Certificates mailed no earlier than the 15th
day and not later than the 10th day preceding the Optional Termination Date.
Such notice shall specify (A) the Distribution Date upon which final
distribution on the Certificates will the made upon presentation and surrender
of the Certificates at the office or agency of the Master Servicer therein
designated, (B) the amount of such final distribution and (C) that the Record
Date otherwise applicable to such Distribution Date is not applicable, such
distribution being made only upon presentation and surrender of
-16-
<PAGE>
the Certificates at the office or agency of the Master Servicer maintained for
such purposes (the address of which shall be set forth in such notice). The
Master Servicer shall give such notice to the Certificate Registrar at the time
such notice is given to Holders of the Certificates. Upon deposit in the
Certificate Account on the applicable Distribution Date of an amount equal to
the Repurchase Price pursuant to Section 14.01 and presentation and surrender of
the Certificates, the Master Servicer shall cause to be distributed to Holders
of Certificates an amount equal to the Repurchase Price. Payments received by
the Master Servicer with respect to the Contracts in excess of the Repurchase
Price, after giving effect to any amounts to be retained or distributed by it
pursuant to Section [3.12], shall be promptly remitted by the Master Servicer to
the [Depositor].
ARTICLE XV.
MISCELLANEOUS
SECTION 15.01. Standard Terms.
--------------
The Standard Terms attached hereto is hereby incorporated herein by
reference, to the extent specified herein, and hereby forms a part of this
instrument with the same force and effect as if set forth in full herein. In
the event that any term or provision contained herein shall conflict or be
inconsistent with any term or provision contained in the Standard Terms, the
terms and provisions of this Reference Agreement shall govern.
SECTION 15.02. Ratification of Standard Terms.
------------------------------
As incorporated by reference into this Reference Agreement, the
Standard Terms is in all respects ratified and confirmed, and the Standard Terms
and this Reference Agreement shall be read, taken and construed as one and the
same instrument.
SECTION 15.03. Amendment.
---------
In addition to the amendments permitted by Section 10.01, this
Agreement may be amended from time to time by the Depositor, the Master Servicer
and the Trustee with the consent of the Holders of Certificates evidencing, in
the aggregate, not less than 66% of the Voting Rights of all the Certificates
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Certificates; provided, however, that no
such amendment may, without the consent of the Holders of Certificates
evidencing 100% of the Voting Rights of the Certificates: (i) reduce in any
manner the amount of, delay the timing of or change the manner in
-17-
<PAGE>
which payments received on Contracts are required to be distributed with respect
to any Certificate, or (ii) reduce the aforesaid percentages of Certificates,
the Holders of which are required to consent to any such amendments.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
SECTION 15.04. Counterparts.
------------
For the purpose of facilitating the recordation of this Reference
Agreement as herein provided and for other purposes, this Reference Agreement
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
SECTION 15.05. Governing Law.
-------------
This Reference Agreement shall be construed in accordance with and
governed by the substantive laws of the [State of ____________________]
applicable to agreements made and to be performed in the [State of
_______________] and the obligations, rights and remedies of the parties hereto
and of the Certificateholders shall be determined in accordance with such laws.
SECTION 15.06. Recordation of Agreement.
------------------------
This Reference Agreement is subject to recordation in all appropriate
public offices for records in all the counties or other comparable jurisdictions
in which any or all of the Manufactured Homes are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the [Depositor] or upon
direction by the Trustee, but only upon direction by the Trustee accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Certificateholders.
-18-
<PAGE>
SECTION 15.07. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Reference Agreement or of the Certificates or the rights of the Holders thereof.
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
ASSET BACKED SECURITIES
CORPORATION,
as Depositor
By _______________________
[SEAL]
ATTEST:
[NAME OF TRUSTEE],
as Trustee
By _______________________
[SEAL]
ATTEST:
[NAME OF MASTER SERVICER],
as Master Servicer
By _______________________
[SEAL]
ATTEST:
-19-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __________ day of __________, 199__, before me personally
appeared ___________________, to me known, who being by me duly sworn, did
depose and say that he resides at ____________________, that he is the
________________ of Asset Backed Securities Corporation, one of the corporations
described in and which executed the above instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
________________________________
Notary Public
[NOTARIAL SEAL]
STATE OF __________ )
) ss.:
COUNTY OF ________ )
On this __________ day of __________, 199__, before me personally
appeared ___________________, to me known, who being by me duly sworn, did
depose and say that he resides at ____________________, that he is the
________________ of [ ], the [ ]
corporation described in and which executed the above instrument; that he knows
the seal of said banking corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said banking corporation; and that he signed his name thereto by
like order.
________________________________
Notary Public
[NOTARIAL SEAL]
-20-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __________ day of __________, 199__, before me personally
appeared ___________________, to me known, who being by me duly sworn, did
depose and say that he resides at ____________________, that he is the
________________ of [Name of Master Servicer], one of the corporations described
in and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
________________________________
Notary Public
[NOTARIAL SEAL]
-21-
<PAGE>
EXHIBIT A
[Form of Face of Certificate]
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS
SET FORTH HEREIN; ACCORDINGLY, THE UNPAID PRINCIPAL BALANCE OF THE CONTRACTS AT
ANY TIME MAY BE LESS THAN THE PRINCIPAL AMOUNT SET FORTH ON THIS CERTIFICATE.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR OF ANY OF ITS AFFILIATES EXCEPT AS SET FORTH HEREIN
AND IN THE AGREEMENT.
CONDUIT MANUFACTURED HOUSING CONTRACT PASS-THROUGH CERTIFICATES,
SERIES ____
_______% PASS-THROUGH RATE
evidencing an undivided interest in a trust fund consisting of certain
manufactured housing conditional sales contracts and installment sales
agreements transferred by
ASSET BACKED SECURITIES CORPORATION [The following information is
provided solely for purposes of applying federal income tax original issue
discount ("OID") rules to this instrument:
OID: ____%
ISSUE DATE: _____________, 199_
YIELD (ASSUMING NO PREPAYMENTS): ____%
SHORT ACCRUAL PERIOD YIELD COMPUTATION: EXACT
OID ALLOCABLE TO SHORT ACCRUAL PERIOD: ___%
CUSIP: ______________
ISSUE PRICE: ___________%]
Certificate No. ___________ $__________ DENOMINATION
First Distribution Final Scheduled
Date: _____, 199___ Distribution Date: __________, 199__
THIS CERTIFIES THAT ___________________ is the registered owner of the
pro rata undivided interest obtained by dividing the Denomination set forth
above by the aggregate Denominations of all the Certificates in the Trust Fund
referred to below consisting of certain manufactured housing conditional sales
contracts and installment sales agreements (the "Contracts") sold to the Trust
by Asset Backed Securities Corporation (the "Depositor"), exclusive of a portion
of the interest payable on each Contract the ownership of which has been
retained by the Depositor (the "Retained Yield"), and certain related property
transferred to the Trust by the Depositor. The Trust Fund was created pursuant
to the Standard Terms and Provisions of Pooling and Servicing, dated as of
__________, 199__ (the "Standard Terms") and the Reference Agreement, dated as
of __________, 199__ (the "Reference Agreement and, together
<PAGE>
with the Standard Terms, the "Agreement") each among the Depositor,
_________________________________, as master servicer (the "Master Servicer")
and __________________________, as trustee (the "Trustee," which term includes
any successor entity under the Agreement), a summary of certain of the pertinent
provisions of which is set forth hereinbelow. The aggregate Principal Balance of
the Contracts included in the Trust Fund as of __________, 199__ (the "Cut-off
Date"), exclusive of payments due on or before such date, was $__________. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Reference is hereby made to the further provisions of this Certificate
and the Agreement set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as trough fully set forth at this
place.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid or obligatory for any
purpose.
-2-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its corporate seal.
Date: [NAME OF TRUSTEE],
as Trustee
By:_________________________
[TITLE]
[SEAL]
ATTEST
____________________________
Authorized officer of
[Name of Trustee]
[Form of certificate of Authentication)
THIS is ONE OF THE CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED AGREEMENT
[________________________________]
REGISTRAR
By _____________________________
AUTHORIZED OFFICER
-3-
<PAGE>
(FORM OF REVERSE OF CERTIFICATE]
ASSET BACKED SECURITIES CORPORATION
CONDUIT MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATES, SERIES _____
_____% PASS-THROUGH RATE
This Certificate is one of a duly authorized issue of Certificates of
Asset Backed Securities Corporation designated as its Conduit Manufactured
Housing Contract Pass-Through Certificates, Series ___, ___% Pass-Through Rate
(the "Certificates") issued under and subject to the terms, provisions and
conditions of the Agreement. Reference is hereby made to the Agreement for a
statement of the respective rights thereunder of the Depositor, the Master
Servicer, the Trustee and the Holders of the Certificates and the terms upon
which the Certificates are authenticated and delivered. This Certificate
represents the undivided interest obtained by dividing the Denomination set
forth on the face hereof by the aggregate Denominations of all Certificates in
(i) the Contracts and the proceeds thereof payable after the Cut-off Date, net
of any amounts payable to the Depositor, the Master Servicer and the Servicers
in accordance with the provisions of the Agreement, (ii) the Certificate Account
and all amounts deposited therein pursuant to the applicable provisions of the
Agreement, net of the Retained Yield, the Administrative Fee and amounts payable
to the Servicers, the Master Servicer and the Depositor, as provided in the
Agreement, (iii) property acquired by repossession or otherwise with respect to
the Contracts and (iv) the interest of the Certificateholders in the [Pool
Insurance Policy, the Performance Bond, Special Hazard Insurance Policy,
Alternative Credit Support], and all proceeds thereof as provided in the
Agreement (such Contracts, funds, property and interests are herein collectively
called the "Trust Fund").
The Master Servicer shall distribute on the ___ day of each month, or,
if such _____ day is not a Business Day, the Business Day immediately following
such _____ day (the "Distribution Date"), commencing __________ _____, 199__, to
the Person in whose name this Certificate is registered at the close of business
on the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
undivided interest evidenced by this Certificate in the Trust Fund and the
aggregate of (i) all previously undistributed payments or other receipts on
account of principal (including Principal Prepayments, if any) and interest on
the Contracts, exclusive of the Retained Yield, subject at any time to the
Agreement, including any Liquidation Proceeds, received by the Master Servicer
after the Cut-off Date as set forth on the face hereof, or received on or prior
to the Cut-off Date but due thereafter, and prior to the Determination Date
except: (a) payments that were due and payable on or before
-4-
<PAGE>
the Cut-off Date; (b) Principal Prepayments and Liquidation Proceeds and all
proceeds of any Contracts or property acquired in respect thereof repurchased
pursuant to Sections 2.02, 2.04, 2.05 and 9.01 of the Agreement received during
the month of distribution and all related payments of interest representing
interest for the month of distribution or any portion thereof; (c) payments,
other than Principal Prepayments, that represent early receipt of scheduled
payments of principal and interest due on or after the first day of the month of
distribution; (d) late payments of principal or interest in respect of which
there are any unreimbursed Monthly Advances; (e) amounts representing
reimbursement for certain losses and expenses, all as described in the
Agreement; (f) that portion of each payment of interest on each Contract in
excess of interest at the Pass-Through Rate set forth above on the unpaid
principal balance of such Contract outstanding for the period for which such
payment was received; and (g) to the extent specified in the Agreement, that
portion of the Liquidation Proceeds of Contracts in excess of the unpaid
principal balances thereof and unpaid interest thereon; and (ii) the Monthly
Advance, if any, made by the Master Servicer for the related period. For the
purposes hereof, amounts received by the Master Servicer in connection with the
liquidation of Contracts through repossession, sale or otherwise shall be deemed
to be payments on account of principal of Contacts.
Distributions on this Certificate will be made by the Master Servicer
by check mailed to the address of the Holder hereof entitled thereto at the
address appearing in the Certificate Register or, if eligible for wire transfer
as set forth in Section [11.15] of the Agreement, by wire transfer in
immediately available funds or by such other means of payment as the Holder
hereof and the Master Servicer shall agree upon. Except as otherwise provided in
the Agreement, the final distribution on this Certificate will be made, in the
applicable manner described above, after due notice by the Master Servicer of
the pendency of such final distribution and only upon presentation and surrender
of this Certificate at the office or agency designated in such notice.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account may be made by the Master Servicer from time to time for
purposes other than distributions to the Certificateholders, such purposes
including payment of the Retained Yield and Administrative Fee to the Depositor
and reimbursement to the Master Servicer of Monthly Advances and of certain
expenses incurred by it.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Master Servicer, the Depositor and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
-5-
<PAGE>
evidencing Voting Rights aggregating not less than 66% of the Voting Rights of
all the Certificates; provided, however, that no such amendment may, without the
consent of the Holders of all Certificates then outstanding, (i) reduce in any
manner the amount of, delay the timing of or change the manner in which payments
received on Contracts are required to be distributed in respect of any
Certificate, or (ii) reduce the aforesaid percentages of Certificates, the
Holders of which are required to consent to any such amendments. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the Master Servicer, the Depositor and the Trustee to
amend certain terms and conditions set forth in the Agreement without the
consent of Holders of the Certificates issued thereunder.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register maintained by the Trustee upon surrender of this
Certificate for registration of transfer at the office or agency maintained for
that purpose by the Trustee in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in a form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denomina tions and for the same aggregate Denomination and undivided interest
will be issued to the designated transferee or transferees.
The Certificates are issuable only in registered form in minimum
Denominations of $_______, and integral multiples of $____ in excess thereof,
and one Certificate may be issued in such Denomination as may be necessary to
represent the remainder of the aggregate Principal Balance of the Contracts on
the Cut-off Date. As provided in the Agreement and subject to certain
limitations therein set forth, this Certificate is exchangeable for one or more
new Certificates of authorized Denominations evidencing a like aggregate
undivided interest, as requested by the Holder surrendering the same.
No service charge will be made for such registrations, transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Master
Servicer, the Certificate Registrar and the Trustee and any agent of the Master
Servicer, the Certificate Registrar or the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Master Servicer, the Certificate Registrar nor the Trustee nor any
such agent thereof shall be affected by notice to the contrary.
-6-
<PAGE>
The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligation of the Master Servicer to provide for
payments to Certificateholders pursuant to the Agreement) shall terminate upon
the earlier of (a) the repurchase by the [Depositor] from the Trust Fund of all
Contracts remaining In the Trust Fund and all property acquired with respect
thereto and (b) the later of (i) the maturity or other liquidation of the last
Contract subject thereto and the disposition of all property acquired upon
repossession and (ii) the distribution to Certificateholders of all amounts in
the Certificate Account required to be distributed to them pursuant to the
Agreement. Any such purchase by the [Depositor] will be made at a price equal
to the aggregate outstanding Principal Balance of the Contracts as of the date
of repurchase, together with accrued and unpaid interest thereon at the Pass-
Through Rate to the last day of the month of such repurchase, plus the appraised
value of any property acquired in respect thereof. The Agreement permits, but
does not require, the [Depositor] to make such purchase on any Distribution
Date, subject to the condition that the aggregate Principal Balance of the
Contracts at the time of purchase is less than __% of the aggregate Principal
Balance of the Contracts on the Cut-off Date. The exercise of such right will
effect early retirement of the Certificates.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
-7-
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name and address, including postal zip code, or
assignee)
the undivided interest in the Trust Fund evidenced by the within Certificate and
hereby authorize(s) the transfer of registration of such interest to the
assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of a like
Denomination and undivided interest in the Trust Fund to the above names
assignee and to deliver such Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________
Dated: _________
Social Security or _________________________________
other Tax Identifi- Signature by or on behalf of assignor
cation No. of Assignee: (signature must be signed as registered)
_________________________ ______________________________
Signature Guaranteed
-8-
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer;
Distribution shall be made by the wire transfer in immediately
available funds to ___________________________________________________________
______________________________________________________________________________
the account of _____________________________________, account number
______________________, or, if mailed by check, to ________________. This
information is provided by the assignee named above, or its agent.
-9-
<PAGE>
Schedule I
CONTRACT SCHEDULE
[Each Contract shall be identified by loan number, address of the
Manufactured Home and name of the Obligor. The following details shall be set
forth as to each Contract: (i) the Principal Balance at the time of its
origination, (ii) the adjusted Principal Balance as of the Cut-off Date, (iii)
the APR, (iv) the scheduled monthly payment of principal and interest, (v) the
first payment date, (vi) the original term, (vii) the Contract Loan-to-Value
Ratio at origination and (viii) the Retained Yield.]
<PAGE>
EXHIBIT 4.3.3
VERSION B
---------
================================================================================
ASSET BACKED SECURITIES CORPORATION
Depositor
[NAME OF MASTER SERVICER]
Master Servicer
and
[NAME OF TRUSTEE]
Trustee
__________________________________
REFERENCE AGREEMENT
incorporating by reference
STANDARD TERMS AND CONDITIONS
OF POOLING AND SERVICING
Dated as of , 199__
__________________________________
Class A and Class B
Conduit Manufactured Housing Contract
Pass-Through Certificates, Series ___
$_____ Class A[-1
$_____ Class A-2]
$_____ Class B
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE XI.
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
Section 11.01. Designation............................... 2
Section 11.02. Conveyance of Trust Fund; Issuance of
Certificates.............................. 2
Section 11.03. Delivery of Documents..................... 3
Section 11.04. Denominations............................. 6
Section 11.05. Principal Balance......................... 6
Section 11.06. Distributions on the Certificates......... 6
Section 11.07. Place and Notice for Final Distribution
on Certificates........................... 7
Section 11.08. Pass-Through Rate......................... 7
Section 11.09. Distribution Dates........................ 7
Section 11.10. Record Dates.............................. 7
Section 11.11. Contracts................................. 7
Section 11.12. Forms Generally........................... 7
[Section 11.13. Termination at Option of the Depositor.... 8
Section 11.14. Substitution.............................. 8
Section 11.15. Wire Transfer Eligibility................. 8
Section 11.16. Required Rating........................... 8
[Section 11.17. REMIC Treatment........................... 8
Section 11.18. Performance Bond.......................... 8
Section 11.19. Warranty and Servicing Agreements......... 9
Section 11.20. Custodial Agreements...................... 9
Section 11.21. Retained Yield; Administrative Fee;
Servicing Compensation.................... 9
Section 11.22. Cut-off Date.............................. 9
Section 11.23. Certificate Registrar..................... 9
Section 11.24. Authenticating Agent...................... 9
Section 11.25. Paying Agent.............................. 9
[Section 11.26. Limited Guarantor......................... 9
Section 11.27. Limited Guarantee and Guarantee Amount.... 10
Section 11.28. Limited Guarantee Fee..................... 10
Section 11.29. Applicability of Certain Provisions of
Standard Terms............................ 10
ARTICLE XII.
DEFINITIONS
APR................................................. 10
Administrative Fee.................................. 10
(i)
<PAGE>
Aggregate Losses.................................... 10
Agreement........................................... 11
Authenticating Agent................................ 11
Certificate......................................... 11
Certificate Registrar............................... 11
Certificateholder................................... 11
Class A Certificate................................. 11
Class A-1 Certificate............................... 11
Class A-2 Certificate............................... 11
Class B Certificate................................. 11
Contracts........................................... 11
Contract Schedule................................... 11
Deleted Contract.................................... 11
Denomination........................................ 11
Distribution Date................................... 12
Due Date............................................ 12
Notional Amount......................................12
Optional Termination................................ 12
Optional Termination Date........................... 12
Percentage Interest................................. 12
Performance Bond.................................... 12
Repurchase Price.................................... 12
Required Distribution............................... 12
Required Reserve.................................... 12
Reserve Fund........................................ 13
Retained Yield...................................... 13
Senior Interest..................................... 13
Single Certificate.................................. 13
Subordinated Amount................................. 13
Substitute Contract................................. 14
Trust Fund...........................................15
Undivided Interest.................................. 15
Voting Rights....................................... 15
Whole Class A Certificate........................... 15
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS;
RESERVE FUND
Section 13.01. Certificate Account....................... 16
Section 13.02. Distributions............................. 16
Section 13.03. Subordination; Reserve Fund; Priority of
Distribution.............................. 16
Section 13.04. Monthly Statements to
Certificateholders........................ 20
Section 13.05. Statements to Class B
Certificateholders........................ 21
(ii)
<PAGE>
ARTICLE XIV.
OPTIONAL TERMINATION
Section 14.01. Repurchase at the Option of the
[Depositor]............................... 22
Section 14.02. Procedure Upon Optional Termination....... 23
ARTICLE XV.
MISCELLANEOUS
Section 15.01. Standard Terms........................... 24
Section 15.02. Ratification of Standard Terms........... 24
Section 15.03. Amendment................................ 24
Section 15.04. Whole Class A Certificates............... 25
Section 15.05. Counterparts............................. 25
Section 15.06. Governing Law............................ 25
Section 15.07. Recordation of Agreement................. 26
Section 15.08. Severability of Provisions............... 26
Exhibits
Form of Class A Certificate..............................A-1
Form of Class B Certificate..............................B-1
(iii)
<PAGE>
REFERENCE AGREEMENT, dated as of _______ 199__, by and among ASSET
BACKED SECURITIES CORPORATION, a Delaware corporation, as depositor (the
"Depositor"), [____________________], a [_______________] corporation, as master
servicer (the "Master Servicer"), and [________________________], a
______________ corporation, as trustee, (together with its successors in trust
thereunder as provided in the Agreement referred to below, the "Trustee").
PRELIMINARY STATEMENT
The Depositor has duly authorized the execution and delivery of this
Reference Agreement and the incorporation, to the extent permitted herein, of
the Standard Terms and Provisions of Pooling and Servicing (the "Standard
Terms") attached hereto to provide for the issuance of its Conduit Manufactured
Housing Contract Pass-Through Certificates, Series ____ issued as provided
herein and delivered by the Trustee to the Depositor as provided hereunder. The
Reference Agreement, incorporating the Standard Terms, is sometimes referred to
herein as the Agreement. All references herein to Sections or Articles of the
Agreement shall be construed to mean Sections or Articles of this Reference
Agreement or of the Standard Terms as the Section numbers and context may
require and capitalized terms used herein shall have the meanings ascribed to
them in the Standard Terms or the Reference Agreement. The Depositor is the
owner of the Contracts (as hereinafter defined) and the other property being
conveyed by it to the Trustee as part of the Trust Fund (as hereinafter defined)
and has duly authorized the execution and delivery of this Agreement to provide
for the conveyance to the Trustee of the Trust Fund. [By the execution and
delivery of this Agreement, the Depositor has agreed that it will elect to treat
the Trust Fund as, and that the affairs of the Trust Fund shall be conducted so
as to qualify as, a "real estate mortgage investment conduit" ("REMIC") pursuant
to Section 860D of the Code.] All covenants and agreements made by the
Depositor herein and in the Standard Terms are for the benefit and security of
the Certificateholders. The Depositor is entering into this Reference Agreement
and the Standard Terms, and the Trustee is accepting the trusts created hereby
and thereby, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged.
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
<PAGE>
ARTICLE XI.
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
Section 11.01. Designation.
-----------
The Certificates shall be designated generally as the Conduit
Manufactured Housing Contract Pass-Through Certificates, Series _______.
Section 11.02. Conveyance of Trust Fund;
-------------------------
Issuance of Certificates.
------------------------
In exchange for the Certificates, the Depositor hereby delivers to the
Trustee, without recourse, for the benefit of all present and future Holders of
the Certificates, all of the Depositor's right, title and interest (other than
with respect to any Retained Yield specified in Section 11.21) in and to (a) the
Contracts listed in Schedule I to this Agreement, which the Depositor causes to
be delivered to the Trustee, together with the Contract Files relating to the
Contracts and the other property in respect of such Contracts, as specified in
Section 2.01, and the proceeds thereof payable after the Cut-off Date, net of
any amounts payable to the Servicers, the Master Servicer and the Depositor in
accordance with the provisions of the Standard Terms, (b) the Insurance
Policies, if any, relating to the Contracts, (c) property that secured a
Contract and that has been acquired by Repossession, (d) [the Depositor's rights
under the Warranty and Servicing Agreements with respect to the Contracts, (e)]
the Certificate Account and all amounts deposited therein pursuant to the
applicable provisions of the Agreement, net of amounts payable to the Servicers,
the Master Servicer and the Depositor, as provided in Sections 3.18 and 3.19 and
net of any Retained Yield and Administrative Fee payable to the Depositor, as
specified in Sections 3.19 and 11.21 (f) [the Performance Bond and the proceeds
thereof, as provided in Section 3.17, and (g)] all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquid
property.
The Trustee acknowledges the transfer and assignment to it of the
Contracts and the delivery of the Contract Files to it (or, with respect to the
Contracts subject to a Custodial Agreement, to the respective Custodian on its
behalf) and the other property included in the Trust Fund, all to the extent
provided above and in Section 2.01, and, concurrently with such delivery, has
delivered to or upon the order of the Depositor, in exchange for the Contracts,
Certificates duly authenticated and duly executed by the Trustee in authorized
denominations evidencing the entire ownership of the Trust Fund. The Trustee
agrees to hold the Trust Fund and exercise the rights referred to
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<PAGE>
above for the benefit of all present and future Holders of the Certificates and
to perform the duties set forth herein and in the Standard Terms to the best of
its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.
Section 11.03. Delivery of Documents.
---------------------
In connection with the foregoing conveyance, the creation of the Trust
Fund and the issuance of the Certificates pursuant to Section 11.02 and 2.01,
the Depositor hereby delivers to and/or deposits with the Trustee the following
documents, instruments and property related to the Certificates:
(1) Opinion of Counsel. Opinion(s) of Counsel (in which such counsel
------------------
is entitled to rely upon certificates, opinions or representations as to matters
of fact by Authorized Officers of the Depositor or the Trustee and governmental
officials and, as to matters involving the laws of any state other than the
state in which such counsel is admitted to practice, upon an Opinion of Counsel
satisfactory to the Trustee) addressed to the Trustee to the effect that:
(a) the Depositor has been duly incorporated and is validly existing
as corporation in good standing under the laws of the State of Delaware,
with corporate power to own its properties, to conduct its business as now
conducted by it and to enter into and perform its obligations under this
Agreement;
(b) assuming due execution and delivery thereof by the Trustee, this
Agreement, as executed and delivered by the Depositor, is the valid, legal
and binding obligation of the Depositor, enforceable in accordance with its
terms, subject to bankruptcy, reorganization, insolvency and other laws
affecting the enforcement of creditors' rights generally and to general
principles of equity;
(c) the Certificates, assuming that they have been duly and validly
authorized, executed, delivered and issued by the Trustee, will, when
authenticated by the Certificate Registrar pursuant to this Agreement and
delivered to or upon the order of the Depositor, be valid, legal and binding
instruments, entitled to the benefits of this Agreement;
(d) immediately prior to the conveyance thereof to the Trustee, the
Depositor had corporate power and authority to convey the Contracts and
other property included in the Trust Fund to the Trustee pursuant to this
Agreement;
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<PAGE>
(e) such action has been taken with respect to delivery of possession
of the Contracts and other property included in the Trust Fund on the
Delivery Date and with respect to the execution and delivery of all
requisite documents as is necessary to make effective the conveyance of such
property to the Trustee, with either the details of such action recited
therein, or the absence of any such action being necessary to make such
conveyance effective stated therein;
(f) the Depositor has effectively conveyed to the Trustee all of its
right, title and interest in and to the Contracts and other property
included in the Trust Fund on the Delivery Date;
(g) this Agreement is not required to be qualified under the Trust
Indenture Act of 1939; the Trust Fund created by this Agreement is not
required to be registered under the Investment Company Act of 1940, as
amended; the Registration Statement is effective under the Securities Act of
1933, as amended (the "Securities Act"), and to the best of such counsel's
knowledge, no stop order suspending such effectiveness has been issued;
(h) no consent, approval, authorization or order of any state or
federal court or governmental agency or body is required for the
consummation by the Depositor of the transactions contemplated herein,
except such as may be required under the blue sky laws of any jurisdiction
in connection with the acquisition of Certificates and such other approvals
as have been obtained; and
(i) the issue and sale of the Certificates and the fulfillment of the
terms of this Agreement will not conflict with or result in a breach or
violation of, any term or provision of, or constitute a default under, the
certificate of incorporation or by-laws of the Depositor, or, to the
knowledge of such counsel, any indenture or other agreement or instrument to
which the Depositor is a party or by which it is bound, or any statute or
regulation applicable to the Depositor or, to the knowledge or such counsel,
any order of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Depositor.
(2) The Contracts. The Contracts included in the Trust Fund, in the
-------------
manner specified in Section 2.01.
(3) Performance Bond. The Performance Bond as specified in
----------------
Section 2.01.
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<PAGE>
(4) Officers' Certificate of Issuer of the Performance Bond. An
-------------------------------------------------------
Officers' Certificate of the issuer of the Performance Bond to the effect that
the Performance Bond is in full force and effect with respect to the obligations
of the Master Servicer under this Agreement.
(5) Opinion of Counsel for the Issuer of the Performance Bond. An
---------------------------------------------------------
Opinion of Counsel for the issuer of the Performance Bond (the "issuer") dated
the Delivery Date, to the effect that:
(a) the issuer is duly organized, validly existing under the laws of
the state of its incorporation, is duly qualified to do business in all
jurisdictions where the nature of its operations as contemplated by the
Performance Bond issued by such issuer legally requires such qualification,
and has the power and authority (corporate and other) to issue, and to take
all action required of it under, such Performance Bond;
(b) the execution, delivery and performance by the issuer of the
Performance Bond issued by such issuer has been duly authorized by all
necessary corporate action on the part of the issuer, and under present law
does not and will not contravene any law or governmental regulation or order
presently binding on the issuer or the charter or the by-laws of the issuer
or contravene any provision of or constitute a default under any indenture,
contract or other instrument to which the issuer is a party or by which the
issuer is bound;
(c) the execution, delivery and performance by the issuer of the
Performance Bond issued by such issuer does not require the consent or
approval of, the giving of notice to, the registration with, or the taking
of any other action in respect of, any federal, state or other governmental
agency or authority that has not previously been effected; and
(d) the Performance Bond issued by such issuer has been duly issued
and constitutes a legal, valid and binding agreement of the issuer,
enforceable against the issuer in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity.
(7) Opinion of Counsel to the Master Servicer. An Opinion of Counsel
-----------------------------------------
to the Master Servicer, dated not later than the Delivery Date, to the effect
that:
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<PAGE>
(a) the Master Servicer is a duly organized and validly existing
corporation in good standing under the laws of the State of ___________; the
Master Servicer is duly qualified to do business as a foreign corporation in
and is in good standing under the laws of each jurisdiction where the nature
of its operations contemplated by this Agreement requires such
qualification;
(b) the Master Servicer has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated thereby;
the execution, deliver and performance of this Agreement have been duly
authorized by all requisite corporate action on the part of the Master
Servicer and (i) do not conflict with or result in, or will not conflict
with or result in a breach of the [certificate] [articles] of incorporation
or by-laws of the Master Servicer, or to such counsel's knowledge, any of
the provisions of any indenture, mortgage, contract or other instrument to
which the Master Servicer is a party or by which it is bound or (ii) do not
result in the creation or imposition of any lien, charge or encumbrance upon
any of its property pursuant to the terms of any such indenture, mortgage,
contract or other instruments; and
(c) this Agreement constitutes a legal, valid and binding agreement of
the Master Servicer, enforceable against the Master Servicer in accordance
with its terms, subject, as to enforceability, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and to principles of equity.
Section 11.04. Denominations.
-------------
The Certificates will be issued in fully registered form in minimum
Denominations of $_______________ and integral multiples thereof [and one
Certificate may be issued in such Denomination as may be necessary to represent
the remainder of the Principal Balance of the Contracts on the Cut-off Date.]
Section 11.05. Principal Balance.
-----------------
The Principal Balance of the Contracts on the Cut-off Date, exclusive
of principal payments due and payable on or before such date, is $_____.
Section 11.06. Distributions on the Certificates.
---------------------------------
On each Distribution Date, the Master Servicer shall make
distributions to the Certificateholders in the amounts and in the manner
specified in Section 13.02 and in the forms of the Certificates.
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<PAGE>
Section 11.07. Place and Notice for Final Distribution on
------------------------------------------
Certificates.
------------
(a) The final distribution made on each Certificate on any
Distribution Date shall be distributable upon presentation and surrender thereof
at the office or agency of the Trustee maintained for such purpose in the
Borough of Manhattan, City and State of New York pursuant to Section 5.02.
(b) Notice of final distribution on any Certificate on any
Distribution Date or Optional Termination Date shall be mailed no later than the
tenth day prior to the applicable Distribution Date or Optional Termination
Date.
Section 1.118. Pass-Through Rate.
-----------------
The Pass-Through Rate is _____%.
Section 11.09. Distribution Dates.
------------------
The Distribution Dates for the Certificates are the _______ day of
each month, or, if such day is not a Business Day, the next succeeding Business
Day, commencing __________ ___, 199__.
Section 11.10. Record Dates.
------------
The Record Date for each Distribution Date will be the close of
business on the last day of the month preceding the month in which the
applicable Distribution Date occurs, or if such day is not a Business Day, the
next preceding Business Day.
Section 11.11. Contracts.
---------
The Contracts transferred and assigned to the Trustee by the Depositor
are the Contracts identified in the Contracts Schedule attached hereto as
Schedule I.
Section 11.12. Forms Generally.
---------------
The Class A[, Class A-1, Class A-2] and Class B Certificates and the
Certificate Registrar's certificate of authentication shall be in substantially
the forms set forth as Exhibits A[, A-1, A-2] and B hereto, respectively, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Agreement or as may, in the judgment of the
Master Servicer, the Trustee or the Depositor be necessary, appropriate or
convenient to comply, or facilitate compliance, with applicable laws, and may
have such letters,numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange on which any of the
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<PAGE>
Certificates may be listed, or as may, consistently herewith, be determined by
the officers executing such Certificates, as evidenced by their execution
thereof.
The definitive Certificates shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which any of the
Certificates may be listed, all as determined by the officers executing such
Certificates, as evidenced by their execution thereof.
[Section 11.13. Termination at Option of the Depositor.
--------------------------------------
The Depositor may, at its option, repurchase from the Trust Fund all
Contracts remaining outstanding on any Distribution Date on or after the date on
which the Principal Balance of such Contracts is less than ____% of the
Principal Balance of the Certificates on the Cut-off Date, in the manner and at
the Repurchase Price [provided in Article XIV].]
Section 11.14. Substitution.
------------
The Depositor or the Servicer of a Contract may substitute for such
Contract a Substitute Contract or Contracts pursuant to Section 2.02, 2.04 or
2.08, which substitution shall be accomplished within [three months] of the
Closing Date and in the manner and subject to the conditions set forth in
Section 2.07. [Any funds deposited in the Certificate Account pursuant to such
substitution shall not exceed 1/2 of 1% of the Principal Balance of the
Contracts, after giving effect to such substitution.]
Section 11.15. Wire Transfer Eligibility.
-------------------------
The minimum Denomination eligible for wire transfer on each
Distribution Date is $___________.
Section 11.16. Required Rating.
---------------
The Certificates shall have been rated "_____" by
________________________.
[Section 11.17. REMIC Treatment.
---------------
The provisions of this Agreement shall be construed so as to carry out
the intention of the parties that the Trust Fund be treated as a REMIC at all
times until the Certificates are retired and this Agreement is terminated
pursuant to Article IX or Article XIV.]
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<PAGE>
Section 11.18. Performance Bond.
----------------
A specimen of the Performance Bond is attached hereto as Exhibit [ ].
The Performance Bond has been issued by __ __________, a _________ corporation.
Section 11.19. Warranty and Servicing Agreements.
---------------------------------
The Warranty and Servicing Agreements with respect to the Contracts
included in the Trust Fund are listed on Schedule [ ] hereto.
Section 11.20. Custodial Agreements.
--------------------
The Custodial Agreements with respect to the Contracts included in
the Trust Fund are listed on Schedule [ ] hereto.
Section 11.21. Retained Yield; Administrative Fee;
-----------------------------------
Servicing Compensation.
- ----------------------
On each Distribution Date, the Master Servicer shall remit to the
Depositor, by wire transfer of immediately available funds, from payments of
interest and other collections with respect to interest on the Contracts
deposited in the Certificate Account a Retained Yield equal to __% of the
Principal Balance of each Contract and an Administrative Fee equal to __% of the
Principal Balance of each Contract as provided in Section 3.19. The Master
Servicer shall be entitled to retain an amount in respect of each interest
payment on a Contract equal to the excess of each interest payment on such
Contract over the sum of (i) the Retained Yield, (ii) the Administrative Fee and
(iii) the Pass-Through Rate as provided in Section 3.19, and such other amounts
as provided in accordance with the provisions of the Standard Terms.
Section 11.22. Cut-off Date.
------------
The Cut-off Date is _______, 199 .
Section 11.23. Certificate Registrar.
---------------------
The Certificate Registrar is the Trustee.
Section 11.24. Authenticating Agent.
--------------------
The Authenticating Agent is the Trustee.
Section 11.25. Paying Agent.
------------
The Paying Agent is the Master Servicer.
[Section 11.26. Limited Guarantor.
-----------------
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<PAGE>
The Limited Guarantor is ____________.
Section 11.27. Limited Guarantee and Guarantee Amount.
--------------------------------------
[Relevant description and amounts to be provided.]
Section 11.28. Limited Guarantee Fee.
---------------------
The Limited Guarantee Fee is ________________.]
[ Section 11.29. Applicability of Certain Provisions of Standard
-----------------------------------------------
Terms.
- -----
The provisions of Sections 2.03(b), 3.13 with respect to the Pool
Insurance Policy, 3.14 with respect to the Special Hazard Insurance Policy, 3.23
and 3.24 of the Standard Terms shall not apply to the Certificates.]
ARTICLE XII.
DEFINITIONS
Article One of the Standard Terms provides that the meaning of certain defined
terms used in this Agreement shall, when applied to a particular Series of
Certificates, be as defined herein. With respect to the Certificates, the
following definitions shall apply:
APR: The annualized percentage rate of interest on a Contract.
----
Administrative Fee: The percentage rate per annum of the Principal
-------------------
Balance from time to time of each Contract that is payable to the Depositor out
of each interest payment on a Contract as compensation for the performance of
duties related to the administration of the Trust Fund, which percentage is set
forth in Article XI.
Aggregate Losses: For any given period, the aggregate amount of
----------------
delinquencies, losses and other deficiencies in the amount due to the Class A
Certificateholders paid or borne by the Class B Certificateholders ("payment
deficiencies") during such period, whether by way of withdrawal from the Reserve
Fund, reduction in amounts otherwise distributable to the Class B
Certificateholders on any Distribution Date or otherwise, less the aggregate
----
amount of previous payment deficiencies recovered by the Trust Fund during such
period in respect of the Contracts giving rise to previous payment deficiencies,
including without limitation such recoveries resulting from the receipt of
delinquent principal and/or interest payments, Liquidation Proceeds and
insurance proceeds (net, in each case, of the Retained Yield, unpaid Servicing
Fees, foreclosure costs and
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<PAGE>
other servicing costs, expenses and advances relating to such Contracts).
Agreement: The Standard Terms and Provisions of Pooling and
---------
Servicing together with this Reference Agreement, and all amendments and
supplements hereto.
Authenticating Agent: The authenticating agent specified in Section
---------------------
11.24.
Certificate: Any one of the Class A Certificates, [Class A-1
------------
Certificates, Class A-2 Certificates,] or the Class B Certificates executed by
or on behalf of the Depositor and authenticated by or on behalf of the Trustee
in substantially the forms set forth in Exhibits A[, A-1, A-2] and B hereto,
respectively.
Certificate Registrar: The registrar appointed and identified in
----------------------
Section 11.23.
Certificateholder: The registered holder of a Certificate.
------------------
Class A Certificate: Any one of the Class A-[1 Certificates, Class
-------------------
A-2 Certificates] or Whole Class A Certificates.
[Class A-1 Certificate: A Certificate designated as a Class A-1
---------------------
Certificate in substantially the form set forth as Exhibit A-1 hereto.
Class A-2 Certificate: A Certificate designated as a Class A-2
---------------------
Certificate in substantially the form set forth as Exhibit A-2 hereto.]
Class B Certificate: A Certificate designated as a Class B
-------------------
Certificate in substantially the form set forth as Exhibit B hereto.
Contracts: The Contracts listed on the Contract Schedule attached
---------
hereto.
Contract Schedule: The list of Contracts transferred on the Delivery
-----------------
Date to the Trustee as part of the Trust Fund for the Certificates, which list
is attached hereto as Schedule I.
Deleted Contract: A Contract replaced or to be replaced by a
----------------
Substitute Contract.
Delivery Date: _______________, 199 .
-------------
Denomination: For each Certificate, the amount designated as such on
------------
the face thereof; the aggregate of the
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denominations of the Class A[-1] Certificates and Class B Certificates being
equal to the aggregate Principal Balances of the Contracts on the Cut-off Date,
exclusive of principal payments due and payable on or before such date. [The
Denominations of the Class A-2 Certificates shall be their Notional Amounts; the
aggregate Notional Amount for the Class A-2 Certificates for any month will be
equal to the aggregate unpaid principal amount of the Class A-1 Certificates.]
Distribution Date: The ___ day of each month, or if such day is not
-----------------
a Business Day, the Business Day immediately following such day, commencing
_______, 199 .
Due Date: The first day of the month in which the related
--------
Distribution Date occurs.
[Notional Amount: With respect to the Class A-2 Certificates, their
---------------
Denominations. The Notional Amount is used solely for the purpose of
determining interest payments and certain other rights of the Class A-2
Certificateholders, and will be equal to the aggregate unpaid principal amount
on the Class A Certificates as of the date of determination. The original
Notional Amount of a Class A-2 Certificate will be set forth in the form of such
Certificate. The Notional Amount does not represent any interest in principal
payments on the Contracts.]
Optional Termination: The repurchase of the Contracts by the
--------------------
Depositor pursuant to Section 14.01.
Optional Termination Date: The Distribution Date fixed by the
-------------------------
Depositor for the repurchase of the Contracts pursuant to Article XIV.
Percentage Interest: With respect to a Class A[-1 or Class A-2
-------------------
Certificate], the undivided percentage interest obtained by dividing the
Denomination of such Certificate by the aggregate Denominations of all
Certificates of the related Class.
Performance Bond: The performance letter issued by [ ], a specimen
----------------
of which is attached hereto as Exhibit [ ].
Repurchase Price: The price, calculated as set forth in Section
-----------------
14.01, to be paid by the Depositor in connection with the repurchase of the
Contracts pursuant to an Optional Termination.
Required Distribution: With respect to the Class A Certificates, the
----------------------
amount described as the "Required Distribution" in the form of Class A
Certificate.
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<PAGE>
Required Reserve: That amount that, together with the then
-----------------
outstanding aggregate principal amount of the Class B Certificates, equals the
Subordinated Amount at the time of determination.
Notwithstanding the foregoing, the Required Reserve may be reduced
from time to time to such amount as shall be approved by the Rating Agencies in
letters delivered by the Master Servicer to the Trustee and as shall not result
in a lowering or withdrawal of the current ratings on the Class A Certificates.
Reserve Fund: The fund established and maintained pursuant to
------------
Section 13.03 hereof.
Retained Yield: The percentage rate per annum of the principal
--------------
balance from time to time of each Contract that is retained by the Depositor and
payable out of each interest payment on a Contract, which percentage is set
forth in Article XI and in the Contract Schedule.
Senior Interest: The aggregate undivided interest in the Contracts
---------------
evidenced by all Class A Certificates.
Single Certificate: A Certificate issued in a minimum Denomination
------------------
of $______.
Subordinated Amount: As of any Determination Date, the Subordinated
-------------------
Amount shall be the Subordinated Amount as of the preceding ______, minus
additions to Aggregate Losses since such date through the last day of the month
preceding such Determination Date and plus the recovery of prior Aggregate
Losses for the same period.
The Subordinated Amount on each respective _____ for purposes of the
preceding clause shall be:
(i) on the Cut-off Date and on each anniversary of the Cut-off
Date until ________, __% of the initial aggregate Principal Balance of the
Contracts on the Cut-off Date minus Aggregate Losses since the Cut-off Date
through the last day of the month preceding such anniversary date;
(ii) on ______, the lesser of (A) the Subordinated Amount as
of the preceding Determination Date, and (B) the sum of (x) __% of the aggregate
unpaid Principal Balance of the Contracts outstanding at the close of business
on ______, and (y) __% of the amount, if any, by which the amount set forth
under (A) exceeds the amount computed under (x);
(iii) on _______, the lesser of (A) the Subordinated Amount as
of the preceding Determination Date, and (B) the sum of (x) ___% of the
aggregate unpaid Principal Balance
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<PAGE>
of the Contracts outstanding at the close of business on _______, and (y) __% of
the amount, if any, by which the amount set forth under (A) exceeds the amount
computed under (x);
(iv) on ________, the lesser of (A) the Subordinated Amount as
of the preceding Determination Date, and (B) the sum of (x) __% of the aggregate
unpaid Principal Balance of the Contracts outstanding at the close of business
on ________, and (y) __% of the amount, if any, by which the amount set forth
under (A) exceeds the amount computed under (x);
(v) on _______, the lesser of (A) the Subordinated Amount as
of the preceding Determination Date, and (B) the sum of (x) __% of the aggregate
unpaid Principal Balance of the Contracts outstanding at the close of business
on _______, and (y) __% of the amount, if any, by which the amount set forth
under (A) exceeds the amount computed under (x); and
(vi) on _______, and on each _______ thereafter, the lesser of
(A) the applicable Subordinated Amount on the preceding _____ minus Aggregate
Losses since such preceding _____ through the preceding ______, and (B) __% of
the aggregate unpaid Principal Balance of the Contracts at the close of business
on such current ______;
provided, however, that the amount determined for part (B) of clauses (ii)
- -------- -------
through (vi) above shall be not less than the sum of the then outstanding
Principal Balances of the then three largest Contracts at the beginning of each
such period.
Notwithstanding the foregoing, the Subordinated Amount shall be
determined in the manner prescribed in clause (i) of this definition for each
anniversary of the Cut-off Date for the entire term of this Agreement, unless
either (a) the Master Servicer certifies to the Trustee, as of the _____
anniversary of the Cut-off Date, that for each of the past 12 calendar months as
of the Determination Date (or such other date or time period as may be regularly
used by the Master Servicer for delinquency reporting purposes in its ordinary
course of business) not more than __% of the Contracts (determined by aggregate
principal balances) have been delinquent for 60 days or more, or (b) the
Depositor provides the Trustee with a letter from the Rating Agencies stating
that the application of the other portions of this definition is satisfactory to
the Rating Agencies in respect of manufactured housing pass-through certificates
rated by the Rating Agency in one of its two highest rating categories.
Substitute Contract: A Contract substituted by the Depositor or the
-------------------
related Servicer for a Deleted Contract which must, on the date of such
substitution, (i) have an outstanding Principal Balance, after deduction of the
principal portion of the monthly payment due in the month of substitution (or in
the
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case of a substitution of more than one Contract for a Deleted Contract, an
aggregate Principal Balance), not in excess of the Principal Balance of the
Deleted Contract [and not less than __% of Principal Balance of the Deleted
Contract] (the amount of any shortage will be deposited by the Depositor or the
Servicer in the Certificate Account and distributed by the Master Servicer to
Certificateholders in the month of substitution); (ii) have an APR not less than
the APR of the Deleted Contract but not greater than __% in excess of the APR of
the Deleted Contract; (iii) have a remaining term to maturity not greater than
___ years and not more than ___ years less than the remaining term of the
Deleted Contract; and (iv) comply with each representation and warranty set
forth in Section 2.04 or in the related Warranty Servicing Agreement.
Trust Fund: The corpus of the trust created by this Agreement
----------
consisting of (i) the Contracts described in the Contract Schedule, exclusive of
the Retained Yield, (ii) all distributions thereon payable after the Cut-off
Date, other than as provided herein, (iii) property that secured a Contract and
has been acquired by Repossession, (iv) amounts remitted from time to time to
the Master Servicer and held from time to time by the Master Servicer in the
Certificate Account, net of the amounts payable to the Master Servicer, as
provided in this Agreement, (v) the rights of the Certificateholders in the
Primary Credit Insurance Policies and any other insurance policies with respect
to the Contracts, (vi) the rights of the Certificateholders in the Performance
Bond and the proceeds thereof and (vii) the Depositor's rights under the
Warranty and Servicing Agreements with respect to the Contracts included in the
Trust Fund. The Reserve Fund is not, and will not under any circumstances be
deemed to be, included in the Trust Fund.
Undivided Interest: The undivided interest in the Trust Fund
------------------
evidenced by a Whole Class A Certificate or a Class B Certificate, or in the
case of a Class A Certificate other than a Whole Class A Certificate, the
undivided interest evidenced by like Percentage Interests of a Class A[-1 and a
Class A-2 Certificate], as if such Certificates were combined.
Voting Rights: As to any Certificate of any Class, the portion of
--------------
the aggregate voting rights of such Class evidenced by such Certificate which is
obtained by dividing the Denomination of such Certificate by the aggregate
Denominations of all Certificates of such Class.
Whole Class A Certificate: Any Class A Certificate that has been
-------------------------
issued upon combination of one or more Class A-1 Certificates and one or more
Class A-2 Certificates pursuant to Section 15.04 hereof, in substantially the
form set forth in Exhibit A hereto.
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<PAGE>
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS;
RESERVE FUND
Section 13.01. Certificate Account.
-------------------
The Master Servicer shall, prior to the Delivery Date, establish and
maintain, in the name of the Trustee on behalf of the Certificateholders the
Certificate Account, into which the Master Servicer shall deposit not later than
each Distribution Date, the amounts specified in Section 3.08 and any amounts
withdrawn from the Reserve Fund and deposited in the Certificate Account, as
provided in Section 13.03. All distributions to be made from time to time to
the Certificateholders out of funds in the Certificate Account shall be made by
the Master Servicer.
Section 13.02. Distributions.
-------------
Subject to Section 9.01 and Section 14.02 hereof respecting the final
distribution, on each Distribution Date the Master Servicer shall distribute
from the Certificate Account to each Certificateholder of record on the related
Record Date, the amount to be distributed to such Certificateholder pursuant to
the respective Certificate or Certificates held by such Certificateholder, and
in accordance with the provisions of Section 13.03. Such distribution shall be
made by check mailed on the Distribution Date to the address of each
Certificateholder appearing in the Certificate Register, except that, with
respect to any Holder eligible for wire transfer, as provided in Section 11.15,
distributions shall be made on the Distribution Date by wire transfer in
immediately available funds, provided that such Certificateholder, not less than
two Business Days prior to the related Distribution Date, shall have furnished
the Master Servicer with appropriate wiring instructions. Distributions may
also be made by such other means of payment as to which each Certificateholder
and the Master Servicer shall agree.
[ Section 13.03. Subordination; Reserve Fund; Priority of Distribution.
-----------------------------------------------------
(a) The rights of the Class B Certificateholders to receive
distributions with respect to principal of the Class B Certificates on any
Distribution Date shall be subordinated to the rights of the Class A
Certificateholders to receive distributions in respect of the Class A
Certificates to the extent, and only to the extent, of the Subordinated Amount
as of the immediately preceding Determination Date, all in accordance with the
terms of the Class A Certificates and this Agreement. The right of the Master
Servicer to retain or to receive funds from the Certificate Account in
accordance with Section 3.12 for its Servicing Fee on each Contract, assumption
or substitution
-16-
<PAGE>
fees, late payment charges and other obligor charges, reimbursement of Monthly
Advances and expenses or otherwise, shall not be subordinated to the rights of
the Class A Certificateholders or the Class B Certificateholders. In addition,
the Depositor's right to the Retained Yield and the Administrative Fee shall not
be subordinated to the rights of the Class A Certificateholders or Class B
Certificateholders.
(b) The Depositor shall establish and maintain with the Trustee a
separate investment account (the "Reserve Fund"). All amounts shall be
deposited into and withdrawn from the Reserve Fund in accordance with this
Section. The Reserve Fund is not, and will not under any circumstances be
deemed to be, included in the Trust Fund.
(c) The initial Holders of the Class B Certificates grant, and any
future Holders of the Class B Certificates shall be deemed to have granted, to
the Trustee, for the exclusive benefit of the Class A Certificateholders, a
valid and perfected first priority security interest under the Uniform
Commercial Code as in effect from time to time in the State of
[________________] (the "UCC") in and to all of their right, title and interest
in and to the Reserve Fund, the amounts deposited therein (or theretofore
deposited into the Certificate Account and required pursuant to this Agreement
to be deposited in the Reserve Fund) and all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash, instruments,
securities or other property; provided, however, that all income from the
investment of funds in the Reserve Fund shall be excluded from such grant and
security interest. This grant is made in trust, pursuant to a trust agreement
(the "Reserve Fund Trust Agreement") attached hereto as Exhibit D, to secure the
Class A Certificates equally and ratably and to secure the obligations of the
Class B Certificateholders pursuant to the Class B Certificates.
(d) The Trustee acknowledges this grant and accepts the trust under
this Section 13.03 in accordance with the provisions hereof.
(e) The Master Servicer, on behalf of the Depositor, will cause a
valid and perfected first priority security interest under the UCC to be
maintained in the Reserve Fund, the amount deposited therein and the investments
thereof (other than any income from the investment of funds in the Reserve Fund)
in order to secure the full and timely performance with respect to the
subordination of the Class B Certificates pursuant to this Section 13.03.
(f) All principal distributions allocable to Class B
Certificateholders and not distributed to Class A Certificateholders pursuant to
Section 13.03(a) hereof shall be
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<PAGE>
paid into the Reserve Fund until the Reserve Fund has reached the Required
Reserve. Thereafter, such distributions shall be paid to Class B
Certificateholders, except that, if the amount of the Reserve Fund, after
distribution to the Class A Certificateholders on any Distribution Date, is less
than the Required Reserve on such Distribution Date, the Master Servicer shall
withhold from the amounts otherwise distributable to the Class B
Certificateholders all amounts due on account of principal (or such lesser
amounts as may be required to restore the amount of the Reserve Fund to the
Required Reserve) and deposit these amounts in the Reserve Fund. If at any
time, the balance of the Reserve Fund is reduced to zero, distributions of
principal and interest otherwise allocable to the Class B Certificateholders
will be retained until the Reserve Fund balance reaches an amount equal to the
Required Reserve.
(g) If the amount of the Reserve Fund, after taking into account the
distributions to the Class A Certificateholders on any Distribution Date, is
greater than the Required Reserve on that Distribution Date, the Master Servicer
will distribute the amount of the excess to the Class B Certificateholders on a
pro rata basis according to their ownership of the Class B Certificates.
Amounts properly distributed by the Master Servicer to the Class B
Certificateholders pursuant to this Section 13.03 shall be released from the
security interest established by this Section 13.03, and the Class B
Certificateholders will not be required to refund any such distributed amounts.
(h) Amounts held in the Reserve Fund from time to time shall continue
to be the property of the Class B Certificateholders until withdrawn from the
Reserve Fund pursuant to Section 13.03(i) hereof. Amounts held in the Reserve
Fund shall be invested for the benefit of the Class B Certificateholders in one
or more Eligible Investments, in the manner set forth in the Reserve Fund Trust
Agreement, in the name of the Trustee, as trustee, in accordance with written
instructions from the Master Servicer unless other written instructions are
submitted by the Holders of Class B Certificates evidencing Voting Rights
aggregating not less than 51% of the Voting Rights evidenced by all of the Class
B Certificates, or their designee. Any investment earnings on funds in the
Reserve Fund shall be held by the Trustee for the benefit of the Class B
Certificateholders in accordance with their respective interests therein and
will not be subject to any claims or rights of the Class A Certificateholders.
The Master Servicer shall distribute to the Class B Certificateholders their
share of all earnings not invested in unmatured Eligible Investments on any
Distribution Date. Realized losses, if any, on amounts invested pursuant to
this Section 13.03(h) shall first be credited against undistributed investment
earnings on amounts invested pursuant to this Section 13.03(h), and shall
thereafter be deemed to reduce
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<PAGE>
the amount on deposit in the Reserve Fund. The Trustee shall in no way be
liable for losses incurred in respect of such investments.
(i) If, on any Distribution Date immediately following a Determination
Date on which the Subordinated Amount was more than zero, the amount of the
distribution to Class A Certificateholders, after taking into account any
Monthly Advance to be made by the Master Servicer with respect to such
Distribution Date, and after giving effect to the distribution to Class A
Certificateholders of amounts otherwise allocable to Class B Certificateholders
on such Distribution Date and amounts in the Certificate Account being held for
future distribution, but before giving effect to any amount withdrawn from the
Reserve Fund, is less than the Required Distribution on such date, the Master
Servicer shall withdraw from the Reserve Fund and deposit into the Certificate
Account the lesser of (a) the entire amount on deposit in the Reserve Fund; or
(b) the amount necessary to make up such shortage. However, in no event will
any amount representing investment earnings on amounts held in the Reserve Fund
be transferred into the Certificate Account or otherwise used in any manner for
the benefit of the Class A Certificateholders. Amounts so transferred to the
Certificate Account will be withdrawn pursuant to Section 3.12 of the Standard
Terms, and will be applied in the following order:
(1) to the reimbursement of the Master Servicer for Advances
determined by the Master Servicer to be otherwise nonrecoverable pursuant
to Section 3.12(vii), if sufficient funds for such reimbursement are not
otherwise available in the Certificate Account;
(2) to the payment to the Class A Certificateholders of amounts
distributable to them on such Distribution Date for scheduled payments of
principal and interest due on the Contracts on the related Due Date;
(3) to the payment to the Class A Certificateholders of the Principal
Balance of Contracts repurchased, liquidated or repossessed during the
calendar month preceding the month of the Distribution Date and interest
thereon at the Pass-Through Rate, as provided in the form of Class A
Certificate; and
(4) to any other permitted application of funds
in the Certificate Account.
The Reserve Fund will terminate when the Subordinated Amount has been
reduced to zero or upon termination of this Agreement pursuant to Section 9.01
or 14.01 hereof. Upon termination, all amounts remaining in the Reserve Fund
shall be distributed to the Class B Certificateholders in accordance with
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<PAGE>
their pro rata ownership thereof, and such amounts will not be subject to any
claims or rights of the Class A Certificateholders.]
Section 13.04. Monthly Statements to Certificateholders.
----------------------------------------
Prior or concurrently with each distribution from the Certificate
Account to the Class A Certificateholders made on a Distribution Date, the
Master Servicer shall cause to be forwarded by mail to each Certificateholder
and to the Trustee a statement setting forth:
(i) the amount of such distribution with respect to each Class of
Certificates;
(ii) the amount of such distribution allocable to principal on the
Contracts, separately identifying the aggregate amount of any Principal
Prepayments included therein;
(iii) the amount of such distribution allocable to interest on the
Contracts;
(iv) the aggregate amount of any Advances by the Servicers and the
Master Servicer included in the amounts actually distributed to the Class A
Certificateholders on the preceding Distribution Date;
(v) the amount of any withdrawal from the Reserve Fund pursuant to
Section 13.03(i) or Section 4.01 included in the amounts actually
distributed to the Class A Certificateholders on the preceding Distribution
Date;
(vi) the amount of servicing compensation received by the Servicers
and the Master Servicer with respect to the monthly period preceding the
related Distribution Date and such other customary information as the
Master Servicer deems necessary or desirable to enable Certificateholders
to prepare their tax returns;
(vii) the amount of Retained Yield and the Administrative Fee paid to
the Depositor;
(viii) the aggregate Principal Balance of the Contracts as of the
close of business on a date not earlier than the Due Date, after giving
effect to payments allocated to principal reported under (ii) above;
(ix) the number and aggregate Principal Balance of Contracts (1) more
than 30 days delinquent, (2) more than 60 days delinquent, and (3) in
foreclosure, as of
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<PAGE>
the close of business on a date not earlier than the Due Date;
(x) the book value of any collateral acquired through Repossession as
of the close of business on a date not earlier than the Due Date;
(xi) the Subordinated Amount as of a date not earlier than the Due
Date, expressed as a dollar amount and as a percentage of the aggregate
Principal Balance of the Contracts reported under (ix) above; and
(xii) the amount remaining in the Reserve Fund on the Distribution Date
after any withdrawal reported under (v) above.
In the case of information furnished pursuant to clauses (ii) through
(vii) above, the amounts shall be expressed as a dollar amount per Single
Certificate.
Upon reasonable advance notice in writing, the Master Servicer shall
provide to each Class A Certificateholder that is a savings and loan
association, bank or insurance company certain reports and access to information
and documentation regarding the Contracts sufficient to permit such Class A
Certificateholders to comply with applicable regulations of the Federal Home
Loan Bank Board or other regulatory authorities with respect to their investment
in the Class A Certificates; provided, however, that the Master Servicer shall
be entitled to be reimbursed by each such Class A Certificateholder for the
actual expenses incurred by the Master Servicer in providing such reports and
access.
Within a reasonable period of time after the end of each calendar
year, the Master Servicer shall cause to be furnished to each Person who at any
time during the calendar year was a Certificateholder, a statement containing
the information set forth in clauses (ii) through (vii) of this Section 13.04
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder. Such obligation of the Master Servicer
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer pursuant to any
requirements of the Code as from time to time in effect.
Section 13.05. Statements to Class B Certificateholders.
---------------------------------------
On each Distribution Date the Master Servicer shall forward to each
Class B Certificateholder and to the Trustee a copy of the report forwarded to
the Class A Certificateholders on such Distribution Date and a statement setting
forth the amounts actually distributed to such Class B Certificateholder on such
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<PAGE>
Distribution Date and the amounts withheld and placed in the Reserve Fund on
such Distribution Date, together with such other information as the Master
Servicer deems necessary or appropriate. Within a reasonable period of time
after the end of each calendar year, the Master Servicer shall furnish to each
Person who at any time during the calendar year was a Class B Certificateholder
a statement containing the information provided pursuant to this Section 13.05
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class B Certificateholder. Such obligation of the Master
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer pursuant to any
requirements of the Code, as from time to time in force.
ARTICLE XIV.
OPTIONAL TERMINATION
Section 14.01. Repurchase at the Option of the [Depositor].
------------------------------------------
To the extent specified in Article XI, the Contracts included in the
Trust Fund shall be subject to repurchase at the option of the [Depositor] as
permitted herein on any Optional Termination Date at the Repurchase Price
specified herein.
[The Repurchase Price for any such Optional Termination shall be equal
to the lesser of (a) the aggregate Principal Balance of the Contracts as of the
date of repurchase, together with accrued and unpaid interest thereon at the
Pass-Through Rate through the last day of the month of such repurchase, plus the
Appraised Value of any property acquired in respect thereof, or (b) the fair
market value of the Contracts (as specified below).
For purposes of this Section 14.01, the fair market value of the
Contracts shall be deemed to be the aggregate market value of the Certificates
(determined, in the event that the Certificates are traded in the over-the-
counter securities market, by the most recent bid price for the Certificates in
such market, or, in the event that the Certificates are traded on a securities
exchange, by the average closing sale price for the Certificates on such
exchange for the last five trading days of such exchange immediately preceding
such repurchase or, in the event that the Certificates are not so traded, on the
basis of current prices of securities as determined by the latest bids made by
two dealers making a market in securities deemed by the Depositor and the
Trustee to be most comparable to the Certificates), plus accrued interest at the
Pass-Through Rate through the last day of the month of repurchase. The right of
the Depositor to repurchase the Contracts is conditioned upon the
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<PAGE>
Depositor's having previously given notice of termination as required by Section
14.02.]
Section 14.02. Procedure Upon Optional Termination.
-----------------------------------
(a) In case of any Optional Termination pursuant to Section 14.01,
the [Depositor] shall, at least 20 days prior to the Optional Termination Date
(unless a shorter period shall be satisfactory to the Trustee and the Master
Servicer), notify the Trustee and the Master Servicer of such Optional
Termination Date and of the Repurchase Price of the Contracts to be purchased.
(b) Any repurchase by the [Depositor] of the Contracts shall be made
on the Optional Termination Date by deposit of the Repurchase Price into the
Certificate Account on or before the Distribution Date on which such repurchase
is effected. Upon receipt by the Trustee of an Officer's Certificate of the
Master Servicer certifying as to the deposit of the Repurchase Price into the
Certificate Account, the Trustee and each co-trustee and separate trustee, if
any, then acting as such under this Agreement, shall, upon the request of the
[Depositor] and at the expense of the [Depositor], execute and deliver all such
instruments of transfer or assignment, in each case without recourse, as shall
be reasonably requested by the [Depositor] to vest title in the Contracts so
repurchased to the [Depositor] and shall transfer or deliver or shall cause the
applicable Custodian to transfer or deliver to the [Depositor] or its designee
the repurchased Contracts. Any distributions on the Contracts received by the
Trustee or the Master Servicer subsequent to the Optional Termination Date shall
be promptly remitted by it to the [Depositor].
(c) Notice of any Optional Termination pursuant to the provisions of
this Article XIV, specifying the Distribution Date upon which the final
distribution shall be made, shall be given promptly by the Master Servicer by
first class mail to Holders of the Certificates mailed no earlier than the 15th
day and not later than the tenth day preceding the Optional Termination Date.
Such notice shall specify (A) the Distribution Date upon which final
distribution on the Certificates will be made upon presentation and surrender of
the Certificates at the office or agency of the Master Servicer therein
designated, (B) the amount of such final distribution and (C) that the Record
Date otherwise applicable to such Distribution Date is not applicable, such
distribution being made only upon presentation and surrender of the Certificates
at the office or agency of the Master Servicer maintained for such purposes (the
address of which shall be set forth in such notice). The Master Servicer shall
give such notice to the Certificate Registrar at the time such notice is given
to Holders
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<PAGE>
of the Certificates. Upon deposit in the Certificate Account on the applicable
Distribution Date of an amount equal to the Repurchase Price pursuant to Section
14.01 and presentation and surrender of the Certificates, the Master Servicer
shall cause to be distributed to the Holders of Certificates an amount equal to
the Repurchase Price. Payments received by the Master Servicer with respect to
the Contracts in excess of the Repurchase Price, after giving effect to any
amounts to be retained or distributed by it pursuant to Section 3.12, and all
funds, if any, remaining in the Reserve Fund after allocation of funds to
Holders of Certificates, shall be promptly remitted by the Master Servicer to
the [Depositor].
ARTICLE XV.
MISCELLANEOUS
Section 15.01. Standard Terms.
--------------
The Standard Terms attached hereto is hereby incorporated herein by
reference, to the extent specified herein, and hereby forms a part of this
instrument with the same force and effect as if set forth in full herein. In
the event that any term or provision contained herein shall conflict or be
inconsistent with any term or provision contained in the Standard Terms, the
terms and provisions of this Reference Agreement shall govern.
Section 15.02. Ratification of Standard Terms.
------------------------------
As incorporated by reference into this Reference Agreement, the
Standard Terms is in all respects ratified and confirmed, and the Standard Terms
and this Reference Agreement shall be read, taken and construed as one and the
same instrument.
Section 15.03. Amendment.
---------
In addition to the amendments permitted by Section 10.01, this
Agreement may also be amended from time to time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
aggregating not less than 66% of the interest in the Trust Fund evidenced by
each Class of Certificates for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of the Certificates;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, delay the timing of, or change the manner in which payments received
on the Contracts are required to be distributed with respect to any
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<PAGE>
Certificate, without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of the
Certificates, of any Class in a manner other than as described in (i) above
without the consent of the Holders of Certificates of such Class evidencing
Voting Rights aggregating not less than ___% of the Voting Rights evidenced by
all Certificates of such Class or (iii) reduce the aforesaid percentage of the
Certificates of any Class, the Holders of which are required to consent to any
such amendment without the consent of the Holders of all Certificates of such
Class affected thereby then Outstanding.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Section 15.04. Whole Class A Certificates.
--------------------------
In addition to the provisions for registration of transfer and
exchange of Certificates in Section 5.02 of the Standard Terms, like Percentage
Interests of Class A-1 Certificates and Class A-2 Certificates may be exchanged
for one or more Whole Class A Certificates having an undivided interest
determined by the matching Percentage Interests of the Class A-1 Certificates
and Class A-2 Certificates so exchanged, upon surrender of such Certificates to
be exchanged in accordance with Section 5.02 of the Standard Terms. For
purposes of subclause (ii) of the proviso to Section 15.03, Whole Class A
Certificates shall be treated as if they were not so exchanged.
Section 15.05. Counterparts.
------------
For the purpose of facilitating the recordation of this Reference
Agreement as herein provided and for other purposes, this Reference Agreement
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
Section 15.06. Governing Law.
-------------
This Reference Agreement shall be construed in accordance with and
governed by the substantive laws of the State of [______________] applicable to
a greements made and to be
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<PAGE>
performed in the State of [_________________] and the obligations, rights and
remedies of the parties hereto and the Certificateholders shall be determined in
accordance with such laws.
Section 15.07. Recordation of Agreement.
------------------------
This Reference Agreement is subject to recordation in all appropriate
public offices for records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Manufactured Homes are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer at the expense of the
Depositor, or upon direction by the Trustee, but only upon direction by the
Trustee accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of Certificateholders.
Section 15.08. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Reference Agreement or of the Certificates or the rights of the Holders thereof.
-26-
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
ASSET BACKED SECURITIES CORPORATION,
as Depositor
By_____________________________
[SEAL]
ATTEST:
[NAME OF TRUSTEE],
as Trustee
By____________________________
[SEAL]
ATTEST:
[NAME OF MASTER SERVICER],
as Master Servicer
By___________________________
[SEAL]
ATTEST:
-27-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of __________________, 19__, before me personally
appeared ___________, to me known, who being by me duly sworn, did depose and
say that he resides at ________________, that he is the _________________ of
Asset Backed Securities Corporation, one of the corporations described in and
which executed the above instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
__________________________
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ______ day of ________________, before me personally appeared
_________________, to me known, who being by me duly sworn, did depose and say,
that he resides at ______________, that he is the ____________________ of
______________, the corporation described in and which executed the above
instrument; that he knows the seal of said banking corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said banking corporation; and that he signed
his name thereto by like order.
__________________________
Notary Public
[NOTARIAL SEAL]
-28-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ______ day of ________________, before me personally appeared
_________________, to me known, who being by me duly sworn, did depose and say,
that he resides at ______________, that he is the ____________________ of [Name
of Master Servicer], one of the corporations described in and which executed the
above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
__________________________
Notary Public
[NOTARIAL SEAL]
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<PAGE>
Exhibit A
(Form of Face of Class A - __ Certificate)
CONDUIT MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATES
CLASS A-___, SERIES ___
Evidencing an undivided Percentage Interest in the Class A-__
Distribution Amount from a trust, consisting of certain manufactured housing
conditional sales contracts and installment loan agreements transferred by
ASSET BACKED SECURITIES CORPORATION
____________________
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR OF ANY OF ITS AFFILIATES EXCEPT AS SET FORTH HEREIN
AND IN THE AGREEMENT.
[THE AGGREGATE NOTIONAL AMOUNT OF THE CLASS A-2 CERTIFICATES IS EQUAL TO THE
UNPAID PRINCIPAL AMOUNT OF THE CLASS A-1 CERTIFICATES, BUT IS USED SOLELY FOR
PURPOSES OF DETERMINING INTEREST PAYMENTS AND CERTAIN OTHER RIGHTS AND
OBLIGATIONS OF HOLDERS OF CLASS A-2 CERTIFICATES AND DOES NOT REPRESENT ANY
INTEREST IN PRINCIPAL PAYMENTS OF THE CONTRACTS].
___________________
[The following information is provided solely for purposes of applying federal
income tax original issue discount ("OID") rules to this instrument:
OID:______%
ISSUE DATE:___________________, 19__
YIELD (ASSUMING NO PREPAYMENTS):______%
SHORT ACCRUAL PERIOD YIELD COMPUTATION: EXACT
OID ALLOCABLE TO SHORT ACCRUAL PERIOD: ______%
CUSIP:_____________
ISSUE PRICE: _____%]
No. _________________________ Denomination $__________
Aggregate Denom-
inations of all
Class A-__ Cer-
tificates $__________
A-1
<PAGE>
First Distribution Final Scheduled
Date:___________, 19__ Distribution Date: _______
THIS CERTIFIES THAT ________ is the registered owner of the undivided
Percentage Interest obtained by dividing the Denomination of this Certificate
specified above by the aggregate Denominations of all Class A-__ Certificates
specified above in each Class A-__ Distribution Amount from the Trust Fund
referred to below consisting of certain manufactured housing conditional sales
contracts and installment loan agreements (the "Contracts") sold to the Trust by
the Asset Backed Securities Corporation (the "Depositor"), exclusive of a
portion of the interest payable on each Contract, the ownership of which has
been retained by the Depositor (the "Retained Yield"), and certain related
property transferred to the Trust by the Depositor. The Trust Fund was created
pursuant to the Standard Terms and Provisions of Pooling and Servicing dated as
of _____, 19__ (the "Standard Terms") and the Reference Agreement dated as of
______, 19__ (the "Reference Agreement" and, together with the Standard Terms,
the "Agreement"), each among the Depositor, _____________, as master servicer
(the "Master Servicer") and, ____________________, as trustee (the "Trustee",
which term includes any successor entity under the Agreement), a summary of
certain of the pertinent provisions of which is set forth hereinbelow. The
aggregate Principal Balance of the Contracts included in the Trust Fund as of
_______, 19__ (the "Cut-off Date"), exclusive of payments due on or before such
date, was $__________. To the extent not defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Reference is hereby made to the further provisions of this Certificate
and the Agreement set forth on the reverse hereof, which provisions shall for
all purposes have the same effect as though fully set forth at this place.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature,
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<PAGE>
this Certificate shall not be entitled to any benefit under the Agreement or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be duly
executed under its corporate seal.
Date:
[Seal] [NAME OF TRUSTEE],
as Trustee
By______________________
[Title]
Attest
___________________________
Authorized Officer of
[Name of Trustee]
A-3
<PAGE>
[Form of Certificate of Authentication]
THIS IS ONE OF THE CLASS A-__ CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED
POOLING AND SERVICING AGREEMENT
[__________________________]
REGISTRAR
BY ________________________
AUTHORIZED OFFICER
A-4
<PAGE>
(Form of Reverse of Class A-___ Certificate)
ASSET BACKED SECURITIES CORPORATION
CONDUIT MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATES
CLASS A-___, SERIES ___
This Certificate is one of a duly authorized issue of Certificates of
Asset Backed Securities Corporation designated as its Conduit Manufactured
Housing Contract Pass-Through Certificates, Class A-___, Series ___ (the "Class
A-___ Certificates") issued under and subject to the terms, provisions and
conditions of the Agreement. Also issued under the Agreement are Certificates
designated as Conduit Manufactured Housing Contract Pass-Through Certificates,
Class A-___, Series ___ (the "Class A-___ Certificates" and, together with the
Class A-___ Certificates, the "Class A Certificates"), and Certificates
designated as Conduit Manufactured Housing Contract Pass-Through Certificates,
Class B, Series ___ (the "Class B Certificates") which are subordinated in right
of payment to the Class A Certificates to the extent of [the Subordinated
Amount,] as described herein and in the Agreement. (The Class A Certificates
and the Class B Certificates are hereinafter collectively referred to as the
"Certificates.") The aggregate Undivided Interest evidenced by all Class A
Certificates is ___% and the aggregate Undivided Interest evidenced by all Class
B Certificates is ___%. Reference is hereby made to the Agreement for a
statement of the respective rights thereunder of the Depositor, the Master
Servicer, the Trustee and the Holders of the Certificates and the terms upon
which the Certificates are authenticated and delivered.
This Certificate represents the Percentage Interest obtained by
dividing the Denomination set forth on the face hereof by the aggregate
Denominations of all Class A-___ Certificates in each Class A-___ Distribution
Amount from (i) the Contracts and the proceeds thereof payable after the Cut-off
Date, net of any amounts payable to the Depositor, the Master Servicer and the
Servicers in accordance with the provisions of the Agreement, (ii) the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of the Agreement, net of the Retained Yield, the Administrative Fee
and amounts payable to the Servicers, the Master Servicer and the Depositor, as
provided in the Agreement, (iii) property acquired by repossession or otherwise
with respect to the Contracts and (iv) the interest of the Certificateholders in
the Performance Bond, [Alternative Credit Support,] and all proceeds thereof as
provided in the Agreement (such Contracts, funds, property and interests are
herein collectively called the "Trust Fund").
A-5
<PAGE>
The Master Servicer shall distribute on the ___ day of each month or,
if such ___ day is not a Business Day, the Business Day immediately following
such ___ day (the "Distribution Date"), commencing ____________, 19__, to the
Person in whose name this Certificate is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Class A-___ Certificate and the Class A-
___ Distribution Amount. The Class A-___ Distribution Amount on any
Distribution Date shall be an amount equal to ___% of the portion of the
Required Distribution that is allocable to principal that is distributable with
respect to the Senior Interest as defined below, and ___% of the portion of the
Required Distribution that is allocable to interest that is distributable with
respect to the Senior Interest as defined below.
[Until the Subordinated Amount, as defined below, has been reduced to
zero, if the aggregate amount distributable on the Class A Certificates on any
Distribution Date, as described above and after giving effect to any Monthly
Advance, is less than the Required Distribution as defined below, the Master
Servicer shall distribute to the Class A Certificateholders all or such portion
of the amounts otherwise distributable on such Distribution Date to the Class B
Certificateholders as may be required to cover such shortage. If a shortage
remains, the Trustee shall, on or before such Distribution Date, transfer funds
to the Certificate Account from amounts deposited in the Reserve Fund required
to be maintained pursuant to Section 3.25 of the Agreement, in an amount equal
to such remaining shortage, or such lesser amount as is then on deposit in the
Reserve Fund.]
[The Required Distribution with respect to the Class A Certificates on
any Distribution Date shall be the sum of:
(i) the aggregate Undivided Interest evidenced by all Class A
Certificates (such aggregate Undivided Interest being the sum of the
aggregate Percentage Interests evidenced by the Class A-1 and Class A-2
Certificates in the Class A-1 Distribution Amount and Class A-2
Distribution Amount, respectively) (the "Senior Interest") in: (a) until
such time as the Subordinated Amount is reduced to zero, all scheduled
payments of principal and interest (including any advances thereof),
adjusted to a ___% Pass-Through Rate, which payments became due on the due
date to which such Distribution Date related (the "Due Date"), whether or
not such payments are actually received; and (b) after the Subordinated
Amount is reduced to zero, all payments of principal and interest, adjusted
to a ___% Pass-Through Rate, due on such Due Date or due, but not
previously received, since the time the
A-6
<PAGE>
Subordinated Amount was reduced to zero, but only to the extent such
payments are actually received or advanced prior to the Determination Date;
(ii) the Senior Interest in all Principal Prepayments received during
the month prior to the month of distribution and interest at the Pass-
Through Rate to the end of the month in which such Principal Prepayments
occur;
(iii) the Senior Interest in the sum of (a) the outstanding Principal
Balance of each Contract or property acquired in respect thereof that was
repurchased pursuant to the Agreement or liquidated or repossessed during
the monthly period ending on the day prior to the Due Date to which such
distribution relates, calculated as of the date each such Contract was
repurchased, liquidated or repossessed, and (b) accrued but unpaid interest
on such principal balance, adjusted to the Pass-Through Rate, to the first
day of the month following the month of such repurchase, liquidation or
repossession.]
The Required Distribution will be distributed to the Class A
Certificateholders to the extent that there are sufficient eligible funds
available for distribution to such Class A Certificateholders on a Distribution
Date.
Funds eligible for such purpose with respect to each Distribution Date
shall be the sum of (i) all previously undistributed payments or other receipts
on account of principal (including Principal Prepayments, if any) and interest
on the Contracts, exclusive of the Retained Yield, subject at any time to the
Agreement, including any Liquidation Proceeds, received by the Master Servicer
after the Cut-off Date set forth on the face hereof, or received prior to the
Cut-off Date but due thereafter, and prior to the Determination Date except (a)
payments that were due and payable on or before the Cut-off Date; (b) Principal
Prepayments and Liquidation Proceeds and all proceeds of any Contracts or
property acquired in respect thereof repurchased pursuant to Sections [2.02,
2.04, 2.08 and 9.01] of the Agreement received during the month of distribution
and all related payments of interest representing interest for the month of
distribution or any portion thereof; (c) payments, other than Principal
Prepayments, that represent early receipt of scheduled payments of principal and
interest due on or after the first day of the month of distribution; (d) late
payments of principal or interest in respect of which there are any unreimbursed
Monthly Advances; (e) amounts representing reimbursement for certain losses and
expenses, all as described in the Agreement; (f) that portion of each payment of
interest on each Contract in excess of interest at the Pass-Through Rate set
forth above on the unpaid
A-7
<PAGE>
principal balance of such Contract outstanding for the period for which such
payment was received; and (g) to the extent specified in the Agreement, that
portion of the Liquidation Proceeds of Contracts in excess of the unpaid
principal balances thereof and unpaid interest thereon; and (ii) the Monthly
Advance, if any, made by the Master Servicer for the related period. For the
purposes hereof, amounts received by the Master Servicer in connection with the
liquidation of Contracts through repossession, sale, deed in lieu of foreclosure
or otherwise shall be deemed to be payments on account of principal of
Contracts. Any amount in the Certificate Account after the Required
Distribution is made to the Class A Certificateholders will be paid to the
Holders of the Class B Certificates.
[All distributions of principal allocable to Class B
Certificateholders and not distributed to Class A Certificateholders pursuant to
the foregoing provisions hereof will be paid into the Reserve Fund until the
Reserve Fund has reached the Required Reserve, as defined in the Agreement, and
thereafter will be paid to the Class B Certificateholders except for any amounts
of principal required to be paid into the Reserve Fund to restore it to the
Required Reserve. The interests of the Class B Certificateholders in amounts so
deposited in the Reserve Fund, to the extent described below, are pledged to
secure the obligations of the Class B Certificateholders as described in the
Agreement and such amounts are available for distribution to the Class A
Certificateholders in the manner described above. The subordination of
distributions allocable to Class B Certificateholders is limited to the
Subordinated Amount, as defined in the Agreement, that decreases over time as
described in the Agreement and such subordination applies only to the extent set
forth herein and in the Agreement.
Distributions on this Certificate will be made by the Master Servicer
by check mailed to the address of the Holder hereof entitled thereto at the
address appearing in the Certificate Register or, if eligible for wire transfer
as set forth in Section [11.15] of the Agreement, by wire transfer in
immediately available funds or by such other means of payment as the Holder
hereof and the Master Servicer shall agree upon. Except as otherwise provided in
the Agreement, the final distribution on this Certificate will be made, in the
applicable manner described above, after due notice by the Master Servicer of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency designated in such notice.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account may be made by the Master Servicer from time to time for
purposes other than distributions to the Certificateholders, such purposes
including payment of the Retained Yield and Administrative Fee to the
A-8
<PAGE>
Depositor and reimbursement to the Master Servicer of Monthly Advances and of
certain expenses incurred by it.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Master Servicer, the Depositor and the Trustee and the rights of the Holders of
the Certificates under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing Voting Rights aggregating not less than ___% of the aggregate
Voting Rights of each Class of Certificates affected thereby; provided, however,
that no such amendment may, without the consent of the Holders of Certificates
evidencing 100% of the Voting Rights of each Class affected thereby, (i) reduce
in any manner the amount of, delay the timing of or change the manner in which
payments received on the contracts are required to be distributed in respect of
any Certificate of such Class or (ii) reduce the aforesaid percentage of
Certificates of each Class, the Holders of which are required to consent to any
such amendments. Any such consent by the Holder of this Certificate shall be
conclusive and binding upon such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
Depositor, the Master Servicer and the Trustee to amend certain terms and
conditions set forth in the Agreement without the consent of Holders of the
Certificates issued thereunder.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register maintained by the Trustee upon surrender of this
Certificate for registration of transfer at the office or agency maintained for
that purpose by the Trustee in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in a form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Class A-___ Certificates of
authorized denominations and for the same aggregate Denomination and Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in registered form in minimum
Denominations of $_______, and integral multiples of $__________ in excess
thereof, and one Certificate may be issued in such Denomination as may be
necessary to represent the remainder of the aggregate Principal Balance of the
Contracts on the Cut-off Date. As provided in the Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for one
or more new Class A-___ Certificates of
A-9
<PAGE>
authorized Denomination and Percentage Interest, as requested by the Holder
surrendering the same. As further provided in the Agreement, like Percentage
Interests of Class A-1 Certificates and Class A-2 Certificates may be exchanged
for one or more Whole Class A Certificates having an Undivided Interest
determined by the matching Percentage Interests of the Class A-1 Certificates
and Class A-2 Certificates so exchanged, upon surrender of such Certificates to
be exchanged.
No service charge will be made for such registrations, transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Master
Servicer, the Certificate Registrar and the Trustee and any agent of the Master
Servicer, the Certificate Registrar or the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Master Servicer, the Certificate Registrar nor the Trustee nor any
such agent thereof shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligation of the Master Servicer to provide for
payments to Certificateholders pursuant to the Agreement) shall terminate upon
the earlier of (a) the repurchase by the Depositor from the Trust Fund of all
Contracts remaining in the Trust Fund and all property acquired with respect
thereto and (b) the later of (i) the maturity or other liquidation of the last
Contract subject thereto and the disposition of all property acquired upon
repossession and (ii) the distribution to Certificateholders of all amounts in
the Certificate Account required to be distributed to them pursuant to the
Agreement. Any such purchase by the [Depositor] will be made in accordance with
Article [ ] of the Agreement. The exercise of such right will effect early
retirement of the Certificates.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
A-10
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address, including postal zip code, or
assignee)
the Percentage Interest in each Class A-___ Distribution Amount evidenced by the
within Certificate and hereby authorize(s) the transfer of registration of such
interest to the assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of a like
Denomination and Percentage Interest to the above named assignee and to deliver
such Certificate to the following address:______________________________________
________________________________________________________________________________
_____________________________________________________________
Dated:___________________
Social Security _________________________________________
or Other (signature must be signed as registered)
Tax Identification
No. of Assignee:
- ---------------------------- -------------------------------------------------
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be mailed by check to ___________ or, if made by
wire transfer in immediately available funds to
____________________________________________________________________ the account
of _______________________________________________, account number
_____________. This information is provided by ______________, the assignee
named above, or its agent.
A-11
<PAGE>
EXHIBIT B
[Form of Face of Class B Certificate]
[THE OFFERING AND SALE OF THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE ON THE EXEMPTIONS
PROVIDED IN SECTIONS 4(2) AND 4(5) OF SUCH ACT. ANY RESALE OR OTHER TRANSFER OF
THIS CERTIFICATE MUST BE MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
AN APPLICABLE EXEMPTION UNDER SUCH ACT, AND ONLY IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.]
[LEGEND INSERT FOR REMIC RESIDUAL
TRANSFER RESTRICTIONS]
CONDUIT MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATES
CLASS B, SERIES _____
evidencing an undivided interest in a trust fund consisting of certain
manufactured housing conditional sales contracts and installment loan agreements
transferred by
ASSET BACKED SECURITIES CORPORATION
--------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
ASSET BACKED SECURITIES CORPORATION OR OF ANY OF ITS AFFILIATES EXCEPT AS SET
FORTH HEREIN AND IN THE AGREEMENT.
[The following information is provided solely for purposes of applying
federal income tax original issue discount ("OID") rules to this instrument:
OID:____________
ISSUE DATE:______________, 199__
YIELD (ASSUMING NO REPAYMENTS):_________%
SHORT ACCRUAL PERIOD YIELD COMPUTATION: EXACT
OID ALLOCABLE TO SHORT ACCRUAL PERIOD:_________%
CUSIP: ______________
ISSUE PRICE: ______________%]
Denomination $_________________
B-1
<PAGE>
First Distribution Final Scheduled
Date: _______, 199__ Distribution Date: __________
THIS CERTIFIES THAT ______________ is the registered owner of the
Undivided Interest obtained by dividing the Denomination set forth above by the
aggregate of the Principal Balances of the Contracts included in the Trust Fund
on the Cut-off Date, as defined below, in the Trust Fund referred to below
consisting of certain manufactured housing conditional sales contracts and
installment loan agreements (the "Contracts") sold to the Trust by Asset Backed
Securities Corporation (the "Depositor"), exclusive of a portion of the interest
payable on each Contract the ownership of which has been retained by the
Depositor (the "Retained Yield"), and certain related property transferred to
the Trust by the Depositor. The Trust Fund was created pursuant to the Standard
Terms and Provisions of Pooling and Servicing dated of ______________, 199___
(the "Standard Terms") and the Reference Agreement dated as of _____________,
199__ (the "Reference Agreement" and, together with the Standard Terms, the
Agreement") each among the Depositor, _______________________________________,
as master servicer (the "Master Servicer") and _________________________, as
trustee (the "Trustee," which term includes any successor entity under the
Agreement), a summary of certain of the pertinent provisions of which is set
forth herein below. The aggregate Principal Balance of the Contracts included
in the Trust Funds as of _______, 199__ (the "Cut-off Date"), exclusive of
payments due on or before such date, was $_________. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Reference is hereby made to the further provisions of this Certificate
and the Agreement set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid or obligatory for any
purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its corporate seal.
Date:
[NAME OF TRUSTEE]
as Trustee
By:
______________________________
[Title]
[SEAL]
ATTEST
- ----------------------------
Authorized officer of
[Name of Trustee]
[Form of Certificate of Authentication]
THIS IS ONE OF THE CLASS B CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED
POOLING AND SERVICING AGREEMENT
[________________________________]
REGISTRAR
By: _____________________________
AUTHORIZED OFFICER
B-3
<PAGE>
[FORM OF REVERSE OF CLASS B CERTIFICATE]
ASSET BACKED SECURITIES CORPORATION
CONDUIT MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATES
CLASS B, SERIES ______
This Certificate is one of a duly authorized issues of Certificates of
Asset Backed Securities Corporation designated as its Conduit manufactured
Housing Contract Pass-Through Certificates, Class B, Series ___ (the "Class B
Certificates") issued under and subject to the terms, provisions and conditions
of the Agreement. Also issued under the Agreement are Certificates designated
as Conduit Manufactured Housing Contract Pass-Through Certificates, Class A,
Series ___ (the "Class A Certificates") issued in two sub-classes (the "Class A-
1 Certificates" and the "Class A-2 Certificates"). The Class B Certificates are
subordinated in right of payment to the Class A Certificates to the extent of
the Subordinated Amount as described herein and in the Agreement. (The Class A
Certificates and the Class B Certificates are hereinafter collectively referred
to as the "Certificates.") The aggregate undivided interest evidenced by all
Class A Certificates is __% and the aggregate undivided interest evidenced by
all Class B Certificates is __%. Reference is hereby made to the Agreement for
a statement of the respective rights thereunder of the Depositor, the Master
Servicer, the Trustee and the Holders of the Certificates and the terms upon
which the Certificates are authenticated and delivered.
This Certificate represents the undivided interest obtained by
dividing the Denomination set forth on the face hereof by the aggregate of the
Principal Balances of the Contracts included in the Trust Fund on the Cut-off
Date in (i) the Contracts and the proceeds thereof payable after the Cut-off
Date, net of any amounts payable to the Depositor, the Master Servicer and the
Servicers in accordance with the provisions of the Agreement, (ii) the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of the Agreement, net of the Retained Yield, the Administrative Fee
and amounts payable to the Servicers, the Master Servicer and the Depositor, as
provided in the Agreement, (iii) property acquired by repossession or otherwise
with respect to the Contracts and (iv) the interest of the Certificateholders in
the Performance Bond, and all proceeds thereof as provided in the Agreement
(such Contracts, funds, property and interest are herein collectively called the
"Trust Fund")
The Master Servicer shall distribute on the __ day of each month, or,
if such ___ day is not a Business Day, the
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<PAGE>
Business Day immediately following such ___ day (the "Distribution Date"),
commencing on _______, 199 , to the Person in whose name this Certificate is
registered at the close of business on the last Business Day of the month
immediately preceding the month of such distribution (the "Record Date"), an
amount equal to the product of the Undivided Interest evidenced by this
Certificate and the aggregate of (i) all previously undistributed payments or
other receipts on account of principal (including Principal Prepayments, if any)
and interest on the Contracts, exclusive of the Retained Yield, subject at any
time to the Agreement, including any Liquidation Proceeds, received by the
Master Servicer after the Cut-off Date set forth on the face hereof, or received
prior to the Cut-off Date but due thereafter, and prior to the Determination
Date except: (a) payments that were due and payable on or before the Cut-off
Date; (b) Principal Prepayments and Liquidation Proceeds and all proceeds of any
Contracts or property acquired in respect thereof repurchased pursuant to
Sections 2.02, 2.04, 2.08 and 9.01 of the Agreement received during the month of
distribution and all related payments of interest representing interest for the
month of distribution or any portion thereof; (c) payments, other than Principal
Prepayments, that represent early receipt of scheduled payments of principal and
interest due on or after the first day of the month of distribution; (d) late
payments of principal or interest in respect of which there are any unreimbursed
Monthly Advances; (e) amounts representing reimbursement for certain losses and
expenses, all as described in the Agreement; (f) that portion of each payment of
interest on each Contract in excess of interest at the Pass-Through Rate set
forth above on the unpaid principal balance of such Contract outstanding for the
period for which such payment was received; and (g) to the extent specified in
the Agreement, that portion of the Liquidation Proceeds of Contracts in excess
of the unpaid principal balances thereof and unpaid interest thereon; and (ii)
the Monthly Advance, if any, made by the Master Servicer for the related period.
For the purposes hereof, amounts received by the Master Servicer in connection
with the liquidation of Contracts through repossession, sale or otherwise shall
be deemed to be payments on account of principal of Contracts.
As provided in the Pooling and Servicing Agreement, distributions
otherwise payable to the Holders of the Class B Certificates are subordinated to
the rights of the Class A Certificateholders to receive amounts due them to the
extent of the Subordinated Amount as defined in the Agreement. To the extent
such distributions otherwise payable to the Holders of the Class B Certificates
on any Distribution Date are not needed to cover any shortage with respect to
the Class A Certificates, the portion of such distributions representing
principal on the Contracts shall be deposited in the Reserve Fund established
pursuant to Section [ ] of the Agreement to permit the Reserve Fund to attain
and maintain the Required Reserve as specified in
B-5
<PAGE>
the Agreement, and may be released to the Holders of the Class B Certificates,
if at all, only in accordance with the provisions of the Agreement. Holders of
Class B Certificates are not required to refund any amounts that have previously
been properly distributed to them.
Distributions on this Certificate will be made by the Master Servicer
by check mailed to the address of the Holder hereof entitled thereto at the
address appearing in the Certificate Register or, if eligible for wire transfer
as set forth in Section [11.15] of the Agreement, by wire transfer in
immediately available funds or by such other means of payment as the Holder
hereof and the Master Servicer shall agree upon. Except as otherwise provided in
the Agreement, the final distribution on this Certificate will be made, in the
applicable manner described above, after due notice by the Master Servicer of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency designated in such notice.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account may be made by the Master Servicer from time to time for
purposes other than distributions to the Certificateholders, such purposes
including payment of the Retained Yield and Administrative Fee to the Depositor
and reimbursement to the Master Servicer of Monthly Advances and of certain
expenses incurred by it.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Master Servicer, the Depositor and the Trustee and the rights of the Holders of
Certificates under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing Voting Rights aggregating not less than _% of the aggregate Voting
Rights of each Class of Certificates affected thereby; provided, however, that
no such amendment may, without the consent of the Holders of Certificates
evidencing __% of the Voting Rights of each Class affected thereby, (i) reduce
in any manner the amount of, delay the timing of or change the manner in which
payments received on Contracts are required to be distributed in respect of any
Certificate of such Class, or (ii) reduce the aforesaid percentages of
Certificates of each Class, the Holders of which are required to consent to any
such amendments. Any such consent by the Holder of this Certificate shall be
conclusive and binding upon such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
Depositor, the Master Servicer and the Trustee to amend certain terms and
B-6
<PAGE>
conditions set forth in the Agreement without the consent of Holders of the
Certificates issued thereunder.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register maintained by the Trustee upon surrender of this
Certificate for registration of transfer at the office or agency maintained for
that purpose by the Trustee in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in a form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Class B Certificates of
authorized denominations and for the same aggregate Denomination and undivided
interest will be issued to the designated transferee or transferees.
[Additional restrictions to be set forth here]
The Certificates are issuable only in registered form in minimum
Denominations of $_____ and integral multiples of $___ in excess thereof, and
one Certificate may be issued in such Denomination as necessary to represent the
remainder of the aggregate Principal Balance of the Contracts on the Cut-off
Date. As provided in the Agreement and subject to certain limitations therein
set forth, this Certificate is exchangeable for one or more new Class B
Certificates of authorized denominations evidencing a like aggregate
Denomination and Undivided Interest, as requested by the Holder surrendering the
same.
No service charge will be made for such registrations, transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Master
Servicer, the Certificate Registrar and the Trustee and any agent of the Master
Servicer, the Certificate Registrar or the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Master Servicer, the Certificate Registrar nor the Trustee nor any
such agent thereof shall be affected by notice of the contrary.
The obligations created by the Agreement and the Trust Fund created
thereby (other than the obligation of the Master Servicer to provide for
payments to Certificateholders pursuant to the Agreement) shall terminate upon
the earlier of (a) the repurchase by the [Depositor] from the Trust Fund of all
Contracts remaining in the Trust Fund and all property acquired with respect
thereto and (b) the later of (i) the maturity or other liquidation of the last
Contract subject thereto and the disposition of all property acquired upon
repossession and (ii) the distribution to Certificateholders of all amounts in
the Certificate Account required to be distributed to them pursuant to the
Agreement. Any such purchase by the [Depositor] will be made in accordance
with Article [XIV] of the Agreement. The
B-7
<PAGE>
exercise of such right will effect early retirement of the Certificates.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
B-8
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address, including postal zip code, or
assignee)
the Undivided Interest in the Trust Fund evidenced by the within Certificate and
hereby authorize(s) the transfer of registration of such interest to the
assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of a like
Denomination and Undivided Interest to the above-named assignee and to deliver
such Certificate to the following
address:_________________________________________________________
_________________________________________________________________
_________________________________________________________________
Dated:___________
________________________________
Social Security or Other Signature by or on behalf of
Tax Identification No. of assignor (signature must be signed
Assignee: as registered)
__________________________ ___________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by wire transfer in immediately available
funds to _______________________________________________________________________
________________________________________________________________________________
___________________ the account of _______________________________________,
account number __________, or, if mailed by check, to _____________. This
information is provided by ___________, the assignee named above, or
___________________, its agent.
B-9
<PAGE>
FORM OF TRUST AGREEMENT
between
ASSET BACKED SECURITIES CORPORATION,
as Company,
and
[_____________________]
as Owner Trustee
Dated as of _________________
<PAGE>
Table of Contents Page
ARTICLE I
Definitions....................................................... 1
SECTION 1.01. Defined Terms...................................... 1
SECTION 1.02. Other Definitional Provisions...................... 4
ARTICLE II
Organization...................................................... 4
SECTION 2.01. Name............................................... 4
SECTION 2.02. Office............................................. 5
SECTION 2.03. Purposes and Powers................................ 5
SECTION 2.04. Appointment of Owner Trustee....................... 5
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate 5
SECTION 2.06. Declaration of Trust............................... 6
SECTION 2.07. Liability of the Owners............................ 6
SECTION 2.08. Title to Trust Property............................ 6
SECTION 2.09. Situs of Trust..................................... 6
SECTION 2.10. Representations and Warranties of the Company...... 7
SECTION 2.11. Maintenance of the Demand Note.............. 8
SECTION 2.12. Federal Income Tax Allocations.............. 8
ARTICLE III
Trust Certificates and Transfer of Interests............... 9
SECTION 3.01. Initial Ownership........................... 9
SECTION 3.02. The Trust Certificates...................... 9
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates....................................... 9
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates...................................... 10
SECTION 3.06. Persons Deemed Owners............................. 10
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses..........................................11
SECTION 3.08. Maintenance of Office or Agency................... 11
SECTION 3.09. Appointment of Paying Agent....................... 11
SECTION 3.10. Ownership by Company of Trust Certificates........ 12
SECTION 3.11. Book-Entry Trust Certificates..................... 12
SECTION 3.12. Notices to Clearing Agency........................ 13
SECTION 3.13. Definitive Trust Certificates..................... 13
i
<PAGE>
ARTICLE IV
Actions by Owner Trustee......................................... 14
SECTION 4.01. Prior Notice to Owners with Respect to Certain
Matters........................................... 14
SECTION 4.02. Action by Owners with Respect to Certain Matters.. 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy ...... 14
SECTION 4.04. Restrictions on Owners' Power..................... 15
SECTION 4.05. Majority Control.................................. 15
ARTICLE V
Application of Trust Funds; Certain Duties....................... 15
SECTION 5.01. Establishment of Trust Account.................... 15
SECTION 5.02. Application of Trust Funds........................ 15
SECTION 5.03. Method of Payment................................. 16
SECTION 5.04. No Segregation of Moneys; No Interest............. 16
SECTION 5.05. Accounting and Reports to the Noteholders, Owners,
the Internal Revenue Service and Others........... 16
SECTION 5.06. Signature on Returns; Tax Matters Partner......... 17
ARTICLE VI
Authority and Duties of Owner Trustee............................ 17
SECTION 6.01. General Authority................................. 17
SECTION 6.02. General Duties.................................... 17
SECTION 6.03. Action upon Instruction........................... 17
SECTION 6.04. No Duties Except as Specified in this Agreement or
in Instructions .................................. 18
SECTION 6.05. No Action Except Under Specified Documents or
Instructions...................................... 18
SECTION 6.06. Restrictions...................................... 19
ARTICLE VII
Concerning the Owner Trustee.............................. .......19
SECTION 7.01. Acceptance of Trust and Duties.................... 19
SECTION 7.02. Furnishing of Documents........................... 20
SECTION 7.03. Representations and Warranties.................... 20
SECTION 7.04. Reliance; Advice of Counsel....................... 21
SECTION 7.05. Not Acting in Individual Capacity................. 21
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Receivables....................................... 21
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes 22
ii
<PAGE>
ARTICLE VIII
Compensation of Owner Trustee.................................... 22
SECTION 8.01. Owner Trustee's Fees and Expenses................. 22
SECTION 8.02. Indemnification................................... 22
SECTION 8.03. Payments to the Owner Trustee..................... 23
ARTICLE IX
Termination of Trust Agreement................................... 23
SECTION 9.01. Termination of Trust Agreement.................... 23
SECTION 9.02. Dissolution upon Bankruptcy of the Company........ 24
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees........... 24
SECTION 10.01. Eligibility Requirements for Owner Trustee....... 24
SECTION 10.02. Resignation or Removal of Owner Trustee.......... 25
SECTION 10.03. Successor Owner Trustee.......................... 25
SECTION 10.04. Merger or Consolidation of Owner Trustee......... 26
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.... 26
ARTICLE XI
Miscellaneous.................................................... 27
SECTION 11.01. Supplements and Amendments....................... 27
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners... 29
SECTION 11.03. Limitations on Rights of Others.................. 29
SECTION 11.04. Notices.......................................... 29
SECTION 11.05. Severability..................................... 29
SECTION 11.06. Separate Counterparts............................ 29
SECTION 11.07. Successors and Assigns........................... 30
SECTION 11.08. Covenants of the Company......................... 30
SECTION 11.09. No Petition...................................... 30
SECTION 11.10. No Recourse...................................... 30
SECTION 11.11. Headings......................................... 31
SECTION 11.12. GOVERNING LAW.................................... 31
SECTION 11.13. Trust Certificate Transfer Restrictions.......... 31
EXHIBIT A - FORM OF TRUST CERTIFICATE................................ A-1
EXHIBIT B - CERTIFICATE OF TRUST OF
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__................. B-1
iii
<PAGE>
EXHIBIT C - FORM OF CERTIFICATE DEPOSITORY AGREEMENT................. C-1
iv
<PAGE>
TRUST AGREEMENT dated as of _______________________, between ASSET BACKED
SECURITIES CORPORATION, a Delaware corporation (the "Company"), and
________________, a Delaware banking corporation, as owner trustee (the "Owner
Trustee").
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. Whenever used in this Agreement, the
-------------
following terms, unless the context requires otherwise, shall have the meanings
set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended and
---------
supplemented from time to time.
"Basic Documents" shall mean the Sale and Servicing Agreement, the
---------------
Indenture, the Note Depository Agreement, the Certificate Depository Agreement
and the other documents and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
------------
11.13.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
----------------------------
Trust Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
----------------------
Code, 12 Del. Code (S) 3801 et seq., as the same may be amended from time to
---- ----
time.
"Certificate Depository Agreement" shall mean the agreement dated
--------------------------------
____________________, among the Trust, the Owner Trustee and The Depository
Trust Company, as the initial Clearing Agency, substantially in the form
attached hereto as Exhibit C, relating to the Trust Certificates, as the same
may be amended and supplemented from time to time.
"Certificate Distribution Account" shall have the meaning assigned to such
--------------------------------
term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust, substantially
--------------------
in the form of Exhibit B, filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
-----------------
Certificate, the Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency or on the books of
a Person maintaining an account with such Clearing Agency
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<PAGE>
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the register
-------------------- ---------------------
mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a Trust
----------------- ------
Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Company" shall mean Asset Backed Securities Corporation, a Delaware
-------
corporation, and any successor in interest.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
----------------------
principal corporate trust office of the Owner Trustee located at
_____________________, or at such other address as the Owner Trustee may
designate by notice to the Owners and the Company, or the principal corporate
trust office of any successor Owner Trustee at the address designated by such
successor Owner Trustee by notice to the Owners and the Company.
"Definitive Trust Certificates" shall have the meaning set forth in Section
-----------------------------
3.11.
"Demand Note" shall mean, in the case of _____________, the Demand Note
-----------
dated __________, from [CS First Boston Corporation] to ________________.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-----
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
"Expenses" shall have the meaning assigned to such term in Section 8.02.
--------
"Indemnified Parties" shall have the meaning assigned to such term in
-------------------
Section 8.02.
"Indenture" shall mean the Indenture dated as of _______________ between
---------
the Trust and ___________, as Indenture Trustee.
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<PAGE>
"Initial Certificate Balance" shall mean $________________.
---------------------------
"Note Depository Agreement" shall mean the agreement dated
-------------------------
________________, among the Trust, the Indenture Trustee and The Depository
Trust Company, as the initial Clearing Agency, relating to the Notes, as the
same may be amended and supplemented from time to time.
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Estate" shall mean all right, title and interest of the Trust
------------------
in and to the property and rights assigned to the Trust pursuant to Article II
of the Sale and Servicing Agreement, all funds on deposit from time to time in
the Trust Accounts and the Certificate Distribution Account and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean _______________, a Delaware banking corporation,
-------------
not in its individual capacity but solely as owner trustee under this Agreement,
and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09, which initially shall be ________________.
"Record Date" shall mean, with respect to any Distribution Date, the close
-----------
of business on the day immediately preceding such Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
----------------------------
dated as of ________________, among the Trust, as issuer, Asset Backed
Securities Corporation, as seller, and ____________, as servicer, as the same
may be amended or supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
--------------------
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Certificate" shall mean a certificate evidencing the beneficial
-----------------
interest of a Certificate Owner in the Trust, substantially in the form attached
hereto as Exhibit A.
"Underwriter" shall mean that underwriter named in and a party to the
-----------
Certificate Underwriting Agreement dated _______________, with the Company,
pursuant to which the Trust Certificates will be offered publicly.
-3-
<PAGE>
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
-----------------------------
and not otherwise defined herein shall have the meanings assigned to them in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined herein or therein, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as "CS First
----
Boston Auto Receivables Trust 199_-_", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
-4-
<PAGE>
SECTION 2.02. Office. The office of the Trust shall be in care of the
------
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Owners and the
Company.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is to
-------------------
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust Certificates,
to purchase the Receivables, to fund the Reserve Account and to pay the
organizational, start-up and transactional expenses of the Trust and to pay the
balance to the Company pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the Trust
Estate pursuant to the Indenture and to hold, manage and distribute to the
Owners pursuant to the terms of the Sale and Servicing Agreement any portion of
the Owner Trust Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic Documents
to which it is to be a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the Owner
Trust Estate and the making of distributions to the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.04. Appointment of Owner Trustee. The Company hereby appoints
----------------------------
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
--------------------------------------------------
Company hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Company, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Company
shall pay
-5-
<PAGE>
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
--------------------
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Receivables and other assets held
by the Trust, the partners of the partnership being the Certificateholders, and
the Notes being debt of the partnership. The parties agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Company shall be liable
-----------------------
directly to and will indemnify any injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
by a Certificateholder in the capacity of an investor in the Trust Certificates
or by a Noteholder in the capacity of an investor in the Notes. In addition, any
third party creditors of the Trust (other than in connection with the
obligations described in the preceding sentence for which the Company shall not
be liable) shall be deemed third party beneficiaries of this paragraph. The
obligations of the Company under this paragraph shall be evidenced by the Trust
Certificates described in Section 3.10, which for purposes of the Business Trust
Statute shall be deemed to be a separate class of Trust Certificates from all
other Trust Certificates issued by the Trust; provided that the rights and
obligations evidenced by all Trust Certificates, regardless of class, shall,
except as provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a) above,
shall have any personal liability for any liability or obligation of the Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
-----------------------
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and administered
--------------
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. The Trust shall not have any
-6-
<PAGE>
employees in any state other than Delaware; provided, however, that nothing
herein shall restrict or prohibit the Owner Trustee from having employees within
or without the State of Delaware. Payments will be received by the Trust only in
Delaware or New York, and payments will be made by the Trust only from Delaware
or New York. The only office of the Trust will be at the Corporate Trust Office
in Delaware.
SECTION 2.10. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to the Owner Trustee that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
organization, with the power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted.
(ii) The Company is duly qualified to do business as a foreign corporation
in good standing and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of its property or the conduct of
its business shall require such qualifications.
(iii) The Company has the power and authority to execute and deliver this
Agreement and to carry out its terms; the Company has full power and authority
to sell and assign the property to be sold and assigned to and deposited with
the Trust, and the Company has duly authorized such sale and assignment and
deposit to the Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement have been duly authorized by the
Company by all necessary corporate action.
(iv) The Company has the full power and authority to purchase the Trust
Certificates that the Company has agreed to purchase pursuant to Section 3.10.
(v) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of incorporation or
bylaws of the Company, or any indenture, agreement or other instrument to which
the Company is a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to the Basic
Documents); nor violate any law or, to the best of the Company's knowledge, any
order, rule or regulation applicable to the Company of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(vi) There are no proceedings or investigations pending or, to the
Company's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Company or its properties: (A)
-7-
<PAGE>
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (C)
seeking any determination or ruling that might materially and adversely affect
the performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
------------------------------
permitted by applicable law, the Company agrees that it shall not sell, convey,
pledge, transfer or otherwise dispose of the Demand Note.
SECTION 2.12. Federal Income Tax Allocations. Net income of the Trust
------------------------------
for any month as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated:
(a) among the Certificate Owners as of the first day following the end of
such month, in proportion to their ownership of principal amount of Trust
Certificates on such date, net income in an amount up to the sum of (i) the
Certificateholders' Monthly Interest Distributable Amount for such month, (ii)
interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by law, at
the Pass-Through Rate from such preceding Distribution Date through the current
Distribution Date, (iii) the portion of the market discount on the Receivables
accrued during such month that is allocable to the excess, if any, of the
initial aggregate principal amount of the Trust Certificates over their initial
aggregate issue price, (iv) any amount expected to be distributed to the
Certificateholders pursuant to Section 5.07(g) of the Sale and Servicing
Agreement (to the extent not previously allocated pursuant to this clause), and
(v) any other amounts of income payable to the Certificateholders for such
month; such sum to be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust, if any, for any month as determined for
federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated to the Company to the
extent the Company is reasonably expected to bear the economic burden of such
net losses, and any remaining net losses shall be allocated among the
Certificate Owners as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Trust Certificates on
such Record Date. The Company is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the Company
or to the Certificate Owners, or as otherwise required by the Code.
-8-
<PAGE>
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
-----------------
contribution by the Company pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Company shall be the sole beneficiary of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
----------------------
issued in minimum denominations of $20,000 and in integral multiples of $1 in
excess thereof; provided, however, that the Trust Certificates issued to the
Company pursuant to Section 3.10 may be issued in such denomination as required
to include any residual amount. The Trust Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of an authorized officer of
the Owner Trustee. Trust Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefit of this Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificates or did not hold such
offices at the date of authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
SECTION 3.03. Authentication of Trust Certificates. On the Closing Date,
------------------------------------
the Owner Trustee shall cause the Trust Certificates in an aggregate principal
amount equal to the Initial Certificate Balance to be executed on behalf of the
Trust, authenticated and delivered to or upon the written order of the Company,
signed by its chairman of the board, its president, any vice president,
secretary or any assistant treasurer, without further corporate action by the
Company, in authorized denominations. No Trust Certificate shall entitle its
Holder to any benefit under this Agreement or be valid for any purpose unless
there shall appear on such Trust Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Owner Trustee
by manual signature; such authentication shall constitute conclusive evidence
that such Trust Certificate shall have been duly authenticated and delivered
hereunder. All Trust Certificates shall be dated the date of their
authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates.
-----------------------------------------------------------
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. _______________ shall be
the initial Certificate Registrar.
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<PAGE>
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.08, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Trust Certificates in authorized denominations of a
like aggregate amount dated the date of authentication by the Owner Trustee or
any authenticating agent. At the option of a Holder, Trust Certificates may be
exchanged for other Trust Certificates of authorized denominations of a like
aggregate amount upon surrender of the Trust Certificates to be exchanged at the
office or agency maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make, and the Certificate Registrar shall not register transfers or
exchanges of, Trust Certificates for a period of 15 days preceding the due date
for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
-------------------------------------------------------
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute,
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like
tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Certificate issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name any
Trust Certificate is registered in the Certificate Register as the
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owner of such Trust Certificate for the purpose of receiving distributions
pursuant to Section 5.02 and for all other purposes whatsoever, and none of the
Owner Trustee, the Certificate Registrar or any Paying Agent shall be bound by
any notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
The Owner Trustee shall furnish or cause to be furnished to the Servicer and the
Company, within 15 days after receipt by the Owner Trustee of a written request
therefor from the Servicer or the Company, a list, in such form as the Servicer
or the Company may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more
Certificateholders or one or more Holders of Trust Certificates evidencing not
less than 25% of the Certificate Balance apply in writing to the Owner Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Trust Certificate,
shall be deemed to have agreed not to hold any of the Company, the Company, the
Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information is derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates ______________ as its
office for such purposes. The Owner Trustee shall give prompt written notice to
the Company and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
---------------------------
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent initially shall be
_______________, and any co-paying agent chosen by _______________ and
acceptable to the Owner Trustee. _______________ shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Owner Trustee. In the event
that _______________ shall no longer be the Paying Agent, the Owner Trustee
shall appoint a successor to act as Paying Agent (which shall be a bank or trust
company). The Owner Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Owner Trustee to execute and deliver to
the Owner Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Owner Trustee that, as Paying
Agent, such
-11-
<PAGE>
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its
role as Paying Agent for so long as the Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10. Ownership by Company of Trust Certificates. The Company
------------------------------------------
shall on the Closing Date purchase from the Underwriter Trust Certificates
representing at least 1% of the Initial Certificate Balance and shall thereafter
retain beneficial and record ownership of Trust Certificates representing at
least 1% of the Certificate Balance. Any attempted transfer of any Trust
Certificate that would reduce such interest of the Company below 1% of the
Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the Company to contain a legend stating "THIS CERTIFICATE
IS NON-TRANSFERABLE AS DESCRIBED IN SECTION 3.10 OF THE TRUST AGREEMENT".
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
-----------------------------
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Company pursuant to Section 3.10. Such Trust
Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until definitive,
fully registered Trust Certificates (the "Definitive Trust Certificates") have
been issued to Certificate Owners pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Agreement (including the
payment of principal of and interest on the Trust Certificates and the giving of
instructions or directions hereunder) as the sole Holder of the Trust
Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants. Pursuant to the
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<PAGE>
Certificate Depository Agreement, unless and until Definitive Trust Certificates
are issued pursuant to Section 3.13, the initial Clearing Agency will make book-
entry transfers among the Clearing Agency Participants and receive and transmit
payments of principal of and interest on the Trust Certificates to such Clearing
Agency Participants; and
(e) Whenever this Agreement requires or permits actions to be taken based
upon instructions or directions of Holders of Trust Certificates evidencing a
specified percentage of the Certificate Balance, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage of
the beneficial interest in the Trust Certificates and has delivered such
instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Trust Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Company advises
-----------------------------
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Trust
Certificates and the Company is unable to locate a qualified successor, (ii) the
Company at its option advises the Owner Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Default, Certificate Owners
representing beneficial interests aggregating at least a majority of the
Certificate Balance advise the Clearing Agency in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interest of the Certificate Owners, then the Clearing Agency shall notify all
Certificate Owners and the Owner Trustee of the occurrence of such event and of
the availability of the Definitive Trust Certificates to Certificate Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Trust Certificate or Trust Certificates representing the Book-Entry Trust
Certificates by the Clearing Agency, accompanied by registration instructions,
the Owner Trustee shall execute and authenticate the Definitive Trust
Certificates in accordance with the instructions of the Clearing Agency.
Neither the Certificate Registrar nor the Owner Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Trust Certificates, the Owner Trustee shall recognize the Holders of the
Definitive Trust Certificates as Certificateholders. The Definitive Trust
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner that is reasonably acceptable to the Owner Trustee, as
evidenced by its execution thereof.
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<PAGE>
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
------------------------------------------------------
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Owners shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Owners have withheld consent or
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Receivables) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Receivables);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interests of the Owners; or
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
------------------------------------------------
Owner Trustee shall not have the power, except upon the direction of the Owners,
to (a) remove the Servicer under the Sale and Servicing Agreement pursuant to
Section 8.01 thereof or (b) except as expressly provided in the Basic Documents,
sell the Receivables after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon written
instructions signed by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
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<PAGE>
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not direct
-----------------------------
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.03, nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein, any
----------------
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice to
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
------------------------------
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Deposit Account (the "Certificate Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Owner Trustee (or the Company on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
--------------------------
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Sections 5.06 and 5.07 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.08 of the Sale and Servicing Agreement with
respect to such Distribution Date.
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<PAGE>
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an
Owner shall be treated as cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Owner), the Owner Trustee may
in its sole discretion withhold such amounts in accordance with this paragraph
(c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer in immediately available funds to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution Date
and such Holder's Trust Certificates in the aggregate evidence a denomination of
not less than $____________, or, if not, by check mailed to such
Certificateholder at the address of such holder appearing in the Certificate
Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to Sections
-------------------------------------
5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
------------------------------------------------------
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
- -----------------------------------
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.02(c) with respect to income or distributions to
Owners. The Owner Trustee shall elect under Section 1278 of the Code to include
in income currently any market discount that accrues with respect to the
Receivables. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
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<PAGE>
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The Owner
-----------------------------------------
Trustee shall sign on behalf of the Trust the tax returns of the Trust unless
applicable law requires an Owner to sign such documents, in which case such
documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of the Trust
pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
-----------------
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party, in each
case, in such form as the Company shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof. In addition to the foregoing, the Owner
Trustee is authorized, but shall not be obligated, to take all actions required
of the Trust pursuant to the Basic Documents. The Owner Trustee is further
authorized from time to time to take such action as the Company recommends with
respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
--------------
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and in
-----------------------
accordance with the terms of the Basic Documents, the Owners may by written
instruction direct the Owner Trustee in the management of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instructions as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction
received from the Owners, the Owner Trustee shall not be liable on account of
such action to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of
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such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the Basic Documents as it shall deem to be
in the best interests of the Owners, and shall have no liability to any Person
for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document, or any such provision is
ambiguous as to its application or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable with respect to any such action or inaction to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action that may be necessary to discharge any
liens on any part of the Owner Trust Estate that result from actions by, or
claims against, the Owner Trustee that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or Instructions.
----------------------------------------------------------
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.03.
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<PAGE>
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
------------
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Owners shall not direct the Owner Trustee to take action that would violate
the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trust and Duties. The Owner Trustee accepts
------------------------------
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder
or under any Basic Document under any circumstances, except (i) for its own
willful misconduct or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment made by
a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of any Owner
transmitted pursuant to the terms hereof;
(c) No provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of its rights or powers hereunder or under any Basic Document
if the Owner Trustee shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Company, or for the form, character, genuineness, sufficiency, value or validity
of any of the Owner Trust Estate, or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Trust Certificates, and the Owner Trustee shall in no event assume or
incur
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<PAGE>
any liability, duty or obligation to any Noteholder or to any Owner, other than
as expressly provided for herein or expressly agreed to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct of
the Company, the Indenture Trustee or the Servicer under any of the Basic
Documents or otherwise, and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or the
Basic Documents that are required to be performed by the Indenture Trustee under
the Indenture or the Servicer or the Company under the Sale and Servicing
Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
-----------------------
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
------------------------------
represents and warrants to the Company, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in good
standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Agreement, and this Agreement will be executed and
delivered by one of its officers who is duly authorized to execute and deliver
this Agreement on its behalf.
(c) None of the execution and delivery by it of this Agreement, the
consummation by it of the transactions contemplated hereby or compliance by it
with any of the terms or provisions hereof will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
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SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee shall
---------------------------
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter,
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
---------------------------------
this Article VII, in accepting the trusts hereby created ____________________
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Receivables. The recitals contained herein and in the Trust Certificates (other
- -----------
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Company, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates) or the Notes,
or of any Receivable or any related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable, or the perfection and priority of
any security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or to Noteholders
under the Indenture, including, without limitation: the existence, condition
and ownership of any Financed Vehicle; the existence and enforceability of any
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insurance thereon; the existence and contents of any Receivable on any computer
or other record thereof; the validity of the assignment of any Receivable to the
Trust or of any intervening assignment; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Company or
the Servicer with any warranty or representation made under any Basic Document
or in any related document or the accuracy of any such warranty or
representation, or any action of the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
--------------------------------------------------
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Company, the
Indenture Trustee and the Servicer in banking transactions with the same rights
it would have if it were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
---------------------------------
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Company and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Company
for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
SECTION 8.02. Indemnification. The Company shall be liable as primary
---------------
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, except only that the Company shall not be liable
for or required to indemnify an Indemnified Party from and against Expenses
arising or resulting from any of the matters described in the third sentence of
Section 7.01. The indemnities contained in this Section shall survive the
resignation or termination of the Owner Trustee or the termination of this
Agreement. In the event of any claim, action or proceeding for which indemnity
will be sought pursuant to this Section, the Owner Trustee's choice of legal
counsel shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld.
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SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
-----------------------------
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
------------------------------
than Article VIII) and the Trust shall terminate and be of no further force or
effect (i) upon the final distribution by the Owner Trustee of all moneys or
other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Sale and Servicing Agreement and Article V or (ii)
at the time provided in Section 9.02. The bankruptcy, liquidation, dissolution,
death or incapacity of any Owner, other than the Company as described in Section
9.02, shall not (x) operate to terminate this Agreement or the Trust or (y)
entitle such Owner's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate or (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), none of the Company or any Owner
shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificate holders mailed within
five Business Days of receipt of notice of such termination from the Servicer
given pursuant to Section 9.01(c) of the Sale and Servicing Agreement, stating
(i) the Distribution Date upon or with respect to which final payment of the
Trust Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificates at the office of the
Paying Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at
the time such notice is given to Certificateholders. Upon presentation and
surrender of the Trust Certificates, the Paying Agent shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take
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appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out of
the funds and other assets that shall remain subject to this Agreement. Any
funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Owner Trustee to the Company, subject to applicable laws with
respect to escheat of funds.
(d) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be cancelled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the event
------------------------------------------
that an Insolvency Event shall occur with respect to the Company, this Agreement
shall be terminated in accordance with Section 9.01 90 days after the date of
such Insolvency Event, unless, before the end of such 90-day period, the Owner
Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Company) representing more than 50% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Company) and (b) Holders (as defined in the Indenture)
of the Notes representing more than 50% of the Outstanding Amount thereof, to
the effect that each such party disapproves of the liquidation of the
Receivables and termination of the Trust. Promptly after the occurrence of any
Insolvency Event with respect to the Company, (A) the Company shall give the
Indenture Trustee and the Owner Trustee written notice of such Insolvency Event,
(B) the Owner Trustee shall, upon receipt of such written notice from the
Company, give prompt written notice to the Certificateholders and the Indenture
Trustee of the occurrence of such event and (C) the Indenture Trustee shall,
upon receipt of written notice of such Insolvency Event from the Owner Trustee
or the Company, give prompt written notice to the Noteholders of the occurrence
of such event; provided, however, that any failure to give a notice required by
this sentence shall not prevent or delay, in any manner, the termination of the
Trust pursuant to the first sentence of this Section 9.02. Upon termination
pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee
promptly to sell the assets of the Trust (other than the Trust Accounts and the
Certificate Distribution Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Trust shall be treated as collections made under the Sale and Servicing
Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
------------------------------------------
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least Baa3 by Moody's. If
such corporation shall publish reports of condition at least annually pursuant
to law or to the requirements of the
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aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Owner Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Owner Trustee
shall resign immediately in the manner and with the effect specified in Section
10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
---------------------------------------
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Company. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Owner Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Company, or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Company may remove the Owner Trustee. If the Company shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Company
shall promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing Owner
Trustee so removed and one copy to the successor Owner Trustee, and shall pay
all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Company shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
-----------------------
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Company and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents, statements and monies held by it
under this Agreement; and the Company and the predecessor Owner Trustee shall
execute and deliver such instruments and do such other things as may
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<PAGE>
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Company shall mail notice thereof to all Certificateholders,
the Indenture Trustee, the Noteholders and the Rating Agencies. If the Company
shall fail to mail such notice within 10 days after acceptance of such
appointment by the successor Owner Trustee, the successor Owner Trustee shall
cause such notice to be mailed at the expense of the Company.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any corporation
----------------------------------------
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
- --------
provided, further, that the Owner Trustee shall mail notice of such merger or
- -------- -------
consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Company and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Company and Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust or any part thereof and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Company and
the Owner Trustee may consider necessary or desirable. If the Company shall not
have joined in such appointment within 15 days after the receipt by it of a
request to do so, the Owner Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as successor Owner Trustee under
Section 10.01 and no notice of the appointment of any co-trustee or separate
trustee shall be required under Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such
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<PAGE>
separate trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the Owner
Trustee joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the Owner
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Owner Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate trustee
or co-trustee, but solely at the direction of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason of
any act or omission of any other trustee under this Agreement; and
(c) The Company and the Owner Trustee acting jointly may at any time accept
the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Company.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be amended
--------------------------
by the Company and the Owner Trustee, with prior written notice to the Rating
Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement
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or modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
-------- -------
by an Opinion of Counsel, adversely affect in any material respect the interest
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Company and the
Owner Trustee, with prior written notice to the Rating Agencies, with the
consent of the Holders (as defined in the Indenture) of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
- -------- -------
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust Agreement
or any amendment of any other agreement to which the Issuer is a party, the
Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion
of Counsel to the effect that such amendment is authorized or permitted by the
Basic Documents and that all conditions
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precedent in the Basic Documents for the execution and delivery thereof by the
Issuer or the Owner Trustee, as the case may be, have been satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
----------------------------------------------
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
-------------------------------
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Company, the Owners, and, to the extent expressly provided herein,
the Indenture Trustee and the Noteholders, and nothing in this Agreement (other
than Section 2.07 hereof), whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
-------
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if mailed by certified mail, postage prepaid (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; and
if to the Company, addressed to _______________, Attention _______________; or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder listed in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
---------------------
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
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SECTION 11.07. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, each of the
Company and its permitted assignees, the Owner Trustee and its successors and
each Owner and its successors and permitted assigns, all as herein provided.
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the Company. In the event that (a) the
------------------------
Certificate Balance shall be reduced by Realized Losses and (b) any litigation
with claims in excess of $1,000,000 to which the Company is a party which shall
be reasonably likely to result in a material judgment against the Company that
the Company will not be able to satisfy shall be commenced by an Owner, during
the period beginning nine months following the commencement of such litigation
and continuing until such litigation is dismissed or otherwise terminated (and,
if such litigation has resulted in a final judgment against the Company, such
judgment has been satisfied), the Company shall not pay any dividend to
Collateralized Mortgage Securities Corporation, or make any distribution on or
in respect of its capital stock to Collateralized Mortgage Securities
Corporation, or repay the principal amount of any indebtedness of the Company
held by Collateralized Mortgage Securities Corporation, unless (i) after giving
effect to such payment, distribution or repayment, the Company's liquid assets
shall not be less than the amount of actual damages claimed in such litigation
or (ii) the Rating Agency Condition shall have been satisfied with respect to
any such payment, distribution or repayment. The Company will not at any time
institute against the Trust any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, the Trust Agreement or any of the
Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
-----------
Agreement, each Owner, by accepting a Trust Certificate or a beneficial interest
therein, and the Indenture Trustee and each Noteholder, by accepting the
benefits of this Agreement, hereby covenant and agree that they will not at any
time institute against the Company or the Trust, or join in any institution
against the Company or the Trust of, any bankruptcy proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, this Agreement or any
of the Basic Documents.
SECTION 11.10. No Recourse. Each Owner, by accepting a Trust Certificate
-----------
or a beneficial interest therein, acknowledges that such Owner's Trust
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Servicer, the Company, the Owner
Trustee, the Indenture Trustee or any of their respective Affiliates and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated in this Agreement, the Trust Certificates or
the Basic Documents.
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SECTION 11.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Trust Certificate Transfer Restrictions. The Trust
---------------------------------------
Certificates may not be acquired by or for the account of (i) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or
(iii) any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding a Trust Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
ASSET BACKED SECURITIES CORPORATION,
as Company,
By __________________________
Name:
Title:
_____________________________,
not in its individual capacity
but solely as Owner Trustee,
By ___________________________
Name:
Title:
-32-
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $____________
R- CUSIP NO. ________
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__
_______% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which consists of a pool of motor vehicle installment loan contracts
and motor vehicle retail installment sale contracts (collectively, "Motor
Vehicle Installment Contracts") secured by new and used automobiles, vans and
light-duty trucks.
(This Trust Certificate does not represent an interest in or an obligation of CS
First Boston Corporation or any of its affiliates, except to the extent
described below.)
THIS CERTIFIES THAT ___________________ is the registered owner of
______________ DOLLARS nonassessable, fully-paid, fractional undivided interest
in CS First Boston Auto Receivables Trust 199__-__ (the "Trust"), formed
pursuant to a Trust Agreement dated as of _________________ (the "Trust
Agreement"), between Asset Backed Securities Corporation, a Delaware corporation
(the "Company") and ___________________, as owner trustee (the "Owner Trustee").
A-1
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
__________________________________
as Owner Trustee
By: ______________________________
Authorized Signatory
A-2
<PAGE>
The Trust was created pursuant to the Trust Agreement, a summary of certain
of the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement or the Sale and Servicing Agreement
dated as of ___________________ (as amended and supplemented from time to time,
the "Sale and Servicing Agreement"), among the Trust, the Company, and
________________, as servicer (the "Servicer"), as applicable.
This Certificate is one of the duly authorized Certificates designated as
the _______% Asset Backed Certificates (herein called the "Trust Certificates")
issued by the Trust. Also issued under an Indenture dated as of
___________________ (the "Indenture"), between the Trust and
____________________, as indenture trustee, are the two classes of Notes
designated as "Class A-1 _______% Asset Backed Notes" and the "Class A-2 ______%
Asset Backed Notes," (collectively, the "Notes"). This Trust Certificate is
issued under and is subject to the terms, provisions and conditions of the Trust
Agreement, to which Trust Agreement the Holder of this Trust Certificate by
virtue of its acceptance hereof assents and by which such Holder is bound. The
property of the Trust consists of a pool of Motor Vehicle Installment Contracts
secured by new and used automobiles, vans and light-duty trucks, all monies due
under such Receivables on or after the Cutoff Date, in the case of Precomputed
Receivables, or received on or after the Cutoff Date, in the case of Simple
Interest Receivables, security interests in the vehicles financed thereby,
certain bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Trust Agreement and the
Sale and Servicing Agreement, and all proceeds of the foregoing. The rights of
the Holders of the Trust Certificates are subordinated to the rights of the
Holders of the Notes, as set forth in the Sale and Servicing Agreement.
Under the Trust Agreement, there will be distributed on the ___________ day
of each month or, if such _________ day is not a Business Day, the next Business
Day (each, a "Distribution Date"), commencing on __________________, to the
Person in whose name this Trust Certificate is registered at the close of
business on the day immediately preceding such Distribution Date (the "Record
Date"), such Certificateholder's fractional undivided interest in the amount to
be distributed to Certificateholders on such Distribution Date. No
distributions of principal will be made on any Certificate until all of the
Notes have paid in full.
The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement and the Indenture.
It is the intent of the Company, the Servicer and the Certificateholders
that, for purposes of federal income, state and local income and single business
tax and any other income taxes, the Trust will be treated as a partnership and
the Certificateholders (including the Company) will be treated as partners in
that partnership. The Company and the other Certificateholders, by acceptance
of a Trust Certificate, agree to treat, and to take no action inconsistent with
the treatment of, the Trust Certificates for such tax purposes as partnership
interests in the Trust.
A-3
<PAGE>
Each Certificateholder or Certificate Owner, by its acceptance of a Trust
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Company, or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon,
except that with respect to Trust Certificates registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided
in the Trust Agreement and notwithstanding the above, the final distribution on
this Trust Certificate will made after due notice by the Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Trust Certificate at the office or agency maintained for that purpose by the
Owner Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the Holder hereof to any benefit under the Trust
Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__
By: __________________________, not in its individual
capacity but solely as Owner Trustee
Dated: _____________ By: ______________________________________
Authorized Signatory
A-5
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an interest
in, the Servicer, the Company, the Owner Trustee or any of their respective
Affiliates, and no recourse may be had against such parties or their assets
except as expressly set forth or contemplated herein or in the Trust Agreement
or the Basic Documents. In addition, this Trust Certificate is not guaranteed
by any governmental agency or instrumentality and is limited in right of payment
to certain collections and recoveries with respect to the Receivables (and
certain other amounts), all as more specifically set forth herein and in the
Sale and Servicing Agreement. A copy of each of the Sale and Servicing
Agreement and the Trust Agreement may be examined by any Certificateholder upon
written request during normal business hours at the principal office of the
Company and at such other places, if any, designated by the Company.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Trust Agreement at
any time by the Company and the Owner Trustee with the consent of Holders of the
Trust Certificates and of each class of the Notes, voting as a class, evidencing
not less than a majority of the Certificate Balance and the outstanding
principal balance of the Notes of each such class. Any such consent by the
Holder of this Trust Certificate shall be conclusive and binding on such Holder
and on all future Holders of this Trust Certificate and of any Trust Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent is made upon this Trust Certificate.
The Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Trust
Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar, duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is
____________________________.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $20,000 and in integral multiples of $1 in excess thereof. As provided in
the Trust Agreement and subject to certain limitations therein set forth, Trust
Certificates are exchangeable for new Trust Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or
A-6
<PAGE>
exchange, but the Owner Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
Sale and Servicing Agreement and the disposition of all property held as part of
the Owner Trust Estate. The Servicer of the Receivables may at its option
purchase the Owner Trust Estate at the price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect an early retirement of the Trust Certificates; however, such right
of purchase is exercisable only as of the last day of any Collection Period as
of which the Pool Balance is less than or equal to 10% of the Cutoff Date Pool
Balance.
The Trust Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity or which uses plan assets to acquire Trust Certificates
(each, a "Benefit Plan"). By accepting and holding this Trust Certificate, the
Holder hereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
A-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, and hereby irrevocably
constitutes and appoints _____________________ attorney to transfer said Trust
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
_____________________________/*/
Signature Guaranteed:
_____________________________/*/
_________________
NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
A-8
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__
THIS Certificate of Trust of CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-
__ (the "Trust"), dated ____________________, is being duly executed and filed
by ___________________, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code. (S) 3801 et
---------
seq.).
1. Name: The name of the business trust formed hereby is CS FIRST BOSTON
----
AUTO RECEIVABLES TRUST 199__-__.
2. Delaware Trustee. The name and business address of the trustee of the
----------------
Trust in the State of Delaware is _______________________. Attention:
______________________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
__________________________________, not
in its individual capacity but solely as
owner trustee under a Trust Agreement
dated as of ______________________.
By: __________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
[Form of Certificate Depository Agreement]
Letter of Representations
[To be Completed by Issuer and Trustee]
___________________________________
[Name of Issuer]
___________________________________
[Name of Trustee]
______________________
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to a trust indenture dated
____________________ (the "Document"). ______________________ (the
"Underwriter") is distributing the Securities through the Depository Trust
Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trustee make the following representations to DTC:
1. Prior to closing on the Securities on _______________________ there
shall be deposited with DTC one Security certificate registered in the name of
DTC's nominee. Cede & Co. ___________ stated maturity of the Securities in the
face amounts set forth on Schedule A hereto, the total of which represents 100%
of the principal amount of such Securities. If,
C-1
<PAGE>
however, the aggregate principal amount of any maturity exceeds $200 million,
one Certificate will be issued with respect to each $200 million of principal
amount and an additional Certificate will be issued with respect to any
remaining principal amount. Each $200 million Certificate shall bear the
following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any Certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
2. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer or Trustee shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall, to the extent possible, send notice of such record date to
DTC not less than 15 calendar days in advance of such record date. Notices to
DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices
shall be confirmed by telephoning (212) 709-6370. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or a partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of refunding the maturity date(s) established under
the refunding; and (c) the date such notice is to be mailed to Security holders
or published (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Trustee shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be not less than 30 days nor more than 60 days prior the
redemption date or, in the case of an advance refunding, the date that the
proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by
telecopy shall be sent to DTC's Call Notification Department at (516) 227-4039
or (516) 227-4191. If the party sending the notice does not receive a telecopy
receipt from DTC confirming that the notice has been received, such party shall
telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or
by any other means shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
C-2
<PAGE>
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephone (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also
contain the current pool factor and Trustee contact's name and telephone number,
shall be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if
by mail or by any other means to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
7. [NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
---- ---------
OTHER.] [The interest accrual period is record date to record date.] [The
interest accrual period is payment date to payment date.]
8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the
C-3
<PAGE>
order of Cede & Co. Absent any other existing arrangements, such
payments shall be addressed as follows:
Manager, Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
9. [NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
---- ---------
OTHER.]
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS")
----------------------------------------------------------------
System.
-------
Other principal payments (redemption payments) shall be made in same-day
funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS")
----------------------------------------------------------------
System.
-------
Other principal payments (redemption payments) shall made in next-day funds
by Trustee to Cede & Co., as nominee of DTC, or its registered assigns, on each
payment date. Such payments shall be made payable to the order of Cede & Co.,
and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
10. DTC may direct Issuer or Trustee to use any other number or address as
the number or address to which notices or payments of interest or principal may
be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security Certificate; or (b) may make an appropriate
notation on the Security Certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
Certificate will be presented to Issuer or Trustee prior to payment, if
required.
12. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
C-4
<PAGE>
13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security Certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such Certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trustee to advance funds on
behalf of Issuer.
Notes: Very truly yours,
- -----
A. If there is a Trustee (as defined in ____________________________________
this Letter of Representations), Trustee (Issuer)
as well as Issuer must sign this Letter.
If there is no Trustee, in signing this
Letter Issuer itself undertakes to perform
all of the obligations set forth herein. By: ________________________________
(Authorized Officer's Signature)
B. Schedule B contains statements that
DTC believes accurately describe DTC, the ____________________________________
method of effecting book-entry transfers of (Trustee)
securities distributed through DTC, and
certain related matters.
By: ________________________________
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: _______________________________
cc: Underwriter
Underwriter's Counsel
C-5
<PAGE>
SCHEDULE A
----------
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
C-6
<PAGE>
SCHEDULE B
----------
SAMPLE OFFERING DOCUMENT LANGUAGE
Describing book-entry-only issuance
-----------------------------------
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the securities (the "Securities"). The Securities will be issued
as fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully-registered Security Certificate will be issued
for [each issue of the Securities, [each] in the aggregate principal amount of
[any] issue exceeds $150 million, one Certificate will be issued with respect to
each $150 million of principal amount and an additional Certificate will be
issued with respect to any remaining principal amount of such issue.]
2. 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 New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
C-7
<PAGE>
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede
& Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Agent, or the Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Issuer or the Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirement for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.
C-8
<PAGE>
10. DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Issuer
or the Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be reliable,
but the Issuer takes no responsibility for the accuracy thereof.
C-9
<PAGE>
S&A DRAFT 1/15/96
================================================================================
[FORM OF TRUST AGREEMENT]
between
ASSET BACKED SECURITIES CORPORATION,
Depositor
and
[TRUSTEE NAME],
as Trustee
Dated as of [ ], 199[ ]
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: Definitions and Usage............................................................. 2
- ---------------------
SECTION 1.01 Defined Terms........................................................... 2
-------------
SECTION 1.02 Other Definitional Provisions and Rules of Construction................. 9
-------------------------------------------------------
ARTICLE II: Conveyance of the CRB Certificates;Original Issuance of Cert..................... 9
------------------------------------------------------------
SECTION 2.01 Creation and Declaration of Trust; Conveyance of the CRB Certificates... 9
---------------------------------------------------------------------
SECTION 2.02 Acceptance by Trustee................................................... 10
---------------------
SECTION 2.03 Representations and Warranties of the Depositor......................... 11
-----------------------------------------------
SECTION 2.04 Agreement to Authenticate and Deliver Certificates...................... 12
--------------------------------------------------
ARTICLE III: Administration of the Trust Property; Distributions and Reports to
------------------------------------------------------------------
Certificateholders.............................................................. 13
------------------
SECTION 3.01 Administration of the Trust Property.................................... 13
------------------------------------
SECTION 3.02 Certificate Account..................................................... 13
-------------------
SECTION 3.03 Investment of Funds in the Certificate Account.......................... 14
----------------------------------------------
SECTION 3.04 Permitted Withdrawals from the Certificate Account...................... 14
--------------------------------------------------
SECTION 3.05 Distributions........................................................... 14
-------------
SECTION 3.06 Compliance with Withholding Requirements................................ 15
----------------------------------------
SECTION 3.07 Statements to Certificateholders........................................ 16
--------------------------------
SECTION 3.08 Reports of the Trustee; Certificate Account............................. 17
-------------------------------------------
SECTION 3.09 Access to Certain Documentation and Information......................... 17
-----------------------------------------------
ARTICLE IV: The Certificates................................................................. 17
----------------
SECTION 4.01 The Certificates........................................................ 17
----------------
SECTION 4.02 Registration of Transfer and Exchange of Certificates................... 18
-----------------------------------------------------
SECTION 4.03 Mutilated, Destroyed, Lost or Stolen Certificates....................... 19
-------------------------------------------------
SECTION 4.04 Persons Deemed Owners................................................... 19
---------------------
SECTION 4.05 Maintenance of Office or Agency......................................... 19
-------------------------------
SECTION 4.06 ERISA Considerations.................................................... 19
--------------------
SECTION 4.07 Authenticating Agent.................................................... 20
--------------------
SECTION 4.08 Book-Entry Certificates................................................. 21
-----------------------
SECTION 4.09 Notices to Clearing Agency.............................................. 22
--------------------------
SECTION 4.10 Definitive Certificates................................................. 22
-----------------------
ARTICLE V: The Trustee....................................................................... 23
-----------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5.01 Duties of the Trustee.................................................. 23
---------------------
SECTION 5.02 Certain Matters Affecting the Trustee.................................. 25
-------------------------------------
SECTION 5.03 Trustee Not Liable for Certificates.................................... 26
-----------------------------------
SECTION 5.04 Trustee May Own Certificates........................................... 26
----------------------------
SECTION 5.05 Trustee's Fees and Expenses............................................ 26
---------------------------
SECTION 5.06 Eligibility Requirements for Trustee................................... 26
------------------------------------
SECTION 5.07 Resignation and Removal of the Trustee................................. 27
--------------------------------------
SECTION 5.08 Successor Trustee...................................................... 28
-----------------
SECTION 5.09 Merger or Consolidation of Trustee..................................... 28
----------------------------------
SECTION 5.10 Appointment of Co-Trustee or Separate Trustee.......................... 28
---------------------------------------------
SECTION 5.11 Tax Returns............................................................ 29
-----------
SECTION 5.12 Representations and Warranties of Trustee.............................. 29
-----------------------------------------
SECTION 5.13 Limitation of Powers and Duties........................................ 31
-------------------------------
ARTICLE VI: The Depositor................................................................... 31
-------------
SECTION 6.01 Liability of the Depositor............................................. 31
--------------------------
SECTION 6.02 Merger, Consolidation or Conversion of the Depositor................... 31
----------------------------------------------------
SECTION 6.03 Limitation on Liability of the Depositor and Others.................... 32
---------------------------------------------------
ARTICLE VII: Termination; Optional Purchase of CRB Certificates............................. 32
--------------------------------------------------
SECTION 7.01 Termination............................................................ 32
-----------
SECTION 7.02 Optional Purchase of CRB Certificates.................................. 33
-------------------------------------
ARTICLE VIII: Miscellaneous.................................................................. 33
-------------
SECTION 8.01 Amendment; Waiver...................................................... 33
-----------------
SECTION 8.02 Limitation on Rights of Certificateholders............................. 35
------------------------------------------
SECTION 8.03 Governing Law.......................................................... 35
-------------
SECTION 8.04 Notices................................................................ 36
-------
SECTION 8.05 Severability of Provisions............................................. 36
--------------------------
SECTION 8.06 Notice to Each Rating Agency........................................... 36
----------------------------
SECTION 8.07 No Petition............................................................ 37
-----------
SECTION 8.08 No Recourse............................................................ 37
-----------
SECTION 8.09 Grant of Security Interest............................................. 37
--------------------------
SECTION 8.10 Successors and Assigns................................................. 38
----------------------
SECTION 8.11 Article and Section Headings........................................... 38
----------------------------
SECTION 8.12 Certificates Nonassessable and Fully Paid.............................. 38
-----------------------------------------
</TABLE>
ii
<PAGE>
TRUST AGREEMENT dated as of [ ], 199[ ], between ASSET BACKED
SECURITIES CORPORATION, as depositor (the "Depositor"), and [TRUSTEE NAME], not
in its individual capacity but solely as trustee (the "Trustee")
In consideration of the mutual agreements
herein contained, the Depositor and the Trustee agree as follows:
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.01 Defined Terms. Whenever used in this Agreement, the
-------------
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Affiliate" means, as to any specified Person, (i) any other Person,
---------
directly or indirectly, controlling, controlled by or under common control with
such specified Person and (ii) any officer, director or partner of such
specified Person. The term "control", with respect to any Person, means
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise.
"Aggregate Collateral Balance" means as of any date of determination,
----------------------------
the aggregate of the outstanding principal amounts of all of the CRB
Certificates. As of the Cutoff Date, the Aggregate Collateral Balance shall be
$[ ].
"Agreement" means this Trust Agreement and all amendments hereof and
---------
supplements hereto.
"Available Funds" means, as of any date of determination, the
---------------
aggregate amount then on deposit in the Certificate Account, net of any portion
thereof which represents amounts payable pursuant to clauses (ii) and (iii) of
Section 3.04.
"Benefit Plan" has the meaning specified in Section 4.02(d).
------------
"Book-Entry Certificates" means a beneficial interest in the
-----------------------
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 4.08.
"Business Day" means any day other than a Saturday or a Sunday or a
------------
day on which banking institutions in New York, New York, or in the city in which
the Corporate Trust Office of the Trustee is located, are authorized or
obligated by law, regulation or executive order to be closed.
1
<PAGE>
"Certificate" means any one of the certificates executed and
-----------
authenticated by the Trustee substantially in the forms attached thereto as
Exhibits A and B.
"Certificate Account" means the segregated, noninterest- bearing trust
-------------------
account or accounts, which shall at all times be Eligible Accounts, created and
maintained by the Trustee pursuant to Section 3.02. Funds deposited in the
Certificate Account shall be held in trust for the Certificateholders for the
uses and purposes set forth in this Agreement.
"Certificate Register" means the register maintained pursuant to
--------------------
Section 4.02.
"Certificateholder" or "Holder" means the Person in whose name a
-----------------------------
Certificateholder is registered in the Certificate Register, except that, solely
for the purpose of giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Depositor shall be deemed not to be
Outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage Interests
necessary to effect such consent has been obtained; provided, however, that if
-------- -------
any such Person owns 100% of the Percentage Interests evidenced by a Class of
Certificates, all such Certificates shall be deemed to be Outstanding.
"Class" means all Certificates bearing the same designation as set
-----
forth in Section 4.01.
"[Class [A]] Certificate" means any one of the certificates issued by
-----------------------
the Trust and executed and authenticated by the Trustee substantially in the
form attached hereto as Exhibit A.
"[Class [A]] Certificate Principal Balance" means, with respect to the
-----------------------------------------
[Class [A]] Certificates as of any date of determination, the Initial
Certificate Principal Balance thereof less all payments made with respect to the
Certificates of such Class in accordance with Section 3.05(a)(iii) on previous
Distribution Dates.
"[Class [A]] Certificate Rate" means [[ ]% per annum] [insert Class
----------------------------
[A] interest formula].
"[Class [A]] Interest Amount" means, as to any Distribution Date, an
---------------------------
amount equal to the sum of (i) the amount of interest accrued at the [Class [A]]
Certificate Rate for the related Collection Period on the [Class [A]]
Certificate Principal Balance on the immediately preceding Distribution Date,
(or, in the case of the first Distribution Date, on the Closing Date), after
giving effect to all distributions on such prior Distribution Date, and (ii) any
unpaid [Class [A]] Interest Amounts from prior Distribution Dates, together with
interest thereon, to the extent permitted by law, at the [Class [A]] Certificate
Rate.
"[Class [B]] Certificate" means any one of the certificates issued by
-----------------------
the Trust and executed and authenticated by the Trustee substantially in the
form attached hereto as Exhibit B.
"[Class [B]] Certificate Principal Balance" means, with respect to the
-----------------------------------------
[Class [B]] Certificates as of any date of determination, the Initial
Certificate Principal Balance thereof less all
2
<PAGE>
payments made with respect to the Certificates of such Class in accordance with
Section 3.05(a)(iii) on previous Distribution Dates.
"[Class [B]] Certificate Rate" means [[ ]% per annum] [insert Class
----------------------------
[B] interest formula].
"[Class [B]] Interest Amount" means, as to any Distribution Date, an
---------------------------
amount equal to the sum of (i) the amount of interest accrued at the [Class [B]]
Certificate Rate for the related Collection Period on the [Class [B]]
Certificate Principal Balance on the immediately preceding Distribution Date,
(or, in the case of the first Distribution Date, on the Closing Date), after
giving effect to all distributions on such prior Distribution Date, and (ii) any
unpaid [Class [B]] Interest Amounts from prior Distribution Dates, together with
interest thereon, to the extent permitted by law, at the [Class [B]] Certificate
Rate.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means [ ] 199[ ].
------------
"Code" means the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"CRB Certificate" means any one of the [ ] issued by [ ]
---------------
and transferred to the Trustee by the Depositor pursuant to Section 2.01, as
from time to time are held as a part of the Trust Property and as are more fully
described in the CRB Certificate Schedule attached hereto as Exhibit C.
"CRB Certificate Schedule" means the schedule attached as Exhibit C
------------------------
hereto identifying the CRB Certificates and setting forth the following
information as to each CRB Certificate: (i) the original principal amount as of
the date the CRB Certificates were originally issued and, if different, the
current principal amount as of the Cutoff Date; and (ii) the fractional
undivided interest evidenced thereby as compared to the Aggregate Collateral
Balance as of such dates.
"CRB Certificate Statement" means the servicing report or other
-------------------------
statement setting forth the amount of interest and, if applicable, principal
payable on each Payment Date with respect to the CRB Certificates that is
required to be furnished to each holder of CRB Certificates with respect to each
Payment Date pursuant to the related Pooling and Servicing Agreement.
"Collateral Holder" means the registered holder of any CRB
-----------------
Certificate, which following the execution and delivery of this Agreement by the
parties hereto shall be the Trustee.
3
<PAGE>
"Corporate Trust Office" means the principal corporate trust office of
----------------------
the Trustee in the State of New York at which at any particular time its
corporate trust business with respect to this Agreement and the Trust shall be
administered, which office at the date of the execution of this Agreement is
located at [ ].
"Cutoff Date" means [ ], 199[ ].
-----------
"Definitive Certificates" has the meaning specified in Section 4.08.
-----------------------
"Depositor" means Asset Backed Securities Corp., a Delaware
---------
corporation.
"Depository Agreement" means the Depository Agreement dated as of the
--------------------
Closing Date among the Trust, the Trustee and DTC, as the initial Clearing
Agency, substantially in the form attached hereto as Exhibit E.
"Determination Date" has the meaning specified in Section 3.07.
------------------
"Distribution Date" means the [second] [third] Business Day following
-----------------
each Payment Date, commencing on [ ], 199[ ].
"Distribution Date Statement" has the meaning specified in Section
---------------------------
3.07.
"DTC" means The Depositary Trust Company, as the initial Clearing
---
Agency.
"Eligible Account" means either (i) an account maintained with a
----------------
Federal or state chartered depository institution or trust company the unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the unsecured
debt obligations of such holding company) are rated by the Rating Agency in one
of its generic rating categories which signifies investment grade at the time
any amounts are held in deposit therein, (ii) an account the deposits in which
are insured by the FDIC to the limits established by such corporation, provided
that any such deposits not so insured shall be otherwise maintained such that
(as evidenced by an Opinion of Counsel delivered to the Trustee and to each
Rating Agency) the Certificateholders have a claim with respect to the funds in
such account or a perfected first priority security interest against any
collateral (which shall be limited to Eligible Investments) fully securing such
funds that is superior to claims of any other depositors or creditors of the
depository institution or trust company with which such account is maintained,
or (iii) a trust account maintained with a Federal or state chartered depository
institution or trust company acting in its fiduciary capacity or (iv) such other
account that will not cause each Rating Agency to downgrade or withdraw the
rating of the Certificates as evidenced by a letter from each Rating Agency to
such effect delivered to the Trustee.
"Eligible Investments" means any one or more of the following (any of
--------------------
which may be obligations of, or may be purchased from the Depositor or the
Trustee if the indicated requirements are met):
4
<PAGE>
(i) direct obligations of, or obligations fully guaranteed as to
principal and interest by, the United States of America or any agency or
instrumentality thereof, provided such obligations are backed by the full faith
and credit of the United States;
(ii) repurchase obligations (the collateral for which is held by a third
party or the Trustee) with respect to any security described in clause (i)
above, provided that the long-term unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated by each Rating Agency in
its highest long-term rating category;
(iii) certificates of deposit, time deposits, demand deposits and
bankers' acceptances of any bank or trust company incorporated under the laws
of the United States or of any state thereof or the District of Columbia,
including the Trustee and any Affiliate thereof, provided that the long-term
debt obligations of such bank or trust company (or, in the case of the principal
depository institution in a depository institution holding company, the long-
term unsecured debt obligations of the depository institution holding company)
at the date of acquisition thereof have been rated by each Rating Agency in its
highest long-term rating category or the short-term unsecured debt obligations
of which are rated "A1" or the equivalent.
(iv) commercial paper of any corporation incorporated under the laws of
the United States or any state thereof or the District of Columbia which on the
date of investment or contractual commitment to invest has been rated by each
Rating Agency in its highest short-term rating category;
(v) investment in money market funds having a rating from each Rating
Agency in the highest investments category granted thereby (including funds for
which the Trustee or the Depositor or any of their respective Affiliates is
investment manager or advisor); and
(vi) any other obligation or security acceptable to each Rating Agency
(as certified by a letter from each Rating Agency to the Trustee).
"ERISA" has the meaning specified in Section 4.06.
-----
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Initial [Class [A]] Certificate Principal Balance" means with respect to
-------------------------------------------------
the [Class [A]] Certificates, the aggregate principal balance of the [Class [A]]
Certificates on the Closing Date as set forth in Section 4.01.
"Initial [Class [B]] Certificate Principal Balance" means with respect to
-------------------------------------------------
the [Class [B]] Certificates, the aggregate principal balance of the [Class [B]]
Certificates on the Closing Date as set forth in Section 4.01.
5
<PAGE>
"Interest Distribution Amount" means, as to any Distribution Date, an
----------------------------
amount equal to (i) the aggregate amount actually distributed on the CRB
Certificates on the immediately preceding Payment Date and identified as
allocable to interest in the related CRB Certificate Statement plus (ii) the
interest portion of the purchase price paid by the Depositor in connection with
the repurchase of any CRB Certificates pursuant to Section 2.03 since the
preceding Distribution Date.
"Majority in Interest" means the Holders of Certificates evidencing, in
--------------------
the aggregate, at least 51% of the Percentage Interests evidenced by all
Certificates.
"Moody's" means Moody's Investors Service, Inc.
-------
"Officers' Certificate" means a certificate signed by the Chairman of the
---------------------
Board, the President, any Vice President, the Treasurer, the Secretary, or one
of the Assistant Treasurers or Assistant Secretaries of the Depositor, as
required by this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be
------------------
counsel for the Depositor, which opinion is reasonably acceptable to the
Trustee.
"Outstanding" means, with respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement but excluding:
(i) Certificates theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement unless
proof satisfactory to the Trustee is presented that any such Certificates are
held by a holder in due course.
"Payment Date" means the dates on which payments are due in respect of
------------
the CRB Certificates, as specified in the related Pooling and Servicing
Agreement.
"Percentage Interest" means, with respect to any Certificate, the
-------------------
undivided beneficial ownership interest in the Trust Property evidenced by
Certificates of the same Class as such Certificate or by all Certificates, in
either case as specified more fully herein.
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
"Plan Assets Regulation" means the plan assets regulation adopted by the
----------------------
Department of Labor under ERISA and codified at 29 C.F.R. (S) 2510.3-101.
6
<PAGE>
"Pooling and Servicing Agreement" means the Pooling and Servicing
-------------------------------
Agreement dated as of [ ], among [ ], as seller, [
], as servicer, and [ ], as trustee, pursuant to which the CRB
Certificates were issued, attached hereto as Exhibit D.
"Principal Distribution Amount" means, as to any Distribution Date, an
-----------------------------
amount equal to (i) the aggregate amount, if any, actually distributed on the
CRB Certificates on the immediately preceding Payment Date and identified as
allocable to principal in the related CRB Certificate Statement plus (ii) the
principal portion of the purchase price paid by the Depositor in connection with
the repurchase of any of the CRB Certificates pursuant to Section 2.03 since the
preceding Distribution Date.
"Rating Agency" means each of [S&P and Moody's]. References herein to
-------------
the highest rating categories of any Rating Agency shall mean such ratings
without any modifiers.
"Record Date" means, with respect to any Distribution Date, the close of
-----------
business on the last day immediately preceding such Distribution Date (or, in
the case of Definitive Certificates, the last day of the month preceding the
month in which such Distribution Date occurs).
"Responsible Officer", when used with respect to the Trustee, means the
-------------------
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or
Assistant Trust Officer, the Controller and any Assistant Controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and 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.
"S&P" means Standard & Poor's Corporation.
---
"Treasury Regulations" means regulations, including proposed or temporary
--------------------
regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" means the trust created by this Agreement and denominated as Card
-----
Account Trust, Series 199[ ]-[ ].
"Trust Property" means the corpus of the Trust, which shall consist of:
--------------
(i) the CRB Certificates described in the CRB Certificate Schedule; (ii) all
distributions thereon on and after the Cutoff Date; and (iii) the Certificate
Account and such assets that are deposited therein from time to time and any
investments thereof, together with any and all income, proceeds and payments
with respect thereto.
7
<PAGE>
"Trustee" means [ ], a New York banking corporation, not in its
-------
individual capacity but solely as Trustee hereunder.
SECTION 1.02 Other Definitional Provisions and Rules of Construction.
-------------------------------------------------------
(a) All terms defined in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement as a whole and not to any
particular provision of this Agreement; Article, Section and Exhibit references
contained in this Agreement are references to Articles, Sections and Exhibits in
or to this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".
(c) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(d) Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of the CRB Certificates;
-----------------------------------
Original Issuance of Certificates
---------------------------------
SECTION 2.01 Creation and Declaration of Trust; Conveyance of the CRB
--------------------------------------------------------
Certificates. (a) The Depositor, concurrently with the execution and delivery
- ------------
of this Agreement, does hereby sell, transfer, assign, set over and otherwise
convey to the Trustee, in trust, for the use and benefit of the
Certificateholders, without recourse, all the right, title and interest of the
Depositor including any security interest therein, in, to and under the CRB
Certificates, all payments and all proceeds therefrom, and all other assets
constituting the Trust Property.
(b) In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Trustee the following:
8
<PAGE>
(i) confirmation of DTC of the sale by the Depositor of the CRB
Certificates to the Trustee and of the making by DTC of entries on its records
identifying the CRB Certificates as belonging to the Trustee; and
(ii) a copy of the Pooling and Servicing Agreement together
with all exhibits and amendments thereto.
(c) It is intended that the conveyance of the Depositor's right, title
and interest in and to the CRB Certificates and all other assets constituting
the Trust Property pursuant to this Agreement shall constitute, and be construed
as, an absolute sale of the CRB Certificates by the Depositor to the Trustee for
the benefit of the Certificateholders. Furthermore, it is not intended that
such conveyance be deemed a pledge of the CRB Certificates and the other assets
constituting the Trust Property by the Depositor to the Trustee to secure a debt
or other obligation of the Depositor. However, in the event that,
notwithstanding the aforementioned intent of the parties, the CRB Certificates
and the other assets constituting the Trust Property are held to be the property
of the Depositor, or if for any other reason this Agreement is held or deemed to
create a security interest in the CRB Certificates and the other assets
constituting the Trust Property, then it is intended as follows: (a) this
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time
in the State of New York; (b) the conveyance provided for in this Section shall
be deemed to be a grant by the Depositor to the Trustee of a security interest
in all the Depositor's right, title and interest in and to the CRB Certificates
and all amounts payable to the holders of the CRB Certificates after the Closing
Date in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including without limitation all amounts from time to time held
or invested in the Certificate Account, whether in the form of cash,
instruments, securities or other property, (c) the possession by the Trustee or
its agent of the CRB Certificates and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the Uniform Commercial Code; and (d)
notifications to persons holding such property, and 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. Notwithstanding the foregoing, the parties to this Agreement
intend the transfer pursuant to this section to be a true, absolute and
unconditional sale of the CRB Certificates and all such other assets
constituting the Trust Property by the Depositor to the Trustee.
(d) If the CRB Certificates are reissued as definitive certificates as
provided in the Pooling and Servicing Agreement, the Trustee shall cause such
definitive certificates to be issued in its name as Trustee on behalf of the
Trust and shall thereafter maintain possession of such definitive certificates
during the term of this Agreement unless otherwise required to surrender such
definitive certificates for final payment as provided in the Pooling and
Servicing Agreement.
SECTION 2.02 Acceptance by Trustee. The Trustee hereby acknowledges
---------------------
the receipt by it of the CRB Certificates and the documents referred to in
Section 2.01(b)(ii) and declares that it holds and will hold such CRB
Certificates; such other documents and all other assets and
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documents delivered to it pursuant to this Agreement, and that it will hold all
such assets and all such other assets comprising the Trust Property in trust for
the exclusive use and benefit of all present and future Certificateholders and
for the purposes and subject to the terms and conditions set forth in this
Agreement.
SECTION 2.03 Representations and Warranties of the Depositor. The
-----------------------------------------------
Depositor hereby represents and warrants to the Trustee that as of the Closing
Date:
(a) With respect to the CRB Certificates:
(i) the information set forth in the CRB Certificate Schedule is true
and correct in all material respects as of the date or dates such information is
furnished;
(ii) immediately prior to the sale and assignment herein contemplated,
the Depositor was the sole owner of the CRB Certificates free and clear of any
lien, pledge, charge or encumbrance of any kind;
(iii) the Depositor acquired its ownership in the CRB Certificates in good
faith without notice of any adverse claim; and
(iv) the Depository has not assigned any interest in the CRB
Certificates or any distributions thereon, except as contemplated herein.
The representations and warranties set forth in this Section 2.03(a)
shall survive the transfer and assignment of the CRB Certificates. Upon
discovery by the Depositor or the Trustee of a breach of any of the foregoing
representations and warranties which materially and adversely affects the
interests of the Certificateholders in the CRB Certificates, the Depositor or
the Trustee shall give prompt written notice to the other, to the
Certificateholders and to each Rating Agency. Within 90 days of its discovery or
its receipt of notice of any such breach, the Depositor shall cure such breach
in all material respects or, if such breach cannot be cured, the Depositor shall
repurchase the affected CRB Certificates from the Trustee if the Depositor is so
directed by a Majority in Interest of the Certificateholders. Any such
repurchase of a CRB Certificate by the Depositor shall be accomplished prior to
the Distribution Date next following the receipt of such direction by a Majority
in Interest of the Certificateholders at a price equal to the sum of (i) the
outstanding principal amount of such CRB Certificate as of the date of such
repurchase and (ii) all unpaid accrued interest on such CRB Certificate to the
date of such repurchase at [ ] per annum (the "Purchase Price"). The payment
of the Purchase Price in connection with repurchased CRB Certificates shall be
considered a prepayment in full of such CRB Certificates and shall be delivered
to the Trustee for deposit in the Certificate Account in accordance with the
provisions of Section 3.02. Upon such deposit into the Certificate Account,
such CRB Certificates shall be released to the Depositor, and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be reasonably requested and provided by the Depositor
to vest in the Depositor, or its designee or assignee, title to the CRB
Certificates repurchased pursuant hereto. The Depositor shall be entitled to
all amounts received by the Trustee in respect of any repurchased CRB
Certificate to the extent
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the distribution of such amounts would not make the total amount distributed in
respect of any such repurchased CRB Certificate greater than the Purchase Price
therefor. The obligation of the Depositor to cure or repurchase the CRB
Certificates as to which a breach specified in this Section 2.03(a) has occurred
and is continuing shall constitute the sole remedy respecting such breach
against the Depositor available to Certificateholders or the Trustee on behalf
of Certificateholders.
(b) With respect to the Depositor:
(i) the Depositor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full power and
authority to execute, deliver and perform this Agreement;
(ii) the Certificates will be free and clear of any right, charge,
security interest, or lien or claim in favor of the Depositor;
(iii) this Agreement has been duly authorized, executed and delivered by
the Depositor and assuming due authorization, execution and delivery by the
Trustee, constitutes the valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with its terms, except as enforcement
hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect 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) neither the execution nor the delivery of this Agreement nor the
issuance, delivery and sale of the Certificates, nor the consummation of any
other of the transactions contemplated herein nor the performance of its
obligations under this Agreement or the Certificates will result in the breach
of any term or provision of the certificate of incorporation or bylaws of the
Depositor or conflict with, result in a breach, violation or acceleration of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, the terms of any material contract, indenture
or other agreement or instrument to which the Depositor is a party or by which
it is bound or any of its assets is bound, or any statute, order or regulation
applicable to the Depositor of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Depositor; and
(v) there are no actions or proceedings against, or investigations of,
the Depositor pending, or, to the knowledge of the Depositor, threatened, before
any court, administrative agency or other tribunal (A) asserting the invalidity
of this Agreement or the Certificates, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions contemplated by
this Agreement or (C) which might materially and adversely affect the validity
or enforceability of this Agreement or the Certificates.
SECTION 2.04 Agreement to Authenticate and Deliver Certificates. The
--------------------------------------------------
Trustee acknowledges the transfer, delivery and assignment to it of the Trust
Property, and concurrently with such transfer and delivery, the Trustee has
executed, authenticated and delivered, to or upon the order
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of the Depositor, the Certificates duly executed and authenticated by the
Trustee in authorized denominations evidencing ownership of the entire Trust
Property and registered in such names as the Depositor shall direct in writing,
all in accordance with the terms and subject to the conditions hereof.
ARTICLE III
Administration of the Trust Property;
-------------------------------------
Distributions and Reports to Certificateholders
-----------------------------------------------
SECTION 3.01 Administration of the Trust Property. The Trustee shall
------------------------------------
administer the Trust Property for the benefit of the Certificateholders. The
Trustee shall make reasonable effort to collect all payments required to be made
pursuant to the terms of the CRB Certificates and the Pooling and Servicing
Agreement in a manner consistent with the terms of the Pooling and Servicing
Agreement and such CRB Certificates. In connection with its receipts of any
funds distributed in respect of a CRB Certificate on any Payment Date, the
Trustee shall review the related CRB Certificate Statement and shall confirm
that the principal and interest payments received on such Payment Date are equal
to the distribution amount shown on the related CRB Certificate Statement. If
(i) the amount of any distribution on a CRB Certificate varies from the amount
reported to the Trustee on the applicable CRB Certificate Statement for such
distribution, (ii) the Trustee shall not have received a distribution on any CRB
Certificate by the close of business on the date on which such distribution was
to be received by the Trustee or (iii) the Trustee shall gain actual knowledge
of any other default or event of default under the Pooling and Servicing
Agreement, the Trustee shall promptly notify the Depositor and the
Certificateholders and shall proceed in accordance with the provisions hereof,
including Section 5.01(c), (d) and (e).
SECTION 3.02 Certificate Account. (a) The Trustee, for the benefit of
-------------------
the Certificateholders, shall establish and maintain one or more non-interest
bearing Eligible Accounts (collectively, the "Certificate Account"), entitled [
], as Trustee, in trust for the registered holders of Certificates in Card
Account Trust, Series, 199[ ]-[ ]. The Trustee, on behalf of the
Certificateholders, shall possess all right, title and interest in all funds
deposited from time to time n the Certificate Account and in all proceeds
thereof. The Trustee shall upon receipt deposit in the Certificate Account all
amounts collected and payments received in respect of the CRB Certificates,
including:
(i) all distributions received on the CRB Certificates subsequent to the
Cutoff Date; and
(ii) any amount required to be deposited in the Certificate Account
pursuant to Section 2.03(a) in connection with the repurchase of a CRB
Certificate by the Depositor.
If, at any time, the Certificate Account ceases to be an Eligible
Account, the Trustee shall within five Business Days establish a new Certificate
Account meeting the conditions specified
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above and transfer any cash and any investments on deposit in the Certificate
Account to such new Certificate Account, and from the date such new Certificate
Account is established, it shall be the Certificate Account.
(b) The Trustee shall give written notice to the Depositor and each
Rating Agency of the location of each Eligible Account constituting the
Certificate Account upon establishment thereof and prior to any change thereof.
SECTION 3.03 Investment of Funds in the Certificate Account. The
----------------------------------------------
Depositor, on behalf of the Trust, may direct in writing any depository
institution maintaining the Certificate Account to invest the funds in such
Certificate Account in one or more Eligible Investments, which shall mature not
later than the Business Day immediately preceding the next Distribution Date
(or, if the Trustee in its commercial capacity is the obligor of such Eligible
Investments and the Certificate Account is maintained by the Trustee, such
Eligible Investments shall mature not later than the next Distribution Date) and
shall not be sold or disposed of prior to their respective maturities; provided,
--------
however, that if the Depositor fails to select any such Eligible Investment, the
- -------
Trustee shall direct such institution to invest such funds in demand deposits
meeting the requirements described in item (iii) of the definition of Eligible
Investments. All such Eligible Investments shall be made in the name of the
Trustee, in trust for the Holders of the Certificates, or its nominee. All
proceeds of any such investment shall be deposited in the Certificate Account,
may not be reinvested and may only be withdrawn and applied for the purposes set
forth herein.
SECTION 3.04 Permitted Withdrawals from the Certificate Account. The
--------------------------------------------------
Trustee, may from time to time withdraw funds from the Certificate Account for
the following purposes:
(i) to make payments to Certificateholders in the amounts and in the
manner provided for in Section 3.05;
(ii) to reimburse the Trustee, to the extent of the net proceeds
recovered on any defaulted CRB Certificates, prior to the distribution of such
proceeds to Certificateholders, for any unreimbursed expenses incurred with
respect to the exercise of remedies in respect of such CRB Certificates pursuant
to Section 5.01;
(iii) to reimburse the Depositor for expenses incurred by and reimbursable
to the Depositor pursuant to Section 6.03;
(iv) to clear and terminate the Certificate Account upon the termination
of this Agreement.
SECTION 3.05 Distributions. (a) On each Distribution Date, the
-------------
Trustee shall withdraw from the Certificate Account all Available Funds then on
deposit and shall distribute such Available Funds (in each case to the extent of
the remaining Available Funds) for the following purposes and in the following
order of priority:
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(i) to pay to the Holders of the [Class [A]] Certificates the [Class
[A]] Interest Amount for such Distribution Date and to pay to the Holders of the
[Class [B]] Certificates the [Class [B]] Interest Amount for such Distribution
Date, without preference or priority one over the other;
(ii) to pay to the Trustee a pro rata portion of the Trustee's annual fee
for services;
(iii) to pay to the Holders of the [Class [A]] Certificates the [Class
[A]] Principal Distribution Amount for such Distribution Date and to pay to the
Holders of the [Class [B]] Certificates the [Class [B]] Principal Distribution
Amount for such Distribution Date, without preference or priority one over the
other; and
(iv) to pay to the Trustee any unreimbursed expenses incurred by the
Trustee but not covered by the Trustee's annual fee.
(b) All distributions made with respect to each Class on each
Distribution Date shall be allocated pro rata among the Outstanding Certificates
of such Class based upon their respective Percentage Interests in respect of
such Class. Payments to the Certificateholders of each Class on each
Distribution Date will be made to the Certificateholders of record on the
related Record Date (other than as provided in Section 7.01 with respect to the
final distribution). Distributions to any Certificateholder on any Distribution
Date shall be made by wire transfer of immediately available funds, at the
expense of the Certificateholder requesting such wire transfer by deducting a
wire transfer fee from the related transfer, to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have so notified the Trustee in
writing at least five Business Days prior to the related Record Date and such
Certificateholder shall hold Certificates with an aggregate Certificate
Principal Balance as of the Closing Date of at least $1,000,000 or in such other
manner as shall be agreed to by the Trustee and such Certificateholder, or
otherwise by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. Final distribution on
each Certificate will be made in like manner, but only upon present and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution.
SECTION 3.06 Compliance with Withholding Requirements. Notwithstanding
----------------------------------------
any other provision of this Agreement to the contrary, the Trustee shall comply
with all Federal income tax withholding requirements respecting distributions
to, or receipts of amounts on behalf of, Certificateholders that the Trustee
reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or principal distribution thereof
to any Certificateholder pursuant to federal withholding requirements, the
Trustee shall indicate in the statement required pursuant to Section 3.07 the
amount so withheld.
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SECTION 3.07 Statements to Certificateholders. On the second Business
--------------------------------
Day preceding each Distribution Date (each, a "Determination Date"), the
Depositor (or its designee) shall prepare and forward a statement (a
"Distribution Date Statement") to the Trustee, who in turn shall forward such
statement by mail to each Rating Agency and each Certificateholder. Each such
Distribution Date Statement shall set forth the following information:
(i) the Available Funds for such Distribution Date;
(ii) the Interest Distribution Amount for such Distribution Date;
(iii) the Principal Distribution Amount, if any, for such Distribution
Date;
(iv) with respect to such Distribution Date, the [Class [A]] Interest
Amount, the [Class [A]] Principal Distribution Amount and the aggregate amount
of distributions made to the [Class [A]] Certificateholders on such Distribution
Date in respect of each such item pursuant to Section 3.05;
(v) with respect to such Distribution Date, the [Class [B]] Interest
Amount, the [Class [B]] Principal Distribution Amount and the aggregate amount
of distributions made to the [Class [B]] Certificateholders on such Distribution
Date in respect of each such item pursuant to Section 3.05;
(vi) the [Class [A]] Certificate Principal Balance and the [Class [B]]
Certificate Principal Balance, after giving effect to distributions of principal
of such Certificates on such Distribution Date; and
(vii) the amount of any withdrawals made from the Certificate Account
since the immediately preceding Distribution Date pursuant to clauses (ii)
through (iv) of Section 3.04, together with a general description of the purpose
of each such withdrawal.
In the case of the information furnished pursuant to clauses (i), (iv)
and (v) above, the foregoing amounts shall also be stated as a dollar amount per
$1,000 principal amount of the applicable Class.
In addition, the Trustee promptly shall furnish to Certificateholders
copies of any notices, statements, reports or other communications received by
the Trustee as the Collateral Holder.
On or before January 31 of each calendar year, beginning with calendar
year 199[ ], the Trustee shall furnish by first class mail to each Person who at
any time during the previous calendar year was a Certificateholder of record a
statement containing the information required to be contained in the regular
report to Certificateholders, as set forth in clauses (iv) and (v) above,
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Certificateholder which statement shall contain sufficient
information to allow Certificateholders to
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<PAGE>
calculate their United States federal income tax liability with respect to the
Certificates. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code.
The Trustee shall furnish to each Certificateholder during the term of
this Agreement such periodic, special or other reports or information, whether
or not provided for herein, as shall be necessary, reasonable or appropriate
with respect to the Certificateholder or otherwise with respect to the purposes
of this Agreement, all such reports or information to be provided by and in
accordance with such applicable instructions and directions as the
Certificateholder may reasonably require and at the expense of such
Certificateholder.
SECTION 3.08 Reports of the Trustee; Certificate Account. Upon request
-------------------------------------------
of a Certificateholder, the Trustee shall make available to Certificateholders a
statement setting forth the status of the Certificate Account as of the close of
business on the Distribution Date immediately preceding such request, and
showing, for the period covered by such statement, the aggregate of deposits
into and withdrawals from the Certificate Account.
SECTION 3.09 Access to Certain Documentation and Information. (a) The
-----------------------------------------------
Trustee shall provide the Certificateholders with access to a copy of each
report received by it as Collateral Holder under the Pooling and Servicing
Agreement with respect to the CRB Certificates. The Trustee shall also provide
the Depositor with access to each such report and to all written reports,
documents and records required to be maintained by the Trustee in respect of its
duties hereunder. The Trustee shall keep a certified copy or duplicate original
of this Agreement on file at its Corporate Trust Office for inspection by any
Certificateholder. The Trustee shall provide, at the written request of three
or more Certificateholders or one or more Certificateholders evidencing
Percentage Interests of not less than 25% of the Certificates, access to the
current list of the names and addresses of all Certificateholders for the
purpose of communicating with other Certificateholders with respect to their
rights under this Agreement or under the Certificates. Such access shall be
afforded without charge but only upon reasonable request evidenced by prior
written notice to the Trustee and during normal business hours at offices
designated by the Trustee.
ARTICLE IV
The Certificates
----------------
SECTION 4.01 The Certificates. (a) The [Class [A]] Certificates and
----------------
the [Class [B]] Certificates shall be substantially in the respective forms set
forth in Exhibits A and B hereto. The Certificates shall, on original issue, be
executed and authenticated by the Trustee and delivered by the Trustee to or
upon the order of the Depositor upon receipt by the Trustee of the CRB
Certificates and any other documents specified in Section 2.01.
(b) The Certificates shall be issuable in fully registered form only,
in the minimum original principal amounts of $1,000 and integral multiples
thereof.
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(c) The Certificates shall be executed by manual signature on behalf
of the Trustee in its capacity as trustee hereunder by a Responsible Officer.
Certificates bearing the manual signatures of individuals who were at any time
the proper officers of the Trustee shall bind the Trustee, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificate. No Certificates shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein executed by the Trustee by manual signature, and such certificate
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates issued on the Closing Date shall be dated the Closing Date. All
Certificates issued thereafter shall be dated the date of their authentication.
SECTION 4.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall keep at one of the offices or agencies to be maintained
by the Trustee in accordance with Section 4.05 a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided.
(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall execute and deliver, in the name
of the designated transferee or transferees, one or more new Certificates in
authorized denominations and of the same Class and aggregate Percentage
Interest.
(c) At the option of the Certificateholders, each Certificate may be
exchanged for a Certificate of like aggregate original principal amount, series,
class, original issue date and maturity, in different authorized denominations
upon surrender of the Certificates to be exchanged at the office maintained by
the Trustee pursuant to Section 4.05. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates that the Certificateholder making the exchange is entitled to
receive. Each Certificate presented or surrendered for registration of transfer
or exchange shall (if so required by the Trustee) be duly endorsed by, or be
accompanied by a written instrument of transfer in the form satisfactory to the
Trustee, duly executed by the Holder thereof or his attorney duly authorized in
writing.
(d) Certificates delivered upon any exchange will evidence the same
obligations, and will be entitled to the same rights and privileges, as the
Certificates surrendered.
(e) No service charge shall be imposed for any registration of transfer
or exchange of Certificates of any Class, but the Trustee may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(f) All Certificates surrendered for registration of transfer and
exchange shall be cancelled and destroyed by the Trustee in accordance with its
standard procedures without liability on its part.
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SECTION 4.03 Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a)(i) any mutilated Certificate is surrendered to the Trustee or (ii) the
Depositor and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate and of the ownership thereof and
(b) there is delivered to the Trustee and the Depositor such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of receipt by either the Trustee or the Depositor of written notice that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor, form,
terms and principal amount, as applicable, bearing a number not
contemporaneously Outstanding, so that neither gain nor loss in interest shall
result from such exchange or substitution.
Upon the issuance of any new Certificate under this Section 4.03, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Any duplicate Certificate issued pursuant to this Section 4.03 shall
constitute complete and indefeasible evidence of the rights of a Holder of the
originally issued Certificate as if such duplicate Certificate was originally
issued, whether or not the lost, stolen or destroyed Certificate shall be, at
any time, enforceable by anyone and shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other Certificates
of the respective Class, if any, duly issued hereunder. All Certificates
surrendered to the Trustee under the terms of this Section 4.03 shall be
cancelled and destroyed by the Trustee in accordance with its standard
procedures without liability on its part. The provisions of this Section 4.03
are exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Certificates.
SECTION 4.04 Persons Deemed Owners. The Trustee and the Depositor
---------------------
and any agent of either of them may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 3.05 and for all other purposes
whatsoever, and neither the Trustee, the Depositor nor any such agent shall be
affected by notice to the contrary.
SECTION 4.05 Maintenance of Office or Agency. The Trustee will
-------------------------------
maintain at its expense in the Borough of Manhattan, The City of New York, State
of New York, an office or agency where Certificates may be surrendered for
registration of transfer or exchange and presented for final distribution and
where notices and demands to or upon the Trust Property in respect of the
Certificates and this Agreement may be served. Such office or agency shall
initially be maintained at [ ]. The Trustee will give prompt written
notice to the Certificateholders and the Depositor of any change in the location
of any such office or agency.
SECTION 4.06 ERISA Considerations. No Certificate may be acquired by
--------------------
an employee benefit plan, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that is subject to the
provisions of Title I of ERISA, a plan
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described in Section 4975(e)(i) of the Code or any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity (each,
a "Benefit Plan"). Each Certificateholder, by virtue of the acquisition and
holding of a Certificate, will be deemed to have represented and warranted to
the Depositor and the Trustee that such Certificateholder is not a Benefit Plan.
SECTION 4.07 Authenticating Agent. (a) The Trustee may appoint one or
--------------------
more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates.
Whenever reference is made in this Agreement to the authentications of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
acceptable to the Depositor.
(b) Any institution succeeding to the corporate agency business of any
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any power or any further act on the part of the Trustee
or such authenticating agent. An authenticating agent may at any time resign by
giving notice of resignation to the Trustee and to the Depositor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Depositor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Depositor, the Trustee promptly may appoint a successor authenticating
agent. Any successor authenticating agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to the Trustee and the Depositor. The Depositor agrees to pay
to each authenticating agent from time to time reasonable compensation for its
services under this Section. In the event the Trustee acts as authenticating
agent hereunder, the provisions of Article V shall be applicable to the Trustee
in such other capacity as authenticating agent.
(c) Pursuant to an appointment made under this Section, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
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This is one of the [Class [A]] [Class [B]] Certificates described in the
Trust Agreement referred to herein.
----------------------------
----------------------------
as Authenticating Agent
for the Trustee,
By _____________________
Authorized Officer
SECTION 4.08 Book-Entry Certificates. The Certificates, upon original
-----------------------
issuance, shall be issued in the form of one or more typewritten Certificates
for each Class representing the Book-Entry Certificates, to be delivered to DTC,
the initial Clearing Agency, by, or on behalf of, the Trust. The Certificates
shall initially be registered on the Certificate Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Certificateholder will
receive a Definitive Certificate (as defined below) representing such
Certificateholder's interest in the Certificates, except as provided in Section
4.10. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the applicable Certificateholder pursuant to
Section 4.10.:
(a) the provisions of this Section shall be in full force and effect;
(b) the Depositor and the Trustee may deal with the Clearing Agency and the
Clearing Agency Participant for all purposes (including the making of
distributions in respect of the Certificates) as the authorized representatives
of the respective Certificateholders;
(c) to the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) the rights of the respective Certificateholders shall be exercised only
through the Clearing Agency and the Clearing Agency participants and shall be
limited to those established by law and agreements between such
Certificateholders and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Depository Agreement. Unless and until Definitive
Certificates are issued pursuant to Section 4.10, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants and
receive and transmit distributions of principle and interest and any other
amounts on the related Certificates to such Clearing Agency Participants; and
(e) whenever this agreement requires or permits actions to be taken with
the consent of, or at the direction of, Certificateholders evidencing a
specified percentage of the aggregate principal amount or notional amount, as
the case may be, of Outstanding Certificates of any Class, the Clearing Agency
shall be deemed to represent such percentage
20
<PAGE>
only to the extent that it has received instructions to such effect from
Certificateholders and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
principal amount or notional amount, as the case may be, of the applicable Class
of Certificates and has delivered instructions to the Trustee.
SECTION 4.09 Notices to Clearing Agency. Whenever any notice or other
--------------------------
communication is required to be given to Certificateholders with respect to
which Book-Entry Certificates have been issued, unless and until Definitive
Certificates shall have been issued to the related Certificateholders, the
Trustee shall give all such notices and communications to the Clearing Agency.
SECTION 4.10 Definitive Certificates. If Book-Entry Certificates have
-----------------------
been issued with respect to any Class and (a) the depositor advised the Trustee
that DTC is no longer willing or able to discharge properly its responsibilities
under the Depository Agreement with respect to such Class and the Trustee or the
Depositor is unable to locate a qualified successor, (b) the Depositor, at its
option, advises the Trustee that it elects to terminate the book-entry system
with respect to such Class through the Clearing Agency or (c) after the
occurrence of a payment default with respect to the CRB Certificates,
Certificateholders representing at least a majority of the outstanding principal
amount of Certificate of such Class advise the Clearing Agency (which shall then
notify the Trustee) in writing that the continuation of a book-entry system with
respect to the Certificates of such Class through the Clearing Agency is no
longer in the best interests of the holders of such Certificates, then the
Trustee shall cause the Clearing Agency to notify all holders of such
Certificates, through the Clearing Agency, of the occurrence of any such event
and of the availability of Definitive Certificates to holders of such
Certificates requesting the same. Upon surrender to the Trustee of any such
Certificates representing Book-Entry Certificates by the Clearing Agency,
accompanied by instructions for re-registration, the Trustee shall execute
authenticate and deliver such Certificates as Definitive Certificates to such
Certificateholders in accordance with the instructions of the Clearing Agency.
None of the Trust, the Depositor or the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of such Definitive
Certificate, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of such
Definitive Certificates as Certificateholders hereunder.
Upon the issuance of Definitive Certificates, distributions of amount in
respect of such Definitive Certificates shall thereafter be made by the Trustee
on each Distribution Date in accordance with the procedures set forth in Section
3.05 directly to holders of Definitive Certificates in whose names the
Definitive Certificates were registered at the close of business on the related
Record Date. Such distributions shall be made by check mailed to the address of
such holder as it appears on the Certificate Register maintained by the Trustee
(or, as provided in Section 3.05, by wire transfer); provided, however, that the
-------- -------
final payment on any such Definitive Certificate shall be made only upon
presentation and surrender of such Definitive Certificate at the office or
agency specified in the notice of final distribution to Certificateholders.
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ARTICLE V
The Trustee
-----------
SECTION 5.01 Duties of the Trustee. (a) The Trustee undertakes to
---------------------
perform such duties and only such duties as are specifically set forth in this
Agreement. The Trustee shall have the authority to exercise the rights and
powers vested in it by this Agreement. Any permissive right of the Trustee set
forth in this Agreement shall not be construed as a duty.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished to it pursuant to
any provision of this Agreement or to it in its capacity as Collateral Holder
pursuant to the Pooling and Servicing Agreement, shall examine them to determine
whether they conform to the requirements of this Agreement or the pooling and
Servicing Agreement. If any such instrument is found not to conform to the
requirements of this Agreement or the Pooling and Servicing Agreement in a
material manner, the Trustee shall take such action as a Majority in Interest of
Certificateholders shall direct, and the Trustee will provide notice thereof to
the Depositor, the Certificateholders and each Rating Agency.
(c) In the event of a default in respect of the CRB Certificates, the
Trustee shall proceed to enforce its rights as a holder of the CRB Certificates
under the Pooling and Servicing Agreement, unless otherwise directed by a
Majority in Interest of each Class of Certificates affected thereby. The
Trustee may, in its discretion, and will, if so directed by a Majority in
Interest of each Class of Certificates affected thereby, proceed to enforce any
rights which it may have as a holder of CRB Certificates. In addition, a
Majority in Interest of each Class of Certificates may together direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee as a holder of CRB Certificates. Notwithstanding the foregoing, the
Trustee shall in no event exercise any of its rights as a Collateral Holder in
an manner inconsistent with the terms of paragraphs (d) and (e) of this Section
5.01.
(d) In the event that (i) the Trustee has the right to vote or give
consent in respect of the CRB Certificates or receives a request from the
trustee or the issuer of the CRB Certificates for its consent to any amendment,
modification or waiver under any document relating to the CRB Certificates, or
receives any other solicitation for any action with respect to the CRB
Certificates, (ii) the Depositor notifies the Trustee of its determination that
taking any such action is primarily intended to maintain the initial value or
credit rating of the CRB Certificates, and any additional consequences that
might arise as a result of taking any such action are incidental, and (iii)
either (A) the CRB Certificate are in default, (B) the Depositor notifies the
Trustee of its determination that the CRB Certificates will probably have their
credit rating downgraded (or be in default) in the reasonably foreseeable future
absent such action or (C) the Depositor delivers to the Trustee an opinion of
tax counsel to the effect that the Trust will continue to qualify as a grantor
trust under the Code if any such action were to be taken, then, (x) the Trustee
shall mail a notice of such proposed action, including a description thereof, to
each Certificateholder of record as of such date, (y) the Trustee
22
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shall request instructions from the Certificateholders as to whether or not to
take such action and (z) the Trustee shall vote, give consent or otherwise act
as Collateral Holder with respect to a particular matter in the same proportion
as the Certificates of the Trust were actually voted with respect to such matter
(or, if such a proportional action is not permitted, in accordance with the
instructions of Holders of a Majority in Interest of the Certificates) as of a
date determined by the Trustee prior to the date on which such action is
required, provided that the Trustee shall have no liability for any failure to
act resulting from Certificateholders' late return of, or failure to return,
directions requested by the Trustee from the Certificateholders. If each of the
conditions set forth in clauses (ii) and (iii) of the next preceding sentence
are not satisfied, then the Trustee shall abstain from taking any action with
respect to any vote, consent or other action that is referred to in clause (i)
of the next preceding sentence.
(e) Notwithstanding anything to the contrary contained herein, the
Trustee shall be under no obligation to exercise or enforce any of the rights or
powers vested in it by this Agreement or as the Collateral Holder, at the
request, order or direction of any of the Certificateholders, unless such
Certificateholders have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Trustee in compliance with such request, order or direction or
if such request, order or direction is in conflict with any rule of law or this
Agreement. In the event of any default under this Agreement by the Depositor or
any default under the CRB Certificates, subject to compliance with paragraph (d)
above, the Trustee may in its discretion proceed to protect and enforce the
rights of Certificateholders by any action, suit or proceeding deemed proper by
the Trustee which is not inconsistent with any request or direction by the
Holders of a Majority in Interest of the Certificates of each Class affected
thereby.
(f) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct or from liability for any negligent action or any
negligent failure to act in respect of the Trust Property, the CRB Certificates
or the Pooling and Servicing Agreement in any capacity other than as Trustee;
provided, however, that:
- -------- -------
(i) the duties and obligations of the Trustee shall be determined solely
by the express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith or
negligence on the part of the Trustee, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates, opinions, documents and other statements
furnished to the Trustee that conform on their face to the requirements of this
Agreement;
(ii) the Trustee shall not be personally liable for an error of judgment
made in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
23
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(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 and
believed by it to be authorized or within its discretion or authority hereunder
or in accordance with the direction of the Holders of Certificates evidencing
Percentage Interests aggregating not less than 66-2/3% of all 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.
SECTION 5.02 Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 5.01:
(i) the Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in accordance
therewith;
(iii) except for the duties and obligations of the Trustee expressly
created by this Agreement, the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Agreement or to make any
investigation of matters arising hereunder or to institute, conduct or defend
any litigation hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, or if such request or direction is in conflict with any rule of law
or 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; nothing contained herein
shall, however, relieve the Trustee of the obligation, to use the same degree of
care and skill in its exercise of rights and remedies hereunder on behalf of
Certificateholders as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(iv) 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;
(v) the Trustee shall not be personally liable for any loss resulting
from the investment of funds held in the Certificate Account pursuant to Section
3.03; and
(vi) the Trustee shall not be deemed to have notice or knowledge of any
matter unless a Responsible Officer assigned to and working in the Corporate
Trust Office has actual knowledge thereof or unless written notice thereof is
received by the Trustee at the Corporate Trust Office and such notice references
the Certificates generally or this Agreement.
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SECTION 5.03 Trustee Not Liable for Certificates. The recitals
-----------------------------------
contained herein and in the Certificates, other than the signature of the
Trustee on the Certificates and the certificate of authentication, shall be
taken as the statements of the Depositor, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement or of the
Certificates or of the CRB Certificates or related documents, other than the
signature of the Trustee on the Certificates and the certificate of
authentication. The Trustee shall not be accountable hereunder or under the
Certificates, except (i) for its own bad faith or negligence or (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 5.12
expressly made by the Trustee.
SECTION 5.04 Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee; provided, however,
-------- -------
that in determining whether the Holders of the required Percentage Interest
shall have consented to any action hereunder requiring such consent, the
Trustee's interest shall be excluded.
SECTION 5.05 Trustee's Fees and Expenses. The Depositor covenants
---------------------------
and agrees to pay to the Trustee on the Closing Date, and the Trustee shall be
entitled to receive from time to time out of amounts collected and payments
received in respect of the CRB Certificates, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder or of the Trustee, and the Depositor will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from the Trustee's willful misfeasance, negligence or bad faith. The
Trustee and any director, officer, employee or agent of the Trustee shall be
indemnified by the Depositor and held harmless against any loss, liability or
expense incurred in connection with any legal action relating to this Agreement
or the Certificates, or the performance of any of the Trustee's duties
hereunder, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder; provided that (i) with respect to any such loss, liability or
--------
expense, the Trustee shall have given to the Depositor written notice thereof
promptly after the Trustee shall have knowledge thereof and (ii) while
maintaining control over its own defense, the Trustee shall cooperate and
consult fully with the Depositor. Such indemnity shall survive the termination
or discharge of this Agreement and the resignation or removal of the Trustee.
Any payment hereunder made by the Depositor to the Trustee shall be from the
Depositor's own funds, without reimbursement from the Trust Property therefor.
SECTION 5.06 Eligibility Requirements for Trustee. The Trustee shall
------------------------------------
at all times be a corporation or a national banking association organized and
doing business under the laws of any state or the United States of America or
the District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 and
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the long-term debt obligations of which are rated in one of the four highest
categories assigned long-term debt obligations by one of the Rating Agencies,
and is subject to supervision or examination by federal or state authority. If
such corporation or association publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of conditions so published. In
the event that any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Trustee shall resign immediately in the
manner and with the effect specified in Section 5.07. The corporation or
national banking association serving as Trustee may have normal banking and
trust relationships with the Depositor and its Affiliates; provided, however,
-------- -------
that such corporation shall not be an Affiliate of the Depositor.
SECTION 5.07 Resignation and Removal of the Trustee.
--------------------------------------
(a) Subject to the last sentence of this subsection (a), the Trustee
may at any time resign and be discharged from the Trust hereby created by giving
notice thereof to the Depositor, the Certificateholders and each Rating Agency.
Upon receiving such notice of resignation, the Depositor (with the consent of a
Majority in Interest of Certificateholders) shall as promptly as possible (and
in any event within 30 days after the date of such notice of resignation)
appoint a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders
and each Rating Agency by the Depositor. 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 for the
Certificates.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 5.06 and shall fail to resign after
written request therefor by the Depositor or a Majority in Interest of the
Certificateholders, 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, reorganization, conservation or liquidation, then the Depositor
(with the consent of a Majority in Interest of Certificateholders) may remove
the Trustee and appoint a successor trustee by written instrument, in duplicate,
which instrument shall be delivered to the Trustee so removed and to the
successor trustee. A copy of such instrument shall be delivered to the
Certificateholders and each Rating Agency by the Depositor.
(c) The Holders of Certificates representing not less than a Majority
in Interest of Certificateholders may at any time remove the Trustee and appoint
a successor trustee upon 30 days' notice to the Trustee by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Trustee so removed and one complete set to
the successor trustee so appointed. A copy of such instrument shall be
delivered to the Certificateholders and each Rating Agency by the Depositor.
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(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 5.08.
SECTION 5.08 Successor Trustee. (a) Any successor trustee appointed
-----------------
as provided in Section 5.07 shall execute, acknowledge and deliver to each of
the Depositor, the Certificateholders and its predecessor trustee and each
Rating Agency an instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Trustee
herein. The predecessor Trustee shall deliver to the successor trustee the CRB
Certificates and all 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 the
rights, powers, duties and obligations of the Trustee under this Agreement.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 5.06.
(b) Upon acceptance of appointment by a successor trustee as provided
in this Section, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register.
SECTION 5.09 Merger or Consolidation of Trustee. Any corporation
----------------------------------
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 5.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Trustee
shall provide notice of any such merger to each Rating Agency.
SECTION 5.10 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property 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 as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Property,
and to vest in such Person or Persons, in such capacity, such title to the Trust
Property, or any part thereof, and subject to the other provisions of this
Section 5.10, such powers, duties, obligations, rights and trusts as the
Depositor and the Trustee
27
<PAGE>
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,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 5.06 hereunder and no notice to Holders of
Certificates or Rating Agencies of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 5.08.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 5.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or co-
trustee jointly (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, 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 Property or
any portion thereof in any such jurisdiction) shall be exercised and performed
by such separate trustee or co-trustee at the direction of the Trustee. The
Depositor and the Trustee acting jointly may at any time accept the resignation
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article V. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Depositor.
(d) Any separate trustee or co-trustee may, at any time, constitute
and appoint the Trustee as its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 5.11 Tax Returns. The Trustee will prepare or cause to be
-----------
prepared, sign and file or cause to be filed all tax or informational returns
required to be prepared and filed on behalf of the Trust under any Federal,
state or local income tax laws.
SECTION 5.12 Representations and Warranties of Trustee. (a) The
-----------------------------------------
Trustee represents and warrants that:
28
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(i) the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or association;
(ii) the Trustee has full power, authority and right to execute, deliver
and perform its duties and obligations under this Agreement and the Certificates
and has taken all necessary action to authorize the execution, delivery and
performance by it (or, with respect to the Certificates, by it and an
authenticating agent on its behalf, if applicable) of this Agreement and the
Certificates;
(iii) the execution and delivery of this Agreement and the Certificates
by the Trustee and its performance of and compliance with the terms of this
Agreement, and the Certificates will not violate the Trustee's articles of
incorporation, association or other constitutive documents 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 or acceleration of,
any material contract, agreement or other instrument to which the Trustee is a
party or which may be applicable to the Trustee or any of its assets;
(iv) as of the Closing Date, each of this Agreement and the Certificates
have been duly executed and delivered by the Trustee (and, with respect to the
Certificates, by an authenticating agent on its behalf, if applicable) and this
Agreement constitutes the legal, valid and binding obligation of the Trustee,
enforceable in accordance with its terms, except as enforcement may be limited
by the applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law);
(v) the Trustee is not in violation, and the execution and delivery of
this Agreement and the Certificates by the Trustee and its performance and
compliance with the respective terms of this Agreement and the Certificates will
not constitute a violation, of any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction over the Trustee or its properties, which violation would
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or operations of the Trustee or its properties or on
the performance of its duties thereunder);
(vi) there are no actions or proceedings against, or investigations of,
the Trustee pending, or, to the knowledge of the Trustee, threatened, before any
court, administrative agency or other tribunal (A) that could reasonably be
expected to prohibit its entering into this Agreement or to render the
Certificates invalid, (B) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated hereunder or (C) that
could reasonably be expected to prohibit or materially and adversely affect the
performance by the Trustee of its obligations under, or the validity or
enforceability of this Agreement or the Certificates; and
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(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Trustee of, or compliance by the Trustee with, this Agreement
or the Certificates, or for consummation of the transactions contemplated
herein, except for such consents, approvals, authorizations and orders, if any,
as have been obtained prior to the Closing Date.
(b) Within 30 days of the earlier of discovery by the Trustee or
receipt by the Trustee of notice from the Depositor or any Certificateholder of
a breach of any representation or warranty of the Trustee set forth in paragraph
(a) above that materially and adversely affects the interests of the
Certificateholders, the Trustee shall promptly cure such breach in all material
respects.
SECTION 5.13 Limitation of Powers and Duties. The Trust is
-------------------------------
constituted solely for the purposes of acquiring and holding the CRB
Certificates, issuing the Certificates, making distributions thereon and other
activities incidental thereto. The Trustee is not authorized to acquire any
other investments or engage in any activities not authorized herein and, in
particular, the Trustee is not authorized (i) to sell, assign, transfer,
exchange, pledge, set-off or otherwise dispose of any of the CRB Certificates or
interests therein, including to Certificateholders (except upon termination of
the Trust in accordance with Article VII or in accordance with Section 5.01),
(ii) to do anything that would cause the Trust to fail or cease to qualify as a
"grantor trust" for Federal income tax purposes or (iii) to do anything that
would cause the assets of a Trust to be treated as "plan assets" as determined
pursuant to the Plan Assets Regulation.
ARTICLE VI
The Depositor
-------------
SECTION 6.01 Liability of the Depositor. The Depositor shall be
--------------------------
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Depositor herein.
SECTION 6.02 Merger, Consolidation or Conversion of the Depositor.
----------------------------------------------------
Subject to the following paragraph, the Depositor will keep in full effect its
existence, rights and franchises as a corporation under the laws of the
jurisdiction of its incorporation, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the Certificates and to perform its duties
under this Agreement.
The Depositor may be merged or consolidated with or into any Person,
or transfer all or substantially all of its assets to any Person, in which case
any Person resulting from any merger or consolidation to which the Depositor
shall be a party, or any Person succeeding to the business of the Depositor,
shall be the successor of the Depositor hereunder without the execution or
filing of any
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paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 6.03 Limitation on Liability of the Depositor and Others.
---------------------------------------------------
Neither the Depositor nor any of the directors, officers, employees or agents of
the Depositor shall be under any liability to the Trust, the Trustee 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 any
- -------- -------
such person against any breach of warranties or representations made herein, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence. The Depositor and any director,
officer, employee or agent of the Depositor may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor and any
director, officer, employee or agent of the Depositor shall be indemnified and
held harmless by the Trust Property against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
any breach of warranties or representations made by it herein, or willful
misfeasance, bad faith or gross negligence. The Depositor shall not be under
any obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under this Agreement and which in its opinion
does not involve it in any expense or liability.
ARTICLE VII
Termination; Optional Purchase
------------------------------
of CRB Certificates
-------------------
SECTION 7.01 Termination. (a) The respective obligations and
-----------
responsibilities of the Depositor and the Trustee 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 upon the occurrence of the last action required to be taken by the
Trustee on the Distribution Date pursuant to this Article VII following the
earlier to occur of (i) the final distribution by the Trustee of all money or
other property or proceeds of the Trust Property in accordance with the terms
hereof and (ii) the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late Ambassador of the United
States to the Court of St. James, living on the date hereof.
(b) Notice of any termination, specifying the Distribution Date upon
which all Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by the Trustee by letter to
Certificateholders mailed no later than the first day of the month of such final
distribution specifying (i) the Distribution Date upon which final payment of
the Certificates will be made upon presentation and surrender of Certificates at
the office or agency appointed by the Trustee for that purpose, (ii) the amount
of any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable and that payments shall be made only
upon presentation and surrender of the Certificates at the office or agency of
the
31
<PAGE>
Trustee therein specified. Upon presentation and surrender of the Certificates,
the Trustee shall cause to be distributed to Certificateholders an amount equal
to the amount otherwise distributable on such Distribution Date.
(c) Any funds not distributed on the final Distribution 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 nontendering
Certificateholders, whereupon the Trust Property shall terminate. If any
Certificates as to which notice of the termination date has been given pursuant
to this Section 7.01 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 shall directly or through an agent,
take reasonable steps to contact the remaining Certificateholders concerning
surrender of their Certificates. The costs and expenses of maintaining such
funds and of contacting Certificateholders shall be paid out of the assets which
remain held. If within two years after the second notice any Certificates shall
not have been surrendered for cancellation, the Trustee shall pay to the
Depositor all amounts distributable to the Holders thereof and the Depositor
shall thereafter hold such amounts for the benefit of such Holders. 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 7.01.
SECTION 7.02 Optional Purchase of CRB Certificates. As of any
-------------------------------------
Distribution Date as of which the then outstanding Aggregate Collateral Balance
is [5%] or less of the Aggregate Collateral Balance as of the Cutoff Date, the
Depositor shall have the option to purchase the outstanding CRB Certificates.
To exercise such option, the Depositor shall deposit in the Certificate Account
an amount equal to the aggregate unpaid principal balance of the then
outstanding CRB Certificates together with any accrued interest thereon through
the related Payment Date, and shall succeed to all interests of the Trust, the
Trustee and the Certificateholders in and to such CRB Certificates. The Trustee
shall apply such funds deposited in the Certificate Account by the Depositor
pursuant to this Section 7.02 in order to retire the Certificates as of such
Distribution Date.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01 Amendment; Waiver. (a) This Agreement may be amended
-----------------
from time to time by the Depositor and the Trustee without the consent of any of
the Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement
any provisions herein which may be defective or inconsistent with any other
provisions herein, (iii) to add any other provisions with respect to matters or
questions arising under this Agreement not inconsistent with the terms of this
Agreement or (iv) if such amendment, as evidenced by an Opinion of Counsel
delivered to the Trustee, is reasonably necessary to comply with any
requirements imposed by the Code or other written official
32
<PAGE>
announcement or interpretation relating to federal income tax laws or any such
proposed action which, if made effective, would apply retroactively to the Trust
Property at least from the effective date of such amendment; provided that such
action (except any amendment described in (iv) above) shall not, as evidenced by
an Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the rights of any Certificateholder.
(b) Without limiting the generality of the foregoing, this Agreement
may also be amended from time to time by the Depositor and the Trustee with the
consent of the Holders of Certificates evidencing not less than 66-2/3% of the
then outstanding aggregate principal amount or notional amount, as the case may
be, of the Certificates of each Class adversely affected thereby for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Certificateholders of such Class; provided, however, that no such amendment
-------- -------
shall (i) reduce in any manner the amount of, or delay the timing of, payments
required to be distributed on any such Certificate without he 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 clause (i), without the consent of the Holders of Certificates of
such Class evidencing not less than 66-2/3% of the then outstanding aggregate
principal amount or notional amount, as applicable, of such Class or (iii)
change the aforesaid percentages of Certificates the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all such Certificates then outstanding of the given Class.
(c) Promptly after the execution of any such amendment, the Trustee
shall furnish a written statement describing the substance of the amendment to
each Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 8.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
(d) Notwithstanding the foregoing, no amendment or modification to
this Agreement shall be permitted unless the Trustee receives an Opinion of
Counsel that such amendment or modification will not alter the status of the
trust for United States federal income tax purposes.
(e) The Holders of Certificates representing not less than a Majority
in Interest of Certificateholders may, on behalf of all Certificateholders,
waive in writing any default by the Depositor or the Trustee in the performance
of its obligations hereunder and any consequences thereof, except a default by
the Trustee in failing to distribute amounts received in respect of the CRB
Certificates and except a default in respect of a covenant or provision the
modification or amendment of which would require the consent of the Holder of
each Outstanding Certificate affected thereby. Upon any such waiver of a past
default, such default shall cease to exist; provided, however, that no such
-------- -------
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
33
<PAGE>
SECTION 8.02 Limitation on Rights of Certificateholders. (a) The
------------------------------------------
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Property, 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 Property, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(b) No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Property, 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 any association; nor shall any
Certificateholder be under any liability to any third party by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless (a) the
Holders of Certificates evidencing Percentage Interests aggregating not less
than 25% of all the 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, (b) 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 and (c) no direction inconsistent with such
written request shall have been given to the Trustee during such 60-day period
by the Holders of Certificates evidencing a majority of Percentage Interests of
all the Certificates. It is understood and agreed that the Trustee shall be
under no obligation to make any investigation of matters arising under this
Agreement or to institute conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any Certificateholders
unless such Certificateholders have offered to the Trustee the reasonable
indemnity referred to above. It is further understood and agreed, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other 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.
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 8.03 Governing Law. This Agreement and the Certificates
-------------
shall be construed in accordance with the laws of the State of New York without
reference to such state's principles of conflicts of law to the extent that the
application of the laws of another jurisdiction would be required thereby, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
34
<PAGE>
SECTION 8.04 Notices. All demands, notices and directions hereunder
-------
shall be in writing and shall be deemed effective upon receipt if personally
delivered at or mailed by registered or first class mail, postage prepaid, by
express delivery service or by telecopy when confirmed in writing, to:
(a) in the case of the Depositor,
Asset Backed Securities Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Ms. Gina Hubbell, Director and Vice President; and
(b) in the case of the Trustee,
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Attention: _______________________
or, in each case, such other address as may hereafter be furnished by any party
to the others. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
SECTION 8.05 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then 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 8.06 Notice to Each Rating Agency. The Trustee shall use its
----------------------------
best efforts promptly to provide notice to each Rating Agency with respect to
each of the following of which it has actual knowledge:
(i) any material change or amendment to this Agreement;
(ii) the resignation or termination of the Trustee;
(iii)the final payment to Holders of the Certificates; and
35
<PAGE>
(iv) any change in the location of the Certificate Account.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of each report to Certificateholders described in Section 3.07. Any such
notice pursuant to this Section shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by first class mail, postage
prepaid, or by express delivery service to each Rating Agency at the address
provided to the Trustee from time to time.
SECTION 8.07 No Petition. Each of the Trustee and the Depositor, by
-----------
entering into this Agreement, and each Certificateholder, by accepting a
Certificate, hereby covenant and agree that they will not at any time institute
against the Trust, or join in any institution against the Trust of, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates, or
this Agreement. The Trustee covenants and agrees that it will have secured a
written acknowledgement (which need not be a separate document) from any Person
proposing to provide any service by such Person, that such Person will not at
any time institute against the Trust, or join in any institution against the
Trust of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with the provision of such service.
SECTION 8.08 No Recourse. Each Certificateholder by accepting a
-----------
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Trustee, or any Affiliate, employee or agent
of the foregoing Persons and no recourse may be had against such Persons or
their respective assets, except as may be expressly set forth in this Agreement
or the Certificates.
SECTION 8.09 Grant of Security Interest. It is the express intent of
--------------------------
the parties to this Agreement that the conveyance of the CRB Certificates by the
Depositor to the Trustee be, and be construed as, a sale of the CRB Certificates
by the Depositor and not a pledge of any CRB Certificates by the Depositor to
secure a debt or other obligation of the Depositor. However, in the event that,
notwithstanding the aforementioned intent of the parties, any CRB Certificates
are held to be property of the Depositor, then, (a) it is the express intent of
the parties that such conveyance be deemed a pledge of such CRB Certificates by
the Depositor to the Trustee to secure a debt or other obligation of the
Depositor and (b)(1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
as in effect from time to time in the State of New York; (2) the conveyance
provided for in Section 2.01 shall be deemed to be a grant by the Depositor to
the Trustee of a security interest in all the Depositor's right, title and
interest in and to such CRB Certificates and all amounts payable to the holders
of such CRB Certificates 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 all amounts from time to
time held or invested in the Certificate Account, whether in the form of cash,
instruments, securities or other property; (3) the obligations secured by such
security agreement shall be deemed to be all the Depositor's obligations under
this Agreement, including the obligation to provide to the Certificateholders
the benefits of this Agreement; and (4) notifications to persons holding such
property, and acknowledgements, receipts or confirmations from persons holding
such
36
<PAGE>
property, shall be deemed notifications to, or acknowledgements, receipts or
confirmation from, financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. Accordingly, the Depositor hereby grants to the Trustee a
security interest in the CRB Certificates and all other property described in
clause (2) of the immediately preceding sentence for the purpose of securing to
the Trustee the performance by the Depositor of the obligations described in
clause (3) of the immediately preceding sentence. Notwithstanding the foregoing,
the parties to this Agreement intend the transfer pursuant to Section 2.01 to be
true, absolute and unconditional sale of the CRB Certificates and assets
constituting the Trust Property by the Depositor to the Trustee. The depositor
and the Trustee shall to the extent consistent with this Agreement take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the CRB Certificates, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such for so long as any of the CRB Certificates
remain outstanding. Without limiting the generality of the foregoing, the
Trustee shall file, or shall cause to be filed, all filings necessary to
maintain the effectiveness of any original filings necessary under the Uniform
Commercial Code as in effect in any jurisdiction to perfect the Trustee's
security interest in or lien on the CRB Certificates, including (x) continuation
statements and (y) such other statements as may be occasioned by (A) any change
of name of the Depositor or the Trustee, (B) any change of location of the place
of business or the chief executive office of the Depositor or (C) any transfer
of any interest of the Depositor in any CRB Certificate.
SECTION 8.10 Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, and all such provisions shall
inure to the benefit of the Certificate holders.
SECTION 8.11 Article and Section Headings. The article and section
----------------------------
headings herein are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
SECTION 8.12 Certificates Nonassessable and Fully Paid. It is the
-----------------------------------------
intention of this Agreement that Certificateholders shall not be personally
liable for obligations of the Trust Property, that the beneficial ownership
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust Property or for any reason whatsoever, and that
Certificates, upon execution, authentication and delivery thereof by the Trustee
pursuant to Section 2.04, are and shall be deemed fully paid.
37
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
ASSET BACKED SECURITIES CORP.,
as Depositor
by ____________________________
Name:
Title:
[TRUSTEE NAME],
not in its individual capacity but solely
as Trustee
by _____________________________
Name:
Title:
38
<PAGE>
EXHIBIT A
---------
NUMBER $
R- CUSIP NO.
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL BALANCE OF THIS CERTIFICATE IS DISTRIBUTABLE IN
INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NONE OF THIS CERTIFICATE, THE CRB CertificateS OR THE
UNDERLYING ACCOUNTS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY
OTHER PERSON.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A
BENEFIT PLAN.
A-1
<PAGE>
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
[CLASS [A]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
evidencing a fractional undivided beneficial ownership interest in the Trust, as
defined below, the property of which included certain CRB Certificates created
pursuant to a Pooling and Servicing Agreement dated as of [ ], among [ ],
as seller, [ ], as servicer, and [ ], as trustee, and
distributions thereon, deposited in trust by Asset Backed Securities Corp. (the
"Depositor").
THIS CERTIFIES THAT [ ] is the registered owner of [ ]
DOLLARS nonassessable, fully-paid, fractional undivided interest in Card Account
Trust, Series 199[ ]-[ ] formed by the Depositor. The [Class [A]] Certificates
have a pass-through rate of [[ %] per annum] [insert interest rate formula].
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [Class [A]] Certificates described in the Trust
Agreement referred to herein.
[TRUSTEE NAME], not in its ______________________________
individual capacity but solely as ______________________________
Trustee, or as Authenticating Agent for the
Trustee,
by by
__________________ ____________________
Authorized Officer Authorized Officer
The Trust was created pursuant to a Trust Agreement dated as of
[ ], 199[ ] (the "Trust Agreement"), between the Depositor and [ ], a
New York banking corporation, not in its individual capacity but solely as
Trustee (the "Trustee"). Reference is hereby made to the Trust Agreement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee with respect hereto. A copy of the Trust Agreement may be obtained
from the Trustee by written request sent to the Corporate Trust Office.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "[Class [A]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset
Backed Certificates" (herein called the "Certificates") pursuant to the Trust
Agreement. The Trust is also issuing [Class [B]] [ %] [Floating Rate]
[Adjustable Rate] [Variable Rate] Asset Backed Certificates (the "[Class [B]]
Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which the acceptance hereof
assents and by which such Holder is bound. The Trust Property consists of: (i)
certain CRB Certificates described in the Trust Agreement; (ii) all
A-2
<PAGE>
distributions thereon on and after the Cutoff Date; and (iii) the Certificate
Account and such assets that are deposited therein from time to time and any
investments thereof, together with any and all income, proceeds and payments
with respect thereto.
Pursuant to the terms of the Trust Agreement, distributions will be
made on each Distribution Date, commencing on [ ], 199[ ], to the Person
in whose name this Certificate is registered on the applicable Record Date, in
an amount equal to such Certificateholder's fractional undivided interest in the
amount required to be distributed to the Holders of the [Class [A]] Certificates
on such Distribution Date. The Record Date applicable to any Distribution Date
is the close of business on the day immediately preceding such Distribution Date
(or, in the event Definitive Certificates are issued, the last day of the month
preceding the month in which such Distribution Date occurs).
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust, or join in any institution against the Trust of, any bankruptcy
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates or the Trust
Agreement.
Distributions made on this Certificate will be made as provided in the
Trust Agreement by the Trustee by wire transfer in immediately available funds,
or check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon, except that with respect to Certificates registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee shall be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the Corporate Trust Office or such other
location as may be specified in such notice.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not
entitle the holder hereof to any benefit under the Trust Agreement or be valid
for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ],
by [TRUSTEE NAME],
not in its individual capacity
but solely as Trustee
by: ___________________________
Authorized Officer
Dated:
A-4
<PAGE>
(REVERSE OF TRUST CERTIFICATE)
The Certificates are limited in right of distribution to certain
collections and recoveries respecting the CRB Certificates, all as more
specifically set forth herein and in the Trust Agreement. The registered Holder
hereof, by its acceptance hereof, agrees that it will look solely to the Trust
Property (to the extent of its rights therein) for distributions hereunder. As
provided in the Trust Agreement, withdrawals from the Certificate Account may be
made from time to time for purposes other than, and, in certain cases, prior to,
distributions to Certificateholders, such purposes including reimbursement of
certain expenses incurred with respect to the Trust Property.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Trustee with the consent of
the Holders of Certificates evidencing at least 66-2/3% of the then outstanding
aggregate principal amount subject to certain provisions set forth in the Trust
Agreement. Any such consent by the Holder of this Certificate (or any
predecessor Certificate) shall be conclusive and binding on such Holder and upon
all future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Trust Agreement also permits
the amendment thereof, in certain limited circumstances, without the consent of
the Holders of any of the Certificates.
The [Class [A]] Certificates are issuable in fully registered form
only in minimum original principal amounts of $1,000 and integral multiples
thereof. As provided in the Trust Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of the
same principal amount, class, original issue date and maturity, in authorized
denominations as requested by the Holder surrendering the same.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Trustee in the Borough of Manhattan, the City of New York, duly endorsed by
or accompanied by an assignment in the form below and by such other documents as
required by the Trust Agreement, and thereupon one or more new Certificates of
the same class in authorized denominations evidencing the same principal amount
will be issued to the designated transferee or transferees. The initial
Certificate Registrar appointed under the Trust Agreement is [ ], New
York, New York.
No service charge will be made for any registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
A-5
<PAGE>
The Depositor and the Trustee and any agent of the Depositor or the
Trustee may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and neither the Depositor, the Trustee, nor any
such agent shall be affected by any notice to the contrary.
The Trust and the obligations of the Depositor and the Trustee created
by the Trust Agreement with respect to the Certificates shall terminate upon
distribution (or provision for distribution) to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be distributed to
them pursuant to the Trust Agreement following the earlier to occur of (i) the
final distribution by the Trustee of all moneys or other property or proceeds of
the Trust Property in accordance with the terms of the Trust Agreement and (ii)
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.
The Depositor may at its option purchase the outstanding CRB
Certificates at a price specified in the Trust Agreement, and such purchase of
the CRB Certificates will effect early retirement of the Certificates; however,
the Depositor may exercise such right of purchase only as of a Distribution Date
as of which the then outstanding Aggregate Collateral Balance is [5%] or less of
the Aggregate Collateral Balance as of the Cutoff Date.
The Certificates may not be acquired by or for the account of (i) an
employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to
the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(i)
of the Code or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
acquiring and holding this Certificate, the Holder hereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the Undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
______________________________________________________________________________
Please print or type name and address, including postal zip code, or assignee)
______________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________ Attorney to
transfer said Trust Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
_____________________________*
Signature Guaranteed:
_____________________________*
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-7
<PAGE>
EXHIBIT B
---------
NUMBER $
R- CUSIP NO.
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL BALANCE OF THIS CERTIFICATE IS DISTRIBUTABLE IN
INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OF ANY OF THEIR
RESPECTIVE AFFILIATES. NONE OF THIS CERTIFICATE, THE CRB CertificateS OR THE
UNDERLYING ACCOUNTS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY
OTHER PERSON.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN.
B-1
<PAGE>
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
[CLASS [B]] [ %] [FLOATING RATE] [ADJUSTABLE RATE] [VARIABLE RATE]
ASSET BACKED CERTIFICATE
evidencing a fractional undivided beneficial ownership interest in the Trust, as
defined below, the property of which included certain CRB Certificates created
pursuant to a Pooling and Servicing Agreement dated as of [ ], among [ ],
as seller, [ ], as servicer, and [ ], as trustee, and
distributions thereon, deposited in trust by Asset Backed Securities Corp. (the
"Depositor").
THIS CERTIFIES THAT [ ] is the registered owner of [ ]
DOLLARS nonassessable, fully-paid, fractional undivided interest in Card Account
Trust, Series 199[ ]-[ ] formed by the Depositor. The [Class [A]] Certificates
have a pass-through rate of [[ %] per annum] [insert interest rate formula].
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the
[Class [B]] Certificates described in the Trust Agreement referred to herein.
[TRUSTEE NAME], not in its __________________________
individual capacity buy solely as __________________________
Trustee, or as Authenticating Agent for
the Trustee,
by by
__________________ ____________________
Authorized Officer Authorized Officer
The Trust was created pursuant to a Trust Agreement dated as of [ ],
199[ ] (the "Trust Agreement"), between the Depositor and [ ], a New
York banking corporation, not in its individual capacity but solely as Trustee
(the "Trustee"). Reference is hereby made to the Trust Agreement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee with respect hereto. A copy of the Trust Agreement may be obtained
from the Trustee by written request sent to the Corporate Trust Office.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "[Class [B]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset
Backed Certificates" (herein called the "Certificates"). The Trust is also
issuing [Class [A]] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates (the "[Class [A]] Certificate") pursuant to the Trust
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions
B-2
<PAGE>
of the Trust Agreement, to which Trust Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
The Trust Property consists of: (i) certain CRB Certificates described in the
Trust Agreement; (ii) all distributions thereon on and after the Cutoff Date;
and (iii) the Certificate Account and such assets that are deposited therein
from time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto.
Pursuant to the terms of the Trust Agreement, distributions will be
made on each Distribution Date, commencing on [ ], 199[ ], to the Person in
whose name this Certificate is registered on the applicable Record Date, in an
amount equal to such Certificateholder's fractional undivided interest in the
amount required to be distributed to the Holders of the [Class [B]] Certificates
on such Distribution Date. The Record Date applicable to any Distribution Date
is the close of business on the day immediately preceding such Distribution Date
(or, in the event Definitive Certificates are issued, the last day of the month
preceding the month in which such Distribution Date occurs).
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust, or join in any institution against the Trust of, any bankruptcy
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates or the Trust
Agreement.
Distributions made on this Certificate will be made as provided in the
Trust Agreement by the Trustee by wire transfer in immediately available funds,
or check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon, except that with respect to Certificates registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee shall be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the Corporate Trust Office or such other
location as may be specified in such notice.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not
entitle the holder hereof to any benefit under the Trust Agreement or be valid
for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
B-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
CARD ACCOUNT TRUST, SERIES
199[ ]-[ ],
by [TRUSTEE NAME], not in its
individual capacity but
solely as Trustee,
by: ________________________
Authorized Officer
Dated:
B-4
<PAGE>
(REVERSE OF TRUST CERTIFICATE)
The Certificates are limited in right of distribution to certain
collections and recoveries respecting the CRB Certificates, all as more
specifically set forth herein and in the Trust Agreement. The registered Holder
hereof, by its acceptance hereof, agrees that it will look solely to the Trust
Property (to the extent of its rights therein) for distributions hereunder. As
provided in the Trust Agreement, withdrawals from the Certificate Account may be
made from time to time for purposes other than, and, in certain cases, prior to,
distributions to Certificateholders, such purposes including reimbursement of
certain expenses incurred with respect to the Trust Property.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the trustee with the consent of
the Holders of Certificates evidencing at least 66-2/3% of then outstanding
aggregate notional amount subject to certain provisions set forth in the Trust
Agreement. Any such consent by the Holder of this Certificate (or any
predecessor Certificate) shall be conclusive and binding on such Holder and upon
all future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Trust Agreement also permits
the amendment thereof, in certain limited circumstances, without the consent of
the Holders of any of the Certificates.
The [Class [B]] Certificates are issuable in fully registered form
only in minimum original notional amounts of $1,000 and integral multiples
thereof. As provided in the Trust Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of the
same notional amount, class, original issue date and maturity, in authorized
denominations as requested by the Holder surrendering the same.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Trustee in the Borough of Manhattan, the City of New York, duly endorsed by
or accompanied by an assignment in the form below and by such other documents as
required by the Trust Agreement, and thereupon one or more new Certificates of
the same class in authorized denominations evidencing the same notional amount
will be issued to the designated transferee or transferees. The initial
Certificate Registrar appointed under the Trust Agreement is [ ], New
York, New York.
No service charge will be made for any registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
B-5
<PAGE>
The Depositor and the Trustee and any agent of the Depositor or the
Trustee may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and neither the Depositor, the Trustee, nor any
such agent shall be affected by any notice to the contrary.
The Trust and the obligations of the Depositor and the Trustee created
by the Trust Agreement with respect to the Certificates shall terminate upon
distribution (or provision for distribution) to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be distributed to
them pursuant to the Trust Agreement following the earlier to occur of (i) the
final distribution by the Trustee of all moneys or other property or proceeds of
the Trust Property in accordance with the terms of the Trust Agreement and (ii)
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.
The Depositor may at its option purchase the outstanding CRB
Certificates at a price specified in the Trust Agreement, and such purchase of
the CRB Certificates will effect early retirement of the Certificates; however,
the Depositor may exercise such right of purchase only as of a Distribution Date
as of which the then outstanding Aggregate Collateral Balance is [5%] or less of
the Aggregate Collateral Balance as of the Cutoff Date.
The Certificates may not be acquired by or for the account of (i) an
employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to
the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(i)
of the Code or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
acquiring and holding this Certificate, the Holder hereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
B-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- ---------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- ---------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________ Attorney to transfer
said Trust Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
______________________________*
Signature Guaranteed:
______________________________*
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-7
<PAGE>
EXHIBIT C
---------
CRB CERTIFICATE SCHEDULE
[To come]
C-1
<PAGE>
EXHIBIT D
---------
POOLING AND SERVICING AGREEMENT
[To come]
D-1
<PAGE>
EXHIBIT E
---------
FORM OF DEPOSITORY AGREEMENT
[To come]
E-1
<PAGE>
EXHIBIT 10.1.2
================================================================================
FORM OF RECEIVABLES PURCHASE AGREEMENT
Dated as of [ ], 199[ ]
CSFB CARD ACCOUNT MASTER TRUST
SERIES 199[ ]-[ ]
ASSET BACKED SECURITIES CORPORATION,
and
[SELLER NAME],
================================================================================
<PAGE>
RECEIVABLES PURCHASE AGREEMENT, dated as of _______, 199[ ], by and
between [SELLER NAME], a _________ corporation (the "Seller"), and ASSET BACKED
SECURITIES CORPORATION, a Delaware corporation ("ABSC").
W I T N E S S E T H:
WHEREAS, ABSC desires to purchase, from time to time, certain Receivables
(hereinafter defined) due or to become due under certain credit card accounts of
the Seller;
WHEREAS, the Seller desires to sell from time to time and assign certain
Receivables to ABSC upon the terms and conditions hereinafter set forth;
WHEREAS, it is contemplated that the Receivables purchased hereunder will
be transferred by ABSC to the Trust (hereinafter defined) in connection with the
issuance of certain Certificates (hereinafter defined); and
WHEREAS, the Seller agrees that all covenants and agreements made by the
Seller herein with respect to the Accounts (hereinafter defined) and Receivables
shall also be for the benefit of the Trustee (hereinafter defined) and all
beneficiaries of the Trust, including the holders of the Certificates.
NOW, THEREFORE, it is hereby agreed by and between ABSC and the Seller as
follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Definitions. All capitalized terms used herein or in any
-----------
certificate, document, or Conveyance Paper made or delivered pursuant hereto,
and not defined herein or therein, shall have the meaning ascribed thereto in
the Pooling and Servicing Agreement; in addition, the following words and
phrases shall have the following meanings:
"ABSC" shall mean Asset Backed Securities Corporation, a Delaware
----
Corporation.
"Account" shall mean (a) each account established pursuant to a Credit
-------
Card Agreement between the Seller and any Person, which account is identified by
account number and by the receivables balance in the computer file, microfiche
list or printed list delivered to ABSC by the Seller on the Closing Date (b)
each Additional Account (but only from and after the Addition Date with respect
thereto), (c) each Related Account, and (d) each account into which an Account
shall be transferred (a "Transferred Account") provided that (i) such transfer
was made in accordance with the Credit Card Guidelines and (ii) such account can
be traced or identified as an account into which an Account has been
transferred, but shall exclude (g) any Account that (x)
-1-
<PAGE>
after the Removal Date, the newly generated Receivables in which are reassigned
to the Seller pursuant to Section 2.06, (y) all the Receivables in which are
reassigned to the Seller pursuant to Section 6.01 or (z) all the Receivables in
which are assigned and transferred to the Servicer pursuant to Section 3.03 of
the Pooling and Servicing Agreement.
"Additional Account" shall mean each New Account and each Aggregate
------------------
Additional Account.
"Additional Cut-Off Date" shall mean (i) with respect to Aggregate Addition
-----------------------
Accounts, the date specified as such in the notice delivered with respect
thereto pursuant to Section 2.02, and (ii) with respect to New Accounts, the
later of the dates on which such New Accounts are originated or designated
pursuant to Section 2.03.
"Addition Date" shall mean (a) with respect to Aggregate Addition Accounts,
-------------
the date from and after which such Aggregate Addition Accounts are to be
included as Accounts pursuant to Section 2.02 and (b) with respect to New
Accounts, the first Distribution Date following the calendar month in which such
New Accounts are originated.
"Addition Notice Date" shall have the meaning specified in Section 2.02 of
--------------------
this Agreement.
"Aggregate Addition Account" shall mean each Eligible Account that is
--------------------------
designated pursuant to Section 2.02 to be included as an Account and is
identified in the computer file or microfiche list delivered to ABSC by the
Seller pursuant to Sections 2.01 and 2.05.
"Agreement" shall mean this Receivables Purchase Agreement and all
---------
amendments hereof and supplements hereto.
"Closing Date" shall mean _____________ __, 1995.
------------
"Conveyance" shall have the meaning specified in subsection 2.01(a).
----------
"Conveyance Papers" shall have the meaning specified in subsection 4.01(c).
-----------------
"Credit Adjustment" shall have the meaning specified in subsection 3.02.
-----------------
"Debtor Relief Laws" shall mean (i) the Bankruptcy Code in the United
------------------
States of America and (ii) all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
suspension of payments, readjustment of debt, marshaling of assets or similar
debtor relief laws of the United States, any state or any foreign country from
time to time in effect affecting the rights of creditors generally.
-2-
<PAGE>
"Finance Charge Receivables" shall mean all Receivables in the Accounts
--------------------------
which would be treated as "Finance Charge Receivables" in accordance with the
definition for such term in the Pooling and Servicing Agreement.
"Initial Account" shall mean any Account designated as an "Account"
---------------
hereunder and as an "Account" under the Pooling and Servicing Agreement on the
Closing Date.
"Initial Cut-Off Date" shall mean the close of business on [ ], 199[ ].
--------------------
"Insolvency Event" shall have the meaning specified in Section 8.02.
----------------
"Interchange" shall mean interchange fees payable to the Seller in its
-----------
capacity as credit card issuer, through VISA or MasterCard [or any similar
entity or organization with respect to any other type of revolving credit card
accounts included as Accounts, except as otherwise provided in the initial
Assignment with respect to any such other type of Accounts, in connection with
cardholder charges for goods and services with respect to the Accounts.
"New Account" shall mean each MasterCard and VISA consumer revolving credit
-----------
card account established pursuant to a Credit Card Agreement, which account is
designated pursuant to Section 2.03 to be included as an Account and is
identified in the computer file or microfiche list delivered to ABSC by the
Seller pursuant to Sections 2.01 and 2.05.
"New Principal Receivables" shall have the meaning set forth in Section
-------------------------
3.01.
"Obligor" shall mean, with respect to each Account, each person that would
-------
be treated as an "Obligor" in accordance with the definition for such term in
the Pooling and Servicing Agreement.
"Pooling and Servicing Agreement" shall mean the Pooling and Servicing
-------------------------------
Agreement, dated as of [ ], 199[ ], among [Servicer Name], as Servicer,
ABSC, as Depositor and the Trustee, and all amendments and supplements thereto.
"Portfolio Reassignment Price" shall mean the portion of the amount payable
----------------------------
by ABSC to the Trustee pursuant to Section 2.06 of the Pooling and Servicing
Agreement with respect to the Receivables.
"Principal Receivables" shall mean all Receivables in the Accounts that
---------------------
would be treated as "Principal Receivables" in accordance with the definition
for such term in the Pooling and Servicing Agreement.
"Purchase Price" shall have the meaning set forth in Section 3.01.
--------------
"Purchased Assets" shall have the meaning set forth in Section 2.01.
----------------
-3-
<PAGE>
"Receivables" shall mean Receivables as defined in the Pooling and
-----------
Servicing Agreement, existing or created after the Initial Cut Off Date in
respect of the Initial Accounts or the Additional Cut Off Date in respect of
Additional Accounts.
"Removed Account" shall mean an Account hereunder that is a "Removed
---------------
Account" (as such term is defined in the Pooling and Servicing Agreement) that
is designated for removal pursuant to Section 2.10 of the Pooling and Servicing
Agreement.
"Repurchase Price" shall have the meaning set forth in Section 6.01(b).
----------------
"Seller" shall mean [Seller Name], a [______________] and its successors
------
and permitted assigns.
"Supplemental Conveyance" shall have the meaning set forth in Section 2.02.
-----------------------
"Trust" shall mean the trust created by the Pooling and Servicing
-----
Agreement.
"Trustee" shall mean [Trustee Name], a [_____________] banking corporation,
-------
the institution executing the Pooling and Servicing Agreement as, and acting in
the capacity of Trustee thereunder, or its successor in interest, or any
successor trustee appointed as provided in the Pooling and Servicing Agreement.
SECTION 1.02. Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate, other document, or Conveyance Paper made or
delivered pursuant hereto unless otherwise defined therein.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement or any Conveyance Paper shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
Section, Subsection, Schedule and Exhibit references contained in this Agreement
are references to Sections, Subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
(c) All determinations of the principal or finance charge balance of
Receivables, and of any collections thereof, shall be made in accordance with
the Pooling and Servicing Agreement and all applicable Supplements.
-4-
<PAGE>
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
--------------------------------------
SECTION 2.01. Purchase.
--------
(a) By execution of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to ABSC (collectively, the
"Conveyance"), without recourse except as provided herein, all its right, title
and interest in, to and under (i) the Receivables existing at the close of
business on the Closing Date, in the case of Receivables arising in the Initial
Accounts, and on each Additional Date, in the case of Receivables arising in the
Additional Accounts, and in each case thereafter created from time to time until
the termination of this Agreement pursuant to Article VIII hereof and all monies
due and or to become due and all amounts received with respect thereto and all
proceeds (including, without limitation, "proceeds" as defined in the UCC)
thereof and (ii) the right to receive Interchange and Recoveries with respect to
such Receivables that are allocable to the Trust as provided in the Pooling and
Servicing Agreement (the "Purchased Assets").
(b) In connection with such Conveyance, the Seller agrees (i) to
record and file, at its own expense, any financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to the Receivables now existing and hereafter created, meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect, and maintain perfection of, the Conveyance of such
Purchased Assets from the Seller to ABSC, (ii) that such financing statements
shall name the Seller, as seller, and ABSC, as purchaser, of the Receivables and
(iii) to deliver a file-stamped copy of such financing statements or other
evidence of such filings (excluding such continuation statements, which shall be
delivered as filed) to ABSC as soon as is practicable after filing.
(c) In connection with such Conveyance, the Seller further agrees that
it will, at its own expense, (i) on or prior to (x) the Closing Date, in the
case of Initial Accounts, (y) the applicable Addition Date, in the case of
Additional Accounts, and (z) the applicable Removal Date, in the case of Removed
Accounts, to indicate in its computer files that Receivables created (or
reassigned, in the case of Removed Accounts) in connection with the Accounts
have been conveyed to ABSC in accordance with this Agreement and have been
conveyed by ABSC to the Trustee pursuant to the Pooling and Servicing Agreement
for the benefit of the Certificateholders (or conveyed to the Seller or its
designee in accordance with Section 2.06, in the case of Removed Accounts) by
including (or deleting, in the case of newly originated Receivables in Removed
Accounts) in such computer files the code identifying each such Account and (ii)
on or prior to (w) the Closing Date, in the case of the Initial Accounts, (x)
the date that is five Business Days after the applicable Addition Date, in the
case of designation of Aggregate Addition Accounts, (y) the date that is 90 days
after the applicable Addition Date, in the case of New Accounts, and (z) the
date that is five business Days after the applicable Removal Date, in the case
of Removed Accounts, to deliver to ABSC a computer file or microfiche list
containing a true and complete list of all such Accounts specifying for each
such Account, as of the Initial Cut-
-5-
<PAGE>
Off Date, in the case of the Initial Accounts, the applicable Additional Cut-off
Date, in the case of Additional Accounts, the applicable Removal Date, and in
the case of Removed Accounts, (A) its account number, (B) the aggregate amount
outstanding in such Account. Each such file or list, as supplemented from time
to time to reflect Additional Accounts or Removed Accounts, shall be marked as
Schedule I to this Agreement, shall be delivered to ABSC, and is hereby
incorporated into and made a part of this Agreement. The Seller further agrees
not to alter the code referenced in clause (i) of this paragraph with respect to
any Account during the term of this Agreement unless and until such Account
becomes a Removed Account.
(d) The parties hereto intend that the conveyance of the Seller's
right, title and interest in and to the Receivables shall constitute an absolute
sale, conveying good title free and clear of any liens, claims, encumbrances or
rights of others from the Seller to ABSC. It is the intention of the parties
hereto that the arrangements with respect to the Receivables shall constitute a
purchase and sale of such Receivables and not a loan. In the event, however,
that a court of competent jurisdiction were to hold that the transactions
evidenced hereby constitute a loan and not a purchase and sale, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law, and that the Seller shall be deemed to have
granted and does hereby grant to ABSC a first priority perfected security
interest, whether now owned or hereafter acquired, in all of the Seller's right,
title and interest in, to and under the Receivables and other Purchased Assets
to secure the rights of ABSC hereunder and the Obligations of the Seller
hereunder.
SECTION 2.02. Addition of Aggregate Addition Accounts.
---------------------------------------
(a) If, from time to time, ABSC becomes obligated to designate
Aggregate Addition Accounts (as such term is defined in the Pooling and
Servicing Agreement) pursuant to subsection 2.09(a) of the Pooling and Servicing
Agreement, then ABSC may, at its option, give the Seller written notice thereof
on or before the eighth Business Day (the "Addition Notice Date") prior to the
Addition Date therefor, and upon receipt of such notice the Seller shall on or
before the Addition Date, designate sufficient Eligible Accounts to be included
as Additional Accounts so that after the inclusion thereof ABSC will be in
compliance with the requirements of said subsection 2.09(a). Additionally,
subject to subsections 2.09(b) and (c) of the Pooling and Servicing Agreement
and subsection 2.02(b), from time to time Eligible Accounts may be designated to
be included as Aggregate Addition Accounts, upon the mutual agreement of ABSC
and the Seller. In either event, the Seller shall have sole responsibility for
selecting the Aggregate Addition Accounts.
(b) On the Addition Date with respect to any designation of Aggregate
Addition Accounts, ABSC shall purchase the Seller's right, title and interest
in, to and under the Receivables in Aggregate Addition Accounts (and such
Aggregate Addition Accounts shall be deemed to be Accounts for purposes of this
Agreement), subject to the satisfaction of the following conditions:
(i) any Aggregate Addition Accounts shall all be Eligible Accounts;
-6-
<PAGE>
(ii) the Seller shall have delivered to ABSC copies of UCC-1 financing
statements covering such Aggregate Addition Accounts, if necessary to perfect
ABSC's undivided interest in the Receivables arising therein;
(iii) to the extent required of ABSC by Section 4.03 of the Pooling
and Servicing Agreement, the Seller shall have deposited in the Collection
Account all Collections with respect to such Aggregate Addition Accounts since
the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition Date,
no Insolvency Event with respect to the Seller or other Account Owner, as
applicable shall have occurred nor shall the transfer of the Receivables arising
in the Aggregate Addition Accounts to ABSC have been made in contemplation of
the occurrence thereof;
(v) solely with respect to Aggregate Addition Accounts designated
pursuant to the second sentence of subsection 2.02(a), the Rating Agency
Condition shall have been satisfied;
(vi) the Seller shall have delivered to ABSC an Officer's Certificate,
dated the Addition Date, confirming, to the extent applicable, the items set
forth in clauses (i) through (v) above; and
(vii) the transfer of the Receivables arising in the Aggregate
Addition Accounts to ABSC and by ABSC to the Trust will not result in an Adverse
Effect and, in the case of Aggregate Addition Accounts, the Seller shall have
delivered to ABSC an Officer's Certificate, dated the Addition Date, stating
that the Seller reasonably believes that the addition of the Receivables arising
in the Aggregate Addition Accounts to ABSC and by ABSC to the Trust will not
have an Adverse Effect.
SECTION 2.03. Addition of New Accounts.
------------------------
(a) Upon the mutual agreement of ABSC and the Seller, subject to
compliance by ABSC with the conditions specified in subsections 2.09(d) and (e)
of the Pooling and Servicing Agreement and compliance by the Seller with
subsection 2.03(b), the Seller may designate newly originated Eligible Accounts
to be included as New Accounts. Upon such designation, such New Accounts shall
be deemed to be Accounts hereunder. The Seller shall take all actions necessary
to comply, or to enable ABSC to comply, with the requirements of Section 2.09 of
the Pooling and Servicing Agreement and shall cooperate with ABSC to enable it
to perform with respect to the Receivables in such New Accounts all actions
specified in subsections 2.09(d) and (e) of the Pooling and Servicing Agreement.
(b) On the Addition Date with respect to any New Accounts, ABSC shall
purchase the Seller's right, title and interest in, to and under the Receivables
in New Accounts
-7-
<PAGE>
(and such New Accounts shall be deemed to be Accounts for purposes of this
Agreement) as of the close of business on the applicable Additional Cut-Off
Date, subject to the satisfaction of the following conditions:
(i) the New Accounts shall all be Eligible Accounts;
(ii) the Seller shall have delivered to ABSC copies of UCC-1
financing statements covering such New Accounts, if necessary to perfect ABSC's
interest in the Receivables arising therein;
(iii) to the extent required of ABSC by Section 4.03 of the Pooling
and Servicing Agreement, the Seller shall have deposited in the Collection
Account all Collections with respect to such New Accounts since the Additional
Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition Date,
no Insolvency Event with respect to the Seller shall have occurred nor shall the
transfer of the Receivables arising in the New Accounts to ABSC have been made
in contemplation of the occurrence thereof; and
(v) the transfer of the Receivables arising in the New Accounts to
ABSC and by ABSC to the Trust will not result in the occurrence of a Pay Out
Event or a Reinvestment Event.
SECTION 2.04. Representations and Warranties. The Seller hereby
------------------------------
represents and warrants to ABSC as of the related Addition Date as to the
matters set forth in Section 2.01(b) (iv) and (viii) above and that, in the case
of Additional Accounts, the list delivered pursuant to Section 2.05 below is, as
of the applicable Additional Cut-Off Date, true and complete in all material
respects.
SECTION 2.05. Delivery of Documents. In the case of the designation
---------------------
of Additional Accounts, the Seller shall deliver to ABSC (i) the computer file
or microfiche list required to be delivered pursuant to Section 2.01 with
respect to such Additional Accounts on the date such file or list is required to
be delivered pursuant to Section 2.01 (the "Document Delivery Date") and (ii) a
duly executed, written assignment (including an acceptance by ABSC),
substantially in the form of Exhibit A (the "Supplemental Conveyance"), on the
Document Delivery Date. In addition, in the case of the designation of New
Accounts, the Seller shall deliver to ABSC on the Document Delivery Date an
Officer's Certificate confirming, to the extent applicable, the items set forth
in clause (i) through (v) of subsection 2.03(b) above.
ARTICLE III
CONSIDERATION AND PAYMENT
-------------------------
SECTION 3.01. Purchase Price.
--------------
-8-
<PAGE>
(a) The "Purchase Price" for the Receivables which came into existence
on or prior to the Closing Date conveyed to ABSC under this Agreement shall be
payable on the Closing Date and shall be an amount equal to [100% of the
aggregate balance of Principal Receivables so conveyed, adjusted to reflect such
factors as the Seller and ABSC mutually agree will result in a Purchase Price
determined to be the fair market value of such Receivables]. This computation
of initial purchase price should assume no reinvestment in the new Receivables.
The Purchase Price for the Receivables (including Receivables in Additional
Accounts) to be conveyed to ABSC under this Agreement which come into existence
after the Closing Date, [shall be payable on the date on which such Receivables
are conveyed by the Seller to ABSC in an amount equal to 100% of the aggregate
balance of the Principal Receivables so conveyed (the "New Principal
Receivables"), adjusted to reflect such factors as the Seller and ABSC mutually
agree will result in a Purchase Price determined to be at the fair market value
of such New Principal Receivables]. The Purchase Price to be paid by ABSC on
the Closing Date and on each Distribution Date following a Monthly Period during
which New Principal Receivables are conveyed to ABSC shall be paid in cash.
SECTION 3.02. Adjustments to Purchase Price. The Purchase Price
-----------------------------
shall be adjusted on each Distribution Date (a "Credit Adjustment") with respect
to any Receivable previously conveyed to ABSC by the Seller which has since been
reversed by the Seller or the Servicer because of a rebate, refund, unauthorized
charge or billing error to a cardholder because such Receivable was created in
respect of merchandise with was refused or returned by a cardholder or due to
the occurrence of any other event referred to in Section 3.09 of the Pooling and
Servicing Agreement. The amount of such adjustment shall equal [(x) the
reduction in the principal balance of such Receivable resulting from the
occurrence of such event multiplied by (y) the quotient (expressed as a
percentage) of (i) the purchase Price payable on such Distribution Date computed
in accordance with Section 3.01 divided by (ii) the Principal Receivables paid
for on such date pursuant to such Section]. In the event that an adjustment
pursuant to this Section 3.02 causes the Purchase Price to be a negative number,
the Seller agrees that, not later than 1:00 P.M. New York City time on such
Distribution Date, the Seller shall pay to ABSC, an amount equal to the amount
by which the Purchase Price minus the Credit Adjustment would be reduced below
zero.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Seller Relating
-----------------------------------------------------
to the Seller. The Seller hereby represents and warrants to, and agrees with,
- -------------
ABSC as of the Closing Date and on each Addition Date, that:
(a) Organization and Good Standing. The Seller is a corporation duly
------------------------------
organized and validly existing in good standing under the laws of the State of
[______________] and has, in all material respects, full power and authority to
own its properties and conduct its business as
-9-
<PAGE>
such properties are presently owned and such business is presently conducted,
and to execute, deliver and perform its obligations under this Agreement.
(b) Due Qualification. The Seller is duly qualified to do business
-----------------
and is in good standing as a foreign corporation (or is exempt from such
requirements) and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would (i) render any Credit Card Agreement relating to an Account, or
any Receivable unenforceable by the Seller, ABSC or the Trust and (ii) have a
material adverse effect on the Investor Certificateholders.
(c) Due Authorization. The execution, delivery and performance of
-----------------
this Agreement and any other document or instrument delivered pursuant hereto,
including any Supplemental Conveyance (such other documents or instruments,
collectively, the "Conveyance Papers"), and the consummation of the transactions
provided for in this Agreement and the Conveyance Papers have been duly
authorized by the Seller by all necessary corporate action on the part of the
Seller.
(d) No Conflict. The execution and delivery of this Agreement and
-----------
the Conveyance Papers by the Seller, the performance of the transactions
contemplated by this Agreement and the Conveyance Papers, and the fulfillment
of the terms of this Agreement and the Conveyance Papers applicable to the
Seller will not conflict with, violate or result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or lapse
of time or both) a material default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its properties are bound.
(e) No Violation. The execution, delivery and performance of this
------------
Agreement and the Conveyance Papers by the Seller and the fulfillment of the
terms contemplated herein and therein applicable to the Seller will not conflict
with or violate any Requirements of Law applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the best knowledge of the Seller, threatened against the Seller,
before any Governmental Authority (i) asserting the invalidity of this Agreement
or the Conveyance Papers, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Conveyance Papers, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Seller, would materially and adversely affect the performance by the Seller of
its obligations under this Agreement or the Conveyance Papers, (iv) seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of this Agreement or the attributes of the Trust under United
States Federal or [________________] income tax systems.
(g) All Consents. All authorizations, consents, orders or approvals
------------
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Seller in connection with the execution
and delivery by the Seller of this Agreement
-10-
<PAGE>
and the Conveyance Papers and the performance of the transactions contemplated
by this Agreement or the Conveyance Papers by the Seller have been duly
obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section 4.01
shall survive the transfer and assignment of the Receivables to ABSC. Upon
discovery by the Seller or ABSC of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice to the other party and the Trustee within three Business Days
following such discovery.
SECTION 4.02. Representations and Warranties of the Seller Relating
-----------------------------------------------------
to the Agreement and the Receivables.
- ------------------------------------
(a) Representations and Warranties. the Seller hereby represents
------------------------------
and warrants to ABSC as of the date of this Agreement, as of the Closing Date
and, with respect to Additional Accounts, as of the related Addition Date that:
(i) this Agreement and, in the case of Additional Accounts, the
related Supplemental Conveyance, each constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect or general principles of
equity;
(ii) as of the Initial Cut-Off Date, and as of the related Additional
Cut-Off Date with respect to Additional Accounts, Schedule I to this Agreement,
as supplemented to such date, is an accurate and complete listing in all
material respects of all the Accounts as of the Initial Cut-Off Date or such
Additional Cut-Off Date, as the case may be, and the information contained
therein supplied by the Seller with respect to the identity of such Accounts and
the Receivables existing thereunder is true and correct in all material respects
as of the Initial Cut-Off Date or such applicable Additional Cut-Off Date, as
the case may be and as of the Initial Cut-Off Date, the aggregate amount of
Receivables in all the Initial Accounts was $_______, of which $________ were
Principal Receivables;
(iii) each Receivable has been conveyed to ABSC free and clear of any
Lien;
(iv) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the conveyance of
Receivables to ABSC have been duly obtained, effected or given and are in full
force and effect;
(v) this Agreement or, in the case of Additional Accounts, the
related Supplemental Conveyance constitutes a valid sale, transfer and
assignment to ABSC of all right, title and interest of the Seller in the
Receivables and the proceeds thereof and the
-11-
<PAGE>
Interchange payable pursuant to this Agreement and the Recoveries payable
pursuant to this Agreement;
(vi) on the Initial Cut-Off Date, each Account is an Eligible
Account and, in the case of Additional Accounts, on the Additional Cut-Off Date,
each related Additional Account is an Eligible Account;
(vii) on the Initial Cut-Off Date, each Receivable then existing is
an Eligible Receivable, and in the case of Additional Accounts, on the
applicable Additional Cut-Off Date, each Receivable generated thereunder is an
Eligible Receivable;
(viii) as of the date of the creation of any new Receivable, such
Receivable is an Eligible Receivable; and
(ix) no selection procedures believed by the Seller to be materially
adverse to the interests of ABSC or the Investor Certificateholders have been
used in selecting such Accounts.
(b) Notice of Breach. The representations and warranties set forth
----------------
in this Section 4.02 shall survive the transfer and assignment of the
Receivables to ABSC. Upon discovery by either the Seller or ABSC of a breach of
any of the representations and warranties set forth in this Section 4.02, the
party discovering such breach shall give written notice to the other party and
the Trustee within three Business Days following such discovery; provided that
--------
the failure to give notice within three Business Days does not preclude
subsequent notice. The Seller hereby acknowledges that ABSC intends to rely on
the representations hereunder in connection with representations made by ABSC to
secured parties, assignees or subsequent transferees including but not limited
to transfers made by ABSC to the Trust pursuant to the Pooling and Servicing
Agreement.
SECTION 4.03. Representations and Warranties of ABSC. As of the
--------------------------------------
Closing Date, ABSC hereby represents and warrants to, and agrees with, the
Seller that:
(a) Organization and Good Standing. ABSC is a corporation duly
------------------------------
organized and validly existing under the laws of the State of Delaware and has,
in all material respects, full power and authority to own its properties and
conduct its business as such properties are presently owned and such business is
presently conducted and to execute, deliver and perform its obligations under
this Agreement.
(b) Due Authorization. The execution and delivery of this Agreement
-----------------
and the Conveyance Papers and the consummation of the transactions provided for
in this Agreement and the Conveyance Papers have been duly authorized by ABSC by
all necessary corporate action on the part of ABSC.
-12-
<PAGE>
(c) No Conflict. The execution and delivery of this Agreement and
-----------
the Conveyance Papers by ABSC, the performance of the transactions contemplated
by this Agreement and the Conveyance Papers, and the fulfillment of the terms of
this Agreement and the Conveyance Papers applicable to ABSC, will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any indenture, contract, agreement, mortgage, deed of trust or other
instrument to which ABSC is a party or by which it or any of its properties are
bound.
(d) No Violation. The execution, delivery and performance of this
------------
Agreement and the Conveyance Papers by ABSC and the fulfillment of the terms
contemplated herein and therein applicable to ABSC will not conflict with or
violate any Requirements of Law applicable to ABSC.
(e) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the best knowledge of ABSC, threatened against ABSC, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or the Conveyance
Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or the Conveyance Papers, (iii) seeking any
determination or ruling that, in the reasonable judgment of ABSC, would
materially and adversely affect the performance by ABSC of its obligations under
this Agreement or the Conveyance Papers or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or enforceability
of this Agreement or the Conveyance Papers.
(f) All Consents. All authorizations, consents, orders or approvals
------------
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by ABSC in connection with the execution and
delivery by ABSC of this Agreement and the Conveyance Papers and the performance
of the transactions contemplated by this Agreement and the Conveyance Papers
have been duly obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section 4.03
shall survive the Conveyance of the Receivables to ABSC. Upon discovery by ABSC
or the Seller of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the other party.
ARTICLE V
COVENANTS
---------
SECTION 5.01. Covenants of the Seller. The Seller hereby covenants and
-----------------------
agrees with ABSC as follows:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except in
---------------------------------------------------
connection with its enforcement or collection of an Account, the Seller will
take no action to
-13-
<PAGE>
cause any Receivable to be evidenced by any instrument (as defined in the UCC)
and if any Receivable is so evidenced as a result of any action by the Seller it
shall be deemed to be an ineligible Receivable in accordance with Section
6.01(a) and shall be reassigned to the Seller in accordance with Section
6.01(b).
(b) Security Interests. Except for the conveyances hereunder, the
------------------
Seller will not sell, pledge, assign or transfer to any other Person, or take
any other action inconsistent with ABSC's ownership of the Receivables or grant,
create, incur, assume or suffer to exist any Lien on, any Receivable, whether
now existing or hereafter created, or any interest therein, and the Seller shall
not claim any ownership interest in the Receivables and shall defend the right,
title and interest of ABSC in, to and under the Receivables, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
(c) Accounting Allocations. In the event that the Seller is unable
----------------------
for any reason to transfer Receivables to ABSC in accordance with the provisions
of this Agreement (including, without limitation, by reason of the application
of the provisions of Section 8.02 or any order of any Governmental Authority),
then, in any such event, the Seller agrees (except as prohibited by any such
order) to allocate and pay to ABSC, after the date of such inability, all
amounts in the manner by which ABSC will allocate and pay to the Trust after
such inability by ABSC pursuant to Section 2.11 of the Pooling and Servicing
Agreement.
(d) Delivery of Collections or Recoveries. In the event that the
-------------------------------------
Seller receives Collections or Recoveries, the Seller agrees to pay to ABSC (or
to the Servicer if ABSC so directs) all such Collections and Recoveries to the
extent such amounts are payable to ABSC as soon as practicable after receipt
thereof.
(e) Notice of Liens. The Seller shall notify ABSC promptly after
---------------
becoming aware of any Lien on any Receivable other than the conveyances
hereunder under the Pooling and Servicing Agreement.
(f) Interchange. Not later than 1:00 p.m., New York City time, on
-----------
each Transfer Date, the Seller shall deposit into the Collection Account, in
immediately available funds, (i) the amount of Interchange to be included as
Collections of Finance Charge Receivables with respect to the preceding Monthly
Period or (ii) if at any time the Servicer cannot identify the amount of such
Interchange, the amount reasonably estimated and notified to the Seller by the
Servicer as the amount of such Interchange.
(g) Documentation of Transfer. the Seller shall undertake to file
-------------------------
the documents which would be necessary to perfect and maintain the transfer of
the Purchased Assets to ABSC.
(h) Periodic Rate Finance Charges. (i) Except (x) as otherwise
-----------------------------
required by any Requirements of Law or (y) as is deemed by the Seller [or other
Account Owner, as the case may be], to be necessary in order for it to maintain
its credit card business or a program operated by
-14-
<PAGE>
such credit card business on a competitive basis based on a good faith
assessment by it of the nature of the competition with respect to the credit
card business or such program, it shall not at any time take any action which
would have the effect of reducing the Portfolio Yield to a level that could be
reasonably expected to cause any Series to experience any Pay Out Event or
Reinvestment Event based on the insufficiency of the Portfolio Yield or any
similar test and (ii) except as otherwise required by any Requirements of Law,
it shall not take any action which would have the effect of reducing the
Portfolio Yield to be less than the highest Average Rate for any Group.
(i) Credit Card Agreements and Guidelines. Subject to compliance
-------------------------------------
with all Requirements of Law and paragraph (h) above, the Seller [or other
Account Owner, as the case may be], may change the terms and provisions of the
applicable Credit Card Agreements or the applicable Credit Card Guidelines in
any respect (including the calculation of the amount or the timing of charge-
offs and the Periodic Rate Finance Charges to be assessed thereon).
Notwithstanding the above, unless required by Requirements of Law or as
permitted by Section 5.02(a), the Seller [or other Account Owner, as the case
may be], will take no action with respect to the applicable Credit Card
Agreements or the applicable Credit Card Guidelines, which, at the time of such
action [or other Account Owner, as the case may be,] reasonably believes will
have a material adverse effect on ABSC or the Investor Certificateholders.
ABSC covenants that, at any time that the Seller is not the Servicer
under the Pooling and Servicing Agreement, it will provide the Seller with such
information as the Seller may reasonably request to enable the Seller to
determine compliance with the covenants contained in Section 5.02(b).
ARTICLE VI
REPURCHASE OBLIGATION
---------------------
SECTION 6.01. Reassignment of Ineligible Receivables.
--------------------------------------
(a) In the event any representation or warranty under Section
4.02(a)(ii), (iii), (iv), (vi), (vii) or (viii) is not true and correct in any
material respect as of the date specified therein with respect to any Receivable
or the related Account and as a result of such breach ABSC is required to accept
reassignment of Ineligible Receivables previously sold by the Seller to ABSC
pursuant to Section 2.05(a) of the Pooling and Servicing Agreement, the Seller
shall accept reassignment of ABSC's interest in such Ineligible Receivables on
the terms and conditions set forth in Section 6.01(b).
(b) The Seller shall accept reassignment of any Ineligible
Receivables previously sold by the Seller to ABSC from ABSC on or prior to the
end of the Monthly Period in which such reassignment obligation arises, [and
shall pay for such reassigned Ineligible Receivables by treating such Ineligible
Receivables as if they were subject to a reversal of the
-15-
<PAGE>
entire unpaid principal balance thereof plus accrued and unpaid finance charges
at the annual percentage rate applicable to such Receivables from the last date
billed through the end of such Monthly Period and by adjusting the purchase
price of future Receivables purchased as provided in Section 3.02 (the
"Repurchase Price")]. Upon reassignment of such Ineligible Receivables, ABSC
shall automatically and without further action be deemed to sell, transfer,
assign, set-over and otherwise convey to the Seller, without recourse,
representation or warranty, all the right, title and interest of ABSC in and to
such Ineligible Receivables, all monies due or to become due with respect
thereto and all proceeds thereof; and such reassigned Ineligible Receivables
shall be treated by ABSC as collected in full as of the date on which they were
transferred. ABSC shall execute such documents and instruments of transfer or
assignment and take such other action as shall reasonably be requested by the
Seller to effect the conveyance of such Ineligible Receivables pursuant to this
subsection.
SECTION 6.02. Reassignment of Certificateholders' Interest in Trust
-----------------------------------------------------
Portfolio. In the event any representation or warranty set forth in Section
- ---------
4.01(a) or (c) or Section 4.02(a)(i) or (a)(v) is not true and correct in any
material respect and as a result of such breach ABSC is required to accept a
reassignment of the Certificateholders' Interest in the Receivables previously
sold by the Seller to ABSC pursuant to Section 2.06 of the Pooling and Servicing
Agreement, the Seller shall be obligated to accept a reassignment of ABSC's
interest in such Receivables on the terms set forth below.
The Seller shall pay to ABSC by depositing in the Collection Account
in immediately available funds, not later than 1:00 P.M. New York City time, on
the first Transfer Date following the Monthly Period in which such reassignment
obligation arises, in payment for such reassignment, an amount equal to the
Portfolio Reassignment Price.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.01. Conditions to ABSC's Obligations Regarding Initial
--------------------------------------------------
Receivables. The obligations of ABSC to purchase the Receivables in the Initial
- -----------
Accounts on the Closing Date shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Seller contained in
this Agreement shall be true and correct on the Closing Date with the same
effect as though such representations and warranties had been made on such date;
(b) All information concerning the Initial Accounts provided to ABSC
shall be true and correct as of the Initial Cut-Off Date in all material
respects;
(c) The Seller shall have (i) delivered to ABSC a computer file or
microfiche list containing a true and complete list of all Initial Accounts
identified by account number and by
-16-
<PAGE>
the Receivables balance as of the Initial Cut-Off Date and (ii) substantially
performed all other obligations required to be performed by the provisions of
this Agreement;
(d) The Seller shall have recorded and filed, at its expense, any
financing statement with respect to the Receivables (other than Receivables in
Additional Accounts) now existing and hereafter created for the transfer of
accounts and general intangibles (each as defined in Section 9-106 of the UCC)
meeting the requirements of applicable state law in such manner and in such
jurisdiction as would be necessary to perfect the sale of and security interest
in the Receivables from the Seller to ABSC, and shall deliver a file-stamped
copy of such financing statements or other evidence of such filings to ABSC;
(e) On or before the closing Date, ABSC and the Trustee shall have
entered into the Pooling and Servicing Agreement and the closing under the
Pooling and Servicing Agreement shall take place simultaneously with the initial
closing hereunder; and
(f) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to ABSC, and ABSC shall have received from
the Seller copies of all documents (including, without limitation, records of
corporate proceedings) relevant to the transactions herein contemplated as ABSC
may reasonably have requested.
SECTION 7.02. Conditions Precedent to the Seller's Obligations. The
------------------------------------------------
obligations of the Seller to sell Receivables in the Initial Accounts on the
Closing Date shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of ABSC contained in this
Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date;
(b) Payment or provision for payment of the Purchase Price in
accordance with the provision of Section 3.01 hereof shall have been made; and
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Seller, and the Seller shall have
received from ABSC copies of all documents (including, without limitation,
records for corporate proceedings) relevant to the transactions herein
contemplated as the Seller may reasonably have requested.
ARTICLE VIII
TERM AND PURCHASE TERMINATION
-----------------------------
-17-
<PAGE>
SECTION 8.01. Term. This Agreement shall commence as of the date of
----
execution and delivery hereof and shall continue until the termination of the
Trust as provided in Article XII of the Pooling and Servicing Agreement.
SECTION 8.02. Purchase Termination. If the Seller shall fail
--------------------
generally to, or admit in writing its inability to, pay its debts as they become
due; or if a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
the Seller in an involuntary case under any Debtors Relief law, or for the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of the Seller or for any
substantial part of the Seller's property, or for the winding-up or liquidation
of the Seller's affairs and, if instituted against the Seller, any such
proceeding shall continue undismissed or unstayed and in effect, for a period of
60 consecutive days, or any of the actions sought in such proceeding shall
occur; or if the Seller shall commence a voluntary case under any debtor Relief
Law, or if the Seller shall consent to the entry of an order for relief in an
involuntary case under any Debtor Relief Law, or consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of, or for, any substantial
part of its property, or any general assignment for the benefit of its
creditors; or the Seller or any subsidiary of the Seller shall have taken any
corporate action in furtherance of any of the foregoing actions (each an
"Insolvency Event"); then the Seller shall immediately cease to transfer
- -----------------
Principal Receivables to ABSC and shall promptly give notice to ABSC and the
Trustee of such Insolvency Event. Notwithstanding any cessation of the transfer
to ABSC of additional Principal Receivables, Principal Receivables transferred
to ABSC prior to the occurrence of such Dissolution Event and Collections in
respect of such Principal Receivables and Finance Charge Receivables whenever
created, accrued in respect of such Principal Receivables, shall continue to be
properly of ABSC available for transfer by ABSC to the Trust pursuant to the
Pooling and Servicing Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
------------------------
SECTION 9.01. Amendment. This Agreement and any Conveyance Papers
---------
and the rights and obligations of the parties hereunder may not be changed
orally, but only by an instrument in writing signed by ABSC and the Seller in
accordance with this Section 9.01. This Agreement and any Conveyance Papers may
be amended from time to time by ABSC and the Seller (i) to cure any ambiguity,
(ii) to correct or supplement any provisions herein which may be inconsistent
with any other provisions herein or in any such other Conveyance Papers, (iii)
to add any other provisions with respect to matters or questions arising under
this Agreement or any Conveyance Papers which shall not be inconsistent with the
provisions of this Agreement or any Conveyance Papers, (iv) to change or modify
the Purchase Price and (v) to change, modify, delete or add any other obligation
of the Seller or ABSC; provided, however, that no amendment pursuant to clause
-------- -------
(v) of this Section 9.01 shall be effective unless the Seller and ABSC have
been notified in writing that the Rating Agency Condition has been satisfied;
provided, further,
- -------- -------
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<PAGE>
that such action shall not (as evidenced by an Opinion of Counsel delivered to
the Trustee) adversely affect in any material respect the interests of the
Trustee or the Investor Certificateholders, unless the Trustee shall consent
thereto. Any reconveyance executed in accordance with the provisions hereof
shall not be considered to be an amendment to this Agreement. A copy of any
amendment to this Agreement shall be sent to the Rating Agency.
SECTION 9.02. Governing Law. THIS AGREEMENT AND THE CONVEYANCE
-------------
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION 9.03. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, return receipt requested,
to
(a) in the case of the Seller:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
___________________________
Facsimile No.:
_______________________
(b) in the case of ABSC:
Asset Backed Securities Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Ms. Gina Hubbel,
Director and Vice President
Facsimile No.:
_________________________
(c) in the case of the Trustee:
---------------------------------------
---------------------------------------
---------------------------------------
Attention:
_____________________________
Facsimile No.:
________________________;
-19-
<PAGE>
or, as to each party, at such other address as shall be designated by such party
in written notice to each other party.
SECTION 9.04. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement or any Conveyance
Paper shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions, or terms shall be deemed severable from the remaining
covenants, agreements, provisions, and terms of this Agreement or any Conveyance
Paper and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Conveyance Paper.
SECTION 9.05. Assignment. Notwithstanding anything to the contrary
----------
contained herein, other than ABSC's assignment of its rights, title, and
interest in, to, and under this Agreement to the Trustee for the benefit of the
beneficiaries of the Trust, including the Certificateholders as contemplated by
the Pooling and Servicing Agreement and Section 9.06 hereof, this Agreement and
all other Conveyance Papers may not be assigned by the parties hereto; provided,
--------
however, that the Seller shall have the right to assign its rights, title and
- -------
interests, in to and under this Agreement to (i) any successor by merger
assuming this Agreement (ii) to any affiliate owned directly or indirectly by
ABSC which assumes the obligations of this Agreement or (iii) to any entity
provided that the Rating Agency has advised ABSC and the Seller that the Rating
Agency Condition has been satisfied.
SECTION 9.06. Acknowledgment and Agreement of the Seller. By
------------------------------------------
execution below, the Seller expressly acknowledges and agrees that all of ABSC's
right, title, and interest in, to, and under this Agreement, including, without
limitation, all of ABSC's right, title, and interest in and to the Receivables
purchased pursuant to this Agreement, shall be assigned by ABSC to the Trustee
for the benefit of the beneficiaries of the Trust, including the
Certificateholders, and the Seller consents to such assignment. The Seller
further agrees that notwithstanding any claim, counterclaim, right or setoff or
defense which it may have against ABSC, due to a breach by ABSC of this
Agreement or for any other reason, and notwithstanding the bankruptcy of ABSC or
any other event whatsoever, the Seller's sole remedy shall be a claim against
ABSC for money damages and, then only to the extent of funds received by ABSC
pursuant to the Pooling and Servicing Agreement, and in no event shall the
Seller assert any claim on or any interest in the Receivables or any proceeds
thereof or take any action which would reduce or delay receipt by
Certificateholders of collections with respect to the Receivables.
Additionally, the Seller agrees for the benefit of the Trustee that any amounts
payable by the Seller to ABSC hereunder which are to be paid by ABSC to the
Trustee for the benefit of the Certificateholders shall be paid by the Seller,
on behalf of ABSC, directly to the Trustee.
SECTION 9.07. Further Assurances. ABSC and the Seller agree to do
------------------
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the other party or the
Trustee more fully to effect the purposes of this Agreement and the Conveyance
Papers, including, without limitation, the execution of any financing statements
or continuation statements or equivalent documents relating
-20-
<PAGE>
to the Receivables for filing under the provisions of the UCC or other law of
any applicable jurisdiction.
SECTION 9.08. No Waiver; Cumulative Remedies. No failure to exercise
------------------------------
and no delay in exercising, on the part of ABSC or the Seller, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, powers or privilege. Subject to Section 9.06, the rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 9.09. Counterparts. This Agreement and all Conveyance Papers
------------
may be executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.10. Binding; Third-Party Beneficiaries. This Agreement and
----------------------------------
the Conveyance Papers will inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. The
Trustee shall be considered a third-party beneficiary of this Agreement.
SECTION 9.11. Merger and Integration. Except as specifically stated
----------------------
otherwise herein, this Agreement and the Conveyance Papers set forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement and
Conveyance Papers. This Agreement and the Conveyance Papers may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 9.12. Headings. The headings are for purposes of reference
--------
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 9.13. Schedules and Exhibits. The schedules and exhibits
----------------------
attached hereto and referred to herein shall constitute a part of this Agreement
and are incorporated into this Agreement for all purposes.
SECTION 9.14. Survival of Representations and Warranties. All
------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in any Supplemental Conveyance, shall remain operative and in full
force and effect and shall survive conveyance of the Receivables by ABSC to the
Trustee pursuant to the Pooling and Servicing Agreement.
SECTION 9.15. Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Agreement, the Seller shall not, prior to the date which is
one year and one day after the termination of this Agreement, acquiesce,
petition or otherwise invoke or cause ABSC to invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against ABSC under any Federal or state bankruptcy, insolvency or similar law or
appointing a
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<PAGE>
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of ABSC or any substantial part of its property or ordering the
winding-up or liquidation or the affairs of ABSC.
-22-
<PAGE>
IN WITNESS WHEREOF, ABSC and the Seller have caused this Receivables
Purchase Agreement to be duly executed by their respective officers as of the
day and year first above written.
[SELLER NAME]
By: _______________________________
Title: ____________________________
ASSET BACKED SECURITIES CORPORATION
By: _______________________________
Title: ____________________________
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<PAGE>
EXHIBIT A
---------
FORM OF SUPPLEMENTAL CONVEYANCE
(As required by Section 2.05 of
the Receivables Purchase Agreement)
SUPPLEMENTAL CONVEYANCE No. ___ dated as of ________, 19__, by and
between [SELLER NAME], as Seller ("the Seller"), and ASSET BACKED SECURITIES
CORPORATION ("ABSC") pursuant to the Receivables Purchase Agreement referred to
below.
WITNESSETH:
----------
WHEREAS, the Seller and ABSC are parties to a Receivables Purchase
Agreement, dated as of [ ], 199[ ] (hereinafter as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Receivables Purchase Agreement");
WHEREAS, pursuant to the Receivables Purchase Agreement, the Seller
wishes to designate Additional Accounts to be included as Accounts and the
Seller wishes to convey its right, title and interest in the Receivables of such
Additional Accounts, whether now existing or hereafter created, to ABSC pursuant
to the Receivables Purchase Agreement (as each such term is defined in the
Receivables Purchase Agreement); and
WHEREAS, ABSC is willing to accept such designation and conveyance
subject to the terms and conditions hereof.
NOW, THEREFORE, the Seller and ABSC hereby agree as follows:
1. Defined Terms. all capitalized terms used herein shall have the
-------------
meanings ascribed to them in the Receivables Purchase Agreement unless otherwise
defined herein.
"Addition Date" shall mean, with respect to the Additional Accounts
-------------
designated hereby, [ ], 199[ ].
"Additional Cut-Off Date" shall mean, with respect to the Additional
-----------------------
Accounts designated hereby, [ ], 199[ ].
2. Designation of Additional Accounts. the Seller delivers herewith
----------------------------------
a computer file or microfiche list containing a true and complete schedule
identifying all such Additional Accounts and specifying for each such Account,
as of the Additional Cut-Off Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of
A-1
<PAGE>
Principal Receivables in such Account. Such computer file, microfiche list or
other documentation shall be as of the date of this Supplemental conveyance
incorporated into and made part of this Supplemental Conveyance and is marked as
Schedule I to this Supplemental Conveyance.
3. Conveyance of Receivables.
-------------------------
(a) The Seller does hereby sell, transfer, assign, set over and
otherwise convey to ABSC, without recourse except as provided in the Receivables
Purchase Agreement, all its right, title and interest in, to and under (i) the
Receivables generated by such Additional Accounts, now existing at the close of
business on the Additional Cut-Off Date and hereafter created until termination
of the Receivables Purchase Agreement, all monies due or to become due and all
amounts received with respect thereto and all "proceeds" (including, without
limitation, "Proceeds" as defined in Article 9 of the UCC) thereof and (ii) the
right to receive Interchange and Recoveries with respect to such Receivables
allocable to the Trust as provided in the Pooling and Servicing Agreement. The
foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation of an assumption by ABSC
of any obligation of the Servicer, the Seller or any other Person in connection
with the Accounts, the Receivables or under any agreement or instrument relating
thereto, including, without limitation, any obligation to any Obligor, merchant
banks, merchants clearance systems, VISA USA, Inc., MasterCard International
Incorporated or insurers.
(b) In connection with such sale, the Seller agrees to record and
file, at its own expense, one or more financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to the Receivables, now existing and hereafter created, for the transfer
of accounts and general intangibles meeting the requirements of applicable state
law in such manner and in such jurisdictions as are necessary to perfect the
sale and assignment of and to deliver a file-stamped copy of such financing
statement or other evidence of such filing to ABSC.
(c) In connection with such sale, the Seller further agrees, at its
own expense, on or prior to the date of this Supplemental Conveyance, to
indicate in the appropriate computer files or microfiche list that all
Receivables created in connection with the Additional Accounts designated hereby
have been conveyed to ABSC pursuant to this Supplemental conveyance.
4. Acceptance by ABSC. Subject to the satisfaction of the conditions
------------------
set forth in Section 6 of this Supplemental Conveyance, ABSC hereby acknowledges
its acceptance of all right, title and interest to the property, now existing
and hereafter created, conveyed to ABSC pursuant to Section 3(a) of this
Supplemental Conveyance, and declares that it shall maintain such right, title
and interest. ABSC further acknowledges that, prior to or simultaneously with
the execution and delivery of this Supplemental Conveyance, the Seller delivered
to ABSC the computer file or microfiche list described in Section 2 of this
Supplemental Conveyance.
A-2
<PAGE>
5. Representation and Warranties of the Seller. The Seller hereby
-------------------------------------------
represents and warrants to ABSC as of the date of this Supplemental Conveyance
and as of the Addition Date that:
(a) Legal, Valid and Binding Obligation. This Supplemental Conveyance
-----------------------------------
constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally from time to time in
effect or general principles of equity;
(b) Eligibility of Accounts. On the Additional Cut-Off Date, each
-----------------------
Additional Account designated hereby is an Eligible Account;
(c) No Liens. Each Receivable in an Additional account designated
--------
hereby has been conveyed to ABSC free and clear of any Lien;
(d) Eligibility of Receivables. On the Additional Cut-Off Date, each
--------------------------
Receivable existing in an Additional Account designate hereby is an Eligible
Receivable and as of the date of creation of any Receivables in an Additional
Account designated hereby, such Receivable is an Eligible Receivable;
(e) Selection Procedures. No selection procedure believed by the
--------------------
Seller to be adverse to the interests of ABSC or the Investor Certificateholders
was utilized in selecting the Additional Accounts;
(f) Transfer of Receivables. This Supplemental Conveyance constitutes
-----------------------
a valid sale, transfer and assignment to ABSC of all right, title and interest
of the Seller in the Receivables arising in the Additional Accounts designated
hereby now existing or hereafter created, all monies due or to become due and
all amounts received with respect thereto and the "proceeds" (including, without
limitation, "proceeds" as defined in Article 9 of the UCC) thereof and the
Interchange and the Recoveries with respect thereto payable pursuant to the
Receivables Purchase Agreement;
(g) No Conflict. The execution and delivery of this Supplemental
-----------
Conveyance, the performance of the transactions contemplated by this
Supplemental conveyance and the fulfillment of the terms hereof, will not
conflict with, result in any breach of any of the material terms and provisions
of, or constitute (with or without notice or lapse of time or both) a material
default under, any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it or its properties
are bound;
(h) No Violation. The execution and delivery of this Supplemental
------------
Conveyance by the Seller, the performance of the transactions contemplated by
this Supplemental Conveyance and the fulfillment of the terms hereof applicable
to the Seller will not conflict with or violate any Requirements of Law
applicable to the Seller;
A-3
<PAGE>
(i) No Proceedings. There are no proceedings or investigations,
--------------
pending or, to the best knowledge of the Seller, threatened against the Seller
before any Governmental Authority (i) asserting the invalidity of this
Supplemental Conveyance, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Supplemental Conveyance, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Seller, would
materially and adversely affect the performance by the Seller of its obligations
under this Supplemental Conveyance or (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability of
this Supplemental Conveyance; and
(j) All Consents. All authorizations, consents, orders or approval of
------------
any court or other governmental authority required to be obtained by the Seller
in connection with the execution and delivery of this Supplemental Conveyance by
the Seller and the performance of the transactions contemplated by this
Supplemental Conveyance by the Seller, have been obtained.
6. Ratification of the Receivables Purchase Agreement. The
--------------------------------------------------
Receivables Purchase Agreement is hereby ratified, and all references to the
"Receivables Purchase Agreement", to "this Agreement" and "herein" shall be
deemed from and after the Addition Date to be a reference to the Receivables
Purchase Agreement as supplemented by this Supplemental Conveyance. Except as
expressly amended hereby, all the representations, warranties, terms, covenants
and conditions of the Receivables Purchase Agreement shall remain unamended and
shall continue to be, and shall, remain, in full force and effect in accordance
with its terms and except as expressly provided herein shall not constitute or
be deemed to constitute a waiver of compliance with or consent to non-compliance
with any term or provision of the Receivables Purchase Agreement.
7. Counterparts. This Supplemental Conveyance may be executed in
------------
any number of counterparts, all of which taken together shall constitute one and
the same instrument.
A-4
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Supplemental
Conveyance to be duly executed and delivered by their respective duly authorized
officers on the day and the year first above written.
ASSET BACKED SECURITIES
CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
[SELLER NAME]
By: _______________________
Name: _______________________
Title: __________________________
A-5
<PAGE>
Schedule I to Supplemental Conveyance
Additional Accounts
-------------------
A-6
<PAGE>
Schedule I
----------
LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
I-1
<PAGE>
EXHIBIT 10.1.3
- --------------------------------------------------------------------------------
MASTER SELLER'S WARRANTY AND SERVICING AGREEMENT
Dated as of _____________, 199__
(Purchaser)
and
----------------------------
(Company)
----------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Agreement................................................ 1
Appraised Value.......................................... 1
Assignment of Mortgage................................... 1
Business Day............................................. 1
Company.................................................. 1
Custodial Account........................................ 1
Cut-off Date............................................. 2
Determination Date....................................... 2
Due Date................................................. 2
Due Period............................................... 2
Escrow Account........................................... 2
Escrow Payments.......................................... 2
Event of Default......................................... 2
FDIC..................................................... 2
FHLMC.................................................... 2
Fidelity Bond............................................ 2
First Boston Offering System............................. 2
Flood Insurance Policy................................... 3
FNMA..................................................... 3
FSLIC.................................................... 3
Funding Date............................................. 3
Hazard Insurance Policy.................................. 3
Liquidation Proceeds..................................... 3
Loan Data................................................ 3
Loan-to-value Ratio or Ltv............................... 3
Monthly Payment.......................................... 3
Mortgage................................................. 3
Mortgage File............................................ 3
Mortgage Interest Rate................................... 3
Mortgage Loan............................................ 3
Mortgage Loan Remittance Rate............................ 4
Mortgage Loan Schedule................................... 4
Mortgage Note............................................ 5
Mortgagor................................................ 5
Natural Person........................................... 5
Officers' Certificate.................................... 5
Opinion of Counsel....................................... 5
Person................................................... 5
Pooling Transaction...................................... 5
Primary Mortgage Insurance Policy........................ 5
Principal Prepayment..................................... 5
Purchase Agreement....................................... 5
-i-
<PAGE>
Purchaser................................................ 6
Remittance Date.......................................... 6
Servicing Advances....................................... 6
Servicing Fee............................................ 6
Servicing Fee Rate....................................... 6
Servicing Officer........................................ 6
Stated Principal Balance................................. 6
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS
2.01 Conveyance of Mortgage Loans; Possession of
Mortgage Files.................................... 7
2.02 Books and Records................................... 7
2.03 Delivery of Mortgage Loan Documents................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY;
REPURCHASE OF MORTGAGE LOANS
3.01 Individual Mortgage Loans........................... 10
3.02 Company Representations............................. 18
3.03 Repurchase.......................................... 21
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
4.01 Company to Act as Servicer.......................... 23
4.02 Liquidation of Mortgage Loans....................... 24
4.03 Collection of Mortgage Loan Payments................ 24
4.04 Establishment of Custodial Account; Deposits in
Custodial Account................................. 24
4.05 Permitted Withdrawals From the Custodial Account.... 26
4.06 Establishment of Escrow Account; Deposits in
Escrow Account.................................... 27
4.07 Permitted Withdrawals From Escrow Account........... 28
4.08 Payment of Taxes, Insurance and Other Charges....... 29
4.09 Transfer of Accounts................................ 29
4.10 Maintenance of Hazard Insurance..................... 29
4.11 Fidelity Bond; Errors and Omissions Insurance....... 31
4.12 Application of Proceeds of Insurance to Repair or
Restoration....................................... 31
4.13 Maintenance of Primary Mortgage Insurance
Policies.......................................... 32
4.14 Inspections......................................... 32
4.15 Delinquency and Foreclosure......................... 33
4.16 Property Management................................. 34
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<PAGE>
ARTICLE V
PAYMENTS TO THE MASTER SERVICER
5.01 Distributions....................................... 36
5.02 Statements to the Purchaser......................... 37
5.03 Advances by the Company............................. 38
ARTICLE VI
GENERAL SERVICING PROCEDURE
6.01 Assumption and Substitution of Liability
Agreements........................................ 39
6.02 Satisfaction of Mortgages and Release of Mortgage
Files............................................. 40
6.03 Servicing Compensation.............................. 40
6.04 Annual Statement as to Compliance................... 40
6.05 Annual Independent Public Accountants' Servicing
Report............................................ 41
6.06 Purchaser's Right to Examine Company Records........ 41
ARTICLE VII
REPORTS TO BE PREPARED BY COMPANY
7.01 Company Shall Provide Information as Reasonably
Required.......................................... 42
ARTICLE VIII
THE COMPANY
8.01 Indemnification; Third Party Claims................. 43
8.02 Merger or Consolidation of the Company.............. 43
8.03 Limitation on Liability of the Company and Others... 44
8.04 Company Not to Resign............................... 44
ARTICLE IX
DEFAULT
9.01 Events of Default................................... 45
9.02 Waiver of Defaults.................................. 46
ARTICLE X
TERMINATION
10.01 Termination........................................ 47
10.02 Termination Without Cause.......................... 47
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<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 Successor to the Company........................... 48
11.02 Amendment.......................................... 49
11.03 Recordation of Agreement........................... 49
11.04 Recordation of Assignment of Mortgages............. 49
11.05 Duration of Agreement.............................. 50
11.06 Governing Law...................................... 50
11.07 Notices............................................ 50
11.08 Severability of Provisions......................... 50
11.09 No Partnership..................................... 50
11.10 Execution; Successors and Assigns.................. 50
EXHIBITS
EXHIBIT A Contents of Mortgage Files.........................A-1
EXHIBIT B Custodial Account Certification....................B-1
EXHIBIT C Custodial Account Letter Agreement.................C-1
EXHIBIT D Escrow Account Certification.......................D-1
EXHIBIT E Escrow Account Letter Agreement....................E-1
EXHIBIT F Mortgage Loan Schedule.............................F-1
-iv-
<PAGE>
This is a Master Seller's Warranty and Servicing Agreement for
conventional mortgage loans, dated as of ________________, 199__, and is
executed between ________________, as Purchaser (hereinafter, "Purchaser"), and
________________ ______________________, as seller and servicer (hereinafter,
"Company").
The Purchaser and Company have entered into an Origination and
Purchase Agreement, dated as of the date hereof, pursuant to which the Purchaser
may from time to time purchase Mortgage Loans from the Company.
All of the Mortgage Loans will be secured by first mortgages or deeds
of trust on residential dwellings situated within the State(s) indicated on the
related Mortgage Loan Schedule.
The Purchaser and Company wish to prescribe the manner of purchase by
the Purchaser of the Mortgage Loans and the management, servicing and control of
the Mortgage Loans.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Purchaser and the Company agree as follows:
-v-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
AGREEMENT: This Master Seller's Warranty and Servicing Agreement,
----------
including all exhibits hereto, and all amendments hereof and supplements hereto
entered into in accordance with the provisions hereof.
APPRAISED VALUE: The appraised value of the property subject to a
----------------
Mortgage based upon the appraisal made for the Company, as originator of the
related Mortgage Loan, at the time of the origination of such Mortgage Loan
pursuant to guidelines approved by FNMA, or the sale price of the property
subject to such Mortgage in the transaction giving rise to such Mortgage,
whichever is less; provided, that if the proceeds of such Mortgage Loan were
used to refinance an outstanding mortgage loan, the term "Appraised Value" shall
mean the appraised value of the property subject to such Mortgage Loan based
upon the appraisal made for the Company at the time of such refinancing pursuant
to the guidelines referred to above.
ASSIGNMENT OF MORTGAGE: As to each Mortgage Loan, a separate
-----------------------
assignment of such Mortgage Loan and related Mortgage, from the Company to the
Purchaser, conveying all right, title and interest of the Company in and to such
Mortgage Loan and related Mortgage to the Purchaser.
BUSINESS DAY: Any day other that (i) a Saturday or Sunday, or (ii) a
-------------
day on which banking or savings and loan institutions in the State of __________
or the State of ___________ are authorized or obligated by law or executive
order to be closed.
COMPANY: _______________________________________, or its successor
---------
in interest or any successor to the Company under this Agreement appointed as
herein provided.
CUSTODIAL ACCOUNT: The separate account or accounts created and
------------------
maintained pursuant to Section 4.04, which may be interest bearing, which shall
bear a designation clearly indicating that the funds deposited therein are held
in trust for the benefit of the Purchaser, and which shall be either (i)
maintained with a bank having debt obligations rated not lower that AA by
Standard & Poor's Corporation, or (ii) an account or accounts the deposits in
which are fully insured by either FDIC or FSLIC. Funds deposited in the
Custodial Account shall be held in trust for the Purchaser, for the uses and
purposes set forth in Sections 4.04 and 4.05.
-1-
<PAGE>
CUT-OFF DATE: With respect to each Mortgage Loan, the first day of
-------------
the month in which the related Funding Date occurs.
DETERMINATION DATE: The 15th day (or, if such 15th day is not a
-------------------
Business Day, the Business Day immediately Preceding such 15th day) of the month
of the related Remittance Date.
DUE DATE: The day of the month of the related Remittance Date on
---------
which each Monthly Payment is due, exclusive of any days of grace, which, for
the Mortgage Loans, is the first day of the month.
DUE PERIOD: With respect to each Remittance Date, the applicable Due
-----------
Period shall be the period beginning on the second day of the month preceding
the month of the Remittance Date, and ending on the first day of the month of
the Remittance Date.
ESCROW ACCOUNT: The separate account or accounts created and
---------------
maintained pursuant to Section 4.06, which may be interest bearing, which shall
bear a designation clearly indicating that the funds deposited therein are held
in trust for the benefit of the related Mortgagors and the Purchaser, and which
shall be either (i) maintained with a bank having debt obligations rated not
lower than AA by Standard & Poor's Corporation, or (ii) an account or accounts
the deposits in which are fully insured by either FDIC or FSLIC. Funds
deposited in the Escrow Account shall be held in trust for the related
Mortgagors and for the Purchaser, for the uses and purposes set forth in
Sections 4.06 and 4.07.
ESCROW PAYMENTS: The amounts constituting ground rents, taxes,
----------------
assessments, water rates, premiums on any Primary Mortgage Insurance Policy,
premiums on flood, fire and other hazard insurance required to be kept in force
pursuant to this Agreement and other payments required to be escrowed by the
Mortgagor with the mortgagee pursuant to any Mortgage Loan and this Agreement.
EVENT OF DEFAULT: Any one of the conditions or circumstances
-----------------
enumerated as such in Section 9.01.
FDIC: The Federal Deposit Insurance Corporation or any successor.
-----
FHLMC: The Federal Home Loan Mortgage Corporation or any successor.
------
FIDELITY BOND: A fidelity bond to be obtained by the Company
--------------
pursuant to Section 4.11.
FIRST BOSTON OFFERING SYSTEM: As defined in the Purchase Agreement.
-----------------------------
-2-
<PAGE>
FLOOD INSURANCE POLICY: Each policy of flood insurance required to
-----------------------
be caused to be maintained by the Company Pursuant to section 4.10.
FNMA: The Federal National Mortgage Association or any successor.
-----
FSLIC: The Federal Savings and Loan Insurance Corporation or any
------
successor.
FUNDING DATE: With respect to each Mortgage Loan, the date on which
-------------
such Mortgage Loan is purchased.
HAZARD INSURANCE POLICY: Each insurance policy (other than the Flood
------------------------
Insurance Policy) required to be caused to be maintained by the Company pursuant
to Section 4.10.
LIQUIDATION PROCEEDS: Cash received in connection with the
---------------------
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of the Mortgage Loan, trustee's sale, foreclosure sale or otherwise, or the sale
of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction
of the Mortgage.
LOAN DATA: As defined in the Purchase Agreement.
----------
LOAN-TO-VALUE RATIO or LTV: With respect to any Mortgage Loan, as of
---------------------------
any date, the fraction, expressed as a percentage, the numerator of which is the
original principal balance of the Mortgage Loan and the denominator of which is
the Appraised Value of the related Mortgaged Property.
MONTHLY PAYMENT: The scheduled monthly payment of principal and
----------------
interest on a Mortgage Loan which is payable by a Mortgagor under the related
Mortgage Note.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
---------
first lien on or first priority ownership interest in an estate in fee simple in
real property securing a Mortgage Note.
MORTGAGE FILE: The items referred to in Exhibit A annexed hereto
--------------
pertaining to a particular Mortgage Loan (and any additional documents required
to be added to the Mortgage File pursuant to this Agreement).
MORTGAGE INTEREST RATE: The annual rate at which interest accrues
-----------------------
on any Mortgage Loan.
MORTGAGE LOAN: An individual Mortgage Loan which is the subject of
--------------
this Agreement, each Mortgage Loan subject to this Agreement being identified on
the Mortgage Loan Schedule in effect from time to time.
-3-
<PAGE>
MORTGAGE LOAN REMITTANCE RATE: As to each Mortgage Loan, the rate of
------------------------------
interest remitted to Purchaser, which shall be the Mortgage Interest Rate less
the Servicing Fee Rate.
MORTGAGE LOAN SCHEDULE: The list of Mortgage Loans which are subject
-----------------------
to this Agreement, attached hereto as Exhibit F, which list shall set forth the
following information for each Mortgage Loan:
1. Loan number
2. Mortgagor's name
3. Street address (including ZIP code) of the Mortgaged Property
4. Owner-occupancy code (indicating that the property is either (a)
owner-occupied, (b) a vacation home, or (c) investment property)
5. Property type code (indicating that the property is either (a) a
fully detached single-family residence, (b) a two- to four-family
residence, (c) an individual condominium unit, or (d) a townhouse)
6. Origination date
7. Mortgage Interest Rate
8. Servicing Fee Rate
9. Original term and stated maturity
10. Original principal balance
11. First payment due date
12. Monthly Payment
13. Stated Principal Balance as of the Cut-off Date
14. Loan-to-Value Ratio at origination
15. Appraised Value of the related Mortgaged Property
16. The actual principal balance as of the fifteenth day of the
calendar month in which the Funding Date occurs
17. Paid-to date
-4-
<PAGE>
18. The identity of the housing development or condominium project,
as applicable, in which the property is located
19. Whether the proceeds of the Mortgage Loan were used to refinance
an existing loan
Such schedule shall also set forth the total of the amounts described under 10
and 13 above for all of the Mortgage Loans.
MORTGAGE NOTE: The Note or other evidence of indebtedness evidencing
--------------
the indebtedness of Mortgagor secured under a Mortgage Loan.
MORTGAGOR: The obligor an a Mortgage Note.
----------
NATURAL PERSON: Any human being.
---------------
OFFICERS' CERTIFICATE: A certificate signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President or a Vice President and by
the Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Company, and delivered to the Purchaser as required by this
Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may be
-------------------
counsel for the Company, acceptable to the Purchaser.
PERSON: Any individual, corporation, partnership, joint venture,
-------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
POOLING TRANSACTION: As defined in the Purchase Agreement.
--------------------
PRIMARY MORTGAGE INSURANCE POLICY: Each primary policy of mortgage
----------------------------------
guaranty insurance, or any replacement policy therefor, required to be
maintained pursuant to Section 4.13.
PRINCIPAL PREPAYMENT: Any payment or other recovery of all or any
---------------------
portion of the outstanding principal on a Mortgage Loan which is received in
advance of its scheduled Due Date and is not accompanied by an amount as to
interest representing scheduled interest due on any date or dates in any month
or months subsequent to the month of prepayment.
PURCHASE AGREEMENT: The Origination and Purchase Agreement, dated
-------------------
_______, 199__ between the Purchaser, as purchaser, and the Company, as seller,
including all amendments thereof and supplements thereto entered into in
accordance with the provisions thereof.
-5-
<PAGE>
PURCHASER: and its successors
----------
and assigns.
REMITTANCE DATE: The 18th day of any month, or, if such 18th day is
----------------
not a Business Day, the first Business Day immediately preceding, commencing,
with respect to each Mortgage Loan, on the 18th day of the month following the
month in which the related Cut-off Date occurs.
SERVICING ADVANCES: All customary, reasonable and necessary "out of
-------------------
pocket" costs and expenses incurred in the performance by the Company of its
servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the Mortgaged Property if the Mortgaged Property is acquired
in satisfaction of the Mortgage, and (d) compliance with the obligations under
Section 4.08.
SERVICING FEE: With respect to each Mortgage Loan, the amount of the
--------------
annual fee Purchaser shall pay to the Company, calculated as (i) the Servicing
Fee Rate, multiplied by (ii) the outstanding principal amount thereof. Such fee
shall be payable monthly, computed on the basis of the same principal amount and
for the period respecting which any related interest payment on a Mortgage Loan
is computed. The obligation of the Purchaser to pay the servicing Fee is
limited to, and payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds, to the extent permitted by
Section 4.05) of such Monthly Payments collected by the Company, or as otherwise
provided under Section 4.05.
SERVICING FEE RATE: As to each Mortgage Loan, the rate identified
-------------------
as such on the Mortgage Loan Schedule.
SERVICING OFFICER: Any officer of the Company involved in, or
------------------
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished to the Purchaser by the
Company, as such list may from time to time be amended.
STATED PRINCIPAL BALANCE: As to each Mortgage Loan, (i) the
-------------------------
principal balance of the Mortgage Loan at the Cut-off Date after giving effect
to payments of principal due on or before such date, whether or not received,
minus (ii) the aggregate of all amounts previously distributed to the Purchaser
with respect to the Mortgage Loan representing payments or recoveries of
principal, or advances in lieu thereof.
-6-
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
-----------------------------------------------------------
BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS
------------------------------------------------------
Section 2.01 Conveyance of Mortgage Loans; Possession of Mortgage
----------------------------------------------------
Files.
- -----
The Company does hereby sell, transfer, assign, set over and convey to
the Purchaser, without recourse, but subject to the terms of this Agreement, all
the right, title and interest of the Company in and to each Mortgage Loan
purchased by the Purchaser pursuant to the Purchase Agreement, effective on the
applicable Funding Date. The contents of each Mortgage File not delivered to
the Purchaser are and shall be held in trust by the Company for the benefit of
the Purchaser as the owner thereof and the Company's possession of the portion
of each Mortgage File so retained is at the will of the Purchaser for the sole
purpose of servicing the related Mortgage Loan, and such retention and
possession by the Company is in a custodial capacity only. Upon the purchase of
any Mortgage Loan, the ownership of the related Mortgage Note, Mortgage and
Mortgage File is vested in the Purchaser, and the ownership of all records and
documents with respect to each Mortgage Loan prepared by or which come into the
possession of the Company shall immediately vest in the Purchaser and shall be
retained and maintained, in trust, by the Company at the will of the Purchaser
in such custodial capacity only. The portion of each Mortgage File so retained
shall be segregated from the other books and records of the Company and shall be
appropriately marked to clearly reflect the sale of the related Mortgage Loan to
the Purchaser. The Company shall release from its custody the contents of any
Mortgage File only in accordance with written instructions from the Purchaser,
unless such release is required as incidental to the Company's servicing of the
Mortgage Loans or is in connection with a repurchase of any Mortgage Loan
pursuant to Section 3.03.
Section 2.02 Books and Records.
-----------------
All rights arising out of the Mortgage Loans, including, but not
limited to, all funds received on or in connection with a Mortgage Loan, shall
be held by the Company in trust for the benefit of the Purchaser as the owner of
the Mortgage Loans.
The Sale of each Mortgage Loan by the Company to the Purchaser shall
be reflected on the Company's balance sheet and other financial statements as a
sale of assets by the Company. The Company shall be responsible for maintaining,
and shall maintain, a complete set of books and records for each Mortgage
-7-
<PAGE>
Loan which shall be clearly marked to reflect the ownership of each Mortgage
Loan by the Purchaser.
Section 2.03 Delivery of Mortgage Loan Documents.
-----------------------------------
The Company will deliver to the Purchaser, or to such Person as
Purchaser shall designate in writing, each of the following documents for each
Mortgage Loan on or before the applicable Funding Date:
(a) The original Mortgage Note endorsed "Pay to the order of
___________________________ without recourse," and signed in the name
of the Company by an authorized officer;
(b) The original Mortgage, with evidence of recording indicated thereon or
a certified true copy of the original Mortgage in those instances where
the public recorder's office retains the original, certified by the
relevant recorder's office, together with the registration copy of the
Mortgage (if the Mortgaged Property is registered under a Torrens
System) with a proper endorsement of transfer thereon, or, if the
Mortgage Loan was originated within 90 days prior to the Funding Date,
then a true copy of the Mortgage, together with a recorder's receipt
evidencing delivery of such Mortgage to the appropriate public
recorder's office for recordation or, if such office does not issue
such recorder's receipts, with a certificate of a Servicing Officer
certifying that such Mortgage has been delivered to such office for
recordation. In any event, the original Mortgage with evidence of
recording indicated thereon, shall be delivered to the Purchaser within
60 days after the Funding Date;
(c) The original of the Assignment of Mortgage with respect to each
Mortgage, to and signed in the name of the Company by an authorized
officer, which assignment is in form and substance acceptable for
recording;
(d) The original Primary Mortgage Insurance Policy, if required under
Section 3.01(ee);
(e) The original policy of title insurance, or a binder of commitment for
title insurance dated and certified as of the date the Mortgage Loan
was funded, together with an Opinion of Counsel addressed to the
Company and its successors and assigns that such binder or commitment
insures the priority of the lien of the related Mortgage
-8-
<PAGE>
during the period between the date of the funding of the related
Mortgage Loan and the date of the related title policy. In any event,
the original policy of the title insurance, dated the date of recording
of the related Mortgage, shall be delivered to the Purchaser within 60
days after the Funding Date;
(f) Originals of each assumption or modification agreement, written
assurance or substitution agreement;
(g) The original appraisal made by an appraiser meeting the requirements of
Section 3.01(n);
(h) Survey or plat map of the Mortgaged Property, including legal
description if title insurance policy contains an exception as to
boundary and building line restrictions;
(i) A copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy,
e.g., map or plat restrictions, easements, sewer agreements, home
association declarations, etc.;
(j) The original of the final residential loan application (executed by the
Mortgagor);
(k) Verification of employment and income;
(l) Credit report on the Mortgagor;
(m) Photographs of the Mortgaged Property, including front, side, rear and
street views, together with photographs of the comparables contained in
the appraisal;
(n) A copy of the purchase agreement with respect to the Mortgaged Property
(unless the Mortgage Loan constitutes a refinancing of an outstanding
mortgage loan); and
(o) Payment history as of the Funding Date.
-9-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY;
-----------------------------------------
REPURCHASE OF MORTGAGE LOANS
----------------------------
Section 3.01 Individual Mortgage Loans.
-------------------------
The Company hereby represents and warrants to the Purchaser that, as
to each Mortgage Loan, as of the Funding Date with respect to such Mortgage
Loan:
(a) The information set forth on the Mortgage Loan Schedule is complete,
true and correct in all material respects as of the date or dates
respecting which such information is furnished;
(b) The Mortgage Note and the Mortgage have not been assigned or pledged
(provided, that the Company may have pledged such Mortgage Note or
Mortgage to a lender under a warehouse line of credit, in which event
such pledge was released prior to such sale of the Mortgage Loan to the
Purchaser); and the Company has good and marketable title thereto, and
the Company is the sole owner and holder of the Mortgage Loan free and
clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any
nature and has full right and authority, subject to no interest or
participation of, or agreement with, any other party, to sell and
assign the same pursuant to this Agreement;
(c) The Mortgage is a valid and subsisting first lien on the related
Mortgaged Property subject only to (a) the lien of current real
property taxes and assessments, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal or appraisals made
in connection with the origination of the Mortgage Loan, and (c) other
matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be
provided by such Mortgage. Any security agreement, chattel mortgage or
equivalent document related to the Mortgage and delivered to the
Purchaser or its designee establishes in the Company, a valid and
subsisting first lien on the property described therein and the Company
has full right to sell the same to the
-10-
<PAGE>
Purchaser and to assign the same to the Purchaser or to its order;
(d) The terms of the Mortgage Note and the Mortgage have not been impaired,
altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the
holder of the Mortgage Note and the mortgagee under the Mortgage and
which the Company acknowledges has been delivered to the Purchaser or
its designee. The substance of any such alteration or modification has
been approved by the insurer under the Primary Mortgage Insurance
Policy, if any;
(e) No instrument of release or waiver has been executed in connection with
the Mortgage Loan, and no Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement which has been
approved by the insurer under the Primary Mortgage Insurance Policy, if
any, and which has been delivered to the Purchaser or its designee;
(f) There are no defaults in complying with the terms of the Mortgage, and
all taxes, governmental assessments insurance premiums, water, sewer
and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds
has been established in an amount sufficient to pay for every such item
which remains unpaid and which has been assessed but is not yet due and
payable. The Company has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount
required by the Mortgage, except for interest accruing from the date of
the Mortgage Note or date of disbursement of the Mortgage proceeds,
whichever is greater, to the day which precedes by one month the Due
Date of the first installment of principal and interest;
(g) There is no proceeding pending or threatened for the total or partial
condemnation of the Mortgaged Property, nor has any notice of any such
pending or threatened proceeding been received or is such a proceeding
currently occurring, and such property is free of damage and in good
repair;
(h) There are no mechanics' or similar liens or claims for work, labor or
material (and no rights are outstanding that under law could give rise
to such a lien) affecting the Mortgaged Property or the Mortgage which
are, or may be, a lien prior or equal to, or coordinate with, the lien
of the Mortgage, and there are no
-11-
<PAGE>
delinquent tax or assessments liens against the Mortgaged Property;
(i) All of the improvements which were included for the purpose of
determining the appraised value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon the Mortgaged
Property;
(j) There do not exist any circumstances or conditions with respect to the
Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's
credit standing that can be reasonably expected to cause private
institutional investors to regard the Mortgage Loan as an unacceptable
investment, cause the Mortgage Loan to become delinquent or adversely
affect the value or marketability of the Mortgage Loan;
(k) No improvement located on or being part of the Mortgaged Property is in
violation of any applicable zoning law or regulation. All inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the Mortgaged Property and, with respect to
the use and occupancy of the same, including, but not limited to,
certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(l) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the
laws of the State wherein the Mortgaged Property is located, and (2)
(A) organized under the laws of such State, (B) qualified to do
business in such State, or (C) federal savings and loan associations or
national banks having principal offices in such State, or (D) not doing
business in such State;
(m) All payments required to be made up to the Cut-off Date for the
Mortgage Loan under the terms of the Mortgage Note have been made. The
Mortgage Loan is not 30 or more days delinquent in payment on the
Funding Date and has not been 30 or more days delinquent in payment
more than once in the 12-month period ending on the Funding Date;
(n) The Mortgage File contains each of the documents and instruments
specified to be included therein duly
-12-
<PAGE>
executed and in due and proper form, and each such document or
instrument is in form acceptable to FNMA and FHLMC. Each appraisal of
the Mortgaged Property was made by an appraiser experienced in the
appraisal of one- to four-family residences and actively engaged in
such appraisal work, who is a member of the SRA, the RM, the MAI, the
SRPA or the SREA. The Mortgage Note, Mortgage and each appraisal are on
forms approved by FNMA or FHLMC with such riders as have been approved
by FNMA or FHLMC, as the case may be;
(o) The Mortgage Note and the Mortgage are genuine, and each is the legal,
valid and binding obligation of the maker thereof, enforceable in
accordance with its terms. All parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the
Mortgage and each Mortgage Note and Mortgage have been duly and
properly executed by such parties;
(p) The Mortgage Loan, at the time it was originated and on the Funding
Date, complied in all material respects with any and all applicable
requirements of federal, state and local law, including, without
limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity and disclosure
laws, and the Company shall maintain in its possession, available for
the Purchaser's inspection, and shall deliver to the Purchaser or its
designee, upon demand, evidence of compliance with all such
requirements, and the consummation of the transactions contemplated by
this Agreement will not involve the violation of any such laws;
(q) The proceeds of the Mortgage Loan have been fully disbursed, there is
no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied
with. All costs, fees and expenses incurred in making, closing or
recording the Mortgage Loan were paid;
(r) The Assignment of Mortgage validly assigns, transfers and conveys the
Mortgage Loan and Mortgage to the Purchaser free and clear of any
pledge, lien, encumbrance or security interest, and is in recordable
form and sufficient under the laws of the jurisdiction wherein the
Mortgaged Property is located to reflect such assignment, transfer and
conveyance;
-13-
<PAGE>
(s) The Mortgage Loan is covered by an ALTA mortgage title insurance policy
(1970 Form), or such other generally acceptable form of policy of title
insurance acceptable to FNMA or FHLMC, issued by and the valid and
binding obligation of a title insurer acceptable to FNMA and FHLMC and
qualified to do business in the jurisdiction where the Mortgaged
Property securing such Mortgage Loan is located, insuring the Company,
its successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan. The
Company and its successors and assigns are the sole named insureds
under such mortgage title insurance policy; the assignment to the
Purchaser of the Company's interest in such mortgage title insurance
policy in each case does not require the consent of or notification to
the insurer; and such mortgage title insurance policy was valid and in
full force and effect at the origination of the Mortgage Loan, is valid
and remains in full force and effect and will be in full force and
effect and inure to the benefit of the Purchaser and any subsequent
owners of the Mortgage Loans, including a trustee acting on their
behalf, upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such mortgage title insurance
policy and no prior holder of the Mortgage, including the Company has
done, by act or omission, anything which would impair the coverage of
such mortgage title insurance policy;
(t) All improvements upon the Mortgaged Property are insured against loss
by flood, fire, hazards of extended coverage and such other hazards as
are customary in the area where the Mortgaged Property is located,
pursuant to insurance policies conforming to the requirements of
Section 4.10 hereof. Each Hazard Insurance Policy and Flood Insurance
Policy contains a standard mortgagee clause naming the Company and its
successors and assigns as mortgagee and loss payee and all premiums
thereon have been paid. Each Hazard Insurance Policy and Flood
Insurance Policy is the valid and binding obligation of the insurer, is
in full force and effect and will be in full force and effect and inure
to the benefit of the Purchaser and any subsequent owners of the
Mortgage Loans, including a trustee acting on their behalf, upon the
consummation of the transactions contemplated by this Agreement.
Neither the Company nor any Mortgagor has engaged in any act or
omission which would impair the coverage of any policy or the validity
and binding effect thereof. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at Mortgagor's cost and
expense, and, upon the Mortgagor's failure to do so, authorizes the
mortgagee under the Mortgage to obtain
-14-
<PAGE>
and maintain such insurance at Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor. The Company has not acted or
failed to act so as to impair the coverage of any such insurance
policy;
(u) There is no default, breach, violation or event of acceleration
existing under the Mortgage or the Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or
event of acceleration; and the Company has not waived any such default,
breach, violation or event of acceleration;
(v) The Mortgage Loan, the Mortgage and the Mortgage Note, including the
obligation of the Mortgagor to pay the unpaid principal of and interest
on such Mortgage Note, are each not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission, set-
off, counterclaim or defense has been asserted with respect thereto;
(w) The Mortgage Loan was originated by the Company in its own name, and
has not been sold to any Person other than the Purchaser; provided,
that the Company may have pledged such Mortgage Loan to a lender under
a warehouse line of credit, in which event such pledge was released
prior to the sale of such Mortgage Loan to the Purchaser;
(x) The Mortgage Loan is a conventional mortgage loan having an original
term as set forth on the Mortgage Loan Schedule, with interest payable
in arrears on the first day of each month. The Mortgage Loan is payable
in self-amortizing, equal monthly installments of principal and
interest and bears a fixed Mortgage Interest Rate for the term of the
Mortgage Loan. The Mortgage Loan is not subject to any buydown or
subsidy agreement or similar arrangement providing for a temporary
reduction in the cash payment made by the Mortgagor each month. The
Mortgage Loan is not subject to negative amortization;
(y) The Mortgage Loan contains an enforceable provision for the
acceleration by the mortgage under the Mortgage of
-15-
<PAGE>
the payment of the unpaid principal balance of the Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent
of such mortgagee ;
(z) As indicated on the Mortgage Loan Schedule, at the time that the
Mortgage Loan was originated the Mortgagor represented that the
Mortgaged Property would be (i) an owner-occupied primary residence,
or, in the case of a two-to-four-family residence, that at least one of
the units would be so occupied, (ii) a vacation home that will not be
part of a mandatory rental pool and will be suitable for year-round
occupancy, or (iii) an investment property, and, if such Mortgaged
Property is a unit in condominium, that such unit would be owner-
occupied and not a part of a mandatory rental pool; and the Company has
no reason to believe that such representations of the Mortgagor are no
longer true. The Mortgagor is a Natural Person. The Mortgaged Property
is lawfully occupied under applicable law;
(aa) The Mortgage Note is not and has not been secured by any collateral
except the lien of the Mortgage and the security interest of any
applicable security agreement or chattel mortgage referred to in
Section 3.01(c);
(bb) The Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a
deed of trust, by trustee's sale, and (ii) otherwise by judicial
foreclosure. There is not homestead or other exemption available to
the Mortgagor which would interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(cc) With respect to each Mortgage constituting a deed or trust, a trustee,
duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the
Purchaser, or any subsequent owners of the Mortgage Loans or a trustee
acting on their behalf, to the trustee under the deed of trust, except
in connection with a trustee's sale after default by the Mortgagor;
(dd) The Mortgaged Property is located in the State identified in the
Mortgage Loan Schedule and consists of (i) a single parcel of real
property with a fully detached single-family residence erected
thereon, (ii) a two to four-family residence, (iii) an individual
-16-
<PAGE>
condominium unit located in a building consisting of not more than
four stories in a project as described below or (iv) a townhouse
located in a building consisting of not more than four stories;
provided that each condominium unit described above is located within
a project that has been approved, or is eligible for approval, by FNMA
and that no residence or dwelling is (a) a unit in a cooperative
apartment or related capital shares, (b) a property constituting part
of a syndication, (c) a time share unit, (d) a property held in trust,
(e) a property the Mortgagor's ownership interest in which consists of
a leasehold estate, (f) a mobile home, or (g) a manufactured dwelling;
(ee) No Mortgage Loan had a Loan-to-Value Ratio at origination in excess of
95%. There has been issued with respect to each Mortgage Loan with a
Loan-to Value Ratio at origination in excess of 75% a Primary Mortgage
Insurance Policy, issued by a mortgage insurance company licensed to
do business in the State in which the related Mortgaged Property is
located, approved by FHLMC and FNMA and having a rating not lower than
AA by Standard & Poor's Corporation. As to each such Mortgage Loan,
such policy insures the named insured and its successors and assigns,
and provides coverage in an amount equal to the excess of the
outstanding principal balance of the related Mortgage Loan plus
accrued interest thereon and related foreclosure expenses over 75% of
the Appraised Value of the Mortgaged Property. All provisions of such
Primary Mortgage Insurance Policy have been and are being complied
with, such policy is in full force and effect and all premiums due
thereunder have been paid. Any Mortgage subject to any such Primary
Mortgage Insurance Policy obligates the Mortgagor thereunder to
maintain such insurance and pay all premiums and charges in connection
therewith. The Mortgage Interest Rate for the Mortgage Loans as set
forth on the Mortgage Loan Schedule is net of any such insurance
premium. No Mortgage Loan is secured by a Mortgaged Property which was
subject to secondary financing at origination. No Mortgage Loan
secured by a Mortgaged Property used as a vacation home or
constituting an investment property had a Loan-to-Value Ratio at
origination in excess of 80% or an original principal balance in
excess of $250,000. No Mortgage Loan the proceeds of which were used
to refinance an existing loan had a Loan-to-Value Ratio at origination
in excess of 90%. If the Loan-to-Value Ratio of such loan exceeded
80%, all of the proceeds of the Mortgage Loan were used to repay the
prior loan. Each Mortgage Loan secured by a Mortgaged Property used as
a vacation home or constituting an investment property is covered by a
12% Primary
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<PAGE>
Mortgage Insurance Policy for the life of such Mortgage Loan. As to
each Mortgage Loan originated more than 12 months prior to the Funding
Date, the current Appraised Value is not less than the Appraised Value
at the origination of the Mortgage Loan, as evidenced by an appraisal
made by an appraiser meeting the requirements of Section 3.01 (n),
dated no earlier that 12 months prior to the Funding Date;
(ff) The Mortgage Loan was underwritten in accordance with FNMA
underwriting standards in effect at the time the Mortgage Loan was
originated except that the original principal balance of the Mortgage
Loan may exceed such standards;
(gg) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no escrow deposits or
payments of other charges or payments due the Company have been
capitalized under the Mortgage or the Mortgage Note;
(hh) The Mortgage Loan contains no early ownership provision;
(ii) The Mortgage Loan is not secured by Mortgaged Property located in any
of the following Locations: (i) Dade or Broward Counties in the State
of Florida; (ii) Harris, Montgomery or Fort Bend Counties in the State
of Texas; (iii) the State of Hawaii; or (iv) the State of Alaska; and
(jj) Any future advances made prior to the Cut-off Date have been
consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term. The lien of the
Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority by a title insurance policy, an
endorsement to the policy insuring the mortgagee's consolidated
interest or by other title evidence acceptable to FNMA and FHLMC. The
consolidated principal amount does not exceed the original principal
amount of the Mortgage Loan. The Company shall not make future
advances after the Cut-off Date.
Section 3.02 Company Representations.
-----------------------
The Company hereby represents and warrants to the Purchaser as of each
Funding Date:
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(a) The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation and has
all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in the States where the
Mortgaged Property is located if the laws of such State require
licensing or qualification in order to enable the Company to perform
its obligation under this Agreement; the Company has corporate power
and authority to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered
pursuant to this Agreement) by the Company and the consummation of the
transactions contemplated hereby have been duly and validly authorized;
this Agreement evidences the valid, binding and enforceable obligation
of the Company; and all requisite corporate action has been taken by
the Company to make this Agreement valid and binding upon the Company
in accordance with its terms;
(b) At all relevant times, the Company had power and authority to execute
and deliver the Purchase Agreement and to perform in accordance
therewith; the execution, delivery and performance of such agreements
(including all instruments of transfer delivered pursuant thereto) by
the Company and the consummation of the transactions contemplated
thereby were duly and validly authorized; such agreements evidence the
valid, binding and enforceable obligations of the Company; and all
requisite corporate action was taken by the Company to make such
agreements valid and binding upon the Company in accordance with their
terms;
(c) No approval of the transactions contemplated by this Agreement or the
Purchase Agreement from the Federal Home Loan Bank Board, the FSLIC,
the FDIC or any similar State regulatory authority having jurisdiction
over the Company is or was required or, if required, such approval has
been obtained;
(d) The consummation of the transactions contemplated by this Agreement and
the Purchase Agreement are or were in the ordinary course of business
of the Company and will not and did not result in the breach of any
term or provision of the charter or by-laws of the Company or result in
the breach of any term or provision of, or conflict with or constitute
a default under or result in the acceleration of any obligation under,
any agreement, indenture or loan or credit agreement or other
instrument to which the Company or its property is subject, or result
in the violation of any law,
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<PAGE>
rule, regulation, order, judgment or decree to which the Company or its
property is subject;
(e) Neither this Agreement nor any statement, report or other document
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement of fact or omits to state a fact necessary to make the
statements contained herein or therein not misleading;
(f) The origination and collection practices used by the Company with
respect to each Mortgage Note and Mortgage have been in all respects
legal, proper, prudent and customary in the mortgage servicing
business;
(g) The Mortgage Note, the Mortgage, the Assignment of Mortgage and any
other documents described in Section 2.03 or otherwise required to be
delivered under this Agreement on or prior to the Funding Date for each
Mortgage Loan have been delivered to the Purchaser or its designee and
all documents described in Section 2.03 required to be delivered within
60 days after the Funding Date will be delivered within such 60 days.
With respect to each Mortgage Loan the Company is in possession of such
copies or originals of the documents comprising the Mortgage File as
are necessary to enable the Company to service such Mortgage Loan under
this Agreement, and there are no agreements in effect adversely
affecting the right or ability of the Company to make the deliveries
required under this Agreement. The transfer, assignment and conveyance
of the Mortgage Notes and the Mortgages by the Company pursuant to the
Purchase Agreement and the Assignment of Mortgage are not subject to
the bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction;
(h) There is no action, suit, proceeding or investigation pending or
threatened against the Company which, either in any one instance or in
the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of the
Company, or in any material impairment of the right or ability of the
Company to carry on its business substantially as now conducted, or in
any material liability on the part of the Company, or which would draw
into question the validly of this Agreement or the Mortgage Loans or of
any action taken or to be taken in connection with the obligations of
the Company contemplated herein, or which would be likely to impair
materially the ability of the Company to perform under the terms of
this Agreement;
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(i) The Company does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in
this Agreement; and
(j) The Company is an approved seller/servicer of conventional mortgage
loans for FNMA or FHLMC in good standing and the Company's deposits are
insured by the FDIC or FSLIC to the maximum extent permitted by law.
Section 3.03 Repurchase.
----------
Is understood and agreed that, with respect to each Mortgage Loan, the
representations and warranties set forth in Sections 3.01 and 3.02 shall survive
delivery of such Mortgage Loan to the Purchaser and shall inure to the benefit
of the Purchaser, notwithstanding any restrictive or qualified endorsement on
any Mortgage File. Upon discovery by either the Company or the Purchaser of a
breach of any of the foregoing representations and warranties which materially
and adversely affects the value of the related Mortgage Loan or the interest of
the Purchaser or any subsequent owners of the Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other. Within
60 days of the earlier of either discovery by or notice to the Company of any
breach of a representation or warranty, the Company shall promptly cure such
breach in all material respects or, if such breach cannot be cured, at the
option of the Purchaser the Company shall repurchase such Mortgage Loan at a
price equal to (i) 100% of the Stated Principal Balance of the Mortgage Loan as
of the date of repurchase, plus (ii) interest on such Stated Principal Balance
at the Mortgage Loan Remittance Rate from the date to which interest has last
been paid and distributed to Purchaser to the date of repurchase. In the event
that a breach shall involve any representation or warranty set forth in section
3.02, and such breach is not cured within 60 days of the earlier of either
discovery by or notice to the Company of such breach, all the Mortgage Loans
shall, at the option of the Purchaser, be repurchased by the Company at the
price computed as provided above. Any such repurchase shall be accomplished by
deposit in the Custodial Account of the amount of the purchase price (after
deducting therefrom any amounts received in respect of such repurchased Mortgage
Loan or Loans and being held in the Custodial Account for future distribution).
In addition to such repurchase obligation, the Company shall indemnify
and hold harmless the Purchaser against any loss, damages, penalties, fines,
forfeitures, legal fees and related costs, judgments and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the Company's representations and
warranties contained in this Agreement. The Company shall undertake the defense
or prosecution of any claim, demand, defense or assertion based on or grounded
upon, or resulting
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<PAGE>
from, a breach of the Company's representations and warranties contained in
Section 3.01 or Section 3.02. It is understood and agreed that the obligations
of the Company set forth in this Section 3.03 to cure or repurchase a defective
Mortgage Loan and to indemnify the Purchaser as provided in this Section 3.03
constitute the sole remedies of the Purchaser respecting a breach of the
foregoing representations and warranties.
Any cause of action against the Company relating to or arising out of
the breach of any representations and warranties made in Section 3.01 or 3.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Company to the Purchaser, (ii) failure by the
Company to cure such breach or repurchase such mortgage Loan as specified above,
and (iii) demand upon the Company by the Purchaser for all amounts payable in
respect of such Mortgage Loan.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 4.01 Company to Act as Servicer.
--------------------------
In performance of its duties under this Agreement, the Company shall
be acting as an independent contract servicer and shall Service and administer
the Mortgage Loans consistent with the terms of this Agreement and the First
Boston Offering System Seller/Servicer Guide, as such Seller/Servicer Guide may
be amended from time to time. The Company acknowledges that it has received
such Seller/Servicer Guide as in effect on the date of this Agreement. The
Company shall have no authority, express or implied, to act in any manner or by
any means for or on behalf of the Purchaser in any capacity other than that of
an independent contractor, and no authority to act in any manner except as
herein expressly set forth or as it may from time to time be requested in
writing by the Purchaser. The Company is not authorized or empowered to waive,
release or vary the terms of any Mortgage Loan, waive any prepayment penalty, or
waive or consent to the postponement of strict compliance on the part of any
Mortgagor with any term, provision or covenant or to permit the assumption of
any Mortgage Loan or in any other manner grant indulgence to any Mortgage
without the express written consent of the Purchaser. In the event that any
such modification of a Mortgage Loan with the consent of the Purchaser permits
the deferral of interest or principal payments on any Mortgage Loan, the Company
shall include in each remittance for any month in which any such principal or
interest payment has been deferred an amount equal to, as the case may be, such
month's principal and one month's interest at the Mortgage Loan Remittance Rate
on the Stated Principal Balance of such Mortgage Loan and shall be entitled to
reimbursement for such advance only to the same extent as for all other advances
made pursuant to Section 5.03.
The Company shall service and administer the Mortgage Loans in
accordance with applicable State and federal laws and shall provide to each
Mortgagor any reports required to be provided to such Mortgagor thereby. In
servicing and administering the Mortgage Loans, the Company shall employ
procedures (including collection procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering mortgage loans
for it own account and in accordance with the highest standard of accepted
mortgage servicing practices of prudent lending institutions in the respective
States where the Mortgaged Properties are located and giving due consideration
to the Purchaser's reliance on the Company.
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<PAGE>
Section 4.02 Liquidation of Mortgage Loans.
-----------------------------
In the event that any payment due under any Mortgage Loan and not
postponed pursuant to Section 4.01 is not paid when the same becomes due and
payable, or in the event the Mortgagor fails to perform any other covenant or
obligation under the Mortgage Loan and such failure continues beyond any
applicable grace period, the Company shall take such action as it shall deem to
be in the best interest of Purchaser. Prior to commencing foreclosure
proceedings, the Company shall notify Purchaser in writing of the Company's
intention to so do, and the Company will not commence foreclosure proceedings
unless and until directed to do so by the Purchaser, all as more particularly
set forth in Section 4.15. In such connection, the Company shall from its own
funds make all necessary and proper Servicing Advances in accordance with the
provisions of Section 4.15.
Section 4.03 Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the date hereof until termination of this Agreement,
the Company will proceed diligently to collect all payments due under each of
the Mortgage Loans when the same shall become due and payable and will take
special care in ascertaining and estimating annual ground rents, taxes,
assessments, water rates, premiums on any Primary Mortgage Insurance Policy and
all flood, fire and other hazard insurance required to be kept in force pursuant
to this Agreement and all other charges that, as provided in any Mortgage, will
become due and payable to the end that the installments payable by the
Mortgagors will be sufficient to pay such charges as and when they become due
and payable.
Section 4.04 Establishment of Custodial Account; Deposits in
----------------------------------- -----------
Custodial Account.
- -----------------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan (other than any such funds which constitute
Escrow Payments, which are to be held in the Escrow Account) separate and apart
from any of its own funds and general assets and shall establish and maintain
one or more Custodial Accounts (collectively, the "Custodial Account"), which
shall comply with the requirements set forth in the definition of "Custodial
Account" in Article I and shall be established in a depository acceptable to the
Purchaser. The creation of any Custodial Account shall be evidenced by (a) a
certification in the form of Exhibit B hereto, in the case of an account
established with the Company, or (b) a letter agreement in the form of Exhibit C
hereto, in the case of an account held by a depository other than the Company.
In either case, a copy of such certification or letter agreement shall be
furnished to the Purchaser. If a Custodial Account is maintained with a bank
the rating on whose debt obligations by Standard & Poor's Corporation falls
below AA, and if the deposits in such Custodial
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<PAGE>
Account are not fully insured by either FDIC or FSLIC, all funds held in such
Custodial Account shall be immediately withdrawn by the Company and remitted to
the Purchaser, and the Company shall thereafter establish and maintain a new
Custodial Account or Accounts meeting the requirements of the first sentence of
this Paragraph with one or more new depositories.
In the event of the insolvency of the depository institution holding
the Custodial Account, the Company shall establish a new Custodial Account in
accordance with this Agreement, but not with the depository institution holding
the Custodial Account so long as such institution holding the Custodial Account
is insolvent.
With respect to each Mortgage Loan, the Company shall deposit in the
Custodial Account on a daily basis, and retain therein the following payments
and collections received or made by it subsequent to the related Cut-off Date
(other than in respect of principal and interest on the related Mortgage Loan
due on or before the Cut-off Date):
(i) all payments on account of principal, including Principal Prepayments,
on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans adjusted to
the Mortgage Loan Remittance Rate;
(iii) all Liquidation Proceeds;
(iv) all proceeds received by the Company under any title, hazard or other
insurance policy including amounts required to be deposited pursuant to Section
4.10, other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Section 4.12;
(v) all awards or settlements in respect of condemnation proceedings or
eminent domain affecting any Mortgaged Property which are not released to the
Mortgagor in accordance with the Purchaser's normal servicing procedures;
(vi) any amount required to be deposited in the Custodial Account pursuant
to Section 5.03, 6.01 or 6.02;
(vii) any amounts payable by the Company in connection with the repurchase
of any Mortgage Loan pursuant to Section 3.03; and
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<PAGE>
(viii) with respect to each Principal Prepayment, an amount (to be
paid by the Company out of its own funds) which, when added to all amounts
allocable to interest received in connection with the Principal Prepayment,
equals one month's interest on the amount of principal so prepaid for the month
of prepayment at the applicable Mortgage Loan Remittance Rate.
The foregoing requirements for deposit in the Custodial 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 and
assumption fees, to the extent permitted by Section 6.01, need not be deposited
by the Company in the Custodial Account.
Section 4.05 Permitted Withdrawals From the Custodial Account.
------------------------------------------------
The Company may, from time to time, withdraw funds from the Custodial
Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the manner
provided for in Section 5.01;
(ii) to reimburse itself for advances of Company funds made pursuant to
Section 5.03, the Company's right to reimburse itself pursuant to this clause
(ii) being limited to amounts received on the related Mortgage Loan which
represent late payments of principal and/or interest respecting which any such
advance was made;
(iii) to reimburse itself for unreimbursed Servicing Advances and for
unreimbursed advances of Company funds made pursuant to Section 5.03, the
Company's right to reimburse itself pursuant to this clause (iii) with respect
to any Mortgage Loan being limited to related Liquidation Proceeds, condemnation
proceeds, amounts representing proceeds of insurance policies covering the
related Mortgaged Property and such other amounts as may be collected by the
Company from the Mortgagor or otherwise relating to the Mortgage Loan, it being
understood that, in the case of any such reimbursement, the Company's right
thereto shall be prior to the rights of Purchaser unless the Company is required
to repurchase a Mortgage Loan pursuant to Section 3.03, in which case the
Company's right to such reimbursement shall be subsequent to the payment to the
Purchaser of the repurchase price pursuant to Section 3.03 and all other amounts
required to be paid to the Purchaser with respect to such Mortgage Loan;
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<PAGE>
(iv) to pay to itself any unpaid Servicing Fees with respect to a
Mortgage Loan, but only to the extent that the related Liquidation Proceeds,
condemnation proceeds, amounts representing proceeds of insurance policies
covering the related Mortgaged Property and other amounts collected by the
Company from the Mortgagor or otherwise relating to the Mortgage Loan exceed the
sum of (A) the unpaid principal balance of such Mortgage Loan plus accrued
interest at the Mortgage Loan Remittance Rate through the first day of the month
following the month in which such proceeds are to be remitted to the Purchaser
plus (B) all amounts reimbursed to the Company pursuant to clause (iii) above;
(v) to reimburse itself for expenses incurred by and reimbursable to it
pursuant to Section 8.01; and
(vi) to clear and terminate the Custodial Account upon the termination of
this Agreement.
The Company shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Custodial Account pursuant to clauses (ii) through (vi), inclusive.
Section 4.06 Establishment of Escrow Account; Deposits in Escrow
---------------------------------------------------
Account.
- -------
The Company shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments or the proceeds
of flood, fire or other hazard insurance which, pursuant to Section 4.12, are to
be applied to the restoration or repair of the Mortgaged Property or released
general assets and shall establish and maintain one or more Escrow Accounts
(collectively, the "Escrow Account"), which shall comply with the requirements
set forth in the definition of "Escrow Account" in Article I and shall be
established in a depository acceptable to the Purchaser. The creation of any
Escrow Account shall be evidenced by (a) a certification in the form of Exhibit
D hereto, in the case of an account established with the Company, or (b) a
letter agreement in the form of Exhibit E hereto, in the case of an account held
by a depository other than the Company. In either case, a copy of such
certification or letter agreement shall be furnished to the Purchaser. If an
Escrow Account is maintained with a bank the rating on whose debt obligations by
Standard & Poor's Corporation falls below AA, and if the deposits in such Escrow
Account are not fully insured by either FDIC or FSLIC, all funds held in such
Escrow Account shall be immediately withdrawn by the Company and remitted to the
Purchaser, and the Company shall thereafter establish and maintain a new Escrow
Account or Accounts meeting
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the requirements of the first sentence of this paragraph with one or more new
depositories.
In the event of the insolvency of the depository institution holding
the Escrow Account, the Company shall establish a new Escrow Account in
accordance with this Agreement, but not with the depository institution holding
the Escrow Account so long as such institution holding the Escrow Account is
insolvent.
The Company shall deposit in the Escrow Account on a daily basis, and
retain therein: (i) all Escrow Payments collected on account of any Mortgage
Loans, for the purpose of effecting timely payment of any such items as required
under the terms of this Agreement, and (ii) all amounts representing proceeds of
any flood, fire or other hazard insurance policy which are to be applied to the
restoration or repair of any Mortgaged Property or released to the Mortgagor in
accordance with the provisions of Section 4.12. The Company shall make
withdrawals therefrom only in accordance with Section 4.07 hereof. To the
extent required by law, the Company shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account may not bear interest.
Section 4.07 Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account may be made by the Company only
(a) to effect timely payments of ground rents, taxes, assessments, water rates,
premiums on any Primary Mortgage Insurance Policy, premiums on all flood, fire
and other hazard insurance required to be kept in force pursuant to this
Agreement or other items constituting Escrow Payments for the related Mortgage,
(b) to reimburse the Company for any Servicing Advance made by the Company
pursuant to Section 4.08 hereof with respect to a related Mortgage Loan, but
only from amounts received on the related Mortgage Loan which represent late
payments or collections of Escrow Payments thereunder, (c) to refund to any
Mortgagor any funds found to be in excess of the amounts required under the
terms of the related Mortgage Loan, (d) for transfer to the Custodial Account in
accordance with the terms of the related Mortgage Loan, (e) for application to
restoration or repair of the Mortgaged Property or release to the Mortgagor, but
only in accordance with the provisions of Section 4.12 hereof, (f) to pay to the
Mortgagor, to the extent required by law, any interest to be paid on the funds
deposited in the Escrow Account, or (g) to clear and terminate the Escrow
Account upon the termination of the Agreement. The Company shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Escrow Account.
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Section 4.08 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
With respect to each Mortgage Loan, the Company shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of premiums on any Primary Mortgage Insurance Policy and
on all flood, fire and other hazard insurance required to be kept in force
pursuant to this Agreement and shall obtain, from time to time, all bills for
the payment of such charges (including renewal premiums) and shall effect
payment thereof prior to the applicable penalty or termination date and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Company in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage. To the extent that a
Mortgage does not provide for Escrow Payments, the Company shall determine that
any such payments are made by the Mortgagor at the time they first become due.
The Company assumes full responsibility for the timely payment of all such bills
and shall effect timely payments of all such bills irrespective of each
Mortgagor's faithful performance in the payment of same or the making of the
Escrow Payments and shall make advances from its own funds to effect such
payments.
The Company shall furnish to the Purchaser as of December 31st of each
year an Officer's Certificate certifying that all ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property relating to any Mortgage Loan, together with the premiums
on any Primary Mortgage Insurance Policy and on all flood, fire and other hazard
insurance required to be kept in force pursuant to this Agreement, have been
paid.
Section 4.09 Transfer of Accounts.
--------------------
The Company may transfer the Custodial Account or the Escrow Account
to a different depository institution, provided such transferred account
continues to meet the requirements set forth in Sections 4.04 and 4.06, as
applicable. Such transfer shall be made only upon obtaining the consent of the
Purchaser.
SECTION 4.10 Maintenance of Hazard Insurance.
-------------------------------
The Company shall cause to be maintained for each Mortgage Loan
Insurance on all buildings on the related Mortgaged Property against fire,
hazards of extended coverage and such other hazards as are customary in the area
where the Mortgaged Property is located, in an amount which is at least equal to
the maximum insurable value of the improvements of the Stated Principal Balance
of the Mortgage Loan, whichever is less, but in any event in an amount not less
than that which is necessary to
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avoid the application of any coinsurance provision. If the Mortgaged Property
is in an area identified in the Federal Register by the Flood Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available) the Company will cause to be maintained a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable insurance carrier, in an
amount representing coverage not less than the least of (i) the Stated Principal
Balance of the Mortgage Loan, (ii) the full insurable value of the improvements,
or (iii) the maximum amount of insurance available under the Flood Disaster
Protection Act of 1968, as amended. The Company shall also maintain such flood,
fire and other hazard insurance, together with liability insurance, on property
acquired upon foreclosure, or by deed in lieu of foreclosure, of any Mortgage
Loan. Any amounts collected by the Company under any such policies (other than
amounts to be deposited in the Escrow Account and to be (a) applied to the
restoration or repair of the property subject to the related Mortgage or
property acquired in liquidation of the Mortgage Loan, or (b) released to the
Mortgagor, any such amounts to be so applied or released only in accordance with
the provisions of Section 4.12) shall be deposited in the Custodial Account,
subject to withdrawal pursuant to Section 4.05. It is understood and agreed
that no earthquake or other additional insurance need be required by the Company
of any Mortgagor or maintained on property acquired in respect of a Mortgage
Loan, other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. All
policies required hereunder shall be endorsed with standard mortgagee clauses
with loss payable to the Company and its successors and assigns, and shall
provide for at least 30 days prior written notice of any cancellation, reduction
in amount or material change in coverage to the Company. The Company shall not
interfere with the Mortgagor's freedom of choice in selecting either his
insurance carrier or agent, provided, however, that the Company shall not accept
any such insurance policies from insurance companies unless such companies
currently reflect a General Policy Rating of A:VI or better in Best's Key Rating
Guide and are licensed to do business in the State wherein the property subject
to the policy is located. The Company and its successors and assigns will be
named the loss payee under any Hazard Insurance Policy and Flood Insurance
Policy. The Company, on behalf of itself and the Purchaser, shall present
claims to the insurer under any Hazard Insurance Policy or Flood Insurance
Policy in a timely fashion in accordance with the provisions of such policy.
The Company shall retain in its custody and safekeeping the originals of all
policies of insurance required by the Section 4.10 as may be designated by the
Purchaser and shall fully service all policies so retained.
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SECTION 4.11 Fidelity Bond; Errors and Omissions Insurance.
---------------------------------------------
The Company shall maintain with responsible companies, at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("Company Employees"). Any such fidelity bond
and errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Company against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such Company Employees. Such fidelity bond shall also protect and insure the
Company against losses in connection with the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Section 4.11 requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve the Company from
its duties and obligations as set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be at least equal to the
corresponding amounts required by FNMA in Section 1.02 of the FNMA Guaranteed
Mortgage-Backed Securities Program Selling and Servicing Guide or by FHLMC in
Sections 6402 and 6403 of the FHLMC Purchasers' & Servicers' Guide. Upon the
request of Purchaser, the Company shall cause to be delivered to Purchaser a
certified true copy of such fidelity bond and insurance policy and a statement
from the surety and the insurer that such fidelity bond and insurance policy
shall in no event be terminated or materially modified without 30 days prior
written notice to Purchaser.
SECTION 4.12 Application of Proceeds of Insurance to Repair or
-------------------------------------------------
Restoration.
- -----------
The Company shall collect the proceeds from all policies of insurance
required to be maintained pursuant to Section 4.10 with respect to all losses
that may occur. Any such proceeds may be remitted to the Mortgagor toward the
restoration or repair of the related property only upon the written consent of
the Purchaser unless such proceeds aggregate less than $5,000 or relate to
personal property. In such event, the Company shall supervise all such repairs
and, in general, shall do all things reasonably necessary to protect the
interest of the Purchaser.
The Company shall promptly notify the Purchaser of any loss or damage
by fire, or from any other cause, to the property which results in a claim for
$5,000 or more, and will not make any agreement with respect to the
rehabilitation of the property without the written consent of the Purchaser.
The Company shall render such services as are requested by the Purchaser in
adjusting the loss or supervising the repair of the damage. The
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Company's notification shall include a recommendation as to the proposed nature
and cost of repairs. If necessary, the Company shall notify the insured under
the applicable policy and the insurer under any applicable Primary Mortgage
Insurance Policy, and shall determine that all required inspections have been
made and that the necessary determinations of the adequacy of the proposed
repairs shall be obtained before repair work commences. The Company shall send
the Purchaser, to the extent available, copies of all inspection reports and
other reports with respect thereto.
SECTION 4.13 Maintenance of Primary Mortgage Insurance Policies.
--------------------------------------------------
The Company covenants and agrees to maintain or cause to be maintained
in full force and effect each Primary Mortgage Insurance Policy represented to
be in effect pursuant to Section 3.01(ee). The Company shall cause the premiums
on each such Primary Mortgage Insurance Policy to be paid as they become due.
The Company shall not take or omit to take any action which would result in non-
coverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Company, would have been covered thereunder.
The Company shall not cancel or refuse or renew any such Primary Mortgage
Insurance Policy unless the replacement Primary Mortgage Insurance Policy for
such cancelled or non-renewed policy is maintained with an insurer whose claims-
paying ability is acceptable to Standard & Poor's Corporation for mortgage pass-
through certificates rated not lower than AA. The Company shall, promptly after
the Funding Date, submit to the insurer under each Primary Mortgage Insurance
Policy a loan sale notice indicating the sale of the related Mortgage Loan to
the Purchaser.
In connection with its activities as Servicer of the Mortgage Loans,
the Company agrees to present, on behalf of itself and the Purchaser, claims to
the insurers under any Primary Mortgage Insurance Policies in a timely fashion
in accordance with such policies and, in this regard, to take such reasonable
action as shall be necessary to permit recovery under any Primary Mortgage
Insurance Policies respecting defaulted Mortgage Loans. The Company also shall
promptly deliver to the Purchaser copies of all claims that are so presented.
Upon receipt of a check or other form of payment on a claim under a Primary
Mortgage Insurance Policy, the Company shall immediately deposit such check or
other form of payment in the Custodial Account.
SECTION 4.14 Inspections.
-----------
The Company shall promptly notify the Purchaser of any knowledge on
the part of the Company of any vacancy in a Mortgaged Property or abandonment
thereof, of any change in the condition or value of a Mortgaged Property, or any
waste
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committed thereon or any failure on the part of the Mortgagor to keep a
Mortgaged Property in good condition and repair, or of any permanent or
substantial injury to a Mortgaged Property caused by unreasonable use, resulting
in the diminution of the security for the Mortgage Loan. The Company shall also
promptly notify the Purchaser upon learning of any State insolvency or federal
bankruptcy proceedings in which any Mortgagor is seeking relief or is a
defendant debtor, or of the death or incapacity of any Mortgagor or guarantor.
The Company shall service such Mortgage Loans in accordance with the Purchaser's
instructions.
If any Mortgage Loan is more than 60 days delinquent the Company shall
inspect the related Mortgaged Property within not more than 30 days after such
Mortgage Loan has become 60 days delinquent. Inspection of properties shall be
made at more frequent intervals as reasonably required by the Purchaser. The
Company shall determine upon each such inspection the existence of any of the
facts set forth in the preceding paragraph.
The Company shall make a written report of each such inspection.
Written reports that reveal any unsatisfactory conditions shall be forwarded to
the Purchaser. Written reports that reveal a satisfactory condition shall be
retained in the Company's files and made available to the Purchaser upon
request. The Company shall furnish to the Purchaser a certification that all
properties have been inspected within the required period.
SECTION 4.15 Delinquency and Foreclosure.
---------------------------
The Company shall, upon request, advise the Purchaser as to the status
of any Mortgage Loan, and particularly as to the status of all payments required
to be made by the Mortgagor thereunder. Any arrears or defaults by the
Mortgagor on a Mortgage Loan shall be reported to the Purchaser in accordance
with the Purchaser's required procedures. The Company shall also promptly
notify the Purchaser of any failure by a Mortgagor to perform any other of its
material covenants or obligations under the related Mortgage.
The Company shall give to any insurer under a Primary Mortgage
Insurance Policy all notices of default required to be given to maintain in full
force and effect such policy of insurance. Copies of all notices, identified by
the Purchaser's loan number, shall be forwarded by the Company to the Purchaser
for its files.
After any default by a Mortgagor under the related Mortgage and during
any foreclosure or other proceedings affecting such Mortgage, the Company shall
continue to perform all the requirements of the Company to maintain insurance
thereon and to inspect the Mortgaged Property as hereinabove provided, and to
pay any ground rents, taxes, assessments, water rates, other charges and
insurance premiums with respect to the related
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insurance before any penalty or late charge accrues, and in discharging such
duties shall comply with all applicable provisions of the applicable Primary
Mortgage Insurance Policy. The Company shall, with the approval of the
Purchaser, also make all other necessary reasonable expenditures to preserve the
Mortgaged Property.
After any default under a Mortgage, the Company shall, to the extent
requested by the Purchaser, diligently assist in the instituting and conducting
of collection actions and foreclosure proceedings, or proceed to acquire the
property by other means, such as a deed in lieu of foreclosure, and take title
to the property, as designated by the Purchaser, and take possession of the
property, all in accordance with the instructions of the Purchaser and the
requirements of the related Primary Mortgage Insurance Policy and shall protect
and conserve the property until the property is disposed of. The Company shall
assist in exercising any assignment of rents given by any Mortgagor and pursuant
to the Mortgage Loan and shall take such action in connection therewith as may
be requested by the Purchaser.
In connection with any such transfer of the Mortgage or of the
Mortgaged Property, to the insurer under a mortgage pool insurance policy or the
insurer under a Primary Mortgage Insurance Policy, as the case may be, the
Company shall also turn over to such grantee or to the Purchaser for delivery to
such grantee all items relating to the Mortgage transaction requested by such
grantee, including any funds, documents, books, papers and accounts, and in
connection therewith the Company shall, upon request by the Purchaser, certify
to such grantee or to the Purchaser by affidavit or otherwise as to all matters
within the knowledge of the Company with respect to the Mortgage and the
Mortgaged Property.
The Company shall engage an attorney to conduct foreclosure or other
proceedings who is acceptable to the Purchaser and who has agreed to accept fees
therefor in amounts acceptable to the Purchaser. Any amount bid by the Company
or its attorney at any foreclosure sale or at any judicial proceeding must be
approved by the Purchaser in writing.
Notwithstanding anything in this Agreement to the contrary, the
Company shall not be entitled to recover legal expenses incurred in connection
with foreclosure proceedings where the Mortgage Loan is reinstated and such
foreclosure proceedings are terminated prior to completion, other than sums
received from the Mortgagor for such expenses.
SECTION 4.16 Property Management.
-------------------
The Company shall be responsible for managing the acquired property
after completion of foreclosure of a Mortgage
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Loan until its conveyance to any insurer, or for as long as the Purchaser, its
designee or a successor in interest holds title to the property. Such
management shall be conducted in accordance with the Purchaser's instructions
and shall include the collection of rents, attending to insurance on the
premises, management and supervision of repairs, maintenance of the premises,
and the rendering to the Purchaser of such reports as the Purchaser may require.
If the Purchaser or any insurer under the mortgage pool insurance
policy or under any Primary Mortgage Insurance Policy shall from time to time
direct the Company with respect to the manner or procedure of the performance of
any of the duties and services referred to in this Section 4.16, the Company
will perform such duties and services in accordance with such direction,
anything herein to the contrary notwithstanding.
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ARTICLE V
PAYMENTS TO THE MASTER SERVICER
-------------------------------
SECTION 5.01 Distributions.
-------------
On each Remittance Date the Company shall remit by wire transfer of
immediately available funds to the Purchaser or its designee an amount equal to
(a) all amounts deposited in the Custodial Account as of the close of business
on the preceding Determination Date (net of charges against or withdrawals from
the Custodial Account pursuant to Section 4.05), plus (b) all amounts, if any,
which the Company is obligated to distribute pursuant to Section 5.03, minus (c)
any amounts attributable to Principal Prepayments received after the last day of
the calendar month preceding the month of the Remittance Date, which amounts
shall be remitted on the following Remittance Date, together with any additional
interest required to be deposited in the Custodial Account in connection with
such Principal Prepayment in accordance with Section 4.04(viii), and minus (d)
any amounts attributable to Monthly Payments collected but due on a Due Date or
Dates subsequent to the Due Period ending on the first day of the month of the
Remittance Date, which amounts shall be remitted on the Remittance Date next
succeeding the Due Period for such amounts.
With respect to any remittance received by the Purchaser after the
first Business Day following the Business Day on which such payment was due, the
Company shall pay to the Purchaser interest on any such late remittance, until
made, at an annual rate equal to (i) the highest quoted prime rate printed in
The Wall Street Journal in its regular column entitled "Money Rates" on the
- -----------------------
first business day of the calendar month in which such remittance was due, plus
(ii) 3%, but in no event greater than the highest rate permitted by applicable
law. In the event such remittance is not made during the month in which it was
due, the interest payable with respect to subsequent periods shall continue to
be computed in accordance with the preceding formula notwithstanding any change
in the quoted prime rates. Such interest shall be deposited in the Custodial
Account by the Company on the date such late remittance is made and shall cover
the period commencing with the day following such first Business Day and ending
with the Business Day on which such payment is made, both inclusive. Such
interest shall be remitted along with the distribution payable on the next
succeeding Remittance Date. The payment by the Company of any such interest
shall not be deemed an extension of time for payment or a waiver of any Event of
Default by the Company.
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<PAGE>
SECTION 5.02 Statements to the Purchaser.
---------------------------
Promptly, and in no event later than the fifth Business Day of the
month following the month in which a remittance occurs, the Company will furnish
to the Purchaser or its designee a statement setting forth the following
information:
(i) the amount of such remittance allocable to principal (including a
separate breakdown of any Principal Prepayments, including the date of such
prepayment, and any prepayment penalties or premiums);
(ii) the amount of such distribution allocable to interest and assumption
fees;
(iii) the amount of servicing compensation received by the Company during
the prior distribution period;
(iv) the aggregate principal balance of the Mortgage Loans covered by this
Agreement at the close of business on the applicable Determination Date after
giving effect to payments on such Mortgage Loans due on the Due Date and
distributed either as collections or advances;
(v) the aggregate of any expenses reimbursed to the Company during the
prior distribution period pursuant to Section 8.01; and
(vi) the number and aggregate Stated Principal Balances of Mortgage Loans
delinquent (a) 30 days, (b) 60 days, and (c) 90 days or more, as of the close of
business on the applicable Determination Date.
Together with the statement described above, the Company shall also
deliver to the Purchaser (a) computer generated reports and wire calculation
remittance reports, in form and substance reasonably required by the Purchaser
from time to time, detailing all activity since the Remittance Date for the
previous calendar month, and (b) a delinquency report specifying all Mortgage
Loans 30 or more days delinquent, including all Mortgage Loans in foreclosure,
or, if no Mortgage Loans are delinquent, a report indicating that there are no
delinquencies.
The Company shall prepare and file any and all tax returns,
information statements or other filings required to be delivered to any
governmental taxing authority pursuant to any applicable law with respect to the
Mortgage Loans and the transactions contemplated hereby. In addition, the
Company shall provide Purchaser with such information concerning the Mortgage
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Loans as is necessary for income tax purposes, as Purchaser may reasonably
request from time to time.
SECTION 5.03 Advances by the Company.
-----------------------
On the Business Day immediately preceding each Remittance Date, the
Company shall deposit in the Custodial Account an amount equal to all Monthly
Payments (with interest adjusted to the Mortgage Loan Remittance Rate) which
were due on the Mortgage Loans covered by this Agreement during the applicable
Due Period and which were delinquent at the close of business on the immediately
preceding Determination Date or deferred pursuant to Section 4.01. The
Company's obligation to make such advances as to any Mortgage Loan will continue
through the last Monthly Payment due prior to the payment in full of the
Mortgage Loan, or through the last Remittance Date prior to the Remittance Date
for the distribution of all Liquidation Proceeds and other payments of
recoveries (including proceeds under any title, hazard or other insurance
policy, or condemnation awards) with respect to the Mortgage Loan.
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ARTICLE VI
GENERAL SERVICING PROCEDURE
---------------------------
SECTION 6.01 Assumption and Substitution of Liability Agreements.
---------------------------------------------------
The Company shall promptly notify the Purchaser of the prospective
conveyance of any Mortgaged Property of which the Company becomes aware. Unless
instructed otherwise by the Purchaser, the Company shall use its best efforts to
enforce any "due-on-sale" provision contained in any Mortgage or Mortgage Note
and to deny assumption by the person to whom the Mortgaged Property has been or
is about to be sold whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable on the Mortgage and the Mortgage
Note. When the Mortgaged Property is conveyed or is about to be conveyed by the
Mortgagor, the Company shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of
such Mortgage Loan under the "due-on-sale" clause applicable thereto; provided,
however, that the Company shall not exercise such rights if prohibited by law
from doing so or if the exercise of such rights would impair or threaten to
impair any recovery under the related Primary Mortgage Insurance Policy, if any.
If the Company reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, the Company shall promptly so notify the Purchaser
and assist the Purchaser in entering into (a) an assumption and modification
agreement with the person to whom such property has been conveyed, pursuant to
which such person becomes liable under the Mortgage Note and, to the extent
permitted by applicable law, the Mortgagor remains liable thereon, or (b) a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Mortgage Note; provided that, in either
case, the Mortgage Loan shall continue to be covered (if so covered before the
Purchaser enters into such agreement) by any related Primary Mortgage Insurance
Policy. In connection with any such assumption or substitution of liability
agreement, the Mortgage Interest Rate, the amount of the Monthly Payment and the
maturity of the Mortgage Note shall not be changed. If an assumption fee is
collected by the Company for entering into an assumption or substitution of
liability agreement, a portion of such fee, up to an amount equal to one percent
(1%) of the outstanding principal balance of the related Mortgage Loan, will be
retained by the Company as additional servicing compensation, and any portion
thereof in excess of one percent (1%) will be deposited in the Custodial Account
for the benefit of the Purchaser. If an assumption or substitution of liability
is allowed pursuant to this Section 6.01, the Company, with the prior consent of
the
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<PAGE>
insurer under the primary Mortgage Insurance Policy, if any, is authorized to
prepare an assumption or substitution of liability agreement as provided in
clause (a) or (b) above, as appropriate, to be entered into by the Purchaser
with the purchaser of the Mortgaged Property.
SECTION 6.02 Satisfaction of Mortgages and Release of Mortgage
-------------------------------------------------
Files.
- -----
Upon the payment in full of any Mortgage Loan, or the receipt by the
Company of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Company will notify the Purchaser as provided
in Section 5.02 and will prepare a satisfaction or release of the Mortgage for
execution by the mortgagee thereunder.
In the event the Company delivers a satisfaction or release of any
Mortgage without having obtained payment in full of the indebtedness secured by
such Mortgage or should the Company otherwise prejudice any right the Purchaser
may have under the Mortgage or any related instruments, the Company, upon
written demand of Purchaser, shall remit to the Purchaser the Stated Principal
Balance of the related Mortgage Loan by deposit thereof in the Custodial
Account. The Company shall maintain the Fidelity Bond as provided for in
Section 4.11 insuring the Company against any loss it may sustain with respect
to any Mortgage Loan not satisfied in accordance with the procedures set forth
herein.
SECTION 6.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Company shall be
entitled to withdraw from the Custodial Account or to retain from interest
payments on each Mortgage Loan the Company's Servicing Fee with respect to such
Mortgage Loan. Additional servicing compensation in the form of assumption
fees, to the extent permitted under Section 6.01 hereof, and late payment
charges shall be retained by the Company to the extent not required to be
deposited in the Custodial Account. The Company shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement therefor except as specifically
provided for herein.
SECTION 6.04 Annual Statement as to Compliance.
---------------------------------
The Company will deliver to Purchaser, on or before March 31 of each
year beginning March 31, 199__, an Officers Certificate stating that (i) the
Company has fully complied with the provision of Article IV, (ii) a review of
the activities of the Company during the preceding calendar year and of
performance under this Agreement has been made under such officer's supervision,
and (iii) to the best of such officer's knowledge,
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based on such review, the Company has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Company to cure such default.
SECTION 6.05 Annual Independent Public Accountants' Servicing
------------------------------------------------
Report.
- ------
On or before March 31 of each year beginning March 31, 199__, the
Company at its expenses shall cause a firm of independent public accountants,
which firm is a member of the American Institute of Certified Public
Accountants, to furnish a statement to Purchaser to the effect that such firm
has examined certain documents and records relating to the servicing of the
Mortgage Loans and this Agreement and that such firm is of the opinion that the
provisions of Article IV have been complied with, and that, on the basis of such
examination conducted in compliance with Uniform Single Audit Program for
Mortgage Bankers, such servicing has been conducted in compliance with the
provisions of this Agreement, except for (i) such exceptions as such firm shall
believe to be immaterial, and (ii) such other exceptions as shall be set forth
in such statement, which shall include all such significant exceptions or errors
in records which, in the opinion of such firm, paragraph 4 of the Uniform Single
Audit Program for Mortgage Bankers required it to report.
SECTION 6.06 Purchaser's Right to Examine Company Records.
--------------------------------------------
Purchaser or its designee shall have the right, at all reasonable
times and as often as reasonably required, to examine and audit any and all of
the books, records or other information of the Company whether held by the
Company or by another on behalf of the Company, which may be relevant to the
performance or observance by the Company of the terms, covenants or conditions
of this Agreement.
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ARTICLE VII
REPORTS TO BE PREPARED BY COMPANY
---------------------------------
SECTION 7.01 Company Shall Provide Information as Reasonably
-----------------------------------------------
Required.
- --------
The Company shall furnish to Purchaser, if Purchaser so requests,
during the term of this Agreement, such periodic, special or other reports or
information, reasonable or appropriate with respect to the purposes of this
Agreement. All such reports or information shall be provided by and in
accordance with all reasonable instructions and directions the Purchaser may
require. The Company agrees to execute and deliver all such instruments and
take all such action as the Purchaser, from time to time, may reasonably request
in order to effectuate the purposes and carry out the terms of this Agreement.
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ARTICLE VIII
THE COMPANY
-----------
SECTION 8.01 Indemnification; Third Party Claims.
-----------------------------------
The Company agrees to indemnify and hold harmless Purchaser against
any and all claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments, and any other costs, fees and expenses that Purchaser
may sustain in any way related to the failure of the Company to perform its
duties and service any of the Mortgage Loans in strict compliance with the terms
of this Agreement. The Company shall immediately notify Purchaser if a claim is
made by a third party with respect to this Agreement or any of the Mortgage
Loans, and the Company shall assume the defense of any such claim and pay all
expenses in connection therewith, including counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Company or the Purchaser in respect of such claim. Purchaser shall promptly
reimburse the Company for all amounts advanced by it pursuant to the preceding
sentence except when the claim in any way relates to the Company's
indemnification pursuant to Section 3.03 or to the failure of the Company to
service and administer any of the Mortgage Loans in strict compliance with the
terms of this Agreement.
SECTION 8.02 Merger or Consolidation of the Company.
--------------------------------------
The Company will keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement.
Any Person into which the Company may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Company shall be a party, or any Person succeeding to the business of the
Company, shall be the successor of the Company hereunder, without the execution
or filing of any paper or any further act on the part notwithstanding; provided,
however, that the successor or surviving Person shall be an institution the
deposits of which are insured by the FDIC or FSLIC and shall satisfy the
requirements of Section 11.01 with respect to the qualifications of a successor
to the Company.
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SECTION 8.03 Limitation on Liability of the Company and Others.
-------------------------------------------------
The Company and any director, officer, employee or agent of the
Company may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. Subject to the terms of
Section 3.03 and 8.01, the Company shall have no obligations to appear with
respect to, prosecute or defend any legal action which is not incidental to the
Company's duty to service any of the Mortgage Loans in accordance with this
Agreement.
SECTION 8.04 Company Not to Resign.
---------------------
The Company shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Company and the Purchaser or upon the determination that the Company's duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Company. Any such determination permitting the
resignation of the Company shall be evidenced by an Opinion of Counsel to such
effect delivered to the Purchaser, which Opinion of Counsel shall be in form and
substance acceptable to the Purchaser. No such resignation shall become
effective until a successor has assumed the Company's responsibilities and
obligations hereunder in accordance with Section 11.01.
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ARTICLE IX
DEFAULT
-------
SECTION 9.01 Events of Default.
-----------------
In case one or more of the following Events of Default by the Company
shall occur and be continuing, that is to say:
(i) any failure by the Company to remit to Purchaser any payment required
to be made under the terms of this Agreement which continues unremedied for a
period of 5 days after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company by
Purchaser; or
(ii) failure by the Company to duly observe or perform, in any material
respect, any other covenants, obligations or agreements of the Company as set
forth in this Agreement which failure 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 Company by Purchaser; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Company and such decree or order
shall have remained in force, undischarged or unstayed for a period of 60 days;
or
(iv) the Company shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Company or
relating to all or substantially all of the Company's property; or
(v) the Company shall admit in writing its inability to pay its debts as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
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(vi) an Event of Default shall have occurred under the Purchase Agreement.
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, Purchaser, by notice in writing to the Company, may, in
addition to whatever rights Purchaser may have at law or equity to damages,
including injunctive relief and specific performance, terminate all the rights
and obligations of the Company under this Agreement and in and to any of the
Mortgage Loans and the proceeds thereof. Upon receipt by the Company of such
written notice from the Purchaser, all authority and power of the Company under
this Agreement, whether with respect to the Mortgage Loans or otherwise, shall
pass to and be vested in the successor appointed pursuant to Section 11.01.
Upon written request from the Purchaser, the Company shall prepare, execute and
deliver to a successor any and all documents and other instruments, place in
such successor's possession all Mortgage Files and do or cause to be done all
other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Mortgage Loans and related documents to the
successor at the Company's sole expense. The Company agrees to cooperate with
the Purchaser and such successor in effecting the termination of the Company's
responsibilities and rights hereunder, including, without limitation, the
transfer to such successor for administration by it of all amounts which shall
at the time be credited by the Company to the Custodial Account or Escrow
Account or thereafter received with respect to any of the Mortgage Loans.
SECTION 9.02 Waiver of Defaults.
------------------
The Purchaser may waive any default by the Company in the performance
of its obligations hereunder and its consequences. Upon any 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 thereto except to the extent expressly so waived.
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ARTICLE X
TERMINATION
-----------
SECTION 10.01 Termination.
-----------
This Agreement shall terminate upon either: (i) the later of the
distribution to the Purchaser of final payment or liquidation with respect to
the last Mortgage Loan (or advances of same by the Company), or the disposition
of all property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last Mortgage Loan and the remittance of all funds due hereunder;
or (ii) mutual consent of the Company and the Purchaser in writing.
SECTION 10.02 Termination Without Cause.
-------------------------
The Purchaser may, at its sole option, terminate with respect to any
or all of the Mortgage Loans any rights the Company may have hereunder, without
cause, upon 30 days' written notice. Any such notice of termination shall be in
writing and delivered to the Company by registered mail as provided in Section
11.06 of this Agreement. In connection with any such termination as to any or
all of the Mortgage Loans, the Purchaser will pay to the Company an amount equal
to the fair market value of the rights to service such Mortgage Loans in
accordance with the terms of this Agreement, such fair market value being equal
to the average of the prices bid for such servicing rights by three mortgage
servicing institutions selected by the Purchaser and reasonably acceptable to
the Company, each of which shall be a FNMA approved seller/servicer with a
servicing portfolio of not less than $2,000,000,000. If three bids from
qualified mortgage servicing institutions are not received within 30 days after
notice of termination, the Purchaser shall pay to the Company a sum, as
liquidated damages, equal to 2% of the then current aggregate Stated Principal
Balances of the Mortgage Loans.
-47-
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
SECTION 11.01 Successor to the Company.
------------------------
Prior to termination of Company's responsibilities and duties under
this Agreement pursuant to Section 8.04, 9.01, 10.01(ii) or 10.02, the Purchaser
shall (i) succeed to and assume all of the Company's responsibilities, rights,
duties and obligations under this Agreement, or (ii) appoint a successor having
a net worth of not less than $15,000,000 and which shall succeed to all rights
and assume all of the responsibilities, duties and liabilities of the Company
under this Agreement prior to the termination of Company's responsibilities,
duties and liabilities under this Agreement. In connection with such
appointment and assumption, the Purchaser may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree. In the event that the Company's duties, responsibilities
and liabilities under this Agreement should be terminated pursuant to one of the
aforementioned Sections, the Company shall discharge such duties and
responsibilities during the period from the date it acquires knowledge of such
termination until the effective date thereof with the same degree of diligence
and prudence which it is obligated to exercise under this Agreement, and shall
take no action whatsoever that might impair or prejudice the rights or financial
condition of its successor. The resignation or removal of Company pursuant to
the aforementioned Section shall not become effective until the Purchaser
assumes the Company's responsibilities, rights, duties and obligations under
this Agreement or a successor shall be appointed pursuant to this Section and
shall in no event relieve the Company of the representations and warranties made
pursuant to Sections 3.01 and 3.02 and the remedies available to the Purchaser
under Section 3.03, it being understood and agreed that the provisions of such
Sections 3.01, 3.02 and 3.03 shall be applicable to the Company notwithstanding
any such resignation or termination of the Company, or the termination of this
Agreement.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Company and to the Purchaser an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of
Company, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement or resignation of the Company pursuant to
Section 8.04, 9.01, 10.01 or 10.02 shall not affect any claims that the
Purchaser may have against the Company arising prior to any such termination or
resignation.
-48-
<PAGE>
The Company shall promptly deliver to the Purchaser or any appointed
successor, as the case may be, the funds in the Custodial Account and the Escrow
Account (and any other funds collected and held by it pursuant to this Agreement
or any other agreement, letter or arrangement relating to the Mortgage Loans)
and all Mortgage Files and related documents and statements held by it hereunder
and the Company shall account for all funds and shall execute and deliver such
instruments and do such other things as may reasonably be required to more fully
and definitively vest in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Company. In addition, the
Company shall promptly deliver to the Purchaser a full accounting, including a
statement showing the monthly payments collected by it and a statement of moneys
held in trust by it for the payment of ground rents, taxes, assessments, water
rates, insurance premiums or other charges in respect to the Mortgage Loans.
Upon a successor's acceptance of appointment as such, the Company
shall notify the Purchaser by mail of such appointment.
SECTION 11.02 Amendment.
---------
This Agreement may be amended from time to time by the Company and the
Purchaser by written agreement signed by the Company and Purchaser.
SECTION 11.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices or real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Company at the Company's expense upon direction of the Purchaser, but only when
such direction is accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the Purchaser
or is necessary for the administration or servicing of any of the Mortgage
Loans.
SECTION 11.04 Recordation of Assignment of Mortgages.
--------------------------------------
As provided in this Agreement, each Assignment of Mortgage shall be in
a form acceptable for recording in all appropriate public offices for real
property records in the jurisdiction in which the Mortgaged Property recited in
each such Assignment of Mortgage is situated, and shall be submitted for
recording by the Purchaser or upon Purchaser's instructions upon sale of the
Mortgage Loan to Purchaser at any time at its option.
-49-
<PAGE>
SECTION 11.05 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
SECTION 11.06 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 11.07 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail, postage prepaid, to (a) in the case of the Company,
__________________, Attention: ________________ or such other address as may
hereafter be furnished to Purchaser in writing by the Company, (b) in the case
of the Purchaser, __________________, Attention: _________________, Telephone
_________________.
SECTION 11.08 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreements shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreements and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement.
SECTION 11.09 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create a co-
partnership or joint venture between the parties hereto and the services of the
Company shall be rendered as an independent contractor and not as agent for
Purchaser.
SECTION 11.10 Execution; Successors and Assigns.
---------------------------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement. Subject to Section 8.04, this Agreement
shall inure to the benefit of and be binding upon the Company and the Purchaser
and their respective successors and assigns.
The Purchaser shall have the right, without the consent of the
Company, to assign, in whole or in part, its interest under this Agreement with
respect to some or all of the Mortgage
-50-
<PAGE>
Loans, and the assignee or designee shall accede to the rights and obligations
hereunder of the Purchaser with respect to such Mortgage Loans. All references
to the Purchaser shall be deemed to include its assignee or designee.
The Company understands and agrees that in connection with a Pooling
Transaction, the Purchaser or another entity designated by the Purchaser may
become the master servicer of the pooled Mortgage Loans. In such connection,
the Purchaser may, pursuant to the preceding paragraph, assign its interest with
respect to some or all of the Mortgage Loans. If the Purchaser, or such
assignee of the Purchaser, as master servicer, shall for any reason cease to be
the master servicer of the Mortgage Loans, the owners of such Mortgage Loans or
any trustee acting on their behalf, or a designee of any such persons, may,
without the Company's consent, assume all of the rights and obligations of the
Purchaser under this Agreement with respect to those Mortgage Loans as to which
the Purchaser has ceased to be master servicer. Such owners or trustee (i) shall
notify the Company in writing of any such assumption and of the identity of the
assuming party, and (ii) shall demonstrate such owners' ownership of the
Mortgage Loans by making available to the Company for inspection the original
Mortgage Notes relating to the Mortgage Loans, which evidence shall be
conclusive as to such ownership. In such event, such assuming party shall be
deemed to have assumed all the Purchaser's interest in this Agreement with
respect to those Mortgage Loans as to which the Purchaser has ceased to be
master servicer and to have replaced the Purchaser as a party to this Agreement
to the same extent as if this Agreement had been assigned to such assuming
party.
-51-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
_____________________________
Company
By:__________________________
Name:________________________
Title:_______________________
By:__________________________
Name:________________________
Title:_______________________
-52-
<PAGE>
State of _____________)
) SS.
County of ____________)
On the ___ day of ___________, 199__ before me, a Notary Public in and
for said State, personally appeared ________________ known to me to be
_________________________ of ______________________, one of the corporations
that executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_____________________________
Notary Public
My Commission expires _______
-53-
<PAGE>
State of _____________)
) SS.
County of ____________)
On the ___ day of ___________, 199__ before me, a Notary Public in and
for said State, personally appeared ________________ known to me to be
_________________________ of ______________________, one of the corporations
that executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_____________________________
Notary Public
My Commission expires _______
-54-
<PAGE>
EXHIBIT A
CONTENTS OF MORTGAGE FILES
With respect to each Mortgage Loan, the Mortgage File shall include
each of the following items, all of which shall be available for inspection by
the Purchaser. With respect to any original document required to be delivered
to the Purchaser pursuant to Section 2.03 hereof, the Mortgage File shall
include a copy of the original so delivered.
1. The original Mortgage Note endorsed "Pay to the order of ,
without recourse," and signed in the name of the Company by an authorized
officer;
2. The original Mortgage, with evidence of recording indicated thereon or
a certified true copy of the original Mortgage in those instances where the
public recorder's office retains the original, certified by the relevant
recorder's office, together with the registration copy of the Mortgage (if the
Mortgaged Property is registered under a Torrens System) with a proper
endorsement of transfer thereon, or, if the Mortgage Loan was originated within
90 days prior to the Funding Date, then a true copy of the Mortgage, together
with a recorder's receipt evidencing delivery of such Mortgage to the
appropriate public recorder's office for recordation or, if such office does not
issue such recorder's receipts, with a certificate of a Servicing Officer
certifying that such Mortgage has been delivered to such office for recordation.
In any event, the original Mortgage, with evidence of recording indicated
thereon, shall be delivered to the Purchaser within 60 days after the Funding
Date;
3. The original of the Assignment of Mortgage with respect to each
Mortgage, to and signed in the name of the
Company by an authorized officer, which assignment is in form and substance
acceptable for recording;
4. The original Primary Mortgage Insurance Policy, if required under
Section 3.01(ee);
5. The original Policy of title insurance, or a binder or commitment for
title insurance dated and certified as of the date the Mortgage Loan was funded,
together with an Opinion of Counsel addressed to the Company and its successors
and assigns that such binder or commitment insures the priority of the lien of
the related
A-1
<PAGE>
Mortgage during the period between the date of the funding of the related
Mortgage Loan and the date of the related title policy. In any event, the
original policy of title insurance, dated the date of recording of the related
Mortgage, shall be delivered to the Purchaser within 60 days after the Funding
Date;
6. Originals of each assumption or modification agreement, written
assurance or substitution agreement;
7. A copy of each Hazard Insurance Policy, as described in Section
3.01(t), or a binder or commitment for such insurance;
8. The original appraisal made by an appraiser meeting the requirements
of Section 3.01(n);
9. Survey or plat map of the Mortgaged Property, including legal
description if title insurance policy contains an exception as to boundary and
building line restrictions;
10. Original intermediate assignments of Mortgage, with recording
information thereon, including warehousing assignments;
11. A copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy, e.g., map or
plat restrictions, easements, sewer agreements, home association declarations,
etc.;
12. Mortgage Loan closing statement (HUD-1 Settlement Statement);
13. The original of the final residential loan application (executed by
the Mortgagor);
14. Verification of employment and income;
15. Verification of acceptable evidence of source and amount of
downpayment;
16. Credit report on the Mortgagor;
17. Photographs of the Mortgaged Property, including front, side, rear and
street views, together with photographs of the comparables contained in the
appraisal;
18. Amortization schedule;
19. To the extent available, tax receipts, insurance premium receipts,
ledger sheets, insurance claim files
A-2
<PAGE>
and correspondence, correspondence, current and historical computerized data
file, and all other papers and records developed or originated by the Company or
others, required to document the Mortgage Loan or to service the Mortgage Loan;
20. A certification of a Servicing Officer that the Company has determined
whether the provisions of the Flood Disaster Protection Act of 1968, as amended,
apply to the Mortgaged Property and a copy of each Flood Insurance Policy as
described in Section 3.01(t), if required;
21. The original of the federal truth-in-lending statement;
22. The original document setting forth the Mortgagor's right of
rescission (executed by the Mortgagor);
23. A copy of the purchase agreement with respect to the Mortgaged
Property (unless the Mortgage Loan constitutes a refinancing of an outstanding
mortgage loan);
24. Payment history as of the Funding Date; and
25. Evidence of compliance with the Equal Credit Opportunity Act.
A-3
<PAGE>
EXHIBIT B
CUSTODIAL ACCOUNT CERTIFICATION
(date)
_________________________________________________ (the "Company")
hereby certifies that it has established the account described below as a
Custodial Account pursuant to Section 4.04 of the Master Seller's Warranty and
Servicing Agreement, dated as of _________ , 199__, between the Company
and
Title of Account: " _____________________ in trust for
_____________________"
Account Number: ___________________________
Address of office or
branch of the Company
at which Account is
maintained: ___________________________
___________________________
_________________________________
By:______________________________
Name:____________________________
Title:___________________________
B-1
<PAGE>
EXHIBIT C
CUSTODIAL ACCOUNT LETTER AGREEMENT
(date)
To: _________________________________________
_________________________________________
_________________________________________
(the "Depository")
As "Company" under the Master Seller's Warranty and Servicing
Agreement, dated as of ____________________, 199__ (the "Agreement"), between
[Company] and , we hereby authorize and
request you to establish an account, as a Custodial Account pursuant to Section
4.04 of the Agreement, to be designated as "[Company], in trust for
." All deposits in the account shall be subject to withdrawal therefrom by
order signed by the Company. You may refuse any deposit which would result in
violation of the requirement that the account be fully insured as described
below. This letter is submitted to you in duplicate. Please execute and return
one original to us.
_________________________________
(name of Company)
By:______________________________
Name:____________________________
Title:___________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number _________________,
at the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above.
_________________________________
(name of Depository)
By:______________________________
Name:____________________________
Title:___________________________
C-1
<PAGE>
EXHIBIT D
ESCROW ACCOUNT CERTIFICATION
(date)
________________________________________________ (the "Company")
hereby certifies that it has established the account described below as an
Escrow Account pursuant to Section 4.06 of the Master Seller's Warranty and
Servicing Agreement, dated as of __________________, 199__, between the Company
and .
Title of Account: " ________________________, in trust for
and various
Mortgagors"
Account Number: ___________________________
Address of office or
branch of the Company
at which Account is
maintained: __________________________________
__________________________________
_________________________________
By:______________________________
Name:____________________________
Title:___________________________
D-1
<PAGE>
EXHIBIT E
ESCROW ACCOUNT LETTER AGREEMENT
(date)
To: ________________________________________
________________________________________
________________________________________
(the "Depository")
As "Company" under the Master Seller's Warranty and Servicing
Agreement, dated as of _____________________, 199___ (the "Agreement"), between
[Company] and ., we hereby authorize and
request you to establish an account, as an Escrow Account pursuant to Section
4.06 of the Agreement, to be designated as "[Company], in trust for
as various Mortgagors." All deposits in the account shall be subject to
withdrawal therefrom by order signed by the Company. You may refuse any deposit
which would result in violation of the requirement that the account be fully
insured as described below. This letter is submitted to you in duplicate.
Please execute and return one original to us.
_________________________________
(name of Company)
By:______________________________
Name:____________________________
Title:___________________________
The undersigned, as "Depository", hereby certifies that the above
described account has been established under Account Number ____________________
at the office of the depository indicated above, and agrees to honor withdrawals
on such account as provided above.
_________________________________
(name of Depository)
By:______________________________
Name:____________________________
Title:___________________________
E-1
<PAGE>
EXHIBIT F
MORTGAGE LOAN SCHEDULE
F-1
<PAGE>
EXHIBIT 10.2.1
- --------------------------------------------------------------------------------
FORM OF SALE AND SERVICING AGREEMENT
among
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-_,
as Issuer,
ASSET BACKED SECURITIES CORPORATION,
as Company,
and
_______________________,
as Servicer
Dated as of _______________
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
SECTION 1.01. Definitions...............................-1-
SECTION 1.02. Other Definitional Provisions............-15-
ARTICLE II
Conveyance of Receivables...........-16-
SECTION 2.01. Conveyance of Receivables................-16-
ARTICLE III
The Receivables.....................-17-
SECTION 3.01. Representations and Warranties of the
Company with Respect to the Receivables..-17-
SECTION 3.02. Repurchase upon Breach...................-20-
SECTION 3.03. Custody of Receivable Files..............-20-
SECTION 3.04. Duties of Servicer as Custodian..........-21-
SECTION 3.05. Instructions: Authority To Act..........-22-
SECTION 3.06. Custodian's Indemnification..............-22-
SECTION 3.07. Effective Period and Termination.........-22-
ARTICLE IV
Administration and Servicing of
Receivables.........................-23-
SECTION 4.01. Duties of Servicer.......................-23-
SECTION 4.02. Collection and Allocation of Receivable
Payments.................................-23-
SECTION 4.03. Realization upon Receivables.............-24-
SECTION 4.04. Physical Damage Insurance................-24-
SECTION 4.05. Maintenance of Security Interests in
Financed Vehicles........................-24-
SECTION 4.06. Covenants of Servicer....................-24-
SECTION 4.07. Purchase of Receivables upon Breach......-25-
SECTION 4.08. Servicing Fee............................-25-
SECTION 4.09. Servicer's Certificate...................-25-
SECTION 4.10. Annual Statement as to Compliance;
Notice of Default........................-25-
-i-
<PAGE>
SECTION 4.11. Annual Independent Certified Public
Accountants' Report......................-26-
SECTION 4.12. Access to Certain Documentation and
Information Regarding Receivables........-26-
SECTION 4.13. Servicer Expenses........................-27-
SECTION 4.14. Appointment of Subservicer...............-27-
ARTICLE V
Distributions; Reserve Account;
Statements to Certificateholders and
Noteholders.........................-27-
SECTION 5.01. Establishment of Trust Accounts..........-27-
SECTION 5.02. Collections..............................-29-
SECTION 5.03. Application of Collections...............-30-
SECTION 5.04. Advances.................................-30-
SECTION 5.05. Additional Deposits......................-31-
SECTION 5.06. Distributions............................-31-
SECTION 5.07. Reserve Account..........................-33-
SECTION 5.08. Statements to Certificateholders and
Noteholders..............................-35-
SECTION 5.09. Net Deposits.............................-36-
ARTICLE VI
The Company....................-36-
SECTION 6.01. Representations of the Company...........-36-
SECTION 6.02. Corporate Existence......................-37-
SECTION 6.03. Liability of the Company.................-38-
SECTION 6.04. Merger or Consolidation of, or
Assumption of the Obligations of the
Company..................................-38-
SECTION 6.05. Limitation on Liability of the Company
and Others...............................-38-
SECTION 6.06. The Company May Own Certificates
or Notes.................................-38-
ARTICLE VII
The Servicer...................-39-
SECTION 7.01. Representations of Servicer..............-39-
SECTION 7.02. Indemnities of Servicer..................-40-
SECTION 7.03. Merger or Consolidation of, or
Assumption of the Obligations of,
Servicer.................................-41-
SECTION 7.04. Limitation on Liability of Servicer and
Others...................................-41-
SECTION 7.05. Servicer Not To Resign...................-42-
-ii-
<PAGE>
ARTICLE VIII
Default........................-42-
SECTION 8.01. Servicer Default.........................-42-
SECTION 8.02. Appointment of Successor.................-43-
SECTION 8.03. Repayment of Advances....................-44-
SECTION 8.04. Notification to Noteholders and
Certificateholders.......................-44-
SECTION 8.05. Waiver of Past Defaults..................-44-
ARTICLE IX
Termination....................-44-
SECTION 9.01. Optional Purchase of All Receivables.....-44-
ARTICLE X
Miscellaneous..................-46-
SECTION 10.01. Amendment................................-46-
SECTION 10.02. Protection of Title to Trust.............-47-
SECTION 10.03. Notices..................................-49-
SECTION 10.04. Assignment by the Company or
the Servicer.............................-49-
SECTION 10.05. Limitations on Rights of Others..........-49-
SECTION 10.06. Severability.............................-50-
SECTION 10.07. Separate Counterparts....................-50-
SECTION 10.08. Headings.................................-50-
SECTION 10.09. Governing Law............................-50-
SECTION 10.10. Assignment by Issuer.....................-50-
SECTION 10.11. Nonpetition Covenant.....................-50-
SECTION 10.12. Limitation of Liability of Owner
Trustee and Indenture Trustee ...........-51-
-iii-
<PAGE>
SALE AND SERVICING AGREEMENT dated as of ____________, among CS FIRST
BOSTON AUTO RECEIVABLES TRUST 199 - , a Delaware business trust (the "Issuer"),
- -
ASSET BACKED SECURITIES CORPORATION, a Delaware corporation (the "Company"), and
____________, a _____________ corporation (the "Servicer").
WHEREAS, the Issuer desires to purchase a portfolio of receivables
arising in connection with motor vehicle installment loan contracts and motor
vehicle retail installment sale contracts held by the Company;
WHEREAS, the Company is willing to sell such receivables to the
Issuer; and
WHEREAS, the Servicer is willing to service such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Whenever used in this Agreement, the
-----------
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Accelerated Principal Distribution Amount" means, with respect to any
-----------------------------------------
Distribution Date, an amount equal to the portion of the Total Distribution
Amount for such Distribution Date that remains after the payment of (i) the
Servicing Fee, (ii) the Noteholders' Interest Distributable Amount, (iii) the
Regular Principal Distribution Amount, (iv) the Certificateholders' Interest
Distributable Amount and (v) the amount, if any, required to be deposited into
the Reserve Account on such Distribution Date pursuant to Section
5.06(b)(ii)(F).
"Advance" means either a Precomputed Advance or Simple Interest
-------
Advance or both, as applicable.
"Amount Financed" means with respect to a Receivable, the amount
---------------
advanced under the related Motor Vehicle Installment Contract toward the
purchase price of the Financed Vehicle and any related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
---------------------- ---
rate of finance charges stated in the related Motor Vehicle Installment
Contract.
"Available Amount" means, with respect to any Distribution Date, the
----------------
amount of funds on deposit in the Reserve Account on such Distribution Date less
the Certificate Interest Reserve
<PAGE>
Amount with respect to such Distribution Date before giving effect to any
reduction thereto on such date.
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
---------------
the Sale and Servicing Agreement, the Note Depository Agreement, the Certificate
Depository Agreement and other documents and certificates delivered in
connection therewith.
"Certificate Balance" equals, initially, $___________ and, thereafter,
-------------------
equals such initial Certificate Balance reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such
--------------------------------
term in the Trust Agreement.
"Certificateholders" has the meaning assigned to such term in the
------------------
Trust Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
----------------------------------------
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with respect
------------------------------------------------
to any Distribution Date, the excess of the sum of the Certificateholders'
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Certificateholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus 30 days' interest on such excess, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with
-------------------------------------------------
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution Date.
Interest with respect to the Certificates shall be computed on the basis of a
360-day year consisting of twelve 30-day months for all purposes of this
Agreement and the Basic Documents.
"Certificateholders' Monthly Interest Distributable Amount" means,
---------------------------------------------------------
with respect to any Distribution Date, 30 days of interest (or, in the case of
the first Distribution Date, interest accrued from and including the Closing
Date to but excluding _________) at the Pass-Through Rate on the Certificate
Balance on the last day of the preceding Collection Period (or, in the case of
the first Distribution Date, on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means,
----------------------------------------------------------
with respect to any Distribution Date prior to the Distribution Date on which
the Notes are paid in full, zero; and with respect to any Distribution Date on
or after the Distribution Date on which the Notes are paid
-2-
<PAGE>
in full, the Regular Principal Distribution Amount for such Distribution Date
(less, on the Distribution Date on which the Notes are paid in full, the portion
thereof payable on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
-------------------------------------------------
close of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
--------------------------------------------------
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance. In
addition, on the Final Scheduled Distribution Date, the principal required to be
included in the Certificateholders' Principal Distributable Amount will include
the lesser of (a) (i) any Scheduled Payments of principal due and remaining
unpaid on each Precomputed Receivable and (ii) any principal due and remaining
unpaid on each Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Maturity Date or (b) the amount that is necessary (after giving
effect to the other amounts to be deposited in the Certificate Distribution
Account on such Distribution Date and allocable to principal) to reduce the
Certificate Balance to zero.
"Certificate Interest Reserve Amount" means, at the time of reference,
-----------------------------------
the lesser of (i) $___________ less the amount of any application of the
Certificate Interest Reserve Amount to pay interest on the Certificates on any
prior Distribution Date and (ii) _____% of the Certificate Balance on such
Distribution Date (before giving effect to any reduction thereof on such
Distribution Date); provided, however, that the Certificate Interest Reserve
Amount shall be zero subsequent to any reduction by any Rating Agency of its
rating of any Class of Notes to less than "A-" or its equivalent, or withdrawal
by any Rating Agency of its rating of any Class of Notes, unless such rating has
been restored.
"Certificate Depository Agreement" has the meaning specified in
--------------------------------
Section 1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit B to the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the
-----------------------
last day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
-3-
<PAGE>
"Certificates" means the Trust Certificates (as defined in the Trust
------------
Agreement).
"Class" means any one of the classes of Notes.
-----
"Class A-1 Final Scheduled Distribution Date" means the ______________
-------------------------------------------
Distribution Date.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note
--------------------
is registered in the Note Register.
"Class A-2 Final Scheduled Distribution Date" means the __________
-------------------------------------------
Distribution Date.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note
--------------------
is registered in the Note Register.
"Clearing Agency" means an organization registered as a clearing
---------------
agency pursuant to Section 17A of the Exchange Act.
"Collection Account" means the account designated as such, established
------------------
and maintained pursuant to Section 5.01(a)(i).
"Collection Period" means a calendar month. Any amount stated as of
-----------------
the last day of a Collection Period or as of the first day of a Collection
Period shall give effect to the following calculations as determined as of the
close of business on such last day: (1) all applications of collections, (2)
all current and previous Payaheads, (3) all applications of Payahead Balances,
(4) all Advances and reductions of Outstanding Precomputed Advances or
Outstanding Simple Interest Advances and (4) all distributions to be made on the
following Distribution Date.
"Company" means Asset Backed Securities Corporation, a Delaware
-------
corporation and any successor in interest.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at ____________________; or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders and the Company, or the
principal corporate trust office of any successor Indenture Trustee (of which
address such successor Indenture Trustee will notify the Noteholders and the
Company).
"Cutoff Date" means ______________________________.
-----------
"Cutoff Date Pool Balance" means the aggregate principal balance of
------------------------
the Receivables as of the Cutoff Date.
-4-
<PAGE>
"Delivery" when used with respect to Trust Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee or
custodian by physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture Trustee or
its nominee or custodian or endorsed in blank, and, with respect to a
certificated security (as defined in Section 8-102 of the UCC) transfer thereof
(i) by delivery of such certificated security endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in blank
to a financial intermediary (as defined in Section 8-313 of the UCC) and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(3) of the UCC) and the making by such
clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or
the nominee of either subject to the clearing corporation's exclusive control,
the sending of a confirmation by the financial intermediary of the purchase by
the Indenture Trustee or its nominee or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the name of
the Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property (as defined
herein) to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry securities; the
making by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve System
pursuant to Federal book-entry regulations as belonging to the Indenture Trustee
or its nominee or
-5-
<PAGE>
custodian and indicating that such custodian holds such Trust Account Property
solely as agent for the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or custodian.
"Distribution Date" means, with respect to each Collection Period, the
-----------------
__________ day of the following month or, if such day is not a Business Day, the
immediately following Business Day, commencing on _______________.
"Eligible Deposit Account" means either (a) a segregated account with
------------------------
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories that signifies
investment grade.
"Eligible Institution" means (a) the corporate trust department of the
--------------------
Indenture Trustee, the Owner Trustee or _______________ so long as it shall be
Paying Agent under the Trust Agreement or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) has either (A) a long-term unsecured debt rating of AAA or better by
Standard & Poor's and A1 or better by Moody's or (B) a certificate of deposit
rating of A-1+ by Standard & Poor's and P-1, or better by Moody's, or any other
long-term or short-term or certificate of deposit rating acceptable to the
Rating Agencies and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee, the Owner Trustee or _______________ may be
considered an Eligible Institution for the purposes of clause (b) of this
definition.
"Eligible Investments" means book-entry securities, negotiable
--------------------
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment by, the United States of America;
-6-
<PAGE>
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies in the highest investment category granted
thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted thereby;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
described in clause (b); or
(g) any other investment with respect to which the Issuer or the
Servicer has received written notification from the Rating Agencies that the
acquisition of such investment as an Eligible Investment will not result in a
withdrawal or downgrading of the ratings on the Notes or Certificates.
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Final Scheduled Distribution Date" means the _______________
---------------------------------
Distribution Date.
"Final Scheduled Maturity Date" means _______________.
-----------------------------
"Financed Vehicle" means an automobile, van or light-duty truck,
----------------
together with all accessions thereto, securing an Obligor's indebtedness under
the related Receivable.
"Indenture" means the Indenture dated as of _______________, between
---------
the Issuer and the Indenture Trustee.
-7-
<PAGE>
"Indenture Trustee" means the Person acting as Indenture Trustee under
-----------------
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Insolvency Event" means, with respect to a specified Person, (a) the
----------------
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Interest Distribution Amount" means, with respect to any Distribution
----------------------------
Date, the sum of the following amounts, without duplication, with respect to the
Receivables for the Collection Period immediately preceding such Distribution
Date: (a) that portion of all collections on Receivables (including Payaheads)
allocable to interest plus that portion of Payaheads allocable to principal, (b)
Liquidation Proceeds with respect to the Receivables to the extent allocable to
interest due thereon in accordance with the Servicer's customary servicing
procedures, (c) all Advances made by the Servicer of interest due on
Receivables, (d) the Purchase Amount of each Receivable that became a Purchased
Receivable during such Collection Period to the extent attributable to accrued
interest on such Receivable, and (e) Recoveries for such Collection Period;
provided, however, that in calculating the Interest Distribution Amount the
following will be excluded: (i) amounts received on Precomputed Receivables to
the extent of any unreimbursed Precomputed Advances of interest; (ii)
Liquidation Proceeds with respect to a particular Precomputed Receivable to the
extent of any unreimbursed Precomputed Advances of interest; (iii) all payments
and proceeds (including Liquidation Proceeds) of any Purchased Receivables the
Purchase Amount of which has been included in the Interest Distribution Amount
in a prior Collection Period; (iv) the sum for all Simple Interest Receivables
of collections on each such Simple Interest Receivable received during such
preceding Collection Period in excess of the amount of interest that would be
due on the aggregate Principal Balance of the Simple Interest Receivables during
such Collection Period at their respective APRs if a payment were received on
each Simple Interest Receivable during such Collection Period on the date
payment is due under the terms of such Simple Interest Receivable; and (v)
Liquidation Proceeds with respect to a Simple Interest Receivable attributable
to accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed Simple
Interest Advances.
-8-
<PAGE>
"Investment Earnings" means, with respect to any Distribution Date,
-------------------
the investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Distribution Date pursuant to Section 5.01(b).
"Issuer" means CS First Boston Auto Receivables Trust 199 - .
------ - -
"Lien" means a security interest, lien, charge, pledge, equity or
----
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law.
"Liquidated Receivable" means any Receivable liquidated by the
---------------------
Servicer through the sale of a Financed Vehicle or otherwise.
"Liquidation Proceeds" means, with respect to any Liquidated
--------------------
Receivable, the moneys collected in respect thereof, from whatever source on a
Liquidated Receivable during the Collection Period in which such Receivable
became a Liquidated Receivable, net of the sum of any amounts expended by the
Servicer in connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivable.
"Motor Vehicle Installment Contract" means a motor vehicle loan
----------------------------------
installment contract originated by a Seller or a motor vehicle retail
installment sale contract acquired by a Seller from a motor vehicle retail
dealer or another financial institution.
"Note Depository Agreement" means the agreement dated
-------------------------
__________________, among the Issuer, the Indenture Trustee and the Depository
Trust Company, as the initial Clearing Agency, relating to the Notes.
"Note Distribution Account" means the account designated as such,
-------------------------
established and maintained pursuant to Section 5.01(a)(iii).
"Note Pool Factor" means, with respect to each Class of Notes as of
----------------
the close of business on the last day of a Collection Period, a seven-digit
decimal figure equal to the outstanding principal balance of such Class of Notes
(after giving effect to any reductions thereof to be made on the immediately
following Distribution Date) divided by the original outstanding principal
balance of such Class of Notes. The Note Pool Factor for each Class of Notes
will be 1.0000000 as of the Closing Date; thereafter, the Note Pool Factor will
decline to reflect reductions in the outstanding principal balance of such Class
of Notes.
"Noteholders' Distributable Amount" means, with respect to any
---------------------------------
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount for such Distribution Date.
-9-
<PAGE>
"Noteholders' Interest Carryover Shortfall" means, with respect to any
-----------------------------------------
Distribution Date, the excess of the sum of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Interest Rate borne by each Class
of the Notes for the related Interest Period.
"Noteholders' Interest Distributable Amount" means, with respect to
------------------------------------------
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date. For all purposes of this
Agreement and the Basic Documents, interest with respect to all Classes of Notes
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months.
"Noteholders' Monthly Interest Distributable Amount" means, with
--------------------------------------------------
respect to any Distribution Date, interest accrued for the related Interest
Accrual Period on each Class of Notes at the Interest Rate for such Class on the
outstanding principal balance of the Notes of such Class on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date), after giving effect to all distributions of principal to Holders
of the Notes of such Class on or prior to such Distribution Date (or, in the
case of the first Distribution Date, on the Closing Date).
"Noteholders Monthly Principal Distributable Amount" means, with
--------------------------------------------------
respect to any Distribution Date, the sum of (i) the Regular Principal
Distribution Amount plus (ii) the Accelerated Principal Amount plus (iii) any
accelerated payments of principal required to be made from amounts on deposit in
the Reserve Account pursuant to Section 5.07(b)(ii).
"Noteholders' Principal Carryover Shortfall" means, as of the close of
------------------------------------------
any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date, over the amount in respect of
principal that is actually deposited in the Note Distribution Account on such
current Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to
-------------------------------------------
any Distribution Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Distributable Amount shall
not exceed the outstanding principal balance of the Notes. In addition, (a) on
the Class A-1 Final Scheduled Distribution Date, the principal required to be
deposited in the Note Distribution Account will include the amount necessary
(after giving effect to the other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Outstanding Amount of the Class A-1 Notes to zero; and (b) on the
Class A-2 Final Scheduled Distribution Date, the principal required to be
deposited in the Note Distribution Account will include the amount necessary
(after giving effect to the other amounts to be deposited in the Note
Distribution Account
-10-
<PAGE>
on such Distribution Date and allocable to principal) to reduce the Outstanding
Amount of the Class A-2 Notes to zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
-------
Financed Vehicle and any other Person who owes payments under the related Motor
Vehicle Installment Contract.
"Officers' Certificate" means a certificate signed by (a) the chairman
---------------------
of the board, the president, any vice president and (b) the treasurer, assistant
treasurer, secretary or assistant secretary of the Company or the Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel,
------------------
who may be an employee of or counsel to the Company or the Servicer, which
counsel shall be acceptable to the Indenture Trustee, the Owner Trustee or the
Rating Agencies, as applicable.
"Outstanding Precomputed Advances" on the Precomputed Receivables
--------------------------------
means the sum, as of the close of business on the last day of a Collection
Period, of all Precomputed Advances as reduced as provided in Section 5.04(a).
"Outstanding Simple Interest Advances" on the Simple Interest
------------------------------------
Receivables means the sum, as of the close of business on the last day of a
Collection Period, of all Simple Interest Advances as reduced as provided in
Section 5.04(b).
"Owner Trust Estate" has the meaning assigned to such term in the
------------------
Trust Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the
-------------
Trust Agreement, its successors in interest and any successor owner trustee
under the Trust Agreement.
"Pass-Through Rate" means __________% per annum.
-----------------
"Payahead" means, with respect to any Receivable that is a Precomputed
--------
Receivable, the amount, as of the close of business on the last day of a
Collection Period, computed in accordance with Section 5.03.
"Payahead Balance" means, with respect to any Receivable that is a
----------------
Precomputed Receivable, the sum, as of the close of business on the last day of
a Collection Period, of all Payaheads made by or on behalf of the Obligor on
such Precomputed Receivable, as reduced by applications of previous Payaheads
with respect to such Precomputed Receivable pursuant to Section 5.05 and 5.04.
"Payment Distribution Date" means, with respect to any Distribution
-------------------------
Date, the Business Day immediately preceding such Distribution Date.
-11-
<PAGE>
"Physical Property" has the meaning assigned to such term in the
-----------------
definition of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of
------------
a Collection Period, the aggregate Principal Balance of the Receivables as of
such day (excluding Purchased Receivables and Liquidated Receivables).
"Precomputed Advance" means the amount, as of the close of business on
-------------------
the last day of a Collection Period, that the Servicer is required to advance on
the related Precomputed Receivables pursuant to Section 5.04(a).
"Precomputed Receivable" means any Receivable (i) under which the
----------------------
portion of a payment allocable to earned interest (which may be referred to in
the related Motor Vehicle Installment Contract as an add-on finance charge) and
the portion allocable to the Amount Financed is determined according to the sum
of periodic balances or the sum of monthly balances or any equivalent method or
(ii) that is a monthly actuarial receivable.
"Principal Balance" means (a) with respect to a Precomputed
-----------------
Receivable, the Amount Financed minus the sum, as of the close of business on
the last day of a Collection Period, of (i) that portion of all Scheduled
Payments due on or prior to such day allocable to principal using the actuarial
or constant yield method, (ii) any refunded portion of extended warranty
protection plan costs or of physical damage, credit life or disability insurance
premiums included in the Amount Financed, (iii) the portion of any related
Purchase Amount allocable to principal and (iv) any prepayment in full or any
partial prepayments applied to reduce the related Principal Balance and (b) with
respect to a Simple Interest Receivable, the Amount Financed minus the sum, as
of the close of business on the last day of a Collection Period, of (i) the
portion of all payments made by or on behalf of the related Obligor on or prior
to such day and allocable to principal using the Simple Interest Method and (ii)
the portion of any related Purchase Amount allocable to principal.
"Purchase Amount" means the amount, as of the close of business on the
---------------
last day of a Collection Period, required to prepay a Receivable in full under
the terms thereof, including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
--------------------
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by the Company pursuant to Section 3.02.
"Rating Agency" means _______________ or, if no such organization or
-------------
successor is any longer in existence, a nationally recognized statistical rating
organization or other comparable Person designated by the Company, notice of
which designation shall be given to the Indenture Trustee, the Owner Trustee and
the Servicer.
-12-
<PAGE>
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that, within 7 days
of receipt of such notice, none of the Rating Agencies shall have notified the
Company, the Servicer, the Owner Trustee or the Indenture Trustee in writing
that such action will result in a reduction or withdrawal of the then current
rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
---------------
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Motor Vehicle Installment Contract listed on
----------
Schedule I (which Schedule may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
----------------
"Receivables Purchase Agreement" means an agreement, substantially in
------------------------------
the form of Exhibit H hereto, between the Company and a Seller, pursuant to
which such Seller sold Motor Vehicle Installment Contracts to be included in the
Trust to the Company.
"Recoveries" means, with respect to any Receivable that becomes a
----------
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
"Regular Principal Distribution Amount" means, with respect to each
-------------------------------------
Receivable and any Distribution Date, the sum of the following amounts, without
duplication, in respect of the Collection Period immediately preceding such
Distribution Date: (a) that portion of all collections on Receivables allocable
to principal (exclusive of Payaheads allocable to principal that have not been
applied as payments under the related Receivables in such Collection Period and
inclusive of Payaheads allocable to principal that have been applied as payments
under the related Receivables in such Collection Period), (b) all Liquidation
Proceeds attributable to the principal amount of Receivables that became
Liquidated Receivables during such Collection Period in accordance with the
Servicer's customary servicing procedures, plus the amount of Realized Losses
with respect to such Liquidated Receivables, (c) all Precomputed Advances made
by the Servicer of principal due on the Precomputed Receivables, (d) to the
extent attributable to principal, the Purchase Amount of each Receivable that
became a Purchased Receivable during such Collection Period, (e) partial
prepayments on Precomputed Receivables relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligors thereon as of the date of the original contract and only to
the extent not included under clause (a) above, and (f) on the Final Scheduled
Distribution Date, any amounts advanced by the Servicer on such Final Scheduled
Distribution Date with respect
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<PAGE>
to principal on the Receivables: provided, however, that in calculating the
Regular Principal Distribution Amount the following will be excluded: (i)
amounts received on Precomputed Receivables to the extent that the Servicer has
previously made an unreimbursed Precomputed Advance of principal, (ii)
Liquidation Proceeds with respect to a particular Precomputed Receivable to the
extent of any unreimbursed Precomputed Advances of principal, (iii) all payments
and proceeds (including Liquidation Proceeds) of any Purchased Receivables the
Purchase Amount of which has been included in the Principal Distribution Amount
in a prior Collection Period, and (iv) Recoveries.
"Reserve Account" means the account designated as such, established
---------------
and maintained pursuant to Section 5.01(a)(iv).
"Reserve Account Initial Deposit" means an amount equal to the
-------------------------------
Specified Reserve Account Balance on the Closing Date (which is equal to
$______________).
"Scheduled Payment" on a Precomputed Receivable means that portion of
-----------------
the payment required to be made by the Obligor during each Collection Period
sufficient to amortize the Principal Balance under the actuarial method over the
term of the Receivable and to provide interest at the APR.
"Seller" means, with respect to any Receivable, the Person from whom
------
such Receivable was acquired by the Company pursuant to the related Receivables
Purchase Agreement.
"Servicer" means _______________, as the Servicer of the Receivables,
--------
and each successor to ______________ pursuant to Section 7.03 or 8.02.
"Servicer Default" means an event specified in Section 8.01.
----------------
"Servicer's Certificate" means an Officers' Certificate of the
----------------------
Servicer delivered pursuant to Section 4.09.
"Servicing Fee" means the fee payable to the Servicer for services
-------------
rendered during each Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Rate" means __% per annum.
------------------
"Simple Interest Advance" means the amount of interest, as of the
-----------------------
close of business on the last day of a Collection Period, that the Servicer is
required to advance on the Simple Interest Receivables pursuant to Section
5.04(b).
"Simple Interest Method" means the method of allocating a fixed level
----------------------
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied
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by the period of time elapsed since the preceding payment of interest was made
and the remainder of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the
--------------------------
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Specified Reserve Account Balance" means [state formula].
---------------------------------
"Total Distribution Amount" means, for each Distribution Date, the sum
-------------------------
of the Interest Distribution Amount and the Regular Principal Distribution
Amount (other than the portion thereof attributable to Realized Losses).
"Trust" means the Issuer.
-----
"Trust Account Property" means the Trust Accounts, all amounts and
----------------------
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.01.
--------------
"Trust Agreement" means the Amended and Restated Trust Agreement dated
---------------
as of ____________________, between the Company and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee, any
-------------
Officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject and, with respect to the Owner Trustee, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and the Basic
Documents on behalf of the Owner Trustee.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used and not otherwise defined herein have the meanings assigned to them in the
Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
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<PAGE>
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under United States generally accepted accounting principles. To
the extent that the definitions of accounting terms in this Agreement or in any
such certificate or other document are inconsistent with the meanings of such
terms under United States generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
-------------------------
SECTION 2.01. Conveyance of Receivables. In consideration of the Owner
--------------------------
Trustee's delivery on the Closing Date to or upon the order of the Company of
$_______________, the Company does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations as
set forth herein), all right, title and interest of the Company in and to:
(a) the Receivables and all moneys due thereon on and after the
Cutoff Date, in the case of Precomputed Receivables, and all moneys received
thereon on and after the Cutoff Date, in the case of Simple Interest
Receivables;
(b) the security interest in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the Company in
such Financed Vehicles;
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<PAGE>
(c) any proceeds with respect to the Receivables from claims on any
physical damage, theft, credit life or disability insurance policies covering
Financed Vehicles or Obligors;
(d) any Financed Vehicle that shall have secured any such Receivable
and shall have been acquired by or on behalf of the Company, the Servicer or the
Issuer; and
(e) the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
---------------
SECTION 3.01. Representations and Warranties of the Company with Respect
----------------------------------------------------------
to the Receivables. The Company makes the following representations and
- -------------------
warranties as to the Receivables conveyed by it to the Issuer, on which the
Issuer is deemed to have relied in acquiring the Receivables. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Characteristics of Receivables. Each Receivable (1) was
------------------------------
originated by the Seller thereof or purchased from a motor vehicle dealer or
another financial institution by such Seller in the ordinary course of such
Seller's business, (2) has created a valid, subsisting and enforceable first
priority security interest in favor of the Seller in the Financed Vehicle, which
security interest is assignable by the Seller to the Company, by the Company to
the Issuer and by the Issuer to the Indenture Trustee, (3) contains customary
and enforceable provisions such that the rights and remedies of the holder
thereof are adequate for realization against the collateral of the benefits of
the security, (4) provides for level monthly payments (provided, that the
payment in the first or last month in the life of the Receivable may be
minimally different from the level payments) that fully amortize the Amount
Financed by maturity and yield interest at the Annual Percentage Rate, and (5)
in the case of a Precomputed Receivable, in the event that such contract is
prepaid, provides for a prepayment that fully pays the Principal Balance and
includes accrued but unpaid interest through the date of prepayment at the
Annual Percentage Rate.
(b) Schedule of Receivables. The information set forth in Schedule I
-----------------------
to this Agreement is true and correct in all material respects as of the opening
of business on the Cutoff Date, and no selection procedures believed to be
adverse to the Noteholders or the Certificateholders were utilized in selecting
the Receivables. The computer tape or other listing regarding the Receivables
made available to the Issuer and its assigns is true and correct in all material
respects as of the Cutoff Date.
(c) Compliance with Law. Each Receivable and the sale of the related
-------------------
Financed Vehicle complied at the time it was originated or made and at the
execution of this Agreement in all
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<PAGE>
material respects with all requirements of applicable federal, state and local
laws and regulations thereunder, including usury laws, the Federal Truth-in-
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, and
State adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, and other consumer credit laws and equal credit opportunity and
disclosure laws.
(d) Binding Obligation. Each Receivable represents the genuine,
------------------
legal, valid and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws now or
hereafter in effect relating to or affecting creditor's rights generally and to
general principles of equity (whether applied in a proceeding at law or in
equity).
(e) No Government Obligor. None of the Receivables is due from the
---------------------
United States of America or any State thereof or from any agency, department or
instrumentality of the United States of America or any State.
(f) Security Interest in Financed Vehicle. Immediately prior to the
-------------------------------------
sale, assignment and transfer thereof to the Issuer, each Receivable shall be
secured by a validly perfected first security interest in the Financed Vehicle
in favor of the related Seller as secured party of all necessary and appropriate
actions have been commenced that would result in the valid perfection of a first
security interest in the Financed Vehicle in favor of the related Seller as
secured party.
(g) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released from the
lien granted by the related Receivable in whole or in part.
(h) No Waiver. No provision of a Receivable has been waived in such
---------
a manner that the Receivable fails to meet any other representation or warranty
of the Company with respect thereto.
(i) No Amendments. No Receivable has been amended such that the
-------------
amount of the Obligor's Scheduled Payments has been increased except for
increases resulting from the inclusion of any premiums for forced placed
physical damage insurance covering the Financed Vehicle.
(j) No Defenses. No facts are known to the Company that would give
-----------
rise to any right of defense, nor shall the same have been asserted or
threatened, with respect to any Receivable.
(k) No Liens. To the best of the Company' s knowledge, no liens or
--------
claims have been filed for work, labor or materials relating to a Financed
Vehicle that are liens prior to, or equal to or coordinate with, the security
interest in the Financed Vehicle granted by any Receivable.
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<PAGE>
(l) No Default. No Receivable has a payment that is more than 90
----------
days overdue as of the Cutoff Date, and, except as permitted in this paragraph,
no default, breach, violation or event permitting acceleration under the terms
of any Receivable has occurred; no continuing condition that with notice or the
lapse of time would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable has arisen; and the Company has
not waived and shall not waive any of the foregoing.
(m) Insurance. The related Seller, in accordance with its customary
---------
procedures, has determined that the Obligor has obtained physical damage
insurance covering the Financed Vehicle and under terms of the Receivable the
Obligor is required to maintain such insurance.
(n) Title. It is the intention of the Company that the transfer and
-----
assignment herein contemplated constitute a sale of the Receivables from the
Company to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Company. No Receivable has been sold,
transferred, assigned or pledged by the Company to any Person other than the
Issuer. Immediately prior to the transfer and assignment herein contemplated,
the Company had good and marketable title to each Receivable conveyed by it
hereunder to the Issuer, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and marketable
title to each Receivable, free and clear of all Liens and rights of others; and
the transfer has been perfected under the UCC.
(o) Lawful Assignment. No Receivable has been originated in, or is
-----------------
subject to the laws of, any jurisdiction under which the sale, transfer and
assignment of such Receivable or any Receivable under this Agreement or the
Indenture is unlawful, void or voidable.
(p) All Filings Made. All filings (including UCC filings) necessary
----------------
in any jurisdiction to give the Issuer a first perfected ownership interest in
the Receivables, and to give the Indenture Trustee a first perfected security
interest therein, shall have been made.
(q) One Original. There is only one original executed copy of each
------------
Receivable.
(r) Maturity of Receivables. The weighted average remaining term of
-----------------------
the Receivables as of the Cutoff Date is _________ months.
(s) Scheduled Payments. (1) No Receivable has payment that is more
------------------
than 90 days overdue as of the Cutoff Date; and (2) no Receivable has a final
scheduled payment date that is later than the Final Scheduled Maturity Date.
(t) Location of Receivable Files. The Receivable Files are kept at
----------------------------
one or more of the locations listed in Schedule II.
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<PAGE>
(u) No Bankruptcies. No Obligor on any Receivable as of the Cutoff
---------------
Date was noted in the related Receivable File as having filed for bankruptcy.
(v) No Repossessions. No Financed Vehicle securing any Receivable is
----------------
in repossession status.
(w) Chattel Paper. Each Receivable constitutes "chattel paper" as
-------------
defined in the UCC.
(x) Agreement. The representations and warranties of the Company in
---------
Section 6.01 are true and correct.
(y) Financing. Approximately __% of the aggregate principal balance
---------
of the Receivables, constituting ___% of the number of the Receivables as of the
Cutoff Date represents financing of new vehicles and the remainder of the
Receivables represents financing of used vehicles; and approximately ____% of
the aggregate principal balance of the Receivables as of the Cutoff Date
represents Precomputed Receivables and the remainder of the Receivables
represents Simple Interest Receivables. The Principal Balance of the Receivables
as of the Cutoff Date is $___________.
(z) APR. The weighted average Annual Percentage Rate of the
---
Receivables as of the Cutoff Date is approximately ____%.
SECTION 3.02. Repurchase upon Breach. The Company, the Servicer or the
----------------------
Owner Trustee, as the case may be, shall inform the other parties to this
Agreement and the Indenture Trustee promptly, in writing, upon the discovery of
any breach of the Company's representations and warranties made pursuant to
Section 3.01 or 6.01. Unless any such breach shall have been cured in all
material respects by the last day of the second Collection Period following the
discovery thereof (and notice to the Company) by the Owner Trustee or receipt by
the Owner Trustee of written notice from the Company or the Servicer of such
breach, the Company shall be obligated to repurchase any Receivable materially
and adversely affected by any such breach as of such last day (or, at the
Company's option, the last day of the first Collection Period following the
discovery). In consideration of the repurchase of any such Receivable, the
Company shall remit the Purchase Amount, in the manner specified in Section
5.05. The sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee,
the Noteholders or the Certificateholders with respect to a breach or
representations and warranties pursuant to Section 3.01 and the agreement
contained in this Section shall be to require the Company to repurchase
Receivables pursuant to this Section, subject to the conditions contained
herein.
SECTION 3.03. Custody of Receivable Files. To assure uniform quality in
---------------------------
servicing the Receivables and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee as
custodian of the following documents or instruments which are hereby or will
hereby be constructively delivered to the Indenture Trustee, as pledgee of the
Issuer as of the Closing Date:
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(a) the fully executed original of each Receivable;
(b) a filmed copy of each original credit application as executed by
the Obligor;
(c) the original certificate of title or such documents that the
Servicer shall keep on file, in accordance with its customary procedures,
evidencing the security interest of the related Seller in each Financed Vehicle;
and
(d) any and all other documents that the Servicer shall keep on file,
in accordance with its customary procedures, relating to a Receivable, an
Obligor or a Financed Vehicle.
SECTION 3.04. Duties of Servicer as Custodian. (a) Safekeeping. The
------------------------------- -----------
Servicer shall hold the Receivable Files as custodian for the benefit of the
Issuer and maintain such accurate and complete accounts, records and computer
systems pertaining to each Receivable File as shall enable the Issuer to comply
with this Agreement. In performing its duties as custodian, the Servicer shall
act with reasonable care using that degree of skill and attention that the
Servicer exercises with respect to the Receivable Files relating to all
comparable automotive receivables that the Servicer services for itself or
others. The Servicer shall conduct, or cause to be conducted, periodic audits
of the Receivable Files held by it under this Agreement and of the related
accounts, records and computer systems, in such a manner as shall enable the
Issuer or the Indenture Trustee to verify the accuracy of the Servicer's record
keeping. The Servicer shall promptly report to the Issuer and the Indenture
Trustee any failure on its part to hold the Receivable Files and maintain its
accounts, records and computer systems as herein provided and shall promptly
take appropriate action to remedy any such failure. Nothing herein shall be
deemed to require an initial review or any periodic review by the Issuer or the
Indenture Trustee of the Receivables Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
------------------------------------
each Receivable File at one of its offices specified in Schedule II or at such
other office as shall be specified to the Issuer and the Indenture Trustee by
written notice not later than 90 days after any change in location. The
Servicer shall make available to the Issuer and the Indenture Trustee or their
respective duly authorized representatives, attorneys or auditors a list of
locations of the Receivable Files and the related accounts, records and computer
systems maintained by the Servicer at such times during normal business hours as
the Issuer or the Indenture Trustee shall instruct.
(c) Release of Documents. Upon instruction from the Indenture
--------------------
Trustee, the Servicer shall release any Receivable File to the Indenture
Trustee, the Indenture Trustee's agent or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may designate,
as soon as practicable, and upon the release and delivery of any such document
in accordance with the instructions of the Indenture Trustee, the Servicer shall
be released from any further liability and responsibility under this Section
3.04 with respect to such documents unless and until such time as such documents
shall be returned to the Servicer, and in no event shall the Servicer be
responsible for any loss occasioned by the Indenture Trustee's failure to return
any documents in a timely manner.
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SECTION 3.05. Instructions; Authority To Act. The Servicer shall be
-------------------------------
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trust Officer of the
Indenture Trustee.
SECTION 3.06. Custodian's Indemnification. The Servicer as custodian
---------------------------
shall indemnify the Trust, the Owner Trustee and the Indenture Trustee and each
of their respective officers, directors, employees and agents for any and all
liabilities, obligations, losses, compensatory damages, payments, costs or
expenses of any kind whatsoever that may be imposed on, incurred by or asserted
against the Trust, the Owner Trustee or the Indenture Trustee or any of their
respective officers, directors, employees and agents as the result of any
improper act or omission in any way relating to the maintenance and custody by
the Servicer as custodian of the Receivable Files; provided, however, that the
Servicer shall not be liable to the Owner Trustee for any portion of any such
amount resulting from the willful misfeasance, bad faith or negligence of the
Owner Trustee, and the Servicer shall not be liable to the Indenture Trustee for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Indenture Trustee.
SECTION 3.07. Effective Period and Termination. The Servicer's
--------------------------------
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section. If
the Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 8.01, the appointment of such Servicer as
custodian shall be terminated by the Indenture Trustee or by the Holders of
Notes evidencing not less than 25% of the Outstanding Amount of the Notes or,
with the consent of Holders of the Notes evidencing not less than 25% the
Outstanding Amount of the Notes or, with the consent of Holders of the Notes
evidencing not less than 25% of the Outstanding Amount of the Notes, by the
Owner Trustee or by Certificateholders evidencing not less than 25% of the
Certificate Balance, in the same manner as the Indenture Trustee or such Holders
may terminate the rights and obligations of the Servicer under Section 8.01.
The Indenture Trustee or, with the consent of the Indenture Trustee, the Owner
Trustee may terminate the Servicer's appointment as custodian, with cause, at
any time upon written notification to the Servicer, and without cause upon 30
days' prior written notification to the Servicer. As soon as practicable after
any termination of such appointment, the Servicer shall deliver the Receivable
Files to the Indenture Trustee or the Indenture Trustee's agent at such place or
places as the Indenture Trustee may reasonably designate. Notwithstanding any
termination of the Servicer as custodian, the Indenture Trustee or Owner
Trustee, as applicable, shall provide, or shall cause its agent to provide,
access to the Receivable Files to the Servicer for the purpose of carrying out
its duties and responsibilities with respect to the servicing of the Receivables
hereunder.
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ARTICLE IV
Administration and Servicing of Receivables
-------------------------------------------
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
------------------
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and
posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment coupons to Obligors,
reporting tax information to Obligors, accounting for collections, furnishing
monthly and annual statements to the Owner Trustee and the Indenture Trustee
with respect to distributions and making Advances pursuant to Section 5.04.
Subject to the provisions of Section 4.02, the Servicer shall follow its
customary standards, policies and procedures in performing its duties as
Servicer. Without limiting the generality of the foregoing, the Servicer is
authorized and empowered to execute and deliver, on behalf of itself, the
Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders and the
Noteholders or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables or to the Financed Vehicles
securing such Receivables. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Issuer (in the case of a Receivable other than a
Purchased Receivable) shall thereupon be deemed to have automatically assigned,
solely for the purpose of collection, such Receivable to the Servicer. If in
any enforcement suit or legal proceeding it shall be held that the Servicer may
not enforce a Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce such Receivable, the Owner Trustee
shall, at the Servicer's expense and direction, take steps to enforce such
Receivable, including bringing suit in its name or the name of the Owner
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders. The
Owner Trustee shall upon the written request of the Servicer furnish the
Servicer with any powers of attorney and other documents reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
------------------------------------------------
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer shall allocate collections between principal and interest in accordance
with the customary servicing procedures it follows with respect to all
comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on Receivable, which shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the
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Issuer in accordance with the terms of Section 4.07. The Servicer may in its
discretion waive any late payment charge or any other fees that may be collected
in the ordinary course of servicing a Receivable. The Servicer shall not agree
to any alteration of the interest rate on any Receivable or of the amount of any
Scheduled Payment on Precomputed Receivables or the originally Scheduled
Payments on Simple Interest Receivables.
SECTION 4.03. Realization upon Receivables. On behalf of the Issuer,
----------------------------
the Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Financed
Vehicle securing any Receivable as to which the Servicer shall have determined
eventual payment in full is unlikely. The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of automotive receivables, which may include reasonable efforts to
realize upon any recourse to Dealers and selling the Financed Vehicle at public
or private sale. The Servicer shall be entitled to recover all out-of-pocket
expenses incurred by it in the course of converting a Financed Vehicle into cash
proceeds. The foregoing shall be subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with the repair or the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
repossession will increase the Liquidation Proceeds by an amount greater than
the amount of such expenses.
SECTION 4.04. Physical Damage Insurance. The Servicer shall, in
-------------------------
accordance with its customary servicing procedures, require that each Obligor
shall have obtained physical damage insurance covering the Financed Vehicle as
of the execution of the Receivable.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
------------------------------------------------------
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle. The Servicer is
hereby authorized to take such steps as are necessary to re-perfect such
security interest on behalf of the Issuer and the Indenture Trustee in the event
of the relocation of a Financed Vehicle or for any other reason. In the event
that the assignment of a Receivable to the Trust is insufficient, without a
notation on the related Financed Vehicle's's certificate of title, to grant to
the Trust a first perfected security interest in the relaxed Financed Vehicle,
the Servicer hereby agrees to serve as the agent of the Trust for the purposes
of perfecting the security interest in such Financed Vehicle and that the
Servicer's listing as the secured party on the certificate of title is in its
capacity as agent of the Trust.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
---------------------
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer increase the number of scheduled
payments due under a Receivable.
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SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
-----------------------------------
Owner Trustee shall inform the other party and the Indenture Trustee and the
Company promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06 that materially and adversely affects the interests
of the Trust in any Receivable. Unless the breach shall have been cured by the
last day of the second Collection Period following such discovery (or, at the
Servicer's election, the last day of the first following Collection Period), the
Servicer shall purchase, as of such last day, any Receivable that is materially
and adversely affected by such breach. In consideration of the purchase of any
such Receivable pursuant to either of the two preceding sentences, the Servicer
shall remit the Purchase Amount in the manner specified in Section 5.05. For
purposes of this Section, the Purchase Amount shall consist in part of a release
by the Servicer of all rights of reimbursement with respect to Outstanding
Precomputed Advances and Outstanding Simple Interest Advances on the Receivable.
The sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders with respect to a breach pursuant to
Section 4.02, 4.05 or 4.06 shall be to require the Servicer to purchase
Receivables pursuant to this Section. The Owner Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. As compensation for servicing the
-------------
Receivables, the Servicer shall be entitled to receive the Servicing Fee on each
Distribution Date, from the Interest Distribution Amount available on such
Distribution Date, in an amount equal to the product of (a) one-twelfth, (b) the
Servicing Fee Rate and (c) the Pool Balance as of the first day of the preceding
Collection Period. The Servicer shall also be entitled to all late fees,
prepayment charges (including, in the case of a Receivable that provides for
payments according to the "Rule of 78s" and that is prepaid in full, the
difference between the Principal Balance of such Receivable (plus accrued
interest to the date of prepayment) and the principal balance of such Receivable
computed according to the "Rule of 78s"), and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables,
collected (from whatever source) on the Receivables, as and when collected, plus
any reimbursement pursuant to the last paragraph of Section 7.02.
SECTION 4.09. Servicer's Certificate. Not later than 11:00 a.m. (New
----------------------
York time) on each Payment Determination Date, the Servicer shall deliver to the
Owner Trustee, each Paying Agent, the Indenture Trustee and the Company, with a
copy to the Rating Agencies, a Servicer's Certificate containing all information
necessary to make the distributions to be made on the related Distribution Date
pursuant to Section 5.06 and 5.07 for the related Collection Period.
Receivables to be purchased by the Servicer or to be repurchased by the Company
shall be identified by the Servicer by account number with respect to such
Receivable (as specified in Schedule I).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a)
----------------------------------------------------
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee, on or
before _____________________ of each year beginning _________________, 199____,
an Officers' Certificate, dated as of _________________ of the preceding year,
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such shorter period as shall have elapsed since the Closing
Date) and of its performance under this Agreement has been made under
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such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Indenture Trustee shall send a
copy of such certificate and the report referred to in Section 4.11 to the
Rating Agencies. A copy of such certificate and the report referred to in
Section 4.11 may be obtained by any Certificateholder, Certificate Owner,
Noteholder or Note Owner by a request in writing to the Owner Trustee addressed
to the Corporate Trust Office. Upon the telephone request of the Owner Trustee,
the Indenture Trustee will promptly furnish the Owner Trustee a list of
Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five (5) Business Days thereafter, written
notice in an Officers' Certificate of any event which with the giving of notice
or lapse of time, or both, would become a Servicer Default under Section 8.01(a)
or (b).
SECTION 4.11. Annual Independent Certified Public Accountants' Report.
-------------------------------------------------------
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee on or
before _____________ of each year beginning _____________, a report of a firm of
independent certified public accountants, addressed to the Board of Directors of
the Servicer, to the effect that such firm has examined the financial statements
of the Servicer and issued its report thereon and that such examination (a) was
made in accordance with generally accepted auditing standards and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (b) included tests
relating to automotive loans serviced for others in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers (the
"Program"), to the extent the procedures in such Program are applicable to the
servicing obligations set forth in this Agreement; and (c) except as described
in the report, disclosed no exceptions or errors in the records relating to
automobile and light-duty truck loans serviced for others that, in the firm's
opinion, paragraph four of such Program requires such firm to report.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
Receivables. The Servicer shall provide to the Certificateholders and
- -----------
Noteholders access to the Receivable Files in such cases where the
Certificateholders or Noteholders shall be required by applicable statutes or
regulations to review such documentation. Access shall be afforded without
charge, but only upon reasonable request and during the normal business hours at
the respective offices of the Servicer. Nothing in this Section shall affect
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors and the failure of the Servicer
to provide access to information as a result of such obligation shall not
constitute a breach of this Section.
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SECTION 4.13. Servicer Expenses. The Servicer shall be required to pay
-----------------
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders and Noteholders.
SECTION 4.14. Appointment of Subservicer. The Servicer may at any time
--------------------------
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time, and none of the
Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders or the
Noteholders shall have any responsibility therefor.
ARTICLE V
Distributions; Reserve Account; Statements to Certificateholders and Noteholders
- --------------------------------------------------------------------------------
SECTION 5.01. Establishment of Trust Accounts. (a) (i) The Servicer, for
-------------------------------
the benefit of the Noteholders and the Certificateholders, shall establish and
maintain in the name of the Indenture Trustee an Eligible Deposit Account (the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders and the
Certificateholders.
(ii) The Servicer, for the benefit of the Noteholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Note Distribution Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders.
(iii) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and the Certificateholders.
(b) Funds on deposit in the Collection Account, the Note Distribution
Account and the Reserve Account (collectively the "Trust Accounts") shall be
invested (1) by the Indenture Trustee in Eligible Investments selected in
writing by the Servicer or an investment manager selected by the Servicer, which
investment manager shall have agreed to comply with the terms of this Agreement
as it relates to investing such funds or (2) by an investment manager in
Eligible Investments selected
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by such investment manager, provided that (A) such investment manager shall be
selected by the Servicer, (B) such investment manager shall have agreed to
comply with the terms of this Agreement as it relates to investing such funds,
(C) any investment so selected by such investment manager shall be made in the
name of the Indenture Trustee and shall be settled by a Delivery to the
Indenture Trustee that complies with the terms of this Agreement as it relates
to investing such funds, and (D) prior to the settlement of any investment so
selected by such investment manager the Indenture Trustee shall affirm that such
investment is an Eligible Investment. It is understood and agreed that the
Indenture Trustee shall not be liable for any loss arising from an investment in
Eligible Investments made in accordance with this Section 5.01(b). All such
Eligible Investments shall be held by the Indenture Trustee for the benefit of
the Noteholders and the Certificateholders or the Noteholders, as applicable;
provided, that on each Payment Determination Date all interest and other
investment income (net of losses and investment expenses) on funds on deposit in
the Trust Accounts shall be deposited into the Collection Account and shall be
deemed to constitute a portion of the Interest Distribution Amount for the
related Distribution Date. Unless otherwise permitted by the Rating Agencies,
funds on deposit in the Collection Account, the Reserve Account and the Note
Distribution Account shall be invested in Eligible Investments that will mature
(A) not later than the Business Day immediately preceding the next Distribution
Date or (B) on such next Distribution Date if either (x) such investment is held
in the trust department of the institution with which the Collection Account,
the Reserve Account, the Note Distribution Account or the Certificate
Distribution Account, as applicable, is then maintained and is invested in a
time deposit of _____________________ rated at least A-1 by Standard & Poor's
and P-1 by Moody's (such account being maintained within the trust department of
_____________________) or (y) the Indenture Trustee (so long as the short-term
unsecured debt obligations of the Indenture Trustee are either (i) rated at
least P-1 by Moody's and A-1 by Standard & Poor's on the date such investment is
made or (ii) guaranteed by an entity whose short-term unsecured debt obligations
are rated at least P-1 by Moody's and A-1 by Standard & Poor's on the date such
investment is made) has agreed to advance funds on such Distribution Date to the
Note Distribution Account and the Certificate Distribution Account in the amount
payable on such investment on such Distribution Date pending receipt thereof to
the extent necessary to make distributions on such Distribution Date. The
guarantee referred to in clause (y) of the preceding sentence shall be subject
to the Rating Agency Condition. For the purpose of the foregoing, unless the
Indenture Trustee affirmatively agrees in writing to make such advance with
respect to such investment prior to the time an investment is made, it shall not
be deemed to have agreed to make such advance. Funds deposited in a Trust
Account on a day which immediately precedes a Distribution Date upon the
maturity of any Eligible Investments are not required to be invested overnight.
(c) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts
and in all proceeds thereof (including all income thereon) and all such
funds, investments, proceeds and income shall be part of the Trust Estate.
The Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders, as the case may be. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Indenture Trustee
(or the Servicer on its behalf) shall within 10 Business Days (or such
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longer period, not to exceed 30 calendar days, as to which each Rating
Agency may consent) establish a new Trust Account as an Eligible Deposit
Account and shall transfer any cash and/or any investments to such new
Trust Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts, subject to the
last sentence of Section 5.01(c)(i); and each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4))
of the UCC acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee,
to instruct the Indenture Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer or the Owner
Trustee to carry out its respective duties hereunder or permitting the
Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.02. Collections. The Servicer shall remit within two Business
-----------
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds, both as collected during the
Collection Period. Notwithstanding the foregoing, for so long as (i)
___________ remains
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the Servicer, (ii) no Servicer Default shall have occurred and be continuing and
(iii)(x) _____________ maintains a short-term rating of at least A-1 by Standard
& Poor's and P-1 by Moody's (and for five Business Days following a reduction in
either such rating) or (y) prior to ceasing daily remittances, the Rating Agency
Condition shall have been satisfied (and any conditions or limitations imposed
by the Rating Agencies in connection therewith are complied with), the Servicer
may remit such collections with respect to the preceding calendar month to the
Collection Account on a less frequent basis, but in no event later than the
Payment Determination Date immediately preceding each Distribution Date. For
purposes of this Article V the phrase "payments by or on behalf of Obligors"
shall mean payments made with respect to the Receivables by Persons other than
the Servicer.
SECTION 5.03. Application of Collections. All collections for the
--------------------------
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first, in the case
of Precomputed Receivables, to reduce Outstanding Precomputed Advances as
described in Section 5.04(a) and, in the case of Simple Interest
Receivables, to reduce Outstanding Simple Interest Advances to the extent
described in Section 5.04(b). Next, any excess shall be applied, in the
case of Precomputed Receivables, to the Scheduled Payment and, in the case
of Simple Interest Receivables, to interest and principal in accordance
with the Simple Interest Method. With respect to Precomputed Receivables,
any remaining excess shall be added to the Payahead Balance, and shall be
applied to prepay the Precomputed Receivable, but only if the sum of such
excess and the previous Payahead Balance shall be sufficient to prepay the
Receivable in full. Otherwise, any such remaining excess payments shall
constitute a Payahead and shall increase the Payahead Balance.
If the Servicer is required to return a Payahead to the related Obligor, the
amount to be returned shall be retained by the Servicer from collections on the
Receivables allocable to principal and paid by the Servicer to such Obligor.
SECTION 5.04. Advances. (a) As of the close of business on the last day
--------
of each Collection Period, if the payments by or on behalf of the Obligor on a
Precomputed Receivable (other than a Purchased Receivable) shall be less than
the Scheduled Payment, the Payahead Balance shall be applied by the Servicer to
the extent of the shortfall and such Payahead Balance shall be reduced
accordingly. Next, the Servicer shall advance any remaining shortfall (such
amount, a "Precomputed Advance"), to the extent that the Servicer, at its sole
discretion, shall determine that the Precomputed Advance shall be recoverable
from the Obligor, the Purchase Amount, Liquidation Proceeds or proceeds of any
other Precomputed Receivables. With respect to each Precomputed Receivable, the
Precomputed Advance shall increase Outstanding Precomputed Advances.
Outstanding Precomputed Advances shall be reduced by subsequent payments by or
on behalf of the Obligor, collections of Liquidation Proceeds in respect of such
Precomputed Receivables or payments of the Purchase Amount with respect to such
Precomputed Receivables.
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If the Servicer shall determine that an Outstanding Precomputed Advance
with respect to any Precomputed Receivable shall not be recoverable as
aforesaid, the Servicer shall be reimbursed from any collections made on other
Precomputed Receivables in the Trust and Outstanding Precomputed Advances with
respect to such Precomputed Receivables shall be reduced accordingly.
(b) As of the close of business on the last day of each Collection Period,
the Servicer shall advance an amount equal to the amount of interest due on the
Simple Interest Receivables at their respective APR's for the related Collection
Period (assuming the Simple Interest Receivables pay on their respective due
dates) minus the amount of interest actually received on the Simple Interest
Receivables during the related Collection Period (such amount, a "Simple
Interest Advance"). With respect to each Simple Interest Receivable, the Simple
Interest Advance shall increase Outstanding Simple Interest Advances. If such
calculation results in a negative number, an amount equal to such negative
number shall be paid to the Servicer and the amount of Outstanding Simple
Interest Advances shall be reduced by such amount. In addition, in the event
that a Simple Interest Receivable becomes a Liquidated Receivable, Liquidation
Proceeds with respect to such Simple Interest Receivable attributable to accrued
and unpaid interest thereon (but not including interest for the then current
Collection Period) shall be paid to the Servicer to reduce Outstanding Simple
Interest Advances, but only to the extent of any Outstanding Simple Interest
Advances.
SECTION 5.05. Additional Deposits. The Servicer shall deposit in the
-------------------
Collection Account on the Payment Determination Date for the related Collection
Period the aggregate Advances pursuant to Section 5.04. To the extent that the
Servicer fails to make a Simple Interest Advance pursuant to Section 5.04(b) on
the date required, the Servicer shall notify the Indenture Trustee to withdraw
such amount (or, if determinable, such portion of such amount as does not
represent advances for delinquent interest) from the Reserve Account and deposit
such amount in the Collection Account. The Servicer and the Company shall
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables and the Servicer shall
deposit therein all amounts to be paid under Section 9.01. The Servicer will
deposit the aggregate Purchase Amount with respect to Purchased Receivables when
such obligations are due, unless the Servicer shall not be required to make
daily deposits pursuant to Section 5.02. All such other deposits shall be made
on the Payment Determination Date for the related Collection Period.
SECTION 5.06. Distributions. (a) So long as (i) the long-term unsecured
-------------
indebtedness of the Servicer is rated Baa3 or better by Moody's or (ii) the
Rating Agency Condition is otherwise satisfied, the Servicer will be entitled to
receive the payment of the Servicing Fee in respect of a Collection Period (and
all unpaid Servicing Fees from prior Collection Periods) at the beginning of
each Collection Period from payments on the Receivables received during such
Collection Period.
(b) (i) On each Payment Determination Date, the Servicer shall calculate
all amounts required to be deposited in the Note Distribution Account and
the Certificate Distribution Account.
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(ii) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Payment Determination Date pursuant to
Section 4.09) to make the following deposits and distributions for receipt
by the Servicer or deposit in the applicable account by 11:00 a.m. (New
York time), to the extent of the Total Distribution Amount, in the
following order of priority:
(A) to the extent the Servicer has not received the payment of
the Servicing Fee at the beginning of the related Collection Period
pursuant to clause (a) above, to the Servicer, from the Interest
Distribution Amount, the Servicing Fee (and all unpaid Servicing Fees
from prior Collection Periods);
(B) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of Section 5.06(a)
and clause (A), the Noteholders' Interest Distributable Amount;
(C) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of Section 5.06(a)
and clauses (A) and (B), the Noteholders' Principal Distributable
Amount;
(D) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of Section 5.06(a)
and clauses (A) through (C), the Certificateholders' Interest
Distributable Amount;
(E) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of Section 5.06(a)
and clauses (A) through (D), the Certificateholders' Principal
Distributable Amount;
(F) to the Reserve Account, from the Total Distribution Amount
remaining after the application of Section 5.06(a) and clauses (A)
through (E) (it being understood that the Acceleration Principal
Distribution Amount is a function of and subject to the amount
required to be deposited in the Reserve Account pursuant to this
clause (F)), the amount, if any, necessary to reinstate the balance in
the Reserve Account up to the Specified Reserve Account Balance; and
(G) to the Reserve Account, the portion, if any, of the Total
Distribution Amount remaining after the application of Section 5.06(a)
and clauses (A) through (F).
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
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SECTION 5.07. Reserve Account. (a) On the Closing Date, the Owner
---------------
Trustee will deposit, on behalf of the Company, the Reserve Account Initial
Deposit into the Reserve Account from the net proceeds of the sale of the Notes
and the Certificates.
(b) (i) After giving effect to clause (ii) below, if the amount on
deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance
for such Distribution Date, the Servicer shall instruct the Indenture
Trustee to distribute the amount of such excess to the Company.
(ii) On each Distribution Date subsequent to any reduction or
withdrawal by any Rating Agency of its rating of any Class of Notes, unless
such rating has been restored, if the amount on deposit in the Reserve
Account (taking into account any deposits therein pursuant to Section
5.06(b) and withdrawals therefrom on such date pursuant to Section 5.07(c),
(d) or (e)) is greater than the Specified Reserve Account Balance for such
Distribution Date, then the Servicer shall instruct the Indenture Trustee
to include the amount of such excess in the Noteholders' Monthly Principal
Distribution Amount and to deposit the amount of such excess (up to the
amount of cash or cash equivalents in the Reserve Account) to the
Collection Account for deposit to the Note Distribution Account for
distribution to Noteholders as an accelerated payment of principal on such
Distribution Date; provided, that the amount of such deposit shall not
exceed the outstanding principal balance of the Notes after giving effect
to all other payments of principal to be made on such date.
(c) If the Servicer determines pursuant to Section 5.04 that it is
required to make an Advance on a Payment Determination Date and does not do
so from its own funds, the Servicer shall instruct the Indenture Trustee to
withdraw funds from the Reserve Account and deposit them in the Collection
Account to cover any shortfall. Such payment shall be deemed to have been
made by the Servicer pursuant to Section 5.04 for purposes of making
distributions pursuant to this Agreement, but shall not otherwise satisfy
the Servicer's obligation to deliver the amount of the Advances, and the
Servicer shall within two Business Days replace any funds in the Reserve
Account so used.
(d) (i) In the event that the Noteholders' Distributable Amount for
a Distribution Date exceeds the sum of the amounts deposited into the Note
Distribution Account pursuant to Section 5.06(b)(ii)(B) and (C) on such
Distribution Date, the Servicer shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Distribution Date an amount equal
to such excess, to the extent of funds available therein up to the
Available Amount, and deposit such amount into the Note Distribution
Account.
(ii) In the event that the Noteholders' Principal Distributable Amount
on the Class A-1 Final Scheduled Distribution Date or the Class A-2 Final
Scheduled Distribution Date exceeds the amount deposited into the Note
Distribution Account pursuant to Section 5.06(b)(ii)(C) on such
Distribution Date, the Servicer shall instruct the Indenture Trustee to
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withdraw from the Reserve Account on such Distribution Date an amount equal
to such excess, to the extent of funds available therein up to the
Available Amount, and deposit such amount into the Note Distribution
Account.
(e) (i) In the event that the Certificateholders' Distributable
Amount for a Distribution Date exceeds the sum of the amounts deposited
into the Certificate Distribution Account pursuant to Section
5.06(b)(ii)(D) and (E) on such Distribution Date, the Servicer shall
instruct the Indenture Trustee to withdraw from the Reserve Account on such
Distribution Date an amount equal to such excess, to the extent of funds
available therein up to the Available Amount after giving effect to
paragraphs (c) and (d) above, and deposit such amount into the Certificate
Distribution Account on such Distribution Date.
(ii) In the event that the Certificateholders' Monthly Interest
Distributable Amount for a Distribution Date exceeds the amount deposited
in the Certificate Distribution Account pursuant to Section 5.06(b)(ii)(D),
the Servicer shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Distribution Date an amount equal to such excess,
to the extent of funds available therein, after giving effect to paragraphs
(d)(i) and (e)(i) above, up to the Certificate Interest Reserve Amount with
respect to such Distribution Date, and deposit such amount into the
Certificate Distribution Account.
(iii) In the event that the Certificateholders' Principal
Distributable Amount on the Final Scheduled Distribution Date exceeds the
amount deposited in the Certificate Distribution Account pursuant to
Section 5.06(b)(ii)(E), the Servicer shall instruct the Indenture Trustee
to withdraw from the Reserve Account on such Distribution Date an amount
equal to such excess, to the extent of funds available therein after giving
effect to paragraphs (d) and (e)(i) above, and deposit such amount into the
Certificate Distribution Account.
(f) Subject to Section 9.01, amounts will continue to be applied
pursuant to Section 5.06(b) following payment in full of the Outstanding
Amount of the Notes and the Certificate Balance until the Pool Balance is
reduced to zero. Following the payment in full of the aggregate Outstanding
Amount of the Notes and the Certificate Balance and of all other amounts
owing or to be distributed hereunder or under the Indenture or the Trust
Agreement to Noteholders and Certificateholders and the termination of the
Trust, any amount remaining on deposit in the Reserve Account shall be
distributed to the Company.
(g) On the Final Scheduled Distribution Date, if the amount of funds
remaining in the Reserve Account (after all other distributions to be made
from the Reserve Account pursuant to this Section have been made, other
than paragraphs (b)(i) and (f)) is in excess of the amounts described
below, a portion of such excess according to the following schedule shall
be deposited in the Certificate Distribution Account for distribution to
Certificateholders:
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(i) with respect to all such funds in the Reserve Account in excess
of $________ but which do not exceed $_______________, 20% of such amount;
(ii) with respect to all such funds in the Reserve Account in excess
of $________ but which do not exceed $_______________, 40% of such amount;
(iii) with respect to all such funds in the Reserve Account in excess
of $________ but which do not exceed $_______________, 60% of such amount;
(iv) with respect to all such funds in the Reserve Account in excess
of $________ but which do not exceed $_______________, 80% of such amount;
and
(v) with respect to all such funds in the Reserve Account in excess
of $________, 100% of such amount.
The amounts to be deposited in the Certificate Distribution Account pursuant to
the preceding sentence are in excess of all amounts otherwise required to be
deposited in the Certificate Distribution Account pursuant to this Agreement,
notwithstanding anything to the contrary contained herein.
SECTION 5.08. Statements to Certificateholders and Noteholders. (a) On
------------------------------------------------
each Distribution Date, the Servicer shall provide to the Indenture Trustee
(with a copy to the Rating Agencies and each Paying Agent) for the Indenture
Trustee to forward to each Noteholder of record as of the most recent Record
Date and to the Owner Trustee (with a copy to each Paying Agent) for the Owner
Trustee to forward to each Certificateholder of record as of the most recent
Record Date a statement substantially in the form of Exhibit B setting forth at
least the following information as to the Notes and the Certificates to the
extent applicable:
(i) the amount of such distribution allocable to principal allocable
to each Class of Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest allocable
to each Class of Notes and to the Certificates;
(iii) the outstanding principal balance of each Class of Notes, the
Note Pool Factor for each such Class, the Certificate Balance and the
Certificate Pool Factor as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments allocated to
principal reported under clause (i) above;
(iv) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
(v) the amount of Realized Losses, if any, with respect to the
related Collection Period;
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(vi) the balance of the Reserve Account on such Payment Determination
Date after giving effect to deposits and withdrawals to be made on the next
following Distribution Date, if any;
(vii) the aggregate Payahead Balance; and
(viii) the Pool Balance as of the close of business on the last day of
the related Collection Period, after giving effect to payments allocated to
principal reported under subsection (a)(i) above, as reconciled.
Each amount set forth reconciling amounts on the Distribution Date
statement under clauses (i), (ii) or (iv) above shall be expressed as a dollar
amount per $1,000 of original principal balance of a Certificate or Note, as
applicable.
SECTION 5.09. Net Deposits. As an administrative convenience, unless the
------------
Servicer is required to remit collections daily, the Servicer will be permitted
to make the deposit of collections on the Receivables, aggregate Advances and
Purchase Amounts for or with respect to the Collection Period net of
distributions to be made to the Servicer with respect to the Collection Period.
The Servicer, however, will account to the Owner Trustee, the Indenture Trustee,
the Noteholders and the Certificateholders as if all deposits, distributions and
transfers were made individually.
ARTICLE VI
The Company
-----------
SECTION 6.01. Representations of the Company. The Company makes the
------------------------------
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date and shall survive the sale
of the Receivables to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Company is duly organized and
------------------------------
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Company is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
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(c) Power and Authority. The Company has the corporate power and authority
-------------------
to execute and deliver this Agreement and to carry out its terms; the Company
has full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer, and the Company shall have duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement has been
duly authorized by the Company by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Company enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar laws
now or hereafter in effect relating to or affecting creditors' rights generally
and to general principles of equity (whether applied in a proceeding at law or
in equity).
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Company, or any material term of any indenture,
agreement or other instrument to which the Company is a party or by which it is
bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); or violate any law or,
to the best of the Company's knowledge, any order, rule or regulation applicable
to the Company of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Company or its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
--------------
to the Company's knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Company or its properties: (i) asserting the invalidity of this
Agreement, the Indenture or any of the other Basic Documents, the Notes or the
Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) relating to the Company and
which might materially and adversely affect the federal or state income tax
attributes of the Notes or the Certificates.
SECTION 6.02. Corporate Existence. During the term of this Agreement,
-------------------
the Company will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions
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contemplated hereby. In addition, all transactions and dealings between the
Company and its Affiliates will be conducted on an arm's-length basis.
SECTION 6.03. Liability of the Company. The Company shall be liable in
------------------------
accordance herewith only to the extent of the obligations specifically
undertaken and the representations and warranties made by the Company under this
Agreement.
SECTION 6.04. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of the Company. Any Person (a) into which the Company may be merged
- --------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Company shall be a party or (c) which may succeed to substantially all of
the properties and assets of the Company, which person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Company under this Agreement, shall be the successor to the Company hereunder
without the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that (i) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.01 shall have been breached and no Servicer Default, and no event
that, after notice or lapse of time, or both, would become a Servicer Default
shall have occurred and be continuing, (ii) the Company shall have delivered to
the Owner Trustee and the Indenture Trustee an Officers' Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, (iii) the Rating Agency Condition shall
have been satisfied with respect to such transaction and (iv) the Company shall
have delivered to the Owner Trustee and the Indenture Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and Indenture Trustee, respectively, in the Receivables and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b) or (c) above.
SECTION 6.05. Limitation on Liability of the Company and Others. The
-------------------------------------------------
Company and any director, officer, employee or agent of the Company may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Company shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be related to its respective
obligations under this Agreement, and that in the Company's opinion may involve
it in any expense or liability.
SECTION 6.06. The Company May Own Certificates or Notes. The Company and
-----------------------------------------
any Affiliate thereof may in their individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as they would
have if it were not the Company or an Affiliate thereof, except as expressly
provided herein or in any Basic Document.
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ARTICLE VII
The Servicer
------------
SECTION 7.01. Representations of Servicer. The Servicer makes the
---------------------------
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, and shall survive the
sale of the Receivables to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
------------------------------
validly existing as a corporation in good standing under the laws of the state
of its incorporation with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables and to hold the Receivable Files as custodian on behalf
of the Trust and the Indenture Trustee.
(b) Due Qualification. The Servicer is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the corporate power and
-------------------
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Servicer enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar laws
now or hereafter in effect relating to or affecting creditor's rights generally
and to general principles of equity (whether applied in a proceeding at law or
in equity).
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any material term of any indenture,
agreement or other instrument to which the Servicer is a party or by which it is
bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); or violate any law or, to the best of
the Servicer's knowledge, any order, rule or regulation applicable to the
Servicer of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or its properties.
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<PAGE>
(f) No Proceedings. To the Servicer's best knowledge, there are no
--------------
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or its properties: (i) asserting the
invalidity of this Agreement, the Indenture, any of the other Basic Documents,
the Notes or the Certificates, (ii) seeking to prevent the issuance of the Notes
or the Certificates or the consummation of any of the transactions contemplated
by this Agreement, the Indenture or any of the other Basic Documents, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) relating to the Servicer and
which might materially and adversely affect the federal or state income tax
attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the related Cutoff Date, no Obligor on a
---------------------
Receivable is shown on the Receivable Files as the subject of a bankruptcy
proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
-----------------------
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders, the Certificateholders
and the Company and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any and all
costs, expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership or operation by the Servicer or any Affiliate
thereof of a Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Company, the Certificateholders and
the Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any and all
costs, expenses, losses, claims, damages and liabilities to the extent that such
cost, expense, loss, claim, damage or liability arose out of, or was imposed
upon any such Person through, the negligence, willful misfeasance or bad faith
of the Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this Agreement.
For purposes of this Section, in the event of the termination of the rights
and obligations of the Servicer (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable
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fees and expenses of counsel and expenses of litigation. If the Servicer shall
have made any indemnity payments pursuant to this Section and the Person to or
on behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Servicer,
without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
- ------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed to substantially all of
the properties and assets of the Servicer, which Person executed an agreement of
assumption to perform every obligation of the Servicer hereunder, shall be the
successor to the Servicer under this Agreement without further act on the part
of any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no Servicer Default and no event which,
after notice or lapse of time, or both, would become a Servicer Default shall
have occurred and be continuing, (ii) the Servicer shall have delivered to the
Owner Trustee and the Indenture Trustee an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent provided for in this Agreement to such transaction have been complied
with, (iii) the Rating Agency Condition shall have been satisfied with respect
to such transaction and (iv) the Servicer shall have delivered to the Owner
Trustee and the Indenture Trustee an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Indenture Trustee, respectively, in the Receivables and reciting the details
of such filings or (B) no such action shall be necessary to preserve and protect
such interests. Notwithstanding anything herein to the contrary, the execution
of the foregoing agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions to the consummation of the transactions
referred to in clause (a), (b) or (c) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither
----------------------------------------------
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Issuer, the Owner Trustee, the
Indenture Trustee, the Noteholders or the Certificateholders, except as provided
under this Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such person
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
related to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
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<PAGE>
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the Basic
Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under this Agreement
and the Noteholders under the Indenture.
SECTION 7.05. Servicer Not To Resign. Subject to the provisions of
----------------------
Section 7.03, the Servicer shall not resign from the obligations and duties
hereby imposed on it as Servicer under this Agreement except upon a
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of the Servicer shall be communicated to the Owner
Trustee and the Indenture Trustee at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination shall be evidenced by an Opinion of
Counsel to such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 8.02.
ARTICLE VIII
Default
-------
SECTION 8.01. Servicer Default. If any one of the following events (a
----------------
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver to the Indenture Trustee for
deposit in any of the Trust Accounts or the Certificate Distribution Account any
required payment or to direct the Indenture Trustee to make any required
distributions therefrom, which failure continues unremedied for a period of
three Business Days after written notice of such failure is received by the
Servicer from the Owner Trustee or the Indenture Trustee or after discovery of
such failure by an officer of the Servicer; or
(b) failure by the Servicer or the Company, as the case may be, duly to
observe or to perform in any material respect any other covenants or agreements
of the Servicer or the Company (as the case may be) set forth in this Agreement
or any other Basic Document, which failure shall (i) materially and adversely
affect the rights of Certificateholders or Noteholders and (ii) continue
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given (A) to
the Servicer or the Company (as the case may be) by the Owner Trustee or the
Indenture Trustee or (B) to the Servicer or the Company (as the case may be),
and to the Owner Trustee and the Indenture Trustee by the Holders of Notes or
Certificates, as applicable, evidencing not less than 25% of the Outstanding
Amount of the Notes or 25% of the outstanding Certificate Balance; or
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(c) the occurrence of an Insolvency Event with respect to the Company, the
Servicer or the Company;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes, by notice then
given in writing to the Servicer (and to the Indenture Trustee and the Owner
Trustee if given by the Noteholders) may terminate all the rights and
obligations (other than the obligations set forth in Section 7.02 hereof) of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Notes, the Certificates or the Receivables or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Servicer as may be appointed under Section 8.02; and,
without limitation, the Indenture Trustee and the Owner Trustee are hereby
authorized and empowered to execute and deliver, for the benefit of the
predecessor Servicer, as attorney-in-fact, or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer, the Indenture Trustee and the Owner Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received by it with
respect to any Receivable. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the Receivable Files
to the successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section shall be paid by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Owner Trustee
shall give notice thereof to the Rating Agencies.
SECTION 8.02. Appointment of Successor. (a) Upon the Servicer's receipt
------------------------
of notice of termination pursuant to Section 8.01 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the earlier of (i) the date 45
days from the delivery to the Owner Trustee and the Indenture Trustee of written
notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (ii) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in the
notice of resignation and accompanying Opinion of Counsel. In the event of the
Servicer's termination hereunder, the Indenture Trustee shall appoint a
successor Servicer, and the successor Servicer shall accept its appointment by a
written assumption in form acceptable to the Owner Trustee and the Indenture
Trustee. In the event that a successor Servicer has not been appointed at the
time when the predecessor Servicer has ceased to act as Servicer in accordance
with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Servicer and shall be entitled to the
Servicing Fee. Notwithstanding the above, the Indenture Trustee shall, if it
shall be legally unable so to act, appoint
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or petition a court of competent jurisdiction to appoint any established
institution, having a net worth of not less than $100,000,000 and whose regular
business shall include the servicing of automotive receivables, as the successor
to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement.
(c) The Servicer may not resign unless it is prohibited from serving as
such by law.
SECTION 8.03. Repayment of Advances. If the Servicer shall change, the
---------------------
predecessor Servicer shall be entitled to receive reimbursement for Outstanding
Advances pursuant to Sections 5.03 and 5.04 with respect to all Advances made by
the predecessor Servicer.
SECTION 8.04. Notification to Noteholders and Certificateholders. Upon
--------------------------------------------------
any termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and the Rating Agencies.
SECTION 8.05. Waiver of Past Defaults. The Holders of Notes evidencing
-----------------------
not less than a majority of the Outstanding Amount of the Notes or the Holders
(as defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the outstanding Certificate Balance (in the case of any default
which does not adversely affect the Indenture Trustee or the Noteholders) may,
on behalf of all Noteholders and Certificateholders, waive in writing any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to or payments
from any of the Trust Accounts in accordance with this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
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 thereto.
ARTICLE IX
Termination
-----------
SECTION 9.01. Optional Purchase of All Receivables. (a) As of the last
------------------------------------
day of any Collection Period immediately preceding a Distribution Date as of
which the then outstanding Pool Balance is 10% or less of the Original Pool
Balance and the Class A-1 Notes have been paid in full, the Servicer shall have
the option to purchase the Owner Trust Estate, other than the Trust Accounts and
the Certificate Distribution Account; provided, however, that, unless Moody's
-------- -------
agrees otherwise, the Servicer may not effect any such purchase if the rating of
the Servicer's long-term debt obligations
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<PAGE>
is less than Baa3 by Moody's, unless the Owner Trustee and the Indenture Trustee
shall have received an Opinion of Counsel to the effect that such purchase would
not constitute a fraudulent conveyance. To exercise such option, the Servicer
shall deposit pursuant to Section 5.05 in the Collection Account an amount equal
to the aggregate Purchase Amount for the Receivables (including defaulted
Receivables), plus the appraised value of any such other property held by the
Trust other than the Trust Accounts and the Certificate Distribution Account,
such value to be determined by an appraiser mutually agreed upon by the
Servicer, the Owner Trustee and the Indenture Trustee, and shall succeed to all
interests in and to the Trust. Notwithstanding the foregoing, the Servicer
shall not be permitted to exercise such option unless the amount to be deposited
in the Collection Account pursuant to the preceding sentence is greater than or
equal to the sum of the outstanding principal balance of the Notes and the
Certificate Balance and all accrued but unpaid interest (including any overdue
interest and premium) thereon.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount and funds
on deposit in the Reserve Account pursuant to Sections 5.06 and 5.07) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into the
Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding principal
balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits made
in the Note Distribution Account on such Distribution Date and on prior
Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date; and
(iv) to the Certificate Distribution Account, the Certificate Balance
(after giving effect to the reduction in the Certificate Balance to result
from the deposits made in the Certificate Distribution Account on such
Distribution Date).
Any investments on deposit in the Reserve Account or Note Distribution Account
which will not mature on or before such Distribution Date shall be sold by the
Indenture Trustee at such time as will
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result in the Indenture Trustee receiving the proceeds from such sale not later
than the Payment Determination Date preceding such Distribution Date. Any
Insolvency Proceeds remaining after the deposits described above shall be paid
to the Company.
(c) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder other
than Section 5.07(b) and the Owner Trustee will succeed to the rights of, and
assume the obligations of, the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Amendment. This Agreement may be amended by the
---------
Company, the Servicer and the Issuer, with the consent of the Indenture Trustee,
but without the consent of any of the Noteholders or the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement or
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
--------
however, that such action shall not, as evidenced by an Opinion of Counsel
- -------
delivered to the Owner Trustee and the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Company, the
Servicer and the Issuer, with the consent of the Holders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and the consent of
the Holders (as defined in the Trust Agreement) of outstanding Certificates
evidencing not less than a majority of the outstanding Certificate Balance, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided, however, that no such
-------- -------
amendment shall (a) except as otherwise provided in the first paragraph of this
Section, increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Note and the Certificate Balance, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes and the Holders (as defined in the Trust Agreement) of
all the outstanding Certificates.
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Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise.
SECTION 10.02. Protection of Title to Trust. (a)The Company
----------------------------
and the Servicer shall execute and file such financing statements and cause to
be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer and of the Indenture Trustee in the Receivables and
in the proceeds thereof. The Company and the Servicer shall deliver (or cause
to be delivered) to the Owner Trustee and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing.
(b) Neither the Company nor the Servicer shall change their respective
name, identity or corporate structure in any manner that would, could or might
make any financing statement or continuation statement or continuation statement
filed in accordance with paragraph (a) above seriously misleading within the
meaning of (S) 9-4.02(7) of the UCC, unless the Company or the Servicer, as the
case may be, shall have given the Owner Trustee and the Indenture Trustee at
least five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) The Company and the Servicer shall have an obligation to give the Owner
Trustee and the Indenture Trustee at least 60 days' prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly file any such amendment or new financing
statement. The Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii)
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reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
and the Payahead Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Company or the Servicer shall propose to sell, grant
a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee and its agents to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivable at any time during normal business hours upon
reasonable notice.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to the
Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this Agreement and of
each amendment hereto, an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest; and
(2) within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
Cutoff Date to occur, an Opinion of Counsel, dated as of a date during such
90-day period, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements have been
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executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee in the Receivables,
and reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) no such action shall be
necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as o the date of such opinion) to be taken in the following
year to preserve and protect such interest.
(j) The Company shall, to the extent required by applicable law, cause the
Certificates and the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
SECTION 10.03. Notices. All demands, notices, communications and
-------
instructions upon or to the Company, the Servicer, the Owner Trustee, the
Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Company, _____________________, Attention _______________; (b) in
the case of the Servicer, to _________________________________, Attention
_____________; (c) in the case of the Indenture Trustee, at the Corporate Trust
Office; (d) in the case of the Owner Trustee, at the Corporate Trust Office; (e)
in the case of the Rating Agencies, -----------------------------------------
; or, as to each of the foregoing, at such other address as shall be designated
- -
by written notice to the other parties.
SECTION 10.04. Assignment by the Company or the Servicer.
-----------------------------------------
Notwithstanding anything to the contrary contained herein, except as provided in
the remainder of this Section, as provided in Sections 6.04 and 7.03 herein and
as provided in the provisions of this Agreement concerning the resignation of
the Servicer, this Agreement may not be assigned by the Company or the Servicer.
The Issuer and the Servicer hereby acknowledge and consent to the conveyance and
assignment by the Company to_______________________, of any and all of the
Company rights and interests (and corresponding obligations, if any) hereunder
with respect to receiving amounts from the Reserve Account, and the Issuer and
the Servicer hereby agree that any such assignee of the Company, shall be
entitled to enforce such rights and interests directly against the Issuer as if
such assignee of the Company, were itself a party to this Agreement.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
-------------------------------
Agreement are solely for the benefit of the Company (and any assignee of the
Company pursuant to Section 10.04), the Servicer, the Issuer, the Owner Trustee,
the Certificateholders, the Indenture Trustee and the Noteholders, and nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such
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prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
---------------------
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Company hereby acknowledges and
--------------------
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Noteholders of all right, title and interest of the Issuer in, to and under
the Receivables and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Agreement, the Servicer shall not, prior to the date which
is one year and one day after the termination of this Agreement with respect to
the Issuer or the Company, acquiesce, petition or otherwise invoke or cause the
Issuer or the Company (or any assignee of the Company pursuant to Section 10.04)
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Company (or any
assignee of the Company pursuant to Section 10.04) under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or the Company (or any assignee of the Company pursuant to Section 10.04)
or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer or the Company (or any assignee of the
Company pursuant to Section 10.04).
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
------------------------------------------------------
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
- -------
Agreement has been countersigned by ___________________ not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall _______________ in its individual capacity or, except as expressly
provided in the Trust Agreement, as beneficial owner of the Issuer have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or
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in any of the certificates, notices or agreements delivered pursuant hereto, as
to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by The Bank of New York, not in its individual
capacity but solely as Indenture Trustee and in no event shall The Bank of New
York have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199__-__
By: _____________, not in its individual capacity
but solely as Owner Trustee on behalf of the Trust
By:_________________________________________
Name:
Title:
ASSET BACKED SECURITIES CORPORATION, as Company
By: _________________________________________________
Name:
Title:
____________________________, as Servicer
By: _________________________________________________
Name:
Title:
Acknowledged and accepted as of the
day and year first above written:
_________________________________
not in its individual capacity
but solely as Indenture Trustee
By: ___________________________________________
Name:
Title:
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SCHEDULE I
Schedule of Receivables
-----------------------
[To be Delivered to the Trust at Closing]
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SCHEDULE II
Location of Receivable Files
----------------------------
[To be supplied]
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EXHIBIT A
[To be supplied]
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EXHIBIT B
[To be supplied]
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