<PAGE>
As filed with the Securities and Exchange Commission on May 24, 1996
================================================================================
Registration No. 333-00365
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
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
Delaware Park Avenue Plaza 13-3354848
(State or other 55 East 52nd Street (I.R.S. Employer
jurisdiction of New York, New York 10055 Identification No.)
incorporation or organization) (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:
James D. Johnson
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. [ ]
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>
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, collectively 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" and, collectively with
the Notes, the "Securities").
----------------
(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-11 of this Prospectus Supplement and on page 14 of the
accompanying Prospectus.
----------------
Prospective investors should consider the limitations discussed under ERISA
Considerations herein and in 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 holders of the Securities ("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 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 NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
UNTIL ________________, ______ ALL DEALERS EFFECTING TRANSACTIONS IN THE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-2
<PAGE>
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" or the
"Issuer") 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 Servicer" herein.
Indenture Trustee.............. ____________________, as trustee under the
Indenture (the "Indenture Trustee").
Owner Trustee.................. 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, collectively 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,
collectively 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
to the Trust the Receivables 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 ____%, 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 in the
Receivables Purchase Agreement 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
S-5
<PAGE>
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 Securityholders, 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 fixed per annum rate of ____% (the
"Class A-1 Rate") and on the Class A-2 Notes
at a fixed 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
Fee 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 Pool Balance as of the Cutoff
Date. 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,
collectively with the Noteholders, the
"Securityholders") as of the related Record
Date.
B. Certificate
Pass-Through Rate........ Interest will accrue on the Certificates at a
fixed 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 (as defined
herein).
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 Receivables, which it may do
when the Pool Balance is 10% or less of the
Pool Balance as of the Cutoff Date, 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 $________
S-7
<PAGE>
(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' Distributable
Amount and will be deposited in the Note
Distribution Account (as defined herein) 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 (as defined
herein) is less than the Certificateholders'
Distributable Amount (as defined herein) 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 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 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 to the Note Distribution Account,
(iii) the Noteholders' Principal
Distributable Amount to the Note Distribution
Account, (iv) the Certificateholders'
Interest Distributable Amount to the
Certificate Distribution Account, (v) after
the Class A-2 Notes have been paid in full,
the Certificateholders' Principal
Distribution Amount to the Certificate
Distribution Account and (vi) 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
S-8
<PAGE>
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, in each
case, in accordance with the terms of the
Servicing Agreement. 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 a Financed Vehicle may
be not be properly assigned in the event of
(i) the relocation or resale of such 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. Federal Tax Counsel has also
advised the Trust that the Notes will be
classified as debt 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. 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.
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<PAGE>
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 "______" or its
equivalent, the Class A-2 Notes be rated at
least "_______" or its equivalent 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.
S-10
<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 of Securities. 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 any
related Advances) 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
Securities 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
Securityholders could result.
Lack of 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 at least "___________" or
its equivalent, the Class A-2 Notes be rated at least "________" or its
equivalent and the Certificates be rated at least "_________" or its equivalent,
in each case by at least two nationally recognized rating agencies (the "Rating
Agencies"). A rating is not a recommendation to
S-11
<PAGE>
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 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 limited 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 (except to the extent the Servicer is
obligated to make Advances with respect to 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
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<PAGE>
Servicing Agreements --Distributions" and "--Reserve Account" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
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:
<TABLE>
<S> <C>
Class A-1 Notes ....................................... $
Class A-2 Notes..........................................
Certificates.............................................
-----------
Total........................................... $
-----------
</TABLE>
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.
[Describe differences, if any, in contracts related to new vehicles and
contracts related to used vehicles]
The composition, distribution by APR and geographic distribution of the
Receivables as of the Cutoff Date are as set forth in the following tables.
<TABLE>
<CAPTION>
Composition of the Receivables as of the Cutoff Date
Weighted Aggregate principal Number of Weighted Average Weighted Average Average Principal
Average APR Balance Receivables Remaining Term Original Term Balance
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
Distribution of Receivables by APR as of the Cutoff Date
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 to 19.00 %
Greater than 20.00% ____________ ____________ ______________
Total
============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Geographic Distribution of the Receivables as of the Cutoff Date (1)
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.
S-14
<PAGE>
<TABLE>
<CAPTION>
Delinquency Experience (1)
At December 31,
1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
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
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
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 Notes.
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 aggregate
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<PAGE>
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 Pool Balance as of
the Cutoff Date. 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 Certificates. 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.
S-17
<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 Pool Balance as of the Cutoff Date, 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 the material 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 a complete description of all terms of the Transfer and Servicing
Agreements and therefore 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 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 Amount 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 (excluding 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. The Noteholders' Interest
Carryover Shortfall with respect to the initial Distribution Date is zero.
"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. The
Noteholders' Principal Carryover Shortfall with respect to the Initial
Distribution Date is zero.
"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. The Certificateholders' Interest Carryover Shortfall with
respect to the initial Distribution Date is zero.
"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. The Certificateholders' Principal Carryover Shortfall with respect to
the initial Distribution Date is zero.
"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
S-22
<PAGE>
withdrawn from the Reserve Account to cover shortfalls in collections on the
Receivables exceeds the amount of 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, in each case in accordance with the
terms of the Servicing Agreement. 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 Securityholders 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
<TABLE>
<S> <C>
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-
</TABLE>
S-25
<PAGE>
<TABLE>
<S> <C>
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-
</TABLE>
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, collectively with the Class A Certificates, the
"Certificates"). Only the Class A Certificates are being offered hereby.
(Continued on following page)
----------------
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.
NEITHER THE 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 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 14 of the
accompanying Prospectus.
----------------
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in 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................ % % %
$ $ $
(1) Plus accrued interest, if any, from ______________, 199_.
(2) Before deducting expenses, estimated to be $____________.
</TABLE>
----------------
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_.
[GRAPHIC OMITTED] 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 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 Agreement"), 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 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. 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.
UNTIL __________________________, _________ 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 TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
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" or the
"Issuer") 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, collectively 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
S-4
<PAGE>
hereby. 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
to the Trustee the representations and
warranties made by the Seller pursuant to the
Receivables Purchase Agreement 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
S-5
<PAGE>
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 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 Pool Balance as of the
Cutoff Date, 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 to
the Class A Certificateholders, (iii) the
Class A Principal Distributable Amount to the
Class A Certificateholders, (iv) Class B
Interest Distributable Amount to the Class B
Certificateholders, (v) the Class B Principal
Distributable Amount to the Class B
Certificateholders and (vi) 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
S-7
<PAGE>
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 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 bereleased 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, in each
case in accordance with the terms of the
Pooling and Servicing Agreement. 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.
S-8
<PAGE>
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 a Financed Vehicle may
be not be properly assigned in the event of
(i) the relocation or resale of such 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 "_____" or its equivalent 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 of Certificates. 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 (and related Advances, if any, by the Servicer)
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.
Lack of 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
S-10
<PAGE>
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
Certificates or the Receivables (except to the extent that the Servicer is
obligated to make Advances with respect to 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.
S-11
<PAGE>
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 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.
[Describe differences, if any, in contracts related to new vehicles and
contracts related to used vehicles]
The composition, distribution by APR and geographic distribution of the
Receivables as of the Cutoff Date are as set forth in the following tables.
<TABLE>
<CAPTION>
Composition of the Receivables as of the Cutoff Date
Weighted Aggregate principal Number of Weighted Average Weighted Average Average Principal
Average APR Balance Receivables Remaining Term Original Term Balance
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
<TABLE>
<CAPTION>
Distribution of Receivables by APR as of the Cutoff Date
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>
S-12
<PAGE>
<TABLE>
<CAPTION>
Geographic Distribution of the Receivables as of the Cutoff Date (1)
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.
<TABLE>
<CAPTION>
Delinquency Experience (1)
At December 31,
1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
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.
<TABLE>
<CAPTION>
Credit Loss/Repossession Experience(1)
At December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
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 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
S-14
<PAGE>
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
(excluding 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 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
S-15
<PAGE>
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 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 (excluding 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. The Class A Interest Carryover Shortfall for the
initial Distribution Date is zero.
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 Class A Principal Carryover Shortfall for the
initial Distribution Date is zero.
S-16
<PAGE>
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 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 Pool Balance as of the Cutoff Date, 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
S-17
<PAGE>
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 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, in each case in accordance with the
terms of the Pooling and Servicing Agreement. 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.
S-18
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations --
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.
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
<TABLE>
<CAPTION>
<S> <C>
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-
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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-
</TABLE>
S-13
<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 trust agreement (the "Trust Agreement"), dated as
of __________, 199_ (the "Cutoff Date"), between Asset Backed Securities
Corporation (the "Company") as depositor, 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, collectively 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 TRUSTEE, 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 TRUSTEE, 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-9 of this Prospectus Supplement and on page 10 of the
accompanying Prospectus.
----------------
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in 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 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 the vehicles financed thereby, and certain other
property. The Collateral Certificates [will be transferred 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 [Trust]
[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.
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 PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------
S-2
<PAGE>
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 Trustee
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 Trustee 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" or the
"Issuer") to be formed pursuant to a trust
agreement (the "Trust Agreement") dated as of
___________, 199_ (the "Cutoff Date"), between
the Company 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.
Trustee...................... _______, as trustee under the Trust 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, collectively 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.
S-4
<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
-- 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" or, with the Class A
Pass-Through Rate, each a "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 from (i) the Class A
Percentage of the Interest
S-5
<PAGE>
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.
On each Distribution Date 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 Trust Agreement -- Distributions --
Calculation of Amounts to be Distributed"
herein.
E. Optional
Prepayment.......... If the Company 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 Pool Balance as
of the Cutoff Date, 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
Trustee 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 Trust 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 Class A Interest
Distributable Amount to the Class A
Certificateholders, (ii) the Class A Principal
Distributable Amount to the Class A
Certificateholders, (iii) the Class B Interest
Distributable Amount to the Class B
Certificateholders, (iv) the Class B Principal
Distributable
S-6
<PAGE>
Amount to the Class B Certificateholders and (v)
the remaining balance, if any, to the Reserve
Account. See "The Trust 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 Trust 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 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.
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 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 Trust
Agreement -- Subordination of the Class B
Certificates; Reserve Account" herein.
Tax Status................... In the opinion of Sidley & Austin ("Federal Tax
Counsel"), the Trust will
S-7
<PAGE>
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.
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 "_____"
or its equivalent 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 of Certificates. 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
S-9
<PAGE>
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 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 Trustee will
maintain such assets pursuant to the Trust Agreement and will be compensated for
acting as the Trustee. 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 Trust Agreement. __________ is a __________
banking corporation, and its principal offices are located at __________. The
Company or any of its affiliates may maintain normal commercial banking
relations with the Trustee and its affiliates.
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 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 Certificates. The following summary describes
certain terms of the Certificates and the Trust 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 Trust 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 Trust 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 Trustee will provide 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 Trustee will cause the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for any Distribution Date will equal the aggregate amount
of collections on the Collateral Certificates.
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
with respect to the preceding 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
S-11
<PAGE>
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 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 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 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. The Class A Interest
Carryover Shortfall for the initial Distribution Date is zero.
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".
S-12
<PAGE>
Although the Company has no reason to believe the information provided by
an originator of an Underlying Trust Fund or the prospectus relating to the
Collateral Certificates is not reliable, the Company has not verified either its
accuracy or its completeness. Neither the Company nor the Underwriter warrants
that 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 Collateral Certificates,
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 TRUST AGREEMENT
Sale and Assignment of Receivables
Certain information with respect to the conveyance of the Collateral
Certificates by the [Seller][Company] to the Trust on the Closing Date pursuant
to the Trust Agreement is set forth under "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables" in the Prospectus.
Optional Prepayment
If the Company 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 Pool Balance as of
the Cutoff Date, 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
S-13
<PAGE>
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 Trust 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 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 Trust 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-
Interest Distribution Amount.................................................S-
Liquidated Receivables.......................................................S-
Liquidation Proceeds.........................................................S-
Plan.........................................................................S-
Pool Balance.................................................................S-
Principal Distribution Amount................................................S-
Prospectus...................................................................S-
Rating Agencies..............................................................S-
Realized Losses..............................................................S-
Receivables..................................................................S-
Record Date..................................................................S-
Reserve Account..............................................................S-
Reserve Account Initial Deposit..............................................S-
Seller.......................................................................S-
Specified Reserve Account Balance............................................S-
Total Distribution Amount....................................................S-
Trust........................................................................S-
S-16
<PAGE>
Trust Accounts...............................................................S-
Trust Agreement..............................................................S-
Trustee......................................................................S-
Underwriter..................................................................S-
Underwriting Agreement.......................................................S-
S-17
<PAGE>
Schedule I
Class __
CUSIP #___________ Rating: ______________
<TABLE>
<CAPTION>
[Monthly][Quarterly]
[Semi-Annual] Aggregate
Payment Dates Interest Payment Interest Payment Interest Rate
- ------------- ---------------- ---------------- -------------
<S> <C> <C>
- ------------- $---------------- $------------------ -----------%
</TABLE>
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. 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, collectively 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" and, collectively
with the Notes, the "Securities").
----------------
(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 OWNER TRUSTEE, THE
INDENTURE TRUSTEE, 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, 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.
----------------
Prospective investors should consider the limitations discussed under ERISA
Considerations herein and in the accompanying Prospectus.
----------------
<TABLE>
<CAPTION>
Price to the Underwriting Proceeds to the
Public(1) Discount Depositor(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_.
<PAGE>
[LOGO]CS FIRST BOSTON
The date of this Prospectus Supplement is __________, 199_.
S-2
<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 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 transferred 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 [Trust] [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
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 rate 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. 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.
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 OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
UNTIL _____________________, _______ ALL DEALERS EFFECTING TRANSACTIONS IN
THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-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 Trustee
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 Trustee 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" or the
"Issuer") 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.
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,
collectively 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) and the Reserve Account. See
"The Notes -- Payments of Interest" herein.
S-6
<PAGE>
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 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 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 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 Company exercises its option to purchase the
Collateral Certificates. Under the terms of the
Trust Agreement, the Company 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 Pool Balance as of the Cutoff Date.
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, collectively 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 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
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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
Distribution Date").
See "The Certificates -- Distributions of
Principal" and "Description of the Trust
Agreement -- Distributions" herein.
E. Optional Prepayment... If the Company exercises its option to purchase
the Collateral Certificates, which it may do
when the Pool Balance is 10% or less of the Pool
Balance as of the Cutoff Date, 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 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 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 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
S-8
<PAGE>
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
Trust Agreement -- Reserve Account" herein.
Collection Account........... Except under certain conditions described in the
Prospectus under "Description of the Trust
Agreement -- Collections," the Owner Trustee
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 Owner
Trustee (the "Collection Account"). Pursuant to
the Trust Agreement, the Owner 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 Noteholders'
Interest Distributable Amount to the Note
Distribution Account, (ii) the Noteholders'
Principal Distributable Amount to the Note
Distribution Account, (iii) the
Certificateholders' Interest Distributable
Amount to the Certificate Distribution Account,
(iv) after the Class A-2 Notes have been paid in
full, the Certificateholders' Principal
Distributable Amount to the Certificate
Principal Distributable Account and (v) the
remaining balance, if any, to the Reserve
Account. See "The Trust Agreement --
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.
Federal Tax Counsel has also advised the Trust
that the Notes will be classified as debt 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. 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 "______" or its equivalent, the
Class A-2
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<PAGE>
Notes be rated at least "_______" or its
equivalent 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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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 of Certificates. 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.
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 Trust Agreement -- 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 Trust Agreement -- 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 "___________" or its equivalent, the Class A-2 Notes be rated
"________" or its equivalent 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 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.
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<PAGE>
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 Securities 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
Trustee will manage the Collateral Certificates pursuant to the Trust Agreement.
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 Notes and the
Certificates had taken place on such date:
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<TABLE>
<S> <C>
Class A-1 Notes ............................................. $
Class A-2 Notes................................................
Certificates...................................................
----------------
Total........................................ $
================
</TABLE>
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. The Seller, the Company and their respective affiliates may maintain
normal commercial banking release with the Owner Trustee and its affiliates.
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.
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
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<PAGE>
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 and from the Reserve Account. See "The Trust Agreement --
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 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
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 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 Trust Agreement -- 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 significantly 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 Company exercises its option to purchase the
Collateral Certificates, which the Company may do after the aggregate
outstanding principal amount of the Collateral Certificates is reduced to 10% or
less of the Pool Balance as of the Cutoff Date. 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 the
material terms of the Certificates and the Trust Agreement. This summary does
not purport to be a complete description of all of the terms of the Trust
Agreement and therefore 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.
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<PAGE>
Distributions of Interest
Interest on the principal balance of the Certificates will accrue at the
Certificate 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 Certificate 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 Noteholders' Distributable Amount. See
"The Trust Agreements -- Distribution" 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 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 Trust Agreement -- Distributions" and
"-- Reserve Account" herein.
Optional Prepayment
If the Company 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 Pool Balance as of
the Cutoff Date, 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 neither the Company nor the Underwriter has any reason to believe
the information provided by an originator of an Underlying Trust Fund or the
prospectus relating to the Collateral Certificates is not reliable, neither the
Company nor the Underwriter has verified either its accuracy 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
S-15
<PAGE>
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 Collateral Certificates,
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 TRUST AGREEMENT
The following summary describes the material terms of the Trust Agreement.
A form of the Trust Agreement 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. This summary does not purport to be a
complete description of all terms of the Trust Agreement and therefore is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Trust Agreement. The following summary supplements 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 Owner Trustee will
also establish and maintain the Reserve Account on behalf of the Noteholders and
the Certificateholders.
Distributions
Deposits to Collection Account. On or about the _____ Business Day of each
month, the Owner Trustee 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 Owner Trustee 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
S-16
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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 Owner
Trustee will make the following deposits and distributions, to the extent of the
Total Distribution Amount, in the following order of priority:
(i) to the Note Distribution Account, from the Total Distribution
Amount, the Noteholders' Interest Distributable Amount;
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Principal Distributable Amount;
(iii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iii), the Certificateholders' Principal Distributable Amount; and
(v) to the Reserve Account, the Total Distribution Amount remaining
after the application of clauses (i) through (iv).
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. The Noteholders' Interest
Carryover Shortfall for the initial Distribution Date is zero.
S-17
<PAGE>
"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. The Certificateholders' Interest Carryover Shortfall for the
initial Distribution Date is zero.
"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;
(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.
S-18
<PAGE>
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 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 Owner Trustee
will 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 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 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-19
<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-20
<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
Specified Reserve Account Balance.............................................S
S-21
<PAGE>
Total Distribution Amount.....................................................S
Transfer and Servicing Agreements.............................................S
Trust.........................................................................S
Trust Agreement...............................................................S
Underwriting..................................................................S
Underwriting Agreements.......................................................S
S-22
<PAGE>
Schedule I
Class __
CUSIP #___________ Rating: ______________
<TABLE>
<CAPTION>
[Monthly][Quarterly]
[Semi-Annual] Aggregate
Payment Dates Interest Payment Interest Payment
------------- ---------------- ----------------
<S> <C> <C>
$------------------- $-------------------
</TABLE>
<TABLE>
Aggregate Face
Amount Minimum
of Principal Authorized
Component Denomination Interest Rate
--------- ------------ -------------
<S> <C> <C> <C>
$------------ $------------ -----------%
</TABLE>
I-1
<PAGE>
Appendix A
[To be Supplied]
A-1
<PAGE>
Appendix B
[To be Supplied]
B-1
<PAGE>
B-2
<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 AND 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, collectively 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) a de minimis amount of certain other
property ancillary thereto, in each case as more fully described herein and in
the related Prospectus Supplement. The Primary Assets either will be sold to a
Trust by Asset Backed Securities Corporation, a Delaware corporation (the
"Company") or the Company will transfer funds to a Trust in exchange for the
Certificates. Such Trust will use such funds to purchase the Primary Assets, in
each case as described in the related Prospectus Supplement.
To the extent 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.
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.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE LIMITATIONS DISCUSSED UNDER
"ERISA CONSIDERATIONS" HEREIN AND IN THE 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, as applicable, 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, if any, 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.
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 modified or
superseded shall not be deemed, except as so modified or supersede, to
constitute a part of this Prospectus.
-2-
<PAGE>
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: Secretary, Asset Backed Securities Corporation,
Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055 (212) 909-2000.
-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 (each, a "Trust") formed pursuant to
either (i) either (a) a pooling and servicing
agreement (a "Pooling and Servicing
Agreement") among the Company, the Servicer
and the Trustee for such Trust or (b) a trust
agreement (a "Trust Agreement") between the
Company and the Trustee for such Trust (each
such Trust being referred to herein as a
"Grantor Trust") or (ii) 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").
Servicer....................... With respect to each Owner Trust and each
Grantor Trust, the servicer, if any,
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
-4-
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<PAGE>
- --------------------------------------------------------------------------------
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 or
Trust 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.......................... As specified in the related Prospectus
Supplement, each class of Notes will have a
stated principal amount or no principal
amount and will bear interest at a specified
rate or rates (with respect to each class of
Notes, the "Interest Rate") or will not bear
interest. 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,
nominal or no principal payments. See
"Description of the Notes--Distributions of
Principal and Interest".
Notes will be available for purchase in
denominations of $1,000 or such other minimum
denominations as shall be specified in the
related Prospectus Supplement and integral
multiples thereof and will be available in
book-entry form, or such other form as shall
be specified in the related Prospectus
-5-
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Supplement. If the related Prospectus
Supplement provides that the Notes will be
available in book entry form only,
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............... As specified in the related Prospectus
Supplement, each class of Certificates will
have a stated certificate balance (the
"Certificate Balance") or no stated principal
balance and will accrue interest on such
Certificate Balance at a specified rate or
will not bear interest (with respect to each
class of Certificates, the "Certificate
Pass-Through Rate"). Each class of
Certificates may have a different Certificate
Pass-Through Rate, which may be a fixed,
variable or adjustable Certificate
Pass-Through Rate, or any combination of the
foregoing. The related Prospectus Supplement
will specify the Certificate 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, Certificate
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 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.
-6-
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Certificates will be available for purchase
in a minimum denomination of $10,000 or such
other minimum denomination as shall be
specified in the related Prospectus
Supplement and in integral multiples of
$1,000 in excess thereof and will be
available in book-entry form or such other
form as shall be specified in the related
Prospectus Supplement. If the related
Prospectus Supplement provides that the
Certificates will be available in book entry
form only, 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 or the Company 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.
Risk Factors................... For a discussion of risk factors that should
be considered with respect to an investment
in the Securities, see "RISK FACTORS" herein
and 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"),
either (i) the Company will own and will sell
or (ii) the seller or sellers specified in
the related Prospectus Supplement, which
seller or sellers may also be the Servicer,
(the "Seller") will sell to the Company and
Company will sell, in each such case, Primary
Assets having the aggregate principal balance
specified in such Prospectus Supplement as of
the date specified therein (the "Cutoff
Date") 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 (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
applicable
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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 either the Seller or Sellers
specified in the related Prospectus
Supplement (collectively, 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 Sale and Servicing
Agreement--Sale and Assignment of
Receivables" and in the related Prospectus
Supplement under "The Receivables Pool."
Collateral
Certificates............ The Collateral Certificates, if any, 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, if any,
will be more particularly described in the
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 Primary Assets either will be sold to the
Trust by the Company or the Company will
transfer funds to the Trust which will
purchase the related Receivables, if any, and
Collateral Certificates, if any, with such
funds. If the Primary Assets are sold to the
Trust by the Company the Seller will sell the
related Receivables, if any, to the Company
pursuant to a Receivables Purchase Agreement.
The Company will (i) sell or transfer such
Receivables, if any, and will assign certain
rights and benefits received under such
Receivables Purchase Agreement and/or (ii)
sell or transfer the related Collateral
Certificates, if any, to a Trust pursuant to
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, if any of the
related Series.
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
sale and servicing agreement (a "Sale and
Servicing Agreement") (in the case of an
Owner Trust) to be responsible for servicing,
managing, maintaining custody of and making
collections on Receivables.
To the extent 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 such Receivable or from other Precomputed
Receivables in
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accordance with the terms of
the related Pooling and Servicing Agreement
or Sale and Servicing Agreement, as
applicable. In addition, 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.
To the extent 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.
To the extent specified 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.
As 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.
Certain Legal Aspects
of Receivables;
Repurchase Obligations....... To the extent 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
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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. To the extent
specified 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".
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 will deliver
an opinion to the effect that, for federal
income tax purposes: (i) any Notes of such
Series, when issued, 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
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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.
If a Prospectus Supplement specifies that the
related Trust will be a Grantor Trust
(subject to certain limitations which, if
applicable, will be set forth in the related
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 and Local Tax
Considerations 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 (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 may be eligible for purchase by
employee benefit plans.
As 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
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.
Persons investing assets of employee benefit
plans subject to the Employee Retirement
Income Security Act of 1974, as amended, or
of plans as defined in Section 4975 of the
Code should read "ERISA Considerations"
herein and consult their own legal advisors
to determine whether and to what extent the
Notes and Certificates that are not
subordinated to any other Certificates
constitute permissible investments for such
employee benefit plans and whether the
purchase or holding of Notes or Certificates
could give rise to transactions prohibited
under ERISA or Section 4975 of the Code.
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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--Lack of 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, such 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. Should
the Trust 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, then neither the Seller nor
the Servicer will have any obligation to repurchase such Receivable. See
"Certain Legal Aspects of the Receivables--Security Interests in Financed
Vehicles".
To the extent 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 and the Characterization
of the Transfer of Receivables. 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
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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 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 Legal Developments Regarding the Sale of Accounts Receivables. 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--Insolvency Considerations above.
Subordination of Certain Classes of Securities; Limited Assets of a Trust.
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
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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 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 assets of which consist
of Receivables, 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
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benefit of the related Trust to secure timely remittances of collections on the
related Primary Assets or payment of the aggregate Repurchase Amount with
respect to Receivables purchased by the Servicer.
Servicer Default. The related Prospectus Supplement may provide that 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. The related Prospectus Supplement may specify that
one or more classes 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
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damage, credit life and disability insurance policies covering Financed Vehicles
or the 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 Sale and Servicing Agreement, as
applicable, will service the Receivables 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 Sale and Servicing Agreement--Servicing
Compensation" in the related Prospectus Supplement. To facilitate the servicing
of Receivables, 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". In the case of Primary Assets consisting of Collateral
Certificates, the Trustee specified in the related Prospectus Supplement will
manage the Collateral Certificates.
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 Sale 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, which
criteria include that (subject to certain limitations which, if applicable, will
be specified 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 fully 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
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interest in an amount calculated at the stated contract interest rate under 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.
To the extent 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.
New and Used Financed Vehicles
The extension of credit to an Obligor on a Receivable is based on an
assessment of an applicant's ability to repay the amounts due on such Receivable
and the adequacy of the related Financed Vehicle. Such assessment does not
distinguish between new or used vehicles. Rather, the amount advanced under a
motor vehicle loan generally will not exceed 90% of the value of the collateral.
For new motor vehicles, the value equals the dealer invoice for the motor
vehicle that serves as collateral, plus sales tax, license fee, title fee, the
cost of service and warranty contracts, and any premium for credit life and
disability insurance obtained in connection with the loan. For used motor
vehicles, the value equals the wholesale price reported in the most recent
edition of the National Automotive Dealers Association Used Car Guide or the
National Auto Research Division Black Book, plus sales tax, license fee, title
fee, the cost of service and warranty contracts, and any premium for credit life
and disability insurance obtained in connection with the loan. The maximum age
of any used motor vehicle acceptable as collateral generally is six model years.
Additional information with respect to delinquencies, repossessions and net
losses with respect to Motor Vehicle Installment Contracts secured by new or
used Financed Vehicles will be set forth in each Prospectus Supplement.
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 Collateral Certificates, 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, in each case,
subject to certain exceptions which, if applicable, will be described in the
related Prospectus Supplement. Collateral Certificates will have been issued
pursuant to a pooling and servicing agreement, a sale and servicing
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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. The related Prospectus Supplement will (subject to
certain exceptions which, if applicable, will be described in the related
Prospectus Supplement) provide that 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.
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
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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 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, to the extent 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 Securities.
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 and/or Collateral Certificates repurchased by the Company or a
Seller or purchased by a Servicer for administrative reasons. Substantially all
of the Receivables and receivables underlying Collateral Certificates 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 Sale and 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.
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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 or Trustee 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 or Trustee will compute prior to each
distribution with respect to such class of Certificates indicating the 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.
As 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.
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USE OF PROCEEDS
If so 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 or the Seller, as
applicable. 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 describes
the material provisions of each Indenture which are anticipated to be common to
any Notes included in a Series of Securities. 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.
If so 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 DTC (together with any successor depository selected by the
Trust, the "Depository"). The Notes will be available for purchase in minimum
denominations of $1,000 or such other minimum denomination as shall be specified
in the related Prospectus Supplement and integral multiples thereof in
book-entry form or such other form as shall be specified in the related
Prospectus Supplement. If the Notes shall be available 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.
If the Notes shall be available in book-entry form only, 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. If the Notes shall be available in
book-entry form only, 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".
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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. The related Prospectus
Supplement may provide that 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.
The related Prospectus Supplement may also provide that 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. 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 or by such other method as is specified
in the Prospectus Supplement.
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Provisions of the Indenture
Events of Default; Rights upon Event of Default. "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; (v) certain events of bankruptcy, insolvency,
receivership or liquidation with respect to such Trust and (vi) such other
events as are specified in the Prospectus Supplement. 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, 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 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. Subject to certain limitations which, if applicable, will be
specified in the related Prospectus Supplement, 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
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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.
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 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;
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(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 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. 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
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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.
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.
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
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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 describes the material provisions of the Trust
Agreement and the Pooling and Servicing Agreement, in each case, which are
anticipated to be common to any Certificates included in a Series of Securities.
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.
If so 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 affiliate of such Seller, each class of Certificates will
initially be represented by one or more certificates registered in the name of
the Depository. The Certificates will be available for purchase in minimum
denominations of $10,000 or such other minimum denomination as shall be
specified in the related Prospectus Supplement and integral multiples of $1,000
in excess thereof in book-entry form only (or such other form as shall be
specified in the related Prospectus Supplement). In the event that the
Certificates shall be available in book-entry form only, the Company has been
informed by DTC that DTC's nominee will be Cede. Accordingly, such nominee is
expected to be the holder of record of the Certificates of any Series. In the
event that the Certificates shall be available in book-entry form only, 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. In the event that the Certificates shall be available in book-entry
form only, 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
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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,
Certificate 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 Certificate Pass-Through Rate, which may be a fixed, variable or
adjustable Certificate 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 Certificate Pass-Through Rate for each
class of Certificates of a Series or the method for determining such Certificate
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 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
If so 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
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in each Trust Agreement or Pooling and Servicing Agreement, as applicable, 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").
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 or Indirect 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.
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
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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
If so 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 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.
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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) if applicable, the amount of the Servicing Fee paid to the related
Servicer with respect to the related Collection Period;
(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".
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List of Securityholders
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.
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.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material provisions (in each such case,
to the extent anticipated to be common to any Certificates included in a Series
of Securities 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), each Sale and Servicing Agreement pursuant to which
the Servicer will service Receivables (in the case of an Owner Trust) or, in the
case of Securities backed by Collateral Certificates, each Trust Agreement
pursuant to which a Trust will be created, Collateral Certificates will be sold
or transferred to such Trust and a Trustee will manage Collateral Certificates
(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 a complete description of all of the terms of the Transfer and
Servicing Agreements and therefore is subject to, and is qualified in its
entirety by reference to, the provisions of the related Transfer and Servicing
Agreement.
Sale and Assignment of Receivables and Collateral Certificates
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
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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.
To the extent 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 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
Primary Assets in the outstanding principal amount specified in the related
Prospectus Supplement. Concurrently with the transfer and assignment of such
Primary Assets to the related Trust, the related Trustee or Indenture Trustee,
as applicable, will execute, authenticate and deliver the related Securities.
The net proceeds from the sale of the Securities will be applied to the purchase
of the related Primary Assets to the extent specified in the related Prospectus
Supplement.
Pursuant to the terms of the Trust Agreement or the Pooling and Servicing
Agreement, as applicable, the Company will assign to the related Trust the
representations and warranties made by the related Seller under the related
Receivables Purchase Agreement for the benefit of the related Securityholders
and will make certain limited representations and warranties with respect to the
Primary Assets. To the extent that the related Seller does not repurchase a
Primary Asset in the event of a breach of its representations and warranties
under the related
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Receivables Purchase Agreement with respect to such Primary Asset, the Company
will not be required to repurchase such Primary Asset unless such breach also
constitutes a breach of one of the Company's representations and warranties
under the related Receivables Purchase Agreement with respect to such Primary
Asset and such breach materially and adversely affects the interests of the
Securityholders in any such Primary Asset. Neither the Seller nor the Company
will have any other obligation with respect to the Primary Assets or the
Securities.
Trust Accounts
With respect to each Owner Trust, the Servicer will establish and maintain
with the related Indenture Trustee, or the Trustee will establish and maintain
(a) one or more accounts, 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 or
the related Trustee will establish and maintain an account, 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 or the related Trustee 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.
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 Sale and 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, 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
Sale and 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. Eligible Investments will generally 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
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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.
To the extent provided 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 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 Sale and
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
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of any Sale and 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 or the Trustee 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, such 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 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, (subject to certain
limitations which, if applicable, will be specified in the related Prospectus
Supplement) 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
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 generally 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,
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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 Servicer 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.
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 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 or the Trustee is
required to remit collections to the Collection Account on a daily basis as
described under "--Collections" above, the Servicer or the Trustee 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.
Servicing Compensation and Payment of Expenses
To the extent provided 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
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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.
To the extent 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
Receivables, 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, 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
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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.
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. The credit enhancement for a class
or Series of Securities will not (as a general rule) 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 Trust Agreement, Sale and 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. 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.
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Evidence as to Compliance
Each Sale and 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 Sale and 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 Sale and 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 Sale and 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 agree to
give each Indenture Trustee and/or Trustee, as applicable, notice of certain
Servicer Defaults under the related Sale and 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 Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder, except upon determination that such Servicer's performance
of such duties is no 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 Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable.
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Each Sale and 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 Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, 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 Sale and
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 Sale
and 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 Sale and 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
assumes the obligations of the Servicer, will be the successor to the Servicer
under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable.
Servicer Defaults
A "Servicer Default" under each Sale and 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 Sale and 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; (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 and (iv) such other events as
are set forth in the related Prospectus Supplement.
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Rights Upon Servicer Default
Generally, in the case of an Owner Trust, as long as a Servicer Default
under the related Sale and 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 Sale and
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 Sale and Servicing Agreement
and will be entitled to similar compensation arrangements. Generally, in the
case of any Grantor Trust, 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 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 Servicer, 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 Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable.
Waiver of Past Defaults
To the extent 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 Certificateholders, waive any default
by the Servicer in the performance of its obligations under the related Sale and
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 Sale and
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.
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Amendment
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 Agreement 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.
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
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
Agreement 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 Sale and Servicing Agreement, except as otherwise provided
therein.
Termination
The obligations of the related Servicer, the related Trustee and the
related Indenture Trustee, if any, with respect to a Trust pursuant to the
related Transfer and Servicing Agreement 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.
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
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Collection Period, if the then outstanding Pool Balance is 10% or less of the
Pool Balance as of the related Cutoff Date, 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.
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 Sale and 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
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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 Sale and
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 the related Trust Agreement
or Pooling and Servicing Agreement, as applicable, 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 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 related 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
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the related Receivable before its lien is released. Under each Sale and
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. 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
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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 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.
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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 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
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the monthly payments due under the related contract or change the rate of
interest and time of repayment of the indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material United
States 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
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Trust, or 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 include all of its income on the related Primary
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 (subject to certain exceptions
which, if applicable, will be specified in the related Prospectus Supplement)
advise the Owner Trust that the Notes will be classified as debt for federal
income tax purposes, or classified in such other manner as shall be provided in
the related Prospectus Supplement. 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 allocable 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 or received,
depending on the holder's method of accounting. Notwithstanding the foregoing,
interest that is payable
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on a Note with a fixed 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".
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". Under the Treasury Regulations issued under Sections 1271-1273
and 1275 of the Code in January, 1994, (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 or are received, depending on the holder's method of
accounting.
Stated interest generally qualifies as payable at 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 payable at 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, (iii) 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
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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 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 or are received, depending on the
holder's method of accounting.
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 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
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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". In the absence
of authority to the contrary and if otherwise relevant, the Company 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 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,
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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" (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
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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 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 de minimis market 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 the holder 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, 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. Note Owners who
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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 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 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.
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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.
On April 15. 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form. could affect the
United States taxation of Non-United States Holders. The 1996 Proposed
Regulations are generallv proposed to be effective for payrnents after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed, or what, if any, modifications may be made to them. The discussion
under this heading and under "-- Backup Withholding and Information Reporting",
below, is not intended to be a complete discussion of the provisions of the 1996
Proposed Regulations, and prospective investors are urged to consult their tax
advisors with respect to the effect the 1996 Proposed Regulations may have.
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 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 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 Non-United States Holder after the issuance of
the certificate in the calendar year of its issuance and the two immediately
succeeding calendar years. Under temporary Treasury Regulations, the forgoing
certification may be provided by the beneficial owner of a Note on IRS Form
W-8.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described in the preceding
paragraph, but would add "intermediary certification" options for certain
qualifying withholding agents. Under one such option, a withholding agent would
be allowed to rely on IRS Form W-8 furnished by a financial institution or
other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the IRS and is thus a
"qualified intermediary". Under another option, an authorized foreign agent of a
United States withholding agent would be permitted to act on behalf of the
United States withholding agent, provided certain conditions are met.
The 1996 Proposed Regulations, if adopted, would also provide certain
presumptions with respect to withholding for holders not providing the required
certifications to qualify for the withholding exemption described above. ln
addition, the 1996 Proposed Regulations would replace a number of current tax
certification forms (including IRS Form W-8, IRS Form 1001 and IRS Form 4224,
discussed below) with a single, restated form and standardize the period of time
for which withholding agents could rely on such certifications. The 1996
Proposed Regulations would also provide rules to determine whether, for purposes
of United States federal withholding tax, interest paid to a Non-United States
Holder that is an entity should be treated as paid to the entity or those
holding an interest in that entity.
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
distributions 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
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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 annually 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, market discount or original issue discount in certain circumstances)
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.
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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 for United States
federal income tax purposes, 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.
The 1996 Proposed Regulations would, if adopted, alter the forgoing rules
in certain respects. In particular, the 1996 Proposed Regulations would provide
certain presumptions under which Non-United States Holders may be subject to
backup withholding in the absence of required certifications.
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
Stripped 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 allocable 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 Primary Assets (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 Certificate
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 Primary Assets that corresponds to any excess
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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 Primary Assets that corresponds to any excess of the issue price of
Certificates over their principal amount.
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 Certificate 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. An individual taxpayer will be allowed no deduction for his share of
expenses of the Trust in determining his liability for alternative minimum tax.
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 ($117,950 in 1996 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 to the extent relevant.
If the IRS were to require that such calculations be made separately for each
Primary Asset, such calculations may result in certain timing and character
differences under certain circumstances.
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Discount and Premium. 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 it is possible that the IRS might require that it be recomputed on a
Primary Asset-by-Primary Asset basis.)
If the Trust acquires the Primary 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 Primary Assets or to offset any such premium
against interest income on the Primary 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 purposes 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 with these requirements 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).
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
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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 and (ii) as to each beneficial
owner (a) the name, 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
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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 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
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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 NonUnited 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 Primary 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 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.
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Any amounts received by a Grantor Trust Certificateholder in lieu of amounts due
with respect to any Primary Asset because of a default or delinquency in payment
will be treated for federal income tax purposes as having the same character as
the payments they replace.
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 other miscellaneous itemized
deductions exceed two percent of the Grantor Trust Certificateholder's adjusted
gross income, and will be allowed no deduction for such expenses in determining
their liabilities for alternative minimum tax. 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 ($117,950 in 1996 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.
The servicing compensation to be received by the Servicer may be questioned
by the IRS 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 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").
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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". For a
discussion of the market discount rules under the Code, see "Owner Trusts--Tax
Consequences to Note Owners--Market Discount" above; however, Grantor Trust
Certificateholders generally are not permitted to take into account the
Prepayment Assumption in calculating the accrual of market discount with respect
to their Grantor Trust certificates (except for Grantor Trust certificates
representing interests in Collateral Certificates that constitute indebtedness
for federal income tax purposes). See "Prepayments" below.
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. For a discussion of the rules applicable to amortizable bond
premium, see "Owner Trusts--Tax Consequences to Note Owners--Amortizable
Premium" above; however, Grantor Trust Certificateholders generally are not
permitted to take into account the Prepayment Assumption in computing the
amortizable bond premium deduction with respect to their Grantor Trust
Certificates (except for Grantor Trust certificates representing interests in
Collateral Certificates that constitute indebtedness for federal income tax
purposes). See "Prepayments" below.
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 Primary 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 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
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right to non-pro rata percentages of the interest or principal payments on the
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;
however, Grantor Trust Certificateholders generally are not permitted to take
into account the Prepayment Assumption in computing original issue discount. See
"Prepayments" below. 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. The Trustee intends
in reporting information relating to original issue discount to Grant or Trust
Certificateholders to provide such information on an aggregate poolwide basis.
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 coupons as there are scheduled payments of interest on each
Primary Asset, with each such stripped coupon treated as a separate debt
instrument 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 Certificate Pass Through Rate) and the
other is a senior class (with a relatively low Certificate 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
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Stripped Bond"), and (ii) a portion of the interest due on each Primary Asset
equal to the difference between the Certificate Pass Through Rate on the
Subordinate Certificates and the Certificate 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 will be
treated as qualified stated interest.
Income of the holder of the Trust Stripped Coupon will be reported by
treating the Trust Stripped Coupon as a single 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
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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.
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 are 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 Issue 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.
Prepayments. The Tax Reform Act of 1986 (the "1986 Act") contains a
provision requiring original issue discount on certain obligations issued after
December 31, 1996 to be calculated taking into account the Prepayment Assumption
and requiring such discount to be taken into income on the basis of a constant
yield to assumed maturity taking into account of actual prepayments. The
legislative history to the 1986 Act states that similar rules apply with respect
to market discount and amortizable bond premium on such obligations. The proper
treatment of interests, such as the Grantor Trust Certificates, in debt
instruments that are subject to prepayment is unclear. Grantor Trust
Certificateholders should consult their tax advisors as to the proper reporting
of income from such Certificates in light of the
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possibility of prepayment and as to the possible application of the rules
relating to contingent principal debt instruments.
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 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 Primary 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).
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 Primary Assets 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 each of
the issuers of the Primary Assets 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. To the extent that the Primary Assets were
originated on or before July 18, 1984, Non-United States Owners of Grantor Trust
Certificates may be subject to withholding. 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.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of Non-United States Owners of Grantor Trust
Certificates. The 1996 Proposed Regulations are generally proposed to be
effective for payments after December 31, 1997, regardless of the issue date of
the Primary Assets with respect to which such payments are made, subject to
certain transition rules. For further discussion, see "Owner Trusts - Tax
Consequences to Note Owners - Taxation of Certain Foreign Note Owners" above.
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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. See "Owner Trusts--Tax
Consequences to Note Owners--Backup Withholding and Information Reporting"
above.
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 Primary 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 interest 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 of 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.
Furthermore, depending on the specific allocation and apportionment formula, if
any, use by such jurisdiction, it is possible that Security Owners in such case
may be subject to tax in such jurisdiction on their income from other sources.
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.
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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 tax. Accordingly, Security Owners are strictly 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 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.
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 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 medical benefit 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
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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.
Ineligible Purchasers
Securities may not be purchased with the assets of a Plan that is sponsored
by or maintained by the Company, the Trustee, the Indenture Trustee, the Trust,
the Servicer or any of their respective affiliates. Securities may not be
purchased with the assets of a Plan if the Company, the Trustee, the Indenture
Trustee, the Trust, 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 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 in an entity
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 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
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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.
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). Because the availability of this exception to
any Trust 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 exception.
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 (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
issuer 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 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 provisions 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
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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.
If the Trust assets are plan assets, 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 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 transaction.
The Company, the Trustee, the Indenture Trustee, the Trust, 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.
Prohibited Transaction Exemption for Senior Certificates Issued by Grantor
Trusts
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
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
-80-
<PAGE>
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 or placement of the Senior Certificates represents
not more than reasonable compensation for underwriting or placing 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
represents not more than 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 applicable to a Plan whose Plan
Fiduciary is an obligor with respect to more than five percent of the fair
market value of the Contracts, or an affiliate of such person, 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 each class of
Senior Certificates in which Plans have invested are acquired by persons
independent of the Restricted Group (as defined below) and at least fifty
percent of the aggregate interest in the Trust is acquired by persons
independent of the Restricted Group (as defined below), (ii) the Plan's
investment in any class
-81-
<PAGE>
of Senior Certificates does not exceed twenty-five percent of that class of
Senior Certificates outstanding at the time of the acquisition and (ii)
immediately after the acquisition, no more than twenty-five percent of the
assets of the benefit Plan with respect to which the investing fiduciary has
discretionary authority or renders investment advice 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").
Whether the conditions in the Exemption 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 Fiduciary who proposes to acquire Certificates on behalf of a Plan in
reliance upon the Exemption should determine whether the Plan satisfies all of
the applicable conditions of the Exemption and consult with its counsel
regarding other factors that may affect the applicability of the Exemption.
If for any reason the Exemption does not provide an exemption for a
particular Plan, one of three prohibited transaction class exemptions ("PTCE")
issued by the DOL might apply, i.e., PTCE 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), PTCE 90-1 (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 or, even if it were to apply, that the exemption would apply to all
transactions involving the applicable Trust.
Purchase of Notes
If Notes are treated as indebtedness under applicable local law and have no
substantial equity features, the assets of the relevant Trust will not be
treated for purposes of ERISA or Section 4975 of the Code as assets of any Plan.
As a result, the prohibited transactions provisions of ERISA and Section 4975 of
the Code will not apply to transactions involving the underlying assets of the
Trust. However, as is the case with Certificates, if the Trust is or becomes a
"party in interest" or "disqualified person" with respect to a Plan (for
example, if such Trust were owned at least 50% by a service provider to a Plan),
the purchase or holding of such Note could give rise to a prohibited transaction
under ERISA or Section 4975 of the Code.
-82-
<PAGE>
General Considerations
Before a Plan Fiduciary decides to purchase Certificates on behalf of a
Plan, the Plan Fiduciary should determine whether the Exemption is applicable,
whether any other prohibited transaction exemption (if required) is available
under ERISA and Section 4975 of the Code or whether an exemption from "plan
asset" treatment is available to the applicable Trust. The Plan Fiduciary should
also consult the ERISA discussion in the applicable Prospectus Supplement for
further information regarding the application of ERISA to any class of
Certificates.
Subordinated Certificates are not available for purchase by any Plan.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A
REPRESENTATION BY THE COMPANY, THE SERVICER, THE TRUSTEE OR ANY OTHER PARTY THAT
THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO
INVESTMENTS BY ANY PARTICULAR PLAN OR THAT SUCH INVESTMENT IS APPROPRIATE FOR
ANY PARTICULAR PLAN. EACH PLAN FIDUCIARY SHOULD CONSULT WITH ITS ATTORNEYS AND
FINANCIAL ADVISORS AS TO THE PROPRIETY OF SUCH AN INVESTMENT IN LIGHT OF THE
CIRCUMSTANCES OF THE PARTICULAR PLAN AND THE RESTRICTIONS OF ERISA AND SECTION
4975 OF THE CODE.
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
-83-
<PAGE>
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.
If and to the extent required by applicable law or regulation, this
Prospectus and the Prospectus Supplement will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the offered Securities in which the Underwriter
acts as principal. The Underwriter may also act as agent in such transactions.
Sales will be made at negotiated prices determined at the time of sale.
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 Sidley
& Austin or counsel for the related Servicer.
-84-
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
- --------------------------------------------------------------------------------
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, a Delaware
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.
See "Risk Factors" beginning on p.S-8 herein and on p.14 of the Prospectus
for a discussion of certain factors that potential investors should consider in
determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying Prospectus.
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" herein and 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 delivered to the offices of CS First
Boston, New York, New York, 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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
-----------------
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Mortgage Loans will be prepared by the Master Servicer and sent on behalf of the
Trust to each registered holder of the Certificates. See "Description of the
Certificates--Reports to Certificateholders" in the Prospectus.
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. An "Index of Terms" is included at the end of this Prospectus
Supplement. Capitalized terms used in this Prospectus Supplement and not defined
shall have the meanings given in the Prospectus. References to percentages of
the Mortgage Loans or to the principal balance of the Mortgage Loans in this
Prospectus Supplement are to percentages (except as otherwise indicated) by
aggregate principal balance as of the Cut-off Date.
<TABLE>
<CAPTION>
<S> <C>
Securities Offered............. Conduit Mortgage Pass-Through Certificates,
Series , % Pass-Through Rate (the
"Certificates").
Amount......................... $ (Approximate: subject to a permitted
variance of up to 5%).
Description of the Certificates [ ]
Depositor...................... Asset Backed Securities Corporation, a
Delaware corporation (the "Depositor"), and
an affiliate of the Underwriter.
Seller......................... [ ]
Master Servicer................ _____________, a _________ corporation (the
"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 .
Record Date.................... [With respect to each Distribution Date, the
last business day of the month preceding
the month in which such Distribution Date
occurs.]
Distribution Date.............. The ____ day of each month, or, if such day
is not a business day, the next succeeding
business day.
Interest Accrual Period........ [With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Interest for
each Interest Accrual Period is calculated
based on a 360-day year comprised of twelve
30-day months.]
Collection Period.............. [With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such Distribution Date occurs and
ending on the Due Date in the month in
which such Distribution Date occurs.]
Due Date....................... [With respect to any Distribution Date and/or
any Mortgage Loan, as the case may be, the
first day of the month in which such
Distribution Date occurs, or if such first
day is not a business day, the business day
immediately following such first day.]
</TABLE>
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Final Scheduled
Distribution Date.............. [ ]. The Final Scheduled Distribution Date
has been determined to be the Distribution
Date succeeding the latest maturity date of
any Mortgage Loan in the Mortgage Pool.
Interest....................... Passed through monthly at a fixed rate of %
per annum (the "Pass-Through Rate"), on
each Distribution Date, commencing ,
19 .
Principal (including
Prepayments)................... Passed through monthly on the Distribution
Date, commencing , 19 . The rate of
distribution of principal of the
Certificates [(other than the Class R
Certificates)] will depend on the rate of
payment of principal of the Mortgage Loans
which, in turn, will depend on the
characteristics of the Mortgage Loans, the
level of prevailing interest rates and
other economic, geographic and social
factors. No assurance can be given as to
the actual payment experience of the
Mortgage Loans.
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.
Certain Risk Factors........... For a discussion of certain risk factors that
should be considered in connection with an
investment in the Certificates, including
those relating to [describe risk factors
specific to transaction], see "Risk
Factors" 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 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
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
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, as amended (the "Code"), so as to
constitute a "qualifying liquidation"
thereunder.] See "Termination; 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 described
herein and in the Prospectus. See
"Description of the Certificates-Advances"
in the Prospectus.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Trustee........................ (the "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"). A security rating is not
a recommendation to buy, sell or hold
securities and may be subject to revision
or withdrawal at any time by the assigning
rating organization. A security rating does
not address the frequency of prepayments or
the possibility that Certificateholders
might suffer a lower than anticipated
yield. A security rating also does not
represent any assessment of the yield to
maturity that investors may experience. See
"Risk Factors" herein and in the
Prospectus, "Rating" herein and "Yield
Considerations" in the Prospectus.
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
[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. [The Certificates
other than the Class R Certificates (the
"Regular Certificates") will be treated as
regular interests in the REMIC and
generally will be treated as debt
instruments issued by the REMIC for federal
income tax purposes. Certain Classes of the
Regular Certificates may be issued with
original issue discount. The prepayment
assumption that will be used in determining
the rate of accrual of any original issue
discount on the Regular Certificates for
federal income tax purposes (and whether
such original issue discount is de
minimis), and that may be used by a holder
of a Regular Certificate to amortize
premium, will be [ ]% of the Prepayment
Assumption. No representation is made that
the Mortgage Loans will prepay at such rate
or at any other rate. The holders of the
Residual Certificates will be subject to
special federal income tax rules that may
significantly reduce the after-tax yield of
such Certificates. Further, significant
restrictions apply to the transfer of the
Residual Certificates.] See "Certain
Federal Income Tax Consequences" [herein]
[and] in the Prospectus.
- --------------------------------------------------------------------------------
S-6
<PAGE>
RISK FACTORS
General
The rate of distributions in reduction of the principal balance of any
[Subclass or Class of] Certificates, the aggregate amount of distributions of
principal and interest on any Subclass or Class of Certificates and the yield to
maturity of any [Subclass or Class of] Certificates will be directly related to
the rate of payments of principal on the Mortgage Loans in the Trust Fund and
the amount and timing of Mortgagor defaults resulting in realized Losses. The
rate of principal payments on the Mortgage Loans will, in turn, be affected by
the amortization schedules of the Mortgage Loans, the rate of principal
prepayments (including partial prepayments and those resulting from refinancing)
thereon by Mortgagors, liquidations of defaulted Mortgage Loans, repurchases by
the Depositor, the Master Servicer or any Unaffiliated Seller of Mortgage Loans
as a result of certain breaches of representations and warranties and optional
purchase by the Depositor of all of the Mortgage Loans in connection with the
termination of the Trust Fund. See "Description of the Certificates--
Termination; Repurchase of Mortgage Loans" herein and "The Trust Fund-Mortgage
Loan Program--Representations by Unaffiliated Sellers; Repurchases" and
"Description of the Certificates--Assignment of Mortgage Loans; and Termination"
in the Prospectus. Mortgagors are permitted to prepay the Mortgage Loans, in
whole or in part, at any time without penalty.
The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the Mortgage Rates on the
Mortgage Loans, the rate of prepayment would generally be expected to increase.
Conversely, if interest rates on similar mortgage loans rise above the Mortgage
Rates on the Mortgage Loans, the rate of prepayment would generally be expected
to decrease.
An investor that purchases any Certificates at a discount should consider
the risk that a slower than anticipated rate of principal payments on the
Mortgage Loans will result in an actual yield that is lower than such investor's
expected yield. An investor that purchases any Certificates at a premium should
consider the risk that a faster than anticipated rate of principal payments on
the Mortgage Loans will result in an actual yield that is lower than such
investor's expected yield.
[Additional risk factors will be added, as appropriate, including, without
limitation, (i) if an Interest Weighted Class of Certificates or a Principal
Weighted Class of Certificates is being offered, a discussion of the risks
associated with such Class, including any disproportionate share of credit or
prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the Mortgage Loans due to,
among other things (x) a single mortgagor or lessee or cross-default,
cross-collateralization or similar provisions, (y) a concentration of properties
with brief or financially troubled operating histories or (z) a concentration of
properties within a state (or region of a state) experiencing particularly
adverse economic conditions and (iii) a discussion of the basis risk associated
with a Class of Certificates.]
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 average
outstanding principal balance of the Mortgage Loans as of the Cut-off Date will
be $[ ]. 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
S-7
<PAGE>
years. None of the Mortgage Loans will have been originated prior to ,
19 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):
[Tables to be added]
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 [ ]% 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 .
[With respect to ARM Loans, specify 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.]
[With respect to Mortgage Loans which are secured by Multifamily
Properties, specify (i) whether such loans provide for interest only periods and
whether the principal amounts of such loans are amortized on the basis of a
period of time that extends beyond the related maturity dates thereof and (ii)
any materially different underwriting standards for such loans.]
S-8
<PAGE>
[With respect to Multi-Class Certificates, specify the method of
determining the Asset Value of each Trust Asset.]
[Specify whether the Depositor, the Master Servicer or the related
Servicer, as the case may be, has the right to substitute Mortgage Loans and the
period during which the Depositor, the Master Servicer or the related Servicer
may exercise such right.]
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
S-9
<PAGE>
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 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 one-twelfth of % 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 one-twelfth of
% 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 as of the
Cut-off Date. The purchase price for any such optional repurchase shall be equal
to the outstanding principal balance of such Mortgage Loans, together with
accrued interest at the Pass-Through Rate to
S-10
<PAGE>
the first day of the month following such repurchase plus the appraised value of
any acquired property with respect to the Mortgage 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 as of 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 as of 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-11
<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 of issuance that the Certificates be rated in one of the
two highest rating 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 organization. A
security rating does not address the frequency of prepayments or the possibility
that Certificateholders might suffer a lower than anticipated yield. A security
rating also does not represent any assessment of the yield to maturity that
investors may experience.
YIELD AND PREPAYMENT CONSIDERATIONS
Yield Considerations
[to be added, as applicable]
Weighted Average Life of the Certificates
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security to the date of distribution to the
investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations.
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. A prepayment assumption of 100% SPA assumes constant 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, 100% SPA assumes a constant prepayment rate of 6% per annum
each month. As used in the table below, "0% SPA" assumes prepayment rates equal
to 0% of SPA (no prepayments). Correspondingly, "250% SPA" assumes prepayment
rates equal to 250% of SPA, and so forth. 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, including the
Mortgage Loans.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the latest
scheduled maturity date for any Mortgage Loan. The actual final Distribution
Date with respect to the Certificates will likely occur significantly earlier
than, and could occur later than, its assumed final Distribution Date.
S-12
<PAGE>
The following tables have been prepared on the basis of the following
assumed characteristics of the Mortgage Loans: [insert assumptions]
The actual characteristics and performance of the Mortgage Loans will
differ from the assumptions used in constructing the following tables, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Mortgage Loans will prepay at a constant
level of SPA until maturity or that all of the Mortgage Loans will prepay at the
same level of SPA. Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the table at the various constant percentages of SPA specified,
even if the weighted average remaining term to maturity of the Mortgage Loans is
as assumed. Any difference between such assumptions and the actual
characteristics and performance of the Mortgage Loans, or actual prepayment or
loss experience, will affect the percentage of initial Certificate Principal
Balance outstanding over time and the weighted average life of the Certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of the Certificates, and sets forth the
percentage of the initial Certificate Principal Balance [or Notional Amount, as
applicable,] of the Certificates that would be outstanding after each of the
dates shown at various percentages of SPA.
[insert DEC tables]
The Depositor makes no representation that the Mortgage Loans will prepay
in the manner or at any of the rates assumed in the tables 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 Certificates.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
[LEGAL INVESTMENT CONSIDERATIONS]
[legal investment discussion to be added, as applicable]
[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.............................. $
======
S-13
<PAGE>
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 price 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 Discount (Percent of
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.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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-14
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
Page on which Term
is defined in the
Term Prospectus Supplement
- ---- ---------------------
<S> <C>
[ARM Loans.........................................................prospectus]
[Buy-Down Funds....................................................prospectus]
Certificates...............................................................S-3
[Certificateholders........................................................S-5
Class..............................................................prospectus]
Code.......................................................................S-5
[Cut-off-Date......................................................prospectus]
Depositor..................................................................S-3
Distribution Date..........................................................S-4
Due Date...................................................................S-3
Enhancement Act............................................................S-6
Interest Accrual Period.............................................prospectus
Letter of Credit...........................................................S-4
Letter of Credit Percentage................................................S-4
Master Servicer............................................................S-3
Mortgage Loans.............................................................S-4
Mortgage Bankruptcy Bond..................................................S-11
[Mortgage Pool.....................................................prospectus]
Mortgage Rate..............................................................S-7
[Mortgaged Property................................................prospectus]
Mortgagors.................................................................S-5
[Multi-Class Certificates..........................................prospectus]
[Multifamily Property..............................................prospectus]
[Original Value....................................................prospectus]
Pass-Through Rate..........................................................S-4
Performance Bond..........................................................S-10
Pool Insurance Policy......................................................S-4
Pool Insurer..............................................................S-11
Pooling and Servicing Agreement............................................S-9
[Prepayment Assumption.............................................prospectus]
Rating Agency..............................................................S-4
Reference Agreement........................................................S-9
Regular Certificates.......................................................S-6
REMIC......................................................................S-6
Retained Yield............................................................S-10
Servicing Agreement.......................................................S-10
Single Certificate.........................................................S-3
SPA.......................................................................S-12
Special Hazard Insurance Policy...........................................S-15
Special Hazard Insurer....................................................S-11
Standard Terms.............................................................S-9
Trustee....................................................................S-9
[Underwriter.......................................................prospectus]
</TABLE>
S-15
<PAGE>
SUBJECT TO COMPLETION, DATED ,1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchanges 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 sales would be unlawful prior
to registration or qualification under the securities law 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, Class A, Series
Principal and interest payable on the th day
of each month, beginning , 1
-----------------------
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][three] 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") [and
Conduit Mortgage Pass-Through Certificates, Class R (the "Class R
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
(i) [conventional] [fixed-rate] [one- to four-family residential mortgage
loans,] [(ii) mortgage loans secured by multifamily residential rental
properties consisting of five or more dwelling units or apartment buildings
owned by cooperative housing corporations,] [(iii) 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 (iv) 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] (collectively, 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, a Delaware 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 Class A-2 Certificates are not entitled to
distributions in respect of principal. 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 Class B Certificates are not offered hereby. 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, as amended (the "Securities Act").]
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.
See "Risk Factors" beginning on p.S-8 herein and on p.14 of the Prospectus
for a discussion of certain factors that potential investors should consider in
determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"erisa considerations" herein and in the accompanying prospectus.
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 $ $ $
====================================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, at the applicable rate from , 19 .
(2) Before deducting expenses payable by the Depositor estimated at $
-----------------------
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 delivered to the
offices of CS First Boston, New York, New York, 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
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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Mortgage Loans will be prepared by the Master Servicer and sent on behalf of the
Trust to each registered holder of the Certificates. See "Description of the
Certificates -- Reports to Certificateholders" in the Prospectus.
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. An "Index of Terms" is included at the end of this Prospectus
Supplement. Capitalized terms used in this Prospectus Supplement and not
otherwise defined shall have the meanings given in the Prospectus. References to
percentages of the Mortgage Loans or to the principal balance of the Mortgage
Loans in this Prospectus Supplement are to percentages (except as otherwise
indicated) by aggregate principal balance as of the Cut-off Date.
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-2 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 all
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-1 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, as amended (the "Securities
Act").]
Depositor....................... Asset Backed Securities Corporation, a
Delaware corporation (the "Depositor").
Seller.......................... [ ]
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Master Servicer................. __________, a ________ corporation (the
"Master Servicer").
Cut-off Date.................... , 19 .
Delivery Date................... On or about , 19 .
Record Date..................... With respect to each Distribution Date, [the
last business day of the month preceding
the month in which such Distribution Date
occurs].
Distribution Date............... The ____ day of each month, or, if such day
is not a business day, the next succeeding
business day.
Interest Accrual Period......... [With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Interest for
each Interest Accrual Period is calculated
based on a 360-day year comprised of twelve
30-day months.]
Collection Period............... [With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such Distribution Date occurs and
ending on the Due Date in the month in
which such Distribution Date occurs.]
Due Date........................ [With respect to any Distribution Date and/or
any Mortgage Loan, as the case may be, the
first day of the month in which such
Distribution Date occurs, or if such first
day is not a business day, the business day
immediately following such first day.]
Final Scheduled
Distribution Date............ [ ]. The Final Scheduled Distribution Date
has been determined to be the Distribution
Date succeeding the latest maturity date of
any Mortgage Loan in the Mortgage Pool.
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 each Distribution
Date, commencing , 19 . The Pass-Through
Rate on the Mortgage Loans[, as of the
Cut-off Date,] is % per annum. See
"Description of the Certificates" in the
Prospectus.
Principal (including
prepayments) ................ Passed through monthly on the Distribution
Date, commencing on 19 . The rate of
distribution of principal of the
Certificates [(other than the Class A-2 and
Class R Certificates)] will depend on the
rate of payment of principal of the
Mortgage Loans which, in turn, will depend
on the characteristics of the Mortgage
Loans, the level of prevailing interest
rates and other economic, geographic and
social factors. No assurance can be given
as to the actual payment experience of the
Mortgage Loans 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
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
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, collectively 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.*
Certain Risk Factors............ For a discussion of certain risk factors that
should be considered in connection with an
investment in the Class A Certificates,
including those relating to [describe risk
factors specific to transaction], see "Risk
Factors" herein.
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.]
- --------
* 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-5
<PAGE>
- --------------------------------------------------------------------------------
[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.
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. A security
rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating organization. A security
rating does not address the frequency of
prepayments or the possibility that
Certificateholders might suffer a lower
than anticipated yield. A security rating
also does not represent any assessment of
the yield to maturity that investors may
experience. See "Risk Factors" herein and
in the Prospectus, "Rating" herein, "Yield
and Prepayment Considerations" herein and
"Yield Considerations" 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"), 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" in the Prospectus
[and herein].
Tax Aspects..................... The Depositor intends 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. [The Certificates other than the
Class R Certificates (the "Regular
Certificates") will be treated as regular
interests in the REMIC and generally will
be treated as debt instruments issued by
the REMIC for federal income tax purposes.
Certain Classes of the Regular Certificates
may be issued with original issue discount.
The prepayment assumption that will be used
in determining the rate of accrual of any
original issue discount on the Regular
Certificates for federal income tax
purposes (and whether such original issue
discount is de minimis), and that may be
used by a holder of a Regular Certificate
to amortize premium, will be [ ]% of the
Prepayment Assumption. No representation is
made that the Mortgage Loans will prepay at
such rate or at any other rate. The holders
of the Residual Certificates will be
subject to special
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
federal income tax rules that may
significantly reduce the after-tax yield of
such Certificates. Further, significant
restrictions apply to the transfer of the
Residual Certificates. See "Certain Federal
Income Tax Consequences" herein and in the
Prospectus.]
- --------------------------------------------------------------------------------
S-7
<PAGE>
RISK FACTORS
General
The rate of distributions in reduction of the principal balance of any
Subclass or Class of Certificates, the aggregate amount of distributions of
principal and interest on any Subclass or Class of Certificates and the yield to
maturity of any Subclass or Class of Certificates will be directly related to
the rate of payments of principal on the Mortgage Loans in the Trust Fund and
the amount and timing of Mortgagor defaults resulting in realized Losses. The
rate of principal payments on the Mortgage Loans will, in turn, be affected by
the amortization schedules of the Mortgage Loans, the rate of principal
prepayments (including partial prepayments and those resulting from refinancing)
thereon by Mortgagors, liquidations of defaulted Mortgage Loans, repurchases by
the Depositor, the Master Servicer or any Unaffiliated Seller of Mortgage Loans
as a result of certain breaches of representations and warranties and optional
purchase by the Depositor of all of the Mortgage Loans in connection with the
termination of the Trust Fund. See "Description of the Certificates --
Termination; Repurchase of Mortgage Loans" herein and "The Trust Fund-Mortgage
Loan Program -- Representations by Unaffiliated Sellers; Repurchases" and
"Description of the Certificates -- Assignment of Mortgage Loans; and --
Termination" in the Prospectus. Mortgagors are permitted to prepay the Mortgage
Loans, in whole or in part, at any time without penalty.
The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the Mortgage Rates on the
Mortgage Loans, the rate of prepayment would generally be expected to increase.
Conversely, if interest rates on similar mortgage loans rise above the Mortgage
Rates on the Mortgage Loans, the rate of prepayment would generally be expected
to decrease.
An investor that purchases any Certificates at a discount should consider
the risk that a slower than anticipated rate of principal payments on the
Mortgage Loans will result in an actual yield that is lower than such investor's
expected yield. An investor that purchases any Certificates at a premium should
consider the risk that a faster than anticipated rate of principal payments on
the Mortgage Loans will result in an actual yield that is lower than such
investor's expected yield.
[Additional risk factors will be added, as appropriate, including, without
limitation, (i) if an Interest Weighted Class of Certificates or a Principal
Weighted Class of Certificates is being offered, a discussion of the risks
associated with such Class, including any disproportionate share of credit or
prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the Mortgage Loans due to,
among other things (x) a single mortgagor or lessee or cross-default,
cross-collateralization or similar provisions, (y) a concentration of properties
with brief or financially troubled operating histories or (z) a concentration of
properties within a state (or region of a state) experiencing particularly
adverse economic conditions and (iii) a discussion of the basis risk associated
with a Class of Certificates.]
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
average outstanding principal balance of the Mortgage Loans as of the Cut-off
Date will be $[ ]. 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
- --------
* 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-8
<PAGE>
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 xx% 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.
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 .
[With respect to ARM Loans, specify 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.]
[With respect to Mortgage Loans which are secured by Multifamily Properties,
specify (i) whether such loans provide for interest only periods and whether the
principal amounts of such loans are amortized on the basis of a period of time
that extends beyond the related maturity dates thereof and (ii) any materially
different underwriting standards for such loans.]
S-9
<PAGE>
[With respect to Multi-Class Certificates, specify the method of determining the
Asset Value of each Trust Asset.]
[Specify whether the Depositor, the Master Servicer or the related Servicer, as
the case may be, has the right to substitute Mortgage Loans and the period
during which the Depositor, the Master Servicer or the related Servicer may
exercise such right.]
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
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 of $ in excess
thereof.
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 Distribution Amount 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
S-10
<PAGE>
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.
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 .
S-11
<PAGE>
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
one-twelfth of % 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 one-twelfth of %
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
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"
S-12
<PAGE>
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 as
of 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.]
YIELD AND PREPAYMENT CONSIDERATIONS
Yield Considerations
[to be added, as applicable]
Prepayment Experience on the Mortgage Loans
The rate of principal payments on the Class A-1 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
S-13
<PAGE>
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 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.
Weighted Average Lives of the Certificates
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security to the date of distribution to the
investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations.
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. A prepayment assumption of 100% SPA assumes constant 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, 100% SPA assumes a constant prepayment rate of 6% per annum
each month. As used in the table below, "0% SPA" assumes prepayment rates equal
to 0% of SPA (no prepayments). Correspondingly, "250% SPA" assumes prepayment
rates equal to 250% of SPA, and so forth. 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, including the
Mortgage Loans.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the latest scheduled
maturity date for any Mortgage Loan. The actual final Distribution Date with
respect to the Certificates will likely occur significantly earlier than, and
could occur later than, its assumed final Distribution Date.
The following tables have been prepared on the basis of the following
assumed characteristics of the Mortgage Loans: [insert assumptions]
The actual characteristics and performance of the Mortgage Loans will
differ from the assumptions used in constructing the following tables, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Mortgage Loans will prepay at a constant
level of SPA until maturity or that all of the Mortgage Loans will prepay at the
same level of SPA. Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the table at the various constant percentages of SPA specified,
even if the weighted average remaining term to maturity of the Mortgage Loans is
as assumed. Any difference between such assumptions and the actual
characteristics and performance of the Mortgage Loans, or actual prepayment or
loss experience, will affect the percentage of initial Certificate Principal
Balance of each Class of Certificates outstanding over time and the weighted
average life of each such Class of Certificates.
S-14
<PAGE>
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each such Class of Certificates, and sets
forth the percentages of the initial Certificate Principal Balance [or Notional
Amount, as applicable,] of each such Class of Certificates that would be
outstanding after each of the dates shown at various percentages of SPA.
[insert DEC tables]
The Depositor makes no representation that the Mortgage Loans will prepay
in the manner or at any of the rates assumed in the tables 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.
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. 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
organization. A security rating does not address the frequency of prepayments or
the possibility that Certificateholders might suffer a lower than anticipated
yield. A security rating also does not represent any assessment of the yield to
maturity that investors may experience.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
[LEGAL INVESTMENT CONSIDERATIONS]
[legal investment discussion to be added, as applicable]
S-15
<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.
- --------
* 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-16
<PAGE>
[If and to the extent required by applicable law or regulation, this Prospectus
Supplement and the Prospectus will also be used by the Underwriter after the
completion of the offering in connection with offers and sales related to
market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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-17
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
Page on which Term
is defined in the
Term Prospectus Supplement
- ----- ---------------------
<S> <C>
[Aggregate Losses....................................................prospectus]
[ARM Loans...........................................................prospectus]
[Asset Value.........................................................prospectus]
[Buy Down Funds......................................................prospectus]
[Certificate Registration............................................prospectus]
[Certificate Principal Balance.......................................prospectus]
Certificates.................................................................S-1
Class A Certificates.........................................................S-1
Class A-1 Certificates.......................................................S-1
Class A-2 Certificates.......................................................S-1
Class A-1 Distribution Amount...............................................S-11
Class A-2 Distribution Amount...............................................S-11
Class B Certificates.........................................................S-1
Class B-1 Certificates.......................................................S-1
Class R Certificates.........................................................S-1
Commission...................................................................S-2
Contracts....................................................................S-5
Cooperative..................................................................S-1
Cooperative Dwelling.........................................................S-5
Cooperative Loans............................................................S-5
[Cut-off-Date........................................................prospectus]
Depositor....................................................................S-1
[Determination Date..................................................prospectus]
[Distribution Date...................................................prospectus]
Due Date....................................................................S-12
Enhancement Act..............................................................S-7
Exchange act.................................................................S-2
[Final Scheduled Distribution Date...................................prospectus]
[Interest Accrual Period.............................................prospectus]
Interest Distribution........................................................S-3
Master Servicer..............................................................S-4
[Mortgage Pool.......................................................prospectus]
Mortgage Loans...............................................................S-1
Multifamily Property.........................................................S-5
[Notional Amount.....................................................prospectus]
[Original Value......................................................prospectus]
Pass-Through Rate............................................................S-1
Percentage Interest..........................................................S-3
Performance Bond.............................................................S-3
Pooling and Servicing Agreement.............................................S-11
Principal Distribution.......................................................S-3
[Principal Weighted Class............................................prospectus]
Rating Agency................................................................S-1
[Record Date.........................................................prospectus]
Reference Agreement.........................................................S-11
Regular Certificates.........................................................S-7
REMIC........................................................................S-7
Required Distribution.......................................................S-12
Required Reserve.............................................................S-6
Reserve Fund.................................................................S-6
Retained Yield..............................................................S-13
Securities Act...............................................................S-1
</TABLE>
S-18
<PAGE>
<TABLE>
<S> <C>
Senior Interest.............................................................S-12
Single family Property.......................................................S-5
SPA.........................................................................S-15
Standard Terms..............................................................S-11
Subclass.....................................................................S-1
Subordinated Amount..........................................................S-6
Trust........................................................................S-1
[Trust Asset.........................................................prospectus]
Trust Fund...................................................................S-1
Trustee......................................................................S-7
Underwriter.................................................................S-11
[Underwriting Agreement..............................................Prospectus]
</TABLE>
S-19
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
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.
================================================================================
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, a Delaware 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), which are not offered hereby, to sophisticated institutional
investors in transactions not requiring registration under the Securities Act of
1933, as amended. 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.]
See "Risk Factors" beginning on p.S-11 herein and on p.14 of the Prospectus
for a discussion of certain factors that potential investors should consider in
determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying 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>
====================================================================================================================================
Final
Scheduled Proceeds to the
Distribution Price to Underwritng Depositor
Interest Rate Date (1) Public (2) Discount (2)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Class A-1 Certificate (4) % % %
- ------------------------------------------------------------------------------------------------------------------------------------
Per Class A-2 (5) % % %
- ------------------------------------------------------------------------------------------------------------------------------------
Per Class A-3 Certificate % % %
- ------------------------------------------------------------------------------------------------------------------------------------
Per Class A-4 Certificate % % %
- ------------------------------------------------------------------------------------------------------------------------------------
Total % % %
====================================================================================================================================
</TABLE>
(1) These dates are calculated assuming, among other things, that there are no
prepayments and the Mortgage Loan characteristics 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 bear interest at the per annum rate of ___%
through __________, 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 ___%.]
----------------------
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 delivered to the offices of CS First
Boston, New York, New York, 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
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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Mortgage Loans will be prepared by the Master Servicer and sent on behalf of the
Trust to each registered holder of the Certificates. See "Description of the
Certificates - Reports to Certificateholders" in the Prospectus.
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. An "Index of Terms" is included at the end of this Prospectus
Supplement. Capitalized terms used in this Prospectus Supplement and not defined
shall have the meanings given in the Prospectus. References to percentages of
the Mortgage Loans or to the principal balance of the Mortgage Loans in this
Prospectus Supplement are to percentages (except as otherwise indicated) by
aggregate principal balance as of the Cut-off Date.
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, as amended (the "Securities
Act").]]
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 the [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 distribution 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, a
Delaware corporation (The "Depositor").
Seller ........................ [ ]
Master Servicer................ _______, a _____________ corporation (the
"Master Servicer")
Cut-off Date .................. __________, 19__ .
Delivery Date ................. On or about __________, 19__ .
Distribution Date ............. The [____ day of each month] [each , , and
], or, if such day is not a business day,
the next succeeding business day.
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Collection Period ............. [With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the [month] [quarter] preceding the
month in which such Distribution Date occurs
and ending on the Due Date in the month in
which such Distribution Date occurs.]
Due Date ...................... [With respect to any Distribution Date
and/or any Mortgage Loan, as the case may
be, the first day of the [month] [quarter]
in which such Distribution Date occurs, or
if such first day is not a business day, the
business day immediately following such
first day.]
Interest Distributions ........ [Interest will be distributed on each
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 __________, 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 Fixed Rate Certificates
on each Distribution Date will accrue from
the [first 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 last day of the 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
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
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 month in which the
prior] Distribution Date occured (or from
__________, 19__ in the case of the first
Distribution Date) through the last day of
the 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), if
any]. The [Class A] 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
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
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 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 aggregate
principal amount of such Mortgage Loans as
of the Cut-off Date, 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, as amended
(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
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
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.]
[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
Agreement ............ All amounts on deposit in the 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.]
- --------------
* 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-7
<PAGE>
- --------------------------------------------------------------------------------
[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
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 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.
[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.]
- --------------------------------------------------------------------------------
S-8
<PAGE>
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[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.]
Certain Risk Factors .......... For a discussion of certain risk factors
that should be considered in connection with
an investment in the Certificates, including
those relating to [describe risk factors
specific to transaction], see "Risk Factors"
herein.
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 Mortgage Loans.
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.
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, as amended (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, as amended.]
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S-9
<PAGE>
- --------------------------------------------------------------------------------
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. A security
rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating organization. A security
rating does not address the frequency of
prepayments or the possibility that
Certificateholders might suffer a lower than
anticipated yield. A security rating also
does not represent any assessment of the
yield to maturity that investors may
experience. See "Risk Factors" herein and in
the Prospectus, "Rating" herein, "Yield and
Prepayment Considerations" herein and "Yield
Considerations" in the Prospectus.
ERISA Limitations ............. See "ERISA Considerations" in the
Prospectus.
Tax Aspects ................... The Depositor intends 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. [The Certificates other
than the Residual Certificates (the "Regular
Certificates") will be treated as regular
interests in the REMIC and generally will be
treated as debt instruments issued by the
REMIC for federal income tax purposes.
Certain Classes of the Regular Certificates
may be issued with original issue discount.
The prepayment assumption that will be used
in determining the rate of accrual of any
original issue discount on the Regular
Certificates for federal income tax purposes
(and whether such original issue discount is
de minimis), and that may be used by a
holder of a Regular Certificate to amortize
premium, will be [ ]% of the Prepayment
Assumption. No representation is made that
the Mortgage Loans will prepay at such rate
or at any other rate. The holders of the
Residual Certificates will be subject to
special federal income tax rules that may
significantly reduce the after-tax yield of
such Certificates. Further, significant
restrictions apply to the transfer of the
Residual Certificates. See "Certain Federal
Income Tax Consequences" herein and in the
Prospectus.]
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S-10
<PAGE>
RISK FACTORS
General
The rate of distributions in reduction of the principal balance of any
Subclass or Class of Certificates, the aggregate amount of distributions of
principal and interest on any Subclass or Class of Certificates and the yield to
maturity of any Subclass or Class of Certificates will be directly related to
the rate of payments of principal on the Mortgage Loans in the Trust Fund and
the amount and timing of Mortgagor defaults resulting in realized Losses. The
rate of principal payments on the Mortgage Loans will, in turn, be affected by
the amortization schedules of the Mortgage Loans, the rate of principal
prepayments (including partial prepayments and those resulting from refinancing)
thereon by Mortgagors, liquidations of defaulted Mortgage Loans, repurchases by
the Depositor, the Master Servicer or any Unaffiliated Seller of Mortgage Loans
as a result of certain breaches of representations and warranties and optional
purchase by the Depositor of all of the Mortgage Loans in connection with the
termination of the Trust Fund. See "Description of the Certificates Termination;
Repurchase of Mortgage Loans" herein and "The Trust Fund--Mortgage Loan
Program--Representations by Unaffiliated Sellers; Repurchases" and "Description
of the Certificates--Assignment of Mortgage Loans; and Termination" in the
Prospectus. Mortgagors are permitted to prepay the Mortgage Loans, in whole or
in part, at any time without penalty.
The rate of payments (including prepayments) on pools of mortgage loans
is influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the Mortgage Rates on the
Mortgage Loans, the rate of prepayment would generally be expected to increase.
Conversely, if interest rates on similar mortgage loans rise above the Mortgage
Rates on the Mortgage Loans, the rate of prepayment would generally be expected
to decrease.
An investor that purchases any Certificates at a discount should
consider the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans will result in an actual yield that is lower than such
investor's expected yield. An investor that purchases any Certificates at a
premium should consider the risk that a faster than anticipated rate of
principal payments on the Mortgage Loans will result in an actual yield that is
lower than such investor's expected yield.
[Additional risk factors will be added, as appropriate, including,
without limitation, (i) if an Interest Weighted Class of Certificates or a
Principal Weighted Class of Certificates is being offered, a discussion of the
risks associated with such Class, including any disproportionate share of credit
or prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the Mortgage Loans due to,
among other things (x) a single mortgagor or lessee or cross-default,
cross-collateralization or similar provisions, (y) a concentration of properties
with brief or financially troubled operating histories or (z) a concentration of
properties within a state (or region of a state) experiencing particularly
adverse economic conditions and (iii) a discussion of the basis risk associated
with a Class of Certificates.]
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 average outstanding principal
balance of the Mortgage Loans as of the Cut-off Date will be $[ ]. [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 ____ .
- --------
* ____ ____ 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-11
<PAGE>
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
outstandingaggregate 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 [ ]% 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 .
[With respect to ARM Loans, specify 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.]
[With respect to Mortgage Loans which are secured by Multifamily Properties,
specify (i) whether such loans provide for interest only periods and whether the
principal amounts of such loans are amortized on the basis of a period of time
that extends beyond the related maturity dates thereof and (ii) any materially
different underwriting standards for such loans.]
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
S-12
<PAGE>
Distribution Date, as more fully set forth herein. [Any funds remaining in the
Certificate Account on each Distribution Date after making required
distributions to holders of the Class A Certificates on such Distribution Date
will be distributed to the holders of the Class B Certificates.] [Any amounts
remaining in the Certificate Account on each Distribution Date after making
required distributions on the Class B Certificates on such Distribution Date
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.
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.
S-13
<PAGE>
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 asto the accuracy or completeness of such
information.]
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.
S-14
<PAGE>
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 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 herein and 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 Fixed Rate Certificates on each Distribution Date will
accrue from the [first day of the month preceding the month in which the] prior
Distribution Date occurred (or from __________, 19__ (the "Accrual Date") in the
case of the first Distribution Date) through the [last] day [of the 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
S-15
<PAGE>
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 ClassA-4
Certificates and the amount so accrued will be added to the Stated Principal
Balance thereof on each Distribution Date. [Interest accrued on the [Sub]
[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
----- --------- ---------
<C> <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 .
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
S-16
<PAGE>
(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 [Class A] Stated Principal Distribution Amount. For purposes of
determining the [Class A] 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 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
S-17
<PAGE>
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 Asset Value of the Mortgage Loans comprising the Mortgage
Pool as of the Cut-off Date will be equal to at least 100% of the aggregate
Stated Principal Balance of the [Class A] Certificates as of the Cut-off Date.
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 sum of the
Accrual Distribution Amount and 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 remaining Excess Cash Flow
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 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.]
S-18
<PAGE>
[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 aggregate principal
amount of such Mortgage Loans as of the Cut-off Date, 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 maybe 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 one-twelfth of ___% 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 one-twelfth of ___% 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 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.
S-19
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Yield Considerations
[to be added, as applicable]
Prepayment 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].
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 Lives of the Certificates
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security to the date of distribution to
the investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations. 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].
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. A prepayment assumption of 100% SPA assumes constant 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, 100% SPA assumes a constant prepayment rate of 6% per annum
each month. As used in the table below, "0% SPA" assumes prepayment rates equal
to 0% of SPA (no prepayments). Correspondingly, "250% SPA" assumes prepayment
rates equal to 250% of SPA, and so forth. 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, including the
Mortgage Loans.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the latest scheduled
maturity date for any Mortgage Loan. The actual final Distribution Date with
respect to the Certificates will likely occur significantly earlier than, and
could occur later than, its assumed final Distribution Date.
The following tables have been prepared on the basis of the following
assumed characteristics of the Mortgage Loans: [insert assumptions]
The actual characteristics and performance of the Mortgage Loans will
differ from the assumptions used in constructing the following tables, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Mortgage Loans will prepay at a constant
level of SPA until maturity or that all of the Mortgage Loans will prepay at the
same level of SPA. Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the table at the various constant percentages of SPA specified,
even if the weighted average remaining term to maturity of the Mortgage Loans is
as assumed. Any difference between such assumptions and the actual
S-20
<PAGE>
characteristics and performance of the Mortgage Loans, or actual prepayment or
loss experience, will affect the percentage of initial Certificate Principal
Balance of each Class of Certificates outstanding over time and the weighted
average life of each such Class of Certificates.
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average life of each such Class of Certificates,
and sets forth the percentages of the initial Certificate Principal Balance [or
Notional Amount, as applicable,] of each such Class of Certificates that would
be outstanding after each of the dates shown at various percentages of SPA.
[insert DEC tables]
The Depositor makes no representation that the Mortgage Loans will
prepay in the manner or at any of the rates assumed in the tables 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.
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
organization. A security rating does not address the frequency of prepayments or
the possibility that Certificateholders might suffer a lower than anticipated
yield. A security rating also does not represent any assessment of the yield to
maturity that investors may experience.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
[LEGAL INVESTMENT CONSIDERATIONS]
[legal investment discussion to be added, as applicable]
[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>
- --------
* 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-21
<PAGE>
The Underwriting Agreement provides that the obligations of the
Underwriter[s] [is] [are] subject to certain conditions precedent, and that the
Underwriters[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 (Percent of
Principal Amount) Principal Amount)
----------------- -----------------
<S> <C> <C>
Class A-1 Certificates ............ % %
Class A-2 Certificates ............ % %
Class A-3 Certificates ............ % %
Class A-4 Certificates ............ % %
</TABLE>
After the initial public offering, the public offering prices and
concessions and discounts to dealer 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.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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 form one or more affiliates of the
Depositor, which will have acquired such Mortgage Loans form time to time in the
open market or in privately negotiated transactions.
S-22
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
Page on which
Term is Defined
Term in the Prospectus Supplement
- ---- ----------------------------
<S> <C>
Accrual Date................................................................S-17
Accrual Distribution Amount..................................................S-5
[Aggregate Losses....................................................prospectus]
ARM Loans.............................................................prospectus
Asset Value...........................................................prospectus
Asset Value Cap.......................................................prospectus
Assumed Reinvestment Rate....................................................S-6
Available Interest Accrual Date.............................................S-18
Available Interest Amount...................................................S-18
Business Day................................................................S-17
Buy-Down Fund................................................................S-7
Certificate..................................................................S-1
Certificate Account.........................................................S-12
Class A Certificates.........................................................S-3
Class A Certiicateholder.....................................................S-3
Class B Certificate...................................................prospectus
Class B Certificateholders............................................prospectus
Code.........................................................................S-6
Commission...................................................................S-2
Contracts....................................................................S-7
Cut-off Date................................................................S-11
Depositor....................................................................S-1
Determination Date....................................................prospectus
Distribution Date.....................................................prospectus
Due Date....................................................................S-16
Due Period...................................................................S-5
Enhancement Act.............................................................S-10
Excess Cash Flow......................................................prospectus
Exchange Act.................................................................S-2
Final Schedule Distribution Date......................................prospectus
Fixed Rate Certificates......................................................S-4
GPM Fund..............................................................prospectus
GPM Loan....................................................................S-14
Initial Stated Interest Balance........................................pospectus
Interest Accrual Period...............................................prospectus
Interest Rate................................................................S-4
Interest Rate Determination Date............................................S-16
Letter of Credit.............................................................S-7
Letter of Credit Percentage..................................................S-7
Master Servicer..............................................................S-3
Mortgage Loans...............................................................S-7
[Mortgage Pool.......................................................prospectus]
Mortgage Rate...............................................................S-11
Mortgagor....................................................................S-8
Mortgagor Bankruptcy Bond....................................................S-8
Multi-Class Certificates.............................................prospectus]
Original Value.......................................................prospectus]
Performance Bond............................................................S-19
Pool Insurer................................................................S-13
Pool Insurance Policy........................................................S-8
Pooling and Servicing Agreement.............................................S-14
[Prepayment Assumption...............................................prospectus]
Rating Agency................................................................S-1
[Reference Banks.....................................................prospectus]
Reference Agreement.........................................................S-14
Regular Certificates........................................................S-10
Reinvestment Agreement......................................................S-13
REMIC.......................................................................S-10
Required Distribution.......................................................S-16
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
Page on which
Term is Defined
Term in the Prospectus Supplement
- ---- ----------------------------
<S> <C>
Required Reserve.............................................................S-9
Reserve Fund.................................................................S-9
Reserve Interest Rate.......................................................S-16
Residual Certificates.......................................................S-10
Securities Act...............................................................S-3
Senior Interest.............................................................S-15
Servicer.....................................................................S-9
[Servicing Account...................................................prospectus]
Servicing Agreement.........................................................S-19
SPA.........................................................................S-21
Special Distribution Date...................................................S-18
Special Distributions........................................................S-6
Special Hazard Insurance Policy..............................................S-8
Special Hazard Insurer......................................................S-14
Standard Terms..............................................................S-14
[Stated Principal Balance............................................prospectus]
[Stated Principal Distribution Amount................................prospectus]
Subordinanted Amount.........................................................S-9
Trust........................................................................S-1
Trust Fund...................................................................S-1
Trustee.....................................................................S-10
[Underwriter.........................................................prospectus]
[Variable Rate Certificate...........................................prospectus]
</TABLE>
S-24
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
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.
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
(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, a
Delaware 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.
See "Risk Factors" beginning on p. S-6 herein and on p.14 of the Prospectus
for a discussion of certain factors that potential investors should consider in
determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying Prospectus.
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 $ $ $
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(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").
-------------------------
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 delivered to the offices of CS First
Boston, New York, New York, 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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Underlying Certificates will be prepared by the Master Servicer and sent on
behalf of the Trust to each registered holder of the Certificates. See
"Description of the Certificates--Reports to Certificateholders" in the
Prospectus.
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. An "Index of Terms" is included at the end of this
Prospectus Supplement. 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 Class -1
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, a
Delaware corporation (the "Depositor").
Cut-off Date................... , 19 .
Delivery Date.................. On or about , 19 .
Record Date.................... [With respect to each Distribution Date, the
last business day of the month preceding the
month in which such Distribution Date
occurs.]
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. The
rate of distribution of principal of the
Certificates will depend on the rate of
payment of principal
S-3
- --------------------------------------------------------------------------------
<PAGE>
of the mortgage loans underlying the
Underlying Certificates which, in turn, will
depend on the characteristics of such
underlying mortgage loans, the level of
prevailing interest rates and other economic,
geographic and social factors. No assurance
can be given as to the actual payment
experience of the mortgage loans underlying
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.
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 Certificateholders 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.
Under the terms of the Underlying
Certificates, the final payment thereon will
not be later than , . See
"Description of the Underlying Certificates".
Certain Risk Factors........... For a discussion of certain risk factors that
should be considered in connection with an
investment in the Certificates, including
those relating to [describe risk factors
specific to transaction], see "Risk Factors"
herein.
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
S-4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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.
Certificate Rating............. It is a condition of issuance of the
Certificates that they be rated " " by
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 organization. A
security rating does not address the
frequency of prepayments or the possibility
that Certificateholders might suffer a lower
than anticipated yield. A security rating
also does not represent any assessment of the
yield to maturity that investors may
experience. See "Risk Factors" herein and in
the Prospectus, "Rating" herein, "Yield and
Prepayment Considerations" herein and "Yield
Considerations" in the Prospectus.
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.
Trustee........................ (the "Trustee"). See
"Description of the Certificates-Trustee"
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>
RISK FACTORS
General
[The rate of distributions in reduction of the principal balance of any
Class of Certificates, the aggregate amount of distributions of principal and
interest on any Class of Certificates and the yield to maturity of any Class of
Certificates will be directly related to the rate of payments of principal on
the mortgage loans underlying the Underlying Certificates in the Trust Fund and
the amount and timing of mortgagor defaults resulting in realized losses with
respect to such loans. The rate of principal payments on the mortgage loans
underlying the Underlying Certificates will, in turn, be affected by the
amortization schedules of such mortgage loans underlying the Underlying
Certificates, the rate of principal prepayments (including partial prepayments
and those resulting from refinancing) thereon by mortgagors, liquidations of
defaulted mortgage loans underlying the Underlying Certificates, repurchases of
mortgage loans underlying the Underlying Certificates as a result of certain
breaches of representations and warranties by the related seller of such
mortgage loans and the optional purchase of all of such mortgage loans in
connection with the termination of the related trust. Mortgagors are permitted
to prepay the mortgage loans underlying the Underlying Certificates, in whole or
in part, at any time without penalty.]
[The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the mortgage rates on the
mortgage loans underlying the Underlying Certificates, the rate of prepayment
would generally be expected to increase. Conversely, if interest rates on
similar mortgage loans rise above the mortgage rates on the mortgage loans
underlying the Underlying Certificates, the rate of prepayment would generally
be expected to decrease.]
[An investor that purchases any Certificates at a discount should consider
the risk that a slower than anticipated rate of principal payments on the
mortgage loans underlying the Underlying Certificates will result in an actual
yield that is lower than such investor's expected yield. An investor that
purchases any Certificates at a premium should consider the risk that a faster
than anticipated rate of principal payments on the mortgage loans underlying the
Underlying Certificates will result in an actual yield that is lower than such
investor's expected yield.]
[Additional risk factors will be added, as appropriate, including, without
limitation, (i) if an Interest Weighted Class of Certificates or a Principal
Weighted Class of Certificates is being offered, a discussion of the risks
associated with such Class, including any disproportionate share of credit or
prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the mortgage loans
underlying the Underlying Certificates due to, among other things (x) a single
mortgagor or lessee or cross-default, cross-collateralization or similar
provisions, (y) a concentration of properties with brief or financially troubled
operating histories or (z) a concentration of properties within a state (or
region of a state) experiencing particularly adverse economic conditions and
(iii) a discussion of the basis risk associated with a Class of Certificates.]
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 the Underlying Certificates, the final payment
thereon will not be later than , .
[additional disclosure with respect to the Underlying Certificates to be
added, as appropriate]
S-6
<PAGE>
[discussion of underwriting standards used to originate the mortgage loans
underlying the Underlying Certificates to be added with respect to Underlying
Certificates that comprise a material portion of the Trust Fund]
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.
Specific information with respect 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 .]
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-7
<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.
YIELD AND PREPAYMENT CONSIDERATIONS
Yield Considerations
[to be added, as applicable]
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
S-8
<PAGE>
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 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.
Weighted Average Lives of the Certificates
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security to the date of distribution to the
investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
mortgage loans underlying the Underlying Certificates is paid, which may be in
the form of scheduled amortization, prepayments or liquidations.
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. A prepayment assumption of 100% SPA assumes constant 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, 100% SPA assumes a constant prepayment rate of 6% per annum
each month. As used in the table below, "0% SPA" assumes prepayment rates equal
to 0% of SPA (no prepayments). Correspondingly, "250% SPA" assumes prepayment
rates equal to 250% of SPA, and so forth. 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, including the
mortgage loans underlying the Underlying Certificates.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the latest
scheduled maturity date for any mortgage loan underlying the Underlying
Certificates. The actual final Distribution Date with respect to the
Certificates will likely occur significantly earlier than, and could occur later
than, its assumed final Distribution Date.
The following tables have been prepared on the basis of the following
assumed characteristics of the mortgage loans underlying the Underlying
Certificates: [insert assumptions]
S-9
<PAGE>
The actual characteristics and performance of the mortgage loans underlying
the Underlying Certificates will differ from the assumptions used in
constructing the following tables, which are hypothetical in nature and are
provided only to give a general sense of how the principal cash flows might
behave under varying prepayment scenarios. For example, it is very unlikely that
the mortgage loans underlying the Underlying Certificates will prepay at a
constant level of SPA until maturity or that all of the mortgage loans
underlying the Underlying Certificates will prepay at the same level of SPA.
Moreover, the diverse remaining terms to maturity of the mortgage loans
underlying the Underlying Certificates could produce slower or faster principal
distributions than indicated in the table at the various constant percentages of
SPA specified, even if the weighted average remaining term to maturity of the
mortgage loans underlying the Underlying Certificates is as assumed. Any
difference between such assumptions and the actual characteristics and
performance of the mortgage loans underlying the Underlying Certificates, or
actual prepayment or loss experience, will affect the percentage of initial
Certificate Principal Balance of each Class of Certificates outstanding over
time and the weighted average life of each such Class of Certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each such Class of Certificates, and sets
forth the percentages of the initial Certificate Principal Balance [or Notional
Amount, as applicable,] of each such Class of Certificates that would be
outstanding after each of the dates shown at various percentages of SPA.
[insert DEC tables]
The Depositor makes no representation that the mortgage loans underlying
the Underlying Certificates will prepay in the manner or at any of the rates
assumed in the tables 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, 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
S-10
<PAGE>
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".
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
organization. A security rating does not address the frequency of prepayments or
the possibility that Certificateholders might suffer a lower than anticipated
yield. A security rating also does not represent any assessment of the yield to
maturity that investors may experience.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
[LEGAL INVESTMENT CONSIDERATIONS]
[legal investment discussion to be added, as applicable]
[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......................................... $ $ $
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C> <C> <C>
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, as amended.
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.
[If and to the extent required by applicable law or regulation, this Prospectus
Supplement and the Prospectus will also be used by the Underwriter after the
completion of the offering in connection with offers and sales related to
market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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.
[Disclose if a material portion of the Underlying Certificates are derived from
the Depositor's (or an affiliate's) unsold allotment or from the Depositor's (or
an affiliate's) previous offering(s).]
S-12
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Page on which
Term is Defined in the
Term Prospectus Supplement
- ---- ---------------------
<S> <C>
Annual Rate.................................................................S-1
[Certificate Principal Balance......................................prospectus]
Certificates................................................................S-1
Certificateholders..........................................................S-1
Class-1 Certificates........................................................S-1
Class-2 Certificates........................................................S-1
Commission .................................................................S-2
Delivery Date...............................................................S-8
Deposit Trust Agreement.....................................................S-3
Depositor...................................................................S-1
Distribution Date...........................................................S-4
Enhancement Act.............................................................S-5
[ERISA..............................................................prospectus]
Exchange Act................................................................S-2
Interest Weighted Class of Certificates.............................prospectus]
Mortgage Certificate Interest Distribution..................................S-3
Mortgage Certificates Principal Distribution................................S-3
[Mortgage Loan......................................................prospectus]
[Principal Weighted Class of Certificates...........................prospectus]
Record Date.................................................................S-9
Servicing Fee...............................................................S-1
SPA........................................................................S-10
Trust.......................................................................S-1
Underlying Certificates.....................................................S-1
[Underwriter........................................................prospectus]
[Underwriting Agreement.............................................prospectus]
</TABLE>
S-13
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
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.
- --------------------------------------------------------------------------------
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 Rate
Principal and interest payable 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, a Delaware 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
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.
See "Risk Factors" beginning on p. S-8 herein and on p.14 of the Prospectus
for a discussion of certain factors that potential investors should consider in
determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying Prospectus.
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 delivered to the offices of CS First
Boston, New York, New York, on or about , 199 .
- --------------------------------------------------------------------------------
CS First Boston
The date of this Prospectus Supplement is , 1996.
<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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET- MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Contracts will be prepared by the Master Servicer and sent on behalf of the
Trust to each registered holder of the Certificates. See "Description of the
Certificates--Reports to Certificateholders" in the Prospectus.
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. An "Index of Terms" is included at the end of this Prospectus
Supplement. Capitalized terms used in this Prospectus Supplement and not defined
shall have the meanings given in the Prospectus. References to percentages of
the Contracts or to the principal balance of the Contracts in this Prospectus
Supplement are to percentages (except as otherwise indicated) by aggregate
principal balance as of the Cut-off Date.
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 %).
Description of Certificates. .. [ ]
Depositor. .................... Asset Backed Securities Corporation, a
Delaware corporation (the "Depositor").
Seller ........................ [ ]
Master Servicer. .............. , a _______ corporation,(the "Master
Servicer").
Record Date. .................. [With respect to each Distribution Date, the
last business day of the month preceding the
month in which such Distribution Date
occurs.]
Distribution Date. ............ [The ____ day of each month, or, if such day
is not a business day, the next succeeding
business day.]
Interest Accrual Period. ...... [With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Interest for
each Interest Accrual Period is calculated
based on a 360-day year comprised of twelve
30-day months.]
Collection Period ............. [With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such Distribution Date occurs and
ending on the Due Date in the month in which
such Distribution Date occurs.]
Due Date ...................... [With respect to any Distribution Date and/or
any Contract, as the case may be, the first
day of the month in which such Distribution
Date occurs, or if such first day is not a
business day, the business day immediately
following such first day.]
Final Scheduled
Distribution Date. .......... [ ]. The Final Scheduled Distribution Date
has been determined to be the Distribution
Date succeeding the latest maturity date of
any Contract in the Contract Pool.
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 .
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Interest ...................... Passed through monthly at the rate of % per
annum (the "Pass-Through Rate"), on each
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 each Distribution
Date, commencing , 19 . The rate of
distribution of principal of the Certificates
[(other than the Class R Certificates)] will
depend on the rate of payment of principal of
the Contracts which, in turn, will depend on
the characteristics of the Contracts, the
level of prevailing interest rates and other
economic, geographic and social factors. No
assurance can be given as to the actual
payment experience of the Contracts.
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.
Certain Risk Factors .......... For a discussion of certain risk factors that
should be considered in connection with an
investment in the Certificates, including
those relating to [describe risk factors
specific to transaction], see "Risk Factors"
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
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.
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
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 wil
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.
[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 aggregate unpaid 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, as amended (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
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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.
Trustee. ...................... (the "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 a nationally
recognized statistical rating agency (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 organization. A security rating does
not address the frequency of prepayments or
the possibility that Certificateholders might
suffer a lower than anticipated yield. A
security rating also does not represent any
assessment of the yield to maturity that
investors may experience. See "Risk Factors"
herein and in the Prospectus, "Rating"
herein, "Yield and Prepayment Considerations"
herein and "Yield Considerations" in the
Prospectus.
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.
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
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Fund as a Real Estate Mortgage Investment
Conduit (a "REMIC"), pursuant to the Internal
Revenue Code of 1986, as amended. [The
Certificates other than the Class R
Certificates (the "Regular Certificates")
will be treated as regular interests in the
REMIC and generally will be treated as debt
instruments issued by the REMIC for federal
income tax purposes. Certain Classes of the
Regular Certificates may be issued with
original issue discount. The prepayment
assumption that will be used in determining
the rate of accrual of any original issue
discount on the Regular Certificates for
federal income tax purposes (and whether such
original issue discount is de minimis), and
that may be used by a holder of a Regular
Certificate to amortize premium, will be [ ]%
of the Prepayment Assumption. No
representation is made that the Contracts
will prepay at such rate or at any other
rate. The holders of the Residual
Certificates will be subject to special
federal income tax rules that may
significantly reduce the after-tax yield of
such Certificates. Further, significant
restrictions apply to the transfer of the
Residual Certificates. See "Certain Federal
Income Tax Consequences" [herein and] in the
Prospectus.
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S-7
<PAGE>
RISK FACTORS
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.
[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"].
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 ["Yield and Prepayment Considerations"
herein and] "Maturity and Prepayment Considerations" in the Prospectus.
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.
[Additional risk factors will be added, as appropriate, including, without
limitation, (i) if an Interest Weighted Class of Certificates or a Principal
Weighted Class of Certificates is being offered, a discussion of the risks
associated with such Class, including any disproportionate share of credit or
prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the Contracts due to,
among other things, a concentration of properties within a state (or region of a
state) experiencing particularly adverse economic conditions and (iii) a
discussion of the basis risk associated with a Class of Certificates.]
DESCRIPTION OF THE CONTRACT POOL
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<PAGE>
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.]
[With respect to Multi-Class Certificates, specify the method of
determining the Asset Value of each Trust Asset.]
[Specify whether the Depositor, the Master Servicer or the related
Servicer, as the case may be, has the right to substitute Contracts and the
period during which the Depositor, the Master Servicer or the related
Servicer may exercise such right.]
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
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<PAGE>
also set forth tables reflecting the following information regarding the
Contracts: years of origination, types of 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
General
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 , .
[additional disclosure to be added, as appropriate]
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.
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<PAGE>
Trustee
The Trustee for the Certificates will be .
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 one-twelfth of % 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 one-twelfth of % 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].
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<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 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
S-12
<PAGE>
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 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
S-13
<PAGE>
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.]
YIELD AND PREPAYMENT CONSIDERATIONS
Yield Considerations
[to be added, as applicable]
[Weighted Average Lives of the Certificates
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security to the date of distribution to the
investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
Contracts is paid, which may be in the form of scheduled amortization,
prepayments or liquidations.
The model used in this Prospectus Supplement, the Manufactured Housing
Prepayment model (the "MHP"), is based on an assumed rate of prepayment each
month of the then unpaid principal balance of a pool of new Contracts. A
prepayment assumption of 100% MHP assumes constant prepayment rates of 3.7% per
annum of the then unpaid principal balance of such Contracts in the first month
of the life of the Contracts and an additional 0.1% per annum in each month
thereafter until the 24th month. Beginning in the 24th month and in each month
thereafter during the life of all of the Contracts, 100% MHP assumes a constant
prepayment rate of 6.0% per annum each month. As used in the following tables
"0% MHP" assumes no prepayments on the Contracts; "50% MHP" assumes the
Contracts will prepay at rates equal to 50% of the MHP assumed prepayment rates,
and so forth.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the latest scheduled
maturity date for any Contract. The actual final Distribution Date with respect
to the Certificates will likely occur significantly earlier than, and could
occur later than, its assumed final Distribution Date.
The following tables have been prepared on the basis of the following
assumed characteristics of the Contracts: [insert assumptions]
The actual characteristics and performance of the Contracts will differ
from the assumptions used in constructing the following tables, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant level
of MHP until maturity or that all of the Contracts will prepay at the same level
of MHP. Moreover, the diverse remaining terms to maturity of the Contracts could
produce slower or faster principal distributions than indicated in the table at
the various constant percentages of MHP specified, even if the weighted average
remaining term to maturity of the Contracts is as assumed. Any difference
between such assumptions and the actual characteristics and performance of the
Contracts, or actual prepayment or loss experience, will affect the percentage
of initial Certificate Principal Balance of each Class of Certificates
outstanding over time and the weighted average life of each such Class of
Certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each such Class of Certificates, and sets
forth the percentages of the initial Certificate Principal Balance [or Notional
Amount, as applicable,] of each such Class of Certificates that would be
outstanding after each of the dates shown at various percentages of MHP.
[insert tables]
S-14
<PAGE>
There is no assurance, however, that prepayment of the Contracts will
conform to any level of the MHP, and no representation is made that the
Contracts will prepay at the prepayment rates shown or any other prepayment
rate. The rate of principal payments on pools of manufactured housing contracts
is influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates and the rate at which manufactured
homeowners sell their manufactured homes or default on their contracts. Other
factors affecting prepayment of contracts include changes in obligors' housing
needs, job transfers, unemployment and obligors' net equity in the manufactured
homes. In the case of mortgage loans secured by site-built homes, in general, if
prevailing interest rates fall significantly below the interest rates on such
mortgage loans, the mortgage loans are likely to be subject to higher prepayment
rates than if prevailing interest rates remained at or above the rates borne by
such mortgage loans. Conversely, if prevailing interest rates rise above the
interest rates on such mortgage loans, the rate of prepayment would be expected
to decrease. In the case of manufactured housing contracts, however, because the
outstanding principal balances are, in general, much smaller than mortgage loan
balances and the original term to maturity of each such contract is generally
shorter, the reduction or increase in the size of the monthly payment on a
contract arising from a change in the interest rate thereon is generally much
smaller. Consequently, changes in prevailing interest rates may not have a
similar effect, or may have a similar effect but to a smaller degree, on the
prepayment rates on manufactured housing contracts.
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
organization. A security rating does not address the frequency of prepayments or
the possibility that Certificateholders might suffer a lower than anticipated
yield. A security rating also does not represent any assessment of the yield to
maturity that investors may experience.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
[LEGAL INVESTMENT CONSIDERATIONS]
[legal investment discussion to be added, as applicable]
[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).
S-15
<PAGE>
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.]
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:
<TABLE>
<CAPTION>
[Underwriter
<S> <C>
CS First Boston....................... $
____________
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 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 (Percent of Discount (Percent of
Principal Amount) Principal Amount)
----------------- -----------------
<C> <C>
% %
</TABLE>
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, as amended.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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-16
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Page on which
Term is defined in
Term the Prospectus Supplement
- ---- -------------------------
<S> <C>
[Advances....................................................................prospectus]
APR..................................................................................S-4
[Asset Value.................................................................prospectus]
[Business Day................................................................prospectus]
[Certificateholders..........................................................prospectus]
Certificates.........................................................................S-3
Code.................................................................................S-5
Commission...........................................................................S-2
Contract Schedule...................................................................S-10
Contract Pool........................................................................S-9
Contracts............................................................................S-4
[Cut-off Date................................................................prospectus]
[Defaulted Contracts.........................................................prospectus]
Depositor............................................................................S-3
Direct Letter of Credit..............................................................S-5
[Distribution Date...........................................................prospectus]
DOL.................................................................................S-15
[Due Date....................................................................prospectus]
Enhancement Act......................................................................S-6
ERISA...............................................................................S-15
Excess Interest......................................................................S-4
Exchange Act.........................................................................S-2
Guarantee Amount.....................................................................S-4
[Interest Accrual Period.....................................................prospectus]
[Interest Weighted Class of Certifcates......................................prospectus]
L/C Bank............................................................................S-13
Letters of Credit....................................................................S-4
Letters of Credit Percentage.........................................................S-5
Limited Guarantee....................................................................S-5
Limited Guarantee Fee................................................................S-4
Limited Guarantee Fund...............................................................S-5
Manufactured Homes...................................................................S-4
Master Servicer......................................................................S-3
[Mortgage Loan...............................................................prospectus]
[Mortgage Pool...............................................................prospectus]
[Multi-Class Certificates....................................................prospectus]
Obligor..............................................................................S-4
Pass-Through Rate....................................................................S-4
Performance Bond....................................................................S-11
Plan................................................................................S-15
Pooling and Servicing Agreement.....................................................S-10
[Prepayment Assumption.......................................................prospectus]
[Principal Weighted Class of Certificates....................................prospectus]
Rating Agency........................................................................S-6
Record Date..........................................................................S-4
Regular Certificates.................................................................S-7
REMIC................................................................................S-7
Residual Certificates................................................................S-7
Retained Yield......................................................................S-11
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Servicing Agreement.................................................................S-11
Servicing Fee........................................................................S-4
Single Certificate...................................................................S-3
SPA.................................................................................S-14
Standby Letter of Credit.............................................................S-4
Trust................................................................................S-1
[Trust Asset.................................................................prospectus]
Trust Fund...........................................................................S-1
Trustee..............................................................................S-6
[Underwriter.................................................................prospectus]
[Underwriting Agreement......................................................prospectus]
</TABLE>
S-18
<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 , 1996
- --------------------------------------------------------------------------------
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 (or, if such 25th day is not a business day, the next
succeeding business day) 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).
See "Risk Factors" beginning on p. S-9 herein and on p.14 of the
Prospectus for a discussion of certain factors that potential investors should
consider in determining whether to invest in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying Prospectus.
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, [THE 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 delivered to
the offices of CS First Boston, New York, New York, 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.]
[If and to the extent required by applicable law or regulation, this Prospectus
Supplement and the Prospectus will also be used by the Underwriter after the
completion of the offering in connection with offers and sales related to
market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
---------------------------
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 Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C., and at the Commission's
regional offices at Seven World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 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 Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning
the Mortgage Loans will be prepared by the Master Servicer and sent on behalf of
the Trust to each registered holder of the Certificates. See "Description of the
Certificates - Reports to Certificateholders" in the Prospectus.
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. An "Index of Terms" is included at the end of this
Prospectus Supplement. Capitalized terms used in this Prospectus Supplement and
not defined shall have the meanings ascribed thereto in the Prospectus.
References to percentages of the Mortgage Loans or to the principal balance of
the Mortgage Loans in this Prospectus Supplement are to percentages (except as
otherwise indicated) by aggregate principal balance as of the Cutoff Date.
Securities Offered............. $ Conduit Mortgage Pass-Through
Certificates, Series , [Class A,]
Adjustable Pass-Through Rate (the "Class A
Certificates").
Depositor...................... Asset Backed Securities Corporation, a
Delaware corporation (the "Depositor")
Seller......................... [ ]
Master Servicer................ , a corporation (the
"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"); and, collectively,] 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")
(collectively,] [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.
- -------------------------------------------------------------------------------
S-3
<PAGE>
- -------------------------------------------------------------------------------
Record Date.................... [With respect to each Distribution Date, the
last business day of the month
preceding the month in which such
Distribution Date occurs.]
Distribution Date.............. [The day of each month, or, if such day
is not a business day, the next
succeeding business day.]
Interest Accrual Period........ [With respect to any Distribution Date, the
calendar month preceding the month
in which such Distribution Date occurs.
Interest for each Interest Accrual Period is
calculated based on a 360-day year comprised
of twelve 30-day months.]
Collection Period.............. [With respect to a Distribution Date, the
period beginning on the day after the Due
Date in the month preceding the month in
which such Distribution Date occurs and
ending on the Due Date in the month in which
such Distribution Date occurs.]
Due Date....................... [With respect to any Distribution Date
and/or any Mortgage Loan, as the case may
be, the first day of the month in which such
Distribution Date occurs, or if such first
day is not a business day, the business day
immediately following such first day.]
Final Scheduled
Distribution Date............ [ ]. The Final Scheduled Distribution
Date has been determined to be the
Distribution Date succeeding the latest
maturity date of any Mortgage Loan in the
Mortgage Pool.
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
%.]
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 (as defined herein) 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. The rate of distribution of
principal of the Certificates will depend on
the rate of payment of principal of the
Mortgage Loans which, in turn, will depend
on the characteristics of the Mortgage
Loans, the level of prevailing interest
rates and other economic, geographic and
social factors. No assurance can be given as
to the actual payment experience of the
Mortgage Loans. The Class B-2 Certificates
are the residual certificates.
- -------------------------------------------------------------------------------
S-4
<PAGE>
- -------------------------------------------------------------------------------
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 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 (as defined
below) after the Cut-off Date for each
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
related Periodic Mortgage Rate Cap thereof,
less the Servicing Fee Rate or the related
Maximum Subsidiary Pass-Through Rate
thereof. 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 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 Rates
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-
- -------------------------------------------------------------------------------
S-5
<PAGE>
- -------------------------------------------------------------------------------
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.
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 or
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.
Certain Risk Factors........... For a discussion of certain risk factors
that should be considered in connection
with an investment in the Certificates,
including those relating to [describe risk
factors specific to transaction], see "Risk
Factors" 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 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.
- -------------------------------------------------------------------------------
S-6
<PAGE>
- -------------------------------------------------------------------------------
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 (as defined below) 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, subject to the foregoing
limitation, the holder of the Class B[-2]
Certificate has the option to purchase all
the Subsidiary Regular Interests (as defined
herein) in the Master 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.
Trustee........................ (the "Trustee"). See "Description
of the Certificates - The Trustee"
herein.
- -------------------------------------------------------------------------------
S-7
<PAGE>
- -------------------------------------------------------------------------------
Certificate Rating............. It is a condition of issuance that the Class
A Certificates be rated at least " " by
. A security rating is not a
recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning
rating organization. A security rating does
not address the frequency of prepayments or
the possibility that Certificateholders
might suffer a lower than anticipated yield.
A security rating also does not represent
any assessment of the yield to maturity that
investors may experience. See "Risk Factors"
herein and in the Prospectus, "Rating"
herein, "Yield and Prepayment
Considerations" herein and "Yield
Considerations" 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.
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. The [list Subsidiary
Regular interests] (the "Subsidiary Regular
Interests") will be regular interests in the
Subsidiary REMIC and the [name class] will
be designated as the residual interests (the
"Subsidiary Residual Interest") in the
Subsidiary REMIC. The Subsidiary Regular
Interests will be the assets of the Master
Trust Fund and an election will be made to
treat such 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
designated as the residual interest in the
Master REMIC. [The Certificates other than
the [Class B[-2] Certificate] (the "Regular
Certificates") will be treated as regular
interests in the REMIC and generally will be
treated as debt instruments issued by the
REMIC for federal income tax purposes.
Certain Classes of the Regular Certificates
may be issued with original issue discount.
The prepayment assumption that will be used
in determining the rate of accrual of any
original issue discount on the Regular
Certificates for federal income tax purposes
(and whether such original issue discount is
de minimis), and that may be used by a
holder of a Regular Certificate to amortize
premium, will be [ ]% of the Prepayment
Assumption. No representation is made that
the Mortgage Loans will prepay at such rate
or at any other rate. [The holder of the
Class B[-2] Certificate will be subject to
special federal income tax rules that may
significantly reduce the after-tax yield of
such Certificate. Further, significant
restrictions apply to the transfer of the
Class B[-2] Certificate.] See "Certain
Federal Income Tax Consequences" [herein
and] in the Prospectus.]
- -------------------------------------------------------------------------------
S-8
<PAGE>
RISK FACTORS
General
The rate of distributions in reduction of the principal balance of any
Subclass or Class of Certificates, the aggregate amount of distributions of
principal and interest on any Subclass or Class of Certificates and the yield to
maturity of any Subclass or Class of Certificates will be directly related to
the rate of payments of principal on the Mortgage Loans in the Subsidiary Trust
Fund and the amount and timing of Mortgagor defaults resulting in Realized
Losses. The rate of principal payments on the Mortgage Loans will, in turn, be
affected by the amortization schedules of the Mortgage Loans, the rate of
principal prepayments (including partial prepayments and those resulting from
refinancing) thereon by Mortgagors, liquidations of defaulted Mortgage Loans,
repurchases by the Depositor, the Master Servicer or any Unaffiliated Seller of
Mortgage Loans as a result of certain breaches of representations and warranties
and optional purchase by the holder of the Subsidiary Residual Interest of all
of the Mortgage Loans or Subsidiary Regular Interests in connection with the
termination of the Subsidiary Trust Fund and the Master Trust Fund. See
"Description of the Certificates -- Termination; Repurchase of Mortgage Loans"
herein and "The Trust Fund-Mortgage Loan Program -- Representations by
Unaffiliated Sellers; Repurchases" and "Description of the Certificates --
Assignment of Mortgage Loans; and -- Termination" in the Prospectus. Mortgagors
are permitted to prepay the Mortgage Loans, in whole or in part, at any time
without penalty.
The rate of payments (including prepayments) on pools of mortgage loans
is influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the Mortgage Rates on the
Mortgage Loans, the rate of prepayment would generally be expected to increase.
Conversely, if interest rates on similar mortgage loans rise above the Mortgage
Rates on the Mortgage Loans, the rate of prepayment would generally be expected
to decrease.
An investor that purchases any Certificates at a discount should
consider the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans will result in an actual yield that is lower than such
investor's expected yield. An investor that purchases any Certificates at a
premium should consider the risk that a faster than anticipated rate of
principal payments on the Mortgage Loans will result in an actual yield that is
lower than such investor's expected yield.
[Additional risk factors will be added, as appropriate, including,
without limitation, (i) if an Interest Weighted Class of Certificates or a
Principal Weighted Class of Certificates is being offered, a discussion of the
risks associated with such Class, including any disproportionate share of credit
or prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the Mortgage Loans due to,
among other things (x) a single mortgagor or lessee or cross-default,
cross-collateralization or similar provisions, (y) a concentration of properties
with brief or financially troubled operating histories or (z) a concentration of
properties within a state (or region of a state) experiencing particularly
adverse economic conditions and (iii) a discussion of the basis risk associated
with a Class of Certificate.]
S-9
<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
- ----------
(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 Subsidiary 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-10
<PAGE>
will bear interest at their Initial Mortgage Rates. The weighted average number
of months from the Cut-off Date to the first 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-11
<PAGE>
<TABLE>
<CAPTION>
TYPES OF MORTGAGED PROPERTIES
% of
No. Mortgage
of Aggregate Pool
Property Types Loans Balances Balance
- -------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
Single family detached........................................ $ . %
Condominium...................................................
Planned Unit Developments.....................................
-------------- ------------- ------
Total................................................ $ 100.00%
============== ============= ======
</TABLE>
<TABLE>
<CAPTION>
CURRENT LOAN AMOUNTS(1)
% of
No. Mortgage
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-12
<PAGE>
<TABLE>
<CAPTION>
LOAN-TO-VALUE RATIOS AT ORIGINATION
% of
No. Mortgage
of Aggregate Pool
Loan-to-Value Ratios 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.
<TABLE>
<CAPTION>
CURRENT MORTGAGE RATES
% of
No. Mortgage
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-13
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE LOAN GROSS MARGINS
% of
No. Mortgage
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.
<TABLE>
<CAPTION>
MONTH IN WHICH NEXT ADJUSTMENT DATE FALLS
% of
No. Mortgage
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-14
<PAGE>
<TABLE>
<CAPTION>
LIFETIME MORTGAGE RATE CAPS
% of
No. Mortgage
of Aggregate Pool
Lifetime Mortgage Rate Cap Loans Balances Balance
- -------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
%......................................................... $ . %
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
-------------- ------------- ------
Total.................................................... $ 100.00%
============== ============= ======
</TABLE>
<TABLE>
<CAPTION>
YEARS OF ORIGINATION
% of
No. Mortgage
of Aggregate Pool
Month(1) Loans Balances Balance
- -------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
% ....................................................... $ . %
.......................................................
.......................................................
.......................................................
.......................................................
-------------- ------------- ------
Total.................................................... $ 100.00%
============== ============= ======
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
% of
No. Mortgage
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-16
<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-17
<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,
-------------------------------------------------
-------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C>
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-18
<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
-------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C>
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
-------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C>
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
------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conventional mortgage loans
delinquent for:
60-89 days....................... $ $ $ $
90 days and over.................
In foreclosure...................
Total...................... $ $ $ $
</TABLE>
S-19
<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.
[With respect to Mortgage Loans which are secured by Multifamily Properties,
specify (i) whether such loans provide for interest only periods and whether the
principal amounts of such loans are amortized on the basis of a period of time
that extends beyond the related maturity dates thereof and (ii) any materially
different underwriting standards standards for such loans.]
[With respect to Multi-Class Certificates, specify the method of
determining the Asset Value of each Trust Asset.]
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.
S-20
<PAGE>
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.]
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 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 with respect to each Distribution Date will
equal the weighted average of the Subsidiary Pass-Through Rates for the Mortgage
Loans [weighted on the basis of the principal balances thereof as of the Due
Date occurring in the month prior to the month in which such Distribution Date
occurs (after application of amounts due on such Due Date)]. 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,
S-21
<PAGE>
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
thereof less the Servicing Fee Rate and the Maximum Subsidiary Pass-Through Rate
thereof. 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.
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
S-22
<PAGE>
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 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 related 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.
S-23
<PAGE>
[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, 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
S-24
<PAGE>
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
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>
.............................................................
...........................................................
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
<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 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
S-26
<PAGE>
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.]
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 or
the Master Trust Fund or the Master 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 or the Master
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
S-27
<PAGE>
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 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, subject to
the foregoing limitation, 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.]
YIELD AND PREPAYMENT CONSIDERATIONS
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.
S-28
<PAGE>
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 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.
S-29
<PAGE>
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.
Weighted Average Lives of the Certificates
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security to the date of distribution to
the investor of the last dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life of the Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations.
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. A prepayment assumption of 100% SPA assumes constant 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, 100% SPA assumes a constant prepayment rate of 6% per annum
each month. As used in the table below, "0% SPA"
S-30
<PAGE>
assumes prepayment rates equal to 0% of SPA (no prepayments). Correspondingly,
"250% SPA" assumes prepayment rates equal to 250% of SPA, and so forth. 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,
including the Mortgage Loans.
The assumed final Distribution Date with respect to the Certificates is
[ ], which is the Distribution Date immediately following the
latest scheduled maturity date for any Mortgage Loan. The actual final
Distribution Date with respect to the Certificates will likely occur
significantly earlier than, and could occur later than, its assumed final
Distribution Date.
The following tables have been prepared on the basis of the following
assumed characteristics of the Mortgage Loans: [insert assumptions]
The actual characteristics and performance of the Mortgage Loans will
differ from the assumptions used in constructing the following tables, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Mortgage Loans will prepay at a constant
level of SPA until maturity or that all of the Mortgage Loans will prepay at the
same level of SPA. Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the table at the various constant percentages of SPA specified,
even if the weighted average remaining term to maturity of the Mortgage Loans is
as assumed. Any difference between such assumptions and the actual
characteristics and performance of the Mortgage Loans, or actual prepayment or
loss experience, will affect the percentage of initial Certificate Principal
Balance of each Class of Certificates outstanding over time and the weighted
average life of each such Class of Certificates.
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average life of each such Class of Certificates,
and sets forth the percentages of the initial Certificate Principal Balance [or
Notional Amount, as applicable,] of each such Class of Certificates that would
be outstanding after each of the dates shown at various percentages of SPA.
[insert DEC tables]
The Depositor makes no representation that the Mortgage Loans will
prepay in the manner or at any of the rates assumed in the tables 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 Certificates.
[CERTAIN FEDERAL INCOME TAX CONSEQUENCES]
[tax discussion to be added, as applicable]
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 . 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
S-31
<PAGE>
the assigning rating organization. A security rating does not address the
frequency of prepayments or the possibility that Certificateholders might suffer
a lower than anticipated yield. A security rating also does not represent any
assessment of the yield to maturity that investors may experience.
[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.]
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........................... $ $ $
</TABLE>
S-32
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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.]
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
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-33
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
Page on which
Term is defined in the
Term Prospectus Supplement
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Adjustment Date......................................................................................................S-5
Advances.............................................................................................................S-8
[Aggregate Losses............................................................................................prospectus]
[Business Day................................................................................................prospectus]
CEBA................................................................................................................S-19
Certificates.........................................................................................................S-1
[Certificate Account.........................................................................................prospectus]
[Class A Certificateholders..................................................................................prospectus]
Class A Certificates.................................................................................................S-3
Class A Certificate Principal Balance...............................................................................S-24
Class A Distribution Amount.........................................................................................S-23
Class A Prepayment Percentage.......................................................................................S-26
Class A Percentage...................................................................................................S-3
Class B Certificates.................................................................................................S-3
Class B Principal Balance...........................................................................................S-24
Class B-1 Percentage.................................................................................................S-3
Class B-2 Percentage.................................................................................................S-3
Commission...........................................................................................................S-2
Deficient Valuation.................................................................................................S-25
Deleted Mortgage Loan...............................................................................................S-28
Depositor............................................................................................................S-3
Determination Date..................................................................................................S-22
Distribution Date...................................................................................................S-22
Due Date............................................................................................................S-12
[Eligible Investments........................................................................................prospectus]
Enhancement Act......................................................................................................S-9
ERISA...............................................................................................................S-33
Exchange Act.........................................................................................................S-2
FHLB................................................................................................................S-11
Gross Margin.........................................................................................................S-5
Index................................................................................................................S-1
Initial Class A Certificate Principal Balance.......................................................................S-24
Initial Mortgage Rate...............................................................................................S-11
Interest Shortfalls.................................................................................................S-24
[Interest Weighted Class of Certificates.....................................................................prospectus]
Liquidated Loan.....................................................................................................S-25
Master REMIC.........................................................................................................S-1
Master Servicer......................................................................................................S-1
Master Trust Fund....................................................................................................S-3
Master Trust Fund Aggregate Distribution............................................................................S-23
Maximum Mortgage Rate................................................................................................S-5
Maximum Subsidiary Pass-Through Rate.................................................................................S-1
Mortgage Loans.......................................................................................................S-1
Mortgage Note........................................................................................................S-5
Mortgage Pool........................................................................................................S-1
Mortgaged Properties................................................................................................S-11
Mortgage Rate........................................................................................................S-5
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[Mortgage Rate Caps..........................................................................................prospectus]
[Mortgagor...................................................................................................prospectus]
Pass-Through Margin..................................................................................................S-5
Periodic Mortgage Rate Cap...........................................................................................S-5
Pooling and Servicing Agreement.....................................................................................S-11
Prepayment Period...................................................................................................S-22
Principal Prepayments................................................................................................S-4
Principal Shortfall.................................................................................................S-24
[Principal Weighted Class of Certificates....................................................................prospectus]
Purchase Agreement..................................................................................................S-33
[Rate Adjustment Date........................................................................................prospectus]
Realized Loss.......................................................................................................S-25
Record Date.........................................................................................................S-22
Regular Certificates.................................................................................................S-9
REMIC................................................................................................................S-1
Replacement Mortgage Loan...........................................................................................S-28
Scheduled Principal Balance.........................................................................................S-24
Servicer............................................................................................................S-21
Servicing Fee........................................................................................................S-8
Servicing Fee Rate...................................................................................................S-8
Single Certificate...................................................................................................S-8
[Standard Hazard Insurance Policy............................................................................prospectus]
[Special Hazard Realized Losses..............................................................................prospectus]
[Step-down Criteria..........................................................................................prospectus]
Subordinate Percentage...............................................................................................S-3
[Subsidiary Trust Fund.......................................................................................prospectus]
Subsidiary Trust Fund Regular Distribution..........................................................................S-23
Subsidiary REMIC.....................................................................................................S-1
Subordinate Amount..................................................................................................S-26
Subordinate Percentage...............................................................................................S-3
[Subsidiary Pass-Through Rate................................................................................prospectus]
Subsidiary Regular Interests.........................................................................................S-3
Subsidiary REMIC.....................................................................................................S-1
Subsidiary Residual Interest.........................................................................................S-8
[Subsidiary Trust Fund.......................................................................................prospectus]
[Trust Asset.................................................................................................prospectus]
Trustee.............................................................................................................S-11
[Underwriting Agreement......................................................................................prospectus]
</TABLE>
S-35
<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 __, 1996
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".
See "Risk Factors" beginning on p. S-13 herein and on p.14 of the
Prospectus for a discussion of certain factors that potential
investors should consider in determining whether to invest
in the Certificates.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" herein and in the accompanying Prospectus.
(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 __________________ ,19 .
CS First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is , 19
<PAGE>
Prospective investors should consider:
[o The yield on the Class A-1 Certificates will be sensitive to,
among other 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.]]
[o 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.]
S-2
<PAGE>
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.
-----------------------
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.
[IF AND TO THE EXTENT REQUIRED BY APPLICABLE LAW OR REGULATION, THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WILL ALSO BE USED BY THE UNDERWRITER
AFTER THE COMPLETION OF THE OFFERING IN CONNECTION WITH OFFERS AND SALES RELATED
TO MARKET- MAKING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY IN WHICH THE
UNDERWRITER ACTS AS PRINCIPAL. THE UNDERWRITER MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT NEGOTIATED PRICES DETERMINED AT THE TIME OF
SALE.]
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 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 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
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO CERTIFICATEHOLDERS
Monthly and annual unaudited reports containing information concerning the
Mortgage Certificates will be prepared by the Master Servicer and sent on behalf
of the Trust to each registered holder of the Certificates. See "Description of
the Certificates - Reports to Certificateholders" in the Prospectus.
S-3
<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. An "Index of Terms" is included at the end of this Prospectus
Supplement. 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, a
Delaware corporation (the "Depositor").
Certificate Administrator...... Certain administrative functions with respect
to the Certificates will be performed
by .
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 ____
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
"Pooling 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) one-twelfth 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 [second] 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-5
<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.
The rate of distribution of principal of
the Certificates [(other than the Class IO
and Class R Certificates)] will depend on
the rate of payment of principal of the
mortgage loans underlying the Mortgage
Certificates which, in turn, will depend on
the characteristics of such underlying
mortgage loans, the level of prevailing
interest rates and other economic,
geographic and social factors. No assurance
can be given as to the actual payment
experience of the Mortgage Loans.
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) one-twelfth 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".
Certain Risk Factors........... For a discussion of certain risk factors that
should be considered in connection with an
investment in the Certificates, including
those relating to [describe risk factors
specific to transaction], see "Risk
Factors" herein.
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
[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, 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
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
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 not lower than " "
by [ and] " " by (" "
and, collectively with , the
"Rating Agencies").
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".
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating organization.
A security rating does not address the
frequency of prepayments or the possibility
that Certificateholders might suffer a
lower than anticipated yield. A security
rating also does not represent any
assessment of the yield to maturity that
investors may experience. See "Risk
Factors" herein and in the Prospectus,
"Ratings" herein and "Yield Considerations"
in the Prospectus.
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
Class of Mortgage
Series Designation Certificates
------------------ ------------
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
-------------------------------------------
[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".]
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
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
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.
Trustee........................ ______________ (the "Trustee"). See
"Description of the Certificates - Trustee"
herein.
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.
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.
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-11
<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.] [The Certificates other
than the Class R Certificates (the "Regular
Certificates") will be treated as regular
interests in the REMIC and generally will
be treated as debt instruments issued by
the REMIC for federal income tax purposes.
Certain Classes of the Regular Certificates
may be issued with original issue discount.
The prepayment assumption that will be used
in determining the rate of accrual of any
original issue discount on the Regular
Certificates for federal income tax
purposes (and whether such original issue
discount is de minimis), and that may be
used by a holder of a Regular Certificate
to amortize premium, will be [ ]% of the
Prepayment Assumption. No representation is
made that the Mortgage Loans will prepay at
such rate or at any other rate. The holders
of the Residual Certificates will be
subject to special federal income tax rules
that may significantly reduce the after-tax
yield of such Certificates. Further,
significant restrictions apply to the
transfer of the Residual Certificates. See
"Certain Federal Income Tax Consequences"
herein. See "Certain Federal Income Tax
Consequences"[ herein and] 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-12
<PAGE>
RISK FACTORS
Prospective investors should consider the following factors in connection
with a purchase of the Class A-1 Certificates.
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.
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.]
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].
Geographic Concentration
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. The Depositor did not prepare
or assist in the preparation of the Underlying Disclosure Documents and,
therefore, cannot confirm the accuracy or completeness of such information.
S-13
<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>
[Additional risk factors will be added, as appropriate, including, without
limitation, (i) if an Interest Weighted Class of Certificates or a Principal
Weighted Class of Certificates is being offered, a discussion of the risks
associated with such Class, including any disproportionate share of credit or
prepayment risks that such Class will bear, (ii) a discussion of the
concentration of credit risk, if any, with respect to the mortgage loans
underlying the Mortgage Certificates due to, among other things (x) a single
mortgagor or lessee or cross-default, cross-collateralization or similar
provisions, (y) a concentration of properties with brief or financially troubled
operating histories or (z) a concentration of properties within a state (or
region of a state) experiencing particularly adverse economic conditions and
(iii) a discussion of the basis risk associated with a Class of Certificates.]
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
S-14
<PAGE>
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, 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
S-15
<PAGE>
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
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]
S-16
<PAGE>
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").
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].
S-17
<PAGE>
"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 _________________ (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;
S-18
<PAGE>
(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 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
S-19
<PAGE>
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
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
S-20
<PAGE>
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 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
S-21
<PAGE>
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]
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").
S-22
<PAGE>
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.]
Each of the Mortgage Certificates has been assigned the ratings set forth
in the following table by the rating agencies identified therein:
[table to be added]
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>
Percentage
Interest of Class Current
Represented by Current Mortgage
Mortgage Underlying Certificate
Original Class Certificate in Mortgage Current Balance in
Underlying Series Class Balance Trust Fund Pool Balance Class Balance Trust Fund
- ----------------- ----- ------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ % $ $ $
<CAPTION>
Mortgage
Certificate
Pass-
Through
Rate
as of the
Predominant Cut-off
Index Date
----- ----
<S> <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.
S-23
<PAGE>
[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]
General
[to follow]
Interest Distributions
[to follow]
Principal Distributions
[to follow]
Credit Support
[to follow]
Optional Termination
[to follow]
Assignment of Representations and Warranties
[to follow]
Payments on Mortgage Loans
[to follow]
Collection and Other Servicing Procedures
[to follow]
Advances
[to follow]
Mortgage Loan Trustee and Collateral Agent
[to follow]
S-24
<PAGE>
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, including
underwriting standards used to originate the mortgage loans underlying the
Mortgage Certificates that comprise a material portion of the Trust Fund.] The
mortgage loans in each Underlying Mortgage Pool are adjustable rate,
conventional, one-to-four family residential first mortgage loans having
approximately the characteristics set forth in the table below. The related
Mortgaged Properties include owner-occupied, vacation and investor-owned
properties, condominiums, cooperatives, and units in Planned Unit Developments.
With respect to some of the Mortgage Loans, the type of the related Mortgaged
Property was unknown as of the date of issuance of the related Mortgage
Certificates. Investors are urged to review the information concerning the
Mortgage Loans set forth in each of the Underlying Disclosure Documents. Such
information may not have been accurate when prepared. The information regarding
the Mortgage Loans set forth herein (including in the tables below) is based on
information contained in the Underlying disclosure Documents and on other
information made available in connection with the issuance of each of the
Mortgage Certificates. In addition, the information contained in the assumed
Mortgage Certificate Characteristics table is derived from information made
available in connection with the issuance of each of the Mortgage Certificates.
IT SHOULD BE NOTED THAT THERE MAY HAVE BEEN MATERIAL CHANGES IN FACTS AND
CIRCUMSTANCES SINCE THE DATE SUCH DOCUMENTS AND INFORMATION WERE PREPARED,
INCLUDING, BUT NOT LIMITED TO, PREVAILING INTEREST RATES AND OTHER ECONOMIC
FACTORS, WHICH MAY LIMIT THE USEFULNESS OF, AND EVEN BE DIRECTLY CONTRARY TO THE
ASSUMPTIONS USED IN PREPARING SUCH INFORMATION AND DOCUMENTS. In addition, the
Underlying Disclosure Documents do not provide information sufficient to
determine the percentage distribution of Mortgage Loans exhibiting many of the
characteristics described herein. The Depositor did not prepare or assist in the
preparation of the Underlying Disclosure Documents and, therefore, cannot
confirm the accuracy or completeness of such information.
Mortgage Loan Delinquency Status
The following table summarizes the monthly delinquency, foreclosure and REO
information for the Mortgage Loans contained in each of the Underlying Mortgage
Pools for [ _____ ] 19[ ]. The information in the following table has been
prepared by the Depositor solely on the basis of the remittance reports provided
by the Mortgage Loan Trustees, and the Depositor makes no representations as to
its accuracy. Investors should consider the risk that any of the delinquent
Mortgage Loans may become defaulted loans and subsequently liquidated loans, and
that realized losses on such Mortgage Loans may be allocated to the Mortgage
Certificates. Defaults by mortgagors on the Mortgage Loans may result in the
failure of Mortgage Certificates on a given Underlying Series Distribution Date
to receive full payments in respect of interest or principal.
S-25
<PAGE>
DELINQUENCY STATUS
(BASED ON [ ] 19[ ] REMITTANCE REPORT)
<TABLE>
<CAPTION>
DELINQUENCIES AS PERCENT OF POOL BALANCE
------------------------------------------------------------------------------
[ ] 30 60
19[ ] DAYS DAYS 90+ DAYS FORECLOSURE REO(2)
--------- ---- ---- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
- ----------
</TABLE>
(1) Reflects the delinquencies as a percent of the Pool Balance of Mortgage
Loans in the related Mortgage Pool and mortgage loans in two other mortgage
pools in the same Underlying Trust Fund.
(2) NA = Not Available.
[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
S-26
<PAGE>
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.
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.
S-27
<PAGE>
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 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-28
<PAGE>
ASSUMED MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
Weighted Mortgage
Average Certificate
Mortgage Pass-
Interest Servicing Periodic Through
Mortgage Certificates INDEX Rate Fee Cap Net Cap Seasoning Rate
- --------------------- ----- ---- --- --- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Months Months
Until Next Until Next
Remaining Gross Net Rate Payment
Term Margin Margin Adjustment Adjustment
---- ------ ------ ---------- ----------
<S> <C> <C> <C> <C>
</TABLE>
S-29
<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>
Weighted Average Life (1)
Termination Scenario I
Termination Scenario II
Termination Scenario III
Termination Scenario IV
</TABLE>
- ----------
(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-30
<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
................................................ $ $ $
Projected Yield to Maturity and
Outstanding Principal Balance under Rate Scenario II
<CAPTION>
Percent of CPR
-------------------------------------------------
% % %
--------------- --------------- ------------
<S> <C> <C> <C>
Yield to Maturity............................................................... % % %
Outstanding Principal Balance as of
................................................ $ $ $
Projected Yield to Maturity and
Outstanding Principal Balance under Rate Scenario III
<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 be 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-31
<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.
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
S-32
<PAGE>
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:
o 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;
o 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
o 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 Consequence -- General" and "--REMIC Trust
Funds" in the Prospectus.]
[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.]
S-33
<PAGE>
[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 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.]
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.
[If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Certificates offered hereby in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and First
Boston by Sidley & Austin, New York, New York.
S-34
<PAGE>
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 _____________ .
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.
[Disclose if a material portion of the Mortgage Certificates are derived
from the Depositor's (or an affiliate's) unsold allotment or from the
Depositor's (or an affiliate's) previous offering(s).]
S-35
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
Page on which
Term is defined in the
Term Prospectus Supplement
- ---- ---------------------
<S> <C>
ARM's...................................................................S-16
Beneficial Owner........................................................S-28
Book-Entry Certificates.................................................S-22
Breakage Fee............................................................S-27
CEDE....................................................................S-28
Certificate Account.....................................................S-29
Certificates.............................................................S-1
[Class A-1 Certificates..........................................prospectus]
Class A-1 Pass Through Rate..............................................S-6
[Class IO Certificates...........................................prospectus]
Class IO Pass-Through Rate...............................................S-7
[Class R Certificates............................................prospectus]
[Closing Date....................................................prospectus]
Code....................................................................S-12
Collection Period........................................................S-7
Commission...............................................................S-3
CPR.....................................................................S-18
[Deferred Interest...............................................prospectus]
Definitive Certificate..................................................S-28
Depositor................................................................S-1
Distribution Date........................................................S-5
DTC Participants........................................................S-28
[Due Date........................................................prospectus]
ERISA...................................................................S-12
Exchange Act.............................................................S-3
Exemption...............................................................S-32
Indices.................................................................S-11
Indirect DTC Participants...............................................S-28
Interest Accrual Amount..................................................S-5
Interest Accrual Period.................................................S-20
Interest Available Funds................................................S-23
Interest Shortfall Amount................................................S-6
[Interest Weighted Class of Certificates.........................prospectus]
Modeling Assumptions....................................................S-18
Mortgage Certificates....................................................S-1
Mortgage Certificate Balance............................................S-24
Mortgage Certificate Pass-Through Rate...................................S-7
[Mortgage Certificate Principal Balance..........................prospectus]
Mortgage Interest Rate...........................................prospectus]
Mortgage Loans..........................................................S-15
Mortgage Loan Servicer..................................................S-14
Mortgage Loan Trustee...................................................S-14
Percentage Interest.....................................................S-23
Plan....................................................................S-12
Pooling Agreement........................................................S-5
</TABLE>
S-36
<PAGE>
<TABLE>
<S> <C>
[Prepayment Interest Shortfalls..................................prospectus]
Principal Balance.......................................................S-24
Quarterly Mortgage Certificate Pass-Through Rate........................S-24
Record Date..............................................................S-5
Regular Certificates....................................................S-12
Reinvestment Rate.......................................................S-20
Related Subordinated Certificates.......................................S-15
REMIC....................................................................S-2
Reserve Fund............................................................S-25
Reset Date...............................................................S-6
Rules...................................................................S-28
Similar Law.............................................................S-12
SMMEA...................................................................S-11
Special Termination.....................................................S-10
Strike Rate..............................................................S-7
Termination Scenarios...................................................S-20
Trust Fund...............................................................S-5
Trustee.................................................................S-11
Underlying Disclosure Documents..........................................S-2
Underlying Mortgage Pool.................................................S-9
Underlying Pooling Agreements............................................S-2
Underlying Series........................................................S-9
Underlying Series Cut-off Date..........................................S-14
Underlying Series Distribution Date......................................S-7
Underlying Trust Fund...................................................S-15
Weighted Average Mortgage Certificate Pass-Through Rate..................S-7
Yield Support Counterparty...............................................S-7
Yield Support Agreement..................................................S-7
</TABLE>
S-37
<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 ______ __, 1996
PROSPECTUS
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) a pool (the "Mortgage
Pool") containing (i) conventional one- to four-family residential mortgage
loans, (ii) mortgage loans secured by multifamily residential rental properties
consisting of five or more dwelling units or apartment buildings owned by
cooperative housing corporations, (iii) 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, (iv) 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 (v) certain conventional mortgage
pass-through certificates (the "Mortgage Certificates") and related property or
(b) a pool (the "Contract 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 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, or a combination thereof. 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.
See "Risk Factors" beginning on page 14 herein for a discussion of certain
factors that potential investors should consider in determining whether to
invest in the Certificates of a Series in respect of which this Prospectus is
being delivered.
Prospective investors should consider the limitations discussed under
"ERISA Considerations" 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, as amended. 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 the 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 , 1996 .
<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 of
the material provisions of each such contract or other document 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 Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Seven World Trade Center, Suite 1300, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material 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. 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.
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 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>
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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 REMIC. 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 (as defined below)
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, pro rata
basis or other basis, 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 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
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3
<PAGE>
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right to occupy a particular dwelling unit
(a "Cooperative Dwelling" and, together
with one- to four-family residential
properties, each, a "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 participation
certificates referred to in clauses (i)
through (iii) 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
from one or more affiliates or from
Unaffiliated Sellers, and related property
conveyed to such trust by the Depositor.
Each Series of Certificates will be offered
in book-entry form (or, if specified in
the applicable Prospectus Supplement,
fully registered, certificated form), 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 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 (each, a "Distribution Date"),
at the rate, or pursuant to the method of
determining such rate, specified in the
applicable Prospectus Supplement for each
Class 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".
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4
<PAGE>
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Principal (including
Prepayments)................... Principal on each Trust Asset underlying a
Series of Certificates will be distributed
on each Distribution Date (or such other
date or dates as may be specified in the
applicable Prospectus Supplement),
commencing on the date specified in the
applicable 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.
The Stated Principal Distribution Amount will
equal the amount by which the Stated
Principal Balance of such Multi-Class
Certificates (before taking into account
the amount of interest accrued and added to
the Stated Principal Balance of any Class
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 (or
such other amount as may be specified, or
determined by such method as may be
specified, in the applicable Prospectus
Supplement). 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. Special
Distributions will be made on such
Certificates in the same priority and
manner as distributions in reduction of the
Stated Principal Balance would be made on
the next Distribution Date for such
Certificates (or, if so specified in the
applicable Prospectus Supplement, a
different priority or manner). See
"Description of the Certificates-Special
Distributions".
The Mortgage Pools............. If so specified in the applicable 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. 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 (the "Mortgaged Property")
securing such Mortgage Loan (or such other
Loan-to-Value Ratio as may be specified in
the applicable Prospectus Supplement),
based upon an appraisal of the Mortgaged
Property completed in connection with the
origination of such Mortgage Loan and
considered acceptable to the originator of
such Mortgage Loan or the sales price of
such Mortgaged Property, whichever is less
(the "Original Value"). If specified in the
applicable Prospectus Supplement, Mortgage
Loans secured by Single Family Property
having an original principal amount
exceeding 80% of the Original Value (or
such other percentage as may be specified
in the applicable Prospectus Supplement)
will be covered by a policy of private
mortgage insurance until the outstanding
principal amount is reduced to the
percentage of the Original Value set forth
in the applicable Prospectus Supplement as
a result of principal payments by the
borrower (the "Mortgagor").
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5
<PAGE>
The principal balance at origination of each
Mortgage Loan that is secured by Single
Family Property will not exceed $500,000
(or such other amount as may be specified
in the applicable Prospectus Supplement).
The Mortgage Loans in a Mortgage Pool will
have original maturities ranging from 10 to
40 years (or such other original maturities
as may be specified in the applicable
Prospectus Supplement). Mortgage Pools may
be formed from time to time in varying
sizes.
Fixed Pass-through Rate
Mortgage Pools................. 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") that will exceed by
at least 3/8 of 1% (or such other
percentage as may be specified in the
applicable Prospectus Supplement) the
interest rate (the "Pass-Through Rate") for
such Series, (ii) conform to the
eligibility requirements for such Series
set forth in the applicable 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 applicable 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. 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 applicable
Prospectus Supplement or in a Current
Report on Form 8-K (or such other variable
rate as may be specified, or determined by
such method as may be specified, in the
applicable Prospectus Supplement). 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
applicable Prospectus Supplement will be
more fully described in such Prospectus
Supplement.
Mortgage Certificates.......... If so specified in the applicable 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 applicable 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, by pledges of shares of
cooperative corporations and assignments of
proprietary leases or occupancy agreements
on cooperative dwellings or by such other
similar security as may be specified in
such Prospectus Supplement.
The Contract Pools............. If so specified in the applicable 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. The Contracts will be
fixed-rate Contracts (or, if so specified
in the applicable Prospectus Supplement,
the Contracts will be variable rate
Contracts). Such Contracts, as specified in
the
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6
<PAGE>
applicable 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 applicable 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. Generally, 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 applicable 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.
Certain Risk Factors........... For a discussion of certain risk factors that
should be considered in connection with an
investment in the Certificates, including
those relating to the limited liquidity of
an investment in the Certificates, the
limited obligations evidenced by the
Certificates, the limited amount and nature
of credit support, if any, and the credit
and other risks with respect to the Trust
Assets, see "Risk Factors".
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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7
<PAGE>
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, or such
other day as is specified 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
(except to the limited extent described in
the applicable Prospectus Supplement that
certain Trust Assets may be insured or
guaranteed, in whole or in part, by the FHA
or VA). 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, in
each such case, to the extent specified in
the applicable Prospectus Supplement. In
lieu of or in addition to the foregoing
credit support arrangements if so specified
in the applicable 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 applicable
Prospectus Supplement (the "Subordinated
Amount"). In addition, if so specified in
the applicable 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 applicable 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. To the extent described herein and in
the applicable Prospectus Supplement, 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. 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 Dwelling and the
related proprietary lease or occupancy
agreement have been sold or offered for
sale or (d) each
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Contract with respect to which repossession
proceedings have been commenced. Any other
Mortgage Loan, Cooperative Loan or Contract
constituting a Liquidating Loan will be
described in the applicable Prospectus
Supplement. 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
holders of Certificates of the Series
evidencing interests in such Mortgage Pool
or Contract Pool, as specified in the
applicable 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% (or such
other percentage as may be specified in the
applicable Prospectus Supplement) 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 applicable Prospectus
Supplement. If so specified in the
applicable 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 applicable 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 applicable 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 applicable 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 applicable Prospectus Supplement,
and limited to the Subordinated Amount set
forth in the applicable 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 applicable
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 applicable Prospectus
Supplement, a Reserve Fund may be
established for such Series. If so
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 applicable
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 applicable Prospectus Supplement, or by
the deposit of cash in the amount specified
in the applicable Prospectus Supplement
(the "Initial Deposit"). The Reserve Fund
will be funded by the retention of
specified distributions on the Trust Assets
of the related Mortgage Pool or Contract
Pool,
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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 applicable 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 any Initial
Deposit) 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 applicable
Prospectus Supplement. If so specified in
the applicable 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 applicable
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 applicable 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...... If so 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, if any,
will be limited 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
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
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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 one or more
Real Estate Mortgage Investment Conduits
(each, 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 applicable 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 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".
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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 applicable Prospectus
Supplement and (iv) to pay costs of
structuring and issuing such Certificates.
If so specified in the applicable
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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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in
the applicable Prospectus Supplement to be prepared and delivered in connection
with the offering of any Series of Certificates, prospective investors should
carefully consider the following risk factors before investing in any Class or
Classes of Certificates of any such Series.
Limited Liquidity
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates of any Series. The Prospectus Supplement for any Series
of Certificates may indicate that an underwriter specified therein intends to
establish a secondary market in such Certificates, however no underwriter will
be obligated to do so. The Certificates will not be listed on any securities
exchange.
Limited Obligations
Except for any related insurance policies or credit support described in
the applicable Prospectus Supplement, the Trust Assets included in the related
Trust Fund will be the sole source of payments on the Certificates of a Series.
The Certificates of any Series will not represent an interest in or obligation
of the Depositor, the Master Servicer, any Servicer, any Unaffiliated Seller,
the Trustee or any of their affiliates, except for the limited obligations of
the Depositor, the Master Servicer or any Unaffiliated Seller with respect to
certain breaches of representations and warranties and the Master Servicer's
obligations as Master Servicer. Neither the Certificates of any Series nor the
related Trust Assets will be guaranteed or insured by any governmental agency or
instrumentality (except to the limited extent described in the related
Prospectus Supplement that certain Trust Assets may be insured or guaranteed, in
whole or in part, by the FHA or VA), the Depositor, the Master Servicer, any
Servicer, any Unaffiliated Seller, the Trustee, any of their affiliates or any
other person. Consequently, in the event that payments on the Trust Assets are
insufficient or otherwise unavailable to make all payments required on the
Certificates, there will be no recourse to the Depositor, the Master Servicer,
any Servicer, any Unaffiliated Seller, the Trustee or, except as specified in
the applicable Prospectus Supplement, any other entity.
Limitations, Reduction and Substitution of Credit Support
With respect to each Series of Certificates, credit support may be provided
in limited amounts to cover certain types of losses on the underlying Trust
Assets. Credit support may be provided in one or more of the forms referred to
herein, including, but not limited to: a Letter of Credit; a Pool Insurance
Policy; a Mortgagor Bankruptcy Bond; subordination of other Classes of
Certificates of the same Series; a Reserve Fund; and any combination thereof.
See "Credit Support" herein. Regardless of the form of credit support, if any,
provided, the amount of coverage will be limited in amount and in most cases
will be subject to periodic reduction in accordance with a schedule or formula.
Furthermore, such credit support may provide only very limited coverage as to
certain types of losses, and may provide no coverage as to certain other types
of losses. All or a portion of the credit support, if any, for any Series of
Certificates will generally be permitted to be reduced, terminated or
substituted for, if each applicable Rating Agency indicates that the then
current rating thereof will not be adversely affected. See "Credit Support".
Risks of the Trust Assets
An investment in securities such as the Certificates of any Series which
generally represent interests in mortgage loans or manufactured housing
conditional sales contracts and installment loan agreements ("contracts"), as
the case may be, may be affected by, among other things, a decline in real
estate values and changes in the mortgagor's or obligor's financial condition.
No assurance can be given that the values of the Mortgaged Properties securing
the Mortgage Loans or the values of the Manufactured Homes securing the
Contracts, as the case may be, underlying any Series of Certificates have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans or Contracts. If the residential real estate market
should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans comprising a particular Trust Fund,
and any secondary financing on the Mortgaged Properties, become equal to or
greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now generally
experienced in the mortgage lending industry and those experienced in the
related Originator's portfolio. In addition, adverse economic conditions
generally, in particular geographic areas or industries, or
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affecting particular segments of the borrowing community (such as Mortgagors or
Obligors relying on commission income and self-employed Mortgagors or Obligors)
and other factors, may affect the timely payment by Mortgagors or Obligors of
scheduled payments of principal and interest on the Mortgage Loans or Contracts,
as the case may be, and, accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. See "Yield
Considerations" and "Maturity and Prepayment Considerations" herein. To the
extent that such losses are not covered by the applicable credit support,
holders of Certificates of the Series evidencing interests in the related Trust
Fund will bear all risk of loss resulting from default by Mortgagors or Obligors
and will have to look primarily to the value of the Mortgaged Properties or
Manufactured Homes for recovery of the outstanding principal and unpaid interest
on the defaulted Mortgage Loans or Contracts. In addition to the foregoing,
certain geographic regions on the United States from time to time will
experience weaker regional economic conditions and housing markets and,
consequently, will experience higher rates of loss and delinquency on mortgage
loans or contracts generally. The Mortgage Loans or Contracts underlying certain
Series of Certificates may be concentrated in these regions, and such
concentration may present risk considerations in addition to those generally
present for similar mortgage-backed or contract-backed securities without such
concentration. See "The Trust Fund - The Mortgage Pools; - Underwriting
Standards; - The Contract Pools; and - Underwriting Policies".
Prepayment and Yield Considerations
The rate and timing of principal payments on the Certificates of each
Series will depend, among other things, on the rate and timing of principal
payments (including prepayments, defaults and liquidations) on the related
Mortgage Loans or Contracts. As is the case with mortgage-backed securities
generally, each Series of Certificates are subject to substantial inherent
cash-flow uncertainties because the Mortgage Loans and Contracts may be prepaid
at any time. Generally, when prevailing interest rates increase, prepayment
rates on mortgage loans tend to decrease, resulting in a slower return of
principal to investors at a time when reinvestment at such higher prevailing
rates would be desirable. Conversely, when prevailing interest rates decline,
prepayment rates on mortgage loans tend to increase, resulting in a faster
return of principal to investors at a time when reinvestment at comparable
yields may not be possible.
The yield to maturity on each Class of Certificates of each Series will
depend, among other things, on the rate and timing of principal payments
(including prepayments, defaults and liquidations) on the Mortgage Loans or
Contracts, as applicable, and the allocation thereof to reduce the Certificate
Principal Balance of such Class. The yield to maturity on each Class of
Certificates will also depend on the Pass-Through Rate and the purchase price
for such Certificates. The yield to investors on any Class of Certificates will
be adversely affected by any allocation thereto of interest shortfalls on the
Mortgage Loans or Contracts, as applicable, which are expected to result from
the distribution of interest only to the date of prepayment (rather than a full
month's interest) in connection with prepayments in full and in part (including
for this purpose Insurance Proceeds and Liquidation Proceeds) to the extent not
covered by amounts otherwise payable to the Master Servicer as servicing
compensation.
In general, if a Class of Certificates is purchased at a premium and
principal distributions thereon occur at a rate faster than anticipated at the
time of purchase, the investor's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a Class of Certificates is
purchased at a discount and principal distributions thereon occur at a rate
slower than that assumed at the time of purchase, the investor's actual yield to
maturity will be lower than that assumed at the time of purchase.
Subordination
To the extent specified in the applicable 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 one or more other Classes of Certificates of such Series.
Book-Entry Registration
If so specified in the applicable Prospectus Supplement, one or more
Classes of Certificates of a 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 applicable Prospectus
Supplement, and will not be registered in the names of the holders of the
Certificates of such Series or their nominees. Because of this, unless and until
Certificates in fully registered, certificated form ("Definitive Certificates")
for such Series are issued, holders of such Certificates will not be
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recognized by the applicable Trustee as "Certificateholders" (as such terms are
used herein or in the related Pooling and Servicing Agreement or the related
Deposit Trust Agreement, as applicable). Hence, until Definitive Certificates
are issued, holders of such Certificates will be able to exercise the rights of
Certificateholders only indirectly through DTC and its participating
organizations.
THE TRUST FUND
Ownership of the Mortgage Pool or Pools 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 applicable Prospectus Supplement in one or more
Mortgage Pools containing one or more Mortgage Loans or Contract Pools
containing one or more 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"), or such other minimum aggregate principal balance
as may be specified in the applicable Prospectus Supplement. If so specified in
the applicable 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
applicable 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 of such Series,
which, if so specified in the applicable 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
interest 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 from one or more affiliates or from 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 or second lien, as applicable, on the Mortgaged
Properties(as defined below). Single Family Property and Multifamily Property
will consist of single family detached homes, townhouses, row houses, attached
homes (single family units having a common wall), individual units located in
condominiums, individual units located in apartment buildings owned by
cooperative housing corporations, individual units in planned unit developments,
leasehold interests in single family detached homes, multifamily residential
rental properties, apartment buildings owned by cooperative housing
corporations, other forms of real property securing a Mortgage Loan, and such
other type of homes or units as are set forth in the applicable 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
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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 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 or, in each such case, such other Mortgage Loan
characteristics as are set forth in the applicable Prospectus Supplement. In
addition, to the extent so specified in the applicable 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 applicable Prospectus Supplement, a Mortgage Pool may also
include fully amortizing, adjustable rate Mortgage Loans ("ARM Loans") with a
30-year term (or other term specified in the applicable Prospectus Supplement)
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.
If so 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"). If so specified in the applicable 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 such
Mortgage Loan may not exceed $250,000.
If so specified in the applicable 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 applicable 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. If
so specified in the applicable Prospectus Supplement 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
applicable 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
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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.
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 applicable Prospectus
Supplement, with the Trustee. In lieu of a cash deposit, if so specified in the
applicable 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 Loan 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 applicable 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 the VA under this
program currently 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 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
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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 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 applicable
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". 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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Each Mortgage Pool included in the related Trust Fund will be composed of
Mortgage Loans evidencing interests in Mortgage Loans having Mortgage Rates that
will exceed by at least 3/8 of 1% (or such other percentage as may be specified
in the applicable Prospectus Supplement) the fixed or variable Pass-Through Rate
established for the Mortgage Pool. To the extent and in the manner specified in
the applicable 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
related 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 an applicable 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 amounts 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 applicable 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
applicable 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 applicable 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 applicable Prospectus Supplement.
Qualifications of Unaffiliated Sellers
Each Unaffiliated Seller of Closed Loans secured by residential properties
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 each case, subject to certain limited exceptions). 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
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 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)
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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, in each such
case, subject to certain exceptions which may be specified in the applicable
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 material 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 one or more REMICs, 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. 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 generally 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 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".
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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. Closed Loans for which 11 or fewer monthly payments have been
received generally will be further subject to the Depositor's customary
underwriting standards. Closed Loans for which 12 to 60 monthly payments have
been received generally 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. 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 (in each such
case, subject to certain exceptions which may be specified in the applicable
Prospectus Supplement).
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, the entire
interest (or such other percentage interest as may be specified in such
Prospectus Supplement) 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. The Contracts will be fully amortizing (or, if so
specified in the applicable Prospectus Supplement, have balloon payments at
maturity) and will bear interest at a fixed annual percentage rate ("APR") (or,
if so specified in the applicable Prospectus Supplement, bear interest at a
variable rate).
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 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".
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The Depositor will cause the Contracts constituting each Contract Pool to
be assigned to the Trustee named in the applicable Prospectus Supplement for the
benefit of the related Certificateholders. The Master Servicer specified in the
applicable 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 applicable 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.
Each Contract Pool will be composed of Contracts bearing interest at the
APRs specified in the Prospectus Supplement. Each registered holder of a
Certificate will be entitled to receive periodic distributions, which generally
will be monthly, 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. If
so specified in the applicable 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 applicable 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 applicable
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, no Contract was more than 30 days (or such other number of
days as may be specified in the Prospectus Supplement) delinquent as to payment
of principal and interest. Upon a breach of any representation that materially
and adversely affects the interest 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 to
repurchase the Contract or, if so specified in the applicable 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 applicable 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, generally will be obligated to cure the
breach in all material respects, to repurchase such Contract at a price equal to
the principal balance thereof as of the date of repurchase plus accrued interest
at the related Pass-Through-Rate to the first day of the month following the
month of repurchase or to take such other action as may be specified in the
applicable Prospectus Supplement. 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 repurchase obligation. See "Credit Support-Performance
Bond". This repurchase 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.
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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 such Prospectus Supplement of the date of
the initial issuance of the Certificates, the Depositor generally 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 applicable
Prospectus Supplement. Except as described below or in the applicable 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. 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 or such other amount as may be specified, or determined by
such method as may be specified, in the applicable Prospectus Supplement.
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 applicable 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 issuing the
Certificates. If so specified in the applicable Prospectus Supplement,
Certificates may be exchanged by the Depositor for Trust Assets. If so specified
in the applicable 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 (in the case
of Trust Assets other than Mortgage Certificates).
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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. The amount of such interest payment distributed monthly to
Certificateholders with respect to each Mortgage Loan generally 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 applicable 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. If so specified in the
applicable 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% (or such other
percentage as may be specified in the applicable 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 applicable 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, 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 applicable 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 applicable 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.
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, the Master Servicer with respect to a Series (subject to certain
limitations which, if applicable, herein
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or in the applicable Prospectus Supplement) 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. 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 (subject to certain limitations
which, if applicable, herein or in the applicable Prospectus Supplement) 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 applicable 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, to the extent so specified in the applicable
Prospectus Supplement, will be made no earlier than the 25th day of the month
following the month of the accrual (or such other day as is set forth 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 (or such other day as
is set forth in the applicable Prospectus Supplement). 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.
MATURITY AND PREPAYMENT CONSIDERATIONS
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 (or, in each such case, such
other scheduled maturities as are set forth in the applicable Prospectus
Supplement), but such Mortgage Loans (or such underlying mortgage loans) or
Contracts may be prepaid in full
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or in part at any time. If so 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 applicable 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
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.
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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 Subordinated 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 one or more REMICs 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 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 the material provisions common to each Pooling and Servicing
Agreement and Deposit Trust Agreement. The summaries 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 applicable 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.
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General
Each Certificate offered hereby and by means of the applicable Prospectus
Supplement will be issued in book-entry form (or, if specified in the applicable
Prospectus Supplement, fully registered, certificated 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 applicable Prospectus Supplement.
If so specified in the applicable 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 one or more REMICs
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 applicable Prospectus
Supplement. If so specified in the applicable 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 applicable
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". The Asset Value of each Trust Asset in the
related Trust Fund generally 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 Trust Assets allocable to such Class
or Subclass, together with reinvestment income thereon, to the extent specified
in the applicable 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
applicable 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
applicable 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 applicable Prospectus Supplement, the holders
of each
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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
applicable 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 applicable
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 applicable 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
applicable 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 applicable
Prospectus Supplements will be transferable and exchangeable at the office or
agency maintained by the Trustee for such purpose set forth in the applicable
Prospectus Supplement. 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 applicable 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 applicable 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 or on such other basis as may be specified in
the applicable Prospectus Supplement. Distributions of principal on the
Certificates will be made in the priority and manner and in the amounts
specified in the applicable 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.
If so specified in the applicable 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. 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 (in each case, subject to certain limitations which, if applicable,
will be described in the applicable Prospectus Supplement). 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 applicable Prospectus Supplement.
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If so specified in the applicable 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 payments
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.
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 (subject to certain limitations in the case of a Series of
Certificates that includes Multi-Class Certificates, which limitations, if
applicable, will be specified in the applicable Prospectus Supplement).
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 (subject to certain limitations
in the case of a Series of Certificates that includes Multi-Class Certificates,
which limitations, if applicable, will be specified in the applicable Prospectus
Supplement). 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.
If so 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 the Stated Principal Balance will be made to each
Class or Subclass of such Certificates in the order specified in the applicable
Prospectus Supplement, which, if so specified in such Prospectus Supplement, may
be concurrently. 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 (or on such other basis as is specified in the applicable Prospectus
Supplement).
The maximum amount which will be distributed in reduction of the Stated
Principal Balance to holders of Certificates of a Class or Subclass then
entitled thereto on any Distribution Date generally 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 applicable 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
applicable Prospectus Supplement, the applicable percentage of the Excess Cash
Flow specified in such Prospectus Supplement.
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
applicable Prospectus Supplement (or such other amount as is specified in the
applicable Prospectus Supplement relating to a Series of Certificates that
includes Multi-Class Certificates). 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 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.
"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 applicable
Prospectus Supplement in the case of the first Distribution Date), the Stated
Principal Distribution Amount for the then current
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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 (or such other amount as is
specified in the applicable Prospectus Supplement relating to a Series of
Certificates that includes Multi-Class Certificates).
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 applicable 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 Pooling and Servicing 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
Pooling and Servicing 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 Pooling and Servicing 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 one or more REMICs, 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 applicable Prospectus Supplement. Any amounts
received in respect of such repurchases will be distributed to
Certificateholders on the immediately succeeding Distribution Date.
If so specified in the applicable 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 applicable 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
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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 with respect
to 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. 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 one or more REMICs, 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". This repurchase
obligation generally constitutes the sole remedy available to the
Certificateholders or the Trustee for a material defect in a constituent
document.
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 each such
Mortgage Loan. In addition, if so specified in the applicable 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 repurchase the Mortgage
Loan at the purchase price set forth above. 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 generally 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 applicable 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 applicable 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
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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 applicable 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. The
aforementioned purchase obligation generally 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"). The Contract
Schedule generally will specify, with respect to each Contract, among other
things: the original 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, if specified in the applicable 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. The Contracts generally 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. 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 applicable
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
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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 one or more REMICs, 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 with respect to such
Contract. This repurchase obligation generally constitutes the sole remedy
available to the Certificateholders or the Trustee for a material defect in a
Contract document.
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 (in each case, subject to certain
exceptions which, if applicable, will be specified in the applicable Prospectus
Supplement).
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.
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 applicable Prospectus Supplement) after
notice from the Master Servicer, such Unaffiliated Seller will be obligated to
repurchase such Contract at a price equal to, the principal balance thereof (or
such other price as may be specified, or determined by such method as may be
specified, in the applicable Prospectus Supplement) 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 one or more REMICs, 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. This repurchase obligation generally 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".
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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 summary describes the material
provisions common to each Servicing Agreement but 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
insurance, 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 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.
The Master Servicer may (subject to certain limitations which, if applicable,
will be specified in the applicable Prospectus Supplement) 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
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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 (subject to certain exceptions which, if
applicable, will be specified in the applicable Prospectus Supplement) 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 interest that was not timely
received, less its servicing fee, provided that, 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 applicable 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;
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(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 applicable
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 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 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.
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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 with respect to any Contract;
(vi) all amounts received from Credit Support provided with respect to
a Series of Certificates with respect to any Contract;
(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
(viii) all amounts, if any, required to be transferred to the
Certificate Account from the Reserve Fund with respect to any Contract.
Collection of Payments on Mortgage Certificates
The Mortgage Certificates, if any, 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 applicable 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
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prepayments, if any) and interest received (relating to each Mortgage Loan in
the Mortgage Pool or each Contract in the Contract Pool) 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 applicable Prospectus Supplement (in either case the
"Determination Date"), except (other than with respect to a Series which
includes Multi-Class Certificates):
(i) all payments that were due on or before the Cut-off Date;
(ii) all principal prepayments and, if so specified in the applicable
Prospectus Supplement, Liquidation Proceeds and all payments in respect of
certain repurchased Mortgage Loans or Contracts 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 with respect to 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 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, (if so specified in the applicable prospectus supplement, to the
extent such amounts exceed the aggregate of unpaid principal and interest
on the related Contract) (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.
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. If so 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.
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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 applicable 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 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 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 the
Stated Principal Balance of such Certificates on such Distribution Date. Any
such Special Distributions will be made in the same priority and manner as
distributions in reduction of the Stated Principal Balance would be made on the
next Distribution Date.
Reports to Certificateholders
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 (such
portion of Advances, may, if so specified in the applicable Prospectus
Supplement, be given as an aggregate amount of principal and interest;
(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 (such portion of Advances,
may, if so specified in the applicable Prospectus Supplement, be given as
an aggregate consent of principal and interest;
(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 the Stated Principal
Balance are then being made, the amount of such interest distribution and
distribution in reduction of the Stated Principal Balance, and the Stated
Principal Balance of each Class after giving effect to the distribution in
reduction of the 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 the 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;
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(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
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 applicable 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 or more 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
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 (subject to certain
limitations which, if applicable, will be specified herein or in the applicable
Prospectus Supplement) 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 their respective determinations that
such advances are reimbursable under any
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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 with respect to 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. The Servicers and
the Master Servicer will also be required (subject to certain limitations which,
if applicable, will be specified herein or in the applicable Prospectus
Supplement) 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.
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 Mortgagors 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 obligated
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 the applicable 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
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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 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
maintain or 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 applicable 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
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obligation if coverage under the Pool Insurance Policy, if any, 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".
Pool Insurance
To the extent specified in the applicable 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 applicable 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 applicable 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".
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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
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 applicable 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 Mortgagor, 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
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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
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.
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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 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 applicable 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, subject to certain exceptions which,
if applicable, will be specified in the applicable 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
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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.
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
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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 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 applicable 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 applicable 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 applicable 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 applicable 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 applicable 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
the period set forth in the applicable Prospectus Supplement after the giving of
written notice of such failure or breach; (iii) a breach of any of certain
representations and warranties made by the Master Servicer in the Pooling and
Servicing Agreement that materially and adversely affects the interests of
Certificateholders, which continues unremedied for 30 days after the giving of
written notice of such breach; (iv) certain events of insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings regarding
the Master Servicer or a Servicer, as applicable; and (v) 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, (iii) if so specified
in the applicable Prospectus Supplement, to amend any provision thereof to the
extent necessary or desirable to maintain the rating or ratings assigned to each
of the Classes of Certificates by each Rating Agency, or (iv) 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
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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 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 Certificates of a Series
in a manner other than that set forth in (i) above without the consent of the
holders of such Class or Subclass evidencing not less than 66 2/3% of such Class
or Subclass, or (ii) 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. Further, the Depositor, the Master
Servicer and the Trustee, at any time and from time to time, without the consent
of the Certificateholders, may amend the Pooling and Servicing Agreement to
modify, eliminate or add to any of its provisions to such extent as shall be
necessary to maintain the qualification of the Trust (or any part thereof) as a
REMIC, or to prevent the imposition of any additional material state or local
taxes, at all times that any Certificates are outstanding; provided, however,
that such action, as evidenced by an opinion of counsel (obtained at the expense
of the Trust Fund), is necessary or helpful to maintain such qualification or to
prevent the imposition of any such taxes, and would not adversely affect in any
material respect the interest of any Certificateholder.
The Deposit Trust Agreement for a Series may be amended by the Trustee and
the Depositor without Certificateholder consent, (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 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 66 2/3% 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. Further, the Depositor, the Master Servicer and the Trustee, at any
time and from time to time, without the consent of the Certificateholders, may
amend the Deposit Trust Agreement to modify, eliminate or add to any of its
provisions to such extent as shall be necessary to maintain the qualification of
the Trust (or any part thereof) as a REMIC, or to prevent the imposition of any
additional material state or local taxes, at all times that any Certificates are
outstanding; provided, however, that such action, as evidenced by an opinion of
counsel (obtained at the expense of the Trust Fund), is necessary or helpful to
maintain such qualification or to prevent the imposition of any such taxes, and
would not adversely affect in any material respect the interest of any
Certificateholder.
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.
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If so provided in the applicable 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 one or more REMICs,
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 applicable
Prospectus Supplement.
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 applicable 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 applicable
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".
Under the Pooling and Servicing Agreement, the Master Servicer (subject to
certain exceptions which, if applicable, will be specified in the applicable
Prospectus Supplement) 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 applicable
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
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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 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 applicable Prospectus Supplement (the "Required Reserve"), the
Certificateholders (in the priority specified in the applicable 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 applicable 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, if any (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 applicable Prospectus
Supplement, the Subordinated Amount will decline over time in accordance with a
schedule which will also be set forth in the applicable Prospectus Supplement.
Shifting Interest
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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.
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
applicable Prospectus Supplement and will decrease in accordance with the
schedule and subject to the conditions set forth in such 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 applicable 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. If so 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 applicable Prospectus Supplement, by any combination of the foregoing, or
in another manner specified in the applicable 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 applicable Prospectus Supplement, and shall be unavailable
thereafter for future distribution to Certificateholders of any 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 applicable
Prospectus Supplement.
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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 applicable 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 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. Whenever the Reserve Fund is less than the Required Reserve
(subject to certain exceptions which, if applicable, will be specified in the
applicable Prospectus Supplement), 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 applicable 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.
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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 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 applicable 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. 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 applicable 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 applicable 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 applicable 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") generally 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.
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 generally 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 Insurance Policy) on the Mortgaged Property and (5) foreclosure
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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.
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.
The Primary Mortgage Insurer generally 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 applicable 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 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
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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 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
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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, if any, 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 applicable 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 flood
insurance to be maintained (or maintain itself), 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 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
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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 applicable 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 applicable 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
applicable 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 applicable Prospectus Supplement.
The Pool Insurance Policy, if any, will provide that as a condition
precedent to the payment of any claim the Insured generally 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 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,
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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".
Special Hazard Insurance Policies
If so specified in the applicable 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
applicable 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 applicable Prospectus Supplement.
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Subject to the foregoing limitations, each Special Hazard Insurance Policy,
if any, 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 applicable 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 applicable Prospectus Supplement. Subject to the terms of the
Mortgagor 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.
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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
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
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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 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.
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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.
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
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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 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.
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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. 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.
Each Mortgage Loan secured by Multifamily Property will be a non-recourse
loan to the Mortgagor (subject to certain exceptions which, if applicable, will
be specified in the applicable Prospectus Supplement). 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.
The mortgage securing each Mortgage Loan relating to Multifamily Property
will contain an assignment of rents and an assignment of leases or similar
agreement (subject to certain exceptions which, if applicable, will be specified
in the applicable Prospectus Supplement), 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.
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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 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 applicable 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
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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. 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.
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
applicable 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
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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. 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.
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
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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.
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. 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.
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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 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 is 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.
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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 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
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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 Code 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 to be treated as a REMIC, each Unaffiliated Seller
will represent and warrant that each of the Manufactured Homes securing such
Contracts meets the 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 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 yield 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.
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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 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
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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 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
generally 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
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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.
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
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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 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
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Committee Report will apply. Under those rules, the holder of a bond purchased
with more than de minimis market discount 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, 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 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
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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 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
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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
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
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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.
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
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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.
G. Pass-Through of Servicing Fees
The general rule is that Residual Owners 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 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
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of REMIC Regular Certificates. The Depositor intends (subject to certain
exceptions which, if applicable, will be stated in the applicable Prospectus
Supplement) to treat each 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 "startup 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.
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
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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 receives 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.
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 not a "U.S. Person" (as defined
above) (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
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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 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.
Holders of REMIC Regular Certificates and REMIC Residual Certificates
should be aware that proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued on April 15, 1996 which, if adopted in final form,
could affect the United States taxation of foreign investors in REMIC
Certificates. The 1996 Proposed Regulations are generally proposed to be
effective for payments after December 31, 1997, regardless of the issue date of
the REMIC Certificate with respect to which such payments are made, subject to
certain transition rules. One of the effects of the 1996 Proposed Regulations
would be to provide certain presumptions with respect to withholding for holders
not providing the required certifications to qualify for the withholding
exemption described above. In addition, the 1996 Proposed Regulations would
replace a number of current tax certification forms with a single, restated form
and standardize the period of time for which withholding agents could rely on
such certifications. The 1996 Proposed Regulations would also provide rules to
determine whether, for purposes of United States federal withholding tax,
interest paid to a non-U.S. Person that is an entity should be treated as paid
to the entity or those holding an interest in that entity.
The discussion under this heading is not intended to be a complete
discussion of the provisions of the 1996 Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the effect the
1996 Proposed Regulations may have.
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 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.
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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.
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
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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.
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". 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.
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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. 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" (subject to certain exceptions which, if
applicable, will be stated in the applicable Prospectus Supplement) 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 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
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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 as it accrues and 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 by the Trustee, whichever
is earlier.
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".
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II. REMIC TRUST FUNDS
A. Classification of REMIC Trust Funds
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.
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.
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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.
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.
The tax treatment of the Trust Interest 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 Trust Interest 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 Trust Interest Certificate must be included in ordinary gross income for
federal income tax purposes as it accrues in accordance with a 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.
In general, the rules for accruing original issue discount set forth above in
"REMIC Trust Funds - Taxation of Owners of REMIC Regular Certificates - Original
Issue Discount" apply; however there is no authority permitting Trust Interest
Certificateholders to take into account the Prepayment Assumption in computing
original issue discount accruals. See "Prepayments" below. For purposes of
applying the original issue discount provisions of the Code, the issue price of
a Trust Interest 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 Trust Interest Certificate
whether or not denominated as interest. The amount of original issue discount
with respect to a Trust Interest Certificate may be treated as zero under the
original issue discount de minimis rules described above.
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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 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.
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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 a
Certificateholder who is not a citizen or resident of the United States, a
corporation or other entity organized in or under the laws of the United States
or of any State thereof, or entity United States estate or trust, will not
generally be subject to 30% United States withholding tax, provided that such
Certificateholder (i) does not own, directly or indirectly, 10% of more of, and
is not a controlled foreign corporation (within the meaning of Section 957 of
the Code) related to, each of the issuers of the Mortgages and (ii) provides
required certification as to its 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.
Holders of Trust Certificates should be aware that proposed Treasury
Regulations were issued on April 15, 1996 which, if adopted in final form,
could affect the United States taxation of foreign investors in Trust
Certificates. For further discussion of those proposed regulations, see "II.
REMIC TRUST FUNDS - L. Foreign Investors in REMIC Certificates" above.
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.
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
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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, 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 the
rights and interests evidenced by such Certificates are not subordinated to the
rights and interests evidenced by other Certificates of the Trust, 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
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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)
(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:
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(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);
(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).
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).
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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 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
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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.
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 applicable
Prospectus Supplements may be sold directly by the Depositor or may be offered
through CS First Boston Corporation ("CSFB"), an affiliate of the Depositor, or
underwriting syndicates represented by CSFB (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.
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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 applicable 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.
The place and time of delivery for each Series of Certificates offered
hereby and by means of the applicable Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such Series.
If and to the extent required by applicable law or regulation, this
Prospectus and the Prospectus Supplement will also be used by CSFB after the
completion of the offering in connection with offers and sales related to
market-making transactions in the Certificates offered hereby in which CSFB acts
as principal. CSFB may also act as agent in such transactions. Sales will be
made at negotiated prices determined at the time of sale.
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.
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<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Page on which
Term is defined
Term in the Prospectus
- ---- -----------------
<S> <C>
Accrual Distribution Amount ........................................ 32
Advances ........................................................... 12
AFR ................................................................ 83
Agreement .......................................................... 29
Alternative Credit Support ......................................... 8
Approved Sale ...................................................... 61
APR ................................................................ 21
ARM Loans .......................................................... 17
Asset Value ........................................................ 29
Assets ............................................................. 79
Buy-Down Fund ...................................................... 11
Buy-Down Loans ..................................................... 18
Cede ............................................................... 15
Certificate Account ................................................ 39
Certificate Principal Balance ...................................... 3
Certificateholders ................................................. 19
Certificates ....................................................... 1
Class .............................................................. 1
Cleanup Costs ...................................................... 69
Closed Loans ....................................................... 20
Closing Date ....................................................... 76
Code ............................................................... 12
Committee Report ................................................... 73
Contract Loan-to-Value Ratio ....................................... 7
Contract Pool ...................................................... 1
Contract Schedule .................................................. 35
Contracts .......................................................... 1
Converted Mortgage Loan ............................................ 15
Cooperative ........................................................ 3
Cooperative Dwelling ............................................... 36
Cooperative Loans .................................................. 4
Cut-off Date ....................................................... 16
Custodial Account .................................................. 38
Custodial Agreement ................................................ 24
Custodian .......................................................... 24
Deferred Interest .................................................. 16
Deficiency Event ................................................... 50
Definitive Certificates ............................................ 15
Deleted Contract ................................................... 24
Deleted Mortgage Certificates ...................................... 33
Deleted Mortgage Loans ............................................. 34
Deposit Trust Agreement ............................................ 28
Depositor .......................................................... 1
Determination Date ................................................. 39
Discount Certificate ............................................... 7
Distribution Date .................................................. 4
DOL ................................................................ 98
DTC ................................................................ 15
Due Date ........................................................... 16
</TABLE>
104
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<TABLE>
<S> <C>
Due Period ......................................................... 31
ERISA .............................................................. 12
ERISA Plans ........................................................ 98
Escrow Account ..................................................... 42
Exempt Series ...................................................... 99
FHA ................................................................ 1
FHA Experience ..................................................... 28
FHA Loans .......................................................... 16
Final Regulation ................................................... 98
First Boston ....................................................... 100
GPM Fund ........................................................... 11
GPM Loans .......................................................... 18
Initial Deposit .................................................... 10
Insurance Proceeds ................................................. 38
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 ............................................... 38
Loan-to Value Ratio ................................................ 5
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 .......................................................... 6
Mortgagor Bankruptcy Bond .......................................... 8
Multi-Class Certificate ............................................ 3
Multifamily Property ............................................... 4
Multiple Variable Rate ............................................. 78
Nonexempt Assets ................................................... 99
Nonexempt Series ................................................... 99
non-U.S. Person .................................................... 89
Obligor ............................................................ 26
OID Regulations .................................................... 74
Original Value ..................................................... 5
Originator ......................................................... 20
Other Pools ........................................................ 100
Parties in Interest ................................................ 98
Pass-Through Rate .................................................. 6
Percentage Interest ................................................ 1
Performance Bond ................................................... 24
Plans .............................................................. 98
Policy Statement ................................................... 103
</TABLE>
105
<PAGE>
<TABLE>
<S> <C>
Pool Insurance Policy .............................................. 8
Pool Insurer ....................................................... 9
Pooling and Servicing Agreement .................................... 19
Premium Certificate ................................................ 7
Prepayment Assumption .............................................. 76
Primary Insurer .................................................... 38
Primary Mortgage Insurance Policy .................................. 9
Primary Mortgage Insurer ........................................... 45
Principal Distribution ............................................. 31
Principal Prepayments .............................................. 10
Principal Weighted Class ........................................... 3
Purchase Price ..................................................... 36
Rating Agency ...................................................... 1
Record Date ........................................................ 31
Reference Agreement ................................................ 29
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 ........................................................... 19
Servicing Account .................................................. 36
Servicing Agreement ................................................ 19
Single Family Property ............................................. 4
Single Variable Rate ............................................... 76
Single-Class REMIC ................................................. 86
SMMEA .............................................................. 12
SPA ................................................................ 28
Special Distributions .............................................. 5
Special Hazard Insurance Policy .................................... 11
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
</TABLE>
106
<PAGE>
<TABLE>
<S> <C>
Subordinated Certificates .......................................... 8
Subordinated Class ................................................. 3
Subordinated Pool .................................................. 10
Subordinated Subclass .............................................. 3
Substitute Contract ................................................ 24
Substitute Mortgage Certificates ................................... 33
Substitute Mortgage Loans .......................................... 34
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 ................................... 93
U.S. Person ........................................................ 88
UCC ................................................................ 66
Unaffiliated Sellers ............................................... 20
Underwriters ....................................................... 103
Unstripped Mortgage Loans .......................................... 94
VA ................................................................. 1
VA Loans ........................................................... 16
</TABLE>
107
<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
Prospectus Supplement .................................................... 2
Additional Information ................................................... 2
Incorporation of Certain Information by Reference ........................ 2
Summary of Terms ......................................................... 3
Risk Factors ............................................................. 14
The Trust Fund ........................................................... 16
The Depositor ............................................................ 25
Use of Proceeds .......................................................... 25
Yield Considerations ..................................................... 26
Maturity and Prepayment Considerations ................................... 27
Description of the Certificates .......................................... 29
Credit Support ........................................................... 54
Description of Insurance ................................................. 58
Certain Legal Aspects of the Mortgage
Loans and Contracts ................................................... 64
Certain Federal Income Tax Consequences .................................. 74
ERISA Considerations ..................................................... 97
Legal Investment ......................................................... 101
Plan of Distribution ..................................................... 102
Legal Matters ............................................................ 103
Index of Terms ........................................................... 104
- --------------------------------------------------------------------------------
Asset Backed
Securities Corporation
Depositor
$
_________ Conduit Mortgage
Pass-Through Certificates,
Series 199 -_
PROSPECTUS SUPPLEMENT
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[ ]
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 Card Account Master Trust, 199[ ]-[ ] (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
(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.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH
UNDER UNDER "RISK FACTORS" IN THIS PROSPECTUS
SUPPLEMENT AND IN THE PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CONSIDER LIMITATIONS
DISCUSSED UNDER "ERISA CONSIDERATIONS" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
Price to Public Underwriting Discount Proceeds to the Depositor (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per [Class A] Certificate
- ------------------------------------------------------------------------------------------------------------------------
[Per [Class B] Certificate]
- ------------------------------------------------------------------------------------------------------------------------
Total
========================================================================================================================
</TABLE>
(1) Before deduction of expenses payable by the Depositor, 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] FIRST BOSTON
The date of this Prospectus Supplement is [ ], 199[ ]
<PAGE>
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
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 [ ], [ ] 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 -- Definitive 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 "RISK FACTORS" herein and in the
Prospectus.
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.
Trust............................... 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 Certificate
Rate formula] for a period of [one]
[three]
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
[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.
Risk Factors...................... For a discussion of risk factors that
should be considered in respect of an
investment in the Certificates, see
"Risk Factors" herein an in the
Prospectus.
[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
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
Principal Funding Account] [distributed
to the [Class A] Certificateholders as
repayment of principal 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[ ].
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Issuance Date.................... [ ], 199[ ].
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'
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
Interest may be reimbursed out of Excess
Spread, if any, [and] 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
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
the Defaulted Amount will be 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 "DESCRIPTION OF
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
THE CERTIFICATES -- Issuance of
Additional 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 that certain
of
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
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 [The
Depository Trust Company ("DTC"), in the
United States,] [or Centrale de
Livraison de Valeurs
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
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.]
[Servicer........................ Insert information regarding Servicer,
if different from the Seller.]
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
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] CutOff 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.]
[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
- --------------------------------------------------------------------------------
S-12
<PAGE>
- --------------------------------------------------------------------------------
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.
[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
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
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 [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
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
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 to 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 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 to such Distribution Date.
In the event such Reallocated
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
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 any 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, 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
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
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.]
[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
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
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"),
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
- --------------------------------------------------------------------------------
S-20
<PAGE>
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
S-21
<PAGE>
- --------------------------------------------------------------------------------
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 Invested
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 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
- --------------------------------------------------------------------------------
S-22
<PAGE>
- --------------------------------------------------------------------------------
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,]
[Fiduciaries of] any employee benefit
plan [subject to ERISA or the CODE]
contemplating purchasing interests in
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.
- --------------------------------------------------------------------------------
S-23
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and in the Prospectus, 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 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] and acquired by the Depositor 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 Pooling 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
S-24
<PAGE>
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.]
[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
S-25
<PAGE>
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.]
[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.]
[Risks Attendant to Investments in Interest-only or Principal-only
Certificates. [If Certificates are Interest-only or Principal-only certificates,
discuss risks attendant thereto.]]
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
S-26
<PAGE>
"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 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
S-27
<PAGE>
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 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-28
<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 and Servicing
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 and Servicing 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 than otherwise would occur. Pursuant to the Pooling and Servicing
Agreement, the [Seller] [Depositor]
S-29
<PAGE>
can make such a designation without notice to or the consent of
Certificateholders. Thereafter, pursuant to the Pooling and Servicing 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 Seller's 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 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.
S-30
<PAGE>
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-31
<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>
Three Months Year Ended
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 adversely affected by future
changes made by the Seller in such fees and charges or by other factors.
S-32
<PAGE>
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.
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.
- ----------
(1) VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
S-33
<PAGE>
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-34
<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-35
<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
Accounts Accounts Outstanding Outstanding
-------- -------- ----------- -----------
Location
--------
<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-36
<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 the material terms of the
Certificates, the Agreement and the Series Supplement. The summaries do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the provisions of the Certificates, the Agreement and the Series
Supplement. Reference should be made to the Prospectus for additional
information concerning the Certificates, the Agreement and the Series
Supplement.
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-37
<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.
["[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
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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 any 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].]
[During the Controlled Amortization Period, which is scheduled to begin on
[ ], 199[ ], and during any 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
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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 [Shared Principal Collections allocated to
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 any 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 Monthly
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 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].
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<PAGE>
[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 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]
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<PAGE>
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 any Pay Out Event, after giving effect to any payment of principal
on such date as described under "Application of Collections--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 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
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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 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
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<PAGE>
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 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
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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 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].]
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[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,
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
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<PAGE>
(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 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
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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 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
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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 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:
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[(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);
(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.]
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"[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.]
"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] Monthly 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;]
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[(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;]
[(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:
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<PAGE>
[(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.]
(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
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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
(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 the
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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 [Depositor]
(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 any 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 to, or withdrawal from, the Cash
Collateral Account on such Distribution Date) or the Required Cash Collateral
Amount.]
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<PAGE>
[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]
[(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
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[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 a 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 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
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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, 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
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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.]
[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
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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[ ]-[ ]; (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
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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, 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
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Series outstanding on such date (other than any Series or portion thereof (an
"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 a 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.
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
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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;
(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 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
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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.
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
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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. [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
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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, 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>
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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.
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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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
<S> <C>
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.................................................
[Class B] Certificate Rate ..............................................
</TABLE>
S-68
<PAGE>
<TABLE>
<S> <C>
[Class B] Certificateholders' Interest ...................................
[Class B] Certificates ...................................................
[Class B] Charge Off.......................................................
[Class B] Controlled Amortization Amount...................................
[Class B] Controlled Amortization Period...................................
[Class B] Default Amount...................................................
[Class B] Floating Percentage..............................................
[Class B] Initial Invested Amount..........................................
[Class B] Invested 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....................................................
Depositor..................................................................
Distribution Date..........................................................
</TABLE>
S-69
<PAGE>
<TABLE>
<S> <C>
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...............................................................
Required Amount...........................................................
Required Cash Collateral Amount...........................................
Required Collateral Invested Amount.......................................
</TABLE>
S-70
<PAGE>
<TABLE>
<S> <C>
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....................................................
</TABLE>
S-71
<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[ ]
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 Card Account Trust 199[ ]-[ ] (the "Trust") will be formed pursuant to
a trust agreement dated as of [ ], 199[ ] (the "Trust 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.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER UNDER
"RISK FACTORS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CONSIDER LIMITATIONS DISCUSSED UNDER "ERISA
CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS
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 Depositor (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per [Class A] Certificate
- ------------------------------------------------------------------------------------------------------------------------
[Per Class B Certificate]
- ------------------------------------------------------------------------------------------------------------------------
Total
========================================================================================================================
</TABLE>
(1) Before deduction of expenses payable by the Depositor, 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 Trust 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. Potential investors should consider, among other things, the
information set forth in "RISK FACTORS" herein and in the Prospectus.
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, Series 199[ ]-[ ] (the
"Trust" or the "Issuer"), a trust established
pursuant to the Trust 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.
Trust Agreement................ Pursuant to a trust agreement dated as of
[ ], 199[ ] (the "Trust Agreement"),
[between] [among] the Depositor and [insert
Trustee name] in its capacity as trustee (the
"Trustee") [and the Seller], 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").
Risk Factors................... For a discussion of risk factors that should
be considered in respect of an investment in
the Certificates, see "Risk Factors" herein
and in the Prospectus.
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 Distributions 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]
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
[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
Interest Rate"). 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 (the "[Class B]
Certificate Interest Rate").]
Interest will be distributed to
Certificateholders 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
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
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, 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 CRB Securities are
subordinated to the rights of the [Class A]
Certificateholders, as described more fully
herein.]
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
[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 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,
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
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 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 arrangements,
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
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
will not be revised or withdrawn 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>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and in the Prospectus, 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 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.
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[Risks Attendant to Investments in Interest-only or Principal-only
Certificates. [If Certificates are Interest-only or Principal-only certificates,
discuss risks attendant thereto.]]
THE TRUST
General
The Issuer, Card Account Trust, Series 199[ ]-[ ], is a trust formed
pursuant to the Trust 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 Trust 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
Trust Agreement to prospective investors without charge upon request.
The following summaries describe the material 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
Certificates and 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 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
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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 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 Trust 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.]
Distributions 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 Interest 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
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maximum rate of [insert cap if any] until the [ ], 199[ ] Distribution
Date][, and subsequently subject to no maximum rate] (the "Class B Certificate
Interest Rate").]
Interest accrued on the Certificates will be distributable [monthly]
[quarterly] [semi-annually] [on each Distribution [and] Date] [to the extent of
funds available therefor from] [(i)] [the Interest Distribution Amount] [and]
[(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 [ ] 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 [ ] Distribution Date. [Principal distributions to the [Class B]
Certificateholders are expected to commence on the [ ] 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.
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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 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]
Certificates (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 [ ] (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
arrangements, 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
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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 Required
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
Trust 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
<TABLE>
<CAPTION>
<S> <C>
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...........................................................................
CRB Securities 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)......................................................................
</TABLE>
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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 Certificates 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 Interest 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, transferor or depositor 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 or a transferee of 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 Interest
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 [ %] [describe CRB Securities
Certificate Interest Rates] [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"),] [the CRB Securities Expected
Final Payment Date] but may be distributed earlier or later than such date.
However, if a Rapid Amortization Event, Early Amortization Event, Payout Event,
Liquidation Event, Economic Pay Out Event or other similar 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.
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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 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 Securities 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 TRUST AGREEMENT
The following summary describes the material 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 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 Trust 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 Trust
Agreement) received by the Trustee as the date of such request.
Amendment
The Trust 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 Trust Agreement, to add to the duties of the Depositor, or to
add or amend any provisions of the Trust 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 Trust Agreement which shall not be inconsistent
with the provisions of the Trust 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 Trust 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 Trust 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 [ ]. In no event, however, will the Trust created by the Trust
Agreement continue after the death of certain individuals named in the Trust
Agreement. Written notice of termination of the Trust 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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<PAGE>
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 Trust 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 Trust
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 Trust 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 Trust 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 Trust
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 Trust Agreement to
institute any proceeding with respect to the Trust 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 [ ] days
S-25
<PAGE>
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
Trust 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
[Trustee Name] is Trustee under the Trust Agreement. [Trustee Name] 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 Trust Agreement. See "ERISA
CONSIDERATIONS" in the Prospectus.
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
S-26
<PAGE>
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.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed upon
by Sidley & Austin, New York, New York.
S-27
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C>
Accounts..................................................................
Agreement Date............................................................
Agreements................................................................
Ancillary Arrangements....................................................
Beneficial Owner..........................................................
Book-Entry Certificates...................................................
Business Day..............................................................
Card Receivables Backed Securities........................................
Cash Collateral...........................................................
Cash Collateral Account...................................................
Cash Collateral Guaranty..................................................
Cede......................................................................
Certificateholder.........................................................
Certificates..............................................................
[Class A] Certificate.....................................................
[Class A] Certificate Interest Rate.......................................
[Class A] Percentage......................................................
[Class B] Certificate
[Class B] Certificate Interest Rate.......................................
[Class B] Percentage......................................................
Closing Date..............................................................
Code......................................................................
Collection Account........................................................
Collection Period.........................................................
CRB Issuer................................................................
CRB Securities............................................................
CRB Securities Amortization Event.........................................
CRB Securities Certificate Interest Rate..................................
CRB Securities Controlled Amortization Period.............................
CRB Securities Disclosure.................................................
CRB Securities Distribution Date..........................................
CRB Securities Exchange Act Reports.......................................
CRB Securities Expected Final Payment Date................................
CRB Securities Servicing Fee..............................................
CRB Servicer..............................................................
CRB Servicer Reports......................................................
CRB Securities Servicing Fee..............................................
Definitive Certificate....................................................
Depositor.................................................................
Depository................................................................
Distribution Date.........................................................
</TABLE>
S-29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DTC.......................................................................
ERISA.....................................................................
Final Scheduled Distribution Date.........................................
Federal Tax Counsel.......................................................
Final Scheduled Distribution Date.........................................
Finance Charge Receivables................................................
Holdings..................................................................
Interest Distributable Amount.............................................
IRS.......................................................................
Issuer....................................................................
Labor.....................................................................
LIBOR.....................................................................
Moody's...................................................................
Parties in Interest.......................................................
Percentage Interest.......................................................
Plans.....................................................................
Plan Asset Regulation.....................................................
Pool Balance..............................................................
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 Agreement.........................................................
Trustee...................................................................
Underwriter...............................................................
U.S. Certificateholder....................................................
Voting Rights.............................................................
Withholding Agent.........................................................
</TABLE>
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, Dated [ ], 199[ ]
Prospectus Supplement to Prospectus dated [ ], 199[ ]
CARD ACCOUNT TRUST, SERIES 199[ ]-[ ]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Notes, [Class A]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Notes, [Class B]
$[ ] [ %] [Floating Rate] [Adjustable Rate] [Variable Rate]
Asset Backed Certificates, [Class C]
Asset Backed Securities Corporation, Depositor
The 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 A] [ %] [Floating Rate]
[Adjustable Rate] [Variable Rate] Asset Backed Notes (the "[Class A] Notes")
[and $[ ] aggregate principal amount of [Class B] [% ] [Floating Rate ]
[Adjustable Rate] [Variable Rate] Asset Back Notes (the "[Class B] Notes" and,
together with the Class [A] 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 principal amount
of Class [C] [% ] [Floating Rate] [Adjustable Rate] [Variable Rate] Asset Backed
Certificates (the "Class [C] 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").
(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.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER UNDER
"RISK FACTORS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CONSIDER LIMITATIONS DISCUSSED UNDER "ERISA
CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
Price to Public Underwriting Discount Proceeds to the Depositor (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per [Class A] Note
- ------------------------------------------------------------------------------------------------------------------------
[Per Class B Note]
- ------------------------------------------------------------------------------------------------------------------------
[Per Class C Certificate]
- ------------------------------------------------------------------------------------------------------------------------
Total
========================================================================================================================
</TABLE>
(1) Before deduction of expenses payable by the Depositor, 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>
The assets of the Trust will consist of certain asset backed securities
(collectively, the "CRB Securities") each issued pursuant to a pooling and
servicing agreement, master pooling and servicing agreement or similar 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 Arrangement (as defined
herein).]
The per annum rate of interest on the [Class A] 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 B] Notes for each [monthly] [quarterly] [semi-annually] Interest Accrual
Period 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 A] 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 A] Notes. [Principal of the [Class B] 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 B] 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. Potential investors should consider, among other things, the
information set forth in "RISK FACTORS" herein and in the Prospectus.
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 this Prospectus Supplement or in the
Prospectus.
Securities Offered............. (i) [ %] [Floating Rate] [Adjustable Rate]
[Variable Rate] Asset Backed Notes, [Class A]
(the "[Class A] Notes");
[(ii) [ %] [Floating Rate] [Adjustable Rate]
Variable Rate] Asset Backed Notes, [Class B]
(the "[Class B] Notes" and, together with the
[Class A] Notes, the "Notes"); and]
[(iii) [ %] [Floating Rate] [Adjustable Rate]
[Variable Rate] Asset Backed Certificates,
[Class C] (the "[Class C] 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 [Indenture
Trustee name], in its capacity as indenture
trustee (the "Indenture Trustee"). The
[Indenture] [Owner] 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.
Trust Agreement................ Pursuant to a trust agreement dated as of
[ ], 199[ ] (the "Trust Agreement"), among
the Depositor and [ Owner Trustee name] in
its capacity as owner trustee (the "Owner
Trustee"), the Trust will issue the [Class C]
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Certificates in an initial aggregate amount
of $[ ]. The [Class C] 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 securities,
as more fully described herein, each issued
pursuant to a pooling and servicing
agreement, master pooling and servicing
agreement or similar agreement (collectively,
the "Agreements").
Risk Factors................... For a discussion of risk factors that should
be considered in respect of an investment in
the Securities, see "Risk Factors" herein and
in the Prospectus.
Description of Notes........... [Each Class of] [The] Notes will be secured
by a specified group of] the assets of the
Trust pursuant to the Indenture.
A. Interest Rates
Payable on Notes.. [Class A] [ %] [insert interest rate index,
margin above index and cap, if any] (the
"[Class A] Note Interest Rate").
[[Class B] [ %] [insert interest rate index,
margin above index and cap, if any] (the
"[Class B] Note Interest Rate").]
B. Interest Payments.. Interest will accrue on the unpaid principal
amount of the Notes at the [respective] per
annum interest rate[s] 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 current Payment Date
(each, an "Interest Accrual
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
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] the
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 Arrangements
described below,] [interest on the [Class A]
Notes will be payable only from interest
received on the [Group A] CRB Securities and
interest on the [Class B] Notes will be
payable only from interest received on the
[Group B] CRB Securities.]
C. Principal Payments No principal will be payable to the
Noteholders until the [ ], 199[ ] Payment
Date with respect to the [Class A] Notes [and
the [ ], 199[ ] Payment Date with respect to
the [Class B] Notes,] or, upon the occurrence
of a CRB Securities Amortization Event, the
first Payment Date thereafter, as described
herein. Principal payable on the [Class A]
Notes on a Payment Date will generally be
equal to [ ] [[%] (the "[Class A] Note
Percentage") of the principal received on the
[Group A] 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 B] Notes. ] [Principal payable on
the [ClassB] Notes on a Payment Date will
generally be equal to [ ] [[%] (the "[Class
B] Note Percentage") of the principal
received on the [Group B] 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 B] 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
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
"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 A] Notes will
be due on the [ ], 199[ ] Payment Date [and
the principal balance of the [Class B] Notes
will be due on the [ ], 199[ ] Payment Date.]
Failure to pay the full principal balance of
[each Class of] the 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 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
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
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--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
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
denominations of $[ ] and integral multiples
of $1,000 in excess thereof.
J. Title............. DTC, Cedel and/or 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 C]
Certificates...... The [Class C] Certificates represent $[ ]
aggregate principal amount. Interest thereon
will accrue at a rate per annum equal to [ %]
[insert [Class C] interest formula] [the
product of [insert [Group A] interest
formula] and the ratio that the principal
amount of the [Group A] CRB Securities bears
to the aggregate principal amount of the CRB
Securities, [such amount being subject to a
maximum rate of [insert [Group A] interest
cap, if any]]; plus the product of [insert
[Group B] interest formula] and the ratio
that the principal amount of the [Group B]
CRB Securities bears to the aggregate
principal amount of the CRB Securities, [such
amount being subject to a maximum rate of
[insert [Group B] interest cap, if any]],
payable [monthly] [quarterly] [semi-annually]
on each Payment Date[, provided that the rate
of interest on the [Class C] Certificates
shall not exceed [insert [Class C]
Certificate interest cap, if any] per annum]
(the "[Class C] Certificate Interest Rate").
B. Interest Distribu-
tions on the [Class
C] Certificates... Interest will accrue on the unpaid principal
amount of the [Class C] Certificates at the
per annum rate specified herein. Except as
otherwise provided herein, interest will be
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S-8
<PAGE>
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distributed to [Class C] Certificateholders
on each Payment Date. Interest in respect of
a Payment Date will accrue on the [Class C]
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 Distribu-
tions on the [Class
C] Certificates... No principal will be distributable to [Class
C] Certificateholders until the [ ], 199[ ]
Payment Date or, upon the occurrence of a CRB
Securities Amortization Event, the first
Payment Date thereafter, as described herein.
Principal distributable on the [Class C]
Certificates will generally equal [the sum
of] [insert [Group A] Certificate
Percentage]% (the "[Group A] Certificate
Percentage") of the principal received on the
[Group A] CRB Securities and [insert [Group
B] Certificate Percentage]% (the "[Group B]
Certificate Percentage") of the principal
received on the [Group B] 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 A] CRB Securities
and the [Group B] CRB Securities will be
subordinated in priority of payment to the
payment of interest due on the [Class A]
Notes [and [Class B] Notes, respectively].
Distributions of principal on the
Certificates with respect to the [Group A]
CRB Securities and the [Group B] CRB
Securities
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S-9
<PAGE>
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will be subordinated in priority of payment
to the payment of principal due on the [Class
A] Notes [and [Class B] Notes, respectively].
Consequently, Certificateholders will not
receive distributions of interest with
respect to the [Group A] CRB Securities or
the [Group B] 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 A] CRB Securities or the [Group B]
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
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 or 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
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S-10
<PAGE>
- --------------------------------------------------------------------------------
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
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 $1,000 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,
nonUnited 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
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<PAGE>
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C] 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
[the following][certain] ancillary
arrangements (such agreements, the "Ancillary
Arrangements"). [Insert description of
Ancillary Arrangements.]
[Calculation of LIBOR.......... LIBOR applicable to the calculation of the
[Class A] Note Interest 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 A] CRB Securities
immediately prior to such date) applicable to
the distributions of interest on the [Group
A] CRB Securities distributable on such
date.]
[LIBOR applicable to the calculation of the
[Class B] Note Interest 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 B] CRB Securities
immediately prior to such date) applicable to
the distributions of interest on the [Group
B] CRB Securities distributable on such
date.]
[LIBOR applicable to the calculation of the
interest rate on the [Class C] 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
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S-12
<PAGE>
- --------------------------------------------------------------------------------
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
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
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S-13
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT CONSIDERATIONS" herein.
ERISA.......................... [State whether the Notes may be classified as
indebtedness without substantial equity
features for ERISA purposes.]
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 C] 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-14
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and in the Prospectus, prospective investors should carefull consider
the following risk factors before investing in any Class or Classes of
Securities of any such Series.
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]
the Securities, the aggregate amount of each distribution on, and the yield to
maturity of, [each Class of] the 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 any 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 A] CRB Securities [and
the [Group B] CRB Securities]] will be subordinated in priority of payment to
the interest due on the [Class A] Notes [and [Class B] Notes,
S-15
<PAGE>
respectively]. Distributions of principal on the Certificates [with respect to
the [Group A] CRB Securities [and the [Group B] CRB Securities]] will be
subordinated in priority of payment to the payment of principal due on the
[Class A] Notes and [Class B] 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 Payment Date has been paid in full and will not receive
any distributions of principal with respect to the [Group A] CRB Securities [or
the [Group B] CRB Securities] until the full amount of principal due on the
[respective Class of] Notes on such Payment Date is paid in full.
Risks Attendant to Investments in Interest-only or Principal-only
Securities. [If the Securities are interest-only or principal-only securities,
discuss risks attendant thereto.]
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 the material 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] the Notes at all times prior
to the payment in full of the Notes.]
S-16
<PAGE>
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 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 [each Class 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 A] Notes will be funded from the
collections of interest on the [Group A] CRB Securities on such date, and
interest payments on the [Class B] Notes will be funded from the collections of
interest on the [Group B] 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 A] CRB Securities [or the [Group B] CRB Securities] [plus amounts
received with respect to the respective Ancillary Arrangements] are not
sufficient to pay the interest due on the [respective Class of] the 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 A] 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 A] CRB Securities immediately prior to such CRB Securities
Distribution Date) applicable to the distributions of interest on the [Group A]
CRB Securities distributable on such CRB Securities Distribution Date. [LIBOR
applicable to the calculation of the interest rates on the [Class B] 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 B] CRB Securities
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<PAGE>
immediately prior to such CRB Securities Distribution Date) applicable to the
distributions of interest on the [Group B] 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 A]. The [Class A] Notes will bear interest at an annual rate equal
to [insert [Class A] interest rate formula, interest rate index and margin above
index, if any] on the aggregate principal amount of the [Class A] 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 A] Note Interest Rate").
[[Class B]. The [Class B] Notes will bear interest at an annual rate equal
to [insert [Class A] interest rate formula, interest rate index and margin above
index, if any] on the aggregate principal amount of the [Class B] 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 B] Note Interest Rate").]
Payments of Principal
Principal payments to the Noteholders are expected to commence on the [ ],
199[ ] Payment Date with respect to the [Class A] Notes [and the [ ], 199[ ]
Payment Date with respect to the [Class B] Notes]. If, however, a 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 A] CRB Securities, principal payments will be made on the [Class A] Notes
in an amount generally equal to [insert [Class A] Note Percentage] (the "[Class
A] Note Percentage") of the principal distributed on the [Group A] CRB
Securities only.] Such principal will be applied pro rata in accordance with the
outstanding principal balances of the [Class A] Notes. The principal balance of
the [Class A] Notes, to the extent not previously paid, will be due on the [ ],
199[ ] Payment Date (the "[Class A] Final Schedule Payment Date").
[On each Payment Date in respect of which principal is distributed on the
[Group B] CRB Securities, principal payments will be made on the [Class B] Notes
in an amount generally equal to [insert [Class B] Note Percentage] (the "[Class
B] Note Percentage") of such principal distributed on the [Group B] CRB
Securities only. Such principal will be applied pro rata in accordance with the
outstanding principal balances of the [Class B] Notes. The principal balance on
the [Class B] Notes, to the extent not previously paid, will be due on the [ ],
199[ ] Payment Date (the "[Class B] Final Schedule Payment Date").]
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<PAGE>
Principal on the [Class A] Notes will be payable solely from principal on
the [Group A] CRB Securities [and principal on the [Class B] Notes will be
payable solely from principal on the [Group B] CRB Securities].
[Ancillary Arrangements]
[On the Closing Date the Trust will enter into ancillary arrangements
(such arrangements, the "Ancillary Arrangements").] [Insert description of the
Ancillary Arrangements.]
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 DTC, to be delivered to the
[Indenture] [Owner] Trustee's participant account at DTC.]
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[ ], between 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 the material 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
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<PAGE>
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. 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 C] 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, 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].
[Calculation of LIBOR: LIBOR applicable to the calculation of the interest
rates on the [Class C] 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
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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 C]. The [Class C] Certificates will bear interest on the aggregate
principal amount of such Certificates at an annual rate equal to [insert [Class
C] interest rate] [(x) [insert [Class C] index] [plus (i) [insert [Group A]
interest rate formula] multiplied by the ratio that the principal amount of the
[Group A] 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]]; [plus (ii) [insert [Group B] interest rate formula]
multiplied by the ratio that the principal amount of the [Group B] 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, a 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 C] Certificates in an amount generally equal to, [insert amount] [[insert
[Group A] Certificate percentage]% (the "[Group A] Certificate Percentage) of
the principal amount on the [Group A] CRB Securities and [insert [Group B]
Certificate Percentage]% (the "[Group B] Certificate Percentage") of the
principal distributed on the [Group B] CRB Securities.] Such principal will be
applied pro rata in accordance with the outstanding principal balances of the
[Class C] Certificates. [The principal balance of the [Class C] Certificates at
any time will be equal to the outstanding principal balance of the CRB
Securities at such time multiplied by the [Class C] Certificate Percentage at
such time.] As more fully described herein, the outstanding principal balances
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 C] Certificates with respect to the
[Group A] CRB Securities [and the [Group B] CRB Securities] will be subordinated
in priority of payment to the payment of interest due on the [Class A] Notes
[and [Class B] Notes, respectively]]. Distributions of principal on the
Certificates with respect to the] [Group A] CRB Securities [and the [Group B]
CRB Securities] will be subordinated in priority of payment of principal due on
the [Class A] Notes [and [Class B] Notes, respectively]. Consequently, the
Certificateholders will not receive any distributions of interest with respect
to the [Group A] CRB Securities or the [Group B] 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
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respect to the [Group A] CRB Securities [or the [Group B] 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 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
<TABLE>
<CAPTION>
<S> <C>
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...........................................................................
CRB Security Distribution Date.............................................................
Commencement of Controlled Amortization Period.............................................
Minimum [Seller's] [Transferor's] [Depositor's] Percentage.................................
Cash Collateral Guaranty Amount............................................................
Percentage of Subordinated Class B Certificates............................................
Optional Repurchase Percentage.............................................................
Ratings (Moody's/S&P)......................................................................
</TABLE>
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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 directly 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 thereof 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 original seller, transferor or depositor 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 [or a transferee of such Seller holds such interest].
Such Seller [or transferee of 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 A] CRB Securities
The [Group A] CRB Securities will consist of the CRB Securities issued by
the following CRB Securities Issuers: [insert description of [Group A] card
issuers].
The [Group B] CRB Securities
The [Group B] CRB Securities will consist of the CRB Securities issued by
the following CRB Securities Issuers: [insert description of [Group B] 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 bear interest at a rate per annum of [insert
descriptions 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] [to occur] 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")] [[ ] CRB
Securities Distribution Date (the "CRB Securities Expected Final Payment
Date"),], but may be distributed earlier or later than such date. However, if a
Rapid Amortization Event, Early Amortization Event, Pay Out Event, Liquidation
Event, Economic Pay Out Event or similar 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 [CRB Securities Expected Final Payment Date]. If, however, the amount of
principal distributed on the [scheduled final CRB Securities Distribution Date]
[CRB Securities Expected Final Payment 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] [CRB
Securities Expected Final Payment 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.
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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:
(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,
[(e) during the CRB Securities Accumulation Period, collections of
Principal Receivables will be deposited for the benefit of the
holders of CRB Securities based on the investor percentage in a
principal Funding Account].
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,
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(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,
(e) failure to maintain a certain minimum level of Receivables or
Accounts, or if the Seller is unable to transfer Receivables or
Accounts to a CRB Securities Issuer,
(f) certain events of bankruptcy or insolvency relating to the
Seller,
(g) a 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 [ %] 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
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<PAGE>
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.
THE INDENTURE
The following summary describes the material 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 will 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
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amounts of principal and interest[, respectively, paid on each $1,000 in face
amount of [each Class of] the Notes, (ii) the outstanding principal balance of
[each Class of] the Notes and (iii) the outstanding balances of the [Group A]
CRB Securities [or the [Group B] 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.
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, 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] the 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
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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 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
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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 any Rating Agency
as a result of such merger or consolidation and (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.
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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 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
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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.
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 the material 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 Owner 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 Owner 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
S-34
<PAGE>
(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.
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 A] CRB
Securities [or the [Group B] CRB Securities] and any respective amounts on
deposit in the Collection Account are not sufficient to pay the [Class A] Notes
[or [Class B] 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.
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<PAGE>
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.
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.
S-36
<PAGE>
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.
[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
S-37
<PAGE>
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.
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 A] Note, [[_%] per [Class B] Note] [and [_%] per Certificate]; and, the
Underwriter and such dealers may allow a discount of [_%] per [Class A] Note,]
[_%] per [Class B] 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 Depositor 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.
S-38
<PAGE>
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 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-39
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
Accounts...................................................................
Administration Agreement...................................................
Administrator..............................................................
Agreements.................................................................
Ancillary Arrangements.....................................................
Book-Entry Notes...........................................................
Book-Entry Certificates....................................................
Business Day...............................................................
Cash Collateral............................................................
Cash Collateral Account....................................................
Cash Collateral Guaranty...................................................
Cede.......................................................................
CEDEL......................................................................
Certificates...............................................................
Citibank...................................................................
[Class A] Final Scheduled Payment Date.....................................
[Class A] Note Interest Rate...............................................
[Class A] Note Percentage..................................................
[Class A] Notes............................................................
[Class B] Final Scheduled Payment Date.....................................
[Class B] Note Interest Rate...............................................
[Class B] Note Percentage..................................................
[Class B] Notes............................................................
[Class C] Certificate Interest Rate........................................
[Class C] 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 Expected Final Payment Date.................................
CRB Securities Servicer....................................................
CRB Securities Servicing Fee...............................................
Definitive Certificates....................................................
Definitive Notes...........................................................
Depositor..................................................................
DTC........................................................................
</TABLE>
S-40
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ERISA.....................................................................
ERISA Counsel.............................................................
Euroclear.................................................................
European Depositaries.....................................................
Event of Default..........................................................
Federal Tax Counsel.......................................................
Final Legal Maturity......................................................
Finance Charge Receivables................................................
Foreign Person............................................................
[Group A] CRB Securities..................................................
[Group A] Certificate Percentage..........................................
[Group B] CRB Securities..................................................
[Group B] 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.....................................................
Principal Receivables.....................................................
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...........................................................
</TABLE>
S-41
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Underwriter...............................................................
Voting Interests..........................................................
</TABLE>
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
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 (a "Trust Agreement") or a Pooling and
Servicing Agreement, Master Pooling and Servicing Agreement or similar agreement
(a "Pooling and Servicing Agreement") (such Trust Agreements and Pooling and
Servicing Agreements, collectively, the "Agreements") 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.
The property of a Trust the Base Assets of which consist of Receivables
or Participations will include the right to receive all monies due in respect of
such Receivables, 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"),
(Continued on the following page)
----------
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.
PROSPECTIVE INVESTORS SHOULD CONSIDER LIMITATIONS DISCUSSED UNDER
"ERISA CONSIDERATIONS" HEREIN AND IN THE 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
<PAGE>
[LOGO] CS FIRST BOSTON
This date of this Prospectus is [ ], 1996.
-2-
<PAGE>
(Continued from the previous page)
which servicer may also be the Seller. The Base Assets for a Series will be sold
to the Trust by Asset Backed Securities Corporation, a Delaware corporation (the
"Depositor") or such other depositor or transferor as shall be specified in the
related Prospectus Supplement, 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).
To the extent 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.
-3-
<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.
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 AND SERVICING 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 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.
-4-
<PAGE>
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.
-5-
<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 of such Trust or
(ii) a pooling and servicing agreement,
master pooling and servicing agreement or
similar agreement (a "Pooling and Servicing
Agreement") among the Depositor, the Servicer
and the Trustee of such Trust (such Trust
Agreements and Pooling and Servicing
Agreements being sometimes referred to herein
collectively, as the "Agreements"). A Trust
formed pursuant to a Trust Agreement may be
either an owner trust (an "Owner Trust") or a
grantor trust (a "Grantor Trust") and a Trust
formed pursuant to a Pooling and Servicing
Agreement will be 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
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
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.
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").
Risk Factors................... For a discussion of risk factors that should
be considered with respect to an investment
in the Securities, see "RISK FACTORS" herein
and in the related Prospectus Supplement.
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. Each Class of
Certificates will be issued pursuant to the
related Trust Agreement or Pooling and
Servicing Agreement. Any Series of Securities
issued pursuant to a Pooling and Servicing
Agreement will only include Certificates and
the Base Assets of such Certificates will
consist primarily of Receivables or
Participations (such Certificates being
sometimes referred to herein as "Receivables
Pooling Certificates"). Any Series of
Securities issued pursuant to a Trust
Agreement may include Certificates and Notes,
and the Base Assets of such Certificates and
such Notes will consist primarily of CRB
Securities
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(such Certificates being sometimes referred
to herein as "CRB Backed Certificates", such
Notes being sometimes referred to herein as
"CRB Backed Notes" and such CRB Backed
Certificates and CRB Backed Notes being
referred to collectively as "CRB Backed
Securities"). 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. 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.
Notes.......................... As specified in the related Prospectus
Supplement, each Class of Notes will have a
stated principal amount, notional principal
amount or no principal amount and will bear
interest at a specified rate or rates (with
respect to each Class of Notes, the "Note
Interest Rate") or will not bear interest.
Each Class of Notes may have a different Note
Interest Rate, which may be a fixed, variable
or adjustable Note Interest Rate or any
combination of the foregoing. The related
Prospectus Supplement will specify the Note
Interest Rate, or the method for determining
the Note 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,
Note Interest Rates 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,
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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 --
Payments of Interest and Principal".
Notes will be available for purchase in
denominations of $1,000, or such other
minimum denomination as shall be specified in
the related Prospectus Supplement, and
integral multiples of $1,000 in excess
thereof and will be available in book-entry
form, or if specified in the related
Prospectus Supplement, as Definitive Notes.
If the related Prospectus Supplement provides
that the Notes shall be available in
book-entry form only, 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 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 AGREEMENT OR
POOLING AND SERVICING AGREEMENTS --
Termination", the outstanding Notes will be
redeemed as set forth in the related
Prospectus Supplement.
The Certificates............... As specified in the related Prospectus
Supplement, each class of Certificates will
have an original principal amount, no
principal amount or a notional principal
amount and will accrue interest on such
original principal or notional amount at a
specified rate (with respect to each class of
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Certificates, the "Certificate Interest
Rate") or will not bear interest. Each Class
of Certificates may have a different
Certificate Interest Rate, which may be a
fixed, variable or adjustable Certificate
Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement
will specify the Certificate Interest Rate,
or the method for determining the applicable
Certificate Interest 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, Certificate
Interest 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 ("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.
Certificates will be available for purchase
in a minimum denomination of $100,000 or such
other minimum denomination as shall be
specified in the related Prospectus
Supplement, and in integral multiples of
$1,000 in excess thereof and will be
available in book-entry form or, if specified
in the related Prospectus Supplement, as
Definitive Certificates. If the related
Prospectus Supplement specifies that the
Certificates will be available in
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book-entry form only, 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
AND SERVICING AGREEMENT --Termination", the
Certificates will be prepaid as set forth in
the related Prospectus Supplement.
Receivables Pooling Certificates
A. Certificateholders' Interest;
Depositor'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
"Investor Certificateholders' Interest") and
the remainder will be allocated to the
interest of the Depositor therein (the
"Depositor's Interest") and as provided in
the related Prospectus Supplement. The
Depositor's Interest represents the right to
the assets of the Trust not allocated to the
Investor Certificateholders' Interest of any
Series or any interests in the Trust issued
as Series Enhancement. In the case of a
Master Trust, the Depositor may cause the
issuance of additional Series from time to
time and any such issuance will have the
effect of decreasing the Depositor's
Interest. The Depositor's Interest may be
evidenced by an exchangeable certificate that
is subject to certain transfer restrictions.
The aggregate principal amount of the
Investor
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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 Depositor'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
Investor Certificateholders of more than one
Series.
B. Issuance of Additional
Series.................... The related Prospectus Supplement may
provide, in the case of a Master Trust, that
the related Pooling and Servicing Agreement
will provide that pursuant to one or more
supplements to such Pooling and Servicing
Agreement (each, a "Supplement"), the
Depositor may cause the related Trustee to
issue one or more new Series and accordingly
cause a reduction in the Depositor's Interest
represented by the Depositor's Certificate.
Under each such Pooling and Servicing
Agreement, the Depositor 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 or the Trustee as amounts
collected on Principal Receivables and on
Finance Charge Receivables. The Servicer or
the Trustee will allocate between the
Investor Certificateholders' Interest of each
Series (if more than one) of such Trust and
the Depositor'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 --
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<PAGE>
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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
--Receivables Pooling Certificates".
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 Receivables Pooling Certificates of a
Series or Class specified in the related
Prospectus Supplement (the "Invested Amount"
of such Series or Class) at the per annum
rate of interest either specified in or
determined in the manner specified in the
related Prospectus Supplement (the
"Certificate Interest Rate"). If the
Prospectus Supplement for a Series of
Receivables Pooling Certificates so provides,
the Certificate Interest Rate and interest
payment dates applicable to each Certificate
of that Series may be subject to adjustment
from time to time. Any such Certificate
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.
Subject to certain limitations which are
specified herein or which will be specified
in the related Prospectus Supplement,
collections of Finance Charge Receivables and
certain other amounts allocable to the
Investor Certificateholders' Interest of a
Series offered hereby will be used to
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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 (in
the case of the deposit of such interest, 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 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, a
different Expected Final Payment Date and/or
a different 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
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<PAGE>
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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
earliest to occur of (a) if a Pay Out Event
occurs, the commencement of a Rapid
Amortization Period with respect to such
Series and (b) the date specified in the
related Prospectus Supplement as the day on
which the Accumulation Period or Controlled
Amortization Period, as the case may be,
commences. During the Revolving Period with
respect to such Series, collections of
Principal Receivables and certain other
amounts otherwise allocable to the Investor
Certificateholders' Interest of such Series
may be distributed to or for the benefit of
the Certificateholders of other Series (if so
provided in the related Prospectus
Supplement) or the holder of the Depositor's
Certificate in respect of the Seller's
Interest, or allocated and paid to the
Depositor to purchase additional Receivables.
G. Accumulation Period...... If so specified by the related Prospectus
Supplement, unless a Rapid Amortization
Period commences, a Series of Receivables
Pooling Certificates 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 to
occur 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 Series Termination Date with respect
to such Series.
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<PAGE>
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During the Accumulation Period of a Series of
Receivables Pooling Certificates, collections
of Principal Receivables and certain other
amounts allocable to the Investor
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 Investor
Certificateholders of such Series (a
"Principal Funding Account") and used to make
principal distributions to such Investor
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 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, 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 unless a Pay
Out Event shall have occurred prior to such
Expected Final Payment Date.
H. Controlled Amortization
Period................. If the related Prospectus Supplement so
specifies, unless a Rapid Amortization Period
commences with respect to such Series, a
Series of Receivables Pooling Certificates
will have an
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<PAGE>
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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 earliest to occur 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 Series
Termination Date with respect to such Series.
During the Controlled Amortization Period of
a Series, collections of Principal
Receivables and certain other amounts
allocable to the Investor Certificateholders'
Interest in such Series will be used on each
Distribution Date to make principal
distributions to Investor Certificateholders
of such Series or any Class of such Series
then scheduled to receive such distributions.
The amount to be distributed to Investor
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
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deemed to have occurred with respect to a
Series of Receivables Pooling Certificates
and ending upon the earliest 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 Investor Investor
Certificateholders' Interest of such Series
will be distributed as principal payments to
the Investor 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 Investor
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
Investor 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........... A "Pay Out Event" with respect to such Series
refers to any of certain events specified as
such in the related Prospectus Supplement,
which events may include:
(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
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<PAGE>
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(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 be deemed to have occurred
without any notice or other action on the
part of the Trustee or the Investor
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 Receivables Pooling
Certificates offered hereby, will be
described in the related Prospectus
Supplement.
Pursuant to the Pooling and Servicing
Agreement, in addition to the consequences of
a Pay Out Event discussed above, if any
Insolvency Event occurs with respect to the
Seller or the Depositor, on the day of such
Insolvency Event, the Seller or the
Depositor, respectively, 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 and Servicing Agreement applicable to
such Series, within 15 days the
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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 evidencing more than 50% of the
aggregate unpaid principal amount of each
such Series (or if a Series includes more
than one Class, the holders of Certificates
evidencing more than 50% of each Class of
such Certificates of such Series) 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 and Servicing
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 an 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.
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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 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 CRB
Backed Certificates, the terms of the
underlying CRB Securities. 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"))
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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 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
AGREEMENTS OR POOLING AND SERVICING
AGREEMENTS -- 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
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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 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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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)
or such other receivables or assets as the
Prospectus Supplement shall specify.
(b) Credit Card
Receivables........ "Credit Card Receivables" are Receivables due
to issuers of credit cards (such as VISA USA,
Inc. ("VISA"1) or MasterCard International
Incorporated ("Mastercard International"1)
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 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.
- ----------
1 VISA and MasterCard are registered trademarks of VISA USA, Inc. And MasterCard
International Incorporated, respectively.
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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
"TRUST ASSETS - CRB Securities". Payments on
the CRB Securities will be distributed
directly to the Trustee as registered owner
of such CRB Securities or, if applicable, to
the Indenture Trustee as pledgee thereof, or
in such other manner as shall be specified in
the related Prospectus Supplement.
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The related Prospectus Supplement for a
Series which includes CRB Securities as 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 pay out
events or 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 "TRUST
ASSETS -- CRB Securities".
B. Collection, Distribution, Pre-
Funding and other Trust
Accounts................. All payments on or with respect to the Base
Assets for a Series will be 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)
or in such other manner as shall be specified
in the related Prospectus Supplement.
To the extent provided in the related
Prospectus
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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. Amounts
deposited in any such Payment Account will be
available, to the extent 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.
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
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"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 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
caps, 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
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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.
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 advise
the Owner Trust that the Notes will be
classified as debt for federal income tax
purposes, or that the Notes will be
classified in such other manner as shall be
specified in the related Prospectus
Supplement. 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
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<PAGE>
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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 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 will
be properly treated as the owner of the Base
Assets and the other assets of the Trust for
federal income tax purposes
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<PAGE>
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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 Base
Assets. 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 and
qualificaitons discussed under "ERISA
CONSIDERATIONS" herein and the considerations
and qualifications set forth in the related
Prospectus Supplement, the Notes of any
Series issued by a Trust may be 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 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 and whether the purchase or
holding of Certificates could give rise to
transactions prohibited under ERISA or
Section 4975 of the Code.
Legal Investment............... Investors whose investment authority is
subject to legal restrictions should consult
their own legal advisors to determine whether
and to what extent
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<PAGE>
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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 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.
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.
Dependence 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 Amortization 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 depend 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.
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
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<PAGE>
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 "RISK FACTORS -- Maturity Assumptions" in the related Prospectus
Supplement.
Dependence on 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 and Servicing Agreement for such a Series
will provide that if the Depositor's Interest is not maintained at a minimum
level equal to an amount specified in the Pooling and Servicing Agreement and
the related Prospectus Supplement (the "Required Depositor's Interest"), then
the Depositor will be required to transfer Additional Accounts to the Trust. In
addition, subject to certain exceptions, which if applicable, will be set forth
in the related Prospectus Supplement, if the Depositor fails to transfer such
Additional Accounts to the Trust pursuant to the Pooling and Servicing
Agreement, a Pay Out Event will occur.
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. The related Prospectus Supplement may provide
that 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 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
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<PAGE>
"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.
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
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<PAGE>
in the related Pooling and Servicing Agreement and in the related Receivables
Purchase Agreement, respectively, that such transfer of the Receivables from the
Seller to the Depositor and from the Depositor 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 Depositor, and a valid
transfer of all right, title and interest of the Depositor in the Receivables
and all proceeds thereof to the Trust or will be 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 Pooling and Servicing 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 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".
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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 such 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 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.
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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 more Series and commencement of the Rapid
Amortization Period for such Series. Under the applicable Pooling and Servicing
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 in the
applicable Receivables Purchase Agreement and Pooling and Servicing
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Agreement 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, a Pooling and
Servicing 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 to
interest and principal due on 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 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
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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, upon the occurrence of a Servicer Default the related Indenture Trustee
or Noteholders (subject to certain limitations, which if applicable, will be
specified in the related Prospectus Supplement) 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 and Servicing Agreement, a
form of Series Supplement to the Pooling and Servicing Agreement and a form of
Indenture have each been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. If applicable, the Trust Agreement, the
Pooling and Servicing Agreement, the Series Supplement and the Indenture,
relating to a particular Series of Securities will be 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.
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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.
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
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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 and Servicing Agreement. In
addition, pursuant to the related Pooling and Servicing Agreement, a Seller in
some circumstances will be obligated to designate Additional Accounts, which
together with the Receivables arising in such Additional Accounts, 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 set forth in the applicable Pooling and Servicing Agreement. Pursuant
to the related Pooling and Servicing Agreement and Series Supplement, the
Depositor 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.
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
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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.
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.
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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. 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.
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
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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, to the extent 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, to
the extent specified in the related Prospectus Supplement, any income earned
thereon. Certain 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
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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.
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.
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 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
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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 subordinate
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 subordinate
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 subordinate 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 subordinate Securities
or Collateral Indebtedness Interests will be distributed to holders of
Securities which are senior to such subordinate Securities or Collateral
Indebtedness Interests. The amount of subordination will decrease whenever
amounts otherwise payable to the holders of subordinate 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.
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
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under a letter of credit will be determined in the manner specified therein and
in the related Prospectus Supplement.
Cash Collateral Guaranty or Cash Collateral 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 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
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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.
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 Pooling and Servicing 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
Pooling and Servicing Agreement for a
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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
The Servicer will deposit (subject to certain exceptions which, if
applicable, will be specified in the related Prospectus Supplement) 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 Investor
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. To the extent and in the manner 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 holder of the Depositor
Certificate 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).
To the extent and in the manner 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). To
the extent and in the manner indicated in the related Prospectus Supplement, the
Collection Account will be an account maintained (i) at a depository
institution, the long-term 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 Federal Deposit Insurance Corporation (the "FDIC") or
which are secured in a manner meeting requirements established by such Rating
Agencies.
To the extent and in the manner 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
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not required to be deposited therein, it may, at any time, withdraw such amount
from such Collection Account.
Servicing Compensation and Payment of Expenses
The related Prospectus Supplement may provide that 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
subordinated to the rights of holders of the Securities of such Series.
Evidence as to Compliance
The Pooling and Servicing 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 and Servicing 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 and Servicing
Agreement for a Series will provide for delivery to the Trustee for such Series
of an annual statement signed by an officer of the Servicer to the effect that
the Servicer has fulfilled its obligations under the Pooling and Servicing
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. Servicer Defaults and the rights of the Trustee and the holders of
Securities
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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
AGREEMENTS OR POOLING AND SERVICING AGREEMENTS -- Servicer Defaults" and "--
Rights upon Servicer Defaults" or will be as described in the related Prospectus
Supplement.
The Servicer generally may not resign from its obligations and duties
under the Agreement, except (a) upon determination that (i) the performance of
its duties under the Pooling and Servicing 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 and Servicing 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
and Servicing Agreement.
"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 and Servicing Agreement.
Indemnification
Except to the extent otherwise provided therein, each Pooling and
Servicing 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 and Servicing Agreement,
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including those arising from acts or omissions of the Servicer pursuant to the
Pooling and Servicing 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 and Servicing 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 and
Servicing Agreement by the Servicer. Subject to certain exceptions in the
Pooling and Servicing Agreement, any indemnification pursuant to the Pooling and
Servicing Agreement will be only from the assets of the Servicer.
DESCRIPTION OF THE NOTES
General
The following summaries describe the material provisions of 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 and the Indenture. 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.
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.
Payments of principal of and interest, if any, 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 or in such
other manner
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specified in the related Prospectus Supplement, 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
Each Class of Notes of a Series will have a stated principal amount,
notional amount or no principal amount and will bear interest at a specified
Note Interest Rate or will not bear interest. Each Class of Notes may have a
different Note Interest Rate, which may be fixed, variable or an adjustable Note
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 Note Interest Rate for each Class of
Notes or the method for determining such Note 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. The Prospectus Supplement may specify that payments of interest, if
any, on Notes will be made prior to payments of principal thereon or in such
other order or priority as shall be specified in such Prospectus Supplement.
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, Note 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. If
specified in the related Prospectus Supplement, one or more Classes of Notes
("Strip Notes") may be entitled to (i) principal payments
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with disproportionate, nominal or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal payments.
Certain Provisions of the Indenture
Events of Default; Rights upon Event of Default. "Events of Default" in
respect of a Series of Notes under the related Indenture will consist of certain
events specified in the Related Prospectus Supplement, which events will
include: (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; (v) certain events of
bankruptcy, insolvency, receivership or liquidation with respect to such Trust
or (vi) such other events as shall be specified in the related Prospectus
Supplement. 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, 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.
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 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. The Indenture Trustee, however, 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 one of certain conditions
specified in the related Prospectus Supplement are met, which conditions
generally will include (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
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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.
No holder of a Note will have the right to institute any proceeding with
respect to the related Indenture, unless certain conditions specified in such
Indenture have been satisfied, which conditions generally will include (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.
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 and to the extent 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.
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Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless certain conditions,
which shall be specified in such Indenture shall be satisfied, which conditions
generally will include (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, (vi) any action that is necessary to maintain
the lien and security interest created by this Indenture will have been taken;
and (vii) the Trust will 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 the covenants of the
Indenture and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
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 and Servicing 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.
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
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of the related Noteholders, provided that (subject to certain exceptions which,
if applicable, will be 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.
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.
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.
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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 the material provisions in the Agreements
which generally are anticipated to be common to the Trust Agreements and to the
Pooling and Servicing Agreement. The summaries do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, the
provisions of the 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.
The related Prospectus Supplement will provide that each Class of
Certificates will have an original principal amount, no principal amount or
notional amount and will accrue interest on such original principal amount or
notional at a specified Certificate Interest Rate or will not bear interest.
Each Class of Certificates may have a different Certificate Interest Rate, which
may be a fixed, variable or adjustable Certificate Interest Rate, or any
combination of the foregoing. The related Prospectus Supplement will specify the
Certificate Interest Rate, or the method for determining the applicable
Certificate Interest 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, Certificate Interest 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.
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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.
Certificates will be available for purchase in a minimum denomination of
$100,000 or such other minimum denominations as the Prospectus Supplement shall
provide and in integral multiples of $1,000 in excess thereof and will be
available in book-entry form or if provided in the related Prospectus
Supplement, as Definitive Certificates. If the Certificates will be available in
book-entry form only, the related Prospectus Supplement will provide that
Certificateholders will be able to receive Definitive Certificates only in the
limited circumstances described herein or in such 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.
Payments of principal of and interest, if any, 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 or in such other manner as shall be specified in the related
Prospectus Supplement, 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, if any, 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. All payments with respect to the Base Assets
for a Series, together with reinvestment income thereon, amounts withdrawn from
any Reserve Account and amounts available pursuant to any other Series
Enhancement generally 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".
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Payments of Interest
The Certificates of each Class which by their terms are entitled to
receive interest will bear interest (calculated on the basis of a 360-day year
of twelve 30-day months or such other basis as is specified in the related
Prospectus Supplement) 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 and Servicing 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 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
Investor Certificateholders' Interest; Depositor'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 Depositor's Interest and as
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provided in the related Prospectus Supplement. The Depositor's Interest
represents the rights to the assets of the Trust not allocated to the Investor
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 Depositor's Interest.
The Depositor's Interest may be evidenced by an exchangeable certificate that is
subject to certain transfer restrictions. The aggregate principal amount of the
Investor 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
Depositor'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 Investor
Certificateholders of more than one Series.
Issuance of Additional Series. In the case of a Master Trust, the related
Pooling and Servicing Agreement will provide that pursuant to one or more
supplements to such Pooling and Servicing Agreement (each, a "Series
Supplement"), the Depositor may cause the related Trustee to issue one or more
new Series of Certificates and accordingly cause a reduction in the Depositor's
Interest represented by the Depositor's Certificate. Under such Pooling and
Servicing Agreement, the Depositor 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
Depositor shall have received written notice from each Rating Agency that such
issuance will not have a Ratings Effect and (b) the 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 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 and (c) such other conditions
as shall be specified in the related Prospectus Supplement.
Allocation Percentage. Pursuant to the Pooling and Servicing 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 Investor Certificateholders' Interest of each Series, the
Depositor's Interest and in certain circumstances to the provider of Series
Enhancement, 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:
(a) collections of Finance Charge Receivables and the Defaulted Amount
will at all times be allocated to the Investor Certificateholders'
Interest of a Series based on the Floating Allocation Percentage of
such Series;
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(b) collections of Principal Receivables will at all times be allocated
to the Investor 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
Investor 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 Investor Certificateholders'
Interest of any Series as described above will be allocated to the Depositor's
Interest.
Collections. All collections in respect of Base Assets with respect to a
given Trust will be allocated by the related Servicer or Trustee as amounts
collected on Principal Receivables and on Finance Charge Receivables. The
Servicer will allocate between the Investor Certificateholders' Interest of each
Series (if more than one) of such Trust and the Depositor'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 Depositor 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 Depositor,
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".
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, 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
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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. To the extent 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. Receivables Pooling 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 earliest to occur
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
Depositor's Interest.
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
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determined in the manner specified, in the related Prospectus Supplement and
will continue until the earliest to occur 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 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 Investor Certificateholders' Interest of such Series
will be deposited on each Distribution Date in a Principal Funding Account
established for the benefit of the Investor 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 earliest to occur 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 Investor
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 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
Investor Certificateholders' Interest of such Series will be distributed as
principal payments to the Investor Certificateholders of such Series
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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 Investor 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 commence on the Series Cut-Off
Date and continue until the commencement of the Accumulation Period or the
Controlled Amortization Period, unless a Pay Out Event occurs with respect to
such Series prior to any of such dates. A "Pay Out Event" with respect to such
Series refers to any of certain events specified as such in the related
Prospectus Supplement, which events may include:
(a) the occurrence of an "Insolvency Event" (which shall mean the
appointment of the FDIC as receiver of the Depositor or the Seller or
another person specified in related Prospectus Supplement) or certain
other events relating to the bankruptcy, insolvency or receivership of
the Depositor or the Seller (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 Investor 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 Investor
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 Investor
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 Depositor or the Seller, pursuant to
the Pooling and Servicing Agreement and the Receivables Purchase Agreement, on
the day of such Insolvency Event, the Depositor or the
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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 and Servicing Agreement and the
Receivables Purchase 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 and
Servicing Agreement and the related Prospectus Supplement. If the sum of (a) the
portion of such proceeds allocated to the Investor Certificateholders' Interest
of any Series and (b) the proceeds of any collections of the Receivables in the
Collection Account allocated to the Investor 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 Investor 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 Investor Certificateholders
of the Series having a Paired Series.
Optional Termination; Final Payment of Principal. If specified in the
Prospectus Supplement, 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
Depositor will have the option to repurchase the Investor 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 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 Interest Rate. Following any such repurchase and
the deposit of the aggregate purchase price into the Collection Account, the
Investor Certificateholders of such
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Series will have no further rights with respect to the Receivables. In the event
that the Depositor shall fail for any reason to deposit the aggregate purchase
price for the Investor Certificateholders' Interest of a Series, payments would
continue to be made to the Investor 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 Receivables of the
related Trust, as specified in the Pooling and Servicing 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 Certificateholders of
such Series or the holder of the Enhancement Invested Amount after such
Certificateholders are paid in full, as provided in the Pooling and Servicing
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 such Prospectus
Supplement may, at its option, cause an early termination of a Trust by
repurchasing all of the Receivables 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 Receivables, 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.
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.
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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.
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
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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 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.
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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.
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.
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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 under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
Definitive Securities
If the Securities of any Series will be available in book entry form, such
Securities will be issued as Definitive Securities, rather than to DTC or its
nominee, only under circumstances specified in the related Prospectus
Supplement, which circumstances may include that, (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.
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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 AGREEMENTS OR POOLING AND SERVICING
AGREEMENTS
The following summaries describe the material provisions of the Trust
Agreements and Pooling and Servicing 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 Pooling and Servicing
Agreement and Receivables Purchase 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),
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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. If 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--Risk of Commingling" and "CERTAIN
LEGAL ASPECTS OF THE RECEIVABLES".
Assignment of CRB Securities; Pre-Funding Account. All or a portion of the
net proceeds received from the sale of the Securities of a Series, the Base
Assets of which consist entirely or in part of CRB Securities, will be applied
to the purchase of the related CRB Securities from the Depositor or other Seller
on the Closing Date and, to the deposit of a Pre-Funded Amount into a
Pre-Funding Account, if and to the extent specified in the related Prospectus
Supplement. If 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. 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 Trust 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),
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annual Certificate Interest Rate or interest rate and maturity date for each
such CRB Security. In the Trust 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, then 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"). The above-described
cure, repurchase or substitution obligations (subject to certain exceptions
which, if applicable, will be specified in the related Prospectus Supplement)
shall 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 purchased by a Depositor from a
Seller and reconveyed to the Trustee, the Depositor's only source of funds to
effect any cure, repurchase or substitution generally 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 Owner
Trustee 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 Trustee 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
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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 Trustee 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 with respect to the related Base Assets (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.
The related Prospectus Supplement may provide that investment earnings on funds
deposited in the Trust Accounts, net of losses and investment expenses
(collectively, "Investment Earnings"), will be treated as collections of
interest on the related Base Assets.
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.
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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 will be required
to 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
With respect to a Series of Receivables Pooling Certificates, "Servicer
Defaults" under the Pooling and Servicing Agreement for such Series generally
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
Certificateholders 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 Pooling and Servicing 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, (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
and (iv) certain other events that shall be specified in the related Prospectus
Supplement.
Rights Upon Servicer Defaults
With respect to a Series of Receivables Pooling Certificates, so long as a
Servicer Default remains unremedied under the Pooling and Servicing 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 Pooling and Servicing
Agreement in and to the Receivables, whereupon the Trustee will succeed to all
the responsibilities, duties and liabilities of the Servicer under the Pooling
and Servicing 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 Pooling and Servicing Agreement.
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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 Pooling
and Servicing 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 Pooling
and Servicing Agreement.
During the continuance of any Servicer Default under the Pooling and
Servicing 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 Certificateholders of such Series, and
holders of the required percentages of the Certificates 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. The Trustee, however, will not be under any
obligation to pursue any such remedy or to exercise any of such trusts or powers
unless such Certificateholders 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 Certificateholders.
No Certificateholder of a Series, solely by virtue of such holder's status
as a Certificateholder, will have any right under the Pooling and Servicing
Agreement for such Series to institute any proceeding with respect to the
Pooling and Servicing 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 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,
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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 Pooling and
Servicing Agreement, if applicable) 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.
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
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
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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, (vi) to comply
with any requirements imposed by the Code or (vii) to make such other amendments
as are specified in the related Prospectus Supplement; provided that any such
amendment pursuant to clause (iv) or (vii) 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.
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 earliest to occur 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
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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-- Receivables Pooling
Certificates -- Optional Termination; Final Payment of Principal".
Payment in Full of the Notes
With respect to any Series of Securities that includes Notes, the Trust
Agreement will provide that 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 such Trust Agreement, to the extent and in the
matter 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. As a
consequence, investors should consider the issues raised by the following
discussion as relevant in connection with both the Receivables and the
Receivables underlying the CRB Securities. 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 purport to reflect the laws of any
particular state, nor purport to encompass the laws of all states in which
Receivables (or the receivables underlying the CRB Securities) originate. The
summaries are qualified in their entirety by reference to the applicable federal
and state laws governing the Receivables (and the Receivables underlying the CRB
Securities).
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/or the Depositor) in and to the
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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 Depositor'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 upon 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 interest. Under the Pooling and
Servicing 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 Pooling and Servicing Agreement, it will not sell, pledge,
assign, transfer or grant any lien on any Receivables (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 Receivables comes into
existence may also have priority over the interest of the Trust in such
Receivables. 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
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It is likely that the Sellers of Receivables to a Trust or the sellers of
Receivables to CRB Trusts 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 or to a CRB 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) or to a CRB 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 or to a CRB Trust with
respect to 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 or CRB 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 of
CRB Securities relating to such Seller outstanding at such time and possible
reductions in the amount of those payments could occur.
Each Pooling and Servicing Agreement and Receivables Purchase 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 Depositor, and a Pay Out Event will occur. Under the Pooling and
Servicing Agreement, no new Principal Receivables will be transferred to the
Trust and, unless otherwise instructed within a specified period by the 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.
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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 national banking association, the National Bank Act, 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 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.
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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.
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
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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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material United
States 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,
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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 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 advise the Owner Trust that the
Notes will be classified as debt for federal income tax purposes, or classified
in such other manner as shall be provided in the related Prospectus Supplement.
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 allocable to certain tax-exempt
entities (including pension funds)
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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 or are
received, depending on the holder's method of accounting. Notwithstanding the
foregoing, interest that is payable on a Note with a fixed 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".
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
or are received, depending on the holder's method of accounting.
Stated interest generally qualifies as payable at 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
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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 payable at 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, (iii) 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 "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 or are received, depending
on the holder's method of accounting.
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.
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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 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
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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 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
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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 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 de
minimis market 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 the holder 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
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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, 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. 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.
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 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.
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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 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.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of Non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
payments are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed, or what, if any, modifications may be made to them. The discussion
under this heading and under "-- Backup Withholding and Information Reporting",
below, is not intended to be a complete discussion of the provisions of the 1996
Proposed Regulations, and prospective investors are urged to consult their tax
advisors with respect to the effect the 1996 Proposed Regulations may have.
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 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 certificate
has been received from the beneficial owner by it or by a financial institution
between
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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. Under
temporary Treasury Regulations, the forgoing certification may be provided by
the beneficial owner of a Note on IRS Form W-8.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described in the preceding
paragraph, but would add "intermediary certification" options for certain
qualifying withholding agents. Under one such option, a withholding agent would
be allowed to rely on IRS Form W-8 furnished by a financial institution or
other intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the IRS and is thus a
"qualified intermediary". Under another option, an authorized foreign agent of a
United States withholding agent would be permitted to act on behalf of the
United States withholding agent, provided certain conditions are met.
The 1996 Proposed Regulations, if adopted, would also provide certain
presumptions with respect to withholding for holders not providing the required
certifications to qualify for the withholding exemption described above. In
addition, the 1996 Proposed Regulations would replace a number of current tax
certification forms (including IRS Form W-8 IRS, Form 1001, and IRS Form 4224,
discussed below) with a single, restated form and standardize the period of time
for which withholding agents could rely on such certifications. The 1996
Proposed Regulations would also provide rules to determine whether, for purposes
of United States federal withholding tax, interest paid to a Non-United States
Holder that is an entity should be treated as paid to the entity or those
holding an interest in that entity.
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
distributions 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 be required to provide a properly executed IRS
Form 4224 annually 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, market discount or original issue discount in certain circumstances)
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
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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
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 for United States
federal income tax purposes, 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
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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.
The 1996 Proposed Regulations would, if adopted, alter the forgoing rules
in certain respects. In particular, the 1996 Proposed Regulations would provide
certain presumptions under which Non-United States Holders may be subject to
backup witholding in the absence of required certifications.
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 Stripped
Certificates and that a Series of Securities includes a
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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 allocable 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 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 Base 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 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
Certificate Interest 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.
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 Certificate Interest 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.
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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. A non-corporate Certificate
Owner will be allowed no deduction for its share of the expenses of the Trust in
determining its liability for alternative minimum tax. 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 in the Code ($117,950 in 1996 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, such
calculations may result in certain timing and character differences under
certain circumstances.
Discount and Premium. The purchase price paid by the Trust for the related
Base Assets may be greater or less than the remaining principal balance of the
Base Assets at the time of purchase. If so, the Base 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 it is possible that the IRS might require that it be recomputed on a Base
Asset-by-Base Asset 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 purposes 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
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with those requirements. Furthermore, the Trust might not be able to comply with
those requirements 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 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.
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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 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
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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 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 Base 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 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. A non-corporate
Grantor Trust Certificateholder will be allowed no deduction for its share of
the expenses of the Trust in determining its liability for alternative minimum
tax. 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 ($117,950
in 1996 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 Asset will depend on whether
the discount represents original issue discount or market discount. 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 Base Asset 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
Base Asset is considered to have been purchased at a "market discount". For a
discussion of the market discount rules under the Code, see "Owner Trust -- Tax
Consequences to Note Owners -- Market Discount" above; however, Grantor Trust
Certificateholders generally are not permitted to take into account the
Prepayment Assumption in calculating the accrual of market discount with respect
to their Grantor Trust Certificates. See "Prepayments" below.
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. For a
discussion of the rules applicable to premium, see "Owner Trusts -- Tax
Consequences to Note Owners --Amortizable Premium" above; however, Grantor Trust
Certificateholders generally are not permitted
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to take into account the Prepayment Assumption in computing the amortizable bond
premium deduction with respect to their Grantor Trust Certificates. See
"Prepayments" below.
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 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;
however Grantor Trust Certificateholders generally are not permitted to take
into account the Prepayment Assumption in computing original issue discount. See
"Prepayments" below. 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.
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The Trustee intends in reporting information relating to original issue discount
to Grantor Trust Certificateholders to provide such information on an aggregate
poolwide basis.
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 coupons as there are scheduled payments of interest on each
Base Asset, with each such stripped coupon treated as a separate debt instrument
or (ii) a separate installment obligation for each 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
subordinated class (with a relatively higher Certificate Interest 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 Base Asset plus a portion of the interest due on
each Base Asset (the "Trust Stripped Bond"), and (ii) a portion of the interest
due on each Base 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 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
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Certificates. The interest income on the Subordinate Certificates at the Senior
Certificate Certificate Interest Rate and the portion of the Servicing Fee that
does not constitute excess servicing may be treated as qualified stated
interest.
Income of the holder of the Trust Stripped Coupon will be reported by
treating the Trust Stripped Coupon as a single 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 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 Subordinate 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 Base Assets 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 Base Assets 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 are 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
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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 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.
Prepayments. The Tax Reform Act of 1986 (the "1986 Act") contains a
provision requiring original issue discount on certain obligations issued after
December 31, 1986 to be calculated taking into account the Prepayment Assumption
and requiring such discount to be taken into income on the basis of a constant
yield to maturity taking into account of actual prepayments. The legislative
history of the 1986 Act states that similar rules apply with respect to market
discount and amortizable bond premium on such obligations. The proper treatment
of interests, such as the Grantor Trust Certificates, in debt instruments that
are subject to prepayment is unclear. Grantor Trust Certificateholders should
consult their tax advisors as to the proper reporting of income from such
Certificates in light of the possibility of prepayment and as to the possible
application of the rules relating to contingent principal debt instruments.
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 Depositor'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
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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 (i) does not own, directly or
indirectly, 10% or more of, and is not a controlled foreign corporation (within
the meaning of Section 957 of the Code) related to, each of the issuers of the
Base Assets and (ii) 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. Non-United States Owners of Grantor Trust
Certificates may be subject to withholding to the extent that the Base Assets
were originated on or before July 18, 1984. 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.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of Non-United States Owners of Grantor Trust
Certificates. The 1996 Proposed Regulations are generally proposed to be
effective for payments after December 31, 1997, regardless of the issue date of
the Base Assets with respect to which such payments are made, subject to certain
transition rules. For further discussion, see "Owner Trusts - Tax Consequences
to Note Owners - Taxation of Certain Foreign Note Owners" above.
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. See "Owner Trusts -- Tax
Consequences to Note Owners -- Backup Withholding and Information Reporting,"
above.
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) will be properly treated as the owner of the Base
Assets for federal income tax purposes and, accordingly, the Certificates, when
issued, will be properly characterized for federal income tax purposes as
indebtedness of the Depositor (or the Seller) that is secured by the Base
Assets.
The Depositor (or 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 Depositor (or the Seller)
secured by the Base Assets. The Depositor (or 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 Depositor (or the Seller) secured by the Base
Assets 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
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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 Base Assets and not as creating a debt obligation of the
Depositor (or 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 and the Seller believe 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 Base Assets, 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 Certificates will be properly characterized for federal income
tax purposes as indebtedness of the Depositor (or the Seller) secured by the
Base Assets. 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 Depositor (or 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 Trusts--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" may be treated either as part of
a Certificate's stated redemption price at maturity" (as described above under
"Owner Trusts - Tax Consequences to Note Owners Original Issue Discount")
resulting in original issue discount, or be treated as contingent interest which
is recognized as ordinary income only as the interest payment becomes fixed or
is received, depending on the holder's method of accounting.
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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
OID Regulations. See "Owner Trusts - Tax Consequences to Note Owners - Original
Issue Discount" above.
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.
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 Depositor (or
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
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(including a publicly traded partnership) or an association taxable as a
corporation that owns the Base Assets.
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 Depositor (or 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
Base Assets by the partnership would be passed through to the Depositor (or 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 Depositor (or 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, together with other miscellaneous itemized deductions, 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 Base
Assets. 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.
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
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.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
documentation required from Non-United States Holders. The 1996 Proposed
Regulations are generally proposed to be effective for payments after December
31, 1997, regardless of the issue date of the Note with respect to which such
paymnents are made, subject to certain transition rules. It cannot be predicted
at this time whether the 1996 Proposed Regulations will become effective as
proposed, or what, if any, modifications may be made to them. The discussion
under this heading and under "--Backup Withholding and Information Proposed
Regulations, and prospective investors are urged to consult their tax advisors
with respect to the effect the 1996 Proposed Regulations may have.
Subject to the discussion of backup withholding below, and assuming the
Certificates represent debt obligations of the Depositor (or the Seller) for
federal income tax purposes, Foreign Investors
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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 Depositor (or the Seller), (ii) such Investor is not for
federal income tax purposes a controlled foreign corporation related, directly
or indirectly, to the Depositor (or the Seller) 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 Depositor (or the Seller) 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. Under temporary Treasury Regulations, the forgoing
certification may be provided by the beneficial owner of a Note on RS Form W-8.
The 1996 Proposed Regulations provide optional documentation procedures
designed to simplify compliance by withholding agents. The 1996 Proposed
Regulations would not affect the documentation rules described in the preceding
paragraphs but would add "intermediary certification" options for certain
qualifying withholding agents. Under one such option, a withholding agent would
be allowed to rely on IRS Form W-8 furnished by a financial institution or other
intermediary on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the lRS and is thus
a "qualified intermediary". Under another option, an authorized foreign agent of
a United States withholding agent would be permitted to act on behalf of the
United States withholding agent, provided certain conditions are met.
The 1996 Proposed Regulations, if adopted, would also provide certain
presumptions with respect to withholding for holders not providing the required
certifications to qualify for the withholding exemption described above. In
addition, the 1996 Proposed Regulations would replace a number of current tax
certification forms (including IRS Form W-8, IRS Form 1001 and IRS Form 4224,
discussed below) with a single, restated form and standardize the period of time
for which withholding agents could rely on such certifications. The 1996
Proposed Regulations would also provide rules to determine whether, for purposes
of United States federal withholding tax, interest paid to a Non-United States
Holder that is an entity should be treated as paid to the entity or those
holding an interest in that entity.
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 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
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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 annually 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), unless dividends are effectively connected
with the holder's United States trade or business (in which case such dividends
would be taxed at graduated rates applicable to U.S. persons). 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.
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.
The 1996 Proposed Regulations would, if adopted, alter the forgoing rules
in certain respects. In particular, the 1996 Proposed Regulations would provide
certain presumptions under which Non-United States Holders may be subject to
backup withholding in the absence of required certifications.
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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.
Furthermore, depending on the allocation and apportionment formula, if any, used
by such jurisdiction, it is possible that Security Owners in such case may be
subject to tax in such jurisdiction on their income from other sources.
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 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.
***
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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 medical benefit 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 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.
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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 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
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<PAGE>
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). Because the availability of this exception to
any Trust 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 exception.
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 (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
issuer 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.
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
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(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 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 several exemptions from 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 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;
(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.
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<PAGE>
Certain other 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. There can be no assurance that any of these class
exemptions or PTCE 75-1 will apply with respect to any particular Plan or, even
if it were to apply, that the exemption would apply to all transactions
involving the applicable Trust.
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 PTCE 75-1, PTCE 84-14,
PTCE 90-1, PTCE 91-38, 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
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 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 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 THE RESTRICTIONS OF ERISA
AND SECTION 4975 OF THE CODE.
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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.
If and to the extent required by applicable law or regulation, this
Prospectus and the applicable Prospectus Supplements will also be used by the
Underwriter after the completion of the offering in connection with offers and
sales related to market-making transactions in the offered Securities in
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which the Underwriter acts as principal. Sales will be made at negotiated prices
determined at the time of sale.
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 Sidley
& Austin.
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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
Term Page
- ---- ----
<S> <C>
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.........................................................
Certificate................................................................
Certificate Interest Rate..................................................
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....................................................
</TABLE>
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<PAGE>
<TABLE>
Term Page
- ---- ----
<S> <C>
Date of Processing.........................................................
Defaulted Amount...........................................................
Definitive Securities......................................................
Depositaries...............................................................
Depositor..................................................................
Depositor's Certificate....................................................
Depositor's Interest.......................................................
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........................................................
FDIC.......................................................................
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...........................................................
Investment Earnings........................................................
IRS........................................................................
L\C Bank...................................................................
Labor......................................................................
Lump Sum Additions.........................................................
</TABLE>
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<PAGE>
<TABLE>
Term Page
- ---- ----
<S> <C>
Master Pooling and Servicing Agreement.....................................
Master Trust...............................................................
Maturity Assumptions.......................................................
Net Portfolio Yield........................................................
Non-United States Holder...................................................
Non-United States Owner....................................................
Note Interest Rate.........................................................
Notes......................................................................
Note Distribution Account..................................................
Noteholder.................................................................
Noteholders................................................................
objective rate.............................................................
OID Regulations............................................................
Owner Trust................................................................
Paired Series..............................................................
Participations.............................................................
Pay Out Events.............................................................
Paying Agent .........................................................
payment date...............................................................
Plan.......................................................................
Plan Assets Regulation.....................................................
Pooling and Servicing 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.........................................................
</TABLE>
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<PAGE>
<TABLE>
Term Page
- ---- ----
<S> <C>
Repurchase Amount..........................................................
Required Depositor's Interest..............................................
Reserve Account ................................................
Reserve Account............................................................
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....................................................
</TABLE>
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<PAGE>
<TABLE>
Term Page
- ---- ----
<S> <C>
United States Person.......................................................
Yield Calculation..........................................................
Yield Factor...............................................................
Zero Coupon Certificates...................................................
</TABLE>
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<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.
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.
AI-2
<PAGE>
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;
(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
AI-3
<PAGE>
(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.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
documentation required from non-U.S. persons holding Global Securities. The 1996
Proposed Regulations are generally proposed to be effective for payments after
December 31, 1997, regardless of the issue date of the Global Security with
respect to which such payments are made, subject to certain transition rules.
The 1996 Proposed Regulations would, if adopted, replace a number of current tax
certification forms (including IRS Form W-8, IRS Form 1001 and IRS Form 4224,
discussed above) with a single, restated form and standardize the period of
time for which withholding agents could rely on such certifications. It cannot
be predicted at this time whether the 1996 Proposed Regulations will become
effective as proposed, or what, if any, modifications may be made to them.
Prospective investors are urged to consult their tax advisors with respect to
the effect the 1996 Proposed Regulations may have.
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-4
<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>
<CAPTION>
TABLE OF CONTENTS
Page
----
Prospectus Supplement
<S> <C>
Summary......................................................................
Risk Factors ................................................................
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 Agreementsor Pooling and Servicing 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......................................................................
</TABLE>
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.
================================================================================
<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 16. Exhibits
1.1 Form of 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)**
4.2.5 Form of Standard Terms and Conditions of Pooling and Servicing and
Reference Agreement. (Grantor Trust, Mortgage Loans) (Version F)
4.2.6 Form of Pooling and Servicing Agreement. (Grantor Trust, Mortgage Loans
(Version G)
4.3.1 Form of Series Supplement to Pooling and Servicing Agreement. (Credit
Card Receivables)
II-1
<PAGE>
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) (Version
A)
4.3.5 Form of Reference Agreement. (Grantor Trust, Mortgage Loans) (Version
B)
4.3.6 Form of Reference Agreement. (Grantor Trust, Mortgage Loans) (Version
C)
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 to this Registration
Statement filed with the Commission on January 22, 1996)
25.1 Statement of Eligibility and Qualification of Indenture Trustee*
- ------------------
* To be filed by amendment.
** Previously filed.
II-2
<PAGE>
Item 17. Undertakings
(a) As to the Qualification of Trust Indentures under the Trust
Indenture Act of 1939:
The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section
305(b)(2) of the Act.
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 Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on this 24th day of
May, 1996.
Asset Backed Securities Corporation
By: /s/ Gina Hubbell
----------------
Name: Gina Hubbell
Title: Director and Vice President
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
*
- -------------------- Director and Chairman of the May 24, 1996
Andrew Stone Board
*
- -------------------- President and Director May 24, 1996
Scott Ulm (Principal Executive Officer)
/s/ Gina Hubbell Director and Vice President May 24, 1996
- --------------------
Gina Hubbell
*
- -------------------- Director May 24, 1996
William Pitofsky
*
- -------------------- Vice President May 24, 1996
Richard Eimbinder
*
- -------------------- Vice President and Controller May 24, 1996
Thomas Zingalli (Principal Accounting Officer
*
- -------------------- Treasurer (Principal Financial May 24, 1996
Linda Hanauer Officer)
* /s/ Gina Hubbell
- --------------------
By: Gina Hubbell
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
Page Number
-----------
1.1 Form of 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)**
4.2.5 Form of Standard Terms and Conditions of Pooling and Servicing and
Reference Agreement. (Grantor Trust, Mortgage Loans) (Version F)
4.2.6 Form of Pooling and Servicing Agreement. (Grantor Trust, Mortgage Loans
(Version G)
4.3.1 Form of Series Supplement to Pooling and Servicing 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) (Version
A)
4.3.5 Form of Reference Agreement. (Grantor Trust, Mortgage Loans) (Version
B)
4.3.6 Form of Reference Agreement. (Grantor Trust, Mortgage Loans) (Version
C)
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)
II-6
<PAGE>
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 to this Registration
Statement filed with the Commission on January 22, 1996)
25.1 Statement of Eligibility and Qualification of Indenture Trustee*
- ------------------
* To be filed by amendment.
** Previously filed.
II-7
<PAGE>
Exhibit 1.1
ASSET BACKED SECURITIES CORPORATION
Settlor and Depositor
[Name of ABS]
Series _____ - _____
[Class ______ Notes]
[Class ______ Notes]
[Class _______ Certificates]
[Class _______ Certificates]
_______ ___, ____
CS First Boston Corporation
[As Representative of the
Several Underwriters]
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
Asset Backed Securities Corporation, a Delaware corporation (the
"Company"), proposes to cause [Name of Trust] (the "Trust") to issue and sell of
$________ in aggregate stated amount of [Name of ABS] Notes [, Class ____ and
Class ____] ([collectively,] the "Notes") and of $________ in aggregate stated
amount of [Name of ABS] Certificates [, Class ___ and Class ___]
([collectively,] [except for a de minimus portion of the Class ___
Certificates,] the "[Certificates] [Securities]") pursuant to [a] [the] [Trust
Agreement] [[Master] Pooling and Servicing Agreement] [Standard Terms and
Conditions of Pooling and Servicing] [, as supplemented by a [Series Supplement]
[Reference Agreement]] ([as so supplemented,] the "[Trust] [Pooling and
Servicing] Agreement") [each] dated as of [date] [each] [between] [among] the
Company [, __________________, as servicer (the "Servicer")] and ___________, as
trustee (the "Trustee") and will evidence beneficial interests in the Trust.
[The Notes will be issued pursuant to an Indenture dated as of [date] between
the Trust and _____________, as trustee (the "Indenture Trustee") and will
represent obligations of the Trust. The assets of the Trust consist primarily
of a pool of [previously issued securities backed by] [motor vehicle loan
agreements and motor vehicle retail installment sale contracts, in each case
secured by new and used automobiles, vans and light duty trucks, security
interests in the vehicles financed thereby] [[consumer] [corporate] [revolving]
[credit card] [charge card] [debit card] receivables generated or to be
generated from time to time in a portfolio of [consumer] [corporate] [revolving]
[credit card]
<PAGE>
[charge card] [debit card] accounts]] [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] [manufactured housing conditional
sales contracts and installment loan agreements] [insured by the FHA] [partially
guaranteed by the VA] and certain monies due thereunder (the "Trust Assets").
The Notes and the Certificates are herein collectively referred to as the
"Securities".
The Company proposes to sell the Securities to you [and to each of the
other several underwriters participating in an underwriting syndicate managed by
you]. Underwritten offerings of Securities may be made by you or by an
underwriting syndicate managed by you (as used in this Agreement, references to
"you" shall mean the firm or firms acting as sole underwriter(s) or as
representative(s) of a group of underwriters of such offering).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-76276) for the
registration of the Securities under the Securities Act of 1933 (the "1933
Act"), including a related form of prospectus and related form of prospectus
supplement. Such registration statement was declared effective on
_____________. Such registration statement, as from time to time amended,
including all exhibits thereto, is hereinafter referred to as the "Registration
Statement". The form of prospectus that appears in the Registration Statement,
as such prospectus is amended from time to time, is hereinafter referred to as
the "Basic Prospectus". The Basic Prospectus as supplemented by the prospectus
supplement relating to the Securities, in the form in which, as so supplemented,
it shall be filed with the Commission pursuant to Rule 424 under the 1933 Act,
is hereinafter referred to as the "Final Prospectus".
The Company, hereby agrees with you [and the several Underwriters
named in Schedule A hereto (collectively,] [(] the "Underwriter[s]") as follows:
SECTION 1. Representations and Warranties. The Company represents
------------------------------
and warrants to you as of the date hereof, and to each Underwriter named on
Schedule A hereto, as follows:
(a) The Registration Statement, at the time it became effective,
complied in all material respects with the requirements of the 1933 Act and the
rules and regulations of the Commission thereunder (the "1933 Act Regulations")
and does not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission. The Final
Prospectus at the time it is transmitted to the Commission for filing pursuant
to Rule 424 under the 1933 Act and at the Closing Time referred
2
<PAGE>
to in Section 2 will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. There
are no material contracts or documents of the Company which are required to be
filed as exhibits to the Registration Statement by the 1933 Act or the 1933 Act
Regulations which have not been so filed.
(b) Since the respective dates as of which information is given
in the Registration Statement and the Final Prospectus, and other than as herein
or therein contemplated, (i) the Company has not, and at no time through the
Closing Time will it have, entered into any material transaction or incurred any
material liability or obligation, contingent or otherwise, other than as may
relate to additional series of securities similar to the Securities, (ii) there
has not been, and at no time through the Closing Time will there have been, any
material change in the capital stock or debt of the Company, or any material
adverse change in the business of the Company, and no material legal or
governmental proceeding, domestic or foreign, affecting the Company or the
transactions contemplated by this Agreement has been or at any time through the
Closing Time will have been instituted or threatened, and (iii) no event has or
at any time through the Closing Time will have occurred that constitutes or
would constitute a default under the provisions of the [Trust] [Pooling and
Servicing] Agreement [or the Indenture].
(c) The Company has been duly incorporated and is validly
existing in good standing under the laws of the State of Delaware with corporate
power and authority to conduct its business as described in the Registration
Statement. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires such
qualification and where the failure to so qualify would have a material adverse
effect on the Company.
(d) The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and non-
assessable.
(e) The Company is not in violation of its Certificate of
Incorporation or Bylaws. The Company is not in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which it is a party or by which it or its properties may be bound, which
violations or defaults separately or in the aggregate would have a material
adverse effect on the Company.
(f) The Company owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to conduct its business as described in the
Registration Statement or, if later, the applicable Final Prospectus; and the
Company has conducted and is conducting its business so as to comply in all
material respects with all applicable laws, administrative regulations and
administrative and court decrees.
3
<PAGE>
(g) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending against
the Company (except as set forth in the Registration Statement or, if later, the
applicable Final Prospectus) which could reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, earnings,
business affairs or business prospects of the Company or which could reasonably
be expected to interfere with or materially and adversely affect the
consummation of the transactions contemplated herein.
(h) The execution and delivery of this Agreement[,][and [the
[Trust] [Pooling and Servicing] Agreement [and the Indenture], the incurrence of
the obligations herein and therein set forth and the consummation of the
transactions contemplated herein and therein are within the corporate power and
authority of the Company and have been duly authorized by the Company by all
necessary corporate action; this Agreement has been duly executed and delivered
by the Company, and each such instrument constitutes and will constitute a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with such instrument's terms. Neither the execution and
delivery of this Agreement, the incurrence of the obligations herein set forth,
nor the consummation of the transactions contemplated herein will conflict with
or constitute a breach of, or default under, or result in the creation or
imposition of any lien, mortgage, pledge, charge, security interest or
encumbrance (collectively, "Lien") upon any property or assets of the Company,
pursuant to any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Company is a party or by which the Company may be
bound, or to which any of the property or assets of the Company is subject,
which separately or in the aggregate are material, nor will any such action
result in any violation of the provisions of the Certificate of Incorporation or
Bylaws of the Company or of any law, administrative regulation, or, to the best
of such entity's knowledge, any administrative or court decree.
(i) The issuance of the Certificates has been duly authorized by
the Company and, when such Certificates are executed and delivered in accordance
with the [Trust] [Pooling and Servicing] Agreement and sold to the Underwriters
pursuant to this Agreement, such Certificates will be legally issued and will
duly evidence all the beneficial ownership interest in the related trust created
by the [Trust] [Pooling and Servicing] Agreement.
[(j) The issuance of the Notes has been duly authorized by the
Trust and, when such Notes are executed and delivered in accordance with the
Indenture and sold to the Underwriters pursuant to this Agreement, such Notes
will be legally issued and will duly evidence all the interest in the related
trust created by the Indenture.]
([j][k]) The Securities[,] [and] the [Trust] [Pooling and
Servicing] Agreement and the Indenture will conform in all material respects to
the respective descriptions thereof contained in the applicable Final
Prospectus.
4
<PAGE>
([k][l]) The [Trust] [Pooling and Servicing] Agreement will be
effective prior to the Closing Time to establish the Trust under and pursuant to
the laws of the jurisdiction specified in such [Trust] [Pooling and Servicing]
Agreement, and the acquisition of the Trust Assets by the Trustee will be
effective to vest with the holders of the Certificates the entire beneficial
ownership in the Trust Assets intended to be vested thereby.
[([l][m]) The Trust's assignment of the Trust Assets to the
Indenture Trustee pursuant to the Indenture will vest in the Indenture Trustee a
first priority perfected security interest therein, subject to no prior lien,
mortgage, security interest, pledge, adverse claim, charge or other
encumbrance.]
([ ]) Each of the Company and the Trust is not, and will not as
a result of the offer and sale of the Securities as contemplated in this
Agreement become, an "investment company" or under the "control" of an
"investment company" (as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act")), which would be required to
register under the Investment Company Act.
(__) The representations and warranties made by the Company in
the [Trust] [Pooling and Servicing] Agreement and in any Officers' Certificate
of the Company delivered pursuant to such [Trust] [Pooling and Servicing]
Agreement will be true and correct at the time made and at the Closing Time.
(__) Any certificate signed by an officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
(__) All approvals, authorizations, consents, orders or other
actions of any person, corporation or other organization, or of any governmental
body, quasi-governmental body or official (except with respect to the state
securities or Blue Sky laws of various jurisdictions), required in connection
with (i) the valid and proper deposit of the Trust Assets pursuant to the
[Trust] [Pooling and Servicing] Agreement and (ii) the valid and proper
authorization, issuance and sale of the Certificates pursuant to such [Trust]
[Pooling and Servicing] Agreement [and of the Notes pursuant to the Indenture]
and this Agreement, have been or will be taken or obtained on or prior to the
Closing Time.
(__) At or prior to the Closing Time, the Certificates shall be
rated __________ by ___________. At or prior to the Closing Time, the Notes
shall be rated the highest bond rating by ____________.
(__) Any taxes, fees and other governmental charges in
connection with the execution and delivery of this Agreement, [,][and] the
[Trust] [Pooling and Servicing] Agreement [the Indenture] and in connection with
the acquisition of the Trust Assets and the issuance of the Securities have been
paid or will be paid at or prior to the related Closing Time.
5
<PAGE>
(__) [At the Closing Time, the Trustee under the [Trust]
[Pooling and Servicing] Agreement will have acquired all right, title and
interest in and to the Trust Assets] [Immediately prior to the Closing Time, the
Company (or one of its affiliates) will own the Trust Assets free and clear of
any Lien; the Company (or such affiliate) will have the corporate power and
authority to assign, deliver and deposit the Trust Assets owned by it to and
with the Trustee under the [Trust] [Pooling and Servicing] Agreement, and will
have duly authorized the assignment, delivery and deposit of such Trust Assets
to and with such Trustee by all necessary corporate action. At the Closing Time,
the Company (or one of its affiliates) will have assigned and delivered to and
transferred to the applicable Trustee under the applicable [Trust] [Pooling and
Servicing] Agreement all its right, title and interest in and to the Trust
Assets applicable to such Certificates as of the Closing Time.]
SECTION 2. Sale and Delivery to the Underwriter[s]; Closing. The
------------------------------------------------
[commitment of the Underwriter] [several commitments of the Underwriters] to
purchase Certificates shall be deemed to have been made on the basis of the
representations and warranties herein contained. Subject to the terms and
conditions herein set forth, the Company agrees to sell, or to cause one of its
affiliates to sell, to [the] [each] Underwriter, [severally and not jointly,]
and [the] [each] Underwriter, [severally and not jointly,] agrees to purchase
from the Company, at a purchase price equal to [(i)] ___% of the original stated
amount of the [Class ___] Certificates [[,][and] (ii) ______% of the original
stated amount of the [Class ____] Certificates] [[,][and] (iii) _____% of the
original stated amount of the [Class ___] Notes] [and (iv) _____% of the
original stated amount of the [Class ___] Notes] the respective original stated
amount of [the] [each class of such] Securities set forth on Schedule A hereto
opposite the name of such Underwriter[, plus any additional original stated
amount of Securities which such Underwriter may be obligated to purchase
pursuant to Section 10 hereof].
Delivery of, and payment of the purchase price for, the Securities
shall be made at the office of Sidley & Austin, 875 Third Avenue, New York, New
York 10022, or at such other place as shall be agreed upon by you and the
Company, at 10:00 A.M. on _______, or such other time as shall be agreed upon by
you and the Company (such time and date being referred to as the "Closing
Time"). Payment shall be made in immediately available funds, payable to or upon
the order of the Company. Such Certificates shall be in such denominations and
registered in such names as you may request in writing at least two business
days prior to the Closing Time. The Certificates will be made available for
examination and packaging by you in New York, New York not later than 10:00 A.M.
on the business day next preceding the Closing Time. The Certificates to be so
delivered will initially be represented by one or more Certificates registered
in the name of Cede & Co., the nominee of DTC. The interests of beneficial
owners of the Certificates will be represented by book entries on the records of
DTC and participating members thereof.
SECTION 3. Covenants of the Company. The Company covenants with
------------------------
you[, and with each Underwriter participating in the offering of the
Certificates,] as follows:
6
<PAGE>
(a) Immediately following the execution of this Agreement, the
Company will prepare a Final Prospectus setting forth the stated amount of
Securities covered thereby and the terms not otherwise specified in the [Trust]
[Pooling and Servicing] Agreement [and the Indenture] [, the names of the
Underwriters participating in the offering and the principal amount of
Securities which each severally has agreed to purchase, the names of any
Underwriters acting as co-managers with you in connection with the offering,]
the price at which the Securities are to be purchased by the Underwriter[s] from
the Company, the initial public offering price, the selling concession and
reallowance, if any, and such other information as you and the Company deem
appropriate in connection with the offering of the Securities. The Company will
promptly transmit copies of the Final Prospectus to the Commission for filing
pursuant to Rule 424 of the 1933 Act Regulations and will furnish to the
Underwriters named therein as many copies of the Final Prospectus as you shall
reasonably request.
(b) The Company will notify you immediately, and in writing
confirm the notice, of (i) the receipt of any comments from the Commission
concerning the Registration Statement, (ii) any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Final Prospectus or for any additional information, (iii) the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threat of any proceeding for that purpose, and (v) the
happening of any event which makes untrue any statement of a material fact made
in the Registration Statement or in any Final Prospectus then required to be
distributed or which requires the making of a change in the Registration
Statement or any such Final Prospectus in order to make any material statement
therein, in light of the circumstances under which it was made, not misleading.
The Company will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(c) The Company will give you notice of its intention to file
any amendment to the Registration Statement or any amendment or supplement to
the Final Prospectus, and will not file any such amendment or supplement without
furnishing a copy thereof to you and your counsel and obtaining your consent to
such filing, which consent shall not be unreasonably withheld.
(d) The Company will deliver to you, as soon as practicable, as
many signed copies of the Registration Statement as originally filed and of each
amendment thereto, with signed consents and exhibits filed therewith, and will
also deliver to you such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto (including consents
and exhibits), as you may reasonably request.
(e) The Company will furnish to [each] [the] Underwriter, from
time to time during the period when the Final Prospectus is required to be
delivered under the 1933 Act, such number of copies of the Final Prospectus (as
amended or supplemented) as such
7
<PAGE>
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the Securities Exchange Act of 1934 (the "1934 Act").
(f) If at any time when a prospectus relating to the Securities
is required to be delivered under the 1933 Act any event occurs as a result of
which the applicable Final Prospectus as then amended or supplemented would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend such Final Prospectus to comply with the 1933 Act, the Company, subject to
subsection (c) above, promptly will prepare and file with the Commission an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance.
(g) The Company will endeavor, in cooperation with you and your
counsel, to qualify the Securities for offering and sale under the applicable
securities and Blue Sky laws of such jurisdictions as you may reasonably
designate, and will maintain such qualification in effect for a period of not
less than two years after the date hereof, and will cooperate with you and your
counsel to determine the eligibility of the Securities for the investment by
institutional investors in such jurisdictions. The Company will, at your request
or the request of your counsel, file such statements and reports as may be
required by the laws of each jurisdiction in which the Securities have been
qualified as above provided. Notwithstanding the foregoing, no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Company would be subject to general service of process, other than by reason
of the offer and sale of the Securities, to qualification as a foreign
corporation or to taxation as a foreign corporation doing business in such
jurisdiction.
(h) The Company will make generally available to its security
holders and will deliver to you as soon as practicable an earnings statement,
conforming to the requirements of Section 11(a) of the 1933 Act, covering a
period of at least twelve months beginning after the effective date of the
Registration Statement. Compliance with Rule 158 of the 1933 Act Regulations
shall satisfy the requirements of this paragraph.
(i) So long as any Securities are outstanding, the Company will
furnish to you as soon as practicable copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange by the Company and to the extent that such information has been
maintained in the ordinary course by the Company, such other information as may
reasonably be requested by you which in your judgment is necessary or
appropriate to the maintenance of a secondary market in the Securities.
SECTION 4. Payment of Expenses. The Company will pay or cause to be
-------------------
paid all expenses incident to the performance of the Company's obligations under
this Agreement[,] [and] the [Trust] [Pooling and Servicing] Agreement [and the
Indenture] including without limitation those related to: (i) the filing of the
Registration Statement with respect to the Securities
8
<PAGE>
and all amendments thereto, including Commission filing fees, (ii) the printing
or photocopying and delivery to the Underwriter[s], in such quantities as you
may reasonably request, of copies of this Agreement, (iii) the preparation,
registration, issuance and delivery of the Securities to the Underwriter[s],
(iv) the fees and disbursements of the Company's counsel and accountants, and of
any such counsel rendering a closing opinion with respect to matters of local
law, (v) the qualification of the Securities under securities and Blue Sky laws
and the determination of the eligibility of the Securities for investment in
accordance with the provisions of Section 3(g), including filing fees and the
reasonable fees and disbursements of counsel for the Underwriter[s] in
connection therewith and in connection with the preparation of any Blue Sky
Survey and Legal Investment Survey, (vi) the printing and delivery to the
Underwriter[s], in such quantities as you may reasonably request, of copies of
the Registration Statement with respect to the Securities and all amendments
thereto, of any preliminary prospectus and preliminary prospectus supplement and
of the Final Prospectus and all amendments and supplements thereto, and of any
Blue Sky Survey and Legal Investment Survey, (vii) the printing or photocopying
and delivery to the Underwriter[s], in such quantities as you may reasonably
request, of copies of the [Trust] [Pooling and Servicing] Agreement [and the
Indenture], (viii) the fees charged by investment rating agencies for rating the
Certificates, (ix) the fees and expenses, if any, incurred in connection with
the listing of Certificates on any national securities exchange and (x) the fees
and expenses of the Trustee [and the Indenture Trustee] and [its] [their
respective] counsel.
SECTION 5. Conditions of Underwriters' Obligations. The obligations
---------------------------------------
of the Underwriter[s] to purchase and pay for the Certificates pursuant to this
Agreement are subject to the accuracy in all material respects, on and as of the
date hereof, and the applicable Closing Time, of the representations and
warranties of the Company herein contained, to the performance by the Company of
its obligations hereunder, and to the following further conditions:
(a) Subsequent to the execution of this Agreement, there shall
not have occurred or exist any of the following: (i) any change, or any
development involving a prospective change, in or affecting particularly the
business or properties of the Company which, in your judgment, materially
impairs the investment quality of the Securities; (ii) the imposition of
additional material governmental restrictions, not in force and effect on the
date of this Agreement, upon trading in securities generally, or the
establishment generally of minimum or maximum prices on the New York Stock
Exchange or the suspension of trading in securities generally on such exchange,
or the establishment of a general banking moratorium by federal or New York
authorities; (iii) any event which makes untrue or incorrect in any material
respect any statement or information contained in the Registration Statement or
the Final Prospectus, or which is not reflected in the Registration Statement or
the Final Prospectus but should be reflected therein in order to make the
statements or information contained therein not misleading in any material
respect; or (iv) an outbreak of major hostilities or other national or
international calamity or any substantial change or acceleration in market,
financial or economic conditions as, in your judgment, affects adversely the
marketability of the Securities.
9
<PAGE>
(b) At the applicable Closing Time you shall have received the
opinion or opinions, addressed to the Underwriter[s] and dated the Closing Time,
of Sidley & Austin, special counsel to the Company, or other counsel reasonably
satisfactory to you [and counsel for the Underwriters], which opinion or
opinions shall be in form and substance reasonably satisfactory to you [and
counsel for the Underwriters]. In rendering its opinion, Sidley & Austin and
such other counsel may rely, as to matters of fact, on certificates of
responsible officers of the Company, the Trustee [,the Indenture Trustee] and
public officials and upon such opinions of such other counsel as may be
acceptable to you.
(c) At the Closing Time there shall not have been, since the
date hereof or since the respective dates as of which information is given in
the Registration Statement and the Final Prospectus, any material adverse change
in the condition, financial or otherwise, earnings, business affairs, regulatory
situation or business prospects of the Company whether or not arising in the
ordinary course of business, and you shall have received, at the Closing Time, a
certificate of the Chairman of the Board, the President or any Vice President of
the Company to the effect that there has been no such material adverse change
and to the effect that the other representations and warranties of the Company
contained in Section 1 are true and correct with the same force and effect as
though made at and as of the Closing Time.
(d) At the Closing Time, you and the Company shall have received
the favorable opinion of counsel for the Trustee, addressed to the
Underwriter[s] and the Company and dated the Closing Time, which opinion or
opinions shall be in form and substance reasonably satisfactory to you and
counsel for the Underwriter[s] and the Company.
[() At the Closing Time, you and the Company shall have received
the favorable opinion of counsel for the Indenture Trustee, addressed to the
Underwriter[s] and the Company and dated the Closing Time, which opinion or
opinions shall be in form and substance reasonably satisfactory to you and
counsel for the Underwriter[s] and the Company.]
(e) At the Closing Time, (i) counsel for the Underwriter[s]
shall have been furnished with such documents and opinions (which opinions shall
be limited to those specified in Sections 5(b) and 5(d)) as they may reasonably
require for the purpose of enabling them to pass upon the Registration
Statement, the Final Prospectus, the issuance and sale of the Securities and
related proceedings, or in order to evidence the accuracy of any of the
representations and warranties, or the fulfillment of any of the conditions,
herein contained[,] [and] (ii) [each Underwriter that is not an affiliate of the
Company shall have received the opinion or opinions, addressed to such
Underwriter and dated the Closing Time, of special counsel to such Underwriter,
which opinion or opinions shall be in the form specified in the applicable Terms
Agreement or, if not so specified, in form and substance reasonably satisfactory
to such Underwriter, and (iii)] all proceedings taken by the Company in
connection with the issuance and sale of the Securities as contemplated in the
[Trust] [Pooling and Servicing] Agreement [and the Indenture] shall be
reasonably satisfactory in form and substance to you and counsel for the
Underwriter[s].
10
<PAGE>
(f) At the Closing Time you shall have received or be entitled
to rely upon any opinions of counsel to the Company supplied to the rating
agency or rating agencies rating the Securities relating to certain matters with
respect to the Securities. Any such opinions shall specify that the
Underwriter[s are] [is] entitled to rely upon any such opinions as if such
opinions were addressed to them.
(g) You shall have received evidence satisfactory to you that,
on or before the Closing Time, UCC-1 financing statements have been or are being
filed in the appropriate filing offices reflecting the transfer of the interests
of the Company in the Trust Assets and the proceeds thereof to the Trust [and
the grant of the security interest therein by the Trust to the Indenture
Trustee].
(h) The Certificates shall be rated _____ by ________________,
and no rating agency shall have placed the Certificates under surveillance or
review with possible negative implications. The Notes shall be rated ________ by
__________, and no rating agency shall have placed the Notes under surveillance
or review with possible negative implications.
[(i) At the Closing Time, you and the Company shall have received
the favorable opinion of counsel for the Servicer, addressed to the
Underwriter[s] and the Company and dated the Closing Time, which opinion or
opinions shall be in form and substance reasonably satisfactory to you and
counsel for the Underwriter[s] and the Company.]
If any condition in this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement may be terminated by you by
notice to the Company at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party except as
provided in Section 4.
SECTION 6. Indemnification. (a) The Company agrees to indemnify and
---------------
hold harmless [each] [the] Underwriter and each person, if any, who controls
[any] [the] Underwriter within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading, unless such untrue statement or omission or such alleged untrue
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company by [any Underwriter through]
you expressly for use in the
11
<PAGE>
Registration Statement (or any amendment thereto) or in any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or
any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based, in each case,
upon any untrue statement or omission described in (i) above, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever (including the reasonable
fees and disbursements of counsel chosen by you) reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened or any claim whatsoever based upon any untrue statement or
omission, or any alleged untrue statement or omission described in (i)
above, to the extent that any such expense is not paid under (i) or (ii)
above.
(b) [Each] [The] Underwriter [severally] agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement or any amendment thereto, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section 6, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter expressly for use in
the Registration Statement (or any amendment thereto) or in any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or any
amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently
12
<PAGE>
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
SECTION 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which an indemnity provided for in subsections
(a) or (b) of Section 6 is for any reason held to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company, on the one hand, and the Underwriter[s], on the other, shall contribute
to the aggregate losses, liabilities, claims, damages and expense of the nature
contemplated by such subsection incurred by the Company and [one or more of] the
Underwriter[s], (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriter[s] on the
other from the offering of the Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above and also the relative fault of the Company on the one hand and the
Underwriter[s] on the other in connection with the statements or omissions that
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriter[s] on the other shall be deemed
to be in the same proportion as the total proceeds from the offering of the
Certificates (before deducting expenses) received by the Company bear to the
total compensation and profit (before deducting expenses) received or realized
by the Underwriter[s] from the purchase and resale, or underwriting, of the
Certificates. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriter[s] and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such untrue or alleged untrue statement or omission or alleged omission.
The Company and the Underwriter[s] agree that it would not be just and equitable
if the contributions pursuant to this Section 7 were to be determined by pro
rata allocation [(even if the Underwriters were treated as one entity for such
purpose)] or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this Section 7.
The amount paid by an indemnified party as a result of the losses, liabilities,
claims, damages, or expenses referred to in the first sentence of this Section 7
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending against any
action or claim which is the subject of this Section 7. Notwithstanding any
other provision of this Section 7, [no] [the] Underwriter shall [not] be
obligated to make contributions hereunder that in the aggregate exceed the total
public offering price of the Certificates purchased by such Underwriter, less
the aggregate amount of any damages that such Underwriter has been required to
pay in respect of the same or substantially similar claim, and no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such
13
<PAGE>
fraudulent misrepresentation. [The Underwriters' obligations in this Section 7
to contribute shall be several in proportion to their respective underwriting
obligations and not joint.] For purposes of this Section, each person, if any,
who controls an Underwriter within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement or any amendment thereto, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
SECTION 8. Representations, Warranties, and Agreements to Survive
------------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto or as contemplated hereby, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of [any]
[the] Underwriter or controlling person thereof, and shall survive delivery of
any Certificates to the Underwriters.
SECTION 9. Termination of Agreement. (a) You may terminate this
------------------------
Agreement by notice to the Company, at any time at or prior to the Closing Time,
(i) if there has been, since the respective dates as of which information is
given in the Registration Statement or Final Prospectus, any material adverse
change in the condition, financial or otherwise, earnings, business affairs,
regulatory situation or business prospects of the Company, whether or not
arising in the ordinary course of business, (ii) if there has occurred any
outbreak of major hostilities or other national or international calamity or any
substantial change or acceleration in market, financial or economic conditions,
the effect of which is such as to make it, in your reasonable judgment,
impracticable to market the Securities or enforce contracts for the sale of the
Securities or (iii) if trading generally on either the New York Stock Exchange
or the American Stock Exchange has been suspended, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by either of said exchanges or by order of the Commission or any
other governmental authority, or if a banking moratorium has been declared by
either federal or state authorities.
(b) This Agreement may be terminated by you in accordance with
Section 5 hereof.
(c) In the event of any such termination, (i) the covenants set
forth in Section 3 with respect to any offering of Securities shall remain in
effect so long as [any] [the] Underwriter owns any Securities and (ii) the
covenant set forth in Section 3(h), the provisions of Section 4, the indemnity
agreement set forth in Section 6, and the provisions of Sections 7 and 13 shall
remain in effect forever.
SECTION 10. [Default by One or More of the Underwriters. If one or
-------------------------------------------
more of the Underwriters shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase hereunder (the "Defaulted
Securities"), you shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or
14
<PAGE>
any Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, you have not completed such arrangements within such 24-hour
period, then:
(a) if the aggregate original stated amount of Defaulted
Securities does not exceed 10% of the aggregate original stated amount of the
Securities to be purchased pursuant to this Agreement, the nondefaulting
Underwriters named herein shall be obligated to purchase the full amount thereof
in the proportions that their respective underwriting obligations thereunder
bear to the underwriting obligations of all nondefaulting Underwriters; and
(b) if the aggregate original stated amount of the Defaulted
Securities exceeds 10% of the aggregate original stated amount of the Securities
to be pursuant to this Agreement, this Agreement shall terminate without any
liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 and nothing in this
Agreement shall relieve any defaulting Underwriter from liability in respect of
its default.
In the event of any such default which does not result in a
termination of this Agreement, either you or the Company shall have the right to
postpone the Closing Time for a period of time not exceeding seven days in order
to effect any required changes in the Registration Statement or in any other
documents or arrangements.]
[RESERVED]
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Company shall be directed to it at Asset Backed Securities Corporation, Park
Avenue Plaza, 55 East 52nd Street, New York, New York, Attn: _______, and
notices to you shall be directed to CS First Boston Corporation, Park Avenue
Plaza, 55 East 52nd Street, New York, New York 10055, Attn: ____________.
SECTION 12. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Underwriter[s] named herein and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the parties hereto, and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and thereto and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No
15
<PAGE>
purchaser of Securities from [any] [the] Underwriter shall be deemed to be a
successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND EACH TERMS
----------------------
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
16
<PAGE>
If the foregoing is in accordance with your understanding hereof, please execute
this Agreement in the appropriate space below and return to the undersigned,
whereupon this instrument along with any counterpart will become a binding
agreement among the Company and you in accordance with its terms.
Very truly yours,
ASSET BACKED SECURITIES CORPORATION
By:_________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
CS FIRST BOSTON CORPORATION
[Acting on behalf of themselves
and as Representative of the
several Underwriters]
By:____________________________
Name:
Title:
17
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount of
Underwriter [Class ___] Certificates
----------- ------------------------
<S> <C>
CS First Boston Corporation........................ $
______________________
Total.............................................. $
<CAPTION>
Principal Amount of
Underwriter [Class ___] Certificates
----------- ------------------------
<S> <C>
CS First Boston Corporation........................ $
______________________
Total.............................................. $
<CAPTION>
Principal Amount of
Underwriter [Class ___] Certificates
----------- ------------------------
<S> <C>
CS First Boston Corporation........................ $
______________________
Total.............................................. $
<CAPTION>
Principal Amount of
Underwriter [Class ___] Certificates
----------- ------------------------
<S> <C>
CS First Boston Corporation........................ $
______________________
Total.............................................. $
</TABLE>
A-1
<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 ______________
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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
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SECTION 3.19. Further Instruments and Acts .................................................... 28
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
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Addresses of Noteholders ................................................. 46
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
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SECTION 11.18. Inspection ..................................................................... 62
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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, collectively with the Class A-1 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee as of 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
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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 in which the
Corporate Trust Office is located] 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.
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"Certificateholder" has the meaning specified in Section ___ 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.
"Class A-1 Final Scheduled Distribution Date" means _________.
"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 Final Scheduled Distribution Date" means ___________.
"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 Account" has the meaning specified in Section ___ of the Sale
and Servicing Agreement.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Collection Account" has the meaning specified in Section _____ of the Sale
and Servicing Agreement.
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"Collection Period" has the meaning specified in Section __ of the Sale and
Servicing Agreement.
"Company" means Asset Backed Securities Corporation, a Delaware
corporation, and any successor in interest.
"Commission" means the Securities and Exchange Commission, or its 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 2.10.
"Distribution Date" means the ___________ day of each month (or if such
_____ day is not a Business Day, the next succeeding Business Day).
"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
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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.
"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.
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"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 Distribution Account" has the meaning specified in Section ______.
"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.
"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
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(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.
"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.
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"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, 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.
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"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.
"Servicer Default" has the meaning specified in Section _____ of the Sale
and Servicing Agreement.
"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 Agreement" means the Trust Agreement dated as of ___________,
between the Company and the Owner Trustee.
"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;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
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"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.
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
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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 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
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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.
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.
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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 the request of the Issuer, 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 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
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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, 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.
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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 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.
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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 Section 314(c) and Section 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
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
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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 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.
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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 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:
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(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 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
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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.
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
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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, rerecording 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.
(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.
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(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
Receivables 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 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
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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
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
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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
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;
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(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 indenture
that such Person (or if a group of Persons, then one specified
Person) shall make all filings with the
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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 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.
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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.
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.
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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
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.
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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.
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):
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(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 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,
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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
(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.
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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 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:
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(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.
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(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(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 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
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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.
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
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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 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
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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 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;
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(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.
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
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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 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,
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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:
(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 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.
(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
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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.
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
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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.
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.
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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 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:
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(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that
such separate trustee or co-trustee is not authorized to act
separately without the Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate
or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-
trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $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
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better by [ ] or shall otherwise be acceptable to [ ]. The Indenture Trustee
shall comply with TIA Section 310(b), including the optional provision permitted
by the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
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 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 Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
SECTION 7.03. Reports by Issuer.
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(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 Section
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.03(a) and by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee. If required by TIA Section
313(a), within 30 days after each ___________ beginning with ________, ___, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
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ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the 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)):
(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-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 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.
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(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 Section 314(c) and
Section 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
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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 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.
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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 this Indenture or certain defaults hereunder and their
consequences provided for in this Indenture;
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(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 in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
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SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental 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.
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
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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
(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.
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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;
(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.
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(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
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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 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
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<PAGE>
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 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,
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<PAGE>
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 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
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<PAGE>
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 Section 310 through Section 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.
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<PAGE>
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.
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.
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<PAGE>
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.
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<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:
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<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:
_______________________________
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<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:
_______________________________
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<PAGE>
SCHEDULE I
[To be provided on the Closing Date]
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<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
A-1-4
<PAGE>
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.
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
A-1-5
<PAGE>
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-1-6
<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 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). _________________________________
Trustee as well as Issuer must sign this (Issuer)
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
B-6
<PAGE>
SCHEDULE A
(Describe Issue)
<TABLE>
<CAPTION>
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
<S> <C> <C> <C>
</TABLE>
S-1
<PAGE>
Exhibit 4.1.2
- --------------------------------------------------------------------------------
[FORM OF INDENTURE]
between
CS FIRST BOSTON AUTO RECEIVABLES SECURITIES 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 ......... 10
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 ................ 14
SECTION 2.06. Persons Deemed Owner ...................................... 15
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest ..... 15
SECTION 2.08. Cancellation .............................................. 16
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 ............................................. 18
ARTICLE III
Covenants .......................................................... 18
SECTION 3.01. Payment of Principal and Interest ......................... 18
SECTION 3.02. Maintenance of Office or Agency ........................... 19
SECTION 3.03. Money for Payments To Be Held in Trust .................... 19
SECTION 3.04. Existence ................................................. 20
SECTION 3.05. Protection of Trust Estate ................................ 21
SECTION 3.06. Opinions as to Trust Estate ............................... 21
SECTION 3.07. Performance of Obligations ................................ 22
SECTION 3.08. Negative Covenants ........................................ 23
SECTION 3.09. Annual Statement as to Compliance ......................... 23
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 .............................................. 26
-i-
<PAGE>
SECTION 3.14. Reserved .................................................. 26
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities ......... 26
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 .............................. 27
ARTICLE IV
Satisfaction and Discharge ......................................... 27
SECTION 4.01. Satisfaction and Discharge of Indenture ................... 27
SECTION 4.02. Application of Trust Money ................................ 28
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 ..................................... 31
SECTION 5.04. Remedies; Priorities ...................................... 34
SECTION 5.05. Optional Preservation of the Underlying Securities ........ 35
SECTION 5.06. Limitation of Suits ....................................... 36
SECTION 5.07. Unconditional Right 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
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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
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 ............................... 48
SECTION 8.01. Collection of Money ....................................... 48
SECTION 8.02. Trust Accounts ............................................ 48
SECTION 8.03. General Provisions Regarding Accounts ..................... 49
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 ....... 52
SECTION 9.03. Execution of Supplemental Indentures ...................... 53
SECTION 9.04. Effect of Supplemental Indentures ......................... 54
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
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ARTICLE XI
Miscellaneous ...................................................... 56
SECTION 11.01. Compliance Certificates and Opinions, etc. ............... 56
SECTION 11.02. Form of Documents Delivered to Indenture Trustee ......... 58
SECTION 11.03. Acts of Noteholders ...................................... 59
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 .................. 61
SECTION 11.07. Conflict with Trust Indenture Act ........................ 61
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 ............................................ 62
SECTION 11.14. Counterparts ............................................. 62
SECTION 11.15. Recording of Indenture ................................... 62
SECTION 11.16. Trust Obligation ......................................... 62
SECTION 11.17. No Petition .............................................. 62
SECTION 11.18. Inspection ............................................... 63
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INDENTURE dated as of ______________, between CS FIRST BOSTON AUTO
RECEIVABLES SECURITIES 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 Underlying Securities
and all moneys due thereon on or after the Cutoff Date; (b) the security
interest in the Underlying Securities granted by the Company pursuant to the
Trust Agreement and any other interest of the Company in such Underlying
Securities; (c) all funds on deposit from time to time in the Owner Trust
Accounts, including the Reserve Account Initial Deposit, 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.
<PAGE>
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 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.
"Class" means any one of the classes of Notes.
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"Class A-1 Final Scheduled Distribution Date" means the _______
Distribution Date.
"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 Noteholder" means the Person in whose name a Class A-1
Note is registered in the Note Register.
"Class A-1 Notes" means the Class A-1 _____% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Final Scheduled Distribution Date" means the _______
Distribution Date.
"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 Noteholder" means the Person in whose name a Class A-2
Note is registered in the Note Register.
"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.
"Collection Account" has the meaning set forth in the Trust
Agreement.
"Collection Period" has the meaning set forth in the Trust
Agreement.
"Company" means Asset Backed Securities Corporation, a Delaware
corporation and any successor in interest.
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<PAGE>
"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.
"Distribution Date" means the _____ day of each month, or, if such
_____ day is not a Business Day, the next succeeding 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 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
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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-l+ from Standard &
Poor's and Pl 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 Pl 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 Notes.
"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
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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.
"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.
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"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 Securities Trust
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.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"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 Distribution Account" means the account designated as such,
established and maintained pursuant to Section 3.01(a).
"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
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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 Trust Accounts" has the meaning set forth in the Trust
Agreement.
"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.
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"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.
"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.
"Pool Balance" has the meaning set forth in the Trust Agreement.
"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 _________________ 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 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 Company 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
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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.
"Reserve Account" has the meaning set forth in the Trust Agreement.
"Reserve Account Initial Deposit" has the meaning set forth in the
Trust Agreement.
"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.
"Schedule of Underlying Securities" means the listing of the
Underlying Securities set forth in Schedule I (which Schedule may be in the form
of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
"Standard & Poor's" means Standard & Poor's Rating Services, a
division of the McGraw Hill, Inc.
"State" means any one of the 50 States of the United States of
America or the District of Columbia.
"Total Distribution Amount" has the meaning set forth in the Trust
Agreement.
"Trust Agreement" means the Trust Agreement dated as of __________,
between the Company and the Owner Trustee.
"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.
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"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Underlying Securities" has the meaning specified in the Trust
Agreement.
(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 Trust 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;
"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;
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(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-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
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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 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
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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.
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.
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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 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,
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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, 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
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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 (ss) 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;
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(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 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
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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
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. (a) The Indenture
Trustee, for the benefit of the Noteholders, shall establish and maintain in the
name of the Trust 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.
(b) 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(b), the
Indenture Trustee will cause to be distributed all amounts on deposit in the
Note Distribution Account on a Distribution Date deposited therein pursuant to
the Trust 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
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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(b) 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 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
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(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 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
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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.
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.
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(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) 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.
(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 Trust 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
Default, 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.
(e) 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 Trust Agreement) or the Basic Documents, or
waive timely performance or observance by the Company under the Trust 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.
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SECTION 3.08. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Trust
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 the payment of the taxes levied or assessed upon
any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden
the Trust Estate or any part thereof or any interest therein
or the proceeds thereof or (C) permit the lien of this
Indenture not to constitute a valid first priority security
interest in the Trust Estate.
SECTION 3.09. 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
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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 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:
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(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 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
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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
Securities 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 to the
Indenture Trustee stating that CS First Boston Auto Receivables Securities 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
Underlying 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.
SECTION 3.14. Reserved.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by the Trust 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
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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 3.18. 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 Company of its obligations
under the Trust 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
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(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
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 Trust Agreement or required by law.
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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;
(ii) default in the payment of the principal of any Note when the
same becomes due and payable;
(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;
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(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 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;
(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;
(vi) failure by the Company duly to observe or to perform in any
material respect any other covenants or agreements of the
Company set forth in the Trust 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 Company
by the Owner Trustee or the Indenture Trustee or (B) to the
Company, 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
(vii) the occurrence of an Insolvency Event with respect to the
Company.
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
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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
(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
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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 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
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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 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.
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(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 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.
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(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.
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 Underlying Securities. 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:
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(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 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
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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 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.
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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 Company, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder and under the
Trust Agreement, 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 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
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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 of its
obligations to the Issuer under or in connection with the Trust Agreement, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Trust 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 thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Company of its obligations under the Trust 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 under
or in connection with the Trust Agreement, including the right or power to take
any action to compel or secure performance or observance by the Company of its
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Trust 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
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degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee
and conforming to the requirements of this Indenture; however,
the Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(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 Trust Agreement.
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(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.
(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.
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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), (v) or (vii) 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.
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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.
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
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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
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(including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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
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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 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
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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).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Indenture Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
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ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts.
(a) On or 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 Trust 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 5.03 and 5.04 of the Trust Agreement will be transferred from the
Collection Account and/or the Reserve Account to the Note Distribution Account.
(b) 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)):
(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
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(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 Note Distribution
Account 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 Trust Agreement. All income or other gain from investments of
moneys deposited in the Note Distribution Account 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 the Note Distribution Account 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 the Note Distribution
Account 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 Note Distribution Account 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 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 Note Distribution Account 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
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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 Note Distribution
Account. 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 (ss)
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:
(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
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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
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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 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;
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(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 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
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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.
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 Company pursuant to Section 9.03 of the Trust
Agreement, on any Distribution Date on which the Company exercises its option to
purchase the Trust Estate pursuant to said Section 9.03 for a purchase price
equal to the Redemption Price; provided, that the Issuer has available funds
sufficient to pay the Redemption Price. The Company 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 Company 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
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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 Company 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
(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.
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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;
(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
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(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 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
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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 Underlying Securities as and to the extent
permitted or required by the Basic Documents and (B)
make cash payments out of the Onwer 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 Company or the Issuer, stating that the information
with respect to such factual matters is in the possession of 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.
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Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(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:
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<PAGE>
(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 Securities 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 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.
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<PAGE>
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 (ss) 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
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<PAGE>
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.
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
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<PAGE>
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.
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<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 SECURITIES 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:
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<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 SECURITIES 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:
_____________________________
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<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:
_____________________________
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<PAGE>
SCHEDULE I
[To be provided on the Closing Date]
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<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 SECURITIES TRUST 199____-____
CLASS A-1 _____% ASSET BACKED NOTES
CS First Boston Auto Receivables Securities 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.
A-1-1
<PAGE>
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 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 SECURITIES 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.
A-1-6
<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 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 SECURITIES TRUST 199__-__
CLASS A-2 ______% ASSET BACKED NOTES
CS First Boston Auto Receivables Securities 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
A-2-1
<PAGE>
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 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 SECURITIES 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 Company, 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.
A-2-5
<PAGE>
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.
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.
A-2-6
<PAGE>
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________ in its individual
capacity, ________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries
agents, officers, directors, employees or successors or assigns 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, 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)
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
B-6
<PAGE>
SCHEDULE A
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
S-1
<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>
<CAPTION>
TABLE OF CONTENTS
Page
<C> <S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
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
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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
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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
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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.
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"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.
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"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.
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"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
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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,
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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
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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.
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"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.
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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.
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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
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 ss.ss. 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, rerecording 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 section 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
section 310(b), including the optional provision permitted by the second
sentence of TIA section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA section 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA section 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA section 311(a), excluding any creditor
relationship listed in TIA section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA section 311(a) to the extent indicated.
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 section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA section 312(c).
SECTION 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 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 section 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by
rules and regulations prescribed from time to time by the Commission.
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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 section
313(a), within 30 days after each [ ____ ] beginning with [ ____ ], 199[ ], the
Indenture Trustee shall mail to each Noteholder as required by TIA section
313(c) a brief report dated as of such date that complies with TIA section
313(a). The Indenture Trustee also shall comply with TIA section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
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 ss.ss. 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 ss.ss. 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
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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
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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
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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.
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<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.
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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
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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
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(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
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
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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.
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(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.
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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:_____________________________
uthorized 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
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SCHEDULE A
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
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Exhibit 4.2.1
================================================================================
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>
<CAPTION>
Table of Contents
Page
ARTICLE I
<S> <C>
Definitions...................................................1
Section 1.01. Definitions................................................................................1
ARTICLE II
Conveyance of Receivables; Original Issuance of Certificates...............................................17
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]
</TABLE>
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<TABLE>
ARTICLE V
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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 Certificateholders..............................................70
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
</TABLE>
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<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.
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"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, with respect to each class of Certificates, 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.
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"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 (a) any amount
distributed to Holders of Class A Certificates on such preceding Distribution
Date and allocable to principal and (b) any Realized Losses allocated to the
Class A Certificates on such preceding Distribution Date.
"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 ___%.
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"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 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 sum 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.
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"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.
"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.
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"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.
"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
-6-
<PAGE>
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 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
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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 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
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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 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
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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.
"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
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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 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.
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"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 on the last day of a
Collection Period, of all Precomputed Advances, reduced as provided by Section
5.03(b).
"Payahead" means, with respect to a Precomputed Receivable and
any Collection Period, the amount, as of the close of business on the last day
of such Collection Period, computed in accordance with Section 5.02 with respect
to such Receivable.
"Payahead Account" means the account designated, as such,
established and maintained pursuant to Section 4.01.
"Payahead Balance" means, with respect to a Precomputed
Receivable and any Collection Period, the sum, as of the close of business on
the last day of such 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.
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"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 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.
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"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 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 to 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
$---------).
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"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.
"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 Services,
a division of the McGraw-Hill, Inc., 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.
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"Trust Account" means any of the Collection Account, the
Distribution Account and the Payahead Account, established and maintained
pursuant to Section 4.01.
"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 (ii) the Servicing Fee Rate, minus (iii) 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
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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 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:
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(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;
(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 comprising the estate of the
Trust; and
(f) the proceeds of any and all 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
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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 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
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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.
(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
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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 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
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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 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;
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(b) a copy of the original credit application as
executed by the Obligor;
(c) the original certificate of title or such documents that
the Servicer or the related Seller shall keep 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
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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
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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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 Seller 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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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, to pay interest accrued on such Simple Interest
Receivable to [and including] the date of receipt of such payment and any
remaining excess shall be applied to prepay the Simple Interest Receivable, and,
in the case of Precomputed Receivables, any remaining excess (a "Payahead")
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
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amount, a "Simple Interest Advance"). Each such Simple Interest Advance
shall increase the aggregate amount of 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
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(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 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 paragraph (a) 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
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Principal Carryover Shortfall and Class B Interest Carryover 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 Distribution 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
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Section 6.01. The Certificates. The Certificates shall be
issued in fully registered form in minimum denominations 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
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authorized denominations of a like aggregate amount upon 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
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list, in such form as the Servicer 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 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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(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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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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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 6.11 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
Assignment 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
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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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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 ss. 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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(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.
-71-
<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:
-73-
<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
Representations), Trustee as
well as Issuer must sign this _________________________________
Letter. If there is no (Issuer)
Trustee, in signing this By:_______________________________
Letter, Issuer itself
undertakes to perform all of
the obligations set forth
herein. (Authorized Officer's
Signature)
- --------------------------------------------------------------------------------
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 By:___________________________
related matters. (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.
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<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:
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<PAGE>
SCHEDULE I
Schedule of Receivables
[to be delivered on the Closing Date]
I-1
<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
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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
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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
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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
----
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
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Exhibit A Form of Depositor's Certificate
Exhibit B Form of Assignment of Receivables in Additional Accounts
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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) */ [or other card issuer] 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; (iiii) 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.
"Account Owner" shall mean [Seller Name] or any other entity which is
the issuer of the credit card relating to an Account pursuant to a Credit Card
Agreement.
"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.
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<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 2.09(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 2.09(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 the Depositor (i) shall have received written notice from each Rating
Agency that such designation will satisfy the Rating Agency Condition and shall
have delivered copies of each such written notice to the Servicer and the
Trustee, and (ii) 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 2.09(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 2.09 (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
2.09(f).
"Additional Payment" shall have the meaning specified in Section
3.09(a).
"Adjustment Payment" has the meaning specified in Section 3.09.
"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 2.09(a),
without the prior Rating Agency notice described under Section 2.09(d)(v), which
would either (x) with respect to any three consecutive Monthly Periods, equal
15% or less 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) and
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<PAGE>
(y) with respect to any twelve Monthly Periods, equal 20% or less 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 2.09(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 2.09(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(h).
"Average Rate" shall mean, as of any date of determination and with
respect to any Group, the percentage equivalent of a decimal equal to the sum of
the amounts for each outstanding Series (or each Class within any Series
consisting of more than one Class) within such Group obtained by multiplying (a)
the Certificate Rate (reduced to take into account the payments received
pursuant to any interest rate agreements net of any amounts payable under such
agreements, or, if such agreements result in a net amount payable, increased by
such net amount payable) for such Series or Class, by (b) a fraction, the
numerator of which is the aggregate unpaid principal amount of the Investor
Certificates of such Series or Class and the denominator of which is the
aggregate unpaid principal amount of all Investor Certificates within such
Group.
"Average Rate" means, with respect to any Group.
"Bearer Certificates" shall have the meaning specified in Section
6.01.
"Benefit Plan" shall have the meaning specified in Section 6.04(c).
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<PAGE>
"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 Certificates 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.
"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.
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<PAGE>
"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, 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 Account.
"Date of Processing" shall mean, with respect to any transaction, the
date on which such transaction is 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 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 Servicer, the amount of such Defaulted Receivables which are
subject to reassignment or
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<PAGE>
assignment to the Servicer 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 Receivables, 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 of 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 Servicer 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.
"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
2.09(f).
"Depositor's Interest" shall have the meaning specified in Section
4.01.
"Determination Date" shall mean the fourth Business Day prior to each
Distribution Date.
"Discount Option Receivables" shall have the meaning specified in
Section 2.12(a).
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<PAGE>
"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 2.12(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 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
2.12(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.
"Eligible Account" shall mean a MasterCard or VISA consumer revolving
credit card account or other consumer revolving credit account owned by the
Seller, the Depositor, or other Account Owner, which as of the Trust Cut-Off
Date with respect to an Initial Account or as of the Addition Date with respect
to an Additional Account (a) is in existence and maintained with the Seller or
any other Account Owner, 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 Seller or other Account
Owner 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
Seller or other Account Owner 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 Seller or other Account Owner in its
computer files as being the subject of a voluntary or involuntary bankruptcy
proceeding. Eligible Accounts may include accounts, the Receivable of 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 Seller or other
Account Owner (and is treated for purposes of this Agreement) as "zero", and (b)
charging privileges with respect to all such accounts have been cancelled in
accordance with the Lending Guidelines of the Seller or other Account Owner and
will not be reinstated by the Seller or other Account Owner or the
Servicer.
"Eligible Deposit Account" shall mean 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 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
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<PAGE>
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 (b) has either (i) a long-term unsecured
debt rating acceptable to [each] [the] Rating Agency or (ii) a certificate of
deposit rating acceptable to [each] [the] Rating Agency, and (c) is a member of
the FDIC. Notwithstanding the previous sentence, any institution the appointment
of which is acceptable to [each] [the] Rating Agency shall be considered an
Eligible Institution. If so qualified, the Servicer may be considered an
Eligible Institution for the purposes of this definition.
"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;
(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 that satisfy the Rating Agency Condition.
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"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
institution which owned such Receivable at the time of its creation, 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 Seller or any
Account Owner, 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 in
connection with the creation of such Receivable or the execution, delivery
and performance by the Seller or any other Account Owner 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 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 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 to the Trust of all the right, title and
interest therein 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 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 matters 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)
and in accordance with the Lending
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Guidelines and which waiver or modification is reflected in the Servicer's
file of revolving credit card accounts;
(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, the Seller or any Account Owner 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, non of the
Depositor, the Seller or any Account Owner has 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.
"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.
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"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 Checks Fees, (vi) Membership Fees
and (vii) any 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.
"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).
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"Initial Account" shall mean each MasterCard and VISA [and other
consumer revolving credit] 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 on or prior to the first Closing Date pursuant to Section 2.01.
"Initial Depositor Certificate Issuance Date" shall mean [ ], 199[ ],
the date on which the Depositor Certificate was issued by the Trust and
delivered to the Depositor.
"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.
"Investor Certificates" shall mean [any certificated or uncertificated
interest in the Trust designated as, or deemed tobe, an "Investor Certificate"
in the related Supplement] [any one of the certificates (including the Bearer
Certificates, the Registered Certificates or any Global Certificate) executed by
the Depositor 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 the established policies and
procedures of the Seller or other Account Owner relating to the operation of its
credit card business, which are applicable to
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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 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).
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"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.
"Officer's 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, the
Seller or any other Account Owner 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.
"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.
"Portfolio Yield" means, with respect to a Series, the yield
specified in the related Supplement.
"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) purchases of
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goods and services and (b) cash advances. Such amounts shall exclude Defaulted
Receivables [provided, that on any date on or after the Depositor shall have
designated the Discount Percentage, the Principal Receivables shall not include
Discount Option 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 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 as Bearer Certificates and any limitations imposed thereon;
(xiv) the priority of such Series with respect to any other Series; (xv) the
Rating Agency or Rating 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.
"Rapid 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
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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.
"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.
"Rating Agency Condition" shall mean, with respect to any action and
any Rating Agency, that each Rating Agency shall have notified the Depositor in
writing 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.
"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.
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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 2.10(a).
Removal Notice Date" shall have the meaning specified in subsection
2.10(a).
Accounts" shall have the meaning specified in Section 2.10(a).
"Required Designation Date" shall have the meaning specified in
Section 2.09(a).
"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 [ %]; 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 satisfy the Rating Agency Condition, (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, that the Required Depositor's
Percentage shall not at any time be less than the Specified Percentage.
"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.
"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
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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, the
Seller 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 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.
"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.
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"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.
"Specified Percentage" shall mean [ ]% provided, however, that the
Depositor may reduce the Specified 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 satisfy the Rating
Agency Condition, (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.
"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.
"Trust Cut-Off Date" shall mean [ ], 199[ ].
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"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 [ ] 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
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
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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 and [Servicer Name] as Servicer shall be deemed to be the
agreements, representations and warranties of ABSC and [Servicer Name] solely in
each such capacity for so long as ABSC and [Servicer Name] act in each such
respective 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) thereof.
Such property, together with all moneys on deposit in the Collection Account,
the Excess Funding Account, the Series Accounts, the rights of the Trustee on
behalf of the Trust under this Agreement and any Supplement, the property
conveyed to the Trustee on behalf of the Trust under any Participation Interest
Supplement, the right to receive certain Recoveries and any Series Enhancement
shall constitute the assets of the Trust (the "Trust Assets"). 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 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.
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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 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 from 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.
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 it were determined 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 Depositor shall be deemed
to have granted to the Trust a first priority security interest in all of the
Depositor's right, title, and interest, whether now owned or hereafter acquired,
in, to and under the Receivables and the other Trust Assets conveyed by the
Depositor.
Section 2.02. Acceptance by Trustee.
(a) 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 in the last
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paragraph of Section 2.01. The Trustee shall maintain a copy of Schedule 1, as
delivered from time to time, at the Corporate Trust Office.
(b) 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 [five] days prior to any disclosure
pursuant to this Section.
(c) 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.
(d) 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.
(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 Investor
Certificateholders.
(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 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.
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(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 validity
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 [insert State name] 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, effected or given and are in full force and
effect.
(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 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
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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 the Initial Depositor Certificate Issuance
Date, 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, the Initial Depositor
Certificate Issuance 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.
(iv) 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;
(v) 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 and Recoveries and Interchange identified as relating to
Receivables conveyed to the Trust by the Depositor which have become
Defaulted Receivables; or, if this Agreement does not constitute a sale of
such property, or, in the case of Additional Accounts,
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if the related Assignment does not constitute a sale of such property, this
Agreement or the related Assignment, as the case may be, 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.
(vi) on the Trust Cut-Off Date, each Account owned by the
Depositor or specified in a Receivables Purchase Agreement with the
Depositor was an Eligible Account and, in the case of Additional Accounts,
on the Additional Cut-Off Date with respect thereto, each such Additional
Account will be an Eligible Account;
(vii) on the Trust Cut-Off Date, each Receivable then existing and
conveyed to the Trust by the Depositor 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;
(viii) 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
(ix) 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 Enhancer entitled thereto pursuant to the relevant
Supplement within three Business Days following such discovery; provided that
the failure to give notice within three Business Days does not preclude
subsequent notice.
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), or (viii) 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
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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 [120] days, as may be specified in such notice 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 the
Servicer, or
(ii) it is so provided in Section 2.07(a) or 2.09(d)(iii) with
respect to any Receivables conveyed to the Trust by the Depositor,
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 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
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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 Certificateholders' Interest in Trust
Portfolio. In the event any representation or warranty of the Depositor set
forth in subsection 2.03(a) or (c) or subsection 2.04(a)(i) or (v) 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
Certificateholders' Interest in the Receivables and any Participation Interests
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
[120] days, as may be specified in such notice), 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 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 to
the Investor Certificateholders on such Distribution Date in accordance with the
terms of each Supplement.
If the Trustee or the Investor Certificateholders give notice
directing the Depositor to accept a reassignment of the Certificateholders'
Interest in the Receivables as provided above, the obligation of the Depositor
to accept such reassignment 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 an event of the type specified in the first sentence of
this Section 2.06, 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:
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(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).
(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.
(c) Depositor's Interest. Except for (i) the conveyances hereunder,
in connection with any transaction permitted by Section 7.02 and as provided in
Sections 2.09(g) and 6.03, and (ii) conveyances with respect to which the Rating
Agency Condition shall have been satisfied and a Tax Opinion shall have been
delivered, 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 or Participation
Interest other than the conveyances hereunder or under the Receivables Purchase
Agreement.
(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]
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Section 2.08. Covenants of Depositor with Respect to Receivables
Purchase Agreement. The 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 set forth in Section 5.01(h) and (i) of such Receivables Purchase
Agreement 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 the Seller 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 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 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 less than the highest Average Rate for any Group.
(ii) Credit Card Agreements and Lending Guidelines. Subject to
compliance with all Requirements of Law and subsection 2.08(a)(i) of this
Agreement, 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 Lending 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 subsection 2.08(a)(i) of this
Agreement, 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 Lending Guidelines, which, at the time of such action, the
Seller or other Account Owner, as the case may be, reasonably believes will
have a material adverse effect on ABSC or 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.
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(a) Required Additions.
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(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") cause to be designated additional
Eligible Accounts to be included as
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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 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 [eighth] 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;
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(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;
(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
2.09(a), the Depositor shall have received written notice from each Rating
Agency that such Addition will satisfy the Rating Agency Condition 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 [ ]
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) 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 (e)
below, voluntarily designate newly originated Eligible Accounts
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to be included as New Accounts. 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. If the
Assignment related to such Aggregate Addition expressly provides that such type
of revolving credit card account is permitted to be designated as a New Account.
(i) The Depositor shall not be permitted to designate Automatic
Additional Accounts unless and until each Rating Agency shall have
consented in writing, and upon obtaining such consent, the number and
balance of New Accounts shall not exceed [the Aggregate Addition Limited];
(ii) With respect to each semi-annual period, in which New
Accounts are added as Accounts, 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), with respect to the New Accounts included as Accounts during the
preceding six-month period confirming the validity and perfection of each
transfer of such New Accounts.
(iii) With respect to each semi-annual period in which New
Accounts are added as Accounts, the failure of such Transferor to deliver
[to the Trustee and each Rating Agency] an Opinion of Counsel substantially
in the form of Exhibit C-2 shall result in all Receivables arising in the
New Accounts to which such failure relates to be deemed to be Ineligible
Receivables in accordance with subsection 2.05(a) and all such Receivables
shall be reassigned to such Transferor in accordance with subsection
2.05(b). The opinion delivery requirement set forth in the immediately
preceding sentence may be modified provided that the Rating Agency
Condition is satisfied.
(e) 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 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 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;
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(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 a required addition pursuant to Section
2.09(a), the Depositor shall have received written notice from each Rating
Agency that such Addition will satisfy the Rating Agency Condition 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 2.09(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 not satisfy the Rating Agency Condition;
(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 [ ]
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
(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.
(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
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list delivered pursuant to paragraph (g) below is, as of the applicable
Additional Cut-Off Date, true and complete in all material respects.
[(g) 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 Seller 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.]
[(h) 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.]
Section 2.10. Removal of Accounts. (a) 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
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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 from each
Rating Agency that such removal will satisfy the Rating Agency Condition
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 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
(b) Notwithstanding Section 2.10(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
2.10(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.
(c) 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 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
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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 which 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 from each Rating Agency
that such designation (or reduction or withdrawal) will satisfy the Rating
Agency Condition 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 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,
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(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, 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 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 servicing procedures,
offices, employees or accounts for servicing the Receivables separate from the
servicing procedures, offices, employees and accounts used by the Servicer in
connection with servicing other credit card and consumer revolving credit
receivables.
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(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).
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 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
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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).
(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
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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.
(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
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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 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
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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.
(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, commencing in 19[ ], 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, commencing in 19[ ], 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
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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, commencing in 19[ ],
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.
(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
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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.
(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
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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.
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
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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 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
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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 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 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 Rapid 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
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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 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 Rapid 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
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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 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
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
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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 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, 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 each case, 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
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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 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;
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(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;
(iv) the Depositor shall have received written notice from each Rating
Agency that such issuance will satisfy the Rating Agency Condition 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
satisfy the Rating Agency
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Condition 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.
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
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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 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
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transfer or exchange (except that Bearer Certificates may not be surrendered for
exchange at any such office or agency in the United States).
(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.
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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 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.
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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 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 authenticated by the Trustee upon the same
conditions, in substantially the same manner and with the same effect as the
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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.
Such statement shall be 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 evidence that a corresponding certification or
certifications has or have been delivered to such Foreign Clearing Agency
pursuant to the terms of this Agreement.
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(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 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.
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(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 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
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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
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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 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
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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 satisfy the Rating Agency
Condition 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 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.
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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;
(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 satisfy the Rating Agency Condition 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.
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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 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
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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 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
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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 "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
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(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:
(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
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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 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
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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 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.
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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 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
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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.
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
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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.
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(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 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.
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(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 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 the Trustee. 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 Certificateholders, pursuant to the provisions of
this Agreement or any Enhancement Agreement, unless such
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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);
(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
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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
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
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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 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.
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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 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
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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.
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
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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, 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.
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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.
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 [ ].
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
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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.
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
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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 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
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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 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 satisfy the Rating Agency Condition 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 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
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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 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.
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(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 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.
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(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 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:
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(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,
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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.
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
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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.
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 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
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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
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.
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
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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;
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,
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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.
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.
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.
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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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Exhibit 4.2.3
[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
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
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
</TABLE>
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<TABLE>
<S> <C> <C>
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
</TABLE>
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<TABLE>
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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
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
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
</TABLE>
-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
-6-
<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
-7-
<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;
-8-
<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.
-9-
<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: Asset Backed Securities Corporation, 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:
(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;
-10-
<PAGE>
(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 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
-11-
<PAGE>
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 of the foregoing insurance policies, or any other insurance
policy with respect to the Contract.
-12-
<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 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
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
-13-
<PAGE>
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.
NADA: National Automobile Dealers Association.
----
-14-
<PAGE>
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 hereof providing a guaranty of the performance of the
Master Servicer's obligations under this Agreement.
-15-
<PAGE>
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 one or more REMICs under the Code and payment
of such amount results in a prohibited transaction tax, the adjusted basis (as
defined in the Code) of 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
-16-
<PAGE>
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 must take place within the time period specified
in the Reference
-17-
<PAGE>
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
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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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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.
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<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;
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<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
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<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 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 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, then such Servicer, if and to the extent that such Servicer is obligated
to do so under the related Warranty and Servicing Agreement, shall 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 of 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,
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<PAGE>
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 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 Contracts 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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(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 the 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 1.025. 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, then such Servicer, if and to the extent
that such Servicer is obligated to do so under the related Warranty and
Servicing Agreement, shall 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 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
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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
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shall have priority for purposes of withdrawals from the Certificate Account
pursuant to Section 3.12 hereof) or through Insurance Proceeds (respecting 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 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 Administrative
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 Attestation 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 Attestation 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 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 transfer or assignment, in each case without recourse, as shall
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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, to amend any provision hereof to the extent necessary or
desirable to maintain the rating or ratings assigned to each Class of
Certificates by the Rating Agency, 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 11.02. 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
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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 __________] 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
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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 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
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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 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.
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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
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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]
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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]
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Exhibit 4.2.5
[VERSION F--Double REMIC--
Shifting of Interest]
- --------------------------------------------------------------------------------
ASSET BACKED SECURITIES CORPORATION,
Depositor
[NAME OF MASTER SERVICER]
Master Servicer
and
[NAME OF TRUSTEE],
Trustee
- --------------------------------------------------------------------------------
STANDARD TERMS AND PROVISIONS
OF
POOLING AND SERVICING
Dated as of ____________ 1, 19__
relating to
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATES
----------
and
REFERENCE AGREEMENT
Dated as of _____________ 1, 19__
relating to
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 19__-__
Adjustable Pass-Through Rate
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I.
<S> <C> <C>
DEFINITIONS................................. 2
ARTICLE II.
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES.............................. 35
SECTION 2.01. Conveyance of Mortgage Loans................................ 35
SECTION 2.02. Acceptance by Trustee....................................... 38
SECTION 2.03. Representations, Warranties and
Covenants of the Master Servicer............................ 40
SECTION 2.04. Representations, Warranties and
Covenants of the Depositor as to the
Mortgage Loans.............................................. 44
SECTION 2.05. Representations and Warranties of
Servicers................................................... 47
SECTION 2.06. Assignment of Rights under Warranty and
Servicing Agreements........................................ 48
ARTICLE III.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.............. 48
SECTION 3.01. Master Servicer to Act as Servicer.......................... 48
SECTION 3.02. Enforcement of the Obligations
of Servicers................................................ 50
SECTION 3.03. Successor Servicer.......................................... 51
SECTION 3.04. Termination of the Rights of Servicers...................... 52
SECTION 3.05. Liability of the Master Servicer............................ 52
SECTION 3.06. Rights of the Depositor and the Trustee
in Respect of the Master Servicer........................... 53
SECTION 3.07. Trustee to Act as Master Servicer........................... 53
SECTION 3.08. Collection of Mortgage Loan Payments;
Certificate Account......................................... 54
SECTION 3.09. Servicing Accounts.......................................... 56
SECTION 3.10. Collection of Taxes, Assessments and
Similar Items; Escrow Accounts.............................. 57
SECTION 3.11. Access to Certain Documentation and
Information Regarding the Mortgage
Loans....................................................... 58
SECTION 3.12. Permitted Withdrawals from the
Certificate Account......................................... 58
SECTION 3.13. Maintenance of the Primary Mortgage
Insurance Policies; Collections
Thereunder.................................................. 60
SECTION 3.14. Maintenance of Hazard Insurance and
Other Insurance............................................. 62
SECTION 3.15. Enforcement of Due-On-Sale Clauses;
Assumption Agreements....................................... 63
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.16. Realization Upon Defaulted Mortgage
Loans....................................................... 65
SECTION 3.17. Trustee to Cooperate; Release of
Mortgage Files.............................................. 67
SECTION 3.18. Documents, Records and Funds in Posses-
sion of Master Servicer to be Held for
the Depositor and the Trustee for the
Benefit of the Subsidiary Trust
Certificateholders.......................................... 69
SECTION 3.19. Servicing Compensation...................................... 70
SECTION 3.20. Reports to the Depositor; Certificate
Account Statements.......................................... 70
SECTION 3.21. Annual Statement as to Compliance........................... 71
SECTION 3.22. Annual Independent Public Accountants'
Servicing Report............................................ 71
SECTION 3.23. [Not Applicable]............................................ 72
SECTION 3.24. [Not Applicable]............................................ 72
SECTION 3.25. [Not Applicable]............................................ 72
SECTION 3.26. [Not Applicable]............................................ 72
ARTICLE IV.
ADVANCES BY THE MASTER SERVICER............................. 72
SECTION 4.01. Monthly Advances............................................ 72
SECTION 4.02. Advances for Attorneys' Fees................................ 73
SECTION 4.03. Advances for Amounts Collected by
Servicer but Not Remitted................................... 73
SECTION 4.04. Nonrecoverable Advances..................................... 74
SECTION 4.05. Advances for Additional Interest in
Connection with Principal Prepayments....................... 74
SECTION 4.06. [Not Applicable]............................................ 75
ARTICLE V.
THE CERTIFICATES............................................ 75
SECTION 5.01. The Certificates............................................ 75
SECTION 5.02. Registration of Transfer and Exchange of
Certificates................................................ 75
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates................................................ 76
SECTION 5.04. Persons Deemed Owners....................................... 77
SECTION 5.05. Access to List of Certificateholders'
Names and Addresses......................................... 77
SECTION 5.06. Maintenance of Office or Agency............................. 78
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ARTICLE VI.
THE DEPOSITOR AND THE MASTER SERVICER....................... 78
SECTION 6.01. Respective Liabilities of the Depositor
and the Master Servicer..................................... 78
SECTION 6.02. Merger or Consolidation of the Depositor
or the Master Servicer...................................... 78
SECTION 6.03. Limitation on Liability of the
Depositor, the Master Servicer and
Others...................................................... 79
SECTION 6.04. Master Servicer Not to Resign............................... 80
SECTION 6.05. Errors and Omissions Insurance; Fidelity
Bonds....................................................... 80
ARTICLE VII.
DEFAULT..................................................... 81
SECTION 7.01. Events of Default........................................... 81
SECTION 7.02. Trustee to Act; Appointment of
Successor................................................... 83
SECTION 7.03. Notification to Certificateholders.......................... 84
ARTICLE VIII.
CONCERNING THE TRUSTEE...................................... 85
SECTION 8.01. Duties of Trustee........................................... 85
SECTION 8.02. Certain Matters Affecting the Trustee....................... 86
SECTION 8.03. Trustee Not Liable for Mortgage Loans....................... 87
SECTION 8.04. Trustee May Own Certificates................................ 87
SECTION 8.05. Master Servicer to Pay Trustee's Fees
and Expenses................................................ 87
SECTION 8.06. Eligibility Requirements for Trustee........................ 88
SECTION 8.07. Resignation and Removal of Trustee.......................... 88
SECTION 8.08. Successor Trustee........................................... 89
SECTION 8.09. Merger or Consolidation of Trustee.......................... 90
SECTION 8.10. Appointment of Authenticating Agent......................... 90
SECTION 8.11. Appointment of Co-Trustee or Separate
Trustee..................................................... 91
SECTION 8.12. Tax Returns................................................. 93
SECTION 8.13. [Not Applicable]............................................ 93
ARTICLE IX.
TERMINATION................................................. 93
SECTION 9.01. Termination upon Liquidation or
Repurchase of all Mortgage Loans............................ 93
SECTION 9.02. Final Distribution on the Certificates...................... 94
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ARTICLE X.
MISCELLANEOUS PROVISIONS................................... 95
SECTION 10.01. Amendment.................................................. 95
SECTION 10.02. Recordation of Agreement; Counterparts..................... 96
SECTION 10.03. Governing Law.............................................. 96
SECTION 10.04. Intention of Parties....................................... 96
SECTION 10.05. Notices.................................................... 96
SECTION 10.06. Severability of Provisions................................. 97
SECTION 10.07. Assignment................................................. 97
SECTION 10.08. Limitation on Rights of
Certificateholders......................................... 97
SECTION 10.09. Inspection and Audit Rights................................ 98
SECTION 10.10 Certificates Nonassessable and Fully
Paid....................................................... 99
ARTICLE XI.
CONVEYANCE OF TRUST FUNDS;
DESCRIPTION OF THE CERTIFICATES............................ 99
SECTION 11.01. Designation................................................ 99
SECTION 11.02. Conveyance of Trust Funds; Issuance of
Certificates............................................... 99
SECTION 11.03. Delivery of Documents......................................101
SECTION 11.04. Denominations..............................................105
SECTION 11.05. Scheduled Principal Balance................................105
SECTION 11.06. Distribution...............................................105
SECTION 11.07. Place and Notice for Final Distribution
on Certificates............................................105
SECTION 11.08. Distribution Date..........................................105
SECTION 11.09. Mortgage Loans.............................................106
SECTION 11.10. Forms Generally............................................106
SECTION 11.11. Optional Termination.......................................106
SECTION 11.12. Substitution...............................................107
SECTION 11.13. Wire Transfer Eligibility..................................107
SECTION 11.14. Required Rating............................................107
SECTION 11.15. Servicing Compensation.....................................107
SECTION 11.16. Cut-off Date...............................................107
SECTION 11.17. Certificate Registrar......................................107
SECTION 11.18. [Not Applicable]...........................................107
SECTION 11.19. Paying Agent...............................................108
SECTION 11.20. Restrictions on Transfer of
Certificates...............................................108
SECTION 11.21. Monthly Advances...........................................110
SECTION 11.22. REMIC Election.............................................111
[SECTION 11.23. Warranty and Servicing Agreements..........................112
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ARTICLE XII.
[Not Applicable]...........................112
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS..............112
SECTION 13.01. Accounts...................................................112
SECTION 13.02. Distributions..............................................114
SECTION 13.03. Subordination; Priority of
Distributions..............................................116
SECTION 13.04. Monthly Statements to
Certificateholders.........................................118
ARTICLE XIV.
ADDITIONAL REPRESENTATIONS AND WARRANTIES..................121
SECTION 14.01. Individual Mortgage Loans..................................121
SECTION 14.02. Subsidiary Regular Interests...............................129
SECTION 14.03. Conversion of Mortgage Loans...............................130
ARTICLE XV.
OPTIONAL TERMINATION.......................................131
SECTION 15.01. Purchase of Mortgage Loans in the
Subsidiary Trust Fund......................................131
SECTION 15.02. Purchase of Subsidiary Regular Interest
Certificates in the Master Trust Fund......................131
SECTION 15.03. Procedure Upon Optional Termination........................132
SECTION 15.04. Additional Termination Requirements........................133
ARTICLE XVI.
ADDITIONAL PROVISIONS......................................134
SECTION 16.01. Amendment..................................................134
SECTION 16.02. Recordation of Agreement...................................135
SECTION 16.03. Intention of the Parties...................................135
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THESE STANDARD TERMS AND PROVISIONS OF POOLING AND SERVICING and REFERENCE
AGREEMENT, are each dated as of _____________ 1, 19__, among ASSET BACKED
SECURITIES CORPORATION, depositor (the "Depositor"), [ ], as master
servicer (the "Master Servicer"), and [ ], as trustee (the "Trustee"),
and together shall constitute one and the same agreement. The Depositor has
purchased from the Master Servicer and is the owner of the Mortgage Loans (as
hereinafter defined) and the other property being conveyed by it to the Trustee
in its capacity as trustee of the Subsidiary Trust Fund (as hereinafter defined)
and, in accordance with this Agreement, will become the owner of the Subsidiary
Regular Interests (as hereinafter defined) and the other property being conveyed
by it to the Trustee in its capacity as trustee of the Master 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 Subsidiary Trust
Fund and the Master Trust Fund. All covenants and agreements made by the
Depositor and the Master Servicer herein are for the benefit and security of the
Certificateholders. The Depositor is entering into this Agreement, 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:
STANDARD TERMS AND PROVISIONS
OF POOLING AND SERVICING
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Adjustment Date: As to each Mortgage Loan, the date on which the Mortgage
Rate adjusts.
* Administrative Fee: [Not Applicable]
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*Definitions from Standard Terms and Provisions.
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* Agreement: This Standard Terms and Provisions of Pooling and Servicing
and Reference Agreement and any and all amendments or supplements hereto or
thereto.
* Alternative Credit Support: [Not Applicable]
* 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, or with respect to any Mortgage Loan
that represents a refinancing, the appraised value of the Mortgaged Property
based upon the appraisal made at the time of such refinancing.
* Authenticating Agent: The Authenticating Agent appointed pursuant to
Section 8.10 hereof and identified in Section 11.18 of 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.
Basis Limited Price: As to each Mortgage Loan, the subsidiary trust's
adjusted federal income tax basis in such Mortgage Loan on the date such
Mortgage Loan is to be sold by the subsidiary trust, together with unpaid
accrued interest thereon, if any, from the Due Date as to which interest was
last paid by the Mortgagor to the first day of the month following the month of
purchase at the applicable Subsidiary Pass-Through Rate and less any Monthly
Advances made by the Master Servicer with respect to any such Mortgage Loan.
* Business Day: Any date other than (i) a Saturday or a Sunday, or (ii) a
day on which banking institutions in [name of state] are authorized or obligated
by law or executive order to be closed.
* Buydown Funds: [Not Applicable]
* Buydown Mortgage Loan: [Not Applicable]
* Certificate: Any one of the certificates evidencing a beneficial interest
in the Subsidiary Trust Fund or the Master Trust Fund executed by the Depositor
and authenticated by or on behalf of the Trustee for the benefit of the
Certificateholders of the applicable Trust Fund in substantially the form or
forms attached as Exhibits hereto. The Certificates may be issued in such
Classes or Subclasses and with such characteristics as are specified in the
applicable Reference Agreement.
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* Certificate Account: The separate trust 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 holders of interests in the Subsidiary Trust Fund 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 Principal Balance: Any or all of the Class A Certificate
Principal Balance, the Class B-1 Certificate Principal Balance, or the Class B-2
Certificate Principal Balance as applicable.
* Certificate Register and Certificate Registrar: Respectively, the
register maintained pursuant to Section 5.02 hereof and the registrar appointed
and identified in Section 11.17 of 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
determining Voting Rights, 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.
Class A Certificate: A Certificate designated as a Class A Certificate
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.
Class A Certificate Principal Balance: On any Distribution Date, the
Initial Class A Certificate Principal Balance less the sum of (A) all amounts
previously distributed to holders of Class A Certificates on previous
Distribution Dates on account of amounts described in clauses (y)(iii)-(v),
inclusive, of the definition of Class A Distribution, and (B) all amounts of
Realized Losses allocated to the Class A Certificates pursuant to Section 13.03
of the Reference Agreement. For purposes of determining whether amounts
calculated pursuant to such clauses (y)(iii)-(v), inclusive, were actually
distributed on any particular Distribution Date, the distribution on any such
Distribution Date to holders of Class A Certificates shall be allocated first to
the interest requirement calculated pursuant to clause (y)(i) thereof, second to
any balance in the Class A Interest Shortfall Account pursuant to clause (y)(ii)
thereof, third to any balance in the Class A Principal Shortfall Account
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in accordance with clause (y)(iii) of such definition; and fourth to the
principal component of the Class A Distribution calculated pursuant to clauses
(y)(iv) and (v) thereof.
Class A Distribution: With respect to any Distribution Date, the lesser of
(x) the Master Trust Fund Aggregate Distribution; and (y) the sum of:
(i) the Class A Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
all Subsidiary Regular Interest Interest Amounts for such Distribution
Date;
(ii) the outstanding balance of the Class A Interest Shortfall
Account;
(iii) the outstanding balance of the Class A Principal Shortfall
Account;
(iv) the Class A Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
the Subsidiary Regular Interest Principal Amounts; and
(v) the Class A Prepayment Percentage multiplied by the aggregate for
all Subsidiary Regular Interest Certificates held by the Master Trust Fund
of the Subsidiary Regular Interest Prepayment Amounts.
Notwithstanding the above, at any time when the Subordinated Amount is
equal to zero, the amount calculated under item (y) above shall not include any
amount calculated in reference to Subsidiary Regular Interest Interest Amounts
and Subsidiary Regular Interest Principal Amounts which were not actually
received.
Class A Interest Shortfall: On any Distribution Date, any excess of the
amount computed pursuant to clause (y)(i) of the definition of Class A
Distribution over the amount distributed to Class A Certificateholders on such
Distribution Date.
Class A Interest Shortfall Account: A ledger account established to reflect
all previously due and unpaid Class A Interest Shortfall owed to the Class A
Certificateholders and accrued interest thereon at the Master Pass-Through Rate.
The balance in such account will be decreased on each Distribution Date by
disbursements to the Class A Certificateholders of any previously due Class A
Interest Shortfalls and accrued interest thereon at the Master Pass-Through Rate
and increased on each Distribution Date by any new Class A Interest Shortfall
allocable to the Class A Certificates and by accrued and unpaid interest on
previously due and unpaid Class A Interest Shortfalls at the
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Master Pass-Through Rate. For purposes of determining whether previously due
Class A Interest Shortfalls have been disbursed to Class A Certificateholders,
distributions shall be allocated first to the interest component of the Class A
Distribution calculated pursuant to clause (y)(i) thereof; second to any balance
in the Class A Interest Shortfall Account in accordance with clause (y)(ii) of
such definition; third to any balance in the Class A Principal Shortfall Account
in accordance with clause (y)(iii) of such definition; and fourth to the
principal component of the Class A Distribution calculated pursuant to clauses
(y)(iv) and (v) thereof.
Class A Percentage: At any given time, the lesser of (i) 100%, and (ii) the
percentage (expressed as a decimal and carried to six places rounded up)
obtained by dividing the aggregate Class A Certificate Principal Balance by an
amount equal to the aggregate of the Scheduled Principal Balances of the
Subsidiary Regular Interest Certificates.
Class A Prepayment Percentage: As to any Distribution Date to and including
the Distribution Date in [month] [year], 100%. As to any Distribution Date
subsequent to [month] [year] to and including the Distribution Date in [month]
[year], the Class A Percentage as of such Distribution Date plus 70% of the
Subordinate Prepayment Percentage for such Distribution Date, provided that
prior to the Distribution Date next succeeding the first Distribution Date, if
any, after [month] [year] as of which the Step-down Criteria are met, the Class
A Prepayment Percentage shall be 100%. As to any Distribution Date subsequent to
[month] [year] to and including the Distribution Date in [month] [year], the
Class A Percentage as of such Distribution Date plus 60% of the Subordinate
Prepayment Percentage for such Distribution Date, provided that prior to the
Distribution Date next succeeding the first Distribution Date, if any, after
[month] [year] as of which the Step-down Criteria are met, the Class A
Prepayment Percentage shall be the Class A Prepayment Percentage in effect in
[month] [year]. As to any Distribution Date subsequent to [month] [year], to and
including the Distribution Date in [month] [year], the Class A Percentage as of
such Distribution Date plus 40% of the Subordinate Prepayment Percentage for
such Distribution Date, provided that prior to the Distribution Date next
succeeding the first Distribution Date, if any, after [month] [year] as of which
the Step-down Criteria are met, the Class A Prepayment Percentage shall be the
Class A Prepayment Percentage in effect in Subordinate Prepayment Percentage for
[month] [year]. As to any Distribution Date subsequent to [month] [year], to and
including the Distribution Date in [month] [year], the Class A Percentage as of
such Distribution Date plus 20% of the Subordinate Prepayment Percentage for
such Distribution Date, provided that prior to the Distribution Date next
succeeding the first Distribution Date, if any, after [month] [year] as of which
the Step-down Criteria are met, the Class A Prepayment Percentage shall be the
Class A Prepayment Percentage in effect in [month]
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[year]. As to any Distribution Date subsequent to [month] [year], the Class A
Percentage as of such Distribution Date, provided that prior to the Distribution
Date next succeeding the first Distribution Date, if any, after [month] [year]
as of which the Step-down Criteria are met, the Class A Prepayment Percentage
shall be the Class A Prepayment Percentage in effect in [month] [year]. The
foregoing is subject to the following: (i) if the distribution on any
Distribution Date of the Class A Prepayment Percentage of the Subsidiary Regular
Interest Prepayment Amounts related to Principal Prepayments received in the
prior month to holders of Class A Certificates would reduce the Class A
Certificate Principal Balance below zero, the Class A Prepayment Percentage for
such Distribution Date shall be the percentage necessary to bring the Class A
Certificate Principal Balance to zero and thereafter the Class A Prepayment
Percentage shall be zero and (ii) if the Class A Percentage as of any
Distribution Date is greater than the initial Class A Percentage, the Class A
Prepayment Percentage for such Distribution Date shall be 100%.
Class A Principal Shortfall: On any Distribution Date, the excess of the
Class A Shortfall over the Class A Interest Shortfall.
Class A Principal Shortfall Account: A ledger account established to
reflect all previously due and unpaid Class A Principal Shortfalls owed to the
Class A Certificateholders. The balance in such account will be decreased on
each Distribution Date by disbursements to the Class A Certificateholders of any
previously due Class A Principal Shortfalls and increased on each Distribution
Date by any new Class A Principal Shortfall allocable to the Class A
Certificates. For purposes of determining whether previously due Class A
Principal Shortfalls have been disbursed to Class A Certificateholders,
distributions shall be allocated first to the interest component of the Class A
Distribution calculated pursuant to clause (y)(i) thereof; second to any balance
in the Class A Interest Shortfall Account in accordance with clause (y)(ii) of
such definition; third to any balance in the Class A Principal Shortfall Account
in accordance with clause (y)(iii) of such definition; and fourth to the
principal component of the Class A Distribution calculated pursuant to clauses
(y)(iv) and (v) thereof.
Class A Shortfall: On any Distribution Date, any excess of the amount
computed pursuant to clause (y) of the definition of Class A Distribution over
the amount distributed to Class A Certificateholders on such Distribution Date.
The Shortfall is comprised of the Class A Interest Shortfall and the Class A
Principal Shortfall.
Class B Certificate: Any one of the Class B-1 Certificates or Class B-2
Certificates.
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Class B-1 Certificate: A Certificate designated as a Class B-1 Certificate,
which collectively shall be a subclass of the Class B 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 B hereto.
Class B-1 Certificate Principal Balance: On any Distribution Date, the
Initial Class B-1 Certificate Principal Balance less the sum of (A) all amounts
previously distributed to holders of Class B-1 Certificates on previous
Distribution Dates on account of amounts described in clauses (I)(y)(iii)-(v),
inclusive, of the definition of Class B-1 Distribution, and (B) all amounts of
Realized Losses allocated to the Class B-1 Certificates pursuant to Section
13.03 of the Reference Agreement. For purposes of determining whether amounts
(I)(y)(iii)-(v), inclusive, were actually distributed on any particular
Distribution Date, the distribution on any such Distribution Date to holders of
Class B-1 Certificates shall be allocated first to the interest requirement
calculated pursuant to clause (I)(y)(i) thereof, second to any balance in the
Class B-1 Interest Shortfall Account pursuant to clause (I)(y)(ii) thereof,
third to any balance in the Class B-1 Principal Shortfall Account in accordance
with clause (I)(y)(iii) of such definition; and fourth to the principal
component of the Class B-1 Distribution calculated pursuant to clauses
(I)(y)(iv) and (v) thereof.
Class B-1 Distribution: On any Distribution Date, an amount equal to the
lesser of (x) the Master Trust Fund Aggregate Distribution on such Distribution
Date reduced by the Class A Distribution on such Distribution Date, and (y) the
sum of:
(i) the Class B-1 Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
all Subsidiary Regular Interest Interest amounts for such Distribution
Date;
(ii) the outstanding balance of the Class B-1 Interest Shortfall
Account;
(iii) the outstanding balance of the Class B-1 Principal Shortfall
Account;
(iv) the Class B-1 Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
the Subsidiary Regular Interest Principal Amounts; and
(v) the Class B-1 Prepayment Percentage multiplied by the aggregate
for all Subsidiary Regular Interest Certificates held by the Master Trust
Fund of the Subsidiary Regular Interest Prepayment Amounts.
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Notwithstanding the above, at any time when the Subordinated Class B-2
Amount is equal to zero, the amount calculated under item (I)(y) above shall not
include any amount calculated in reference to Subsidiary Regular Interest
Interest Amounts and Subsidiary Regular Interest Principal Amounts which were
not actually received.
Class B-1 Interest Shortfall: On any Distribution Date, any excess of the
amount computed pursuant to clause (I)(y)(i) of the definition of Class B-1
Distribution over the amount distributed to Class B-1 Certificateholders on such
Distribution Date.
Class B-1 Interest Shortfall Account: A ledger account established to
reflect all previously due and unpaid Class B-1 Interest Shortfall owed to the
Class B-1 Certificateholders and accrued interest thereon at the Master
Pass-Through Rate. The balance in such account will be decreased on each
Distribution Date by disbursements to the Class B-1 Certificateholders of any
previously due Class B-1 Interest Shortfalls and accrued interest thereon at the
Master Pass-Through Rate and increased on each Distribution Date by any new
Class B-1 Interest Shortfall allocable to the Class B-1 Certificates and by
accrued and unpaid interest on previously due and unpaid Class B-1 Interest
Shortfalls at the Master Pass-Through Rate. For purposes of determining whether
previously due Class B-1 Interest Shortfalls have been disbursed to Class B-1
Certificateholders, distributions shall be allocated first to the interest
component of the Class B-1 Distribution calculated pursuant to clause (I)(y)(i)
thereof; second to any balance in the Class B-1 Interest Shortfall Account in
accordance with clause (I)(y)(ii) of such definition; third to any balance in
the Class B-1 Principal Shortfall Account in accordance with clause (I)(y)(iii)
of such definition; and fourth to the principal component of the Class B-1
Distribution calculated pursuant to clauses (I)(y)(iv) and (v) thereof.
Class B-1 Percentage: At any given time, the lesser of (i) 100%, (ii) the
positive difference, if any, between 100% and the Class A Percentage, and (iii)
the percentage (expressed as a decimal and carried to six places rounded up)
obtained by dividing the aggregate Class B-1 Certificate Principal Balance by an
amount equal to the aggregate of the Scheduled Principal Balances of the
Subsidiary Regular Interest Certificates.
Class B-1 Prepayment Percentage: As to any Distribution Date to and
including the Distribution Date in [month] [year], 0%. As to any Distribution
Date subsequent to [month] [year] to and including the Distribution Date in
[month] [year], the Subordinate Prepayment Percentage times the sum of the Class
B-1 Subordinate Percentage plus 70% of the Subordinate Prepayment Percentage for
such Distribution Date, provided that prior to the Distribution Date next
succeeding the first
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Distribution Date, if any, after [month] [year] as of which the Step-down
Criteria are met, the Class B-1 Prepayment Percentage shall be 0%. As to any
Distribution Date subsequent to [month] [year] to and including the Distribution
Date in [month] [year], the Class B-1 Subordinate Prepayment Percentage times
the sum of the Class B-1 Subordinate Percentage as of such Distribution Date
plus 60% of the Class B-2 Subordinate Percentage Subordinate Prepayment
Percentage for such Distribution Date, provided that prior to the Distribution
Date next succeeding the first Distribution Date, if any, after [month] [year]
as of which the Step-down Criteria are met, the Class B-1 Prepayment Percentage
shall be the Class B-1 Prepayment Percentage in effect in [month] [year]. As to
any Distribution Date subsequent to [month] [year] to and including the
Distribution Date in [month] [year], the Class A Percentage Subordinate
Prepayment Percentage times the sum of the Class B-1 Subordinate Percentage as
of such Distribution Date plus 40% Class B-1 Subordinate Percentage of the
Subordinate Prepayment Percentage for such Distribution Date, provided that
prior to the Distribution Date next succeeding the first Distribution Date, if
any, after [month] [year] as of which the Step-down Criteria are met, the Class
B-1 Prepayment Percentage shall be the Class B-1 Prepayment Percentage in effect
in Subordinate Prepayment Percentage for [month] [year]. As to any Distribution
Date subsequent to [month] [year], to and including the Distribution Date in
[month] [year], the Subordinate Prepayment Percentage times the sum of the Class
B-1 Subordinate Percentage as of such Distribution Date plus 20% of the Class
B-2 Subordinate Percentage Subordinate Prepayment Percentage for such
Distribution Date, provided that prior to the Distribution Date next succeeding
the first Distribution Date, if any, after [month] [year] as of which the
Step-down Criteria are met, the Class A Prepayment Percentage shall be the Class
B-1 Prepayment Percentage in effect in [month] [year]. As to any Distribution
Date subsequent to [month] [year], the Class A Percentage as of such
Distribution Date, provided that prior to the Distribution Date next succeeding
the first Distribution Date, if any, after [month] [year] as of which the
Step-down Criteria are met, the Class A Prepayment Percentage shall be the Class
A Prepayment Percentage in effect in [month] [year]. The foregoing is subject to
the following: (i) if the distribution on any Distribution Date of the Class A
Prepayment Percentage of the Subsidiary Regular Interest Prepayment Amounts
related to Principal Prepayments received in the prior month to holders of Class
A Certificates would reduce the Class A Certificate Principal Balance below
zero, the Class A Prepayment Percentage for such Distribution Date shall be the
percentage necessary to bring the Class A Certificate Principal Balance to zero
and thereafter the Class A Prepayment Percentage shall be zero and (ii) if the
Class A Percentage as of any Distribution Date is greater than the initial Class
A Percentage, the Class A Prepayment Percentage for such Distribution Date shall
be the Subordinate Prepayment Percentage.
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Class B-1 Principal Shortfall: On any Distribution Date, the excess of the
Class B-1 Shortfall over the Class B-1 Interest Shortfall.
Class B-1 Principal Shortfall Account: A ledger account established to
reflect all previously due and unpaid Class B-1 Principal Shortfalls owed to the
Class B-1 Certificateholders. The balance in such account will be decreased on
each Distribution Date by disbursements to the Class B-1 Certificateholders of
any previously due Class B-1 Principal Shortfalls and increased on each
Distribution Date by any new Class B-1 Principal Shortfall allocable to the
Class B-1 Certificates. For purposes of determining whether previously due Class
B-1 Principal Shortfalls have been disbursed to Class B-1 Certificateholders,
distributions shall be allocated first to the interest component of the Class
B-1 Distribution calculated pursuant to clause (I)(y)(i) thereof; second to any
balance in the Class B-1 Interest Shortfall Account in accordance with clause
(I)(y)(ii) of such definition; third to any balance in the Class B-1 Principal
Shortfall Account in accordance with clause (I)(y)(iii) of such definition; and
fourth to the principal component of the Class B-1 Distribution calculated
pursuant to clauses (I)(y)(iv) and (v) thereof.
Class B-1 Shortfall: On any Distribution Date, any excess of the amount
computed pursuant to clause (I)(y) of the definition of Class B-1 Distribution
over the amount distributed to Class B-1 Certificateholders on such Distribution
Date. The Class B-1 Shortfall is comprised of the Class B-1 Interest Shortfall
and the Class B-1 Principal Shortfall.
Class B-1 Subordinate Percentage: As of any Distribution Date, the
percentage obtained by dividing the Class B-1 Percentage by the sum of the Class
B-1 Percentage and the Class B-2 Percentage.
Class B-2 Advance: The excess of the amount determined by clause I(b) of
the definition of Class B-2 Distribution over the amount determined by clause
I(a) of such definition, representing amounts distributed to holders of Class A
Certificates and Class B-1 Certificates from amounts otherwise distributable to
the Class B-2 Certificateholder.
Class B-2 Certificate: The Certificate designated as a Class B-2
Certificate, which shall be a subclass of the Class B Certificates, executed by
or on behalf of the Depositor and authenticated by or on behalf of the Trustee
in substantially the form of Exhibit C hereto.
Class B-2 Certificate Principal Balance: As of any Distribution Date, the
difference between the Scheduled Principal Balance of the Subsidiary Regular
Interest Certificates and sum
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of the Class A Certificate Principal Balance and the Class B-1 Certificate
Principal Balance.
Class B-2 Distribution: On any Distribution Date, an amount equal to the
sum of
(I) the lesser of (a) the Master Trust Fund Aggregate Distribution on such
Distribution Date reduced by the sum of the Class A Distribution and the Class
B-1 Distribution on such Distribution Date, and (b) the sum of:
(i) the Class B-2 Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
all Subsidiary Regular Interest Interest Amounts for such Distribution
Date;
(ii) the Class B-2 Percentage multiplied by the aggregate for all
Subsidiary Regular Interest Certificates held by the Master Trust Fund of
the Subsidiary Regular Interest Principal Amounts; and
(iii) the Class B-2 Prepayment Percentage multiplied by the aggregate
for all Subsidiary Regular Interest Certificates held by the Master Trust
Fund of the Subsidiary Regular Interest Prepayment Amounts; and
(II) Payments with respect to Subsidiary Regular Interest Distributions of
funds received as part of such distributions representing delinquent principal
and interest which were previously the subject of Class B-2 Advances which
remain unreimbursed as of such date.
Class B-2 Percentage: At any given time, the positive difference, if any,
between 100% and the sum of the Class A Percentage and the Class B-1 Percentage.
Class B-2 Prepayment Percentage: As to any Distribution Date, the positive
difference, if any, between 100% and the sum of the Class A Prepayment
Percentage and the Class B- 1 Prepayment Percentage for such Distribution Date.
Class B-2 Subordinate Percentage: As of any Distribution Date, the
difference between 100% and the Class B-1 Subordinate Percentage.
* Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.
Conversion Shortfall: With respect to each Converted Mortgage Loan as to
which the Purchase Price has been deposited in the Certificate Account upon
repurchase or sale pursuant to Section 14.03, an amount equal to the excess, if
any, of the Purchase Price calculated without reference to the Basis Limit
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Price as set forth in clause (i) of the definition of Purchase Price, over the
Basis Limit Price.
Converted Mortgage Loan: Any Mortgage Loan with respect to which the
related Mortgagor has complied with the applicable requirements of the Mortgage
Note to convert the Mortgage Rate on such Mortgage Loan from an adjustable rate
to a fixed rate and for which the date of such conversion has been established.
* Corporate Trust Office: The designated office of the Trustee in the State
of [ ] at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at [address of Trustee].
* Credit Support: [Not Applicable]
* 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: [Not Applicable]
* Custodian: [Not Applicable]
* Cut-off Date: The first day of the month of the initial issuance of a
Series of Certificates, as specified in Section 11.16 of the Reference
Agreement.
Deficient Valuation: With respect to any Mortgage Loan, 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 Bankruptcy Code, as amended from time to
time (11 U.S.C.).
* 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: __________, 19__.
* Depositor: Asset Backed Securities Corporation, a ________________
corporation, or its successor in interest.
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* Determination Date: The __th day (or if such __th day is not a Business
Day, the Business Day immediately preceding such __th day) of the month of the
related Distribution Date.
* Distribution Date: Unless otherwise specified in the applicable Reference
Agreement, the __th day of each calendar month after the initial issuance of the
Series of Certificates, or if such __th day is not a Business Day, the next
succeeding Business Day, commencing on the date specified in Section 11.08 of
the Reference Agreement.
* Due Date: Unless otherwise specified in the Reference Agreement, the
first day of the month in which the related Distribution Date occurs.
Due Period: The period commencing on the second day of the month prior to
the month in which the Distribution Date occurs and ending on the first day of
the month in which the Distribution Date occurs.
* Eligible Account: An account maintained with a federal or state chartered
depository institution or trust company (i) 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) 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 secured 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 superior to claims of any
other depositors or creditors of the depository institution or trust company
with which such account is maintained or (iv) any other account acceptable to
the Rating Agency rating the Certificates of the related Series.
* 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
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the downgrading or withdrawal of the ratings then assigned to the
Certificates by the Rating Agency;
(iii) commercial paper which is then rated in the highest commercial
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 category 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 which do not adversely affect the rating on
the Certificates 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 incorporated under the laws of the United States or any state
thereof which, at the time of such investment or contractual commitment
providing for such investments 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
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(ix) such other investments which do not adversely affect the rating
on the Certificates.
Unless otherwise specified herein or in the Reference Agreement, (i) any such
Eligible Investments must be available for withdrawal without penalty and must
mature no later than the Business Day immediately preceding the first succeeding
Distribution Date, and (ii) no such instrument set forth above shall constitute
an Eligible Investment if such instrument evidences either (a) a right to
receive only interest payments with respect to the obligations underlying such
instrument, or (b) a right to receive both principal and interest payments
derived from obligations underlying such instrument and the principal and
interest payments with respect to such instrument provide for a yield to
maturity of greater than 120% of the yield to maturity at par of such underlying
obligations.
* 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 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 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 an 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.
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* FSLIC: The Federal Savings and Loan Insurance Corporation, or any
successor thereto.
Gross Margin: With respect to each Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note to be added to the Index to
determine the Mortgage Rate, which ranges from ____ basis points (___%) to ____
basis points (___%) per annum for any Mortgage Loan, as set forth in the
Mortgage Loan Schedule.
* Guaranty Fund: [Not Applicable]
Index: With respect to each Mortgage Loan, on each Adjustment Date until
the Due Date immediately preceding the next Adjustment Date, the applicable
index shall be a rate per annum equal to __________ and as made available by
__________ as of ___ days prior to such Adjustment Date. If such Index is not so
published or is otherwise unavailable, the Master Servicer shall select an
alternative index based on comparable information and notify the Trustee and any
Rating Agency of such alternative index.
Initial Adjustment Date: As to each Mortgage Loan, its first Adjustment
Date after the Delivery Date.
Initial Certificate Principal Balance: With respect to each Class A and
Class B Certificate, the amount designated as such on the face thereof, the
aggregate of the Initial Certificate Principal Balances of such Certificates
being equal to the aggregate of the Scheduled Principal Balances of the
Subsidiary Regular Interest Certificates at the close of business on the Cut-off
Date.
Initial Class A Certificate Principal Balance:
$-------------.
Initial Class B-1 Certificate Principal Balance:
$-------------.
Initial Class B-2 Certificate Principal Balance:
$-------------.
Initial Mortgage Rate: As to each Mortgage Loan, the Mortgage Rate prior to
the Initial Adjustment Date.
* 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.
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* Insurance Proceeds: Amounts paid pursuant to any Primary Mortgage
Insurance Policy, FHA Certificate of Mortgage Insurance or VA Loan Guaranty
Certificate, Pool Insurance Policy or 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 Mortgage 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.
Interest Rate Caps: With respect to each Mortgage Loan, provisions to the
effect that (i) the Mortgage Rate shall never over the life of the Mortgage Loan
exceed a rate per annum, specified in the Mortgage Note, which is not less than
___% and not greater than ___% for any Mortgage Loan, and (ii) the Mortgage Rate
may not be increased or decreased by more than ___ basis points (___%) on any
Adjustment Date (the amount determined by such increase or decrease being the
"Periodic Mortgage Rate Cap").
* L/C Bank: [Not Applicable]
* Letter of Credit: [Not Applicable]
* Liquidated Loan: 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.
* 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 a
Primary Mortgage Insurance Policy for reasons other than the Master Servicer's
failure to comply with Section 3.13 hereof, such expenses including, without
limitation, legal fees and expenses, any unreimbursed amount expended by the
Master Servicer pursuant to Section 3.14 hereof respecting 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 for
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reasons other than the Master Servicer's failure to comply with Section 3.14
hereof.
* Liquidation Proceeds: Amounts other than Insurance Proceeds 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 Distribution Account: The separate trust account or accounts created
and maintained by the Master Servicer pursuant to Section 13.01 of the Reference
Agreement, in the name of the Trustee for the benefit of the holders of
interests in the Master Trust Fund for deposit of distributions with respect to
the Subsidiary Regular Interest Certificates pursuant to Section 1301 of the
Reference Agreement, which account or accounts must be an Eligible Account or
Accounts.
Master Pass-Through Rate: An adjustment amount which is equal to the
weighted average of the Subsidiary Regular Interest Certificates held by the
Master Trust Fund outstanding on the immediately preceding Due Date. Any
calculation of monthly interest at such rate shall be based upon the annual
interest at such rate on the aggregate outstanding Principal Balance of the
Subsidiary Regular Interests held by the Master Trust Fund divided by twelve.
Any calculation of interest at such rate with respect to any portion of a
calendar month shall be based upon annual interest at such rate multiplied by a
fraction, the numerator of which is the number of days in such portion and the
denominator of which is 360.
* Master Servicer: [ ], or it successor in interest, or any successor
master servicer appointed as herein provided.
Master Trust Certificateholders: The holders from time to time of the Class
A and Class B Certificates.
Master Trust Certificates: The Class A and Class B Certificates.
Master Trust Fund: The corpus of the master trust created by this Agreement
consisting of the Subsidiary Regular Interests, including all distributions with
respect thereto derived from principal or interest on or with respect to the
Mortgage Loans after the Cut-off Date. The "regular interests" (within the
meaning of Section 860G of the Code) in the Master
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Trust Fund shall consist of the Class A Certificates and the Class B-1
Certificates, and the "residual interest" (within the meaning of Section 860G of
the Code) in the Master Trust Fund shall consist of the Class B-2 Certificate.
Master Trust Fund Aggregate Distribution: On any Distribution Date, the sum
of all amounts distributed with respect to the Subsidiary Regular Interest
Certificates (exclusive of the portion of any Subsidiary Regular Interest
Distribution representing delinquent principal and interest which were
previously the subject of Class B-2 Advances which remain unreimbursed as of
such Distribution Date) less the sum of all Master Trust Fund Aggregate
Distributions for all Distribution Dates prior to such Distribution Date.
Maximum Mortgage Rate: With respect to each Mortgage Loan, the maximum rate
of interest set forth as such in the related Mortgage Note.
Maximum Subsidiary Pass-Through Rate: With respect to each Subsidiary
Regular Interest, the Maximum Mortgage Rate for the related Mortgage Loan less
___% per annum.
* Monthly Advance: The aggregate of (i) the advances made by or on behalf
of the Master Servicer with respect to any Distribution Date pursuant to Section
4.01 or 4.03 hereof or Section 11.21 of the Reference Agreement, the amount of
any such advances being equal to the aggregate of payments of principal and
interest on the Mortgage Loans that were due on the Due Date and delinquent as
of the close of business on the Determination Date 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
Subsidiary Pass-Through Rate, 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
with respect to any Distribution Date pursuant to Section 4.05.
Monthly Payment: The scheduled monthly payment of principal and interest on
a Mortgage Loan, as adjusted from time to time in accordance with the terms of
the related Mortgage Note.
* Mortgage: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage 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.
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* Mortgage Loan Repurchase Price: The price, calculated as set forth in
Section 15.01 of the Reference Agreement, to be paid in connection with the
repurchase of the Mortgage Loans pursuant to an Optional Termination of the
Subsidiary Trust Fund.
* Mortgage Loan: Such of the mortgage loans transferred and assigned to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Subsidiary Trust Fund, the Mortgage Loans so held being identified
in the Mortgage Loan Schedule.
* Mortgage Loan Schedule: The list of Mortgage Loans transferred to the
Trustee as part of the Subsidiary Trust Fund for the Certificates of a Series
and from time to time subject to this Agreement (as from time to time amended by
the Master Servicer 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 hereto as Exhibit F, setting
forth the following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the street address of the Mortgaged Property, including the zip
code, and name of the Mortgagor;
(iii) the Appraised Value of the Mortgaged Property;
(iv) the original Mortgage Rate;
(v) the original term;
(vi) the original Principal Balance;
(vii) the Principal Balance as of the Cut-off Date;
(viii) the first payment date;
(ix) the current monthly payment in effect as of the Cut-off Date;
(x) the Loan-to-Value Ratio at origination;
(xi) a code indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(xii) a code indicating whether the residential dwelling is either
(a) a detached single family dwelling or
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a de minimis PUD, or (b) a condominium unit or a dwelling in a
planned unit development;
(xiii) a code indicating the number of units in the residential
dwelling;
(xiv) the Initial Adjustment Date; and
(xv) the Maximum Mortgage Rate, Minimum Mortgage Rate, if any, and
periodic limitations in the amount of increase and decrease of
the Mortgage Rate, if any, and the Gross Margin.
Such schedule shall also set forth the total of the amounts described under
(vii) above for all of the Mortgage Loans 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 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: [Not Applicable]
Net Mortgage Rate: As to each Mortgage Loan, an adjustable amount equal to
the percentage amount resulting when the Servicing Fee Rate during a Due Period
is subtracted from the Mortgage Rate in effect during such Due Period.
* 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 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, the
Depositor and the Rating Agency setting forth the reasons for such determination
as specified in Section 4.04 hereof.
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* Nonsubserviced Mortgage Loan: Any Mortgage Loan that is not subject to a
Warranty and 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, a vice president (however
denominated; or a member of the Executive Group, 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
Depositor and/or the Master Servicer or 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. With respect to
Sections 10.01, 11.03, 11.20 hereof and 15.04 and 16.02 of the Reference
Agreement, and with respect to the establishment of any Certificate Account or
Servicing Account pursuant to this Agreement, such counsel must (i) in fact be
independent of the Depositor and the Master Servicer, (ii) not have any direct
financial interest in the Depositor or the Master Servicer or in any affiliate
of either, and (iii) not be connected with the Depositor or the Master Servicer
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Optional Termination: The purchase of the Mortgage Loans pursuant to
Section 15.01 of the Reference Agreement or the purchase of the Subsidiary
Regular Interest Certificates pursuant to Section 15.02 of the Reference
Agreement.
Optional Termination Date: The Distribution Date fixed by the holder of the
Subsidiary Residual Interest Certificate or the Class B-2 Certificateholder, as
applicable, for the repurchase of the Mortgage Loans or the Subsidiary Regular
Interest Certificates pursuant to Section 15.03 of the Reference Agreement.
Pass-Through Margin: ___ basis points (___%) per annum.
* Pass-Through Rate: [Not Applicable]
* Paying Agent: The Paying Agent identified in Section 11.19 of the
Reference Agreement, with respect to a Series, authorized to make distributions
on behalf of the Trustee.
Percentage Interest: The percentage interest (which may be expressed as a
fraction) evidenced by a Certificate of any Class or Subclass in certain monthly
distributions with respect to the Subsidiary Trust Fund payable to
Certificateholders of
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such Class of Subclass in the aggregate, as specified in such Certificate.
* Performance Bond: [Not Applicable]
Periodic Mortgage Rate Cap: As defined in the definition of "Interest Rate
Caps."
* 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: [Not Applicable]
* Pool Insurer: [Not Applicable]
Prepayment Period: The month prior to the month in which Principal
Prepayments are distributed to Certificateholders.
* Primary Mortgage Insurance Policy: Each primary policy of mortgage
guaranty insurance with respect to a Mortgage Loan, or any replacement policy
therefore.
Principal Balance: (a) with respect to any Mortgage Loan, as of the time of
any determination, the principal balance of such Mortgage Loan remaining to be
paid by the Mortgagor as of the Cut-off Date after deduction of all payments due
on or before the Cut-off Date reduced by all amounts distributed or advanced
with respect to principal to the holder of the related Subsidiary Regular
Interest prior to such date or (b) with respect to any Subsidiary Regular
Interest Certificate, as of the time of any determination, the Principal Balance
of the related Mortgage Loan.
* 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 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: With respect to any Mortgage Loan required to be purchased
by the Master Servicer, a Servicer or the Depositor pursuant to Section 2.01,
2.02, 2.03(b), 2.04 or 2.05 hereof or Sections 14.01 or 14.03 of the Reference
Agreement, an amount equal to the lesser of (a) the sum of (i) 100% of the
Principal Balance of the Mortgage Loan on the date of such purchase, and (ii)
unpaid interest thereon from the Due Date as to which interest was last paid by
the Mortgagor at the Subsidiary Pass-Through Rate to the first day of the month
following such purchase, including the amount of any unreimbursed
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Monthly Advances made by the Master Servicer with respect to such Mortgage Loan
or (b) the Basis Limit Price with respect to such Mortgage Loan; provided,
however, the Purchase Price shall not be limited to the Basis Limit Price if (x)
the Mortgage Loan to be purchased is in default, or default is in the judgment
of the Trustee imminent, or (y) the Purchaser, at its option and expense,
delivers to the Trustee an Opinion of Counsel to the effect that the purchase of
a Mortgage Loan at a Purchase Price in excess of the Basis Limit Price will not
give rise to a tax on a prohibited transaction, as defined in Section 860F(a) of
the Code.
* Purchase Year: With respect to a Series of Certificates to which the
provisions of Sections 2.03(b) and 4.06 are applicable, as specified in the
Reference Agreement with respect to such Series, the one-year period commencing
on the date of the initial issuance of such Certificates and each one-year
period thereafter, ending on the date specified in the Reference Agreement.
* 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 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 will not adversely affect the rating on the Certificates.
* 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.
Realized Loss: An amount determined by the Master Servicer and evidenced by
an Officers' Certificate, equal to (a) with respect to any Liquidated Loan, the
excess of the outstanding principal balance of such Liquidated Loan over
Liquidation Proceeds, if any, received in connection with such Liquidated Loan,
after application of all withdrawals permitted to be made by the Master Servicer
from the Certificate Account with respect to such Mortgage Loan pursuant to
Section 3.12, or (b) with respect to any Mortgage Loan which has become the
subject of a Deficient Valuation, the excess of the outstanding
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principal balance of the Mortgage Loan over the principal amount as reduced in
connection with the proceedings resulting in the Deficient Valuation, or (c)
with respect to any Mortgage Loan which has been purchased by the Master
Servicer, a Servicer or Depositor pursuant to Section 2.01, 2.02, 2.03(b), 2.04
or 2.05 hereof or Section 14.01 of the Reference Agreement, the excess, if any,
of the amount calculated as set forth in (a) of the definition of Purchase Price
over the amount calculated as set forth in (b) of the definition of Purchase
Price, or (d) with respect to any Mortgage Loan which has been purchased
pursuant to Section 1403 the Conversion Shortfall resulting therefrom, if any.
The amount of each Realized Loss for the preceding monthly period shall be
determined by the Master Servicer on each Determination Date.
* Record Date: With respect to any Distribution Date, 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, unless otherwise specified in the applicable Reference
Agreement.
Reference Agreement: The reference agreement consisting of Articles Eleven
through Sixteen attached hereto and incorporated in this Standard Terms and
Provisions of Pooling and Servicing Agreement to the extent set forth herein,
together referred to as the "Agreement."
* Registration Statement: The registration statement specified as the
Registration Statement in Section 11.03 of the Reference Agreement.
* REMIC: A real estate mortgage investment conduit, as defined in the Code.
* REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code and related provisions and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
* Replacement Mortgage Loan: A Mortgage Loan substituted by the Master
Servicer, any Servicer or the Depositor for a Deleted Mortgage Loan 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 Mortgage Loan
for a Deleted Mortgage Loan, an aggregate Principal Balance, after such
deduction), not in excess of the Principal Balance of the Deleted Mortgage Loan
(the amount of any shortage to be deposited by the Master Servicer, Servicer or
Depositor, as the case may be, in the Certificate Account and distributed by the
Master Servicer to Subsidiary Trust
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Certificateholders in the month of substitution); (ii) 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; (iii) have the same Index, Gross
Margin and frequency of Adjustment Dates as the Deleted Mortgage Loan; (iv) be
accruing interest at a rate no lower than and having the same Adjustment Date as
the Adjustment Date of the Deleted Mortgage Loan; (v) have a Loan-to-Value Ratio
no higher than that of the Deleted Mortgage Loan; (vi) have a term to maturity
no greater than (and not more than one year less than) the Deleted Mortgage
Loan; and (vii) comply with each representation and warranty set forth in
Section 2.04 hereof and Section 14.01 of the Reference Agreement.
* Repurchase Fund: As defined in Section 4.06 hereof.
* 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: [Not Applicable]
* 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: If so provided for in the applicable 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) on 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 the Master Servicer or to a Servicer under the terms of the
related Warranty and Servicing Agreement.
Scheduled Principal Balance: (a) As to any Mortgage Loan, as of the time of
any determination, an amount equal to the
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Principal Balance of such Mortgage Loan 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 Monthly
Payments due on or before the date of determination, whether or not received,
and by all Principal Prepayments distributed on the related Subsidiary Regular
Interest Certificate on or before the date of determination, and further reduced
by Realized Losses with respect to such Mortgage Loan on or before the date of
determination.
(b) As to any Subsidiary Regular Interest Certificate, the Scheduled
Principal Balance of the related Mortgage Loan.
* 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 Classes or Subclasses with the
characteristics specified in such Reference Agreement.
* Servicer: With respect to any Mortgage Loan, any Person who agreed to act
as a Servicer, pursuant to a Warranty and Servicing Agreement applicable to such
Mortgage Loan.
* Servicer Advance: The meaning specified in Section 3.09 hereof.
* Service Remittance Date: The date on or before which a Servicer is
required to remit amounts collected on Mortgage Loans to the Master Servicer, as
set forth in the related Warranty and Servicing Agreement.
* Servicing Account: A custodial demand deposit account or accounts
established and maintained by the Servicer pursuant to Section 3.09 hereof,
which account or accounts must be an Eligible Account or Accounts.
* Servicing Fee: As to each Mortgage Loan, an adjustable amount equal to
one month's interest (or in the event of any payment of interest which
accompanies a Principal Prepayment in full made by the Mortgagor, interest for
the number of days covered by such payment of interest) at the applicable
Servicing Fee Rate on the Scheduled Principal Balance of such Mortgage Loan,
reduced by a ratable portion of any interest advances made pursuant to Section
4.05 hereof and increased by any late payment charges, assumption fees and other
usual and customary fees collected from the Mortgagor and by a ratable portion
of any income on Eligible Investments held in the Certificate Account.
Servicing Fee Rate: With respect to each Mortgage Loan, until the Initial
Adjustment Date, ___% per annum, and thereafter, ___% per annum.
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* 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 this Agreement, as such list may from time to time
be amended.
* Single Certificate: A Class A Certificate issued in a minimum Initial
Certificate Principal Balance of $25,000, or such other amount as set forth in
Section 11.04 of the Reference Agreement.
Special Hazard: Any risk of direct physical loss which may be suffered by a
Mortgaged Property, exclusive of (i) any loss covered by a hazard policy or a
flood insurance policy, or blanket policy in respect thereof (without regard to
any portion of the loss not covered by reason of any deductible thereunder),
maintained in respect of such Mortgaged Property pursuant to Section 3.14 and
(ii) any loss caused by or resulting from:
(a) normal wear and tear;
(b) infidelity, conversion or other dishonest act on the part of the
Trustee, the Master Servicer, any Servicer or any of their agents or employees
(without regard to any portion of the loss not covered by any errors and
omissions policy); or
(c) errors in design, faulty workmanship or faulty materials, unless the
collapse of the property or a part thereof ensues and then only for the ensuing
loss.
* Special Hazard Insurance Policy: [Not Applicable]
* Special Hazard Insurer: [Not Applicable]
Special Hazard Realized Loss: With respect to any Mortgage Loan which has
been finally liquidated in connection with a Special Hazard, and for which a
claim could not be validly made under any Primary Mortgage Insurance Policy or
for which such claim was made but the full amount of such claim was not paid, an
amount (not less than zero or more than the amount described in (i) as follows)
equal to (i) the unpaid Principal Balance of the Mortgage Loan as of the date of
such liquidation, plus (ii) interest on the Mortgage Loan at the applicable Net
Mortgage Rate from the Due Date as to which interest was last paid up to the Due
Date next succeeding such liquidation, minus (iii) the proceeds, if any,
received in connection with such liquidation, after application of all
withdrawals permitted to be made by the Master Servicer from the Certificate
Account with respect to such Mortgage Loan pursuant to Section 3.12.
Special Hazard Subordination Amount: An amount obtained by multiplying the
Principal Balance of the Mortgage
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Loans as of the Cut-off Date by the Special Hazard Subordination Percentage.
Special Hazard Subordination Percentage: ___% of the Principal Balance of
the Mortgage Loans as of the Cut-off Date.
Step-down Criteria: As of any Distribution Date in the twelve months
commencing subsequent to December of the year specified in the table below, (a)
no more than one time during the preceding seven calendar months were the
Principal Balances of outstanding Mortgage Loans that were 60 days or more
delinquent (including loans in foreclosure and the book value of owned real
estate) in excess of ___% of the Scheduled Principal Balance at such time, and
(b) cumulative Nonrecoverable Advances as a percentage of the Subordinated
Amount as of the Cut-off Date do not exceed the amounts in the following table:
<TABLE>
<CAPTION>
Cumulative Nonrecoverable
Advances as a Percentage of
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 Master Servicer
and 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.
* Subclass: With respect to a Class of Certificates, all of the
Certificates of such Class designated as a subclass.
Subordinate Prepayment Percentage: As of any Distribution Date, the
difference between 100% and the Class A Prepayment Percentage for such
Distribution Date.
Subordinated Amount: As of any Determination Date, an amount equal to (a)
the sum of the Class B-1 Certificate Principal Balance and the Class B-2
Certificate Principal Balance, less (b) the sum of (i) the aggregate Class B-2
Advances that remain unreimbursed from amounts determined by clause (II) of the
definition of Class B-2 Distribution and (ii) the sum of the amounts in the
Class A Interest Shortfall Account and the Class B-1 Interest Shortfall Account.
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* Subordinated Certificates: Any Certificates of a Series, the rights of
the holders of which to receive distributions on or with respect to the
applicable 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 Section 13.03 of the Reference Agreement.
Subordinated Class B-2 Amount: As of any Determination Date, an amount
equal to the Class B-2 Certificate Principal Balance less the aggregate Class
B-2 Advances that remain unreimbursed from amounts determined by clause (II) of
the definition of Class B-2 distribution.
Subsidiary Interest Amount: For any Distribution Date, for each Subsidiary
Regular Interest Certificate, the lesser of (i) the interest due on the related
Mortgage Loan on the related Due Date, adjusted to the Subsidiary Pass-Through
Rate, and (ii) the amount actually distributed to the holder of such Subsidiary
Regular Interest Certificate on such Distribution Date.
Subsidiary Pass-Through Rate: With respect to each Subsidiary Regular
Interest, the rate determined for such Subsidiary Regular Interest in accordance
with Section 13.02 of the Reference Agreement.
Subsidiary Regular Interest: Any one of the interests in the Subsidiary
Trust Fund representing the right ascribed thereto in this Agreement. Each
Subsidiary Regular Interest bears a regular interest number from 1 to __,
relates to a specified Mortgage Loan which is part of the Subsidiary Trust Fund
and has a stated initial Principal Balance, initial Mortgage Rate, Index, Gross
Margin, Initial Adjustment Date, Maximum Mortgage Rate and Maximum Subsidiary
Pass-Through Rate set forth as Schedule 1 to each Subsidiary Regular Interest
Certificate.
Subsidiary Regular Interest Distribution: On any Distribution Date and with
respect to each Subsidiary Regular Interest, the amount required to be
distributed on such Distribution Date to the holder of such Subsidiary Regular
Interest Certificate, such amount being equal to the lesser of (x) the aggregate
amount received as of the related Determination Date in respect of the related
Mortgage Loan from any source, including the Mortgagor, a Monthly Advance or a
Servicer Advance, Insurance Proceeds, Liquidation Proceeds net of Liquidation
Expenses, proceeds of the sale of Mortgage Loans or property acquired with
respect thereof or received in connection in the substitution of Replacement
Mortgage Loans, and recoveries of amounts previously withdrawn as reimbursement
for Nonrecoverable Advances, less (i) any Servicing Fee payable therefrom, (ii)
any amount representing late payments or other recoveries of principal or
interest (including Liquidation Proceeds net of
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Liquidation Expenses, Insurance Proceeds, and condemnation awards) and
respecting which the Master Servicer made a previously unreimbursed Monthly
Advance or a Servicer made a previously unreimbursed Servicer Advance, (iii)
amounts representing reimbursement of Nonrecoverable Advances and other amounts
permitted to be withdrawn by the Master Servicer from the Certificate Account
pursuant to Section 3.12, (iv) the portion of the Subsidiary Residual Interest
Distribution attributable to the related Mortgage Loan, (v) all Monthly Payments
or portions thereof received in respect of scheduled principal and interest on
the related Mortgage Loan due after the preceding Due Date, (vi) all amounts
representing a Purchase Price, Principal Prepayments, Liquidation Proceeds net
of Liquidation Expenses, Insurance Proceeds and condemnation awards received
with respect to the related Mortgage Loan after the last day of the related
Prepayment Period, and (vii) the sum of all Subsidiary Regular Interest
Distributions on such Subsidiary Regular Interest prior to such Distribution
Date and (y) the Subsidiary Regular Interest Required Distribution Amount for
such Subsidiary Regular Interest.
Subsidiary Regular Interest Interest Amount: On any Distribution Date, (i)
for each Subsidiary Regular Interest not described in (ii) or (iii) below, one
month's interest at the related Subsidiary Pass-Through Rate on the Principal
Balance of the Subsidiary Regular Interest Certificate; (ii) for each Subsidiary
Regular Interest for which the related Mortgage Loan was the subject of a
Principal Prepayment during the related Prepayment Period, one month's interest
at the related Subsidiary Pass-Through Rate on the Principal Balance of such
Subsidiary Regular Interest to the extent set forth in Section 11.21(c) of the
Reference Agreement; or (iii) for each Subsidiary Regular Interest for which the
related Mortgage Loan became a Liquidated Loan during the related Prepayment
Period, or was repurchased pursuant to the provisions of Sections 2.01, 2.02,
2.03, 2.04, 2.05 hereof or Articles XIV or XV of the Reference Agreement during
such period, one month's interest at the related Subsidiary Pass-Through Rate on
the Principal Balance of such Subsidiary Regular Interest.
Subsidiary Regular Interest Prepayment Amount: For each Subsidiary Regular
Interest, on any Distribution Date, the amount of any Principal Prepayment made
on the related Mortgage Loan during the related Prepayment Period.
Subsidiary Regular Interest Principal Amount: On any Distribution Date, (i)
for each Subsidiary Regular Interest not described in (ii) or (iii) below, the
payment of principal due on the related Due Date on the related Mortgage Loan,
(ii) for each Subsidiary Regular Interest for which the related Mortgage Loan
became a Liquidated Loan during the related Prepayment Period, the Principal
Balance of such Mortgage Loan as of the date on which it became a Liquidated
Loan net of any unreimbursed Monthly
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Advances and unreimbursed Servicer Advances with respect thereto, and net of any
amounts reimbursable to the Master Servicer under Section 3.12 hereof, or (iii)
for each Subsidiary Regular Interest for which the related Mortgage Loan was
repurchased by the Master Servicer, a Servicer, or the Depositor during the
related Prepayment Period pursuant to Section 2.01, 2.02, 2.03(b), 2.04, or 2.05
hereof or Articles XIV or XV of the Reference Agreement, the principal amount of
the Purchase Price or Mortgage Loan Repurchase Price (net or amounts with
respect to which a distribution of principal has already been made).
Subsidiary Regular Interest Repurchase Price: The price, calculated as set
forth in Section 15.02 of the Reference Agreement, to be paid in connection with
the repurchase of the Subsidiary Regular Interests pursuant to an Optional
Termination of the Master Trust Fund.
Subsidiary Regular Interest Required Distribution Amount: For each
Subsidiary Regular Interest, the sum of (i) the Subsidiary Regular Interest
Interest Amount, (ii) any delinquent Mortgagor payment of principal and interest
on such Mortgage Loan received prior to the Determination Date immediately
preceding the applicable Distribution Date, after adjustment of the interest
portion of such payment to the related Subsidiary Pass-Through Rate and
deduction of unreimbursed Monthly Advances and unreimbursed Servicer Advances
with respect to such delinquent payment, (iii) the Subsidiary Regular Interest
Prepayment Amount, and (iv) the Subsidiary Regular Interest Principal Amount.
Subsidiary Residual Interest Certificate: The Certificate executed by or on
behalf of the Depositor and authenticated by or on behalf of the Trustee in
substantially the form of Exhibit D.
Subsidiary Residual Interest Distribution: On any Distribution Date, the
aggregate for all Mortgage Loans of the sum of amounts not previously
distributed to the Subsidiary Residual Interest Holder corresponding to the sum
of (i) the excess, if any, of the Mortgage Rate (net of the Servicing Fee) on
each Mortgage Loan over the Subsidiary Pass-Through Rate for such Mortgage Loan
times the Principal Balance of such Mortgage Loan, (ii) the excess, if any, of
(a) Liquidation Proceeds received in respect of any Mortgaged Property less
Liquidation Expenses, less the amounts required to be paid with respect thereto
as set forth in 3.16 over (b) one month's interest on the related Mortgage Loan
at the Subsidiary Pass-Through Rate, (iii) the amount by which the Purchase
Price of each Mortgage Loan purchased pursuant to Sections 2.01, 2.02, 2.03(b),
2.04 or 2.05 hereof or Sections 14.01 or 14.03 of the Reference Agreement or the
Repurchase Price of each Mortgage Loan purchased pursuant to Section 15.01 of
the Reference Agreement exceeds the sum of (a) the Principal Balance of such
Mortgage Loan, plus (b) accrued interest on such Principal Balance at the
related Subsidiary
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Pass-Through Rate to the next scheduled Due Date of such Mortgage Loan, and (iv)
upon termination of the obligations created by the Agreement and the Subsidiary
Trust Fund created thereby, the amounts which remain on deposit in the
Certificate Account, after payment to the holders of Subsidiary Regular Interest
Certificates of the amounts set forth in Section 13.02(d) of the Agreement and
subject to the conditions set forth therein.
Subsidiary Residual Interest Holder: The holder of the Subsidiary Residual
Interest Certificate, being initially [ ].
Subsidiary Trust Certificates: The Subsidiary Regular Interest Certificates
and the Subsidiary Residual Interest Certificate.
* Subsidiary Trust Fund: The corpus of the subsidiary trust created by this
Agreement consisting of (i) the Mortgage Loans and all distributions thereon
payable after the Cut-off Date, net of any amounts payable to the Master
Servicer and any Servicer, as provided in this Agreement, (ii) the Certificate
Account and Custodial Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement and net of any amounts payable to the
Master Servicer and any Servicer in accordance with the provisions of this
Agreement, (iii) property that secured a Mortgage Loan and has been acquired by
foreclosure, deed in lieu of foreclosure or otherwise, and (iv) the rights of
the Subsidiary Trust Certificateholders in the Primary Mortgage Insurance
Policies and any other insurance policies with respect to the Mortgage Loans,
and (v) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property. The "regular interests" (within
the meaning of Section 860G of the Code) in the Subsidiary Trust Fund shall
consist of the Subsidiary Regular Interest Certificates and the "residual
interest" (within the meaning of Section 860C of the Code) in the Subsidiary
Trust Fund shall consist of the Subsidiary Residual Interest Certificate.
* Trust Receipt: The meaning specified in Section 3.17 hereof.
* Trustee: _______________________, a ____________ ___________, not in its
individual capacity, but solely in its capacity as trustee for the benefit of
the Subsidiary Trust Certificateholders and as trustee for the benefit of the
Master Trust Certificateholders under this Agreement, and any successor thereto,
as provided herein.
* Uninsured Cause: [Not Applicable]
* VA: The Veterans Administration, an agency of the United States of
America, or any successor department or agency.
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* VA Loan: A Mortgage Loan covered by a VA Loan Guaranty Certificate.
* VA Loan Guaranty Certificate: [Not Applicable]
* VA Regulations: [Not Applicable]
* Voting Rights: The portion of the aggregate voting rights of all the
Certificates evidenced by a Certificate. At any time that any Class A or Class B
Certificates are outstanding (i) the Voting Rights of a Class A or Class B
Certificate at any time shall be obtained by dividing the then outstanding
Certificate Principal Balance of such Certificate by the aggregate Certificate
Principal Balances at such time of all the Class A and Class B Certificates, and
(ii) the Subsidiary Regular Interest and the Subsidiary Residual Interest shall
have no Voting Rights. At any time that no Class A or Class B Certificates are
outstanding (i) the Voting Rights of any Subsidiary Regular Interest Certificate
shall equal the percentage calculated by dividing the aggregate Principal
Balance of the Mortgage Loan relating to the Subsidiary Regular Interest
indicated on Schedule 1 to such Subsidiary Regular Interest Certificate by such
aggregate Principal Balance of all Mortgage Loans, and (ii) the Subsidiary
Residual Interest shall have no Voting Rights.
* Warranty and Servicing Agreement: If provided for in the applicable
Reference Agreement, a Servicing Agreement providing for the servicing of
Mortgage Loans in such form as has been approved by the Depositor.
ARTICLE II.
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery hereof, shall
in the manner specified in Section 11.02 of the Reference Agreement sell,
transfer, assign, set over and otherwise convey to the Trustee for the benefit
of the Subsidiary Trust Certificateholders, without recourse, all the right,
title and interest of the Depositor in and to the Mortgage Loans listed on the
Mortgage Loan Schedule, 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, together with all
its right, title and interest in and to the proceeds of any related Insurance
Policies under which the Trustee for the benefit of the Subsidiary Trust
Certificateholders is not named
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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 for the benefit of the Subsidiary
Trust Certificateholders the following documents or instruments with respect to
each Mortgage Loan so assigned:
(i) the Mortgage Note, endorsed to the order of the Trustee, as
trustee for the benefit of the Holders from time to time of the Subsidiary
Trust Certificates of the related Series, without recourse, 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 relevant public
recording office in those instances in which 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 relevant
public recording office;
(iii) an original assignment from the Depositor (which may be included
in a blanket assignment) of the Mortgage;
(iv) the original copy of all assumption and modification agreements,
if any, with respect to such Mortgage Loan;
(v) the original commitment or certificate of Primary Mortgage
Insurance Policy, if the Loan-to-Value Ratio listed on the Mortgage Loan
Schedule exceeds 80%; and
(vi) The original title policy and all riders thereto or, in the event
such original title policy has not been received from the insurer, any one
of an original title binder, an original preliminary title report or an
original title commitment, or a copy thereof certified by the title
company, with the original policy of title insurance to be delivered within
____ days of the Delivery Date. The policy must affirmatively insure
ingress and egress and insure against encroachments by or upon the
Mortgaged Property or any interest therein.
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 (other than the assignment
referred to in Section 2.01 (iii)) concurrently with the execution and delivery
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hereof 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 Master Servicer or the related Servicer to deliver, to the Trustee
a true copy of such Mortgage or assignment of the Mortgage certified by the
Master Servicer evidencing 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 Master Servicer or the related
Servicer to deliver, to the Trustee for the benefit of the Subsidiary Trust
Certificateholders (i) such original Mortgage or assignment of the Mortgage with
evidence of recording indicated thereon upon receipt thereof from the public
recording official or from the Master Servicer or the related Servicer, (ii)
upon discovery of any defect or omission in the deliveries of any item (ii)
through (v) above with respect to any Mortgage Loan, a correct and complete
document or instrument meeting the requirements of such item, but in no event
shall any such delivery be made later than ___ days following the date of
initial issuance of the Certificates of the related Series. From time to time
the Servicers or the Master Servicer may forward to the Trustee for the benefit
of the Subsidiary Trust Certificateholders additional original documents
evidencing an assumption or modification of a Mortgage Loan.
The Master Servicer shall promptly cause to be recorded in the appropriate
public office for real property records each assignment with respect to each
Mortgaged Property located in the States of ________________ referred to in this
Section 2.01. If any assignment is returned unrecorded to the Master Servicer
because of any defect therein, the Master Servicer shall promptly notify the
Trustee, the Depositor and 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 Section 11.12 of the Reference Agreement and which shall be subject
to the conditions set forth in Section 2.04 and the terms and conditions with
respect to substitution in Section 11.12 of the Reference Agreement; or (b)
repurchase such Mortgage Loan at the Purchase Price therefor, in the manner
provided in Section 2.02 hereof; provided that if the Mortgage Loan is a
Nonsubserviced Mortgage Loan on the Delivery Date, the Master Servicer shall
promptly substitute for or repurchase such Mortgage Loan as provided above. The
Servicer shall give notice in writing to the Trustee in the event of either (a)
or (b) above.
In the case of Mortgage Loans that have been prepaid in full after the
Cut-off Date and prior to the Delivery Date, the Depositor, in lieu of
delivering the above documents to the
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Trustee for the benefit of the Subsidiary Trust Certificateholders, 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.
SECTION 2.02. Acceptance by Trustee.
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
with respect to a Series in trust for the use and benefit of all present and
future Subsidiary Trust Certificateholders of such Series. Upon execution and
delivery of this Agreement, the Trustee will provide the Depositor with an
initial certification in the form set forth as Exhibit G hereto, subject to any
exceptions noted therein, acknowledging receipt of the proper number of Mortgage
Files and receipt of an original Mortgage Note, endorsed as provided in Section
2.01(i), and an original Mortgage (or a certified copy thereof, as provided in
Section 2.01(ii)) with respect to each Mortgage Loan listed on the Mortgage Loan
Schedule. Within 60 days after the execution and delivery of this Agreement, the
Trustee shall ascertain that all documents required to be delivered to it
pursuant to Section 2.01 hereof are in its possession, and shall deliver to each
Certificateholder of the Subsidiary Trust Fund a certification (the "Final
Certification") in the form set forth as Exhibit H hereto to the effect that, as
to each Mortgage Loan listed in the Mortgage Loan Schedule: (i) all documents
required to be delivered to the Trustee pursuant to this Agreement are in its
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged, defaced, torn or otherwise physically altered, and such
documents relate to such Mortgage Loan, (iii) based on its examination and only
as to the foregoing documents, the information set forth in the Mortgage Loan
Schedule respecting such Mortgage Loan accurately reflects the information
contained in the documents in the Mortgage File and (iv) each Mortgage Note has
been endorsed and each assignment of mortgage has been prepared as provided in
Section 2.01 hereof. The Trustee, provided it shall hold any Subsidiary Regular
Interest Certificates for the benefit of the Master Trust Certificateholders,
shall deliver to the Depositor a copy of such Final Certification. If, in the
course of such review, the Trustee finds any document or documents constituting
a part of a Mortgage File which does not meet the requirements of (i) -- (v)
above, 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
___ 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 such Servicer is obligated to do so under the
related Warranty and Servicing Agreement, either
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(a) substitute for the related Mortgage Loan a Replacement Mortgage Loan or
Loans, which substitution shall be accomplished within the time period set forth
in Section 11.12 of the Reference Agreement, in the manner and subject to the
conditions set forth in Section 2.04 hereof and in Section 11.12 of the
Reference Agreement, or (b) purchase such Mortgage Loan from the Trustee within
____ days from the date the Master Servicer was notified of such defect at the
Purchase Price of such Mortgage Loan, provided that if any such Mortgage Loan is
a Nonsubserviced Mortgage Loan on the Delivery Date, the Master Servicer shall
promptly substitute for or repurchase such Mortgage Loan as provided in this
Section. The Purchase Price for any such Mortgage Loan shall be paid to the
Master Servicer and deposited by the Master 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 the related Mortgage File to such
Servicer or 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 such Servicer or the Master Servicer, or a designee, title to any
Mortgage Loan released pursuant hereto.
In the event that a Servicer fails to substitute for or purchase any
Mortgage Loan that it is required to purchase pursuant to this Section 2.02, the
Master Servicer shall substitute for such Mortgage Loan within the time period
specified and in the manner set forth in Sections 2.04 hereof and Section 11.12
of the Reference Agreement, or 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 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.
The Trustee shall 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 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.
It is understood and agreed that the obligation of the Servicer and Master
Servicer to substitute for or to purchase any Mortgage Loan which does not meet
the requirements of (i) -- (iv) above shall constitute the sole remedy
respecting such defect
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available to the Trustee on behalf of the Subsidiary Trust Certificateholders.
SECTION 2.03. Representations, Warranties and Covenants of the Master
Servicer.
(a) The Master Servicer hereby represents and warrants to, and covenants
with, the Depositor and the Trustee that, as of the date hereof:
(i) the Master Servicer is a [ ], duly organized, validly
existing and in good standing under the laws 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 compliance with the doing business 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 by all necessary corporate action on the part of
the Master Servicer 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 generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought and except that the rights to indemnification under
this Agreement with respect to claims under the Securities Act of 1933 may
be limited by public considerations;
(iii) 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, and the fulfillment of or compliance with the terms hereof
are in the ordinary course of business of the Master Servicer and will not
(A) result in a material breach of any term or provision of the charter or
by-laws of the Master Servicer
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or (B) materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other material 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 material indenture or other material 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, to the Master Servicer's knowledge would 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 Master
Servicer taken as a whole;
(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 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 would materially
and 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;
(vi) the Master Servicer will at all times comply in the performance
of its obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy;
(vii) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor, any
affiliate of the Depositor or the Trustee and prepared by the Master
Servicer pursuant to this Agreement 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) except for permits and similar authorization required under the
securities or "blue sky" laws no consent, approval, authorization or order
of any court or
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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, or if any such consent, approval, authorization or order is
required, the Master Servicer has obtained the same; and
(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.
(b) With the provisos and limitations as to remedies set forth in this
Section 2.03(b) the Master Servicer hereby (i) represents and warrants to the
Depositor and the Trustee for the benefit of the Subsidiary Trust
Certificateholders with respect to each Mortgage Loan that no action has been
taken or failed to have been taken, no event has occurred and no state of facts
exists or has existed on or prior to the Delivery Date (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 (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 breach of such insurance policy or
such insurer's financial inability to pay or by reason of a determination by
such insurer that the loss suffered was a loss not insured by the terms and
provisions of such insurance policy), and (ii) covenants that within ___ days of
its discovery or its receipt of written notice of breach of this representation
and warranty, any representation or warranty set forth in Section 2.03(a) hereof
or 14.01 of the Reference Agreement 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 Section 2.04, shall either (a) substitute a
Replacement Mortgage Loan or Loans for the related Mortgage Loan, which
substitution must occur within the time period specified in Section 11.12 of the
Reference Agreement and which shall be subject to the conditions set forth in
Sections 2.04 hereof and 11.12 of the Reference Agreement or (b) purchase the
Mortgage Loan held for the benefit of the Subsidiary Trust Certificateholders
from the Trustee; provided, however, that: (1) any such purchase by the Master
Servicer shall be at the Purchase Price and be
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accomplished in the manner set forth in Section 2.03(d) hereof; (2) no such
purchase for a breach of the representation or warranty set forth in this
Section 2.03(b) 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 would, in the aggregate, be liable to pay,
absent a denial of liability by any of them; provided that, in any event, the
Subsidiary Trust Certificateholders will not be adversely affected by reason of
the failure of the Master Servicer to purchase such Mortgage Loan under this
clause (2); and (3) the obligations of the Master Servicer to purchase any
Mortgage Loan as to which such a breach has occurred and is continuing shall
constitute the sole remedy against the Master Servicer respecting such breach
available to the Subsidiary Trust Certificateholders or the Trustee on behalf of
the Subsidiary Trust Certificateholders.
(c) Upon discovery by the Depositor, the Master Servicer or the Trustee (or
upon notice thereof in writing from a Certificateholder) of a breach of a
representation and warranty set forth in Section 2.03(a) or 2.03(b) hereof or
Section 14.01 of the Reference Agreement that materially and adversely affects
the interests of the Subsidiary Trust 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
Service pursuant to Section 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 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 thereto.
(e) The representations and warranties set forth in Section 2.03(a) or
2.03(b) hereof shall survive delivery for the benefit of the Subsidiary Trust
Certificateholders of the respective Mortgage Files to the Trustee.
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SECTION 2.04. Representations, Warranties and Covenants of the Depositor
as to the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee with respect to
each Mortgage Loan as of the date hereof or such other date set forth herein
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 respecting which such information is furnished;
(iii) as of the date of the initial issuance of the Certificates
pursuant to the Reference Agreement, each Mortgage Loan does not have an
initial Loan-to-Value Ratio in excess of [ ]%;
(iv) the Mortgaged Property consists of a single parcel of real
property with a detached single-family residence or a de minimis PUD
erected thereon, an individual condominium unit or a dwelling in a planned
unit development that conforms with applicable FNMA or FHLMC requirements
regarding such dwellings; and the residence of dwelling is not a mobile
home or a manufactured dwelling;
(v) [Not applicable]; and
(vi) immediately prior to the date of the initial issuance of the
Certificates, the Depositor had good title to each Mortgage Loan and each
such Mortgage Loan was 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 for the benefit of the Subsidiary Trust Certificateholders to the Trustee.
Upon discovery by the Depositor, the Master Servicer or the Trustee (or upon
written 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 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 __ 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
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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 Mortgage Loan (a "Deleted Mortgage Loan") from the Subsidiary
Trust Fund and substitute in its place a Replacement Mortgage Loan 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 at the
Purchase Price and in the manner set forth in Section 2.02 hereof, provided that
if any such Mortgage Loan is a Nonsubserviced Mortgage Loan on the Delivery
Date, the Depositor shall substitute for or repurchase the Mortgage Loan as
provided above.
Subject to the terms and conditions set forth in Section 11.12 of the
Reference Agreement with respect to such substitution, as to any Replacement
Mortgage Loan or Loans, the related Servicer or the Depositor, and the case may
be, shall deliver to the Trustee for the benefit of the Subsidiary Trust
Certificateholders 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, with the Mortgage Note
endorsed as 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 Subsidiary Trust Fund and will be retained by the
Master Servicer and remitted by the Master Servicer to the related Servicer or
the Depositor, as the case may be, on the next succeeding Distribution Date. For
the month of substitution, distributions to Subsidiary Trust 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 or the Depositor, as the case may be, shall be entitled
to retain all amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer shall amend or cause to be amended the Mortgage Loan Schedule
for the benefit of the Subsidiary Trust Certificateholders 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 Mortgage Loan
contained in the related Warranty and Servicing Agreement, as of the date of
substitution, and the Depositor and the Master Servicer shall be deemed to have
made 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 the Mortgage File held for the
benefit of the Subsidiary Trust
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Certificateholders relating to such Deleted Mortgage Loan to the related
Servicer or the Depositor, as the case may be, 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 the Depositor, or the
respective designee of either, as the case may be, to any Deleted Mortgage Loan
substituted for pursuant to this Section 2.04.
Subject to the terms and conditions set forth in Section 11.12 of the
Reference Agreement with respect to such substitution, for any month in which a
Servicer or the Depositor 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
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 or the Depositor in the month of
substitution pursuant to Section 3.08, without any reimbursement therefor, and
the Servicer or the Depositor, as the case may be, shall give notice in writing
to the Trustee of such event.
In the event that a Person 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 hereof, signed by a Servicing Officer, the
Trustee shall release the related Mortgage File held for the benefit of the
Subsidiary Trust Certificateholders to the related Servicer including the Master
Servicer, or the Depositor, and the Trustee shall execute and deliver the
related instruments of transfer or assignment, in each case without recourse, as
shall be necessary to transfer title from the Trustee for the benefit of the
Subsidiary Trust Certificateholders and vest title in such related Servicer
(including the Master Servicer) or the Depositor, or the respective designee of
either, as the case may be, to any Mortgage Loan purchased pursuant to this
Section 2.04. In the event that the related Servicer (including the Master
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
under this Agreement or the Reference Agreement of any Person to repurchase any
Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy respecting such breach available to Subsidiary Trust
Certificateholders or the Trustee on their behalf, except as provided in Section
2.03(b) and 2.05 hereof.
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SECTION 2.05. Representations and Warranties of Servicers.
(a) Upon the discovery by the Depositor, the Master Servicer or the Trustee
(or upon notice thereof in writing from a Certificateholder) of a breach or
beaches 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 the interests
of the Subsidiary Trust 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 ___ days from the date the Master Servicer
discovers, or received written notification 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 Mortgage
Loan or Loans for the related Mortgage Loan, which substitution must occur
within the time period specified in Section 11.12 of the Reference Agreement and
shall be subject to the conditions set forth in Section 2.04 and Section 11.12
of the Reference Agreement, or (b) purchase such Mortgage Loan held for the
benefit of the Subsidiary Trust Certificateholders 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 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 Section 2.03(b) and Section 2.04 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 respecting such breach or
breaches available to the Trustee on behalf of the Subsidiary Trust
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
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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 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.
SECTION 2.06. Assignment of Rights under Warranty and Servicing Agreements.
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 as Exhibit F
hereto insofar as such Warranty and Servicing Agreement relates 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 Servicer.
For and on behalf of the Trustee and the Subsidiary Trust
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. In connection with such servicing and administration, the Master
Servicer 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
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authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Subsidiary Trust 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), (iii) to collect any
Insurance Proceeds and Liquidation Proceeds, and (iv) to effectuate foreclosure
or other 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 Subsidiary
Trust Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Subsidiary Trust 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 Subsidiary Trust
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharges and all other
comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Subsidiary Trust
Certificateholders. The Master Servicer shall promptly notify the Trustee of any
such execution and delivery. The Depositor and the Trustee for the benefit of
the Subsidiary Trust Certificateholders 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 and related insurance premiums,
which advances, except as otherwise provided in Section 11.22 of the Reference
Agreement, 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 payments of
taxes and assessment on the Mortgaged Properties and related insurance premiums
shall not, for the purpose of calculating monthly distributions to the
Subsidiary Trust Certificateholders, be added to the Principal Balance under the
related Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so
permit.
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The Master Servicer shall act as agent on behalf of the Subsidiary Trust
Fund and the Master 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 each Trust Fund when and as required by
the REMIC Provisions and other applicable federal income tax laws; (b) make an
election, on behalf of each 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
REMIC Provisions; (c) prepare and forward, or cause to be prepared and
forwarded, to the respective Certificateholders of each Trust Fund and to any
governmental taxing authority all information reports as and when required to be
provided to them in accordance with the REMIC Provisions; (d) conduct the
affairs of each Trust Fund so as to maintain the status thereof as REMIC under
the REMIC Provisions; (e) not knowingly or intentionally take any action or omit
to take any action that would cause the termination of the REMIC status of any
Trust Fund; and (f) pay the amount of any federal prohibited transaction penalty
taxes imposed on any Trust Fund when and as the same shall be due and payable
(but such obligation shall not prevent the Master Servicer or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Master Servicer from withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings); provided, that the
Master Servicer shall be entitled to be indemnified by the Subsidiary Trust Fund
for any such prohibited transaction penalty taxes to the extent that the Master
Servicer's failure to exercise reasonable care was not the primary cause for the
imposition of such prohibited transaction penalty taxes.
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, 3.10 hereof when the related Servicer has received such payments and shall
remain obligated to deposit such payments in accordance with Sections 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 related Servicer may enter into amendments to the
Warranty and Servicing Agreement; provided, however, that any such amendments
shall be 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 Depositor, the Trustee and
the Rating Agency.
(b) As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the Depositor, the Trustee and the Subsidiary Trust
Certificateholders, shall supervise,
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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. 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
judgment, 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 this 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 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 and 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 reasonably 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
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shall affect 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 reasonably
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, if any, to
purchase certain Mortgage Loans 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 Sections 3.01 and 3.02. If 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 Depositors, the Trustee and the Subsidiary Trust Certificateholders of
the related Series for the servicing and administering of the Mortgage Loans
included in the Subsidiary 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
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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 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 Master 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 hereunder arising thereafter (except that the Trustee
shall not be liable for losses of the Master Servicer pursuant to Section 3.08
hereof, obligated to make Monthly Advances if prohibited by applicable law, nor
to effectuate repurchases or substitutions of Mortgage Loans hereunder,
including pursuant to Sections 2.01, 2.02, 2.03 or 2.05 hereof or Sections 14.01
or 14.03 of the Reference Agreement and except that the Trustee makes no
representations and warranties hereunder, including pursuant to Section 2.03 of
the first paragraph of Section 6.02 hereof or Section 14.01 of the Reference
Agreement). If the Master Servicer shall for any reason no longer be the Master
Servicer (including by reason of any Event of Default), the Master Servicer
shall thereupon terminate each Warranty and Servicing Agreement or substitute
subservicing agreement that may have been entered into and the Trustee, its
designee or the successor servicer for the Trustee shall not be deemed to have
assumed any of the Master Servicer's interest therein or to have replaced the
Master Servicer as a party to any such agreement. The Master Servicer shall not
thereby be relieved of any liability or obligations under the Warranty and
Servicing Agreement or substitute servicing agreement.
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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 any related Primary Mortgage Insurance Policy, 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 any related Primary
Mortgage Insurance Policy will not be affected, extend the due dates for
payments due on a Mortgage Note for a period not greater than 270 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 Subsidiary Trust 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 net of any portion of such
payments that represent Nonrecoverable Advances;
(ii) all payments on account of interest (net of any portion thereof
retained by the related servicer (including the Master
Servicer), if any, as servicing compensation) on the Mortgage
Loans;
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(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, net of
Liquidation Expenses, unpaid servicing compensation and
Nonrecoverable Advances;
(iv) [not applicable];
(v) [not applicable];
(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 and 3.14 hereof;
(ix) all proceeds of any Mortgage Loans or property acquired in
respect of the Mortgage Loans purchased pursuant to Sections
2.01, 2.02, 2.03(b), 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
2.01, 2.02, 2.03(b), 2.04 or 2.05 hereof;
(x) [not applicable]; and
(xi) any other amounts required to be deposited in the Certificate
Account pursuant to this Agreement.
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 penalties, late payment charges or assumption fees, if collected,
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 and not otherwise subject to
withdrawal pursuant to Section 3.12 hereof, 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. All funds deposited by the Master Servicer in trust for the
Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.12. In no
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event shall the Trustee incur liability for withdrawals from the Certificate
Account by the Master Servicer.
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
for the benefit of the Subsidiary Trust Certificateholders (in its capacity as
such) or its nominee. All income and gain net of any losses realized from any
such investment shall be for the benefit of the Master Servicer as part of its
Servicing Fee 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.
The Master Servicer shall give notice to the Trustee, the Rating Agency and
the Depositor of the location of the Certificate Account, and of any change
thereof, prior to the use thereof.
If so specified and to the extent set forth 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 Subsidiary Trust
Certificateholders. On the Servicer Remittance Date, the Service 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
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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 Service 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 interest received thereon through the date of
Prepayment at the applicable 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; and (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. 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.
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 Agreement, 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 and Primary Mortgage Insurance Policy
premiums 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
or Primary Mortgage Insurance Policy premiums, condominium or PUD association
dues, 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
Mortgage 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
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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; Liquidation Proceeds or otherwise; and provided, further, that such
cost payments shall be advanced when the tax, premium or other; for which
payment is intended is due.
SECTION 3.11. Access to Certain Documentation and Information Regarding the
Mortgage Loans.
In order to permit any Person to comply with Sections 171 and 1276 of the
Code, the Master Servicer shall, upon request, furnish such Person with a
statement setting forth the number and principal balance of Mortgage Loans that
were originated before September 27, 1985 and before July 18, 1984.
The Master Servicer shall provide the Depositor and the Trustee for the
benefit of the Subsidiary Trust Certificateholders 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 or investment income with
respect to funds in the amounts in the Certificate Account
credited to the Certificate Account;
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(ii) to reimburse itself for advances made pursuant to Sections
3.01, 3.09, 3.10, 3.13, 3.14, 3.16, 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 late recoveries of payments of principal and/or
interest respecting which any such advance was made in the case
of advances pursuant to Sections 3.01, 3.09, 3.13, 3.14, 3.16,
4.01, 4.02 and 4.03 hereof;
(iii) to reimburse itself for any Nonrecoverable Advances;
(iv) [Not Applicable];
(v) to reimburse itself from Insurance Proceeds for Insured
Expenses and to pay any unpaid servicing compensation to
itself, such payment of servicing compensation 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, and servicing compensation
payable to 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 Subsidiary 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 Subsidiary 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 unpaid servicing compensation to the Servicer
(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 Sections
2.01, 2.02, 2.03(b), 2.04 or 2.05, all amounts received thereon
and not taken into account in determining the related Principal
Balance of such repurchased Mortgage Loan;
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(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) [not applicable];
(x) to make payments to the Subsidiary Trust Certificateholders, or
remittances to the Trustee for their benefit in the amounts,
and in the manner, specified in this Agreement;
(xi) to withdraw pursuant to Section 3.08 any amount deposited in
the Certificate Account and not required to be deposited
therein; and
(xii) to clear and terminate the Certificate Account upon termination
of this Agreement pursuant to Section 9.01 hereof or Article XV
of the Reference Agreement.
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), (vi), (vii) and (viii).
SECTION 3.13. Maintenance of the Primary Mortgage Insurance Policies;
Collections Thereunder.
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 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 each such
Primary Mortgage Insurance Policy applicable to a Nonsubserviced Mortgage Loan,
and shall use its best reasonable 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 the principal balance of the related
Mortgage Loan is reduced to 30% or less of the Appraised Value, in the case of a
Mortgage Loan having a Loan-to-Value Ration at origination in excess of 30%. The
Master Servicer agrees to pay, with respect to each Nonsubserviced Mortgage
Loan, and otherwise, to the extent the related Servicers does not do so, the
premiums for each Primary Mortgage Insurance Policy on a timely basis and shall
use its best reasonable efforts to cause itself or the Service 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
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jurisdiction over such insurer (or if such insurer's claims-paying ability shall
adversely affect the rating on the Certificates of the related Series) or such
Primary Mortgage 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 Mortgage Insurance Policy with a
total coverage that is equal to the then existing coverage of such Primary
Mortgage Insurance Policy at the expense of the Mortgagor. The Master Servicer
shall not cancel or refuse to renew any such Primary Mortgage Insurance Policy
with respect to 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 and is required to be kept in force hereunder unless the
replacement Primary Mortgage Insurance Policy for such cancelled or non-renewed
policy is maintained with an insurer whose claims-paying will not adversely
affect the rating on the Certificates of the related Series. 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 for the benefit of the Subsidiary Trust
Certificateholders and the Subsidiary Trust Certificateholders, claims to the
insurer under any Primary Mortgage Insurance 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.
Pursuant to Section 3.08 hereof, any amounts collected by the Master Servicer
under any Primary Mortgage Insurance Policy shall be deposited in the
Certificate Account, subject to withdrawal pursuant to Section 3.12 hereof. In
these cases in which a Mortgage Loan is serviced by a Servicer, the Servicer, on
behalf of itself, the Master Servicer, the Depositor, the Trustee for the
benefit of the Subsidiary Trust Certificateholders and the Subsidiary Trust
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 deposit all collections thereunder in the related
Servicing Account for deposit in the Certificate Account.
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SECTION 3.14. Maintenance of Hazard Insurance 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 have an accompanying endorsement that contains, a
standard mortgagee clause complying in all material respects in form and
substance to applicable FNMA guidelines. 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, 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
Subsidiary Trust Certificateholders or remittances to the Trustee for their
benefit, 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 additional such 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 or (ii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program, if
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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
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 Sentence 3.14, and
there shall have been a loss that would 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 for the benefit of the
Subsidiary Trust Certificateholders and the Subsidiary Trust Certificateholders,
claims under any such blanket policy.
SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.
(a) Except as otherwise provided in this Section 3.15(a), when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master Service
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. Notwithstanding the foregoing, the Master Servicer is not
required to exercise such rights with respect to a Nonsubserviced Mortgage Loan
if the person to whom the related Mortgaged Property has been conveyed or is
proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto. 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, or if nonenforcement is otherwise permitted hereunder, 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,
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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 held for
the benefit of the subsidiary Trust Certificateholders that requires the
signature of the Trustee held for the benefit of the Subsidiary Trust
Certificateholders, 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 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 as a result of such assumption or transfer and (E) if
the seller/transferor of the Mortgaged Property is to be released from liability
on the
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Mortgage Loan, the Master Servicer used the same underwriting standards in
evaluating the creditworthiness of the purchaser/transferee as were used in
making the original Mortgage Loan, and 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 for the
benefit of the Subsidiary Trust Certificateholders 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 for the benefit of the Subsidiary Trust Certificateholders 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.
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 3.08 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 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
or, in the case of a Servicer, the Servicer so determines and the Master
Servicer agrees (i) that such restoration and/or foreclosure will increase the
proceeds of liquidation of the Mortgage Loan to the Subsidiary Trust
Certificateholders after reimbursement to itself of such expenses and (ii) that
such expenses will be recoverable to it either through Liquidation Proceeds
(respecting which it shall have
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priority for purposes of withdrawals from the Certificate Account pursuant to
Section 3.12 hereof) or through Insurance Proceeds (respecting 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.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed-in-lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be taken in the name of the Trustee for the benefit of
the Subsidiary Trust Certificateholders, or its nominee, on behalf of the
Certificateholders. The Master Servicer shall sell any REO Property within one
year of its acquisition by the Subsidiary Trust Fund, unless, at the request of
the Master Servicer, the Trustee seeks, and subsequently receives, an Opinion of
Counsel, addressed to the Trustee and the Master Servicer, to the effect that
the holding by the Subsidiary Trust Fund of such REO Property subsequent to one
year after its acquisition will not result in the imposition of taxes on
"prohibited transactions" of the Subsidiary Trust Fund as defined in Section
860F of the Code or cause the Subsidiary Trust Fund to fail to qualify as a
REMIC at any time that any Subsidiary Trust Certificates are outstanding. The
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Subsidiary Trust Certificateholders solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) or
result in the receipt by the REMIC of any "income from non-permitted assets"
within the meaning of Section 860F(a)(2)(B) of the Code or any "net income from
foreclosure property" which is subject to taxation under the REMIC Provisions.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master Servicer protect and
conserve such REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Certificateholders, rent the
same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Master Servicer and the Subsidiary Trust Certificateholders for
the period prior to the sale of such REO Property.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would
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exceed the costs and expenses of bringing such a proceeding. The income earned
from the management of any Mortgaged Properties acquired through foreclosure or
other judicial proceeding on behalf of the Subsidiary Trust Certificateholders,
net of reimbursement to the Master Servicer for expenses incurred (including any
taxes) in connection with such management, shall be applied to the payment of
principal of and interest on the related defaulted Mortgage Loans (with interest
accruing and principal amortizing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Certificate Account. To the
extent the income received is in excess of the amount attributable to amortizing
principal and accrued interest at the Subsidiary Pass-Through Rate on the
related Mortgage Loan, such excess shall be deposited in the Certificate Account
and paid to the Subsidiary Residual Interest Holder.
The Master Servicer may at its option purchase from the Trust Fund any
Mortgage Loan which is 90 days or more delinquent and which the Master Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee prior to purchase), subject to the REMIC Provisions and at a price equal
to the Purchase Price. The Purchase Price for any Mortgage Loan purchased
hereunder shall be delivered to the Trustee for deposit in the Certificate
Account and the Trustee, upon receipt of such deposit, shall release or cause to
be released to the Master Servicer the related Mortgage File 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 any Mortgage Loan
released pursuant hereto.
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 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 the related
Mortgage File held for the benefit of the Subsidiary Trust Certificateholders to
the Master Servicer, and the Trustee shall execute and deliver to the Master
Servicer the request for reconveyance, deed of reconveyance or release or
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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 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 of 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 and reasonably acceptable to the Trustee for the
benefit of the Subsidiary Trust Certificateholders (the "Trust Receipt"),
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 for the benefit of the Subsidiary Trust
Certificateholders when the need thereof 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 for the benefit of the Subsidiary Trust
Certificateholders 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 of 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 held for the benefit
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of the Subsidiary Trust Certificateholders or of the documents therein that
shall have been released by the Trustee to be returned to the Trustee within 21
calendar days after possession thereof shall have been released by the Trustee
unless (i) the Mortgage Loan has been liquidated and the Insurance Proceeds or
Liquidation 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 for the benefit of the Subsidiary Trust
Certificateholders 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 Posses- sion of Master
Servicer to be Held for the Depositor and the Trustee for the
Benefit of the Subsidiary Trust Certificateholders.
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 the benefit of the Subsidiary Trust
Certificateholders 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 central 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 for the
benefit of the Subsidiary Trust Certificateholders and the Subsidiary Trust
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 for the benefit of the Subsidiary Trust Certificateholders, 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.
As compensation for its activities hereunder, the Master Servicer shall be
entitled to retain or withdraw from the Certificate Account the amounts
specified in subclauses (i), (v) and (vi) of Section 3.12 hereof as payable to
it.
Additional servicing compensation in the form of prepayment penalties,
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, to the extent such premiums
are not required to be paid or have not been paid by the related Mortgagors or
the related Servicer, payment of any premiums for hazard insurance, as required
by Section 3.14 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 Depositor; Certificate Account Statements.
Within three Business Days following each Determination Date, the Master
Servicer shall supply to the Trustee information required by the Trustee in
order to prepare the statement provided by this Section 3.20, and on each
Distribution Date the Trustee shall cause to be forwarded to the Depositor a
statement, certified by a Trust Officer, setting forth the status of the
Certificate Account and the Master Distribution Account as of the close of
business on such Distribution Date and showing, for the period covered by such
statement, (a) the aggregate of deposits in or withdrawals from the Certificate
Account for each category of deposit specifed in Section 3.08 hereof and each
category of withdrawal specified in Section 3.12 hereof; and (b) the aggregate
of deposits in or withdrawals from the Master Distribution Account specified in
the Reference Agreement. The Trustee shall cause to be forwarded a copy of each
such statement to the Rating Agency. The Trustee shall not be in breach of this
Agreement by reason of any failure to forward the statement required by this
Section 3.20 if failure is due to the failure of the Master Servicer to supply
any information required hereby.
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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 March 15 of each year, 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 Aqreement 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. The Master Servicer
shall forward a copy of each such statement to the Rating Agency.
SECTION 3.22. Annual Independent Public Accountants' Servicing Report.
On or before April 15, of each year, beginning with the first April 15 that
occurs at least six months after the Cut-off Date, 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 for the benefit of the Subsidiary Trust
Certificateholders 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 Program for Mortgages serviced for
FHLMC (rendered within one year of such statement) of independent public
accountants with respect to the
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related Servicer. The Master Servicer shall forward a copy of each such report
to the Rating Agency.
SECTION 3.23. [Not Applicable]
SECTION 3.24. [Not Applicable]
SECTION 3.25. [Not Applicable]
SECTION 3.26. [Not Applicable]
ARTICLE IV.
ADVANCES BY THE MASTER SERVICER
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 Subsidiary 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 such Monthly Advance shall be remitted to the Certificate Account no
later than the close of business on the date set forth in Section 11.21(a) of
the Reference Agreement 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 judgment of the Master Servicer, is reimbursable from
Insurance Proceeds, Liquidation Proceeds, 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 deliver to the Trustee for the benefit of the Subsidiary
Trust Certificateholders an Officer's Certificate setting forth the reasons for
the Master Servicer's determination as set forth in Section 11.21 of the
Reference Agreement.
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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 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 so applied 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 Subsidiary Trust Certificateholders on such
Distribution Date. The Master Servicer shall be entitled to be reimbursed from
the Certificate Account for all Monthly Advances of its own funds made pursuant
to this Section as provider 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 for the benefit of the
Subsidiary Trust Certificateholders 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 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 rembursement 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 three days prior to 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
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reimbursable from Insurance Proceeds or 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 promtly 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 Proceeds, Liquidation Proceeds, 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
Prepayments.
Subject to any limitations set forth in Section 11.21 of the Reference
Agreement, 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, as a reduction of the Servicing Fee for
the Due Period in which such Principal Prepayment is received, on or before
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 Subsidiary 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, 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 any Servicer that failed to make the advance,
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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.
SECTION 4.06. [Not Applicable]
ARTICLE V.
THE CERTIFICATES
SECTION 5.01. The Certificates.
The Certificates shall be substantially in the forms set forth in Exhibits
A, B, C, D and E hereof. 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, First Vice Presidents or Vice
Presidents 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 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, Certificate Registers for the Subsidiary
Trust Fund and the Master Trust Fund, respectively, in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar 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
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Certificates in like aggregate interest in the applicable Trust Fund and of the
same Class.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of authorized denominations and the same aggregate interest
in the Trust Fund and of the same Class (and Subclass, if any), upon surrender
of the Certificates to be exchanged at the office or agency of the Certificate
Registrar set forth in Section 11.17 of the Reference Agreement. 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 to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but 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 may be required.
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.
The Certificate Registrar will provide the Master Servicer and Paying Agent
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 applicable Trust Fund as of the Record Date.
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
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in relation thereto and any other expenses (including the fees and expenses of
the Trustee and the Certificate Registrar) connected therewith. Any replacement
Certificate issued pursuant to this Section 5.03 shall constitute complete and
indefeasible evidence of ownership in the applicable 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 this 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 of either Trust Fund, 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 of either Trust Fund (a)
request such information in writing from the Trustee, (b) state that such
Certificateholders desire to communicate with other Certificateholders of such
Trust Fund 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 of the
Certificateholders of such Trust Fund 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.
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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
Section 11.17 of the Reference Agreement for transfer and exchange of
Certificates and designates the office described in Section 11.17 of 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 or 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 the United States of America, respectively, 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 Person 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
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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 6.2 or Section 6.4 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 an
institution (i) having servicing obligations at the time of transfer in excess
of $____________, (ii) who is a FNMA, FHLMC and HUD approved seller/servicer in
good standing, (iii) who has a net worth of $_________, and (iv) who will not
adversely affect the rating on the Certificates. Such institution shall execute
and deliver 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. 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 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
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Depositor, the Master Servicer and any director, officer, employee or agent of
the Depositor or the Master Servicer shall be indemnified by the Subsidiary
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 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 Subsidiary 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. The
Master Servicer shall give notice of any proposed resignation to the Trustee,
the Certificateholders and the Rating Agency. 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 7.2 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 policies 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
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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, the Paying Agent 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 Business 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 having not less than ___% of the Voting
Rights evidenced by the Certificates; or
(ii) any failure by the Master Servicer or the Paying Agent to observe
or perform in any material respect any other of the covenants or agreements
on the part of the Master Servicer or the Paying Agent contained in this
Agreement (except as set forth in (iii) below), which 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
Certificates evidencing not less than ____% 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 interests of the Subsidiary Trust
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
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days after the date on which written notice thereof shall have been given
to the Master Servicer by the Trustee for the benefit of the Subsidiary
Trust Certificateholders or by 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 of similar proceedings, or for the winding-up of,
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) the Rating Agency shall lower or withdraw 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; or
(viii) any failure of the Master Servicer to make any Monthly Advance
in the manner and at the time required to be made from its own funds
pursuant to Section 4.01 or 4.03 which continues unremedied for a period of
___________ Business Days after the date upon which telecopied notice of
such failure, requiring the same to be remedied, shall have been given to
the Master Servicer by the Trustee.
If an Event of Default described in clauses (i)-(vii) of this Section 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 ______% 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 (with a copy to the Rating Agency),
may terminate all of the rights and obligations of the Master Servicer under
this
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Agreement and in and to the Mortgage Loans and the proceeds thereof, other than
its rights as a Certificateholder hereunder. [If an Event of Default described
in clause (viii) thereof shall occur, the Trustee shall, by notice in writing to
the Master Servicer and the Depositor, 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, other than its rights as a
Certificateholder hereunder.] 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 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 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 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 2.3 to pay damages as a result of an
Event of Default under this Article VII, 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, the Master Distribution 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, subject to the provisions of Section 3.07
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. 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
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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 the appointment of which
does not adversely affect the then current rating of the Certificates of the
related Series 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. Neither the Trustee nor any other
successor servicer shall be deemed to be in default hereunder by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by the failure of the Master Servicer to deliver, or any
delay in delivering, cash, documents or records to it.
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 6.5.
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 Registers and to the Rating Agency.
(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 with respect
to each Trust Fund 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 person would exercise or use under the
circumstances in the conduct of such person'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
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of Holders of Certificates evidencing not less than 25% of the Voting
Rights allocated to 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 8.1:
(i) the Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document 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 evidencing not less than ____% of the Voting Rights allocated
to each Class of Certificates;
(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;
(vi) the Trustee shall not be required to expend its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such liability is not
assured to it;
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(vii) the Trustee shall not be liable for any loss on any investment
of funds pursuant to this Agreement; and
(viii) the Trustee shall not be deemed to have knowledge of an Event
of Default until it shall have received actual knowledge thereof.
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 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 or the Master Distribution 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. The Trustee and any
director, officer, employee or agent of the Trustee shall be indemnified by the
Master Servicer and held harmless against any loss, liability or expense (i)
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 any of the Trustee's duties
hereunder or by reason of reckless disregard
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of the Trustee's obligations and duties hereunder, (ii) resulting from any error
in any tax or information return prepared by the Master Servicer, and (iii)
resulting from the exercise of any power of attorney granted by the Trustee in
accordance with this Agreement. Such indemnity shall survive the termination of
this Agreement or the resignation or removal of the Trustee hereunder.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of such state or the United States
of America, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority. If such corporation or
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 8.06 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of 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 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, and the
Rating Agency, 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)
acceptance by a successor trustee in accordance with Section 8.08 and meeting
the qualifications set forth in Section 8.06. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice or resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.06 hereof and shall fail to resign after written
request thereto 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
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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 to be 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.
Notice of any removal of the Trustee shall be given to the Rating Agency.
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 had been 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 and its appointment shall
not adversely affect the then current rating of the Certificates.
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.
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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. 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 certificate of
authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authentication Agent shall be acceptable to the Depositor and shall at all
times be a corporation or association 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 authorized Authenticating Agent,
having a combined capital and surplus of not less than $ _________________,
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
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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
Registers. 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:_______________________________________
As Authenticating Agent
By:_______________________________________
Authorized Officer"
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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 either Trust Fund or property securing any Mortgage Note may at the time
be located, the Master Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of
either Trust Fund, and to vest in such Person or Persons, in such capacity and
for the benefit of the applicable Certificateholders, such title to the
applicable 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 so to do, 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 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, except for the obligation of the Trustee under this
Agreement to advance funds on behalf of the Master Servicer, 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 applicable 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
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(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 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, 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 in the possession of the Trustee as may be reasonably required in
connection with the preparation by the Master Servicer of all tax and
information returns of the Subsidiary Trust Fund and Master Trust Fund, and the
Trustee shall, upon request, sign such returns.
SECTION 8.13. [Not Applicable]
ARTICLE IX.
TERMINATION
SECTION 9.01. Termination upon Liquidation or Repurchase of all Mortgage
Loans.
The obligations and responsibilities of the Depositor and the Trustee
created hereby with respect to the Subsidiary Trust Fund created hereby shall
terminate upon the earlier of (a) the repurchase by the person specified in
Article XV of the
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Reference Agreement of all Mortgage Loans and all property acquired in respect
of any Mortgage Loan remaining in the Subsidiary Trust Fund at the price
specified in Section 15.01, including any unreimbursed Monthly Advances (except
for advances made pursuant to Section 4.05), and (b) the later of (i) the
maturity or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan remaining in the Subsidiary 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 Subsidiary Trust Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement.
The obligations and responsibilities of the Depositor and the Trustee created
hereby with respect to the Master Trust Fund created hereby shall terminate on
the earlier of (aa) the repurchase by the Class B-2 Certificateholder of all
Subsidiary Regular Interests remaining in the Master Trust Fund at the price
specified in Section 15.02 and (bb) the later of (i) the final distribution of
amounts with respect to the Subsidiary Regular Interests held in the Master
Trust Fund and (ii) the distribution to Master Trust Certificateholders of all
amounts required to be distributed to them pursuant to this Agreement. In no
event shall the trusts created hereby continue beyond the th anniversary of the
date of initial issuance of the Certificates. As provided in Section 15.01 to
the Reference Agreement, the right 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 set forth in Section 11.11 of the Reference
Agreement of the aggregate Scheduled Principal Balances as of the Cut-off Date.
As provided in Section 11.11 of the Reference Agreement, the right to repurchase
all Subsidiary Regular Interests pursuant to clause (aa) above shall be
conditioned upon the unpaid Principal Balances of the outstanding Subsidiary
Regular Interest Certificates, at the time of any such repurchase, aggregating
less than an amount equal to the percentage set forth in Section 11.11 of the
Reference Agreement of the aggregate Scheduled Principal Balances as of the
Cut-off Date.
SECTION 9.02. Final Distribution on the Certificates.
Notice of any termination of a Trust Fund, specifying the Distribution Date
on which the applicable Certificateholders may surrender their Certificates for
payment of the final distribution and cancellation, shall be given promptly by
the Master Servicer by letter to affected Certificateholders mailed not earlier
than the date specified in Section 15.03 of the Reference Agreement. Any such
notice shall specify (a) the Distribution Date upon which final distribution of
the applicable Certificates will be made upon presentation and surrender of
applicable Certificates at the office therein designated; (b) the amount of such
final distribution; (c) the location of the office
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or agency at which such presentation and surrender must be made; and (d) 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 at the time such
notice is given to Certificateholders.
In the event such notice is given, the Master Servicer upon receipt from
the Subsidiary Residual Interest Holder or the Class B-2 Certificateholder, as
the case may be, shall deposit in the Certificate Account or the Master
Distribution Account, as the case may be, on the applicable Distribution Date an
amount equal to the final distribution in respect of the Certificates of the
applicable Trust Fund. Upon certification to the Trustee by a Servicing Officer
following such final deposit with respect to the Subsidiary Trust Fund or the
Master Trust Fund, the Trustee shall promptly release to the subsidiary Residual
Interest Holder the Mortgage Files for the Mortgage Loans or to the Class B-2
Certificateholder the assignment of the Subsidiary Regular Interest
Certificates, respectively.
In the event that any affected Certificateholders shall not surrender
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 such 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 applicable 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 to the applicable Trust Fund.
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
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Agreement may also be amended with the consent of Certificateholders in the
manner set forth in Section 16.01 of the Reference Agreement.
SECTION 10.02. Recordation of Agreement; Counterparts.
This Agreement is subject to recordation in all appropriate public officer
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 the Certificateholders of either Trust Fund.
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 [ ] without respect to principles of conflicts of
laws, 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 the
Certificateholders that they intend hereby to establish (for federal income tax
purposes) trusts rather than associations taxable as corporations. The powers
granted and obligations undertaken in this Agreement shall be construed so, as
to further such intent.
SECTION 10.05. Notices.
In addition to other notices to be provided to the Trustee under this
Agreement, the Master Servicer shall notify the Trustee in writing: (a) of any
substitution or replacement of any Mortgage Loan; (b) in the event of the
pledge, sale or transfer of the Master Servicer's interest in any Class B
Certificate; (c) of any payment or draw on any insurance policy applicable to
the Mortgage Loans, (d) of the final payment of any
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amounts owing to a Class of Certificates; and (e) any Event of Default under
this Agreement.
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, ________________________________________, 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 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 Funds, 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 any manner otherwise control the operation and management of a
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be
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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 constitute 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 ___% 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 ___ 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 For
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
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 to 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 Master Servicer.
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SECTION 10.11 Certificates Nonassessable and Fully Paid.
It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Funds, that the interests in each
respective 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.
* * * * * * * * * * * * *
REFERENCE AGREEMENT
ARTICLE XI.
CONVEYANCE OF TRUST FUNDS;
DESCRIPTION OF THE CERTIFICATES
SECTION 11.01. Designation.
The Certificates shall be designated generally as the Conduit Mortgage
Pass-Through Certificates, Series 19__-__, Adjustable Pass-Through Rate (the
"Certificates"). The Class A and Class B Certificates shall represent interests
in the Master Trust Fund and the Subsidiary Regular Interest Certificates and
Subsidiary Residual Interest Certificate shall represent interests in the
Subsidiary Trust Fund.
SECTION 11.02. Conveyance of Trust Funds; Issuance of Certificates.
In exchange for the Subsidiary Regular Interest Certificates and the
Subsidiary Residual Interest Certificate, the Depositor hereby sells, transfers,
assigns, delivers, sets over and otherwise conveys to the Trustee for the
benefit of the Subsidiary Trust Certificateholders, without recourse, for the
benefit of all present and future Holders of the Subsidiary Trust Certificates,
all of the Depositor's right, title and interest in and to (a) the Mortgage
Loans listed in Schedule F to this Agreement, which the Depositor causes to be
delivered to the Trustee, together with the Mortgage Files relating to the
Mortgage Loans and the other property in respect of such Mortgage Loans, as
specified in Section 2.01, and the proceeds thereof payable after the Cut-off
Date, net of any amounts Payable to the Master Servicer and any Servicer in
accordance with the provisions of this Agreement, (b) property that secured a
Mortgage Loan and has been acquired by foreclosure, deed in lieu of foreclosure
or otherwise, (c) the Certificate Account and the Custodial Account and all
amounts deposited therein pursuant to
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the applicable provisions of the Agreement, net of amounts payable to the Master
Servicer and any Servicer, as provided in this Agreement, (d) the rights of the
Depositor in the Primary Mortgage Insurance Policies and any other insurance
policies with respect to the Mortgage Loans and (e) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property.
In exchange for the Class A and Class B Certificates, the Depositor hereby
sells, transfers, assigns, delivers, sets over and otherwise conveys to the
Trustee for the benefit of the Master Trust Certificateholders, without
recourse, the Depositor's right, title and interest in and to the Subsidiary
Regular Interest Certificates, including all interest and principal received by
the Depositor on or with respect to the Subsidiary Regular Interest Certificates
after the Cut-off Date and all amounts in the Master Distribution Account and
all amounts deposited therein pursuant to the applicable provisions of the
Agreement, and all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or other liquid property.
The Master Servicer shall, at its own expense, promptly record or cause to
be recorded in the appropriate public real property or other records the
assignments required by this Agreement.
The Trustee for the benefit of the Master Trust Certificateholders is
authorized, with the Depositor's consent, to appoint any bank or trust company
approved by and unaffiliated with the Depositor or the Master Servicer as
custodian of the Subsidiary Regular Interest Certificates, and to enter into a
Custodial Agreement for such purpose.
The Trustee acknowledges the transfer and assignment to it of (a) the
Mortgage Loans and the delivery of the Mortgage Files to it and the other
property included in the Subsidiary Trust Fund, all to the extent provided above
and in Sections 2.01 and 2.02 and (b) the Subsidiary Regular Interests included
in the Master Trust Fund, and, concurrently with such deliveries, has delivered
to or upon the order of the Depositor, (aa) in exchange for the Mortgage Loans,
the Subsidiary Trust Certificates duly executed by the Depositor and duly
authenticated by or on behalf of the Trustee in authorized denominations
evidencing the entire ownership of the Subsidiary Trust Fund, and (bb) in
exchange for the Subsidiary Regular Interest Certificates, the Master Trust
Certificates duly executed by the Depositor and duly authenticated by or on
behalf of the Trustee in authorized denominations evidencing the entire
ownership of the Master Trust Fund. The Trustee agrees to hold the Trust Funds
and exercise the rights referred to above for the benefit of all present and
future Holders of the Certificates of the applicable Trust Fund and to perform
the duties set forth in this Agreement to the
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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 conveyances, the creation of the
Subsidiary Trust Fund and the Master Trust Fund and the issuance of the
Certificates pursuant to Sections 11.02 hereof and 2.01 of the Standard Terms
and Provisions, the Depositor hereby delivers to and/or deposits with, or causes
to be delivered to/or deposited with, the Trustee the following documents,
instruments and property relating 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
____________, with full corporate power and authority to own its assets and
to conduct its business as described in the prospectus related to the
Conduit Mortgage Pass-Through Certificates and the prospectus supplement
related to the Class A Certificates (the "Supplement," and, together with
the basic prospectus, the "Prospectus"), and is duly qualified to do
business as a foreign corporation in all jurisdictions in which the
ownership or lease of its properties or the conduct of its business
requires such qualification, except in those jurisdictions in which the
failure so to qualify would not have a material adverse effect on its
business, condition or properties;
(b) the execution and delivery by the Depositor of the Agreement and
the signing of the related registration statement (the "Registration
Statement") by the Depositor, are within the corporate power of the
Depositor and have been duly authorized by all necessary corporate action
on the part of the Depositor; and neither the execution and delivery by the
Depositor of this Agreement nor the consummation by the Depositor of the
transactions therein contemplated, nor the compliance by the Depositor with
the provisions thereof, will (i) conflict with or result in a breach of, or
constitute a default under, the certificate of incorporation or by-laws of
the Depositor, or, to the knowledge of such counsel, any of the provisions
of any law, governmental rule, regulation, judgment, decree or order
binding on the Depositor or its properties, or (ii) to the
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knowledge of such counsel, conflict with any of the provisions of any
servicing agreement or any indenture, mortgage, contract or other
instrument to which the Depositor is a party or by which it is bound, or
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 instrument;
(c) to the knowledge of such counsel, there are no actions,
proceedings or investigations pending, or threatened, before any court,
administrative agency, governmental body or official (i) asserting the
invalidity of this Agreement or the Certificates or (ii) seeking to prevent
the issuance of the Certificates or the consummation of the transactions
contemplated by any such agreement;
(d) this Agreement has been duly and validly authorized, executed and
delivered by the Depositor and, assuming due authorization, execution and
delivery by the Master Servicer and the Trustee, constitutes the valid and
legally binding obligation of the Depositor, enforceable in accordance with
its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to creditors rights generally from time to time in effect, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(e) the Certificates have been duly and validly authorized and
executed by all necessary corporate action of the Depositor and, when such
Certificates have been duly and validly authenticated by or on behalf of
the Trustee in accordance with this Agreement, and delivered to and paid
for pursuant to this Agreement will be duly and validly issued and
outstanding and entitled to the benefits afforded by this Agreement;
(f) no consent, approval, authorization or order of any court or
supervisory, regulatory, administrative or governmental agency, body or
official is required for the consummation of the transactions contemplated
by this Agreement or the Underwriting Agreement, except such as may have
been obtained under the Securities Act of 1933, as amended (the "1933
Act"), such as may be required under the state securities or Blue Sky laws
of any jurisdiction and such other approvals as have been obtained;
(g) this Agreement is not required to be qualified under the Trust
Indenture Act of 1939, and each Trust Fund is not, and will not become, as
a result of the offer and sale of the Certificates as contemplated,
required to be
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registered under the Investment Company Act of 1940, as amended;
(h) the Registration Statement has become effective under the 1933
Act, and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act; the Registration Statement and the
Prospectus, as of the effective date of the Registration Statement and the
date of the Supplement, respectively, complied as to form in all material
respects to the requirements of the 1933 Act and the Rules and Regulations
thereunder; such counsel has no reason to believe that either the
Registration Statement (excluding any exhibits filed therewith), as of the
date it became effective, or the Prospectus, as of the date of the
Supplement, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading;
(i) the statements in the Prospectus under the caption "Description of
the Certificates," insofar as such statements constitute a summary of
certain terms of the Certificates and this Agreement, constitute a fair
summary of such documents; the statements contained under the captions
"Certain Legal Aspects of the Mortgage Loans" and "ERISA Considerations,"
insofar as they describe federal statutes and regulations, have been
prepared or reviewed by such counsel, and such statements fairly summarize
such statutes and regulations; and the statements contained under the
caption "Certain Federal Income Tax Consequences," insofar as they
constitute conclusions of law, are true and correct in all material
respects as set forth therein and accurately reflect the advice and
opinions ascribed to such counsel therein;
(j) assuming that the Certificates offered pursuant to the
Registration Statement are rated by a nationally recognized statistical
rating organization in one of its two highest rating categories, such
Certificates constitute "mortgage-related securities" within the meaning of
Section 3(a)(41) of the Securities Exchange Act of 1934, as amended;
(k) assuring compliance with all of the provisions of this Agreement,
the Subsidiary Trust Fund and the Master Trust Fund will each qualify as a
real estate mortgage investment conduit ("REMIC") under sections 860A
through 860G of the Code, the Class A and Class B-1 Certificates will be
considered to be the "regular interests" and the Class B-2 Certificate will
be considered to be the "residual
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interest" in the Master Trust Fund and the Subsidiary Regular Interests
will be considered to be the "regular interests" and the Subsidiary
Residual Interest Certificate will be considered to be the "residual
interest" in the Subsidiary Trust Fund; and
(l) for income and franchise tax purposes of the States of [ ] and
[ ], neither the Master Trust Fund nor the Subsidiary Trust Fund
will be classified as an association taxable as a corporation, or otherwise be
subject as an entity to any [ ] or [ ] State tax imposed on,
or measured by, net income.
(2) The Mortgage Loans. The Mortgage Loans included in the Subsidiary Trust
Fund, in the manner specified in Section 2.01 and Section 11.02.
(3) The Subsidiary Regular Interest Certificates. The Subsidiary Regular
Interest Certificates included in the Master Trust Fund, in the manner specified
in Section 11.02, endorsed by the Depositor to the order of the Trustee for the
benefit of the Master Trust Certificateholders, without recourse.
(4) Opinion of Counsel to the Master Servicer. An Opinion of Counsel to the
Master Servicer, dated the Delivery Date, addressed to the Trustee and the
Depositor, to the effect that:
(a) the Master Servicer is a [ ] validly existing and in
good standing under the laws of [ ].
(b) the Master Servicer has the corporate power and authority to enter
into and perform its obligations under this Agreement;
(c) all necessary corporate action on the part of this Agreement has
been duly and validly authorized by the Master Servicer, and when so
executed and delivered by the Master Servicer and duly authorized, executed
and delivered by the Depositor and the Trustee, will constitute a valid and
binding agreement of the Master Servicer enforceable against the Master
Servicer in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, or
by general principles of equity and the discretion of the court (regardless
of whether such enforcement is considered in a proceeding at law or in
equity), and except that the rights to indemnification under this Agreement
with respect to claims under the Act may be limited by public policy
considerations;
(d) the execution, delivery and performance of this Agreement on the
terms set forth herein does not conflict
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with or result in a breach of the charter or bylaws of the Master Servicer;
and
(e) to the knowledge of such counsel, the execution, delivery and
performance of this Agreement does not (i) conflict with or result in a
breach of any of the provisions of any material indenture, mortgage,
contract or other instrument to which the Master Servicer is a party or by
which it is bound or (ii) result in the creation or imposition of any lien
charge or encumbrance upon any of its property pursuant to the terms of any
such material indenture, mortgage, contract or other instrument.
SECTION 11.04. Denominations.
The Class A and Class B-1 Certificates will be issued in fully registered
form only in minimum Initial Certificate Principal Balances of $[ ] and integral
multiples of $[ ] in excess thereof, provided that one Class A Certificate and
one Class B-1 Certificate shall be issued in such Initial Certificate Principal
Balance as may be necessary such that the aggregate Certificate Principal
Balance of the Class A Certificates and Class B-1 Certificates equals the
Initial Class A Certificate Principal Balance and Initial Class B-1 Certificate
Principal Balance, respectively. The Class B-2 Certificate will be issued as a
single certificate.
SECTION 11.05. Scheduled Principal Balance.
The Scheduled Principal Balance of the Mortgage Loans as of the Cut-off
Date is $_______________.
SECTION 11.06. Distribution.
On each Distribution Date, the Trustee or the Paying Agent shall make
distributions in the amounts and in the manner specified in Article XIII and in
the forms of Certificates attached hereto as Exhibits A, B, C, D and E.
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 set forth in the notice given pursuant to
Section 9.02.
(b) Notice of final distribution on any Certificate on any
Distribution Date or Optional Termination Date shall be mailed no later
than the _th day prior to the applicable Distribution Date or Optional
Termination Date.
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SECTION 11.08. Distribution Date.
The Distribution Date for the Certificates is the __th day of each month,
or, if such day is not a Business Day, the succeeding Business Day, commencing
____________________, 19___.
SECTION 11.09. Mortgage Loans.
The Mortgage Loans transferred and assigned to the Trustee by the Depositor
are the Mortgage Loans identified in the Mortgage Loan Schedule attached hereto
as Exhibit F.
SECTION 11.10. Forms Generally.
The Certificates and the Trustee's certificate of authentication shall be
in substantially the forms set forth in Exhibits A, B, C, D and E 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, 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 11.11. Optional Termination.
The Subsidiary Residual Interest Holder may, at its option, repurchase from
the Subsidiary Trust Fund all Mortgage Loans remaining outstanding on any
Distribution Date on or after the date on which the aggregate Principal Balance
of such Mortgage Loans at the time of purchase is less than 10% of the aggregate
Scheduled Principal Balances of the Mortgage Loans on the Cut-off Date in the
manner and at the repurchase price provided in Article XV.
The Class B-2 Certificateholder may, at its option, repurchase from the
Master Trust Fund all Subsidiary Regular Interest Certificates remaining
outstanding on any Distribution Date on or after the date on which the aggregate
Principal Balances of such Certificates is less than 10% of the aggregate
Scheduled Principal Balances on the Cut-off Date in the manner and at the
repurchase price provided in Article XV.
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SECTION 11.12. Substitution.
The Depositor or the Master Servicer may substitute a Replacement Mortgage
Loan or Loans for any Mortgage Loan required to be repurchased pursuant to
Section 2.01, 2.02, 2.03(b), 2.04, 2.05 or 14.01, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.04; provided that any such substitution must be effected within three months
after the Delivery Date (or within two years after the Delivery Date if the
related Mortgage Loan is a "defective obligation" within the meaning of Section
860G(a)(4)(A)(ii) of the Code).
SECTION 11.13. Wire Transfer Eligibility.
Any Class A or Class B Certificateholder shall automatically receive
distributions hereunder on a Distribution Date by wire transfer to the account
specified in writing by the Certificateholder to the Master Servicer (and Paying
Agent, if any) if the Initial Principal Balance evidenced by such Holder's
Certificate is at least equal to $5,000,000. Distributions on the Subsidiary
Residual Interest Certificate and subsidiary Regular Interest Certificates shall
be made by wire transfer to the account specified in writing by such
Certificateholder to the Trustee. In each case, the account must be specified in
writing at least five Business Days prior to the Record Date for the
Distribution Date on which wire transfers will commence.
SECTION 11.14. Required Rating.
The Class A Certificates shall have been rated at least "Aa2" by Moody's
Investors Service, Inc.
SECTION 11.15. Servicing Compensation.
The Master Servicer shall be entitled to retain an amount in respect of
each interest payment on a Mortgage Loan equal to the Servicing Fee, and such
other amounts as provided in this Agreement.
SECTION 11.16. Cut-off Date.
The Cut-off Date is ____________________1, 19___.
SECTION 11.17. Certificate Registrar.
The Certificate Registrar is ______________________. The office of the
Certificate for purposes of receipt of notices and demands is [address of
Certificate Registrar].
SECTION 11.18. [Not Applicable]
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SECTION 11.19. Paying Agent.
The Master Servicer may appoint a Paying Agent hereunder. In the event of
any such appointment, no more than one Business Day prior to each Distribution
Date, the Master Servicer shall to the extent required by this Agreement deposit
or cause to be deposited with the Paying Agent a sum sufficient to make the
payments to Certificateholders in the amounts and in the manner provided for in
Section 13.02, such sum to be held in trust for the benefit of Subsidiary Trust
Certificateholders. The Master Servicer shall cause the Paying Agent to perform
each of the obligations of the Paying Agent set forth herein and shall be liable
to the Trustee and the Certificateholders for failure of the Paying Agent to
perform such obligations. The Master Servicer designates ______________________
as the initial Paying Agent.
The Master Servicer shall cause each Paying Agent other than the Trustee to
execute and deliver to the Master Servicer an instrument in which such Paying
Agent shall agree with the Master Servicer that such Paying Agent will hold all
sums held by it for the payment to Subsidiary Trust Certificateholders in trust
for the benefit of the Subsidiary Trust Certificateholders entitled thereto
until such sums shall be paid to such Subsidiary Trust Certificateholders.
SECTION 11.20. Restrictions on Transfer of Certificates.
No transfer of any Class B or Subsidiary Residual Interest Certificate
shall be made unless that transfer is made pursuant to an effective registration
statement under the 1933 Act and effective registration or qualification under
applicable state securities laws, or is made in a transaction which does not
require such registration or qualification. In the event that a transfer is to
be made without registration or qualification, (a) the Trustee shall require, in
order to assure compliance with such laws, that the Certificateholder desiring
to effect the transfer and such Certificateholder's prospective transferee each
certify to the Trustee in writing the facts surrounding the transfer and (b) the
Master Servicer, the Depositor or the Trustee shall require an opinion of
counsel reasonably satisfactory to the requesting party that such transfer may
be made without such registration or qualification, which opinion of Counsel
shall not be required to be an expense of the Depositor, the Trustee or the
Master Servicer. Neither the Depositor nor the Trustee is obligated to register
or qualify the Class B Certificate, Subsidiary Residual Interest Certificates,
or Subsidiary Regular Interest Certificates under the 1933 Act or any other
securities law or to take any action not otherwise required under this Agreement
to permit the transfer of such Certificates or interest without registration or
qualification. Any such holder desiring to effect such transfer shall, and does
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hereby agree to, indemnify the Trustee, the Depositor and the Master Servicer
against any liability that may result if the transfer is not so exempt, or is
not made in accordance with such federal and state laws.
No transfer of any Class B Certificate, Subsidiary Residual Interest
Certificate or Subsidiary Regular Interest Certificate shall be made to any
employee benefit plan that is subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), unless the prospective transferee of a
Certificateholder desiring to transfer its Certificate provides the Trustee with
a certification or Opinion of Counsel, or both at the request of the Trustee,
which establishes to the satisfaction of the Depositor and the Trustee that such
disposition will not violate the prohibited transaction provisions of Section
406 of ERISA and Section 4975 of the Code. The Trustee shall require that such
prospective transferee certify to the Trustee in writing the facts establishing
that such transferee is not such an employee benefit plan.
The Class B-2 Certificate and Subsidiary Residual Interest Certificate
shall not be transferred, sold, pledged or otherwise disposed of to any Person
having a net worth of less than $__________. In the event that either such Class
B-2 Certificate or the Subsidiary Residual Interest Certificate is proposed to
be transferred, the proposed transferee shall, prior thereto, certify to the
Trustee in writing that it satisfies the net worth requirement set forth in the
preceding sentence.
Prior to the registration of any transfer, sale, pledge or other
disposition of the Class B-2 Certificate or Subsidiary Residual Interest
Certificate, the proposed transferee shall certify in writing to the Trustee, in
such form as the Trustee may require, that such transferee is not a Disqualified
Organization (as hereinafter defined). Notwithstanding the registration in the
Certificate Registrar of any transfer, sale, pledge or other disposition of any
such Certificate Registrar of any transfer, sale, pledge or other disposition of
any such Certificate to a Disqualified Organization, such registration shall be
of no legal force or effect whatsoever and such Disqualified Organization shall
not be deemed to be a Certificateholder for any purpose hereunder, including
(but not limited to) the receipt of distributions on such Class B-2 Certificate
or Subsidiary Residual Interest Certificate. In addition, any transfer, sale,
pledge or other disposition of any such Certificate to a Pass-Through Entity (as
hereinafter defined) shall not be effective unless the proposed transferee shall
have agreed in writing, in such form as the Trustee may require, to provide to
the Trustee such information as the Trustee may reasonably require concerning
any record interest holder or principal of such Pass-through Entity who is or
was a Disqualified Organization. Any holder of any such Class B-2 Certificate or
Subsidiary Residual Interest Certificate, by its
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acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this paragraph. The restrictions described in this paragraph shall
not apply to a transfer of any such Certificate if the Trustee has received an
Opinion of Counsel to the effect that the restrictions described in this
paragraph are not necessary to avoid the imposition of tax on the relevant Trust
Fund or the disqualification of the relevant Trust Fund as a REMIC under the
Code. The Master Servicer shall cause to be made available the information
necessary for the application of Section 860E(e) of the Code. For purposes of
this paragraph, (a) "Disqualified Organization" means (x) the United States, any
state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (y) any organization (other than a cooperative described in section
521 of the Code) that is exempt from tax imposed by Chapter 1 of the Code unless
such organization is subject to the tax imposed by section 511 of the Code, or
(z) any organization described in section 1381(a)(2)(C) of the Code, and (b)
"Pass-Through Entity" means (x) a regulated investment company described in
section 851 of the Code, a real estate investment trust described in section 856
of the Code, a common trust fund, or an organization described in section
1381(a) of the Code, (y) any partnership, trust, or estate, or (z) any person
holding the Class B-2 Certificate or Subsidiary Residual Interest Certificate as
nominee for another person.
The Trustee shall have no liability to a Trust Fund arising from a transfer
of any such Certificate in reliance upon a certification, ruling or Opinion of
Counsel described in this Section 11.20.
SECTION 11.21. Monthly Advances.
(a) If, on any Determination Date, the Master Servicer determines to make a
Monthly Advance in accordance with Section 4.01 or 4.03, it shall make such
Monthly Advance on or before the close of business on the day [three] Business
Days prior to the related Distribution Date. The Master Servicer shall notify
the Trustee of the aggregate amount of Monthly Advances for a Distribution Date
on or before [three] Business Days prior to such Distribution Date. For purposes
of this Section 11.21, the delinquent Monthly Payments referred to in Section
4.01 shall be deemed to include an amount equal to the Monthly Payments that
would have been due on Mortgage Loans which have been foreclosed or otherwise
terminated and, in connection therewith, the Master Servicer acquired and
continues to own the Mortgaged Properties on behalf of the Subsidiary Trust
Certificateholders. Any such Monthly Advance shall be included with the
distribution to the Subsidiary Trust Certificateholders on the related
Distribution Date.
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(b) In the event that the Master Servicer fails to make a Monthly Advance
required to be made pursuant to Section 4.01 or 4.03 on or before the close of
business on the day [three] business Days prior to a Distribution Date, the
Trustee shall, on or before such Distribution Date, deposit in the Certificate
Account an amount equal to the excess of (a) Monthly Advances required to be
made by the Master Servicer under Section 4.01 or 4.03 over (b) the amount of
Monthly advances made by the Master Servicer with respect to such Distribution
Date; provided that the Trustee shall not be required to make such Monthly
Advances if prohibited by law or if it determines that such Monthly Advance
would be a Nonrecoverable Advance. The Trustee shall be entitled to be
reimbursed from the Certificate Account for Monthly Advances and Nonrecoverable
Advances made by it pursuant to this Section 11.21(b) in like manner as if it
were the Master Servicer.
(c) With respect to any Distribution Date, the advance of funds pursuant to
Section 4.05 in connection with a Mortgage Loan that is the subject of a
Principal Prepayment shall be payable only from the Servicing Fee otherwise
payable to the Master Servicer during the month of such Distribution Date.
SECTION 11.22. REMIC Election.
The Depositor hereby elects and authorizes the Trustee to treat each of the
Subsidiary Trust Fund and the Master Trust Fund as separate REMICs under the
Code. This Agreement shall be construed so as to carry out the intention of the
Depositor that each Trust fund be treated as a REMIC at all times prior to the
date on which final payment is made (or made available on demand) to the Holders
of any Class A Certificates, with respect to the Master Trust Fund, and to the
holders of the Subsidiary Regular Interest Certificates, in the case of the
Subsidiary Trust Fund. The Delivery Date is hereby designated as the "startup
day" of each REMIC Pool within the meaning of Section 860G(a)(9) of the Code.
The "regular interests" (within the meaning of Section 860G of the Code) in the
Trust Fund shall consist of the Class A Certificates and the Class B-1
Certificates. The Class B-2 Certificate shall be designated as the "residual
interest" (within the meaning of Section 860G of the Code) in the Master Trust
Fund. The "regular interests" (within the meaning of Section 860G of the Code)
in the Subsidiary Trust Fund shall consist of the Subsidiary Regular Interests
and the "residual interest" (within the meaning of Section 860G of the Code) in
the Subsidiary Trust Fund shall consist of the Subsidiary Residual Interest. The
"regular interests" in the Subsidiary Trust Fund shall be held by the Master
Trust Fund unless otherwise purchased pursuant to Section 11.11.
The Class B-2 Certificateholder shall set as the "tax matters partner"
(within the meaning of Section 6231(a)(7) of the Code) with respect to the
Master Trust Fund and the Subsidiary
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Residual Interest Holder shall act as the "tax matters partner" of the
Subsidiary Trust Fund. By its acceptance of the Class B-2 Certificate of the
Subsidiary Residual Interest Certificate, a Holder shall have agreed to such
appointment and shall have consented to the appointment of the Master Servicer
as agent to act on behalf of the applicable Trust Fund pursuant to Section 3.01.
In the event that any tax is imposed on a "prohibited transaction" of a
Trust Fund as defined in Section 860F of the Code, such tax shall be charged
against amounts otherwise available for distribution to the holder of the Class
B-2 Certificate with respect to the Master Trust Fund and the holder of the
Subsidiary Residual Interest Certificate with respect to the Subsidiary Trust
Fund, as applicable. Notwithstanding anything to the contrary contained herein,
the Master Servicer is hereby authorized to retain from amounts otherwise
available for distribution to the holder of such Class B-2 Certificate or
Subsidiary Residual Interest Certificate on any Distribution Date sufficient
funds to reimburse the Master Servicer for the payment of such tax (to the
extent that the Master Servicer has not been previously reimbursed therefor).
[SECTION 11.23. Warranty and Servicing Agreements.
The Warranty and Servicing Agreements with respect to the Mortgage Loans
included in the Subsidiary Trust Fund are listed on Schedule K hereto.]
ARTICLE XII.
[Not Applicable]
ARTICLE XIII.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
SECTION 13.01. Accounts.
[The Master Servicer shall, prior to the Delivery Date, establish and
maintain, in the name of the Trustee on behalf of the Holders of interests in
the Subsidiary Trust Fund, a Custodial Account, which shall be an Eligible
Account, into which the Master Servicer shall deposit all amounts, except as
otherwise set forth herein, required by Section 3.08 hereof to be deposited into
the Certificate Account, and from which the Master Servicer shall withdraw such
amounts as set forth in Section 3.12 hereof. So long as it does not adversely
affect the rating on the Certificates, the Custodial account may be maintained
with
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_____________________. The Master Servicer shall deliver in immediately
available funds for deposit into the Certificate Account on or before the
Business Day prior to each Distribution Date, the aggregate of the Subsidiary
Regular Interest Distribution and the Subsidiary Residual Interest
Distribution.]
[Funds held in the Custodial Account at any time may be delivered by the
Master Servicer to the Trustee for deposit in an account (which may be the
Certificate Account and must satisfy the standards for the Certificate Account
as set forth in the definition thereof) and for all purposes of this Agreement
shall be deemed to be a part of the Custodial Account; provided, however, that
the Trustee shall have the sole authority to withdraw any funds held in such
account. Notwithstanding the foregoing, if any of the amounts described in
Section 3.08 would, if deposited in the Custodial Account, cause the amount held
therein in respect of a particular Mortgagor to exceed the difference between
(a) the maximum FSLIC insurance coverage and (b) $ ____________, the Master
Servicer shall, not later than the Business Day immediately following such
deposit, deliver an amount equal to not less than such excess to the Trustee for
deposit in the Certificate Account. Any provision in this Agreement requiring
the Master Servicer to transfer funds (other than any Monthly Advance required
pursuant to Section 4.01, 4.03 or 4.05 and except as set forth in the following
sentence) to the Trustee in respect of any Distribution Date shall be deemed to
be satisfied to the extent that immediately available funds are delivered by the
Master Servicer to the Trustee pursuant to this paragraph on or prior to the
Business Day immediately preceding each Distribution Date. In addition, the
Master Servicer shall deliver to the Trustee for deposit in the Certificate
Account, on a daily basis, or as otherwise required hereunder, any proceeds of
any Mortgage Loans or property acquired in respect of Mortgage Loans purchased
pursuant to Sections 2.01, 2.02, 2.03(b), 2.04, 3.15, 3.16, 9.01, 14.01 or 14.03
hereof and all amounts required to be deposited in connection with the
substitution of Replacement Mortgage Loans to the extent any such payment or
deposit is to be made by the Master Servicer from its own funds.]
The Master Servicer shall, prior to the Delivery Date, establish and
maintain, in the name of the Trustee on behalf of the Holders of interests in
the Subsidiary Trust Fund, the Certificate Account, which shall be an Eligible
Account, into which the Master Servicer shall deposit funds as set forth above.
So long as it does not adversely affect the rating on the certificates, the
Certificate Account may be maintained with the Trustee. All distributions to be
made from time to time to holders of interests in the Subsidiary Trust Fund out
of funds in the Certificate Account shall be made by or on behalf of the Trustee
or Paying Agent.
The Master Servicer shall, prior to the initial Distribution Date,
establish and maintain, in the name of the
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Trustee on behalf of the holders of interests in the Master Trust Fund, a Master
Distribution Account, which shall be an Eligible Account. So long as it does not
adversely affect the rating on the Certificates, the Master Distribution Account
may be held by the Trustee. So long as the Trustee holds Subsidiary Regular
Interest Certificates for the benefit of the Master Trust Certificateholders,
the Trustee shall deposit distributions from the Subsidiary Trust Fund on
Subsidiary Regular Interest Certificates upon receipt into the Master
Distribution Account. All distributions to be made from time to time to the
Master Trust Certificateholders out of funds in the Master Distribution Account
shall be made by or on behalf of the Trustee or the Paying Agent. All income and
gain realized from any investment of any amounts on deposit in the Master
Distribution Account 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 investment of any amounts on deposit in the
Master Distribution Account shall be deposited into the Master Distribution
Account by the Master Servicer out of its own funds.
The Master Servicer shall give notice to the Trustee, the Rating Agency and
the Depositor of the location of the Custodial Account, the Certificate Account
and the Master Distribution Account, and of any change thereof, prior to the use
thereof.
SECTION 13.02. Distributions.
(a) On each Distribution Date, the Trustee or Paying Agent, if any, shall
apply amounts in the Certificate Account as follows:
(i) to the holders of the Subsidiary Regular Interest Certificates,
the Subsidiary Regular Interest Distribution; and
(ii) to the holder of the Subsidiary Residual Interest Certificate,
the Subsidiary Residual Interest Distribution.
(b) On each Distribution Date, the Trustee or Paying Agent, if any, shall
apply amounts in the Master Distribution Account (which shall include for the
purposes hereof, to the extent Subsidiary Regular Interest Certificates are held
by the Trustee for the benefit of the Master Trust Certificateholders, any
amounts being distributed with respect to such Subsidiary Regular Interest
Certificates on such date pursuant to Section 2.2 (a)(i)) as follows:
(i) to the Class A Certificateholders, an amount equal to the Class A
Distribution;
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(ii) to the Class B-1 Certificateholders, an amount equal to the Class
B-1 Distribution; and
(iii) to the Class B-2 Certificateholder, an amount equal to the Class
B-2 Distribution plus the balance, if any, of the Master Trust Fund
Aggregate Distribution remaining after the distributions otherwise provided
for pursuant to this subsection (b).
(c) On the second Business Day following each Determination Date, the
Master Servicer shall furnish or cause to be furnished by electromagnetic tape
delivered by overnight courier to the Trustee (or by such other means as the
Master Servicer and the Trustee may agree from time to time) information with
respect to collections on the Mortgage Loans and with respect to the Mortgaged
Properties necessary to make the above calculation to make the distributions on
each Distribution Date and the Trustee shall be responsible for such calculation
with respect to distributions from each Trust Fund so long as such Trust Fund
has not been terminated in accordance with this Agreement. The Trustee may
conclusively rely on such information provided by the Master Servicer and shall
have no duty to verify the accuracy of such information. The Trustee shall make
the results of its calculations available to the Master Servicer no later than
each Distribution Date; provided that the Trustee shall confirm with the Master
Servicer the Monthly Advance required, assuming no amount of such advance would
be a NonRecoverable Advance, no later than (three) Business Days prior to each
Distribution Date. All distributions made to Certificateholders of any Class on
such Distribution Date will be made to the Certificateholders of the respective
Class of record on the immediately preceding Record Date, except for the final
distribution, which shall be made as provided in the form of Certificate. All
distributions made to Class A and Class B Certificateholders shall be based on
the Percentage Interest represented by their respective Certificates. If on any
Determination Date, the Master Servicer determines that there are no Mortgage
Loans outstanding and no other funds or assets in any Trust Fund other than the
funds in the Certificate Account or the Master Distribution Account, the Master
Servicer shall direct the Trustee promptly to send the final distribution notice
to each Certificateholder of the applicable Trust fund specifying the manner in
which the final distribution will be made.
(d) In the case of a final distribution on the Master Trust Certificates in
accordance with Sections 9.01 or 15.03, upon presentation and surrender of the
Master Trust Certificates, the Trustee shall cause to be distributed to Master
Trust Certificateholders on the final Distribution Date in proportion to their
respective Percentage Interests an amount equal to (i) as to Class A
Certificates, the Class A Certificate Principal Balance together with any
balance in the Class B-1 Interest Shortfall Account or the Class B-1 Principal
Shortfall Account
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and one month's interest at the Master Pass-Through Rate on the Class A
Certificate Principal Balance, (ii) as to Class B-1 Certificates, the Class B-1
Certificate Principal Balance together with any Balance in the Class B-1
Interest Shortfall Account or the Class B-1 Principal Shortfall Account and one
month's interest at the Master Pass-Through Rate on the Class B-1 Certificate
Principal Balance, and (iii) as to the Class B-2 Certificate, the amount which
remains on deposit in the Master Distribution Account (other than amounts
retained to meet claims) after application pursuant to clauses (i) and (ii)
above. The distribution on the final Distribution Date shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class or Subclass of Certificates.
(e) The Subsidiary Pass-Through Rate for each Subsidiary Regular Interest
shall equal, with respect to each related Mortgage Loan, (i) until the Initial
Adjustment Date, the applicable Initial Mortgage Rate specified for such
Subsidiary Regular Interest in Schedule 1 to the Subsidiary Regular Interest
Certificate, less the applicable Servicing Fee Rate, and (ii) thereafter, an
amount determined on each Adjustment Date equal to the lesser of (A) the
applicable Index plus the Pass-Through Margin, but not less than the Periodic
Mortgage Rate Cap, if the Mortgage Rate declined as of such Adjustment Date, or
more than the Periodic Mortgage Rate Cap, if the Mortgage Rate increased as of
such Adjustment Date, or in each case less the applicable Servicing Fee Rate, or
(B) the Maximum Subsidiary Pass-Through Rate.
SECTION 13.03. Subordination; Priority of Distributions.
(a) The rights of the Class B Certificateholders to receive distributions
in respect 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, that the Subordinated Amount as of the immediately preceding
Determination Date is greater than zero. Amounts otherwise allocable to Class B
Certificateholders on any Distribution Date immediately following a
Determination Date on which the Subordinated Amount is greater than zero shall
be distributed to Class A Certificateholders on such Distribution Date to the
extent required to cover any deficiency on such Distribution Date, or, if such
deficiency is greater than the then Subordinated Amount, to the extent of the
Subordinated Amount. The rights of the Class B-2 Certificateholder to receive
distributions in respect of the Class B-2 Certificate on any Distribution Date
shall be subordinated to the rights of the Class A and Class B-1 Certificates to
the extent, and only to the extent, that the Subordinated Class B-2 Amount as of
the immediately preceding Determination Date is greater than zero.
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Amounts otherwise allocable to the Class B-2 Certificateholder on any
Distribution Date immediately following a Determination Date on which the
Subordinated Class B-2 Amount is greater than zero shall be distributed first to
Class A Certificateholders and then to Class B-1 Certificateholders on such
Distribution Date to the extent required to cover any deficiency on such
Distribution Date, or, if such deficiency is greater than the then Class B-2
Subordinated Amount, to the extent of the Class B-2 Subordinated Amount.
Amounts held by the Master Servicer or the Trustee for future distribution
to the Class B-1 Certificateholders and the Class B-2 Certificateholder,
including, without limitation, in the Master Distribution Account, shall not be
distributed in respect of the Class B-1 Certificates or the Class B-2
Certificate, except in accordance with the terms of this agreement. The Class
B-1 Certificateholders and the Class B-2 Certificateholder are deemed to have
granted a security interest in such rights to the Class A Certificateholders to
secure the rights of the Class A Certificateholders to receive distributions in
priority over the Class B-1 Certificateholder and the Class B- 2
Certificateholder. The Class B-2 Certificateholder is deemed to have granted a
security interest in such rights to the Class B-1 Certificateholders to secure
the rights of the Class B-1 Certificateholders and the Class B-2
Certificateholder will make, execute and deliver or cause to be made, executed
and delivered any and all further and other notices, instruments and assurances,
and will furnish such information and will make such filings with governmental
authorities, including but not limited to financing statements on Form UCC-1, as
may be necessary or appropriate to carry out the intention or to facilitate the
performance of the terms of this Agreement, including without limitation the
foregoing subordination provisions, or otherwise to protect and preserve the
rights and remedies hereunder of the Class A and Class B-1 Certificateholders.
(b) 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 Mortgage Loan, assumption or substitution fees, late payment charges and
other Mortgagor charges, reimbursement of Monthly Advances and expenses or
otherwise, shall not be subordinated to the rights of Certificateholders.
(c) Prior to each Distribution Date, the Master Servicer shall determine
the total amount of Realized Losses and Special Hazard Realized Losses, if any,
recognized by the Subsidiary Trust Fund on Mortgage Loans related to Subsidiary
Regular Interest Certificates held by the Master Trust Fund during the previous
Prepayment Period. Except as set forth in (d) below, an amount equal to any such
Realized Losses shall be allocated on such Distribution Date (i) first to the
Class B-2 Certificate unless and until the outstanding Certificate
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Principal Balance thereof has been reduced to zero, (ii) then to the Class B-1
Certificates, pro rata among the Certificates of such Class in proportion to
their outstanding Certificate Principal Balances immediately prior to such
Distribution Date, unless and until the outstanding Certificate Principal
Balance thereof has been reduced to zero, and (iii) thereafter to the Class A
Certificates, pro rata among the Certificates of such Class in proportion to
their outstanding Certificate Principal Balances immediately prior to such
Distribution Date. Any allocation of Realized Losses to a Class A Certificate or
Class B Certificate on a Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated, which
allocation shall be deemed to have occurred on such Distribution Date.
SECTION 13.04. Monthly Statements to Certificateholders.
(a) Not later than each Determination Date, the Master Servicer shall cause
to be forwarded to the Trustee by overnight courier (or such other means as the
Master Servicer and the Trustee may from time to time agree on) and concurrently
with each distribution from the Certificate Account to the Subsidiary Trust
Certificateholders to be made on a Distribution Date the Trustee shall cause to
be forwarded by mail to each Subsidiary Trust Certificateholder a statement
setting forth:
(i) the amount of such distribution representing principal on the
Mortgage Loans, 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
Mortgage Loans and the portion of such distribution, if any representing a
Monthly Advance of interest;
(iii) the aggregate Scheduled Principal Balances of the Mortgage Loans
as of the close of business on such Distribution date, after giving effect
to payments allocated to principal reported under clause (i) above;
(iv) the related amount of the Servicing Fees (as adjusted pursuant to
Section 4.050 retained or withdrawn from the Certificate Account by the
Master Servicer and the amount of additional servicing compensation
received by the Master Servicer attributable to penalties, fees, excess
Liquidation Proceeds and other items;
(v) the amount of Monthly Advances paid by the Master Servicer and any
Sub-Servicer;
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(vi) the number and aggregate principal amounts of Mortgage Loans (A)
delinquent (1) one Monthly Payment, (2) two Monthly Payments and (3) three
or more Monthly Payments and (B) in foreclosure;
(vii) the book value (within the meaning of 12 C.F.R. ss.571.13 or
comparable provision) of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure;
(viii) the Master Pass-Through Rate as of the related Due Period;
(ix) the aggregate amount of the Subsidiary Regular Interest
Distributions and the amount of the Subsidiary Residual Interest
Distribution;
(x) all Monthly Advances recovered during the related Due Period; and
(xi) the amount of Special Hazard Realized Losses recognized during
the proceeding Prepayment Period, and the cumulative amount of Special
Hazard Realized Losses recognized since the Cut-off Date.
(b) Concurrently with each distribution from the Master Distribution
Account to the Master Trust Certificateholders to be made on a Distribution
Date, the Trustee or the Paying Agent shall cause to be forwarded by mail to
each Master Trust Certificateholder a copy of the statement delivered pursuant
to (a) above together with a statement setting forth:
(i) if the current distribution includes any amount in respect of a
previous Class A Interest Shortfall or Class A Principal Shortfall, the
amount thereof, stated separately;
(ii) the amount otherwise distributable to Class B-1
Certificateholders which was paid to Class A Certificateholders on such
Distribution Date ("Class B-1 Advances") and the amount otherwise
distributable to the Class B-2 Certificateholder which was paid to the
Class A Certificateholders and the Class B-1 Certificateholders on such
Distribution Date ("Class B-2 Advances");
(iii) the aggregate Class A Certificate Principal Balance after giving
effect to the distribution on such Distribution Date;
(iv) the Class A Percentage for the following Distribution Date (i.e.,
the amount specified in clause (b)(iii) divided by the amount specified in
clause (a)(iii));
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(v) the outstanding balance in the Class A Interest Shortfall Account
after giving effect to the current distribution;
(vi) the outstanding balance in the Class A Principal Shortfall
Account after giving effect to the distribution on such Distribution Date;
(vii) the aggregate Class B-1 Certificate Principal Balance and Class
B-2 Certificate Principal Balance after giving effect to the distribution
on such Distribution Date;
(viii) the Subordinated Amount and the Class B-2 Subordinated Amount
as of the related Determination Date after giving effect to the
distribution made on the related Distribution Date, expressed as a dollar
amount and as a percentage of the aggregate Scheduled Principal Balance
reported under the clause (a)(iii) above;
(ix) all Class B-1 Advances and Class B-2 Advances repaid on the
immediately preceding Distribution Date;
(x) the reduction in the aggregate Class A Certificate Principal
Balance, if any, attributable to the application of Realized Losses thereto
on the related Distribution Date.
(c) Not later than each Distribution Date, the Trustee or the Paying Agent
shall also send to the Holder of the Subsidiary Residual Interest and the
Depositor a statement setting forth the amount, if any, distributed to such
holder on such Distribution Date.
(d) The Trustee's responsibility for disbursing the above information to
the Certificateholders is limited to the availability, timeliness and accuracy
of the information derived from the Master Servicer. The Trustee will send a
copy of each statement provided pursuant to this Section 13.04 to the Rating
Agency.
(e) Upon reasonable advance notice in writing if required by federal
regulation, the Trustee and the Master Servicer will provide to each
Certificateholder which is a savings and loan association, bank or insurance
company certain reports and access to information and documentation regarding
the Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of the FHLBB or other regulatory authorities with respect
to investment in the Certificates; provided, that the Trustee and the Master
Servicer shall be entitled to be reimbursed by each such Certificateholder for
the Master Servicer's actual expenses incurred in providing such reports and
access. On the sixth day of any month or the next subsequent Business Day, the
Trustee will provide upon
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request the Class A Principal Balance after giving effect to Monthly Payments
due on the immediately preceding Due Date.
(f) Within a reasonable period of time after the end of each calendar year,
the Master Servicer shall cause to be furnished to the Trustee and the Trustee
shall cause to be furnished to each Person who at any time during the calendar
year was a Master Trust Certificateholder, a statement containing the
information set forth in clauses (a)(i), (a)(ii), (a)(iv), (b)(i), (b)(ii) and
(b)(x) 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 and the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer and the Trustee pursuant to any requirements of
the Code as from time to time in effect.
ARTICLE XIV.
ADDITIONAL REPRESENTATIONS AND WARRANTIES
SECTION 14.01 Individual Mortgage Loans.
In addition to the representations, warranties and covenants set forth in
Section 2.03, the Master Servicer hereby represents and warrants to, and
covenants with, the Depositor and the Trustee for the benefit of the Subsidiary
Trust Certificateholders that, as to each Mortgage Loan, as of the Delivery Date
or such other date specifically set forth herein:
(a) The information set forth on the Mortgage Loan Schedule and Schedule 1
to the Subsidiary Regular Interest Certificate is complete, true and correct as
of the Cut-off Date;
(b) The Master Servicer had good and marketable title to the Mortgage Note
and the Mortgage, and the Master Servicer was the sole owner of the Mortgage
Loans free and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any nature and
had full right and authority, subject to no interest or participation of, or
agreement with, any other party, to sell and assign the same;
(c) The Mortgage is a valid, subsisting and enforceable first lien on the
property therein described, and the Mortgaged Property is free and clear of all
encumbrances and liens having priority over the first lien of the Mortgage,
except for (1) liens for real estate taxes and special assessments not yet due
and payable, (2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of recording
which are acceptable to mortgage lending institutions generally, or which are
specifically
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referred to in lender's title insurance policy delivered to the originator of
the Mortgage Loan and either (A) which are referred to or otherwise considered
in the appraisal made for the originator of the Mortgage Loan, or (B) which do
not adversely affect the appraised value of the Mortgaged Property as set forth
in such appraisal, and (3) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided to the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property;
(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 Certificateholders
and which has been delivered to the Trustee. The substance of any such
alteration or modification has been approved by the primary mortgage guaranty
insurer, 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
primary mortgage guaranty insurer, if any, and which has been delivered to the
Trustee;
(f) To the best of the Master Servicer's knowledge, 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 with respect to
the Mortgage 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 Master Servicer 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) To the best of Master Servicer's knowledge, there is no proceeding
pending or threatened for the total or partial condemnation of the Mortgaged
Property, nor is such a proceeding currently occurring, and such property to the
best of the Master Servicer's knowledge, is undamaged by waste, or other
casualty, so as to materially, adversely affect the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the premises
were intended;
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(h) To the best of Master Servicer's knowledge, there are no mechanics' or
similar liens or claims which have been filed for work, labor or material (and,
to the best of Master Servicer's knowledge, no rights are outstanding that under
law could give rise to such lien) affecting the Mortgaged Property which are, or
may be, liens prior or equal to, or coordinate with, the lien of the Mortgage;
(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) The Master Seller has no knowledge of 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 investors
to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage
Loan to become delinquent, or materially and adversely affect the value or
marketability of the Mortgage Loan;
(k) To the best of the Master Servicer's knowledge, 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) To the best of the Master Servicer's knowledge, no person other than
the Master Servicer has had any interest in any Mortgage Loan, whether as
mortgagee, assignee, pledgee or otherwise;
(m) All payments required to the made up to the Cutoff Date for each
Mortgage Loan under the terms of the related Mortgage Note have been made. No
payment required under any Mortgage Loan has been delinquent more than 60 days,
and no payment required under any Mortgage Loan is delinquent more than 30 days
or has been delinquent more than 30 days more than once during the twelve-month
period immediately preceding the Cut-off Date;
(n) The Mortgage File contains each of the documents and instruments
specified to be included therein duly executed and in due and proper form,
enforceable in accordance with their terms. The Mortgage Loan and the Mortgage
are on forms acceptable to FNMA. Each appraisal is on a form acceptable to
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FNMA or FHLMC with such riders as are acceptable to FNMA and FHLMC, as the case
may be;
(o) The Mortgage Note and the related Mortgage are genuine, and, to the
best of Master Servicer's knowledge, each is the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms. To
the best of Master Servicer's knowledge, all parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
(p) Any and all requirements of any federal, state or local law including,
without limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects, and the Master Servicer shall maintain in its possession, available
for each Certificateholder's inspection, evidence of compliance in accordance
with its generally accepted business practices;
(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, or closing or recording the Mortgage Loans were paid;
(r) Each Mortgage Loan is covered by an ALTA or CLTA mortgage title
insurance policy with an adjustable rate mortgage endorsement and an extended
coverage endorsement, such endorsements substantially in the form of ALTA Form
6.0 or 6.1 and CLTA Form 100, respectively, or such other generally acceptable
form of policy or insurance acceptable to FNMA or FHLMC, issued by and the valid
and binding obligation of a title insurer acceptable to FNMA or FHLMC and, at
the time of issuance thereof, qualified to do business in the jurisdiction where
the property subject to the Mortgage is located, insuring the Master Servicer,
its successors and assigns, as to the first priority lien of the Mortgage in the
original principal amount of the Mortgage Loan. The Master Servicer is the sole
named insured of such mortgage title insurance policy, the assignment to the
Subsidiary Trust Certificateholders of such mortgage title insurance policy does
not require the consent of or notification to the insurer, such mortgage title
insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of Certificateholders upon the consummation of
the transactions contemplated by this Agreement. To the best of Master
Servicer's knowledge, no claims have been made under such mortgage title
insurance policy and no prior holder of the related Mortgage, including the
Master Servicer, has done, by act
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or omission, anything which would impair the coverage of such mortgage title
insurance policy;
(s) All improvements on the Mortgaged Property are insured by a generally
acceptable insurer against loss by 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 3.14. All individual insurance policies (collectively, the "hazard
insurance policy") contain a standard mortgagee clause naming the Master
Servicer, its successors and assigns, as mortgagee and the Master Servicer has
received no notice that any premiums due and payable thereon have not been paid.
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 holder of the Mortgage to obtain and maintain such insurance at
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(t) To the best of Master Servicer's knowledge, there is no material
default, breach, violation or event of acceleration existing under the Mortgage
or the related 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 a
default, breach, violation or event of acceleration; and the Master Servicer has
not waived any default, breach, violation or event of acceleration;
(u) The Mortgage Loan is 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, to the best of the
Master Servicer's knowledge, no such right of rescission, set-off, counterclaim
or defense has been asserted with respect thereto;
(v) The Mortgage Loan was originated by the Master Servicer or by a savings
and loan association, a savings bank, a commercial bank, similar banking
institution or HUD approved mortgagee which is supervised by federal or state
authority and subsequently acquired by the Master Servicer from such originator;
(w) The Mortgage Loans are semi-annual adjustable rate mortgage loans
having an original term of not more than ____ years to maturity, with interest
payable in arrears on the ____ day of each month. As to each Mortgage Loan, on
each applicable Adjustment Date, the Mortgage Rate will be adjusted to equal the
sum of the Index plus the applicable Gross Margin subject to the
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Interest Rate Caps. ____% of the Mortgage Loans contain terms or provisions
whereby the Mortgagor is permitted to convert the Mortgage Loan to a fixed-rate
mortgage loan at the date ________ years after origination. Each Mortgage Note
requires a monthly payment which is sufficient (a) during the period prior to
the Initial Adjustment Date, to fully amortize the original principal balance
over the original term thereof and to pay interest at the related Mortgage Rate,
and (b) during the succeeding period following each Adjustment Date, to fully
amortize the outstanding principal balance as of the first day of such period
over the then remaining term of such Mortgage Note and to pay interest at the
related Mortgage Rate. If the Mortgage Rate changes on an Adjustment Date, the
then outstanding principal balance will be reamortized over the remaining life
of the Mortgage Loan;
(x) The Mortgage contains an enforceable provision for the acceleration of
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 the
mortgagee thereunder;
(y) With respect to _____% of the Mortgage Loans at the time that such
Mortgage Loan was originated the Mortgagor represented that the Mortgagor would
occupy the related Mortgaged Property as the Mortgagor's primary residence and
the Master Servicer has no reason to believe that such representation of the
Mortgagor is no longer true;
(z) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage;
(aa) The related 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. The Master Servicer
has no knowledge of any 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;
(bb) With respect to each Mortgage constituting a deed of trust, a trustee,
duly qualified if required 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 Certificateholders to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(cc) The Mortgage Loan Files contain an appraisal of the related Mortgaged
Property signed prior to the approval of the Mortgage Loan application by a
qualified appraiser, approved
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by the Master Servicer, who has no interest, direct or indirect, in the
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan. The appraisal is in a form acceptable to FNMA and FHLMC and meets the
requirements of FHLBB as they existed at the time of origination;
(dd) _____% of the Mortgaged Properties are located in [ ],
_____% of the Mortgaged Properties are located in [ ], and _____% of
the Mortgage Loans are located in [ ]. No more than _____% of such
Mortgaged Properties are located in any one five digit zip code area. The
Mortgage Loans had remaining terms to stated maturity as of the Cut-off Date of
between _____ and _____ months and a weighted average remaining term to stated
maturity of _____ months;
(ee) The Mortgage Rates borne by the Mortgage Loans as of the Cut-off Date
ranged from _____% per annum to _____% per annum and the weighted average
Mortgage Rate as of the Cut-off Date was _____% per annum;
(ff) The maximum outstanding principal balance of any Mortgage Loan as of
the Cut-off Date was $_____ and the average outstanding principal balance was
$_____:
(gg) As of the Cut-off Date, _____% of the Mortgage Loans were made to
refinance the related Mortgaged Properties and _____% of the Mortgage Loans were
made to purchase the related Mortgaged Properties. With respect to all Mortgaged
Loans, approximately _____% of the Mortgage Loans measured by aggregate unpaid
Principal Balances are secured by a detached single family residence;
approximately _____% of the Mortgage Loans (similarly measured) are secured by
an individual condominium unit approved or eligible for approval by FNMA or
FHLMC or an individual unit in a planned unit development and no such residence
is a mobile home or a manufactured dwelling:
(hh) The weighted average number of months (calculated as of the Cut-off
Date) until the next Adjustment Date of each Mortgage Loan is _____ months;
(ii) The Gross Margins on the Mortgage Loans range from _____ to _____
basis points and the weighted average Gross Margin as of the Cut-off Date was
_____ basis points;
(jj) With respect to _____% of the Mortgage Loans, the original Principal
Balance was greater than 90% but not greater than 95% of either (A) the
appraised value being, for the purposes hereof, the amount set forth in an
appraisal made in connection with the origination of such Mortgage Loan, or (B)
in the event of a Mortgage Loan made in connection with the acquisition of the
Mortgaged Property by the Mortgagor, the lesser of such appraised value or the
purchase price of the
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Mortgaged Property actually paid by the Mortgagor at the time of the origination
of the Mortgage Loan; with respect to _____% of the Mortgage Loans, the original
Principal Balance was greater than 80% but not greater than 90% of the amount in
(A) or (B) above; with respect to _____% of the Mortgage Loans, the original
Principal Balance was greater than 75% but not greater than 80% of the amount in
(A) or (B) above; with respect to _____% of the Mortgage Loans, the original
Principal Balance was greater than 70% but not greater than 75% of the amount in
(A) or (B) above; and with respect to __% of the Mortgage Loans, the original
Principal Balance was not greater than 70% of the amount in (A) or (B) above.
All Mortgage Loans with a Loan to Value Ratio greater than 80% have Primary
Mortgage Insurance;
(kk) Each Mortgage Loan was underwritten in accordance with the
underwriting standards set forth in Exhibit J:
(ll) There exists 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 payment of other charges
or payments due the mortgagee have been capitalized under the Mortgage or the
related Mortgage Note;
(mm) No Mortgage Loan was originated as an employer relocation program, a
buydown plan or otherwise;
(nn) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(oo) The origination and collection practices used by the Master Servicer
with respect to each Mortgage Note and Mortgage have been and will be in all
respects legal, proper, prudent and, with respect to collection practices,
customary in the mortgage servicing business;
(pp) No Mortgage Loan is secured by a leasehold estate; and
(qq) The Master Servicer has no knowledge that with respect to such
Mortgaged Property (1) there is or has been any storage, disposal, or discharge
of hazardous materials or substances on or affecting the Mortgaged Property, (2)
any events have occurred or conditions exist that constitute material violations
of the applicable local, state or federal environmental or public health laws,
or (3) any environmental or public health litigation or administrative action by
any private party or public authority is pending or threatened with respect to
the Mortgaged Property.
It is understood and agreed that the representations and warranties set
forth in this Section 14.01 shall survive delivery of the respective Mortgage
Files to the Trustee. With
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respect to the representations and warranties described in this Section which
are made to the best of the Master Servicer's knowledge, if it is discovered by
either the Depositor, the Master Servicer or the Trustee that the substance of
such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Mortgage Loan, notwithstanding
the Master Servicer's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time the representation of
warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty. 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 representation and warranties set forth in this
Section 14.01 that materially and adversely affects the interests of the
Subsidiary Trust 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 correct or cure such breach within
_____ days from the date the Master Servicer was notified of such breach and, if
such breach is not so cured or corrected within such period, either (a) remove
such Mortgage Loan from the Subsidiary Trust Fund and substitute in its place a
Replacement Mortgage Loan or Loans, which substitution shall be accomplished
within the time period specified in Section 11.12, in the manner and subject to
the conditions set forth in Section 2.04 or (b) repurchase the affected Mortgage
Loan or Mortgage Loans from the Trustee. Any such repurchase by the Master
Servicer shall be at the Purchase Price and be accomplished in the manner set
forth in Section 2.02.
SECTION 14.02. Subsidiary Regular Interests. The Depositor hereby
represents and warrants to, and covenants with, the Trustee for the benefit of
the Master Trust Certificateholders that, as to each Subsidiary Regular
Interest, as of the Delivery Date or such other date specifically set forth
herein:
(i) that immediately prior to the transfer and assignment of the
Subsidiary Regular Interest Certificates to the Trustee herein
contemplated, the Depositor had good title to, and was the sole owner and
holder of, each Subsidiary Regular Interest Certificate, free and clear of
all liens, pledges, charges or security interests of any nature, and there
had been no other sale or assignment thereof; the Depositor had full right
and authority, subject to no interest or participation of, or agreement
with, any other party, to sell and assign the same; and immediately upon
such transfer and assignment, the Trustee will have good title thereto and
will be the sole legal owner thereof;
(ii) that as of the date of the transfer of the Subsidiary Regular
Interest Certificates to the Trustee
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there is no valid offset, defense or counterclaim to any Subsidiary Regular
Interest Certificate;
(iii) that each Subsidiary Regular Interest complies in all material
respects with applicable state or federal laws, regulations and other
requirements pertaining to usury; and
(iv) that as of date of the initial issuance of the Subsidiary Regular
Interests, all taxes and government assessments due and owing in connection
with such issuance have been paid.
It is understood and agreed that the representations and warranties set
forth in this Section 14.02 shall survive delivery of the Subsidiary Regular
Interest Certificates to the Trustee. Upon discovery by the Depositor, the
Master Servicer or the Trustee (or upon notice thereof from any
Certificateholders) of a breach or breaches of any of the representations and
warranties set forth in this Section 14.02 that materially and adversely
affects, in the reasonable judgement of the Trustee, the interests of the Master
Trust Certificate holders in the related Subsidiary Regular Interest
Certificate, the party discovering such breach or breaches shall give prompt
written notice to the other parties.
SECTION 14.03. Conversion of Mortgage Loans. Upon conversion of any
Mortgage Loans to a Converted Mortgage Loan in accordance with its terms, the
Master Servicer shall promptly notify the Trustee of such conversion and the
Master Servicer shall purchase such Mortgage Loan held for the benefit of the
Subsidiary Trust Certificateholders from the Trustee. The Trustee shall enforce
the Master Servicer's obligation hereunder to repurchase such Converted Mortgage
Loan from the Trustee on behalf of the Certificateholders at the Purchase Price
for settlement on the first day of the month following the month in which such
Mortgage Loan became a Converted Mortgage Loan. The Purchase Price for the
repurchased Converted Mortgage Loan shall be delivered to the Trustee for
deposit in the Certificate Account and the Trustee, upon receipt of such
deposit, shall release or cause to released to the Master Servicer the related
Mortgage File within two Business Days 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 any Converted Mortgage Loan released
pursuant hereto and the Trustee shall have not further responsibility with
regard to such Mortgage File. Any successor Master Servicer under the Agreement,
including, without limitation, the Trustee acting in such capacity, shall not be
required to purchase any Converted Mortgage Loan. In the event the Master
Servicer defaults upon its obligation to repurchase any Converted Mortgage Loan,
and such default remains unremedied for a period of five Business Days after
written notice of such default shall have been given
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by the Trustee to the Master Servicer then the Trustee shall use its best
efforts to cause such Converted Mortgage Loan to be sold at a price equal to the
Purchase Price for settlement on the first day of any month; provided, however,
that the determination to sell or not to sell any such Converted Mortgage Loan
shall be in the sole discretion of the Trustee. Any such Converted Mortgage Loan
which is not repurchased by the Master Servicer and which the Trustee is unable
to sell at the Purchase Price shall remain in the Trust.
ARTICLE XV.
OPTIONAL TERMINATION
SECTION 15.01. Purchase of Mortgage Loans in the Subsidiary Trust Fund.
The Mortgage Loans included in the Subsidiary Trust Fund shall be subject
to purchase at the option of the Subsidiary Residual Interest Holder or its
designee as permitted herein on any Optional Termination Date at the Mortgage
Loan Repurchase Price specified herein.
The Mortgage Loan Repurchase Price for any such Optional Termination of the
Subsidiary Trust Fund shall be equal to the greater of: (a) the aggregate
Principal Balance of the Mortgage Loans as of the date of repurchase, together
with accrued and unpaid interest thereon at the applicable Mortgage Rate with
respect to each Mortgage Loan through the last day of the month of such
repurchase or (b) the fair market value thereof as determined by the Master
Servicer. The Subsidiary Residual Interest Holder shall give notice to the
Master Servicer and the Master Servicer shall give notice to the Rating Agency
of the Subsidiary Residual Interest Holder's election to purchase the Mortgage
Loans pursuant to this Section 15.01 and of the Optional Termination Date. The
right of the Subsidiary Residual Interest Holder to repurchase the Mortgage
Loans is conditioned on the Master Servicer's having previously given notice of
termination as required by Section 15.01.
SECTION 15.02. Purchase of Subsidiary Regular Interest Certificates in the
Master Trust Fund.
The Subsidiary Regular Interest Certificates included in the Master Trust
Fund shall be subject to purchase at the option of the Class B-2
Certificateholder or its designee as permitted herein on any Optional
Termination Date at the Subsidiary Regular Interest Repurchase Price specified
herein.
The Subsidiary Regular Interest Repurchase Price for any Optional
Termination of the Master Trust Fund shall be equal to the greater of (a)
amounts corresponding to the aggregate
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Principal Balance of the Subsidiary Regular Interests as of the date of
repurchase of the Subsidiary Regular Interests, together with accrued and unpaid
interest thereon at the applicable Master Pass-Through Rate through the last day
of the month of such repurchase or (b) amounts corresponding to the fair market
value there of as determined by the Master Servicer. The Class B-2
Certificateholder shall give notice to the Master Servicer and the Master
Servicer shall give notice to the Rating Agency of the Class B-2
Certificateholder's election to purchase the Subsidiary Regular Interest
Certificates pursuant to this Section 15.02 and of the Optional Termination
Date. The right of the Class B-2 Certificateholder to repurchase the Subsidiary
Regular Interest Certificates is conditioned on the Master Servicer having
previously given notice of the termination as required by Section 15.03.
SECTION 15.03. Procedure Upon Optional Termination.
(a) In case of any Optional Termination pursuant to Section 15.01 or 15.02,
the Master Servicer shall, at least _____ days prior to the date notice is to be
mailed to the affected Certificateholders (unless a shorter period shall be
satisfactory to the Depositor, the Subsidiary Residual Interest Holder or Class
B-2 Certificateholder, as applicable, and the Trustee), notify the Depositor and
the Trustee of such Optional Termination Date, and of the applicable repurchase
price of the Mortgage Loans or Subsidiary Regular Interest Certificates to be
repurchased.
(b) Any repurchase by the Subsidiary Residual Interest Holder of the
Mortgage Loans or by the Class B-2 Certificateholder of the Subsidiary Regular
Interest Certificates shall be made on an Optional Termination Date by deposit
of the applicable repurchase price into the Certificate Account or Master
Distribution Account, as applicable, 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 such
repurchase price into the Certificate Account or Master Distribution Account,
the Trustee and each co-trustee and separate trustee, if any, then acting as
such under this Agreement, shall, upon request of the Master Servicer and at the
expense of the subsidiary Residual Interest Holder or the Class B-2
Certificateholder, respectively, execute and deliver all such instruments of
transfer or assignment, in each case without recourse, as shall be reasonably
requested by the Subsidiary Residual Interest Holder or the Class B-2
Certificateholder, as applicable, to vest title in the Mortgage Loans or
Subsidiary Regular Interest Certificates so purchased and shall transfer or
deliver to the Subsidiary Residual Interest Holder or its designee or the Class
B-2 Certificateholder or its designee the repurchased Mortgage Loans or
Subsidiary Regular Interest Certificates, as applicable. Any distributions on
the Mortgage Loans and Subsidiary Regular
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Interest Certificates received by the Trustee or the Subsidiary Residual
Interest Holder subsequent to the Optional Termination Date shall be promptly
remitted by it to the Subsidiary Residual Interest Holder and Class B-2
Certificateholder, respectively.
(c) Notice of any Optional Termination pursuant to the provisions of this
Article XV, 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 affected Certificates mailed no earlier than the __th day
and not later than the __th day preceding the Optional Termination Date. Such
notice shall specify (A) the Distribution Date upon which final distribution on
the affected Certificates will be made upon presentation and surrender of such
Certificates at the office or agency 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 such Certificates at the office or agency
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 affected Certificates.
SECTION 15.04. Additional Termination Requirements.
(a) In the event the Subsidiary Residual Interest Holder exercises its
purchase option as provided in Section 15.01 or the Class B-2 Certificateholder
exercises its purchase option pursuant to Section 15.02, the affected Trust Fund
shall be terminated in accordance with the following additional requirements,
unless the Trustee has received an Opinion of Counsel to the effect that the
failure of such Trust Fund to comply with the requirements of this Section 15.04
will not (i) result in the imposition of taxes on a "prohibited transaction: of
either Trust Fund as described in Section 860F of the Code, or (ii) cause either
Trust Fund to fail to qualify as a REMIC at any time that any Class A
Certificates are outstanding:
(i) Within ____ days prior to the final Distribution Date set forth in
the notice given by the Master Servicer under Section 15.03, the Class B-2
Certificateholder, with respect to the Master Trust Fund, and/or the
Subsidiary Residual Interest Certificateholder, with respect to the
Subsidiary Trust Fund, shall adopt a plan of complete liquidation of the
applicable Trust Fund;
(ii) At or after the time of adoption of any such plan of complete
liquidation for the Subsidiary Trust Fund and at or prior to the final
Distribution Date, the Trustee shall sell all of the assets of the
Subsidiary Trust Fund to the Subsidiary Residual Interest Holder for cash;
provided, however, that in the event that a calendar quarter ends after the
time of adoption of such a plan of complete
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liquidation but prior to the final Distribution Date, the Trustee shall not
sell any of the assets of the Subsidiary Trust Fund prior to the close of
that calendar quarter;
(iii) At or after the time of adoption of any such plan of complete
liquidation for the Master Trust Fund and at or prior to the final
Distribution Date, the Trustee shall sell all of the assets of the Master
Trust Fund to the Class B-2 Certificateholder for cash; provided, however,
that in the event that a calendar quarter ends after the time of adoption
of such a plan of complete liquidation but prior to the final Distribution
Date, the Trustee shall not sell any of the assets of the Master Trust Fund
prior to the close of that calendar quarter.
(b) By its acceptance of the Class B-2 Certificate or Subsidiary Residual
Interest Certificate, each holder thereof hereby agrees to adopt such a plan of
complete liquidation and to take such other action in connection therewith as
may be reasonably required to liquidate and otherwise terminate the
applicable Trust Fund.
ARTICLE XVI.
ADDITIONAL PROVISIONS
SECTION 16.01. 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 66-2/3% 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 (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 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 of Certificates in a manner
other than as set forth in (i) above without the consent of the Holders of
Certificates evidencing not less than 66-2/3% of the Voting Rights of such
Class, or (iii) reduce the aforesaid percentages of Voting Rights, the holders
of which are required to consent to any such amendment, without the consent of
100% of the Holders of Certificates of the Class affected thereby.
Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the
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Trustee shall furnish written notification of the substance of such amendment to
each Certificateholder and the Rating Agency.
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 16.02. Recordation of Agreement.
This Agreement is subject to recordation in all appropriate public offices
for real property records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgaged Properties 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
Certificateholders, but only upon direction by the Certificateholders
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of Certificateholders.
SECTION 16.03. Intention of the Parties.
(a) It is the express intent of the Depositor and the Master Servicer that
the conveyance of the Subsidiary Trust Fund by the Depositor to the Trustee for
the benefit of the Subsidiary Trust Certificateholders as provided in Sections
2.01 and 11.02 hereof be, and be construed as an absolute sale of the Subsidiary
Trust Fund. It is, further, not the intention of the parties that such
conveyance be deemed a pledge of the Subsidiary Trust Fund by the Depositor to
the Trustee for the benefit of the Subsidiary Trust Certificateholders. However,
in the event that, notwithstanding the intent of the parties, the Subsidiary
Trust Fund is 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
Subsidiary Trust Fund, then (i) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code; (ii) the conveyance provided for in Sections 2.01 and 11.20
hereof shall be deemed to be a grant by the Depositor to the Trustee for the
benefit of the Subsidiary Trust Certificateholders of a security interest in all
of the Depositor's right, title, and interest, whether now owned or hereafter
acquired, in and to:
I. All accounts, contract rights, instruments, documents, general
intangibles, money, deposit accounts, certificates of deposit, chattel
paper, and uncertificated securities consisting of, arising from,
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or relating to any of the property described in (1)-(3) below:
1. Mortgage Loans including the Mortgage Notes, related Mortgages
and title insurance policies identified on the Mortgage Loan
Schedule attached hereto and all distributions with respect
thereto payable on and after _________ 1, 19_____:
2. The Custodial Account, the Certificate Account, the Master
Distribution Account, and the Escrow Account, including all
income from the investment of funds therein (including any
accrued discount realized on liquidation of any investment
purchased at a discount); and
3. The Purchase Agreement (including any security interest in the
assets transferred thereunder) dated as of ________, 19_____
among the Depositor and the Master Servicer (the "Purchase
Agreement").
II. All accounts, contract rights, general intangibles, chattel paper,
documents, instruments, uncertificated securities, and other rights
arising from or by virtue of the disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or claims
against other persons with respect to, all or any part of the
collateral described in (I) above (including any accrued discount
realized on liquidation of any investment purchased at a discount).
III. All cash and non-cash proceeds of the collateral described in (I) and
(II) above.
(iii) the possession by the Trustee for the benefit of the Subsidiary Trust
Certificateholders of Mortgage Notes and such other goods, letters of credit,
advices of credit, instruments, money, documents, chattel paper or certificated
securities shall be deemed to be "possession by the secured party," or
possession by a purchaser or a person designated by him or her, for purposes of
perfecting the security interest pursuant to Sections 9-305, 8-313 or 8-321 of
the Uniform Commercial Code, as the case may be; and (iv) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the benefit of the
Subsidiary Trust Certificateholders for the purpose of perfecting such security
interest under applicable law. The Depositor and the Trustee for the benefit of
the Subsidiary Trust Certificateholders shall, to the extent consistent with
this Agreement, take such actions as may be
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necessary to ensure that, if this Agreement were deemed to create a security
interest in the Subsidiary Trust Fund such security interest would be deemed to
be a perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of the Agreement.
(b) It is the express intent of the Depositor and the Master Servicer that
the conveyance of the Master Trust Fund by the Depositor to the Trustee for the
benefit of the Master Trust Certificateholders as provided in Section 11.02
hereof be, and be construed as an absolute sale of the Master Trust Fund. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge of the Master Trust Fund by the Depositor to the Trustee for the benefit
of the Master Trust Certificateholders. However, in the event that,
notwithstanding the intent of the parties, the Master Trust Fund is 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 Master Trust Fund, then (i) this
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the Uniform Commercial Code; (ii) the conveyance provided
for in Section 11.02 hereof shall be deemed to be a grant by the Depositor to
the Trustee for the benefit of the Master Trust Certificateholders of a security
interest in all of the Depositor's right, title, and interest, whether now owned
or hereafter acquired, in and to:
I. All accounts, contract rights, instruments, documents, general
intangibles, money, deposit accounts, certificates of deposit, chattel
paper, and uncertificated securities consisting of, arising from, or
relating to any of the property described in (1)-(4) below:
1. Mortgage Loans including the Mortgage Notes, related Mortgages
and title insurance policies identified on the Mortgage Loan
Schedule attached hereto and all distributions with respect
thereto payable on and after ________ 1, 19__;
2. The Custodial Account, the Certificate Account, the Master
Distribution Account, and the Escrow Account, including all
income from the investment of funds therein (including any
accrued discount realized on liquidation of any investment
purchased at a discount);
3. The Subsidiary Regular Interest Certificates and all
distributions with respect thereto; and
4. The Purchase Agreement.
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II. All accounts, contract rights, general intangibles, chattel paper,
documents, instruments, uncertificated securities, and other rights
arising from or by virtue of the disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or claims
against other persons with respect to, or claims against other persons
with respect to, all or any part of the collateral described in (I)
above (including any accrued discount realized on liquidation of any
investment purchased at a discount).
III. All cash and non-cash proceeds of the collateral described in (I) and
(II) above.
(iii) the possession of the Trustee for the benefit of the Master Trust
Certificateholders of the Subsidiary Regular Interest Certificates and such
other goods, letters of credit, advices of credit, instruments, money,
documents, chattel paper or certificated securities shall be deemed to be
"possession by the secured party," or possession by a purchaser or a person
designated by him or her, for purposes of perfecting the security interest
pursuant to Sections 9-305, 8-313 or 8-321 of the Uniform Commercial Code, as
the case may be; and (iv) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the benefit of the Master Trust Certificateholders for the purpose of
perfecting such security interest under applicable law. The Depositor and the
Trustee for the benefit of the Master Trust Certificateholders 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
Master Trust Fund such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of the Agreement. The security interest described in
this subsection (b) shall be subordinate in all respects to the security
interest described in subsection (a) above.
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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:______________________________
Its:_________________________
[NAME OF TRUSTEE]
as Trustee
By:______________________________
Its:_________________________
[NAME OF MASTER SERVICER]
as Master Servicer
By:______________________________
Its:_________________________
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State of ________ )
) ss.:
County of ________ )
On this ____ day of ________, 19__, before me, a notary public in and for
said State, appeared ________________, personally known to me on the basis of
satisfactory evidence to be a ________________ 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 such 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]
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State of ________ )
) ss.:
County of ________ )
On this ____ day of ________, 19__, before me, a notary public in and for
said State, appeared ________________, personally known to me on the basis of
satisfactory evidence to be a ________________ of ________________________, one
of the _________________ that executed the within instrument, and also known to
me to be the person who executed it on behalf of such 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]
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State of ________ )
) ss.:
County of ________ )
On this ____ day of ________, 19__, before me, the undersigned, a Notary
Public in and for said State, personally appeared ________________, personally
known to me on the basis of satisfactory evidence to be a ________________ of
the ________________________, one of the ___________ that executed the within
instrument, and also known to me to be the person who executed the within
instrument on behalf of such association, and acknowledged to me that such
association 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]
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EXHIBIT A
[Form of Face of Class A Certificate]
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS SET FORTH
HEREIN; ACCORDINGLY, THE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE INITIAL PRINCIPAL BALANCE SET FORTH ON THIS CERTIFICATE. THIS CERTIFICATE
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED SECURITIES
CORPORATION, THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF
THEIR AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS
CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF
APPLYING FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES
TO THIS INSTRUMENT:
<TABLE>
<S> <C>
a. OID......................................... Undeterminable**
b. Issue Date.................................. ________ __, 19__
c. Rate At Which Interest is
Payable As of the Issue
Date..................................... ____%
d. Yield to Maturity........................... Undeterminable*
e. OID Allocable to Short Period............... ____%
f. Short Period Yield Computation
Method................................... ____
</TABLE>
- --------
** OID and Yield to Maturity cannot be calculated currently because the Class
A Certificates are variable rate debt instruments. A prepaying assumption
under Code Section 1272(a)(6)(B)(iii) will be made using a prepaying
assumption that is a Standard Prepaying Assumption ("SPA") of 200%, which
represents an assumed rate of prepayment each month relative to the
then-outstanding principal balance of the pool of mortgage loans. The 200%
SPA assumes prepayment rates of 0.4% per annum of the then outstanding
principal balance of such mortgage loans in the first month increased by
0.4% per annum each month thereafter until the 30th such month. For the
30th month and for each month thereafter during the lives of the mortgage
loans, 200% of SPA assumes a constant prepaying rate of 12% per annum.
A-1
<PAGE>
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 19__-__, CLASS A
ADJUSTABLE PASS-THROUGH RATE
Evidencing an undivided interest in a trust fund whose sole assets consist of
Subsidiary Regular Interest Certificates representing beneficial ownership of
certain monthly distributions with respect to a Subsidiary Trust Fund consisting
of certain adjustable rate first mortgage loans transferred by
ASSET BACKED SECURITIES CORPORATION
$________ INITIAL PRINCIPAL
BALANCE
Certificate No. ___________________ $________ INITIAL CLASS A
PRINCIPAL BALANCE
CUSIP ________
First Distribution Final Scheduled
Date: __________, ____ Distribution Date:
THIS CERTIFIES THAT ________________ is the registered owner of a
beneficial interest in the Master Trust Fund referred to below consisting of the
Subsidiary Regular Interest Certificates in the Subsidiary Trust Fund, which
consists of certain mortgage loans (the "Mortgage Loans") sold to the Subsidiary
Trust Fund by Asset Backed Securities Corporation (the "Depositor"), and certain
related property transferred to the Subsidiary Trust Fund by the Depositor. The
Trust Funds were created pursuant to the Standard Terms and Provisions of
Pooling and Servicing and Reference Agreement, dated as of ________ 1, 19__ (the
"Agreement"), among the Depositor, [name of Master Servicer], as master servicer
(the "Master Servicer"), and [name of Trustee], 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 on the reverse hereof. The
aggregate principal balance of the Mortgage Loans included in the Subsidiary
Trust Fund as of ________ 1, 19__ (the "Cut-off Date", after application 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.
A-2
<PAGE>
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 by valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed under its corporate seal.
Date: ASSET BACKED SECURITIES
CORPORATION, as Depositor
By: _________________________________
Name:
Title:
[SEAL]
ATTEST
___________________________
Name:
Title:
Certificate of Authentication
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
[NAME OF TRUSTEE]
___________________________
As Trustee
By: ___________________________
Authorized Officer
A-3
<PAGE>
[Form of Reverse of Class A Certificate]
ASSET BACKED SECURITIES CORPORATION
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 19__-__, CLASS A
AJDUSTABLE PASS-THROUGH RATE
This Certificate is one of a duly authorized issue of certificates of Asset
Backed Securities Corporation designated as its Conduit Mortgage Pass-Through
Certificates, Series 19__-__, Adjustable Pass-Through Rate issuable as Class A,
Class B-1 or Class B-2 Certificates (the "Certificates") representing interests
in the Master Trust Fund and as Subsidiary Regular Interest Certificates and a
Subsidiary Residual Interest Certificate representing interests in the
Subsidiary Trust Fund, 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 an interest in the Subsidiary Regular Interests of the Subsidiary
Trust Fund, which Trust Fund consists of (i) the Mortgage Loans and all
distributions thereon payable after the Cut-Off Date, net of any amounts payable
to the Master Servicer and any Servicer in accordance with the provisions of the
Agreement, (ii) the Certificate Account and the Custodial Account and all
amounts deposited therein pursuant to the applicable provisions of the
Agreement, net of amounts payable to the Master Servicer and any Servicer, as
provided in the Agreement, (iii) property acquired by foreclosure, deed in lieu
of foreclosure or otherwise with respect to the Mortgage Loans, (iv) the
interest of the Subsidiary Trust Fund in any insurance policies with respect to
the Mortgage Loans, and (v) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property. The
Subsidiary Regular Interest Certificates represent the right to receive all
principal amounts and interest at the Subsidiary Pass-Through Rate with respect
to distributions on the Mortgage Loans held by the Subsidiary Trust Fund.
The Class A Certificates initially evidence in the aggregate an approximate
__% beneficial interest in the Master Trust Fund. The Class B-1 Certificates and
the Class B-2 Certificate initially evidence in the aggregate the remaining
approximate __% beneficial interest in the Master Trust Fund. The interests of
the Class A Certificateholders in the Master Trust Fund will vary as described
herein and in the Agreement.
The Trustee or Paying Agent shall distribute from the Master Distribution
Account on the __th day of each month, or, if the Business Day immediately
following such __th day (the "Distribution Date"), commencing __________, 19__,
to the Person
A-4
<PAGE>
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 Certificate and the Class A Distribution.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made on the Subsidiary Regular Interests held by the Master
Trust Fund and payments made to Master Trust Certificateholders.
The rights of the Class B-1 Certificateholders and the Class B-2
Certificateholder to receive distributions in respect of the Class B-1
Certificates and the Class B-2 Certificate, respectively, on any Distribution
Date are subordinated to the rights of the Class A Certificateholders to receive
distributions in respect of the Class A Certificates to the extent set forth in
the Agreement. On each Distribution Date, the Class A Certificateholders will be
paid prior to payments to the Class B-1 Certificateholders and the Class B-2
Certificateholder. Class A Certificateholders will receive a disproportionately
higher percentage of principal prepayments on the Subsidiary Regular Interest
Certificates in the early years of the Master Trust Fund, which will have the
effect of reducing the Class A Percentage more quickly than would otherwise
occur. If, on any Distribution Date, the Class A Certificateholders are paid
less than the amount due to them on such date, the interest of the Class A
Certificateholders in the Master Trust Fund will vary so as to preserve the
entitlement of the Class A Certificateholders to unpaid amounts from the
Subsidiary Trust Fund representing principal of the Mortgage Loans and interest
thereon. As of any Distribution Date, the Class A Percentage will be equal to
the percentage obtained by dividing the Class A Certificate Principal Balance by
the Scheduled Principal Balance, but not more than 100%. "Scheduled Principal
Balance" means, generally, as of any Distribution Date, the sum of the Principal
Balances of all outstanding Mortgage Loans in the Subsidiary Trust Fund for
which no Monthly Advance was required to be made pursuant to the Agreement.
Amounts properly distributed to the Class B-1 Certificateholders and the Class
B-2 Certificateholders pursuant to the Agreement will be deemed released from
the security interest established by the Agreement, and the Class B-1
Certificateholders and the Class B-2 Certificateholder will not in any event be
required to refund any such distributed amounts.
If at any time the Class A Percentage increases to 100%, all future losses
or delinquencies on the Mortgage Loans will be borne by the Class A
Certificateholders.
Interest on each Mortgage Loan will be passed through to the Subsidiary
Trust Fund at the applicable Subsidiary Pass-Through Rate, which rate for each
Subsidiary Regular Interest
A-5
<PAGE>
shall be equal to (i) until the Initial Adjustment Date, the applicable Initial
Mortgage Rate specified for such Subsidiary Regular Interest in Schedule 1 to
the Subsidiary Regular Interest Certificate, less the Servicing Fee Rate, and
(ii) thereafter, an amount determined on each Adjustment Date equal to the
lesser of (A) the applicable Index plus the Pass-Through Margin, but not less
than the Periodic Mortgage Rate Cap, if the Mortgage Rate declined as of such
Adjustment Date, or more than the Periodic Mortgage Rate Cap, if the Mortgage
Rate increased as of such Adjustment Date, in each case less the Servicing Fee
Rate, or (B) the Maximum Subsidiary Pass-Through Rate. The Index is generally
equal to ____________ as made available by ________________ as of the date __
days prior to the Adjustment Date. The Master Pass-Through Rate is the weighted
average of the Subsidiary Pass-Through Rates on the Subsidiary Regular Interest
Certificates in the Master Trust Fund.
Distributions on the Certificate will be made by the Trustee or Paying
Agent 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 11.13 of the Agreement, by wire transfer in
immediately available funds. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Trustee 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.
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
evidencing Voting Rights aggregating not less than 66-2/3% of the Voting Rights
of all the Certificates; 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 Mortgage Loans are required to be distributed in
respect of any Certificate, without the consent of the Holder of such
Certificate (ii) adversely affect in any material respect the interest of the
Holders of a Class of Certificates in a manner other than in (i) above without
the consent of the Holders of Certificates evidencing not less than 66-2/3% of
the Voting Rights of such Class, or (iii) reduce the aforesaid percentages of
Voting Rights, the holders of which are required to consent to any such
amendment, without the consent of 100% of the Holders of Certificates of the
Class affected thereby. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the
A-6
<PAGE>
Master Servicer, the Depositor and the Trustee to amend certain terms and
conditions set forth in the Agreement without the consent of the Holders of the
Certificates. The voting rights of a Class A Certificate are obtained by
dividing the outstanding principal balance of such Certificate by the aggregate
principal balances of all of the outstanding Class A and Class B Certificates at
that time.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable on the Certificate
Register upon surrender of this Certificate for registration of transfer at
[address of Trustee], 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 the same interest in the Master Trust Fund, will be
issued to the designated transferee or transferees.
The Class A Certificates are issuable only in registered form in minimum
Initial Principal Balances of $[ ], and integral multiples of $[ ] in excess
thereof, provided that one Class A Certificate may be issued in such Initial
Principal Balance as may be necessary to represent the remainder of the
aggregate Principal Balance of the Mortgage Loans represented by the Class A
Certificates 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 the same Class and of authorized denominations
evidencing a like aggregate Class A Principal Balance and a like interest in the
Master Trust Fund, 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, 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, Certificate Registrar, the Trustee nor any such
agent thereof shall be affected by notice to the contrary.
An election shall be made to treat each of the Master Trust Fund and the
Subsidiary Trust Fund as a "real estate mortgage investment conduit" (a "REMIC")
under the Internal Revenue Code of 1986, as amended (the "Code"). The Class A
and Class B-1 Certificates shall be "regular interests" in the Master Trust Fund
and the Class B-2 Certificate shall be the "residual interest" in the Master
Trust Fund. The Class B-2 Certificateholder shall be the "tax matters partner"
(within the meaning of the Code) with respect to the Master Trust Fund.
A-7
<PAGE>
The obligations created by the Agreement and the Master Trust Fund created
thereby shall terminate upon the earlier of (a) the repurchase by the Class B-2
Certificateholder of all Subsidiary Regular Interest Certificates remaining in
the Master Trust Fund and all property acquired with respect thereto and (b) the
later of (i) the final distribution of amounts with respect to the Subsidiary
Regular Interest Certificates held in the Master Trust Fund and (ii) the
distribution to Master Trust Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement. Any such repurchase described in
clause (a) above by the Class B-2 Certificateholder will be made at a price
equal to the greater of (i) amounts corresponding to the aggregate Principal
Balance of the Subsidiary Regular Interest Certificates as of the date of
repurchase of the Subsidiary Regular Interest Certificates, together with
accrued and unpaid interest thereon at the applicable Master Pass-Through Rate
through the last day of the month of such repurchase, and (ii) the fair market
value thereof as determined by the Master Servicer. The Agreement permits, but
does not require, the Class B-2 Certificateholder to make such purchase on any
Distribution Date, subject to the condition that the aggregate Principal Balance
of the outstanding Subsidiary Regular Interest Certificates at the time of
purchase is less than 10% of the aggregate Principal Balance of the Subsidiary
Regular Interest Certificates on the Cut-off Date. The exercise of such right
will effect early retirement of the Certificates.
Early retirement of the Subsidiary Regular Interest Certificates may be
effected by a repurchase of the Mortgage Loans and related property in the
Subsidiary Trust Fund by the Holder of the Subsidiary Residual Interest
Certificate pursuant to a repurchase right similar to that provided to the Class
B-2 Certificateholder. The exercise of such right would also 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-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 Master Trust Fund evidenced by the
written 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 the same
Class and of a like initial certificate principal balance and undivided interest
in the Master Trust Fund to the above-named assignee and to deliver such
Certificate to the following address ________________________________________
____________________________________________________________________________
Dated: ___________
Social Security or other Tax
Identification No. of ____________________________
Assignee: Signature by or on behalf of
assignor (signature must be
signed as registered)
__________________________________ _____________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the Master
Servicer:
Distribution shall be made by check mailed to , or if the _____________
____________________________________________________________________________
____________________________________________________________________________
principal balance of this Certificate is at least $5,000,000 and the Trustee
shall have received appropriate wiring instructions in accordance with the
Agreement, 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-9
<PAGE>
EXHIBIT B
[Form of Class B-1 Certificate]
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS SET FORTH
HEREIN; ACCORDINGLY, THE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE INITIAL PRINCIPAL BALANCE SET FORTH ON THIS CERTIFICATE. THIS CERTIFICATE
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF FIRST BOSTON MORTGAGE
SECURITIES CORP., THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW, OR OF
ANY OF THEIR AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS
CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY.
THIS CLASS B-1 CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES OF THIS
SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT.
THIS CLASS B-1 CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER
OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR
QUALIFICATION MAY ONLY BE MADE IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH
REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION
11.20 OF THE AGREEMENT.
B-1
<PAGE>
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING FEDERAL
INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS INSTRUMENT:
<TABLE>
<S> <C>
a. OID......................................... Undeterminable*
b. Issue Date.................................. ________ __, 19__
c. Rate At Which Interest is
Payable As of the Issue Date............ ____%
d. Yield to Maturity........................... Undeterminable*
e. OID Allocable to Short Period............... ____%
f. Short Period Yield Computation
Method................................... ____
</TABLE>
- --------
* OID and Yield to Maturity cannot be calculated currently because the Class
A Certificates are variable rate debt instruments. A prepayment assumption
under Code Section 1272(a)(6)(B)(iii) will be made using a Standard
Prepayment Assumption ("SPA") of 200%, which represents an assumed rate of
prepayment each month relative to the then-outstanding principal balance of
the pool of mortgage loans. The 200% SPA assumes prepayment rates of 0.4%
per annum of the then- outstanding principal balance of such mortgage loans
in the first month increased by 0.4% per annum each month thereafter until
the 30th such month. For the 30th month and for each month thereafter
during the lives of the mortgage loans, 200% of SPA assumes a constant
prepayment rate of 12% per annum.
B-2
<PAGE>
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 19__-__, CLASS B-1
ADJUSTABLE PASS-THROUGH RATE
Evidencing an undivided interest in a trust fund whose sole assets consist of
Subsidiary Regular Interest Certificates representing beneficial ownership of
certain monthly distributions with respect to a Subsidiary Trust Fund consisting
of certain adjustable rate first mortgage loans transferred by
ASSET BACKED SECURITIES CORPORATION
$________ INITIAL PRINCIPAL
BALANCE
Certificate No. ______________________ $________ INITIAL CLASS B-1
PRINCIPAL BALANCE
First Distribution Final Scheduled
Date: ________________________________ Distribution Date:
THIS CERTIFIES THAT ________________ is the registered owner of a
beneficial interest in the Master Trust Fund referred to below consisting of the
Subsidiary Regular Interests in the Subsidiary Trust Fund, which consists of
certain mortgage loans (the "Mortgage Loans") sold to the Subsidiary Trust Fund
by First Boston Mortgage Securities Corp. (the "Depositor"), and certain related
property transferred to the Subsidiary Trust Fund by the Depositor. The Trust
Funds were created pursuant to the Standard Terms and Provisions of Pooling and
Servicing and Reference Agreement, dated as of ________ 1, 19__ (the
"Agreement"), among the Depositor, [name of Master Servicer], as master servicer
(the "Master Servicer"), and [name of Trustee], 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. The aggregate principal
balance of the Mortgage Loans included in the Subsidiary Trust Fund as of
________ 1, 19__ (the "Cut-off Date"), after application of payments due on or
before such date, was $________.
This Certificate is one of a duly authorized issue of the Asset Backed
Securities Corporation Conduit Mortgage Pass- Through Certificates, Series
19__-__, Adjustable Pass-Through Rate issuable as Class A, Class B-1 or Class
B-2 Certificates (the "Certificates") representing interests in the Master Trust
Fund created by the Agreement, and 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 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
B-3
<PAGE>
delivered. This Certificate represents an interest in the Subsidiary Regular
Interests of the Subsidiary Trust Fund, which Trust Fund consists of (i) the
Mortgage Loans and all distributions thereon payable after the Cut-off Date, net
of any amounts payable to the Master Servicer and any Servicer in accordance
with the provisions of the Agreement, (ii) the Certificate Account and the
Custodial Account and all amounts deposited therein pursuant to the applicable
provisions of the Agreement, net of amounts payable to the Master Servicer and
any Servicer, as provided in the Agreement, (iii) property acquired by
foreclosure, deed in lieu of foreclosure or otherwise with respect to the
Mortgage Loans, (iv) the interest of the Subsidiary Trust Fund in any insurance
policies with respect to the Mortgage Loans, and (v) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property. The Subsidiary Regular Interest Certificates represent the
right to receive all principal amounts and interest at the Subsidiary
Pass-Through Rate with respect to distributions on the Mortgage Loans held by
the Subsidiary Trust Fund.
The Class A Certificates initially evidence in the aggregate an approximate
__% beneficial interest in the Master Trust Fund. The Class B-1 Certificates
initially evidence in the aggregate approximate __% beneficial interest in the
Master Trust Fund. The Class B-2 Certificate initially evidences the remaining
approximate __% beneficial interest in the Master Trust Fund. The interests of
the Class B-1 Certificateholders in the Master Trust Fund will vary as described
herein and in the Agreement.
The Trustee or Paying Agent shall distribute from the Master Distribution
Account on the __th day of each month, or, if such __th day is not a Business
Day, the Business Day immediately following such __th 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 lesser of the amounts remaining after
distribution to the Class A Certificateholders on such Distribution Date and the
Class B-1 Distribution Amount.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made on the Subsidiary Regular Interests held by the Master
Trust Fund and payments made to Master Trust Certificateholders.
The rights of the Class B-2 Certificateholder to receive distributions in
respect of the Class B-2 Certificate on any Distribution Date are subordinated
to the rights of the Class A Certificateholders and Class B-1 Certificateholders
to receive distributions to the extent set forth in the Agreement. On each
B-4
<PAGE>
Distribution Date, the Class A Certificateholders will be paid prior to the
Class B-1 Certificateholders. Class A Certificateholders will receive a
disproportionately higher percentage of principal prepayments on the Subsidiary
Regular Interest Certificates in the early years of the Master Trust Fund, which
will have the effect of reducing the Class A Percentage more quickly than would
otherwise occur. Amounts properly distributed to the Class B-1
Certificateholders pursuant to the Agreement will be deemed released from the
Master Trust Fund, and the Class B-1 Certificateholders will not in any event be
required to refund any such distributed amounts.
Interest on each Mortgage Loan will be passed through to the Subsidiary
Trust at the applicable Pass-Through Rate, which rate for each Subsidiary
Regular Interest shall be equal to (i) until the Initial Adjustment Date, the
applicable Initial Mortgage Rate specified for such Subsidiary Regular Interest
in Schedule 1 to the Subsidiary Regular Interest Certificate, less the Servicing
Fee Rate, and (ii) thereafter, an amount determined on each Adjustment Date
equal to the lesser of (A) the applicable Index plus the Pass-Through Margin,
but not less than the Periodic Mortgage Rate Cap, if the Mortgage Rate declined
as of such Adjustment Date, or more than the Periodic Mortgage Rate Cap, if the
Mortgage Rate increased as of such Adjustment Date, in each case less the
Servicing Fee Rate, or (B) the Maximum Subsidiary Pass-Through Rate. The Index
is generally equal to the monthly weighted average cost of savings, borrowings
and advances of members of the Federal Home Loan Bank of ________ and as made
available by such Bank as of the date __ days prior to the Adjustment Date. The
Master Pass-Through Rate is the weighted average of the Subsidiary Pass-Through
Rates on the Subsidiary Regular Interest Certificates in the Master Trust Fund.
Distributions on this Certificate will be made by the Trustee or Paying
Agent 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 11.13 of the Agreement, by wire transfer in
immediately available funds. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Trustee 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 of final
distribution.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account for the benefit of the Subsidiary Trust Fund may be made by
the Master Servicer from time to time for purposes other than distributions to
the Certificateholders, such purposes including reimbursement to the Master
Servicer of Monthly Advances and of certain expenses incurred by it.
B-5
<PAGE>
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
evidencing Voting Rights aggregating not less than 66-2/3% of the Voting Rights
of all the Certificates; provided, however, that no such amendment may (i)
reduce in any manner in which payments received on Mortgage Loans are required
to be distributed in respect of any Certificate without the consent of the
Holder of such Certificate, (ii) adversely affect in any material respect the
interest of the Holders of a Class of Certificates in a manner other than in (i)
above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the voting Rights of such Class, or (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange 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.
The Voting Rights of a Class B-1 Certificate are obtained at any time by
dividing the outstanding principal balance of such Certificate by the aggregate
principal balances of all the outstanding Class A and Class B Certificates at
that time.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable on the Certificate
Register upon surrender of this Certificate for registration of transfer at
[address of the Trustee], 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 the same Class and of authorized
denominations, and for the same aggregate interest in the Master Trust Fund will
be issued to the designated transferee or transferees.
The Class B-1 Certificates are issuable only in registered form in minimum
Initial Principal Balances of $[ ], and integral multiples of $[ ] in
excess thereof, provided that one Class B-1 Certificate may be issued in such
Initial Class B-1 Principal Balance as may be necessary to represent the
remainder of the aggregate Principal Balance of the Mortgage Loans represented
by the Class B-1 Certificates on the Cut-off Date. As provided in the Agreement
and subject to certain limitations therein set forth, this Certificate is
exchangeable
B-6
<PAGE>
for one or more new Certificates of the same Class and of authorized
denominations evidencing a like aggregate Class B-1 Principal Balance and a like
aggregate Class B-1 Principal Balance and a like interest in the Master Trust
Fund, 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, 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, the Trustee nor any such
agent thereof shall be affected by notice to the contrary.
An election shall be made to treat each of the Master Trust Fund and the
Subsidiary Trust Fund as a "real estate mortgage investment conduit" (a "REMIC")
under the Internal Revenue Code of 1986, as amended (the "Code"). The Class A
and Class B-1 Certificates shall be "regular interests" in the Master Trust Fund
and the Class B-2 Certificate shall be the "residual interest" in the Master
Trust Fund. The Class B-2 Certificateholder shall be the "tax matters partner"
(within the meaning of the Code) with respect to the Master Trust Fund.
The obligations created by the Agreement and the Master Trust Fund created
thereby shall terminate upon the earlier of (a) the repurchase by the Class B-2
Certificateholder of all Subsidiary Regular Interest Certificates remaining in
the Master Trust Fund and all property acquired with respect thereto and (b) the
later of (i) the final distribution of amounts with respect to the Subsidiary
Regular Interest Certificates held in the Master Trust Fund and (ii) the
distribution to Master Trust Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement. Any such repurchase described in
clause (a) above by the Class B-2 Certificateholder will be made at a price
equal to the greater of (i) amounts corresponding to the aggregate Principal
Balance of the Subsidiary Regular Interest Certificates as of the date of
repurchase of the Subsidiary Regular Interest Certificates, together with
accrued and unpaid interest thereon at the applicable Master Pass-Through Rate
through the last day of the month of such repurchase, and (ii) the fair market
value thereof as determined by the Master Servicer. The Agreement permits, but
does not require, the Class B-2 Certificateholder to make such purchase on any
Distribution Date, subject to the condition that the aggregate Principal Balance
of the outstanding Subsidiary Regular Interest Certificates at the time of
purchase is less than 10% of the aggregate Principal Balance of the Subsidiary
Regular Interest Certificates on the Cut-off Date. The exercise of such right
will effect early retirement of the Certificates.
B-7
<PAGE>
Early retirement of the Subsidiary Regular Interest Certificates may be
effected by a repurchase of the Mortgage Loans and related property in the
Subsidiary Trust Fund by the Holder of the Subsidiary Residual Interest
Certificate pursuant to a repurchase right similar to that provided to the Class
B-2 Certificateholder. The exercise of such right would also 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.
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-8
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed under its corporate seal.
Date: ASSET BACKED SECURITIES
CORPORATION, as Depositor
By: ____________________________
Name:
Title:
[SEAL]
ATTEST
__________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-1 Certificates referred to in the within-mentioned
Agreement
[NAME OF TRUSTEE]
_________________________________
As Trustee
By:______________________________
Authorized Officer
B-9
<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 Master Trust Fund evidenced by the
written 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 the same
Class and of a like initial certificate principal balance and undivided interest
in the Master Trust Fund to the above-named assignee and to deliver such
Certificate to the following address ________________________________________
____________________________________________________________________________
____________________________________________________________________________
Dated: ___________, _____
Social Security or
Other Tax Identification ____________________________________
No. of Assignee: Signature by or on behalf of
assignor (signature must be
signed as registered)
__________________________________ _____________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the Master
Servicer:
Distribution shall be made by check mailed to _______________________
____________________________________________________________________________
____________________________________________________________________________,
or if the principal balance of this Certificate is at least $5,000,000 and the
Trustee shall have received appropriate wiring instructions in accordance with
the Agreement, 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.
B-10
<PAGE>
EXHIBIT C
[Form of Class B-2 Certificates]
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS SET FORTH
HEREIN; ACCORDINGLY, THE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE INITIAL PRINCIPAL BALANCE SET FORTH ON THIS CERTIFICATE. THIS CERTIFICATE
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED SECURITIES
CORPORATION, THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF
THEIR AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS
CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY.
THIS CLASS B-2 CERTIFICATE IS SUBORDINATE TO THE CLASS A AND CLASS B-1
CERTIFICATES OF THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT.
THIS CLASS B-2 CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER
OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR
QUALIFICATION MAY ONLY BE MADE IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH
REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION
11.20 OF THE AGREEMENT.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING FEDERAL
INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS INSTRUMENT:
<TABLE>
<S> <C>
a. OID.......................................... Undeterminable*
b. Issue Date................................... __________,19___
c. Rate At Which Interest is Payable
As Of the Issue Date....................... _____%
d. Yield to Maturity............................ Undeterminable*
e. OID Allocable to Short Period................ _____%
f. Short Period Yield Computation
Method..................................... _____
</TABLE>
- --------
* OID and Yield to Maturity cannot be calculated currently because the Class
B-2 Certificates are variable rate debt instruments. A prepayment
assumption under Code Section 1272(s)(6)(B)(iii) will be made using a
Standard Prepayment Assumption ("SPA") of 200%, which represents an assumed
rate of prepayment each month relative to the then-outstanding principal
balance of the pool of mortgage loans. The 200% SPA assumes prepayment
rates of 0.4% per annum of the then-outstanding principal balance of such
mortgage loans in the first month increased by 0.4% per annum each month
thereafter until the 30th such month. For the 30th month and for each month
thereafter during the lives of the mortgage loans, 200% of SPA assumes a
constant prepayment rate of 12% per annum.
C-1
<PAGE>
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, PLEDGED OR OTHERWISE DISPOSED OF
UNLESS, PRIOR THERETO, THE PROPOSED TRANSFEREE SHALL HAVE CERTIFIED IN WRITING
TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN ENTITY (A "PROHIBITED TRANSFEREE")
OF THE TYPE DESCRIBED IN SECTION 11.20 OF THE AGREEMENT. NOTWITHSTANDING THE
DELIVERY OF ANY SUCH CERTIFICATION, THE REGISTRATION OF TRANSFER OF THIS
CERTIFICATE TO ANY PROHIBITED TRANSFEREE SHALL BE OF NO LEGAL FORCE OR EFFECT
WHATSOEVER AND, PURSUANT TO THE TERMS OF THE AGREEMENT, SUCH PROHIBITED
TRANSFEREE SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS HEREON.
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 19__-__, CLASS B-2
ADJUSTABLE PASS-THROUGH RATE
Evidencing an undivided interest in a trust fund whose sole assets consist of
Subsidiary Regular Interest Certificates representing beneficial ownership of
certain monthly distributions with respect to a Subsidiary Trust Fund consisting
of certain adjustable rate first mortgage loans transferred by
ASSET BACKED SECURITIES CORPORATION
Certificate No. __________ $_________ INITIAL CLASS B-2
PRINCIPAL BALANCE
First Distribution Final Scheduled
Date: ___________________ Distribution Date: ________, ____.
THIS CERTIFIES THAT ___________________ is the registered owner of a
beneficial interest in the Master Trust Fund referred to below consisting of the
Subsidiary Regular Interests in the Subsidiary Trust Fund, which consists of
certain mortgage loans (the "Mortgage Loans") sold to the Subsidiary Trust Fund
by Asset Backed Securities Corporation (the "Depositor"), and certain related
property transferred to the Subsidiary Trust Fund by the Depositor. The Trust
Funds were created pursuant to the Standard Terms and Provisions of Pooling and
Servicing and Reference Agreement, dated as of __________ 1, 19__ (the
"Agreement"), among the Depositor, [name of Master Servicer], as master servicer
(the "Master Servicer"), and [name of Trustee], 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. The aggregate principal
balance of the Mortgage Loans included in the Subsidiary Trust Fund as of
__________ 1, 19__ (the "Cut-off
C-2
<PAGE>
Date"), after application of payments due on or before such date, was
$___________.
This Certificate is one of a duly authorized issue of the Asset Backed
Securities Corporation Conduit Mortgage Pass- Through Certificates, Series
19__-__, Adjustable Pass-Through Rate issuable as Class A, Class B-1 or Class
B-2 Certificates (the "Certificates") representing interests in the Master Trust
Fund created by the Agreement, and 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 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 an
interest in the Subsidiary Regular Interests of the Subsidiary Trust Fund, which
Trust Fund consists of (i) the Mortgage Loans and all distributions thereon
payable after the Cut-off Date, net of any amounts payable to the Master
Servicer and any Servicer in accordance with the provisions of the Agreement,
(ii) the Certificate Account and the Custodial Account and all amounts deposited
therein pursuant to the applicable provisions of the Agreement, net of amounts
payable to the Master Servicer and any Servicer, as provided in the Agreement,
(iii) property acquired for foreclosure, deed in lieu of foreclosure or
otherwise with respect to the Mortgage Loans, (iv) the interest of the
Subsidiary Trust Fund in any insurance policies with respect to the Mortgage
Loans, and (v) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or other liquid property. The Subsidiary Regular
Interest Certificates represent the right to receive all principal amounts and
interest at the Subsidiary Pass-Through Rate with respect to distributions on
the Mortgage Loans held by the Subsidiary Trust Fund.
The Class A Certificates initially evidence in the aggregate an approximate
____% beneficial interest in the Master Trust Fund. The Class B-1 Certificates
initially evidence in the aggregate an approximate ____% beneficial interest in
the Master Trust Fund. The Class B-2 Certificate initially evidences the
remaining approximate ___% beneficial interest in the Master Trust Fund. The
interest of the Class B-2 Certificateholder in the Master Trust Fund will vary
as described herein and in the Agreement.
The Trustee or Paying Agent shall distribute from the Master Distribution
Account on the __th day of each month, or, if such __th day is not a Business
Day, the Business Day immediately following such __th day (the "Distribution
Date"), commencing ____________________, to the Person in whose name this
Certificate is registered at the close of business on the last
C-3
<PAGE>
Business Day of the month immediately preceding the month of such distribution
(the "Record Date"), an amount equal to the balance of the Master Trust Fund
Aggregate Distribution after distributions to the Class A Certificateholders and
the Class B-1 Certificateholders on such Distribution Date.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made on the Subsidiary Regular Interests held by the Master
Trust Fund and payments made to Master Trust Certificateholders.
The rights of the Class B-2 Certificateholder to receive distributions in
respect of the Class B-2 Certificate on any Distribution Date are subordinated
to the rights of the Class A Certificateholders and the Class B-1
Certificateholders to receive distributions to the extent set forth in the
Agreement. Class A Certificateholders will receive a disproportionately higher
percentage of principal prepayments on the Subsidiary Regular Interest
Certificates in the early years of the Master Trust Fund, which will have the
effect of reducing the Class A Percentage more quickly than would otherwise
occur. Amounts properly distributed to the Class B-2 Certificateholder pursuant
to the Agreement will be deemed released from the Master Trust Fund, and the
Class B-2 Certificateholder will not in any event be required to refund any such
distributed amounts.
Interest on each Mortgage Loan will be passed through to the Subsidiary
Trust Fund at the applicable Subsidiary Pass- Through Rate, which rate for each
Subsidiary Regular Interest shall be equal to (i) until the Initial Adjustment
Date, the applicable Initial Mortgage Rate specified for such Subsidiary Regular
Interest in Schedule 1 to the Subsidiary Regular Interest Certificate, less the
Servicing Fee Rate, and (ii) thereafter, an amount determined on each Adjustment
Date equal to the lesser of (A) the applicable Index plus the Pass-Through
Margin, but not less than the Periodic Mortgage Rate Cap, if the Mortgage Rate
declined as of such Adjustment Date, or more than the Periodic Mortgage Rate
Cap, if the Mortgage Rate increased as of such Adjustment Date, in each case
less the Servicing Fee Rate or ___________ Maximum Subsidiary Pass-Through Rate.
The Index is generally equal to the average monthly weighted cost of savings,
borrowings and advances of members of the Federal Home Loan Bank of
________________________ and as made available by such Bank as of the date
______ days prior to the Adjustment Date. The Master Pass-Through Rate is the
weighted average of the Subsidiary Pass- Through Rates on the Subsidiary Regular
Interest Certificates in the Master Trust Fund.
Distributions on this Certificate will be made by the Trustee or Paying
Agent 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
C-4
<PAGE>
forth in Section 11.13 of the Agreement, by wire transfer in immediately
available funds. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee 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 of final distribution.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account for the benefit of the Subsidiary Trust Fund may be made by
the Master Servicer from time to time for purposes other than distributions to
the Certificateholders, such purposes including 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
evidencing Voting Rights aggregating not less than 66-2/3% of the Voting Rights
of all the Certificates; 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 Mortgage Loans are required to be distributed in
respect of 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 of Certificates in a manner other than in (i) above without
the consent of the Holders of Certificates evidencing not less than 66-2/3% of
the voting Rights of such Class, or (iii) reduce the aforesaid percentages of
Voting Rights, the holders of which are required to consent to any such
amendment, without the consent of 100% of the Holders of Certificates of the
Class affected thereby. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor 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. The Voting Rights
of a Class B-2 Certificate are obtained at any time by dividing the outstanding
principal balance of such Certificate by the aggregate principal balances of all
of the outstanding Class A and Class B Certificates at that time.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable on the Certificate
Register upon surrender of this Certificate for registration of transfer at
[address of Trustee],
C-5
<PAGE>
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 the same Class and of authorized denominations, and for the same aggregate
interest in the Master Trust Fund will be issued to the designated transferee or
transferees.
The Class B-2 Certificate is issuable only in registered form in one Class
B-2 Certificate, with the Initial Principal Balance of this Certificate.
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, 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, the Trustee nor any such
agent thereof shall be affected by notice to the contrary.
An election shall be made to treat each of the Master Trust Fund and the
Subsidiary Trust Fund as a "real estate mortgage investment conduit" (a "REMIC")
under the Internal Revenue Code of 1986, as amended (the "Code"). The Class A
and Class B-1 Certificates shall be "regular interests" in the Master Trust Fund
and the Class B-2 Certificate shall be the "residual interest" in the Master
Trust Fund. The Class B-2 Certificateholder shall be the "tax matters partner"
(within the meaning of the Code) with respect to the Master Trust Fund.
The obligations created by the Agreement and the Master Trust Fund created
thereby shall terminate upon the earlier of (a) the repurchase by the Class B-2
Certificateholder of all Subsidiary Regular Interest Certificates remaining in
the Master Trust Fund and all property acquired with respect thereto and (b) the
later of (i) the final distribution of amounts with respect to the Subsidiary
Regular Interest Certificates held in the Master Trust Fund and (ii) the
distribution to Master Trust Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement. Any such repurchase described in
clause (a) above by the Class B-2 Certificateholder will be made at a price
equal to the greater of (i) amounts corresponding to the aggregate Principal
Balance of the Subsidiary Regular Interest Certificates as of the date of
repurchase of the Subsidiary Regular Interest Certificates, together with
accrued and unpaid interest thereon at the applicable Master Pass-Through Rate
through the last day of the month of such repurchase, and (ii) the fair market
value thereof as determined by the Master Servicer. The Agreement permits, but
does not require, the Class B-2 Certificateholder to make such purchase on any
Distribution
C-6
<PAGE>
Date, subject to the condition that the aggregate Principal Balance of the
outstanding Subsidiary Regular Interest Certificates at the time of purchase is
less than 10% of the aggregate Principal Balance of the Subsidiary Regular
Interest Certificates on the Cut-off Date. The exercise of such right will
effect early retirement of the Certificates.
Early retirement of the Subsidiary Regular Interest Certificates may be
effected by a repurchase of the Mortgage Loans and related property in the
Subsidiary Trust Fund by the Holder of the Subsidiary Residual Interest
Certificate pursuant to a repurchase right similar to that provided to the Class
B-2 Certificateholder. The exercise of such right would also 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.
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.
C-7
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed under its corporate seal.
Date: ASSET BACKED SECURITIES
CORPORATION, as Depositor
By:_______________________________
Name:
Title:
[SEAL]
ATTEST
- ----------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-2 Certificates referred to in the within-mentioned
Agreement
[NAME OF TRUSTEE]
- ---------------------------------
As Trustee
By:______________________________
Authorized Officer
C-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 Master Trust Fund evidenced by the
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 the same
Class and of a like Initial Certificate Principal Balance and undivided interest
in the Master Trust Fund to the above-named assignee and to deliver such
Certificate to the following address __________________________________
_______________________________________________________________________
_______________________________________________________________________
Dated: ____________, ______
Social Security or __________________________________
other Tax Identification Signature by or on behalf of
No. of Assignee: assignor (signature must be
signed as registered)
___________________________________ __________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the Master
Servicer:
Distributions shall be made by check mailed to ____________
_____________________________________________________________________________
_____________________________________________________________________, or if the
principal balance of this Certificate is at least $5,000,000 and the Trustee
shall have received appropriate wiring instructions in accordance with the
Agreement, 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.
C-9
<PAGE>
EXHIBIT D
[Form of Subsidiary Residual Interest Certificate]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SUBSIDIARY REGULAR
INTEREST CERTIFICATES AS DESCRIBED IN THE AGREEMENT. THIS CERTIFICATE HAS NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY ONLY BE MADE IN A TRANSACTION
WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 11.20 OF THE AGREEMENT.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
SECURITIES CORPORATION, THE MASTER SERVICER OR THE TRUSTEE OR ANY OF THEIR
AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS CERTIFICATE IS
NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR INSTRUMENTALITY.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, PLEDGED OR OTHERWISE DISPOSED OF
UNLESS, PRIOR THERETO, THE PROPOSED TRANSFEREE SHALL HAVE CERTIFIED IN WRITING
TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN ENTITY (A "PROHIBITED TRANSFEREE")
OF THE TYPE DESCRIBED IN SECTION 11.20 OF THE AGREEMENT. NOTWITHSTANDING THE
DELIVERY OF ANY SUCH CERTIFICATION, THE REGISTRATION OF TRANSFER OF THIS
CERTIFICATE TO ANY PROHIBITED TRANSFEREE SHALL BE OF NO LEGAL FORCE OR EFFECT
WHATSOEVER AND, PURSUANT TO THE TERMS OF THE AGREEMENT, SUCH PROHIBITED
TRANSFEREE SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTION HEREON.
SUBSIDIARY RESIDUAL INTEREST CERTIFICATE
Evidencing an undivided interest in a trust fund consisting of certain
adjustable rate first mortgage loans transferred by
ASSET BACKED SECURITIES CORPORATION
THIS CERTIFICATE HAS NO STATED PRINCIPAL AMOUNT.
Certificate No. ______
First Distribution Date: Final Scheduled
______________, _____ Distribution Date: _______, ____
D-1
<PAGE>
THIS CERTIFIES THAT __________________________ is the registered owner of a
beneficial interest in the Subsidiary Trust Fund referred to below consisting of
certain mortgage loans (the "Mortgage Loans") sold to the Subsidiary Trust Fund
by First Boston Mortgage Securities Corp. (the "Depositor"), and certain related
property transferred to the Subsidiary Trust Fund by the Depositor. The
Subsidiary Trust Fund was created pursuant to the Standard Terms and Provisions
of Pooling and Servicing and Reference Agreement, dated as of _______________ 1,
19__ (the "Agreement"), among the Depositor, [name of Master Servicer], as
master servicer (the "Master Servicer"), and [name of Trustee], 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. The
aggregate principal balance of the Mortgage Loans included in the Subsidiary
Trust Fund as of __________ 1, 19__ (the "Cut-off Date"), after application 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.
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
evidencing Voting Rights aggregating not less than 66-2/3% of the Voting Rights
of all the Certificates; 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 Mortgage Loans are required to be distributed in
respect of 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 of Certificates in a manner other than in (i) above without
the consent of the Holders of Certificates evidencing not less than 66-2/3% of
the Voting Rights of such Class, or (iii) reduce the aforesaid percentages of
Voting Rights, the holders of which are required to consent to any such
amendment, without the consent of 100% of the Holders of Certificates of the
Class affected thereby. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor 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. This Subsidiary
Residual Interest Certificate has no Voting Rights.
D-2
<PAGE>
The obligations created by the Agreement and the Subsidiary Trust Fund
created thereby shall terminate upon the earlier of (a) the repurchase by the
Holder hereof from the Subsidiary Trust Fund of all Mortgage Loans remaining in
the Subsidiary Trust Fund and all property acquired with respect thereto and (b)
the later of (i) the maturity or other liquidation of the last Mortgage Loan
held in the Subsidiary Trust Fund and the disposition of all property acquired
upon foreclosure or deed-in-lieu of foreclosure of any Mortgage Loans and (ii)
the distribution to Subsidiary Trust Certificateholders of all amounts required
to be distributed to them pursuant to the Agreement. Any such repurchase
described in clause (a) above by the Holder hereof will be made at a price equal
to the higher of (i) the aggregate Principal Balance of the Mortgage Loans as of
the date of repurchase, together with accrued and unpaid interest thereon at the
applicable Net Mortgage Rate with respect to each Mortgage Loan through the last
day of the month of such repurchase, or (ii) the fair market value thereof as
determined by the Master Servicer. The Agreement permits, but does not require,
the Holder hereof to make such purchase on any Distribution Date, subject to the
condition that the aggregate Principal Balance of the Mortgage Loans at the time
of purchase is less than 10% of the aggregate Principal Balance of the Mortgage
Loans 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.
The holder of this Certificate shall be entitled to receive only the
distributions set forth in the Agreement, which generally provide for a
distribution of (i) excess interest, if any, on each Mortgage Loan over the
Servicing Fee and amounts distributed on the Subsidiary Regular Interest
Certificates; (ii) certain collections of principal on the Mortgage Loans in
excess of their aggregate Scheduled Principal Balance as of the Cut-off Date;
and (iii) upon termination of the obligations created by the Agreement and the
Subsidiary Trust Fund created thereby, the amounts which remain on deposit in
the Certificate Account, after payment to the holders of the Subsidiary Regular
Interest Certificates of the amounts set forth in Section 13.02 of the
Agreement.
The holder of this Subsidiary Residual Interest Certificate is not required
to refund any amounts which have previously been properly distributed to it.
Distributions on this Certificate will be made by the Trustee by wire
transfer in immediately available funds to the account specified in writing by
the Certificateholder to the Trustee. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
D-3
<PAGE>
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 from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Master Servicer of Monthly Advances and of certain expenses incurred by it.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable on the Certificate
Register upon surrender of this Certificate for registration of transfer at
[address of Trustee].
This Subsidiary Residual Interest Certificate is issuable only as a
registered Certificate without coupons or any Denomination. As provided in the
Agreement and subject to certain limitations therein set forth, this Certificate
is exchangeable for a new Subsidiary Residual Interest Certificate evidencing
the same rights and obligations, as requested by the holder surrendering the
same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. 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 nor the Trustee nor any such agent shall be
affected by notice to the contrary.
An election shall be made to treat the Subsidiary Trust Fund as a "real
estate mortgage investment conduit" (a "REMIC") under the Internal Revenue Code
of 1986, as amended (the "Code"). The Subsidiary Regular Interest Certificates
shall be "regular interests" in the Subsidiary Trust Fund and this Subsidiary
Residual Interest Certificate shall be the "residual interest" in the Subsidiary
Trust Fund. The Subsidiary Residual Interest Certificateholder shall be the "tax
matters partner" (within the meaning of the Code) with respect to the Subsidiary
Trust Fund. By its acceptance of this Subsidiary Residual Interest Certificate,
the Holder of this Certificate shall be deemed to have agreed to such
appointment and shall be deemed to have consented to the appointment of the
Master Servicer as agent to act on behalf of the Subsidiary Trust Fund.
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.
D-4
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed under its corporate seal.
Date: ASSET BACKED SECURITIES
CORPORATION, as Depositor
By:_______________________________
Name:
Title:
[SEAL]
ATTEST
- ---------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Subsidiary Residual Interest Certificate referred to in the
within-mentioned Agreement
[NAME OF TRUSTEE]
- ---------------------------
As Trustee
By:________________________
Authorized Officer
D-5
<PAGE>
EXHIBIT E
[Form of Subsidiary Regular Interest Certificate]
THIS SUBSIDIARY REGULAR INTEREST CERTIFICATE HAS NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY ONLY BE MADE IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 11.20 OF THE AGREEMENT.
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS SET FORTH
HEREIN; ACCORDINGLY, THE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE INITIAL PRINCIPAL BALANCE SET FORTH ON THIS CERTIFICATE. THIS CERTIFICATE
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED SECURITIES
CORPORATION, THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF
THEIR AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS
CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY.
SUBSIDIARY REGULAR INTEREST CERTIFICATE
evidencing an undivided interest in a trust fund consisting of certain
adjustable rate mortgage loans transferred by
ASSET BACKED SECURITIES CORPORATION
APPROXIMATE AGGREGATE ORIGINAL
PRINCIPAL BALANCE OF ALL
SUBSIDIARY REGULAR INTEREST
CERTIFICATES: $_______________
Certificate No. _____________
First Distribution Date: Final Scheduled Distribution
___________, _____ Date: ______________________
THIS CERTIFIES THAT _____________________ is the registered owner of a
beneficial interest in the Subsidiary Trust Fund referred to below consisting of
certain mortgage loans (the "Mortgage Loans") sold to the Subsidiary Trust Fund
by Asset Backed Securities Corporation (the "Depositor"), and certain related
property transferred to the Subsidiary Trust Fund by the Depositor. The
Subsidiary Trust Fund was created pursuant to the Standard Terms and Provisions
of Pooling and Servicing and Reference Agreement, dated as of ______________ 1,
19__ (the "Agreement"), among the Depositor, [name of Master Servicer], as
master servicer (the "Master Servicer"), and [name of Trustee], 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. The
aggregate
E-1
<PAGE>
principal balance of the Mortgage Loans included in the Subsidiary Trust Fund as
of ____________ 1, 19__ (the "Cut-off Date"), after application 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.
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
evidencing Voting Rights aggregating not less than 66-2/3% of the Voting Rights
of all the Certificates; 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 Mortgage Loans are required to be distributed in
respect of 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 of Certificates in a manner other than in (i) above without
the consent of the Holders of Certificates evidencing not less than 66-2/3% of
the Voting Rights of such Class, or (iii) reduce the aforesaid percentages of
Voting Rights, the holders of which are required to consent to any such
amendment, without the consent of 100% of the Holders of Certificates of the
Class affected thereby. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor 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. This Certificate
has no independent Voting Rights so long as the Master Trust Fund is the holder
of all Subsidiary Regular Interest Certificates.
The obligations created by the Agreement and the Subsidiary Trust Fund
created thereby shall terminate upon the earlier of (a) the repurchase by the
Subsidiary Residual Interest Certificateholder from the Subsidiary Trust Fund of
all Mortgage Loans remaining in the Subsidiary Trust Fund and all property
acquired with respect thereto and (b) the later of (i) the maturity or other
liquidation of the last Mortgage Loan subject thereto and the disposition of all
property acquired upon foreclosure or deed-in-lieu of foreclosure of any
Mortgage Loans and (ii) the distribution to Subsidiary Trust Certificateholders
of all amounts required to be distributed to them pursuant to the Agreement. Any
such repurchase described in clause (a) above by the Subsidiary Residual
Interest Certificateholder will be made at a price equal to the higher of (i)
the aggregate Principal
E-2
<PAGE>
Balance of the Mortgage Loans as of the date of repurchase, together with
accrued and unpaid interest thereon at the applicable Net Mortgage Rate with
respect to each Mortgage Loan through the last day of the month of such
repurchase, and (ii) the fair market value thereof as determined by the Master
Servicer. The Agreement permits, but does not require, the Subsidiary Residual
Interest Certificateholder to make such purchase on any Distribution Date,
subject to the condition that the aggregate Principal Balance of the Mortgage
Loans at the time of purchase is less than 10% of the aggregate Principal
Balance of the Mortgage Loans on the Cut-off Date. The exercise of such right
will effect early retirement of this Certificate.
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.
Distributions on this Certificate will be made by wire transfer in
immediately available funds to the account specified in writing by the
Certificateholder to the Trustee. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency designated in such notice.
As provided in the Agreement, deductions and withdrawals from the
Certificate Account may be made from time to time for purposes other than
distributions to Certificateholders, such purposes including reimbursement to
the Master Servicer of Monthly Advances and of certain expenses incurred by it.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable on the Certificate
Register upon surrender of this Certificate for registration of transfer at
[address of Trustee].
The Subsidiary Regular Interest Certificates are issuable only as
registered Certificates without coupons and with no minimum Denomination. Each
Subsidiary Regular Interest Certificate must evidence ownership of at least one
Subsidiary Regular Interest, and ownership of a Subsidiary Regular Interest must
be evidenced by only one Subsidiary Regular Interest Certificate. The
Denomination of a Subsidiary Regular Interest Certificate shall equal the sum of
the outstanding Principal Balances of the Mortgage Loans relating to the
Subsidiary Regular Interests of which such Subsidiary Regular Interest
Certificate evidences ownership.
No service charge will be made to the Certificateholders for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
E-3
<PAGE>
payable in connection therewith. 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
nor the Trustee nor any such agent shall be affected by notice to the contrary.
An election shall be made to treat the Subsidiary Trust Fund as a "real
estate mortgage investment conduit" (a "REMIC") under the Internal Revenue Code
of 1986, as amended (the "Code"). The Subsidiary Regular Interest Certificates
shall be "regular interests" in the Subsidiary Trust Fund and the Subsidiary
Residual Interest Certificate shall be the "residual interest" in the Subsidiary
Trust Fund. The Subsidiary Residual Interest Certificateholder shall be the "tax
matters partner" (within the meaning of the Code) with respect to the Subsidiary
Trust Fund.
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed under its corporate seal.
Date:
ASSET BACKED SECURITIES
CORPORATION, as Depositor
By_________________________________
Name:
Title:
[SEAL]
ATTEST:
- ---------------------------------
Name:
Title:
E-4
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Subsidiary Regular Interest Certificates referred to in the
within-mentioned Agreement.
[NAME OF TRUSTEE]
- ---------------------------------
As Trustee
By:______________________________
Authorized Officer
E-5
<PAGE>
SUBSIDIARY REGULAR INTEREST CERTIFICATE SCHEDULE 1
<TABLE>
<CAPTION>
Maximum
Subsidiary
Regular Initial Initial Initial Maximum Pass-
Interest Principal Mortgage Gross Adjustment Mortgage Through
Number Balance Rate Margin Date Rate Rate
------- -------- ----- ------ ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
E-6
<PAGE>
EXHIBIT F
MORTGAGE LOAN SCHEDULE
F-1
<PAGE>
EXHIBIT G
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[date]
[To be addressed to the
Depositor and the Trustee
for the benefit of the
Subsidiary Trust Certificateholders]
Re: Standard Terms and Provisions of Pooling and
Servicing and Reference Agreement (together,
the "Pooling and Servicing Agreement")
relating to Asset Backed Securities Corpo-
ration Conduit Mortgage Pass-Through Certificates,
Series 19__-__, Adjustable Pass-Through Rate
Class A and Class B
--------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of the above-referenced
Pooling and Servicing Agreement the undersigned, as Trustee, hereby certifies
that, with respect to each Mortgage Loan listed in the Mortgage Loan Schedule,
that subject to the exceptions noted hereto it has (a) received the original
Mortgage Note, endorsed as provided in Section 2.01(i) of the Pooling and
Servicing Agreement, and the original mortgage (or a certified copy of such
Mortgage, as provided in Section 2.01(ii)), and (b) received but has not
reviewed (except as set forth in (a) above) a Mortgage File. Attached hereto is
the Loan Exception Report, which indicates the document exceptions. The Trustee
has made no independent examination of any documents contained in each Mortgage
File beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File or any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
The Trustee acknowledges receipt of notice in its capacity as Trustee for
the benefit of the Subsidiary Trust Certificateholders that (i) the Depositor
has granted a security interest to the Trustee for the benefit of the Master
Trust Certificateholders in all of the Depositors' right, title and interest in
and to the Subsidiary Regular Interest Certificates,
G-1
<PAGE>
and (ii) the Master Servicer has granted a security interest to the Trustee for
the benefit of the Master Trust Certificateholders of the Master Servicer's
right, title and interest in and to the Subsidiary Regular Interest
Certificates.
[NAME OF TRUSTEE],
as Trustee
By:____________________________________
Authorized Representative
G-2
<PAGE>
EXHIBIT H
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
[To be addressed to the
Subsidiary Trust Certificateholders of record]
Re: Standard Terms and Provisions of Pooling and
Servicing and Reference Agreement (together,
the "Pooling and Servicing Agreement")
relating to Asset Backed Securities Corpo-
ration Conduit Mortgage Pass-Through Certificates,
Series 19 - , Adjustable Pass-Through Rate
--------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of the above-referenced
Pooling and Servicing Agreement the undersigned, as Trustee, hereby certifies
that as to each Mortgage Loan listed in the Mortgage Loan Schedule it has
reviewed the Mortgage File and has determined that (i) all documents required to
be delivered to it pursuant to the Pooling and Servicing Agreement are in its
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged, defaced, torn or otherwise physically altered and such
documents relate to such Mortgage Loan, (iii) based on an examination and only
as to the foregoing documents, the information set forth in the Mortgage Loan
Schedule respecting such Mortgage Loans accurately reflects the information
contained in the documents in the Mortgage File, and (iv) each Mortgage Note has
been endorsed and each Assignment of Mortgage has been prepared as provided in
Section 2.01 of the Pooling and Servicing Agreement. The Trustee has made no
independent examination of any documents contained in each Mortgage File beyond
the review specifically required in the above-referenced Pooling and Servicing
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in each Mortgage File or any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
[NAME OF TRUSTEE],
as Trustee
By:___________________________________
Authorized Representative
H-1
<PAGE>
EXHIBIT I
Forms of Endorsement and Assignments
1. Endorsement on Mortgage Notes from Master Servicer to Trustee at the
direction of the Depositor:
"Pay to the order of [Name of Trustee] as Trustee for the benefit of
the Subsidiary Trust Certificateholders of Asset Backed Securities
Corporation Conduit Mortgage Pass-Through Certificates, Series
19__-__, without recourse".
2. Endorsement on Subsidiary Regular Interest Certificates from Depositor to
Trustee:
"Pay to the order of [Name of Trustee] as Trustee for the benefit of
the Master Trust Certificateholders of Asset Backed Securities
Corporation Conduit Mortgage Pass-Through Certificates, Series
19__-__, without recourse".
3. Assignment of Mortgages from the Master Servicer to the Depositor directed
as follows:
Assignor: [Name of Master Servicer]
Assignee: Asset Backed Securities Corporation
4. Assignment of Mortgages from Depositor to Trustee directed as follows:
Assignor: Asset Backed Securities Corporation
Assignee: [Name of Trustee] as Trustee for the benefit of the
Subsidiary Trust Certificateholders of Asset Backed Securities Corporation
Conduit Mortgage Pass-Through Certificates, Series 19__-__.
I-1
<PAGE>
EXHIBIT J
Underwriting Standards
J-1
<PAGE>
[EXHIBIT K
WARRANTY AND SERVICING AGREEMENTS]
K-1
<PAGE>
Exhibit 4.2.6
[VERSION G]
- --------------------------------------------------------------------------------
ASSET BACKED SECURITIES CORPORATION,
Depositor
and
[NAME OF TRUSTEE],
Trustee
___________________________________________
POOLING AND SERVICING AGREEMENT
Dated as of __________, 199_
relating to
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 19__-_
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
Administrative Fee...................................... 1
Administrative Fee Rate................................. 2
Agreement............................................... 2
Authenticating Agent.................................... 2
Available Distribution Amount........................... 2
Bankruptcy Code......................................... 3
Bankruptcy Loss......................................... 3
Bankruptcy Loss Loan.................................... 3
BIF..................................................... 3
Business Day............................................ 3
Certificate............................................. 3
Certificate Account..................................... 3
Certificate Principal Balance........................... 3
Certificate Rate........................................ 3
Certificate Register and Certificate Registrar.......... 4
Certificateholder or Holder............................. 4
Class................................................... 4
Class 1-A Certificate................................... 4
Class 1-B Certificate................................... 4
Class 1-C Certificate................................... 4
Class 1-D Certificate................................... 4
Class 1-E Certificate................................... 4
Class 1-F Certificate................................... 4
Class 1-F Mortgage Loan................................. 4
Class 1-G Certificate................................... 4
Class 1-G Mortgage Loan................................. 4
Class 1-H Certificate................................... 4
Class 1-H Fraction...................................... 5
Class 1-M Certificate................................... 5
Class 1-M Certificate Principal Distribution Amount..... 5
Class 1-M Percentage.................................... 5
Class 1-R Certificate................................... 6
Class 1-RS Certificate.................................. 6
Code.................................................... 6
Collection Period....................................... 6
Corporate Trust Office.................................. 6
Custodial Account....................................... 6
Cut-off Date............................................ 6
Debt Service Reduction.................................. 6
Deficient Valuation..................................... 6
Deleted Mortgage Loan................................... 6
Delivery Date........................................... 6
Depletion Loss.......................................... 7
Depositor............................................... 7
Determination Date...................................... 7
Distribution Date....................................... 7
Due Date................................................ 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Due Period.............................................. 7
Eligible Account........................................ 7
Eligible Investments.................................... 8
Event of Default........................................ 10
Expense Reserve Fund.................................... 10
FDIC.................................................... 10
FHLMC................................................... 10
Final Scheduled Distribution Date....................... 10
Fitch................................................... 10
FNMA.................................................... 10
Fraud Loss.............................................. 11
Fraud Loss Loan......................................... 11
Fraud Loss Waiver....................................... 11
Initial Certificate Principal Balance................... 11
Insurance Proceeds...................................... 11
Interest Distribution Amount............................ 11
Liquidated Loan......................................... 11
Liquidation Expenses.................................... 12
Liquidation Proceeds.................................... 12
Loan-to-Value Ratio..................................... 12
Maturity Date........................................... 12
Monthly Advance......................................... 13
Monthly Payment......................................... 13
Mortgage................................................ 13
Mortgage File........................................... 13
Mortgage Loan........................................... 13
Mortgage Loan Repurchase Price.......................... 13
Mortgage Loan Schedule.................................. 13
Mortgage Note........................................... 14
Mortgage Rate........................................... 15
Mortgaged Property...................................... 15
Mortgagor............................................... 15
Mortgagor Bankruptcy Bond............................... 15
Net Mortgage Rate....................................... 15
Nonrecoverable Advance.................................. 15
Notional Amount......................................... 15
Officers' Certificate................................... 15
Opinion of Counsel...................................... 16
Optional Termination.................................... 16
Optional Termination Date............................... 16
Paying Agent............................................ 16
Percentage Interest..................................... 16
Person.................................................. 16
Pool Insurance Policy................................... 16
Pool Insurer............................................ 16
Prepayment Period....................................... 16
Primary Mortgage Insurance Policy....................... 16
Principal Balance....................................... 17
Principal Prepayment.................................... 17
Priority Certificate Principal Distribution Amount...... 17
Priority Certificates................................... 18
Priority Percentage..................................... 18
Purchase Price.......................................... 18
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Qualified Insurer....................................... 18
Rating Agencies......................................... 19
Realized Loss........................................... 19
Record Date............................................. 19
REMIC................................................... 20
REMIC I................................................. 20
REMIC I Certificates.................................... 20
REMIC II................................................ 20
REMIC II Certificates................................... 20
REMIC Provisions........................................ 20
REO Property............................................ 20
Replacement Mortgage Loan............................... 20
Required Insurance Policy............................... 20
Responsible Officer..................................... 21
S&P..................................................... 21
SAIF.................................................... 21
Seller.................................................. 21
Servicer................................................ 21
Servicer Advance Date................................... 21
Servicer Remittance Date................................ 21
Servicing Fee........................................... 21
Servicing Fee Rate...................................... 21
Servicing Officer....................................... 21
Special Hazard.......................................... 22
Special Hazard Insurance Policy......................... 23
Special Hazard Insurer.................................. 23
Special Hazard Loss..................................... 23
Special Hazard Loss Loan................................ 23
Stripped Interest Rate.................................. 23
Trust Fund.............................................. 23
Trustee................................................. 23
Trustee Fee............................................. 23
Trustee Fee Rate........................................ 24
Uncertificated Accrued Interest......................... 24
Uncertificated Certificate Rate......................... 24
Uncertificated Notional Principal Balance............... 24
Uncertificated REMIC I Regular Interest U............... 25
Uncertificated REMIC I Regular Interest V............... 25
Uncertificated REMIC I Regular Interest W............... 25
Uncertificated REMIC I Regular Interest X............... 25
Uncertificated REMIC I Regular Interest Y............... 26
Uncertificated REMIC I Regular Interest Z............... 26
Uncertificated REMIC I Regular Interest U
Distribution Amount.................................. 26
Uncertificated REMIC I Regular Interest V
Distribution Amount.................................. 26
Uncertificated REMIC I Regular Interest W Distribution
Amount............................................... 26
Uncertificated REMIC I Regular Interest X Distribution
Amount............................................... 26
Uncertificated REMIC I Regular Interest Y Distribution
Amount............................................... 26
Uncertificated REMIC I Regular Interest Z Distribution
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Amount............................................... 26
Uncertificated REMIC I Regular Interest Distribution
Amounts.............................................. 27
Uncertificated REMIC I Regular Interests................ 27
Variable Certificate Rate............................... 27
Variable Rate Certificates.............................. 27
Voting Rights........................................... 27
Warranty and Servicing Agreement........................ 27
</TABLE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
SECTION 2.01 Conveyance of Mortgage Loans.............. 28
SECTION 2.02 Acceptance by Trustee..................... 31
SECTION 2.03 Representations, Warranties and
Covenants of the Depositor as to
the Mortgage Loans...................... 32
SECTION 2.04 Representations and Warranties
of Servicers............................ 35
SECTION 2.05 Substitution.............................. 36
SECTION 2.06 Issuance of Certificates Evidencing
Interest in REMIC I..................... 37
SECTION 2.07 Conveyance of Uncertificated REMIC I
Regular Interests: Acceptance by
the Trustee............................. 38
SECTION 2.08 Issuance of Certificates Evidencing
Interest in REMIC II.................... 38
SECTION 2.09 REMIC Provisions.......................... 38
</TABLE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
<TABLE>
<S> <C>
SECTION 3.01 Servicing Standard........................ 42
SECTION 3.02 Enforcement of the Obligations of
Servicers............................... 42
SECTION 3.03 Rights of the Depositor in Respect of
the Trustee and the Servicers........... 43
SECTION 3.04 Custodial Accounts........................ 43
SECTION 3.05 Collection of Taxes, Assessments and
Similar Items; Escrow Accounts.......... 43
SECTION 3.06 Access to Certain Documentation and
Information Regarding the Mortgage
Loans................................... 44
SECTION 3.07 Maintenance of the Pool Insurance Policy,
Primary Mortgage Insurance Policies,
Collections Thereunder.................. 44
SECTION 3.08 Maintenance of Hazard Insurance,
the Special Hazard Insurance Policy and
Other Insurance.................... 45
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
SECTION 3.09 Trustee to Cooperate; Release of
Mortgage Files.......................... 46
SECTION 3.11 Maintenance of the Mortgagor Bankruptcy
Bond; Collections Thereunder............ 47
</TABLE>
ARTICLE IV
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
<TABLE>
<S> <C>
SECTION 4.01 Accounts.................................. 48
SECTION 4.02 Distributions............................. 50
SECTION 4.03 Subordination; Priority of Distributions.. 53
SECTION 4.05 Monthly Statements to
Certificateholders...................... 55
</TABLE>
ARTICLE V
THE CERTIFICATES
<TABLE>
<S> <C>
SECTION 5.01 The Certificates.......................... 57
SECTION 5.02 Registration of Transfer and
Exchange of Certificates................ 58
SECTION 5.03 Mutilated, Destroyed, Lost or
Stolen Certificates..................... 61
SECTION 5.04 Persons Deemed Owners..................... 62
SECTION 5.05 Access to List of Certificateholders'
Names and Addresses..................... 62
SECTION 5.06 Maintenance of Office or Agency........... 63
</TABLE>
ARTICLE VI
THE DEPOSITOR
<TABLE>
<S> <C>
SECTION 6.01 Liabilities of the Depositor.............. 63
SECTION 6.02 Merger or Consolidation of the
Depositor............................... 63
SECTION 6.03 Limitation on Liability of the
Depositor and Others.................... 63
</TABLE>
ARTICLE VII
DEFAULT
<TABLE>
<S> <C>
SECTION 7.01 Events of Default......................... 64
SECTION 7.02 Trustee to Act; Appointment of
Successor............................... 66
SECTION 7.03 Notification to Certificateholders........ 67
</TABLE>
v
<PAGE>
ARTICLE VIII
CONCERNING THE TRUSTEE
<TABLE>
<S> <C>
SECTION 8.01 Duties of Trustee......................... 68
SECTION 8.02 Certain Matters Affecting the Trustee..... 69
SECTION 8.03 Trustee not Liable for Certificates
or Mortgage Loans.................... 71
SECTION 8.04 Trustee May Own Certificates.............. 71
SECTION 8.05 Trustee's Expenses........................ 72
SECTION 8.06 Eligibility Requirements for Trustee...... 73
SECTION 8.07 Resignation and Removal of Trustee........ 73
SECTION 8.08 Successor Trustee......................... 74
SECTION 8.09 Merger or Consolidation of Trustee........ 74
SECTION 8.10 Appointment of Authentication Agent....... 75
SECTION 8.11 Appointment of Co-Trustee or
Separate Trustee..................... 76
SECTION 8.12 Paying Agent.............................. 78
SECTION 8.13 Certificate Register...................... 78
SECTION 8.14 Monthly Advances.......................... 78
</TABLE>
ARTICLE IX
TERMINATION
<TABLE>
<S> <C>
SECTION 9.01 Termination upon Liquidation or
Repurchase of All Mortgage Loans..... 79
SECTION 9.02 Procedure Upon Optional Termination....... 80
SECTION 9.03 Termination of Remic II................... 81
SECTION 9.04 Additional Termination Requirements....... 81
</TABLE>
ARTICLE X
MISCELLANEOUS PROVISIONS
<TABLE>
<S> <C>
SECTION 10.01 Amendment................................ 82
SECTION 10.02 Recordation of Agreement; Counterparts... 83
SECTION 10.03 Governing Law............................ 84
SECTION 10.04 Intention of Parties..................... 84
SECTION 10.05 Notices.................................. 85
SECTION 10.06 Severability of Provisions............... 85
SECTION 10.07 Limitation on Rights of
Certificateholders................... 86
SECTION 10.08 Certificates Nonassessable and
Fully Paid........................... 87
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Form of Priority and Class 1-M Certificates.. A-1
Exhibit B: Form of Class 1-RS Certificates.............. B-1
Exhibit C: Mortgage Loan Schedule....................... C-1
Exhibit D-1: Form of Initial Certification of Trustee.... D-1-1
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Exhibit D-2: Form of Interim Certification of Trustee.... D-2-1
Exhibit E: Form of Final Certification of Trustee....... E-1
Exhibit F: Form of Request for Release.................. F-1
Exhibit G: Specimen Special Hazard Insurance Policy..... G-1
Exhibit H: Specimen Pool Insurance Policy............... H-1
Exhibit I: Specimen Mortgagor Bankruptcy Bond........... I-1
Exhibit J: Transfer Affidavit and Agreement............. J-1
Exhibit K: Form of Transferor Certificate............... K-1
Exhibit L: Form of Investor Representation Letter....... L-1
Exhibit M: Form of Transferor Representation Letter..... M-1
</TABLE>
vii
<PAGE>
THIS POOLING AND SERVICING AGREEMENT is dated as of __________,
1, 199_ between ASSET BACKED SECURITIES CORPORATION, depositor (the "Depositor")
and ______________, as trustee (the "Trustee"). The Depositor has purchased
from ________________ and ________________ (each referred to in such capacity as
a "Seller" and together as the "Sellers") and is the owner of the Mortgage Loans
(as hereinafter defined) and the other property being conveyed by it to the
Trustee in its capacity as trustee of the Trust Fund (as hereinafter defined),
in accordance with this Agreement, and the Depositor has duly authorized the
execution and delivery of this Agreement to provide for the conveyance to the
Trustee of the Trust Fund. As provided herein, the Depositor will make an
election to treat a segregated pool of assets consisting of Mortgage Loans and
certain other assets as described herein as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes and such segregated pool of
assets will be designated as "REMIC I". Six partial undivided beneficial
ownership interests in each of the Mortgage Loans (the "Uncertificated REMIC I
Regular Interests") will be the "regular interests" in REMIC I and the Class 1-
RS Certificates will be the "residual interest" in REMIC I, for purposes of the
REMIC Provisions (as defined herein) under federal income tax law. A segregated
pool of assets consisting of the Uncertificated REMIC I Regular Interests will
be designated as "REMIC II", and the Depositor will make a separate REMIC
election with respect thereto. The Class 1-A, Class 1-B, Class 1-C, Class 1-D,
Class 1-E, Class 1-F, Class 1-G, Class 1-H and Class 1-M Certificates will be
the "regular interests" in REMIC II, and the Class 1-R Certificates will be the
"residual interest" therein. All covenants and agreements made by the Depositor
herein are for the benefit and security of the Certificateholders. The
Depositor is entering into this Agreement, 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. The principal balance
of the Mortgage Loans as of the Cut-Off Date is $_________.
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the
Depositor and the Trustee agree 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: The fee reserved for the payment of the premiums
------------------
on the Pool Insurance Policy, the Special Hazard Insurance Policy and the
Mortgagor Bankruptcy Bond and the
<PAGE>
Trustee Fee equal to the product of the Administrative Fee Rate and the
aggregate Principal Balance of the Mortgage Loans.
Administrative Fee Rate: With respect to any Mortgage Loan, a rate per
-----------------------
annum equal to ___%.
Agreement: This Pooling and Servicing Agreement and any and all
---------
amendments or supplements hereto.
Authenticating Agent: If applicable, the Authenticating Agent
--------------------
appointed pursuant to Section 8.10 hereof and 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.
Available Distribution Amount: With respect to any Distribution Date,
-----------------------------
the excess of (a) the sum of (x) the aggregate amount of payments and
collections received by the Servicers in respect of each Mortgage Loan during or
prior to the Collection Period immediately preceding such Distribution Date and
not previously remitted, from any source, including amounts received from the
related Mortgagor, Insurance Proceeds, Liquidation Proceeds (net of related
Liquidation Expenses) and condemnation awards, and amounts received in
connection with the substitution of Replacement Mortgage Loans and all amounts
required to be remitted by the Servicers in respect of Prepayment Interest
Shortfall Amounts under the related Warranty and Servicing Agreements but not in
excess of the related Servicing Fee, and (y) the aggregate amount of Monthly
Advances required to be remitted by the Servicers or the Pool Insurer relating
to such Distribution Date; over (b) the sum of (i) the aggregate amount of the
servicing compensation (including Servicing Fees) payable therefrom and included
therein pursuant to the Warranty and Servicing Agreements, (ii) any amount
included therein representing late payments or other recoveries of principal or
interest (including Liquidation Proceeds (net of Liquidation Expenses),
Insurance Proceeds, and condemnation awards) with respect to any Mortgage Loans
in respect of which the Servicer or the Pool Insurer has made a previously
unreimbursed Monthly Advance, (iii) amounts included therein representing
reimbursement of Nonrecoverable Advances and other amounts permitted to be
withdrawn from the Custodial Accounts or the Certificate Account, (iv) all
Monthly Payments or portions thereof received in respect to scheduled principal
and interest on any Mortgage Loan due after such Collection Period and included
therein, (v) all payments due on any Mortgage Loan on or prior to the Cut-Off
Date and included thereon, (vi) the Principal Balance of each Mortgage Loan
multiplied by the Administrative Fee Rate, and (vii) Principal Prepayments and
other unscheduled collections of principal received after the related Prepayment
Period and included therein.
-2-
<PAGE>
Bankruptcy Code: The United States Bankruptcy Code, as amended from
---------------
time to time (11 U.S.C.).
Bankruptcy Loss: A Debt Service Reduction or a Deficient Valuation.
---------------
Bankruptcy Loss Loan: A Mortgage Loan as to which a Bankruptcy Loss
--------------------
has occurred after the Mortgagor Bankruptcy Bond has been exhausted.
BIF: The Bank Insurance Fund.
---
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which banking institutions in New York or the state in which the
Corporate Trust Office is located are authorized or obligated by law or
executive order to be closed.
Certificate: Any Class 1-A, Class 1-B, Class 1-C, Class 1-D, Class 1-
-----------
E, Class 1-F, Class 1-G, Class 1-H, Class 1-M, Class 1-R or Class 1-RS
Certificate executed by the Depositor and authenticated by or on behalf of the
Trustee for the benefit of the Certificateholders in substantially the form or
forms attached as Exhibits hereto.
Certificate Account: The separate account or accounts created and
-------------------
maintained by the Trustee pursuant to Section 4.01, in the name of the Trustee
for the benefit of the Certificateholders for deposit of payments and
collections in respect of the Mortgage Loans pursuant to Section 4.01 hereof,
which account or accounts must be an Eligible Account or Accounts.
Certificate Principal Balance: On any date and with respect to any
-----------------------------
Class of Certificates, the Initial Certificate Principal Balance of such Class
less the sum of (A) all amounts previously distributed to holders of such Class
of Certificates pursuant to Section 4.02(a)(i)(B), 4.02(a)(iii) or 4.02(a)(iv)
as applicable, and (B) all amounts of Realized Losses previously allocated to
such Class of the Certificates pursuant to Section 4.03.
Certificate Rate: With respect to the Class 1-A Certificates, Class
----------------
1-B Certificates, Class 1-E Certificates, Class 1-M Certificates and Class 1-R
Certificates, ___% per annum. With respect to the Class 1-C Certificates, ___%
per annum. With respect to the Class 1-D Certificates, ___% per annum. With
respect to the Class 1-F Certificates and the Class 1-G Certificates, the
applicable Variable Certificate Rate. Interest on the Certificates listed above
will be computed on the basis of a 360-day year composed of twelve 30-day
months.
-3-
<PAGE>
Certificate Register and Certificate Registrar: Respectively, the
----------------------------------------------
register maintained and the registrar appointed pursuant to Section 5.02(a)
hereof.
Certificateholder or Holder: The person in whose name a Certificate is
----------------- ------
registered in the Certificate Register.
Class: With respect to the Certificates, all of the Certificates
-----
designated as a class.
Class 1-A Certificate: A Certificate 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 and designated as Class A-1 Certificate.
Class 1-B Certificate: A Certificate 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 and designated as Class 1-B Certificate.
Class 1-C Certificate: A Certificate 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 and designated as Class 1-C Certificate.
Class 1-D Certificate: A Certificate 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 and designated as Class 1-D Certificate.
Class 1-E Certificate: A Certificate 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 and designated as Class 1-E Certificate.
Class 1-F Certificate: A Certificate 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 and designated as Class 1-F Certificate.
Class 1-F Mortgage Loan: Any of the Mortgage Loans listed on Exhibit C
-----------------------
hereto.
Class 1-G Certificate: A Certificate 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 and designated as Class 1-G Certificate.
Class 1-G Mortgage Loan: Any of the Mortgage Loans listed on Exhibit C
-----------------------
hereto.
Class 1-H Certificate: A Certificate executed by or on behalf of the
---------------------
Depositor and authenticated by or on behalf of the
-4-
<PAGE>
Trustee in substantially the form set forth in Exhibit A hereto and designated
as a Class 1-H Certificate.
Class 1-H Fraction: For each Mortgage Loan, the fraction for each
------------------
Mortgage Loan indicated in Mortgage Loan Schedule.
Class 1-M Certificate: A Certificate 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 and designated as Class 1-M Certificate.
Class 1-M Certificate Principal Distribution Amount: On any
---------------------------------------------------
Distribution Date, the sum of (i) the Class 1-M Percentage multiplied by the
principal due on the related Due Date on such Mortgage Loan, whether or not
received during the related Collection Period, (ii) for each Mortgage Loan which
was prepaid during the related Prepayment Period, the Class 1-M Percentage
multiplied by the amount of the Principal Prepayment including, with respect to
any Mortgage Loan that was the subject of a Debt Service Reduction in any prior
Prepayment Period, the amount of any such Principal Prepayment that exceeds the
Principal Balance of such Mortgage Loan as of the date of the prepayment, (iii)
for each Mortgage Loan which was repurchased by the Servicer, the Seller or the
Depositor during the related Prepayment Period pursuant to Section 2.01, 2.02,
2.03, or 2.04 hereof, Article IX or the related Warranty and Servicing
Agreement, the Class 1-M Percentage multiplied by the principal amount of the
Purchase Price or Mortgage Loan Repurchase Price (net of amounts with respect to
which a distribution of principal has already been made), (iv) for each Mortgage
Loan that became a Liquidated Loan during the related Prepayment Period and with
respect to which a Depletion Loss occurred, an amount equal to the aggregate
amount of Liquidation Proceeds and Insurance Proceeds received with respect to
such Mortgage Loan (net of any withdrawals permitted to be made by the Servicer
from the related Custodial Account with respect to such Mortgage Loan) remaining
after the allocation thereof to the Priority Certificates pursuant to clause
(iv) of the definition of Priority Certificate Principal Distribution Amount
herein, (v) for each Mortgage Loan that became a Liquidated Loan during the
related Prepayment Period not described in clause (iv) above, the Class 1-M
Percentage multiplied by the aggregate amount of Liquidation Proceeds and
Insurance Proceeds received with respect to such Mortgage Loan net of any
withdrawals permitted to be made by the Servicer from the related Custodial
Account with respect to such Mortgage Loan and (vi) for each Mortgage Loan with
respect to which any other unscheduled recovery of principal has been received
during the related Prepayment Period, the Class 1-M Percentage of such
unscheduled recovery.
Class 1-M Percentage: 100% minus the Priority Percentage.
--------------------
-5-
<PAGE>
Class 1-R Certificate: A Certificate 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 and designated as a Class 1-R Certificate.
Class 1-RS Certificate: A Certificate 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 B hereto and designated as a Class 1-RS Certificate.
Code: The Internal Revenue Code of 1936.
----
Collection Period: With respect to any Distribution Date, the period
-----------------
commencing on the end of the preceding Collection Period (in the case of the
first Distribution Date, on the Cut-off Date) and ending on the Business Day
prior to the Determination Date immediately preceding such Distribution Date.
Corporate Trust Office: The designated office of the Trustee in the
----------------------
State of ____________ at which at any particular time its corporate trust
business shall be administered, which office at the date of the execution of
this Agreement is located at __________________________________________.
Custodial Account: The deposit accounts created and maintained by
-----------------
each of the Servicers pursuant to Section 4.4 of the related Warranty and
Servicing Agreements in the name of the Trustee for the benefit of the
Certificateholders, which accounts each must be an Eligible Account. Amounts in
each such Custodial Account will be remitted, net of amounts withdrawn pursuant
to Section 4.5 of the related Warranty and Servicing Agreement, to the
Certificate Account maintained by the Trustee pursuant to Section 4.01.
Cut-off Date: ___________ 1, 199_.
------------
Debt Service Reduction: With respect to any Mortgage Loan, a
----------------------
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation or any reduction that results in a
permanent forgiveness of principal.
Deficient Valuation: With respect to any Mortgage Loan, 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 Bankruptcy Code.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.
Delivery Date: ____________, 199_.
-------------
-6-
<PAGE>
Depletion Loss: A Realized Loss or a shortfall in payment of interest
--------------
or principal with respect to a Mortgage Loan which would have been covered by
the Pool Insurance Policy had its coverage not been exhausted (other than Fraud
Losses that would have been covered under the Fraud Loss Waiver) through the
payment of claims (or the failure of the Pool Insurer to pay valid claims for
any reason including failure to make payments under the Fraud Loss Waiver).
Depositor: Asset Backed Securities Corporation, a Delaware
---------
corporation, or its successor in interest.
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 Distribution Date.
Distribution Date: The 25th day of each calendar month, or if such
-----------------
25th day is not a Business Day, the next succeeding Business Day, commencing
____________ [25], 199_.
Due Date: The first day of the month in which the related Distribution
--------
Date occurs.
Due Period: The period from and including the second day of the
----------
calendar month preceding any Distribution Date to and including the first day of
the calendar month in which such Distribution Date occurs.
Eligible Account: Either (i) an account or accounts maintained with a
----------------
federal or state-chartered depository institution or trust company (which may be
an Affiliate of the Seller or the Master Servicer or which may be the Trustee or
an Affiliate of the Trustee) the long-term 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 long-term unsecured debt
obligations of such holding company) are rated by each Rating Agency either (a)
not lower than the rating on the Certificates or (b) AA or AAA by Standard &
Poor's and Fitch and A-1+ by Standard & Poor's and F-1+ by Fitch (or such other
ratings as will not result in the rating of the Certificates being reduced below
the rating on the Closing Date and as to which the Rating Agencies may otherwise
agree), (ii) an account or accounts the deposits in which are fully insured by
the FDIC, 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 the Rating Agencies) the applicable 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)
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 and (iii) a trust account or accounts maintained
-7-
<PAGE>
with the trust department of a federal or state chartered depository institution
or trust company acting in its fiduciary capacity.
Eligible Investments: 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 the highest long-term rating of S&P and, if
rated by Fitch, by Fitch, or such lower ratings as will
not result in the downgrading or withdrawal of the rating,
if any, then assigned to any Class of Certificates by each
applicable Rating Agency;
(iii) commercial paper which is then rated in the highest
commercial paper rating categories of S&P and, if rated by
Fitch, by Fitch, or such lower category as will not result
in the downgrading or withdrawal of the rating then
assigned to the Certificates by each applicable 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 is 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 S&P and, if rated by Fitch, Fitch, 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
-8-
<PAGE>
then assigned to the Certificates by each applicable
Rating Agency, or, in the case of short-term debt
obligations which have maturities of 30 days or less, a
rating of A-1 by S&P;
(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 (either the BIF
or the SAIF);
(vi) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation which do not
adversely affect the rating on any Class of the
Certificates 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 incorporated under the laws of the
United States or any state thereof which, at the time of
such investment or contractual commitment providing for
such investments are then rated in the highest rating
category of S&P and, if rated by Fitch, Fitch, or in such
lower rating category as will not result in the
downgrading or withdrawal of the rating, if any, then
assigned to any Class of the Certificates by each
applicable Rating Agency;
(ix) such other investments which do not adversely affect the
rating, if any, on any Class of Certificates by each
applicable Rating Agency; and
(x) units of taxable money-market portfolios rated AAA by S&P
and not restricted to obligations issued or guaranteed by
any agency or instrumentality of the United States or
entities whose obligations are backed by the full faith
and credit of the United States and repurchase agreements
collateralized by such obligations.
-9-
<PAGE>
Unless otherwise specified herein, (i) any such Eligible Investments must be
available for withdrawal without penalty and must mature no later than the
Business Day immediately preceding the first succeeding Distribution Date, and
(ii) no such instrument set forth above shall constitute an Eligible Investment
if such instrument evidences either (a) a right to receive only interest
payments with respect to the obligations underlying such instrument, or (b) a
right to receive both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provide for a yield to maturity of greater than 120% of the
yield to maturity at par of such underlying obligations.
Event of Default: As defined in Section 7.01 hereof.
----------------
Expense Reserve Fund: The trust account or accounts created and
--------------------
maintained pursuant to Section 4.01 for payment of certain expenses.
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
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.
Final Scheduled Distribution Date: For each Class of Certificates,
---------------------------------
the date so indicated in the following table:
Class of Final Scheduled
Certificates Distribution Date
------------ -----------------
Class 1-A Certificates
Class 1-B Certificates
Class 1-C Certificates
Class 1-D Certificates
Class 1-E Certificates
Class 1-F Certificates
Class 1-G Certificates
Class 1-H Certificates
Class 1-M Certificates
Class 1-R Certificates
Fitch: Fitch Investors Service, Inc.
-----
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.
-10-
<PAGE>
Fraud Loss: A loss on a Mortgage Loan as to which there was fraud,
----------
dishonesty or misrepresentation in connection with such Mortgage Loan.
Fraud Loss Loan: A Mortgage Loan as to which a Fraud Loss has
---------------
occurred after the Fraud Loss Waiver has been exhausted or has expired.
Fraud Loss Waiver: The letter, dated __________, 199_ from the Pool
-----------------
Insurer to the Trustee, pursuant to which the Pool Insurer has agreed to waive
its right to deny a claim under the Pool Insurance Policy resulting from a Fraud
Loss.
Initial Certificate Principal Balance: With respect to each Class 1-
-------------------------------------
A, Class 1-B, Class 1-C, Class 1-E, Class 1-H, Class 1-M and Class 1-R
Certificate, the amount designated as such on the face thereof, the aggregate of
the Initial Certificate Principal Balances of such Certificates being equal to
the aggregate of the Certificate Principal Balances of the Certificates at the
close of business on the Cut-off Date.
Insurance Proceeds: Amounts paid pursuant to any Primary Mortgage
------------------
Insurance Policy, Pool Insurance Policy or Mortgagor Bankruptcy Bond, if any,
with respect to the Certificates and amounts paid pursuant to the Special Hazard
Insurance Policy with respect to the Certificates, that have not been used to
restore the related property, and amounts paid by any insurer pursuant to any
other insurance policy covering a Mortgage Loan.
Interest Distribution Amount: With respect to any Distribution Date
----------------------------
and any Class of the Certificates except for the Variable Rate Certificates and
the Class 1-H Certificates, an amount equal to 30 days' interest accrued at the
applicable Certificate Rate on the Certificate Principal Balance or Notional
Amount of such Class as of the day immediately preceding the related
Distribution Date. With respect to any Distribution Date and any Class of the
Variable Rate Certificates, an amount equal to 30 days' interest accrued at the
applicable Variable Certificate Rate on the applicable Notional Amount of such
Class as of the day immediately preceding the related Distribution Date.
Liquidated Loan: With respect to any Distribution Date, a Mortgage
---------------
Loan which, as of the close of business on the Business Day next preceding the
related Determination Date, (a) 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
-11-
<PAGE>
received, or (b) has been the subject of a Debt Service Reduction or a Deficient
Valuation; provided that any REO Property shall not be treated as a Liquidated
Loan until such property has been finally liquidated.
Liquidation Expenses: Expense incurred by the related Servicer in
--------------------
connection with the liquidation of any defaulted Mortgage Loan and not recovered
by such Servicer under a Primary Mortgage Insurance policy for reasons other
than such Servicer's failure to comply with Section 4.8 of the related Warranty
and Servicing Agreement, such expenses including, without limitation, legal fees
and expenses, any unreimbursed amount expended by such Servicer pursuant to
Section 4.10 of the related Warranty and Servicing Agreement respecting 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 for reasons other than
such Servicer's failure to comply with Section 4.10 of the related Warranty and
Servicing Agreement.
Liquidation Proceeds: Amounts other than Insurance Proceeds 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 Mortgaged Property based upon the appraisal made
for the originator at the time of origination of the related Mortgage Loan, or
the sales price of the Mortgaged Property at the time of such origination,
whichever is less, or with respect to any Mortgage Loan that represents a
refinancing, the appraised value of the Mortgaged Property based upon the
appraisal made at the time of such refinancing or the acquisition cost of the
property plus documented improvements.
Maturity Date: The latest possible maturity date, solely for purposes
-------------
of Section 1.860G-1(a)(4)(iii) of the proposed Treasury regulations, by which
the Certificate Principal Balance of each Class of Certificates representing a
regular interest in REMIC II (other than the Class 1-F, Class 1-G and Class 1-H
Certificates), and the Uncertificated Principal Balance of each Uncertificated
REMIC I Regular Interest, would be reduced to zero as determined under a
hypothetical scenario which assumes, among other things, that (i) scheduled
interest and principal payments on the Mortgage Loans are received in a timely
manner, with no delinquencies or losses, (ii) there are no principal
prepayments, (iii) each Mortgage Loan has a principal amortization schedule
equivalent to that which would result if the interest rate thereon were equal to
___% per annum,
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<PAGE>
(iv) neither the Depositor nor any Servicer will repurchase any
Mortgage Loan and the Depositor will not exercise its option to purchase the
Mortgage Loans and thereby cause a termination of the Trust Fund, and (v) the
Mortgage Loans have an original term to maturity and a remaining term to
maturity of 360 months. The Maturity Date for the Class 1-F, Class 1-G and Class
1-H Certificates is the latest Maturity Date of any other Class of Certificates.
Monthly Advance: The aggregate of the advances made by or on behalf
---------------
of the Servicers with respect to any Distribution Date pursuant to the related
Warranty and Servicing Agreement or Section 8.14, the amount of any such
advances being equal to the aggregate of payments of principal and interest on
the Mortgage Loans that were due on the Due Date and delinquent as of the close
of business on the related Determination Date, after adjustment of any
delinquent interest payment to interest at a rate equal to the sum of the Net
Mortgage Rate and the Administrative Fee Rate on the Principal Balance of the
Mortgage Loans, less the aggregate amount of any such delinquent payments that
the Servicer has determined would constitute a Nonrecoverable Advance if made.
Monthly Payment: The scheduled monthly payment of principal and
---------------
interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first lien on an estate in fee simple in real property securing a Mortgage 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: Each of the mortgage loans transferred and assigned to
-------------
the Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund, evidenced by a Mortgage Note and secured by a Mortgage,
the Mortgage Loans so held being identified in the Mortgage Loan Schedule.
Mortgage Loan Repurchase Price: The price, calculated as set forth in
------------------------------
Section 9.01, to be paid in connection with the repurchase of the Mortgage Loans
pursuant to an Optional Termination of the Trust Fund.
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 Depositor to
reflect the addition of Replacement Mortgage Loans and the deletion of Deleted
Mortgage Loans pursuant to the provisions of this Agreement and the related
Warranty and Servicing Agreements),
-13-
<PAGE>
attached hereto as Exhibit C, setting forth the following information with
respect to each Mortgage Loan:
(i) the loan number;
(ii) the street address of the Mortgaged Property, including
the zip code, and name of the Mortgagor;
(iii) the Mortgage Rate;
(iv) the original term to maturity;
(v) the original principal balance;
(vi) the Principal Balance as of the Cut-off Date;
(vii) the first Due Date;
(viii) the current monthly payment in effect as of the Cut-off
Date;
(ix) the Loan-to-Value Ratio at origination;
(x) the Servicing Fee Rate;
(xi) the Class 1-H Fraction and whether such Mortgage Loan is
a Class 1-F or Class 1-G Mortgage Loan;
(xii) whether the residential dwelling is either (a) a detached
single family dwelling or a de minimis planned unit
development, (b) a condominium unit or a dwelling in a
planned unit development, or (c) a two- to four-unit
residential property; and
(xiii) the purpose for which the financing was made.
Such schedule shall also set forth the total of the amounts described under (vi)
above for all of the Mortgage Loans. Such schedule may be in the form of more
than one list collectively setting forth all of the information required and
shall be in a computer-readable format acceptable to the Trustee.
Mortgage Note: The original 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 is set forth in the related Mortgage Note.
-14-
<PAGE>
Mortgaged Property: The underlying property securing a Mortgage Loan.
------------------
Mortgagor: The obligor on a Mortgage Note.
---------
Mortgagor Bankruptcy Bond: The bankruptcy bond obtained pursuant to
-------------------------
Section 3.11, a specimen of which is attached as Exhibit I hereto, or any
replacement policy obtained pursuant to Section 3.11.
Net Mortgage Rate: As to each Mortgage Loan, as of any date of
-----------------
determination, the rate per annum equal to the excess of the Mortgage Rate in
effect over the sum of Servicing Fee Rate and the Administrative Fee Rate.
Nonrecoverable Advance: Any portion of the Monthly Advance previously
----------------------
made or proposed to be made by any Servicer or the Pool Insurer or other advance
previously made by any Servicer or the Pool Insurer under the related Warranty
and Servicing Agreement or the Pool Insurance Policy that, in the good faith
judgment of such Servicer, will not or, in the case of a current delinquency,
would not be, ultimately recoverable by such Servicer or the Pool Insurer from
Insurance Proceeds, Liquidation Proceeds or otherwise.
Notional Amount: As to the Class 1-D Certificates for any
---------------
Distribution Date, the Certificate Principal Balance of the Class 1-C
Certificates as of the day immediately preceding such Distribution Date. As to
the Class 1-F and Class 1-G Certificates for any Distribution Date an amount
equal to the aggregate outstanding Principal Balance of the Class 1-F and Class
1-G Mortgage Loans, respectively, as of the first day of the month immediately
preceding the month in which the related Distribution Date occurs, reduced by
the principal portion of advances previously made by the applicable Servicer
with respect to each Class 1-F or Class 1-G Mortgage Loan, as applicable, and by
the Principal Balance of any Class 1-F or Class 1-G Mortgage Loan, as
applicable, with respect to which title to the related Mortgaged Property has
been acquired by or on behalf of the Trustee for the benefit of the
Certificateholders.
Officers' Certificate: A certificate signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President, a vice president or a
member of the Executive Group, and by the Treasurer, the Secretary, or one of
the assistant treasurers or assistant secretaries of the Depositor, a Seller, a
Servicer or a Trustee, as the case may be, and delivered to the Depositor, the
Seller, a Servicer or the Trustee, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or a Servicer, acceptable to the Trustee. With respect to
Sections 5.02, 9.04 and 10.01 and any
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<PAGE>
opinion dealing with the qualification of REMIC I or REMIC II as a REMIC or
compliance with the REMIC Provisions, such counsel must (i) in fact be
independent of the Depositor and each Servicer, (ii) not have any direct
financial interest in the Depositor or any Servicer or in any affiliate of
either, and (iii) not be connected with the Depositor or any Servicer as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
Optional Termination: The purchase of the Mortgage Loans pursuant to
--------------------
Section 9.01.
Optional Termination Date: The date fixed by the Depositor for the
-------------------------
purchase of the Mortgage Loans pursuant to Section 9.01.
Paying Agent: The Paying Agent, if any, appointed pursuant to Section
------------
8.12, authorized to make distributions on behalf of the Trustee.
Percentage Interest: The percentage interest (which may be expressed
-------------------
as a fraction) evidenced by any Class in certain monthly distributions payable
hereunder to Certificateholders, as specified in Section 4.02.
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: The policy of mortgage pool guaranty insurance
---------------------
obtained pursuant to Section 3.07, a specimen of which is attached as Exhibit H
hereto, including the Fraud Loss Waiver and cash advance endorsement thereto,
naming the Trustee as loss payee, or any replacement insurance policy obtained
pursuant to Section 3.07 hereof.
Pool Insurer: _________________, a __________ corporation, or any
------------
successor thereto or the named insurer in any replacement policy obtained
pursuant to Section 3.07 hereof.
Prepayment Period: With respect to any Distribution Date, the month
-----------------
prior to the month in which such Distribution Date occurs.
Primary Mortgage Insurance Policy: Each primary policy of mortgage
---------------------------------
guaranty insurance with respect to the Mortgage Loans, or any replacement policy
therefor.
Principal Balance: With respect to any Mortgage Loan, as of the date
-----------------
of any determination, the principal balance of such Mortgage Loan remaining to
be paid by the Mortgagor as of
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<PAGE>
the Cut-off Date after deduction of all payments due on or before the Cut-off
Date, reduced (but not below zero) by the sums of:
(i) all amounts previously received or collected by the
related Servicer in respect of principal on such Mortgage
Loan subsequent to the Cut-off Date, other than amounts
representing payments due on such Mortgage Loan on or
prior to the Cut-off Date;
(ii) all Liquidation Proceeds (net of Liquidation Expenses),
Insurance Proceeds received in connection with a
Bankruptcy Loss and allocated to principal; and
(iii) all amounts allocable to the principal of such Mortgage
Loan previously paid by the related Servicer or the Pool
Insurer as part of a Monthly Advance.
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 amount as to interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.
Priority Certificate Principal Distribution Amount: On any
--------------------------------------------------
Distribution Date, the sum of (i) for each Mortgage Loan, the Priority
Percentage multiplied by the payment of principal due on the related Due Date on
such Mortgage Loan, whether or not received during the related Collection
Period, (ii) for each Mortgage Loan which was prepaid during the related
Prepayment Period, the Priority Percentage multiplied by the amount of the
Principal Prepayment including with respect to any Mortgage Loan that was the
subject of a Debt Service Reduction in any prior Prepayment Period, the amount
of any such Principal Prepayment that exceeds the Principal Balance of such
Mortgage Loan as of the date of the prepayment, (iii) for each Mortgage Loan
which was repurchased by the Servicer or the Depositor during the related
Prepayment Period pursuant to Section 2.01, 2.02, 2.03, or 2.04 hereof, Article
IX hereof or the related Warranty and Servicing Agreement, the Priority
Percentage multiplied by the principal amount of the Purchase Price or Mortgage
Loan Repurchase Price (net of amounts with respect to which a distribution of
principal has already been made), (iv) for each Mortgage Loan that became a
Liquidated Loan during the related Prepayment Period and with respect to which a
Depletion Loss occurred, the Priority Percentage multiplied by the Principal
Balance of such Mortgage Loan as of the date it became a Liquidated Loan, (v)
for each Mortgage Loan that became a Liquidated Loan during the related
Prepayment Period not
-17-
<PAGE>
described in clause (iv) above, the Priority Percentage multiplied by the
aggregate amount of Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan net of any withdrawals permitted to be made by the
Servicer from the related Custodial Account with respect to such Mortgage Loan
and (vi) for each Mortgage Loan with respect to which any other unscheduled
recovery of principal has been received during the related Prepayment Period,
the Priority Percentage of such unscheduled recovery.
Priority Certificates: Class 1-A, Class 1-B, Class 1-C, Class 1-D,
---------------------
Class 1-E, Class 1-F, Class 1-G, Class 1-H and Class 1-R Certificates.
Priority Percentage: The aggregate Certificate Principal Balance of
-------------------
the Priority Certificates divided by the aggregate Certificate Principal Balance
of all the Certificates.
Purchase Price: With respect to any Mortgage Loan required to be
--------------
purchased by the Servicer, Seller or Depositor pursuant to Section 2.01, 2.02,
2.03, or 2.04 hereof, or by a Servicer pursuant to the related Warranty and
Servicing Agreement, an amount equal to (a) the sum of (i) 100% of the Principal
Balance of the Mortgage Loan on the date of such purchase, (ii) accrued and
unpaid interest on the Mortgage Loan at a rate equal to the Mortgage Rate minus
the related Servicing Fee Rate to the first day of the month following such
purchase, net of the interest portion of any Monthly Advances made by the
Servicer with respect to such Mortgage Loan and (iii) the amount of any
unreimbursed Monthly Advances made by the Servicer with respect to such Mortgage
Loan, or (b) if, in the Opinion of Counsel, in form and substance satisfactory
to the Trustee, the repurchase of such Mortgage Loan or property acquired in
respect thereto at the price calculated as set forth in (a) would result in net
income to the 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 Trust Fund to tax, then, the highest amount determined in
accordance with such Opinion of Counsel as will result in no such net income.
With respect to any Mortgage Loan required or allowed to be purchased, the
Servicer or Depositor, as applicable, shall deliver to the Trustee an Officers'
Certificate as to the calculation of the Purchase Price. Any Opinion of Counsel
delivered in accordance with (b) above shall be the expense of the person that
is required to repurchase the related Mortgage Loan pursuant to this Agreement.
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
-18-
<PAGE>
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 will not adversely affect the rating on the Certificates.
Rating Agencies: Any nationally recognized statistical rating
---------------
organization, or any successor thereto, that rated the Certificates at the
request of the Depositor at the time of their initial issuance. If such
organization or successor is no longer in existence, "Rating Agencies" 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.
Realized Loss: An amount determined by the Servicer and evidenced by
-------------
an Officers' Certificate delivered to the Trustee, in connection with any
Liquidated Loan equal to (a) with respect to any Liquidated Loan (other than a
Liquidated Loan with respect to which a Bankruptcy Loss has occurred), the
excess of the Principal Balance of such Liquidated Loan plus interest thereon at
a rate equal to the sum of the applicable Net Mortgage Rate and the
Administrative Fee Rate from the Due Date as to which interest was last paid up
to the Due Date next succeeding such liquidation, over proceeds, if any,
received in connection with such liquidation, after application of all
withdrawals permitted to be made by the Servicer from the related Custodial
Account with respect to such Mortgage Loan, (b) with respect to any Mortgage
Loan which has become the subject of a Deficient Valuation, the excess of the
outstanding principal balance of the Mortgage Loan over the principal amount as
reduced in connection with the proceeding resulting in the Deficient Valuation,
(c) with respect to any Mortgage Loan which has become the subject of a Debt
Service Reduction, the present value of all monthly Debt Service Reductions on
such Mortgage Loan, assuming that the Mortgagor pays each Monthly Payment on the
applicable Due Date and that no Principal Prepayments are received with respect
to such Mortgage Loan, discounted monthly at the applicable Mortgage Rate or (d)
with respect to any Mortgage Loan which has been purchased by the Depositor or a
Servicer pursuant to Section 2.01, 2.02, 2.03 or 2.04 hereof or the related
Warranty and Servicing Agreement, the excess, if any, of the amount calculated
as set forth in (a) of the definition of Purchase Price over the amount
calculated as set forth in (b) of the definition of Purchase Price.
Record Date: With respect to any Distribution Date, the close of
-----------
business on the last Business Day of the month preceding the month in which the
applicable Distribution Date occurs.
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<PAGE>
REMIC: A real estate mortgage investment conduit, as defined in the
-----
Code.
REMIC I: A segregated pool of assets, with respect to which a REMIC
-------
election is to be made, consisting of (i) the Mortgage Loans and all
distributions thereon payable after the Cut-off Date, (ii) the Certificate
Account and all amounts deposited therein pursuant to the applicable provisions
of this Agreement, (iii) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed in lieu of foreclosure or otherwise, (iv) the
Primary Mortgage Insurance Policies, the Special Hazard Insurance Policy, the
Pool Insurance Policy, the Mortgagor Bankruptcy Bond and any other insurance
policies with respect to the Mortgage Loans, (v) the rights of the Depositor
assigned to the Trustee pursuant to Section 2.03 hereof and (vi) all proceeds of
the conversion, voluntary or involuntary, of any of the foregoing into cash or
other liquid property.
REMIC I Certificates: The Class 1-RS Certificates.
--------------------
REMIC II: The segregated pool of assets consisting of the
--------
Uncertificated REMIC I Regular Interests, conveyed in trust to the Trustee for
the benefit of the holders of the REMIC II Certificates pursuant to this
Agreement, with respect to which a separate REMIC election is to be made.
REMIC II Certificates: Any of the Class 1-A, Class 1-B, Class 1-C,
---------------------
Class 1-D, Class 1-E, Class 1-F, Class 1-G, Class 1-H, Class 1-M and Class 1-R
Certificates.
REMIC Provisions: Provisions of the federal income tax law relating
----------------
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code and related provisions,
and regulations promulgated thereunder, as the foregoing may be in effect from
time to time.
REO Property: Any Mortgaged Property acquired in foreclosure or by
------------
deed-in-lieu of foreclosure.
Replacement Mortgage Loan: A "Qualified Substitute Mortgage Loan" as
-------------------------
defined in each Warranty and Servicing Agreement.
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, including each Primary Mortgage Insurance Policy, each standard
hazard and flood insurance policy, the Special Hazard Insurance Policy, the Pool
Insurance Policy and the Bankruptcy Bond.
-20-
<PAGE>
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.
S&P: Standard & Poor's Corporation.
---
SAIF: The Savings Association Insurance Fund.
----
Seller: Each of _____________ and ______________, as to a Mortgage
------
Loan sold by such party.
Servicer: Each of _____________ and ______________, with respect to
--------
any Mortgage Loan under the related Warranty and Servicing Agreement applicable
to such Mortgage Loan and any successors and assigns under such Warranty and
Servicing Agreement.
Servicer Advance Date: The date on which a Servicer is required to
---------------------
make a Monthly Advance pursuant to the related Warranty and Servicing Agreement.
Servicer Remittance Date: The date on or before which a Servicer is
------------------------
required to remit amounts collected on Mortgage Loans to the Trustee, as set
forth in the related Warranty and Servicing Agreement.
Servicing Fee: With respect to each Mortgage Loan, the Servicing Fee
-------------
set forth in the related Warranty and Servicing Agreement.
Servicing Fee Rate: With respect to each Mortgage Loan, the fixed
------------------
percentage amount set forth in the Mortgage Loan Schedule.
Servicing Officer: Any officer of a Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee on the Delivery Date by the related Servicer pursuant to this
Agreement, as such list may from time to time be amended.
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<PAGE>
Special Hazard: Any risk of direct physical loss which may be
--------------
suffered by a Mortgaged Property, exclusive of (i) any loss covered by a hazard
policy or a flood insurance policy, or blanket policy in respect thereof
(without regard to any portion of the loss not covered by reason of any
deductible thereunder), maintained in respect of such Mortgaged Property
pursuant to Section 3.03 and (ii) any loss caused by or resulting from:
(a) wear and tear, deterioration, rust or corrosion, mold, wet or dry
rot; inherent vice or latent defect; animals, birds, vermin, or
insects;
(b) smog, smoke, vapor, liquid or dust discharge from agricultural or
industrial operations; pollution; contamination;
(c) settling, subsidence, cracking, shrinkage, bulging or expansion
of pavements, foundations, walls, floors, roofs or ceilings;
(d) nuclear or chemical reaction or nuclear radiation or radioactive
or chemical contamination, all whether controlled or
uncontrolled, and whether such loss be direct or indirect,
proximate or remote or be in whole or in part caused by,
contributed to or aggravated by a peril insured against in this
policy;
(e) hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual,
impending or expected attack: (i) by any government or sovereign
power, de jure or de facto, or by any authority maintaining or
using military, naval or air forces; (ii) by military, naval or
air forces; or (iii) by an agent of any such government, power,
authority or forces;
(f) any weapon of war employing atomic fission or radioactive force
whether in time of peace or war;
(g) insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or
defending against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation by order of
any government or public authority, or risks of contraband or
illegal transportation or trade; or
(h) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or
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<PAGE>
a part thereof ensues and then only for the ensuing loss.
Special Hazard Insurance Policy: With respect to the Mortgage Loans,
-------------------------------
credit support which is provided by a Special Hazard Insurance Policy, a
specimen of which is attached as Exhibit G hereto, or any replacement policy
obtained pursuant to Section 4.10 of the related Warranty and Servicing
Agreement.
Special Hazard Insurer: ________________________, a ___________
----------------------
property and casualty insurance company, or any successor thereto, or the named
insurer in any replacement policy obtained pursuant to the related Warranty and
Servicing Agreement.
Special Hazard Loss: With respect to any Mortgage Loan which has been
-------------------
finally liquidated in connection with a Special Hazard, and for which a claim
could not be made under the Special Hazard Insurance Policy because the amount
available under such Policy has been reduced to zero or for which such a claim
was made but the full amount of such claim was not paid, an amount (not less
than zero or more than the amount described in (i) as follows) equal to (i) the
Principal Balance of the Mortgage Loan as of the date of such liquidation, plus
(ii) interest thereon at a rate equal to the sum of the applicable Net Mortgage
Rate and the Administrative Fee Rate from the Due Date as to which interest was
last paid up to the Due Date next succeeding such liquidation, minus (iii) the
proceeds, if any, received in connection with such liquidation, after
application of all withdrawals permitted to be made by the Servicer from the
related Custodial Account with respect to such Mortgage Loan.
Special Hazard Loss Loan: A Mortgage Loan as to which a Special
------------------------
Hazard Loss has occurred.
Stripped Interest Rate: As to each Mortgage Loan and with respect to
----------------------
the Class 1-F Certificates, the rate per annum designated as "F-Strip" in
Exhibit C hereto. As to each Mortgage Loan and with respect to the Class 1-G
Certificates, the rate per annum designated as "G-Strip" in Exhibit C hereto.
Trust Fund: REMIC I and REMIC II.
----------
Trustee: ___________________, a ________________, not in its
-------
individual capacity, but solely in its capacity as trustee for the benefit of
the Certificateholders under this Agreement, and any successor thereto, as
provided herein.
Trustee Fee: The fee payable to the Trustee for its services as
-----------
Trustee hereunder, in an amount equal to the Trustee Fee Rate multiplied by the
Principal Balance of the Mortgage Loans.
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<PAGE>
Trustee Fee Rate: ___% per annum.
----------------
Uncertificated Accrued Interest: With respect to each Distribution
-------------------------------
Date, (i) as to the Uncertificated REMIC I Regular Interest U, an amount equal
to the aggregate amount of the Interest Distribution Amount that would result
under the terms of the definition thereof on the Class 1-R Certificates, if the
Certificate Rate on such Class were equal to the Uncertificated Certificate
Rate, (ii) as to the Uncertificated REMIC I Regular Interest V, an amount equal
to the aggregate amount of the Interest Distribution Amount that would result
under the terms of the definition thereof on the Class 1-A, 1-B, 1-E and 1-M
Certificates, if the Certificate Rate on such Classes were equal to the
Uncertificated Certificate Rate, (iii) as to the Uncertificated REMIC I Regular
Interest W, an amount equal to the aggregate amount of the Interest Distribution
Amount that would result under the terms of the definition thereof on the Class
1-C Certificates if the Certificate Rate on such Class were equal to the
Uncertificated Certificate Rate, (iv) as to the Uncertificated REMIC I Regular
Interest X, an amount equal to the aggregate amount of the Interest Distribution
Amount that would result under the terms of the definition thereof on the Class
1-F Certificates if the Certificate Rate on such Class were equal to the
Uncertificated Certificate Rate and (v) as to the Uncertificated REMIC I Regular
Interest Y, an amount equal to the aggregate amount of the Interest Distribution
Amount that would result under the terms of the definition thereof on the Class
1-G Certificates if the Certificate Rate on such Class were equal to the
Uncertificated Certificate Rate.
Uncertificated Certificate Rate: With respect to the Uncertificated
-------------------------------
REMIC I Regular Interests U, V, and W, ___%. With respect to Uncertificated
REMIC I Regular Interests X and Y, the weighted average of the Stripped Interest
Rates on the aggregate Principal Balance of all Class 1-F Mortgage Loans and
Class 1-G Mortgage Loans, respectively, reduced by the Principal Balance of any
Class 1-F Mortgage Loans or Class 1-G Mortgage Loans, as appropriate, with
respect to which title to the related Mortgage Property has been acquired by or
on behalf of the Trustee for the benefit of the Certificateholders.
Uncertificated Notional Principal Balance: With respect to
-----------------------------------------
Uncertificated REMIC I Regular Interest X, the aggregate Principal Balance of
all Class 1-F Mortgage Loans, and with respect to Uncertificated REMIC I Regular
Interest Y, the aggregate Principal Balance of all Class 1-G Mortgage Loans, in
each case reduced by the Principal Balance of any Class 1-F Mortgage Loans or
Class 1-G Mortgage Loans, as appropriate, with respect to which title has been
acquired by or on behalf of the Trustee for the benefit of the
Certificateholders. With respect to each Uncertificated REMIC I Regular Interest
on any date of determination, an amount equal to (i) $_________ with respect to
Uncertificated REMIC I Regular Interest U, $__________ with
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<PAGE>
respect to Uncertificated REMIC I Regular Interest V, $__________ with respect
to Uncertificated REMIC I Regular Interest W, $______ with respect to
Uncertificated REMIC I Regular Interest X, $______ with respect to
Uncertificated REMIC I Regular Interest Y, and $______ with respect to
Uncertificated REMIC I Regular Interest Z, minus (ii) the sum of (x) the
aggregate of all amounts previously deemed distributed with respect to such
interest and applied to reduce the Uncertificated Principal Balance thereof
pursuant to Section 4.04(a)(ii) and (y) the aggregate of all reductions in
Certificate Principal Balance deemed to have occurred in connection with
Realized Losses that were previously deemed allocated to the Uncertificated
Principal Balance of such Uncertificated REMIC I Regular Interest pursuant to
Section 4.04(c).
Uncertificated REMIC I Regular Interest U: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having a principal balance
equal to the Principal Balance of the Mortgage Loans and REO Property from time
to time multiplied by a fraction, the numerator of which is the aggregate
Certificate Principal Balance of the Class 1-R Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all the Certificates,
and which bears interest at ___% per annum.
Uncertificated REMIC I Regular Interest V: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having a principal balance
equal to the Principal Balance of the Mortgage Loans and REO Property from time
to time multiplied by a fraction, the numerator of which is the aggregate
Certificate Principal Balance of the Class 1-A, 1-B, 1-E and 1-M Certificates
and the denominator of which is the aggregate Certificate Principal Balance of
all of the Certificates, and which bears interest at ___% per annum.
Uncertificated REMIC I Regular Interest W: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having a principal balance
equal to the Principal Balance of the Mortgage Loans and REO Property from time
to time multiplied by a fraction, the numerator of which is the aggregate
Certificate Principal Balance of the Class 1-C Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at ___% per annum.
Uncertificated REMIC I Regular Interest X: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having no principal balance,
and which bears interest at a rate equal to the weighted average of the Stripped
Interest Rates on the aggregate Principal Balance of all Class 1-F Mortgage
Loans.
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Uncertificated REMIC I Regular Interest Y: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having no principal balance,
and which bears interest at a rate equal to the weighted average of the Stripped
Interest Rates on the aggregate Principal Balance of all Class 1-G Mortgage
Loans.
Uncertificated REMIC I Regular Interest Z: An uncertificated partial
-----------------------------------------
undivided beneficial ownership interest in REMIC I having a principal balance
equal to the Principal Balance of the Mortgage Loans and REO Property from time
to time multiplied by a fraction, the numerator of which is the aggregate
Certificate Principal Balance of the Class 1-H Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all the Certificates,
and which bears no interest.
Uncertificated REMIC I Regular Interest U Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest U for such
Distribution Date pursuant to Section 4.04.
Uncertificated REMIC I Regular Interest V Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest V for such
Distribution Date pursuant to Section 4.04.
Uncertificated REMIC I Regular Interest W Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest W for such
Distribution Date pursuant to Section 4.04.
Uncertificated REMIC I Regular Interest X Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest X for such
Distribution Date pursuant to Section 4.04.
Uncertificated REMIC I Regular Interest Y Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest Y for such
Distribution Date pursuant to Section 4.04.
Uncertificated REMIC I Regular Interest Z Distribution Amount. With
-------------------------------------------------------------
respect to any Distribution Date, the sum of the amounts deemed to be
distributed on the Uncertificated REMIC I Regular Interest Z for such
Distribution Date pursuant to Section 4.04.
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<PAGE>
Uncertificated REMIC I Regular Interest Distribution Amounts: The
------------------------------------------------------------
Uncertificated REMIC I Regular Interest U Distribution Amount, Uncertificated
REMIC I Regular Interest V Distribution Amount, Uncertificated REMIC I Regular
Interest W Distribution Amount, Uncertificated REMIC I Regular Interest X
Distribution Amount, Uncertificated REMIC I Regular Interest Y Distribution
Amount and Uncertificated REMIC I Regular Interest Z Distribution Amount.
Uncertificated REMIC I Regular Interests: The Uncertificated REMIC I
----------------------------------------
Regular Interest U, Uncertificated REMIC I Interest V, Uncertificated REMIC I
Regular Interest W, Uncertificated REMIC I Regular Interest X, Uncertificated
REMIC I Regular Interest Y, and Uncertificated REMIC I Regular Interest Z.
Variable Certificate Rate: The weighted average, as determined as of
-------------------------
the Due Date occurring in the month preceding the applicable Distribution Date,
after giving effect to principal payments made on such date, of the Stripped
Interest Rates for each of the Class 1-F or Class 1-G Mortgage Loans applicable
to the Class 1-F or Class 1-G Certificates, as appropriate.
Variable Rate Certificates: The Class 1-F Certificates and the Class
--------------------------
1-G Certificates.
Voting Rights: The portion of the aggregate voting rights of all the
-------------
Certificates evidenced by a Certificate. At any time that any of the Priority
Certificates or the Class 1-M Certificates are outstanding, ___% of all Voting
Rights will be allocated among the holders of the Class 1-A, Class 1-B, Class 1-
C, Class 1-E, Class 1-H, Class 1-M and Class 1-R Certificates, in proportion to
their then outstanding Certificate Principal Balances, and __%, __%, __% and __%
of all Voting Rights will be allocated among holders of the Class 1-D, Class 1-
F, Class 1-G and Class 1-RS Certificates, respectively, in proportion to the
percentage interests evidenced by their respective Certificate Principal
Balances or interests.
Warranty and Servicing Agreement: Each of (a) the Seller's Warranties
--------------------------------
and Servicing Agreement dated as of ___________, ____ between __________ and
___________, and (b) the Seller's Warranties and Servicing Agreement dated as of
___________, ____ between _______ and ________.
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<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Conveyance of Mortgage Loans.
----------------------------
The Depositor hereby sells, transfers, assigns, delivers, sets over
and otherwise conveys to the Trustee for the benefit of the Certificateholders,
without recourse, the Depositor's right, title and interest in and to (a) the
Mortgage Loans listed in Exhibit C to this 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, which Mortgage Loans the Depositor causes to be delivered to the Trustee
on or prior to the Delivery Date, together with the Mortgage Files relating to
the Mortgage Loans, (b) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed in lieu of foreclosure or otherwise, (c) the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of the Agreement, (d) the Primary Mortgage Insurance Policies, the
Special Hazard Insurance Policy, the Pool Insurance Policy, the Mortgagor
Bankruptcy Bond and any other insurance policies with respect to the Mortgage
Loans, (e) the rights of the Depositor assigned to the Trustee pursuant to
Section 2.03 hereof and (f) all proceeds of the conversion, voluntary or
involuntary, or any of the foregoing into cash or other liquid property.
The Depositor shall or shall cause the related Servicer to, at the
Depositor's expense, promptly record or cause to be recorded in the appropriate
public real property or other records the assignments required by this
Agreement.
In connection with any such transfer and assignment, the Depositor
shall deliver to, and deposit with, the Trustee the following documents or
instruments with respect to each Mortgage Loan so assigned:
(i) the Mortgage Note, endorsed in blank, with all
intervening endorsements showing a complete chain or
endorsement from the originator to the last endorser, 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
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instrument certified by the relevant public recording
office in those instances in which the public recording
office retains the original;
(ii) the original Mortgage, and any intervening assignment
thereof, in each case as recorded, with evidence of
recording indicated thereon, or a copy of the Mortgage
(and any such assignment) certified by the applicable
public recording office to be a true and complete copy of
the recorded original thereof, or in the case of an
intervening assignment a copy of such assignment
certified by the Servicer to be a true and complete copy
of the original assignment submitted or to be submitted
for recording;
(iii) an original assignment from the last preceding assignee
in blank;
(iv) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any, with
respect to such Mortgage Loan, as identified on the
Mortgage Loan Schedule;
(v) the original or a copy of each Primary Mortgage Insurance
Policy and riders for those Mortgage Loans identified on
the Mortgage Loan Schedule as having a Loan-to-Value at
origination greater than 80%; and
(vi) the original title policy and all riders thereto or, in
the event such original title policy has not been
received from the insurer, any one of an original title
binder, an original preliminary title report or an
original title commitment, or a copy thereof certified by
the title company with the original policy of title
insurance to be delivered within 120 days of the Delivery
Date. The policy must affirmatively insure against
encroachments by or upon the Mortgage Property or any
interest therein.
In the event that, in connection with any Mortgage Loan the Depositor
cannot deliver the original recorded Mortgage or an original recorded
assignment, assumption agreement or modification agreement of the Mortgage with
evidence of recording
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<PAGE>
thereon (other than the assignment referred to in Section 2.01(iii))
concurrently with the execution and delivery hereof, the Depositor shall
deliver, or cause the Servicer to deliver, to the Trustee a true copy of such
Mortgage, assignment, assumption or modification agreement of the Mortgage
certified by the Depositor to be a true and complete copy of the original
thereof submitted for recording, or a copy of the Mortgage certified by a title
insurance or escrow company or companies reasonably acceptable to the Depositor,
evidencing 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 Servicer to deliver, to the Trustee (i)
such original Mortgage or assignment of the Mortgage with evidence of recording
indicated thereon or a photocopy of such Mortgage or assignment certified by the
appropriate county recorder's office to be a true and complete copy of the
original thereof, upon receipt thereof from the public recording official or
from the Servicer, and (ii) upon discovery of any defect or omission in the
deliveries of any of items (ii) through (v) above with respect to any mortgage
Loan, a correct and complete document or instrument meeting the requirements of
such item or a certified copy thereof, certified by the relevant recording
office, but in no event shall any such delivery be made later than 180 days
following the date of initial issuance of the Certificates. From time to time
the Servicers may forward or cause to be forwarded to the Trustee for the
benefit of the Certificateholders additional original documents evidencing an
assumption or modification of a Mortgage Loan.
The Trustee shall complete the endorsement of the Mortgage Note
referred to in (i) above and the assignment of Mortgage referred to in (iii)
above to ________, as trustee for the benefit of the holders of the Asset Backed
Securities Corporation Conduit Mortgage Pass-Through Certificates, Series _____
under the Pooling and Servicing Agreement dated as of ________, 199__. The
Depositor shall or shall cause the Servicer to promptly record in the
appropriate public office for real property records each original assignment
referred to in (iii) above with respect to each Mortgaged Property, and the
Trustee shall release any such assignment to the Depositor for such purpose. If
any assignment is returned unrecorded to the Depositor because of any defect
therein, the Depositor shall cure or correct such defect and cause such
assignment to be recorded in accordance with this paragraph or, if the Depositor
does not cure or correct such defect or in the event such defect cannot be so
cured, the Depositor shall either (a) substitute a Replacement Mortgage Loan or
Loans for the related Mortgage Loan, which substitution shall be accomplished
within the time period specified in Section 2.05, in the manner and subject to
the conditions set forth in Section 2.03 and the terms and conditions with
respect to substitution in Section 2.05; or (b) purchase such Mortgage Loan at
the Purchase Price therefor. The Trustee
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<PAGE>
shall give notice in writing to the Rating Agencies in the event of either (a)
or (b) above.
In the case of the Mortgage Loans that have been prepaid in full after
the cut-off Date and prior to the Delivery Date the Depositor, in lieu of
delivering the above documents to the Trustee, will deposit in the related
Custodial Account the amount with respect to such payment that is required to be
deposited in the Custodial Account pursuant to the related Warranty and
Servicing Agreement and will provide the Trustee with written notice of such
prepayment.
SECTION 2.02 Acceptance by Trustee.
---------------------
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 in trust for the use and benefit of all present and future
Certificateholders. Upon execution and delivery or this Agreement the Trustee
shall provide the Depositor with an initial certification in the form set forth
in Exhibit D hereto, subject to any exceptions noted therein, acknowledging
receipt of (a) an original Mortgage Note, endorsed as provided in Section
2.01(i) with respect to each Mortgage Loan listed on the Mortgage Loan Schedule,
and (b) a number of Mortgage Files equal to the number of Mortgage Loans
included in the Mortgage Loan Schedule as of the Delivery Date, which have not
been reviewed except as set forth in (a) above. Within 15 days after the
execution and delivery of this Agreement, the Trustee shall provide the
Depositor with an interim certification in the form set forth in Exhibit D
hereto, subject to any exceptions noted therein, acknowledging receipt of an
original Mortgage (or a certified copy thereof, as provided in Section 2.01(ii))
with respect to each Mortgage Loan listed on the Mortgage Loan Schedule and
acknowledging that each Mortgage Note has been endorsed and that each assignment
of Mortgage has been completed by the Trustee in accordance with Section 2.01.
Within 60 days after the execution and delivery of this Agreement, the Trustee
shall ascertain whether all documents required to be delivered to it pursuant to
Section 2.01 hereof are in its possession, and shall deliver to the Depositor a
certification (the "Final Certification") in the form set forth as Exhibit E
hereto to the effect that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule: (i) all documents required to be delivered to the Trustee pursuant to
this Agreement are in its possession, (ii) such documents have been reviewed by
it and have not been mutilated, damaged, defaced, torn or otherwise physically
altered, and such documents relate to such Mortgage Loan, (iii) based on its
examination and only as to the foregoing documents, the information set forth in
items (i)-(ii), (iv) and (vi) of the definition of Mortgage Loan Schedule
respecting such Mortgage Loan accurately reflects the information contained in
the documents in the Mortgage File and (iv) each Mortgage Note has been endorsed
and each assignment of mortgage has been
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<PAGE>
prepared as provided in Section 2.01 thereof. The Trustee shall deliver to the
Servicers a copy of such Final Certification. If, in the course of such review,
the Trustee finds any document or documents constituting a part of a Mortgage
File which do not meet the requirements of (i)-(iv) above, the Trustee shall
promptly notify the Servicer and the Depositor in writing, and request that such
Servicer correct or cure such defect within 60 days from the date the Servicer
was so notified of such defect and, if the Servicer does not correct or cure
such defect within such period, that the Servicer pursuant to the assignment by
the Depositor to the Trustee for the benefit of the Certificateholders of the
benefit of the Servicer's obligation to repurchase defective Mortgage Loans,
either (a) substitute for the related Mortgage Loan a Replacement Mortgage Loan
or Loans, which substitution shall be accomplished within the time period set
forth in Section 2.05, in the manner and subject to the conditions set forth in
Section 2.03 and the terms and conditions with respect to substitution in
Section 2.05; or (b) purchase such Mortgage Loan from the Trust Fund at the
Purchase Price therefor. The Purchase Price for any such Mortgage Loan shall be
deposited by the Servicer in the Custodial Account maintained by the Servicer
pursuant to the related Warranty and Servicing Agreement and, upon receipt by
the Trustee of written notification of such deposit signed by a Servicing
Officer (which notification shall include a statement as to the accuracy of the
Purchase Price), the Trustee shall release the related Mortgage File to the
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
Servicer, or a designee, title (to the extent that such title was transferred to
the Trustee) to any Mortgage Loan released pursuant hereto.
The Trustee shall retain possession and custody of each Mortgage File
in accordance with and subject to the terms and conditions set forth herein.
It is understood and agreed that the obligation of the Servicer under
the related Warranty and Servicing Agreement to substitute for or to purchase
any Mortgage Loan which does not meet the requirements of this Section 2.02
(i) - (iv) above shall constitute the sole remedy respecting such defect
available to the Trustee.
SECTION 2.03 Representations, Warranties and
-------------------------------
Covenants of the Depositor as to
--------------------------------
the Mortgage Loans.
------------------
The Depositor hereby assigns to the Trustee for the benefit of the
Certificateholders all of its rights and obligations under each Warranty and
Servicing Agreement, including, but not limited to, the right to require the
Servicer to repurchase or substitute for defective Mortgage Loans under certain
circumstances, as contained in the related Warranty and
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<PAGE>
Servicing Agreement. The Trustee 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 and subject to the provisions of Article VIII. The Depositor hereby
additionally represents and warrants to the Trustee with respect to each
Mortgage Loan as of the date hereof or such other date set forth herein that:
(i) as of the Cut-off Date, 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
is true and correct in all material respects at the date
or dates respecting which such information is furnished;
(iii) as of the date of the initial issuance of the
Certificates, and except as set forth in the Mortgage
Loan Schedule, no Mortgage Loan has an initial Loan-to-
Value Ratio in excess of 90.0%;
(iv) the Mortgaged Property consists of a single parcel of
real property with a detached single-family residence or
an attached or detached dwelling in a planned unit
development; and the residence or dwelling is not a
mobile home or a manufactured dwelling; and
(v) immediately prior to the date of the initial issuance of
the Certificates, the Depositor had good title to each
Mortgage Loan and each such Mortgage Loan was free of
offsets, defenses or counterclaims.
It is understood and agreed that the representations and warranties
set forth in this Section 2.03 shall survive delivery of the respective Mortgage
Files to the Trustee. Upon discovery by the Depositor or the Trustee (or upon
written notice thereof from any Certificateholder) of a breach or breaches of
any of the representations and warranties set forth in this Section 2.03 or in a
Warranty and Servicing Agreement that materially and adversely affects 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 Trustee shall promptly notify the related Servicer of such
breach and request that the Servicer correct or cure such breach within 60 days
from the date the Servicer was notified in writing of such breach and, if such
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Servicer does not correct or cure such breach within such period, or if such
breach cannot be so cured, that such Servicer, if and to the extent that the
Servicer is obligated to under the related Warranty and Servicing Agreement,
either (a) substitute for such Mortgage Loan a Replacement Mortgage Loan or
Loans, which substitution shall be accomplished within the time period specified
in Section 2.05, in the manner and subject to the conditions set forth in this
Section and the terms and conditions with respect to substitution in Section
2.05; or (b) purchase the affected Mortgage Loan at the Purchase Price
therefore. If the Servicer fails to substitute for or repurchase any Mortgage
Loan with respect to which a material breach of any representation or warranty
made by the Depositor pursuant to this Section 2.04 has occurred, the Depositor
shall substitute for or repurchase the Mortgage Loan as provided above.
Subject to the terms and conditions set forth in Section 2.05 with
respect to such substitution, as to any Replacement Mortgage Loan or Loans, the
related Servicer or the Depositor, as the case may be, shall deliver to 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, with the Mortgage Note endorsed as
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 Trust Fund and will be retained by the Servicer or remitted by the Servicer
to the Depositor, as the case may be, 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 or the Depositor, as the case may be, shall be entitled
to retain all amounts received in respect of such Deleted Mortgage Loan. The
Depositor shall amend or cause to be amended 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 any
Mortgage Loan contained in the related Warranty and Servicing Agreement, as of
the date of substitution, and the Depositor shall be deemed to have made with
respect to any Replacement Mortgage Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in this
Section 2.03. Upon any such substitution, the Trustee shall release the Mortgage
File held for the benefit of the Certificateholders relating to such Deleted
Mortgage Loan to the related Servicer or the Depositor, as the case may be, and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as shall be necessary
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to vest title (to the extent that such title was transferred to the Trustee) in
such Person, or its respective designee to any Deleted Mortgage Loan substituted
for pursuant to this Section 2.03.
In the event that a Person shall have repurchased a Mortgage Loan,
upon receipt by the Trustee of written notification of the deposit of the
Purchase Price signed by a Servicing Officer, the Trustee shall release the
related Mortgage File held for the benefit of the Certificateholders to the
related Servicer or the Depositor, as the case may be, and the Trustee shall
execute and deliver the related instruments of transfer or assignment, in each
case without recourse, as shall be necessary to transfer title (to the extent
that such title was transferred to the Trustee) from the Trustee for the benefit
of the Certificateholders and vest title in such related Servicer or the
Depositor, or the respective designee of either, as the case may be, to any
Mortgage Loan purchased pursuant to this Section 2.03. In the event that the
related Servicer does not repurchase or substitute for a Mortgage Loan as to
which a material breach with respect to any representation or warranty contained
in this Section 2.03 has occurred and is continuing, which breach materially and
adversely affects the interests of the Certificateholders on the related
Mortgage Loan, the Depositor shall either repurchase such Mortgage Loan or
substitute a Replacement Mortgage Loan, in the manner specified in this Section
2.03. It is understood and agreed that the obligation under this Agreement or
under the Warranty and Servicing Agreement of any Person to repurchase or
substitute any Mortgage Loan as to which such breach has occurred and is
continuing shall constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on their behalf, except as provided in Section
2.04 hereof.
SECTION 2.04 Representations and Warranties
------------------------------
of Servicers.
------------
(a) Upon the discovery by the Depositor, a Servicer or the Trustee (or
upon notice thereof in writing from a Certificateholder) 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 the interests
of the Certificateholders, the party discovering such breach shall give prompt
written notice to the other parties. The Trustee shall promptly notify the
related Servicer of such breach and request that such Servicer cure such breach
within 90 days from the date the Trustee discovers, or received written
notification of, such breach, and if such Servicer does not cure such breach in
all material respects, the related Servicer, if and to the extent that such
Servicer is obligated to do so under the related Warranty and Servicing
Agreement, shall either (a) substitute a Replacement Mortgage
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<PAGE>
Loan or Loans for the related Mortgage Loan, which substitution must be made as
specified in Section 2.05 and shall be subject to the conditions set forth in
the related Warranty and Servicing Agreement and Section 2.05, or (b) purchase
such Mortgage Loan held for the benefit of the Certificateholders from the
Trustee at the Purchase Price and in the manner set forth in the related
Warranty and Servicing Agreement. Upon receipt by the Trustee of written
notification (which notification shall include a statement as to the accuracy of
such Purchase Price) of the deposit of the Purchase Price pursuant to the
Warranty and Servicing Agreement by the Servicer signed by a Servicing Officer,
the Trustee shall release the related Mortgage File to the 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 the extent that such
title was transferred to the Trustee) to any Mortgage Loan purchased pursuant to
this Section 2.04(a) in such Servicer or its respective designees. Except as
set forth in Section 2.04(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 respecting such breach or breaches available to the
Trustee on behalf of the Certificateholders.
(b) In the case of a Mortgage Loan that a Servicer becomes obligated
to purchase pursuant to Section 2.04(a) hereof, the Trustee shall, so long as
all advances are being made in respect of such Mortgage Loan pursuant to the
related Warranty and Servicing Agreement, first require the Servicer to
substitute for or to purchase such Mortgage Loan pursuant to Section 2.04(a)
hereof and 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 Trustee believes any such Required
Insurance Policy may cover the loss in respect of such Mortgage Loan.
SECTION 2.05 Substitution.
------------
The Depositor or the applicable Servicer may substitute a Replacement
Mortgage Loan or Loans for any Mortgage Loan required to be repurchased pursuant
to Section 2.01, 2.02, 2.03 or 2.04 or the applicable Warranty and Servicing
Agreement, which substitution shall be accomplished in the manner and subject to
the conditions set forth in Section 2.03 or the applicable Warranty and
Servicing Agreement; provided that any such substitution must be effected within
three months after the Delivery Date (or within two years after the Delivery
Date if the related Mortgage Loan is a "defective obligation" within the meaning
of Section 860G(a)(4)(A)(ii) of the Code) and must be accompanied by an
Officers' Certificate delivered to the Trustee,
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<PAGE>
certifying that such Replacement Mortgage Loan conforms to the requirements of
this Agreement, and by an Opinion of Counsel to the effect that such
substitution will not cause REMIC I or REMIC II to fail to qualify as a REMIC
and will not result in a prohibited transaction tax, which Opinion of Counsel
shall be paid for by the Person desiring to make such substitution.
In connection with the substitution of one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the Trustee 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 (in each case
after application of the principal portion of the Monthly Payments due in the
month of substitution that are to be distributed to Certificateholders in the
month of substitution). The Depositor or the Servicer, as the case may be,
shall deposit the amount of such shortfall into the Certificate Account on the
day of substitution, without any reimbursement therefor. The Depositor or the
Servicer, as the case may be, shall give notice in writing to the Trustee of
such event, which notice shall be accompanied by an Officers' Certificate as to
the calculation of such shortfall and by an Opinion of Counsel to the effect
that such substitution will not cause (a) any federal tax to be imposed on the
Trust Fund, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on contributions after the
startup date" under Section 860G(d)(1) of the Code or (b) any portion of the
Trust Fund to fail to qualify as a REMIC at any time that any Certificate is
outstanding.
SECTION 2.06 Issuance of Certificates Evidencing
-----------------------------------
Interest in REMIC I.
-------------------
The Trustee acknowledges the assignment to it of the Mortgage Loans
together with the assignment to it of all other assets included in REMIC I,
receipt of which is hereby acknowledged. Concurrently with such assignment and
delivery and in exchange therefor, the Trustee, pursuant to the written request
of the Depositor executed by an officer of the Company, has executed and caused
to be authenticated and delivered to or upon the order of the Depositor the
Class 1-RS Certificates in authorized denominations which, together with
Uncertificated REMIC I Regular Interests, evidence ownership of REMIC I. The
rights of the Class 1-RS Certificateholders and REMIC II to receive
distributions from the proceeds of REMIC I in respect of the Class 1-RS
Certificates and the Uncertificated REMIC I Regular Interests, and all ownership
interests of the Class 1-RS Certificateholders and REMIC II in such
distributions, shall be as set forth in this Agreement.
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SECTION 2.07 Conveyance of Uncertificated REMIC I
------------------------------------
Regular Interests: Acceptance by
--------------------------------
the Trustee.
-----------
The Depositor, as of the Delivery Date, and concurrently with the
execution and delivery hereof, does hereby assign without recourse all the
right, title and interest of the Depositor in and to the Uncertificated REMIC I
Regular Interests to the Trustee for the benefit of the Class 1-A, Class 1-B,
Class 1-C, Class 1-D, Class 1-E, Class 1-F, Class 1-G, Class 1-H, Class 1-M and
Class 1-R Certificateholders. The Trustee acknowledges receipt of the
Uncertificated REMIC I Regular Interests and declares that it holds and will
hold the same in trust for the exclusive use and benefit of all present and
future Class 1-A, Class 1-B, Class 1-C, Class 1-D, Class 1-E, Class 1-F, Class
1-G, Class 1-H, Class 1-M and Class 1-R Certificateholders. The rights of the
REMIC II Certificateholders to receive distributions from the proceeds of REMIC
II in respect of such Certificates, and all ownership interests of the Class 1-
A, Class I-B, Class 1-C, Class 1-D, Class 1-E, Class 1-F, Class 1-G, Class 1-H,
Class 1-M and Class 1-R Certificateholders in such distributions, shall be as
set forth in this Agreement.
SECTION 2.08 Issuance of Certificates Evidencing
-----------------------------------
Interest in REMIC II.
--------------------
The Trustee acknowledges the assignment to it of the Uncertificated
REMIC I Regular Interests and, currently therewith and in exchange therefor,
pursuant to the written request of the Depositor executed by an officer of the
Company, the Trustee has executed and caused to be authenticated and delivered
to or upon the order of the Depositor, the Class 1-A, Class 1-B, Class 1-D,
Class 1-E, Class 1-F, Class 1-G, Class 1-H, Class 1-M and Class 1-R Certificates
in authorized denominations evidencing ownership of the entire REMIC II.
SECTION 2.09 REMIC Provisions.
----------------
(a) The Depositor hereby elects and authorizes the Trustee to treat
REMIC I and REMIC II as separate REMICs under the Code. This Agreement shall be
construed so as to carry out the intention of the Depositor that REMIC I and
REMIC II each be treated as a REMIC at all times prior to the date on which
final payment is made (or made available on demand) to the Holders of any Class
1-A, Class 1-B, Class 1-C, Class 1-D, Class 1-E, Class 1-F, Class 1-G, Class 1-H
and Class 1-M. The Delivery Date is hereby designated as the "startup day" of
REMIC I and REMIC II within the meaning of Section 860G(a)(9) of the Code. The
"regular interests" (within the meaning of Section 860G of the Code) in REMIC II
shall consist of the Priority Certificates (other than the Class 1-R
Certificates) and the Class 1-M Certificates. The Class 1-R Certificates shall
be designated as the "regular interest" (within the meaning of the Section 860G
of
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the Code) in REMIC II. The "regular interests" (within the meaning of
Section 860G of the Code) in REMIC I shall consist of the Uncertificated REMIC I
Regular Interests and the "residual interest" (within the meaning of Section
860G of the Code) in REMIC I shall consist of the Class 1-RS Certificates.
(b) The Holder of the Class 1-R Certificates shall act as the "tax
matters person" (within the meaning of the REMIC Provisions and
Section 6231(a)(7) of the Code) with respect to REMIC II and the Holder of the
Class 1-RS Certificates shall act as the "tax matters person" with respect to
REMIC I. By its acceptance of the Class 1-R Certificate or the Class 1-RS
Certificates, a Holder shall have agreed to such appointment and shall have
consented to the appointment of the Trustee as agent to act on behalf of the
applicable REMIC I pursuant to the specific duties outlined in Section 2.09(d).
(c) The Holder of the Class 1-RS Certificates and the Holder of the
Class 1-R Certificates, by the purchase of such Certificates, shall be deemed to
have agreed to timely pay, upon demand by the Trustee, the amount of any minimum
California state franchise taxes due with respect to REMIC I and REMIC II,
respectively, under Sections 23151(a) and 23153(a) of the California Revenue and
Taxation Code. Notwithstanding the foregoing, the Trustee shall be authorized
to retain from amounts otherwise distributable to the Holders of the Class 1-RS
and Class 1-R Certificates, the amount of such tax in the event such Holders do
not promptly pay such amount upon demand by the Trustee. In the event that any
other federal, state or local tax is imposed, including without limitation taxes
imposed on a "prohibited transaction" of a REMIC as defined in section 860F of
the Code, such tax shall be charged against amounts otherwise available for
distribution to the Certificateholders in accordance with the provisions set
forth in Section 4.02. The Trustee shall promptly deposit in the Certificate
Account any amount of "prohibited transaction" tax that results from a breach of
the Trustee's duties under this Agreement.
(d) The Trustee shall act as attorney-in-fact and as agent on behalf
of the tax matters person of REMIC I and REMIC II and in such capacity the
Trustee shall: (a) prepare, sign and file, or cause to be prepared, signed and
filed, federal and state tax returns using a calendar year as the taxable year
for REMIC I and REMIC II when and as required by the REMIC Provisions and other
applicable federal income tax laws as the direct representative of REMIC I and
REMIC II in compliance with the Code and shall provide copies of such returns as
required by the Code; (b) make an election, on behalf of each of REMIC I and
REMIC II, to be treated as a REMIC on the federal tax return of each of REMIC I
and REMIC II for its first taxable year, in accordance with the REMIC
Provisions; and (c) prepare and forward, or cause to be prepared, and forwarded,
to the Certificateholders and to any governmental taxing authority all
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information reports as and when required to be provided to them in accordance
with the REMIC Provisions. The expenses of preparing and filing such returns
shall be borne by the Trustee. The Depositor shall provide on a prompt and
timely basis to the Trustee or its designee such information with respect to the
REMIC as is in its possession and reasonably required or requested by the
Trustee to enable it to perform its obligations under this subsection. In its
capacity as attorney-in-fact and as agent on behalf of the tax matters person,
the Trustee shall also: (a) represent REMIC I and REMIC II in any audit,
controversy or judicial proceeding relating to a governmental taxing authority;
and (b) cause to be paid solely from the sources and in accordance with Section
2.09(c) the amount of any taxes imposed on REMIC I or REMIC II when and as the
same shall be due and payable (but such obligation shall not prevent the Trustee
or any other appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Trustee from withholding payment of such
tax, if permitted by law, pending the outcome of such proceedings).
(e) The Trustee, the Depositor, the Holder of the Class 1-RS
Certificates and the Holder of the Class 1-RS Certificates shall take any action
or cause the Trust Fund to take any action necessary to create or maintain the
status of REMIC I and REMIC II as a REMIC under the REMIC Provisions and shall
assist each other as necessary to create or maintain such status. Neither the
Trustee nor the Holder of the Class 1-R Certificates or the Class 1-R
Certificates shall take any action, cause the Trust Fund to take any action or
fail to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of either REMIC I or REMIC II as a REMIC or (ii) result in the imposition
of a tax upon either REMIC I or REMIC II (including, but not limited to, the tax
on prohibited transactions as defined in Code Section 860F(a)(2) and the tax on
prohibited contributions set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel (at the expense of the party seeking to take such action or as otherwise
provided in Section 8.05) to the effect that the contemplated action will not
endanger such status or result in the imposition of such a tax. In addition,
prior to taking any action with respect to either REMIC I or REMIC II or the
assets therein, or causing the Trust Fund to take any action, which is not
expressly permitted under the terms of this Agreement, the Holder of the Class
I-R Certificates or the Holder of the Class 1-RS Certificates, as the case may
be, will consult with the Trustee or its designee, in writing, with respect to
whether such action could cause an Adverse REMIC Event to occur with respect to
either REMIC, and no such Person shall take any action or cause the Trust Fund
to take any such action as to which the Trustee has advised it in writing than
an Adverse REMIC Event could occur. The Trustee may consult with counsel to
make such written advice, and the cost of same
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shall be borne by the party seeking to take action not permitted by this
Agreement.
In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided to the Trustee,
within ten (10) days after the Delivery Date, all information or data that the
Trustee determines to be relevant for tax purposes to the valuations and
offering prices of the Certificates, including, without limitation, the price,
yield, prepayment assumption and projected cash flows of the Certificates and
the Mortgage Loans and the Trustee shall be entitled to rely upon any and all
such information and data in the performance of its duties set forth herein.
Thereafter, the Depositor shall provide, promptly upon request therefor, any
such additional information or data that the Trustee may from time to time
request in order to enable the Trustee to perform its duties as set forth herein
and the Trustee shall be entitled to rely upon any and all such information and
data in the performance of its duties set forth herein. The Depositor shall
indemnify the Trustee and hold it harmless for any loss, liability, damage,
claim or expense of the Trustee arising from any failure of the Depositor or the
related Servicer to provide, or to cause to be provided, accurate information or
data to the Trustee on a timely basis. The indemnification provisions hereunder
shall survive the termination of this Agreement and shall extend to any co-
trustee appointed pursuant to this Agreement.
(f) The Maturity Date for each of the Uncertificated REMIC I Regular
Interests and each of the regular interests in REMIC I is as follows:
Uncertificated REMIC I Regular Interest U:
Uncertificated REMIC I Regular Interest V:
Uncertificated REMIC I Regular Interest W:
Uncertificated REMIC I Regular Interest X:
Uncertificated REMIC I Regular Interest Y:
Uncertificated REMIC I Regular Interest Z:
Class 1-A Certificates:
Class 1-B Certificates:
Class 1-C Certificates:
Class 1-D Certificates:
Class 1-E Certificates:
Class 1-F Certificates:
Class 1-G Certificates:
Class 1-H Certificates:
Class 1-M Certificates:
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ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01 Servicing Standard.
------------------
Except as otherwise provided in Section 2.09, any funds advanced by
the Servicers as necessary for the purpose of effecting the timely payment of
taxes on the Mortgaged Property assessments, hazard insurance premiums or
Primary Mortgage Insurance Policy premiums, condominium or planned unit
development association dues, or comparable items that are not timely paid by
the Mortgagors shall be recoverable by the related Servicer out of payments by
the related Mortgagor or out of Liquidation Proceeds or Insurance Proceeds to
the extent permitted by the applicable Warranty and Servicing Agreement. All
costs incurred by the related Servicers in effecting the timely payments of
taxes and assessments on the Mortgaged Properties and related insurance premiums
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. Each
Servicer shall be entitled to retain an amount in respect of each interest
payment on a Mortgage Loan equal to the Servicing Fee, and such other amounts as
provided in this Agreement and the applicable Warranty and Servicing Agreement.
SECTION 3.02 Enforcement of the Obligations of
---------------------------------
Servicers.
---------
(a) The Trustee and the related Servicer may enter into amendments to
the Warranty and Servicing Agreement; provided, however, that any such
amendments shall be 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 Depositor and
the Rating Agencies.
(b) The Trustee, for the benefit of the Depositor and the
Certificateholders, shall enforce the obligations of each Servicer under the
related Warranty and Servicing Agreement. 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 Trustee, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Trustee shall not waive
any event of default by a Servicer under the Warranty and Servicing Agreement
which is a failure to remit any payment required to be made by such
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Servicer that would result in an Event of Default under this Agreement.
(c) During the term of this Agreement, the Trustee shall consult fully
with each of the Servicers as may be necessary from time to time to perform and
carry out the Trustee's obligations hereunder and receive, review and evaluate
all reports, information and other data that are provided to the Trustee 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 Trustee shall promptly
deliver to the Depositor 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 Trustee.
SECTION 3.03 Rights of the Depositor in Respect of
-------------------------------------
the Trustee and the Servicers.
-----------------------------
The Depositor shall not have any responsibility or liability for any
action or failure to act by the Trustee or the Servicers and is not obligated to
supervise the performance of the Trustee or the Servicers hereunder or
otherwise.
SECTION 3.04 Custodial Accounts.
------------------
Each Servicer will, pursuant to the related Warranty and Servicing
Agreement, be required to establish and maintain one or more Custodial Accounts.
The Servicer will be required thereby to deposit into the Custodial 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.
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.
SECTION 3.05 Collection of Taxes, Assessments and
-------------------------------------
Similar Items; Escrow Accounts.
------------------------------
In addition to the Custodial Accounts, the Servicers, pursuant to the
Warranty and Servicing Agreements, 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)
for the payment of taxes, assessments, hazard insurance premiums and
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Primary Mortgage Insurance Policy premiums or comparable items for the account
of the Mortgagors.
SECTION 3.06 Access to Certain Documentation and
-----------------------------------
Information Regarding the Mortgage
-----------------------------------
Loans.
-----
In order to permit any Person to comply with Sections 171 and 1276 of
the Code, the Trustee shall, upon request, furnish such Person with a statement
setting forth the number and principal balance of Mortgage Loans that were
originated before September 27, 1985 and before July 18, 1984, respectively.
SECTION 3.07 Maintenance of the Pool Insurance Policy,
-----------------------------------------
Primary Mortgage Insurance Policies,
------------------------------------
Collections Thereunder.
----------------------
The Depositor shall exercise its best reasonable 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; provided that it shall be the obligation of the Trustee to pay the
premiums for the Pool Insurance Policy on a timely basis to the extent of
amounts received in respect of the Administrative Fee, after payment of the
Trustee Fee. 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
policy coverage), the Depositor shall give notice of the same to the
Certificateholders and the Rating Agencies and 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 because it is approved as an insurer by neither FHLMC nor
FNMA, the Depositor 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 Depositor 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
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limitation set forth above. Prior to obtaining any replacement pool insurance
policy, the Depositor shall notify the Trustee of the replacement pool insurance
policy the Depositor intends to obtain and, if the Trustee so directs, obtain a
replacement pool insurance policy approved by the Trustee.
The Trustee shall not consent to any action that would result in loss
of coverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Servicer, would have been covered thereunder
or to the cancellation or refusal to renew any such Primary Mortgage Insurance
Policy, which is in effect at the date of the initial issuance of the
Certificates and is required to be kept in force hereunder 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 Agencies with respect to mortgage pass-through certificates having
a rating equal to that of the then applicable rating of the Certificates.
Each Servicer, on behalf of itself, 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 the Pool Insurance Policy and deposit all
collections thereunder in the related Custodial Account.
SECTION 3.08 Maintenance of Hazard Insurance,
--------------------------------
the Special Hazard Insurance Policy and
---------------------------------------
Other Insurance.
---------------
Each Warranty and Servicing Agreement shall require the related
Servicer to 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 that such Mortgage Loan or its Principal Balance,
whichever is less. Any cost incurred by the Servicer in maintaining any such
insurance shall not, for the purpose of calculating monthly distributions to the
Certificateholders or remittances to the Trustee for their benefit, 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 related
Servicer out of payments by the related Mortgagor or out of Insurance Proceeds
or Liquidation Proceeds to the extent permitted by the applicable Warranty and
Servicing Agreement.
The Depositor shall exercise its best reasonable efforts to maintain
the Special Hazard Insurance Policy in full force and effect throughout the term
of this Agreement, unless coverage thereunder has been exhausted through payment
of claims; provided that it shall be the obligation of the Trustee to pay the
premiums for the Special Hazard Insurance Policy on a timely basis to the extent
of amounts received in respect of the
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Administrative Fee, after payment of the Trustee Fee. 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 Depositor shall
exercise its best reasonable efforts to obtain from another insurer, the claims-
paying ability of which shall be acceptable to the Rating Agencies with respect
to mortgage pass-through certificates having a rating equal to that of the then
applicable rating of the Certificates, 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 at the time of such replacement, 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 at the time of such replacement. The original Special Hazard Insurance
Policy shall be delivered to the Trustee on the Delivery Date.
SECTION 3.09 Trustee to Cooperate; Release of
--------------------------------
Mortgage Files.
--------------
Upon the payment in full of any Mortgage Loan, or the receipt by any
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, and upon notification by such Servicer in the form
of 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 Custodial Account have been or will be
so deposited) of a Servicing Officer and a Request for Release of the Mortgage
File in the form of Exhibit F the Trustee shall promptly release the related
Mortgage File to such Servicer, and the Trustee shall execute and deliver to the
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 but shall be paid
by such Servicer. From time to time and as shall be appropriate for the
servicing or foreclosure of any Mortgage Loan, including for such purpose,
collection under 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 of 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 any Servicer and the delivery to the Trustee of a Request for
Release signed by a Servicing Officer in the form of Exhibit F and reasonably
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acceptable to the Trustee, release the Mortgage File to such Servicer. If a
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 the Servicer shall deliver to the Depositor or 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 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 Mortgage except for the termination of such
lien upon completion of the foreclosure.
SECTION 3.10 Account Statements.
------------------
Within 20 days following each Distribution Date, the Trustee shall
deliver to the Depositor a statement setting forth the status of the Certificate
Account as of the close of business on such Distribution Date showing, for the
period covered by such statement, the aggregate of deposits in or withdrawals
from the Certificate Account. The Trustee shall forward a copy of such
statement upon request to the Rating Agencies.
SECTION 3.11 Maintenance of the Mortgagor Bankruptcy
---------------------------------------
Bond; Collections Thereunder.
----------------------------
The Depositor shall exercise its best reasonable 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; provided that it shall be the obligation of the Trustee to pay the
premiums for the Mortgagor Bankruptcy Bond on a timely basis to the extent of
amounts received in respect of the Administrative Fee, after payment of the
Trustee Fee. In the event that the Mortgagor Bankruptcy Bond shall be cancelled
or terminated for any reason (other than the exhaustion of total policy
coverage), the Depositor shall exercise its reasonable efforts to obtain from
another insurer, the claims-paying ability of which shall be acceptable to the
Rating Agencies with respect to mortgage pass-through certificates having a
rating equal to that of the then applicable rating of the Certificates, a
replacement policy comparable to the Mortgagor Bankruptcy Bond with a total
coverage that is equal to the then existing coverage of the Mortgagor Bankruptcy
Bond; provided, however, that if the cost of any replacement policy shall be
greater than the cost of
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the Mortgagor Bankruptcy Bond at the time of such replacement, 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 Mortgagor Bankruptcy Bond.
At the request of the Depositor, coverage under the Mortgagor Bankruptcy Bond
shall be cancelled or reduced by the Trustee to the extent permitted by the
Rating Agencies, provided the outstanding rating of the Certificates by the
Rating Agencies at the time of such cancellation or reduction is not reduced.
ARTICLE IV
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
SECTION 4.01 Accounts.
--------
Each Servicer is required pursuant to the related Warranty and
Servicing Agreement to establish and maintain, in the name of the Trustee on
behalf of the Holders of interests in the Trust Fund, a Custodial Account, which
shall be an Eligible Account, into which such Servicer shall deposit all
amounts, except as otherwise set forth therein, required by the terms thereof,
and from which the Servicer shall withdraw such amounts as set forth therein.
Funds held in any Custodial Account at any time may be delivered by a Servicer
to the Trustee for deposit in an account (which may be the Certificate Account
and must satisfy the standards for the Certificate Account as set forth in the
definition thereof) and for all purposes of this Agreement shall be deemed to be
a part of such Custodial Account; provided, however, that the Trustee shall have
the sole authority to withdraw any funds held in such account.
The Trustee shall establish, prior to the Delivery Date, and shall
maintain, in the name of the Trustee on behalf of the Holders of interests in
the Trust Fund, the Certificate Account, which shall be an Eligible Account,
into which the Trustee upon receipt from the Servicers shall deposit all
payments remitted by the Servicers on a Servicer Remittance Date under the
related Warranty and Servicing Agreement all amounts received pursuant, to the
presentation of claims under the Special Hazard Insurance Policy, Pool Insurance
Policy and Mortgagor Bankruptcy Bond, and any amounts required to be remitted by
the Depositor pursuant to the terms hereof. All distributions to be made from
time to time to holders of interests in the Trust Fund out of funds in the
Certificate Account shall be made by or on behalf of the Trustee or Paying
Agent. The Trustee will give notice to each Servicer, the Rating Agencies and
the Depositor of the location of the Certificate Account and of any change
thereof, prior to the use thereof. Funds held in the Certificate Account and
delivered to the Trustee earlier than one Business Day prior to the next
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Distribution Date shall, if invested, be invested in Eligible Investments and
shall mature not later than the Business Day immediately preceding such
Distribution Date. All income and gain net of any losses realized from any such
investment shall be for the benefit of the Trustee and shall be subject to
withdrawal at its direction from time to time. The amount of any losses net of
any gains not paid to the Trustee incurred in respect of any such investments
shall be deposited in the Certificate Account out of the Trustee's own funds
immediately as realized.
The Trustee shall make, to the extent required or authorized
hereunder, withdrawals from the Certificate Account for the following purposes:
(i) to pay to any Servicer any amounts to which such Servicer
is entitled pursuant to the related Warranty and
Servicing Agreement;
(ii) to make required deposits into the Expense Reserve
Account;
(iii) to withdraw any amount deposited in the Certificate
Account and not required to be deposited therein;
(iv) to make required distributions to the Certificateholders
pursuant to Section 4.02; and
(v) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Article IX
hereof.
The Trustee shall, prior to the Delivery Date, establish and maintain,
in the name of the Trustee on behalf of the Holders of interests in the Trust
Fund, the Expense Reserve Account, which shall be an Eligible Account, into
which the Trustee shall deposit on the Distribution Date an amount equal to the
Administrative Fee with respect to the Mortgage Loans, less the applicable
Trustee's Fee, upon receipt from the Servicers under the related Warranty and
Servicing Agreement or otherwise. So long as it does not adversely affect the
rating on the Certificates, the Expense Reserve Account may be maintained with
the Trustee. The Trustee will give notice to the Rating Agencies and the
Depositor of the location of the Expense Reserve Account and any change thereof,
prior to the use thereof. Funds held in the Expense Reserve Account shall be
invested in Eligible Investments and retained in the Expense Reserve Account and
all income and other gains from investment of moneys deposited in the Expense
Reserve Account shall be deposited in the Expense Reserve Account immediately
upon receipt.
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Any amounts on deposit in the Expense Reserve Account shall be
withdrawn from the Expense Reserve Account in the amounts required for
application as follows:
first, to the payment of the Trustee Fee to the Trustee, to the extent
-----
such Trustee Fee has not been paid, and
second, to the payment of the premiums on the Special Hazard Insurance
------
Policy, Pool Insurance Policy and Mortgagor Bankruptcy Bond as and when
due.
Upon the termination of the Trust Fund pursuant to the terms hereof,
any amounts remaining on deposit in the Expense Reserve Account shall be paid to
the Holder of the Class 1-R Certificate upon surrender for the payment of the
final distribution thereon.
SECTION 4.02 Distributions.
-------------
(a) on each Distribution Date, following withdrawal by the Trustee of
the Administrative Fee in accordance with Section 4.01 and any payments required
pursuant to Sections 2.09(c) and 4.01, and subject to Section 4.02(b), the
Trustee or Paying Agent, if any, shall apply amounts in the Certificate Account
in the following order of priority:
(i) first, to the Holders of the Priority Certificates, in an
-----
amount up to the Available Distribution Amount, in the following order of
priority:
(A) first, to distribute to the Holders of each Class of
-----
Priority Certificates their respective Interest Distribution
Amounts for such Distribution Date; provided that if the
Available Distribution Amount is less than the amount described
in this clause (A), the Available Distribution Amount shall be
distributed to each Class of Priority Certificates on a pro rata
basis in accordance with their respective interest Distribution
Amounts;
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(B) second, to distribute to the Holders of Priority
------
Certificates an amount equal to the Priority Certificate
Principal Distribution Amount, in reduction of their respective
Certificate Principal Balances as follows:
(I) an amount equal to the aggregate of the
applicable Class 1-H Fraction of the amount distributed
with respect to each Mortgage Loan and included in the
Priority Certificate Principal Distribution Amount for
such Distribution Date, will be distributed to the
Holders of the Class 1-H Certificates; and
(II) the remainder of the Priority Certificates
Principal Distribution Amount will be distributed first
to the Holders of the Class 1-R Certificates until the
Certificates Principal Balance of the Class 1-R
Certificates has been reduced to zero, second to the
Holders of the Class 1-A Certificates until the
Certificate Principal Balance of the Class 1-A
Certificates has been reduced to zero, third to the
Holders of the Class 1-B Certificates until the
Certificate Principal Balance of the Class 1-B
Certificates has been reduced to zero, fourth to the
Holders of the Class 1-C Certificates until the
Certificate Principal Balance of the Class 1-C
Certificates has been reduced to zero, and fifth to the
Holders of the Class 1-E Certificates until the
Certificate Principal Balance of the Class 1-E
Certificates has been reduced to zero; provided,
however, that if the coverage under the Pool Insurance
Policy has been exhausted and the Certificate
Principal Balance of the Class 1-M Certificates has
been reduced to zero, such remainder of the Priority
Certificate Principal Distribution Amount will be
distributed pro rata to each Class of Priority
Certificates (other than the Class 1-H Certificates) in
proportion to the Certificate Principal Balance of each
such Class, and provided further that any amount
representing a portion of a Principal Prepayment with
respect to a Mortgage
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Loan that was subject of a Debt Service Reduction in
excess of the Principal Balance of such Mortgage Loan,
after distribution of the Class 1-H Fraction of such
amount to the Holders of the Class 1-H Certificates,
will be distributed to the Holders of the remaining
Priority Certificates pro rata in proportion to the
Certificate Principal Balance of each such Class.
(ii) second, to the Holders of the Class 1-M Certificates, in an
------
amount up to the Interest Distribution Amount for such Class for such
Distribution Date;
(iii) third, to the Holders of the Class 1-M Certificates, in an
-----
amount equal to the Class 1-M Certificate Principal Distribution Amount;
and
(iv) fourth, to the Holders of the Class 1-R Certificates, any
------
balance remaining.
(b) If, on any Distribution Date, the Available Distribution Amount is
less than the sum of the Interest Distribution Amount, the Priority Certificate
Principal Distribution Amount and the Class 1-M Certificate Principal
Distribution Amount for such Distribution Date, the amount of any shortfall that
is not due to a Depletion Loss will be allocated to each Class of Certificates
then outstanding on a pro rata basis in accordance with the Interest
Distribution Amount for each such Class in the case of an interest shortfall and
in accordance with amounts due in respect of principal in the case of a
shortfall allocable to principal, and shall be distributed to such Classes of
Certificates on subsequent Distribution Dates if and when subsequent recoveries
are received with respect to such amounts.
(c) The Trustee shall be responsible for the calculations with respect
to distributions from the Trust Fund so long as the Trust Fund has not been
terminated in accordance with this Agreement. The Trustee may conclusively rely
on information provided by the Servicers pursuant to the Warranty and Servicing
Agreement and shall have no duty to recompute, recalculate or verify the
accuracy of such information. All distributions made to Certificateholders of
any Class on such Distribution Date will be made to the Certificateholders of
the respective Class of record on the immediately preceding Record Date, except
for the final distribution, which shall be made as provided in the form of
Certificate. All distributions made to the Certificateholders shall be based
upon the Percentage Interest represented by their respective Certificates. If
on any Determination Date, the Trustee determines that there are no Mortgage
Loans outstanding and no other funds or assets in the Trust Fund other than the
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funds in the Certificate Account, the Trustee shall promptly send the final
distribution notice to each certificateholder specifying the manner in which the
final distribution will be made.
(d) Any Certificateholder shall be entitled to receive distributions
hereunder on a Distribution Date (other than as provided in Section 9.02
respecting the final distribution) by wire transfer to the account specified in
writing by the Certificateholder to the Trustee (and Paying Agent, if any) if
the Initial Certificate Principal Balance or Notional Amount evidenced by such
Holder's Certificate is at least equal to $5,000,000. In each case, the account
must be specified in writing at least five Business Days prior to the Record
Date for the Distribution Date on which wire transfers will commence. All other
distributions shall be made by check payable to the Certificateholder mailed by
first class mail to the address of such Certificateholder reflected in the
Certificate Register.
SECTION 4.03 Subordination; Priority of Distributions.
----------------------------------------
(a) The rights of the Class 1-M Certificateholders to receive
distributions in respect of the Certificates on any Distribution Date shall be
subordinated to the rights of the Priority Certificates to the extent set forth
herein.
(b) The right of each Servicer to retain or to receive funds from the
related Custodial Account in accordance with the related Warranty and Servicing
Agreement for its Servicing Fee on each Mortgage Loan, assumption or
substitution fees, late payment charges and other Mortgagor charges,
reimbursement of Monthly Advances and expenses or otherwise, shall not be
subordinated to the rights of Certificateholders.
(c) Prior to each Distribution Date, the Trustee shall determine the
total amount of Realized Losses, if any, recognized by the Trust Fund on
Mortgage Loans during the previous Collection Period. An amount equal to any
Realized Losses incurred with respect to a Depletion Loss shall be allocated on
such Distribution Date (i) to the Class 1-M Certificates, pro rata among the
Certificates of such Class in proportion to their outstanding Certificate
Principal Balances immediately prior to such Distribution Date, unless and until
the outstanding Certificate Principal Balance thereof has been reduced to zero,
and (ii) thereafter to the Priority Certificates, pro rata among the
Certificates of each Class of such Certificates in proportion to their
outstanding Certificate Principal Balances immediately prior to such
Distribution Date, provided that Depletion Losses allocated to the Priority
Certificates shall be allocated first to the Class 1-H Certificates in an amount
equal to the applicable Class 1-H Fraction multiplied by the Realized Loss for
each respective Mortgage Loan. The amount of any Realized Loss other than a
Depletion Loss, including with respect to a Special
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Hazard Loss Loan, a Fraud Loss Loan or a Bankruptcy Loss Loan, will be allocated
first to the Class 1-H Certificates in an amount equal to the applicable
Class 1-H Fraction multiplied by the Realized Loss for the respective Mortgage
Loan, and then to each remaining Class of Certificates on a pro rata basis in
accordance with the Certificate Principal Balances thereof immediately prior to
such Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated, which allocation shall be deemed to
have occurred on such Distribution Date.
SECTION 4.04 Distribution on the Uncertificated
----------------------------------
REMIC I Regular Interests.
-------------------------
(a) On each Distribution Date the Trustee shall be deemed to
distribute to itself, as a holder of the Uncertificated REMIC I Regular
Interests, the Uncertificated REMIC I Regular Interest Distribution Amounts in
the following order of priority, in each case to the extent of the Available
Distribution Amount:
(i) Uncertificated Accrued Interest on the Uncertificated REMIC I
Regular Interests for such Distribution Date, plus any Uncertificated
Accrued Interest thereon remaining unpaid from any previous Distribution
Date; and
(ii) In accordance with the priority set forth in Section 4.04(d),
the sum of the amounts distributable on the Class 1-A, 1-B, 1-C, 1-E, 1-H,
1-M and 1-R Certificates under Section 4.02(a)(i)(B), (iii) and (iv), as
allocated thereto pursuant to Section 4.02(a)(i)(B), which sum shall be
applied to reduce the Uncertificated Principal Balance of such
Uncertificated REMIC I Regular Interests.
(b) The amount described in Section 4.04(a)(ii) shall be deem
distributed to Uncertificated REMIC I Regular Interests U, Uncertificated REMIC
I Regular Interest V, Uncertificated REMIC I Regular Interest W and
Uncertificated REMIC I Regular Interest Z, respectively, with the amount to be
distributed allocated among such interests in accordance with the priority
assigned to the (a) Class 1-R Certificates, (b) Class 1-A, 1-B, 1-E and 1-M
Certificates, (c) Class 1-C Certificates and (d) Class-1-H Certificates,
respectively, under Section 4.02(a)(i)(B) until the Uncertificated Principal
Balance of each sum interest is reduced to zero.
(c) In determining from time to time the Uncertificated REMIC I
Regular Interest U Distribution Amount, Uncertificated REMIC I Regular Interest
V Distribution Amount, Uncertificated REMIC I Regular Interest W Distribution
Amount, Uncertificated REMIC I Regular Interest X Distribution Amount,
Uncertificated REMIC I Regular Interest Y Distribution Amount and Uncertificated
REMIC I Regular Interest Z Distribution Amount,
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Realized Losses allocated to the Class 1-R Certificates under Section 4.03(c)
shall be deemed allocated to Uncertificated REMIC I Regular Interest U, Realized
Losses allocated to the Class 1-A, 1-B, 1-E and 1-M Certificates under Section
4.03(c) shall be deemed allocated to Uncertificated REMIC I Regular Interest V,
Realized Losses allocated to the Class 1-C and Class 1-D Certificates under
Section 4.03(c) shall be deemed allocated to Uncertificated REMIC I Regular
Interest W, Realized Losses allocated to the Class 1-F Certificates under
Section 4.03(c) shall be deemed allocated to Uncertificated REMIC I Regular
Interest X, Realized Losses allocated to the Class 1-G Certificates under
Section 4.03(c) shall be deemed allocated to Uncertificated REMIC I Regular
Interest Y and Realized Losses allocated to the Class 1-H Certificates under
Section 4.03(c) shall be deemed allocated to Uncertificated REMIC I Regular
Interest Z.
(d) On each Distribution Date the Trustee shall be deemed to
distribute from REMIC II, in the priority set forth in Section 4.02(a), to the
Class 1-A, 1-B, 1-C, 1-D, 1-E, 1-F, 1-G, 1-H and 1-M Certificates the amounts
distributable thereon, from the Uncertificated REMIC I Regular Interest
Distribution Amounts deemed to have been received by REMIC II from REMIC I under
this Section 4.04.
(e) Notwithstanding the deemed distributions on the Uncertificated
REMIC I Regular Interests described in this Section 4.04, distributions of funds
from the Certificate Account shall be made only in accordance with Section 4.02.
SECTION 4.05 Monthly Statements to
---------------------
Certificateholders.
------------------
(a) Not later than each Distribution Date the Trustee shall cause to
be forwarded by mail to each Certificateholder and the Rating Agencies a
statement setting forth:
(i) the amount of such distribution representing principal on
the Mortgage Loans, 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 and the respective
Certificate Principal Balances of all Classes after
giving effect to such distributions;
(ii) the amount of such distribution representing interest on
the Mortgage Loans and the portion of such distribution,
if any, representing a Monthly Advance of interest;
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(iii) the aggregate Principal Balances of the Mortgage Loans as
of the Close of business on such Distribution Date and
the amount of Principal Prepayments received during the
immediately preceding Collection Period;
(iv) the related amount of the Servicing Fees retained or
withdrawn from a Custodial Account or the Certificate
Account;
(v) the amount of Monthly Advances paid by each Servicer;
(vi) the number of aggregate amounts of Mortgage Loans (A)
delinquent (1) one month, (2) two months, (3) three
months or more and (B) in foreclosure;
(vii) the book value (within the meaning of 12 C.F.R. (S)571.13
or comparable provision) of any real estate acquired
through foreclosure or grant of a deed in lieu of
foreclosure;
(viii) the respective amounts, if any, of Realized Losses
allocated to the respective Classes of Certificates with
respect to such Distribution Date;
(ix) all Monthly advances recovered during the related
Collection Period;
(x) the amount of any tax imposed on a "prohibited
transaction" of the Trust Fund as defined in Section 860F
of the Code during the related Collection Period; and
(xi) the amount of any reduction in Certificate Principal
Balance of any Class attributable to the application of
Realized Losses thereto on the related Distribution Date.
(b) The Trustee's responsibility for disbursing the above information
to the Certificateholders is limited to the availability, timeliness and
accuracy of the information derived from each Servicer. The Trustee will send a
copy of each statement provided pursuant to this Section 4.04 to each Rating
Agency.
(c) Upon reasonable advance notice in writing if required by federal
regulation, the Trustee will provide to each
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Certificateholder which is a savings and loan association, bank or insurance
company certain reports and access to information and documentation regarding
the Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of the Office of Thrift Supervision or other regulatory
authorities with respect to investment in the Certificates; provided, that the
Trustee shall be entitled to be reimbursed by each such Certificateholder for
the Trustee's actual expenses incurred in providing such reports and access. The
Trustee will provide to any Certificateholder upon request the outstanding
Certificate Principal Balance as of such dates and, if then known by the
Trustee, the outstanding Certificate Principal Balances after giving effect to
any distribution to be made on the next following Distribution Date.
ARTICLE V
THE CERTIFICATES
SECTION 5.01 The Certificates.
----------------
The Certificates and the Trustee's certificate of authentication shall
be in substantially the forms set forth in Exhibits A and B 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 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 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, typewritten,
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.
The Class 1-A, Class 1-B, Class 1-C, Class 1-D, Class 1-E, Class 1-F,
Class 1-G, Class 1-H, Class 1-M and Class 1-R Certificates will be issued in
fully registered form only in minimum Initial Principal Balances of $25,000 and
integral multiples of $1,000 in excess thereof, provided that one Certificate of
each Class shall be issued in such Initial Certificate Principal Balance as may
be necessary such that the aggregate Certificate Principal Balances of each such
Class of Certificates equals the Initial Certificate Principal Balance for
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each Class and provided that one Class 1-R Certificate will be issued to
_______________ as "tax matters person" pursuant to Section 2.09(b), in a
minimum denomination representing a Percentage Interest of not less than
______%. The Class 1-RS Certificate will be issued as a single certificate.
The Certificate shall be executed by manual or facsimile on behalf of
the Depositor by its President or one of its Executive Vice Presidents, Senior
Vice Presidents, First Vice Presidents or Vice Presidents 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 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.
------------------------
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 8.13 hereof, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar 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 and of the same Class.
(b) At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of authorized denominations and the same
aggregate interest in the Trust Fund and of the same Class, upon surrender of
the Certificates to be exchanged at the office or agency of the Certificate
Registrar set forth in Section 8.13. 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
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of transfer in form satisfactory to the Trustee duly executed by the holder
thereof or his attorney duly authorized in writing.
(c) No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but 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 may be required.
(d) 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 in accordance with the Trustee's
customary procedures.
(e) Upon request, the Certificate Registrar will provide the Paying
Agent the names and addresses of the Certificateholders as of the Record Date
and the interest of each of them in the Trust Fund as of the Record Date.
(f) No transfer of any Class 1-RS Certificate shall be made unless
that transfer is made pursuant to an effective registration statement under the
1933 Act and effective registration or qualification under applicable state
securities laws, or is made in a transaction which does not require such
registration or qualification. In the event that a transfer is to be made
without registration or qualification, (a) the Trustee shall require, in order
to assure compliance with such laws, that the Certificateholder desiring to
effect the transfer and such Certificateholder's prospective transferee each
certify to the Trustee in writing in the forms set forth in Exhibit L and
Exhibit M the facts surrounding the transfer and (b) the Depositor or the
Trustee shall require an opinion of counsel satisfactory to the requesting party
that such transfer may be made without such registration or qualification, which
Opinion of Counsel shall not be required to be an expense of the Depositor or
the Trustee. Neither the Depositor nor the Trustee is obligated to register or
qualify the Class 1-RS Certificate under the 1933 Act or any other securities
law or to take any action not otherwise required under this Agreement to permit
the transfer of such Certificate or interest without registration or
qualification. Any such holder desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trustee and the Depositor against any liability
that may result if the transfer is not so exempt, or is not made in accordance
with such federal and state laws.
(g) No transfer of a Class 1-M or 1-RS Certificate shall be made to
any employee benefit plan that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code, or a trustee of any
such plan, unless the prospective transferee of a Certificateholder desiring to
transfer its Certificate provides the Trustee with a certification as set forth
in paragraph 6 of Exhibit L or Opinion
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of Counsel, or both at the request of the Trustee, which establishes to the
satisfaction of the Depositor and the Trustee that the purchase and holding of a
Certificate by or on behalf of such employee benefit plan would not result in
the assets of the Trust Fund being deemed to be "plan assets" and subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of the Code (or comparable provisions of any subsequent enactments),
would not constitute or result in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code, and would not subject the Depositor or the
Trustee to any obligation or liability (including liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement or
any other liability. The Trustee shall require that such prospective transferee
certify to the Trustee in writing the facts establishing that such transferee is
not such an employee benefit plan.
(h) The Class 1-RS Certificate shall not be transferred, sold,
pledged or otherwise disposed of to any Person having a net worth of less than
$10,000,000. In the event that such Class 1-RS Certificate is proposed to be
transferred, the proposed transferee shall, prior thereto, certify to the
Trustee in writing that it satisfies the net worth requirement set forth in the
preceding sentence.
(i) (A) Prior to the registration of any transfer, sale, pledge or
other disposition of the Class 1-RS Certificate or Class 1-R Certificate, the
proposed transferee shall provide to the Trustee a "transfer affidavit" in
substantially the form set forth in Exhibit J, to the effect that such
transferee (a) agrees to be bound by the terms of this Agreement and any
restrictions set forth on the face of the Class 1-RS Certificate or the Class 1-
R Certificate, as the case may be, (b) is not a Disqualified Organization (as
hereinafter defined) and (c) such other matters as may be set forth therein and
a "transferor certificate" of the transferor in the form of Exhibit K.
(B) Notwithstanding the registration in the Certificate Register of
any transfer, sale, pledge or other disposition of any such Certificate to a
Disqualified Organization, or if a transfer of a Class 1-R or Class 1-RS
Certificate is disregarded pursuant to the provisions of proposed Treasury
regulations Section 1.860E-1 or Section 1.860G-3 as such provisions may be
adopted as final regulations or applied without such adoption, such registration
shall be of no legal force or effect whatsoever and such Disqualified
Organization shall not be deemed to be a Certificateholder for any purpose
hereunder, including (but not limited to) the receipt of distributions on such
Class 1-RS or Class 1-R Certificate. In addition, any transfer, sale, pledge or
other disposition of any such Certificate to a Pass-Through Entity (as
hereinafter defined) shall not be effective unless the proposed transferee shall
have agreed in writing, in such form as the Trustee may require, to
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provide to the Trustee such information as the Trustee may reasonably require
concerning any record interest holder or principal of such Pass-Through Entity
who is or was a Disqualified Organization. Each holder of a Class 1-R or
Class 1-RS Certificate shall endeavor to remain permitted holder thereof and
shall promptly notify the Trustee of any change or impending change in such
status. Any holder of any such Class 1-RS Certificate or Class 1-R Certificate,
by its acceptance thereof, shall be deemed for all purposes to have consented to
the provisions of this Section 5.02(i).
(C) The restrictions described in this Section 5.02(i) shall not apply
to a transfer of any such Certificate if the Trustee has received an Opinion of
Counsel to the effect that the restrictions described in this Section 5.02(i)
are not necessary to avoid the imposition of tax on the Trust Fund or the
disqualification of the Trust Fund as a REMIC under the Code. For purposes of
this Section 5.02(i), (a) "Disqualified Organization" means (x) the United
States, any state or political subdivision thereof, any foreign government, any
international organization (other than a cooperative described in Section 521 of
the Code, that is exempt from tax imposed by Chapter 1 of the Code unless such
organization is subject to the tax imposed by Section 511 of the Code, or (z)
any organization described in Section 851 of the Code, a real estate investment
company described in Section 856 of the Code, a common trust fund or an
organization described in Section 1381(a) of the Code, (y) any partnership,
trust, or estate, or (z) any person holding the Class 1-R or Class 1-RS
Certificate as nominee for another person. No Class 1-R or Class 1-RS
Certificate shall be transferred to a non-"U.S. Person ." A "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 whose income from sources
without the United States is includable in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States.
(j) The Trustee shall have no liability to the Trust Fund arising from
a transfer of any such Certificate in reliance upon a certification, ruling or
Opinion of Counsel described in this Section 5.02; provided that the Trustee
shall not register the transfer of any Class 1-R or Class 1-RS Certificate if it
has actual knowledge that the proposed transferee does not meet the
qualifications of a permitted Holder of a Class 1-R or Class 1-RS Certificate as
set forth in this Section 5.02.
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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 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 replacement 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 Trustee, the Certificate Registrar and any agent of 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 this Agreement and for all other purposes
whatsoever, and neither the Trustee, the Certificate Registrar nor any agent of
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 of the Trust Fund, 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, if 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 ten Business Days after the
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receipt of such request, afford such Certificateholders access during normal
business hours to the most recent Record Date list of the Certificateholders
held by the Trustee, if any. If such Record Date 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 for the Certificateholders access to such list
promptly upon its receipt by the Trustee. The expense of providing any such
information requested by a Certificate shall be borne by the Certificateholders
requesting such information and shall not be borne by the Trustee or the
Certificate Registrar. 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 wad 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
Section 8.13 for transfer and exchange of Certificates and designates the office
described in Section 8.13 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
SECTION 6.01 Liabilities of the Depositor.
----------------------------
The Depositor shall 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.
----------------------------------------
The Depositor will keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware 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 respective duties under this Agreement.
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Any Person into which the Depositor may be merged or consolidated, or
any Person resulting from any merger or consolidation to which the Depositor
shall be a party, or any Person succeeding to the business of the Depositor,
shall be the successor of the Depositor hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
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 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 representations or warranties made by it herein or protect the
Depositor 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 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 respecting any matters arising hereunder. The Depositor
and any director, officer, employee or agent of the Depositor 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. The Depositor shall not 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 the Depositor
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 shall be entitled to be reimbursed therefor out of the
Certificate Account as set forth in Section 4.01. Such withdrawal shall be
accompanied by an Officer's Certificate given to the Trustee stating the reason
for such withdrawal.
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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 to remit to the Certificateholders, the Paying
Agent or to the Trustee any payment required to be made under the terms of
this Agreement or the related Warranty and Servicing Agreement, which
failure shall continue unremedied for a period of three Business Days after
the date upon which written notice of such failure shall have been given to
the Trustee by the Depositor or to the Trustee by the Holders of
Certificates having not less than 25% of the Voting Rights evidenced by the
Certificates; or
(ii) any failure by the Trustee, the Paying Agent or the
Servicer, respectively, to observe or perform in any material respect any
other of the covenants or agreements on the part of the Trustee or the
Paying Agent contained in this Agreement (except as set forth in
(iii) below) or in 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 Trustee
by the Depositor, or to 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 any Warranty
and Servicing Agreement shall prove to be materially incorrect as of the
time made in any respect that materially and adversely affects 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 120 days after the date on which written notice
thereof shall have been given to the related Servicer by the Trustee for
the benefit of the Certificateholders or by 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
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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 any Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(v) any 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 such Servicer or all or substantially all of the property of
such Servicer; or
(vi) any 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) either Rating Agency shall lower or withdraw the
outstanding rating of the Certificates because the existing or prospective
financial condition or mortgage loan servicing capability of any Servicer
is insufficient to maintain such outstanding rating; or
(viii) any failure of any Servicer to make any Monthly Advance
in the manner and at the time required to be made from its own funds
pursuant to the related Warranty and Servicing Agreement which continues
unremedied after 12 noon, __________ time, on the Business Day prior to the
Distribution Date.
If an Event of Default due to the actions or inaction of a Servicer
described in clauses (i) - (viii) of this Section 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 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
affected Servicer (with a copy to the Rating Agencies), may direct the Trustee
to terminate all of the rights and obligation of such Servicer under the
Warranty and Servicing Agreement and in and to the Mortgage Loans and the
proceeds thereof in accordance with the related Warranty and Servicing
Agreement.
If an Event of Default due to the actions or inaction of the Trustee
or the Paying Agent described in clauses (i) or (ii) shall occur, the
Certificateholders shall have the right to
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terminate the rights and obligations of the Trustee hereunder as set forth in
Section 8.07.
SECTION 7.02 Trustee to Act;Appointment of
-----------------------------
Successor.
---------
On and after the time a Servicer receives a notice of termination
pursuant to Section 7.01 hereof, subject to the provisions of the related
Warranty and Servicing Agreement, the Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under the related Warranty
and Servicing Agreement and the transactions set forth or provided for herein
and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof,
provided that the Trustee shall not be deemed to have made any representation or
warranty as to any Mortgage Loan made by the Servicer in the related Warranty
and Servicing Agreement and shall not effect any repurchases or substitutions
of any Mortgage Loan under the related Warranty and Servicing Agreement. As
compensation therefore, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Servicer would have been entitled to charge to the
related Custodial Account if the Servicer had continued to act thereunder.
Notwithstanding the foregoing, if the Trustee has become the successor to the
Servicer in accordance with this Section 7.02 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 Monthly Advances), appoint, or petition a court
to competent jurisdiction to appoint, any established mortgage loan servicing
institution the appointment of which does not adversely affect the then current
rating to the Certificates as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer. Such Servicer shall be required to provide such periodic
information as to the Mortgage Loans as the Trustee shall determine. Pending
appointment of a successor to the 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
Servicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Neither the Trustee nor any other successor servicer shall be
deemed to be in default hereunder by reason of any failure to make, or any delay
in making, any distribution hereunder or any portion hereof caused by the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it.
Any successor to the Servicer as servicer shall during the term of its
service as servicer maintain in force the policy
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or policies that the Servicer is required to maintain pursuant to the related
Warranty and Servicing Agreement.
SECTION 7.03 Notification to Certificateholders.
----------------------------------
(a) Upon any termination or appointment of a successor to a Servicer,
the Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to the
Rating Agencies.
(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 with
respect to the Trust Fund to perform such duties and only such duties as are
specifically set forth in this Agreement. In case and 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 person would exercise or use under the
circumstances in the conduct of such person's own affairs. Any permissive right
of the Trustee set forth in this Agreement shall not be construed as a duty.
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. The Trustee shall have no duty to
recompute, recalculate or verify the accuracy of any resolution, certificate,
statement, opinion, report, document, order or other instrument so furnished to
the Trustee.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own misconduct, its negligent failure to perform
its obligations in compliance with this Agreement, or any liability which would
be imposed by reason of its willful misfeasance or bad faith; provided, however,
that:
(i) prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default
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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 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 which it reasonably believed in good faith
to be genuine and to have been duly executed by the proper authorities
respecting any matters arising hereunder;
(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 the Trustee was negligent or acted in bad
faith or with willful misfeasance; 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 Holders of Certificates evidencing not
less than 25% of the Voting Rights allocated to 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.
(iv) No provision of this Agreement or the Warranty and
Servicing Agreement shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers
if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
Except with respect to an Event of Default of the Trustee or Paying
Agent described in clauses (i) or (ii) of Section 7.01, the Trustee shall not be
deemed to have knowledge of any Event of Default or event which, with notice or
lapse of time, or both, would become an Event of Default, unless a Responsible
Officer of the Trustee shall have received written notice thereof from a
Servicer, the Depositor or a Certificateholder, or a Responsible Officer of the
Trustee has actual notice thereof, and in the absence of such notice no
provision hereof requiring the taking of any action or the assumption of any
duties or responsibility by the Trustee following the occurrence of any Event of
Default or event which,
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with notice or lapse of time or both, would become an Event of Default, shall
be effective as to the Trustee.
SECTION 8.02 Certain Matters Affecting the Trustee.
-------------------------------------
(a) Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon and shall be protected
in acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) the trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute,
conduct or defend and litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default (which has not 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 circumstances in the
conduct of such person's own affairs;
(iv) 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;
(v) 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;
(vi) prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of
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Default that may be occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certification, 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 evidencing not less than 25%
of the Voting Rights allocated to each Class of Certificates; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
expense or liability as a condition to taking any such action. The
reasonable expense of every such investigation shall be paid by the Trust
Fund in the event that such investigation relates to an Event of Default,
if an Event of Default shall have occurred and is continuing, and otherwise
by the Certificateholders requesting the investigation;
(vii) 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;
(viii) the Trustee shall not be required to expend its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such liability is not
assured to it; and
(ix) the Trustee shall not be liable for any loss on any
investment of funds pursuant to this Agreement.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03 Trustee not Liable for Certificates
-----------------------------------
or Mortgage Loans.
-----------------
The recitals contained herein shall be taken as the statements of the
Depositor and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement, the Certificates or of any Mortgage Loan or related document. The
Trustee shall not be accountable for the use or
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application by the Depositor or any Servicer of any funds paid to the Depositor
or any Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Certificate Account by the Depositor or any 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 Trustee's Expenses.
------------------
The Depositor covenants and agrees to 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 and the Warranty and Servicing Agreements (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ, whether or not such expenses are incurred
in connection with any Opinion of Counsel required or permitted to be obtained
by the Trustee), except any such expense, disbursement or advance that
constitutes a specific liability of the Trustee pursuant to Section 2.09(c) or
any expense, disbursement or advance as may arise from the Trustee's negligence,
willful misfeasance or bad faith or as a result of a breach of the Trustee's
obligations hereunder. 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 that
constitutes a specific liability of the Trustee pursuant to Section 2.09(c) or
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 or as a result of a
breach of the Trustee's obligations hereunder; provided that (i) with respect to
any such legal action the Trustee shall have given the Depositor notice thereof
promptly after the Trustee shall have knowledge thereof and (ii) while
maintaining control over its own defense in any such legal action, the Trustee
shall cooperate and consult fully with the Depositor in preparing such defense.
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 Fund therefor.
The Trustee shall be required to pay all expenses, except as expressly
provided herein, incurred by it or its agents in connection with its activities
hereunder and shall be entitled
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to reimbursement therefor as provided in this Section 8.05. The Trustee shall in
no event acquire any lien upon the Trust Fund, or any claim against the Holders
by reason of nonreceipt of any fees and expenses and the Trustee shall, unless
and until the effective date of any resignation of the Trustee under Section
8.07, continue to perform its obligations hereunder notwithstanding such
nonreceipt.
SECTION 8.06 Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a corporation or
association having its principal office in a state and city acceptable to the
Depositor and organized and doing business under the laws of such state or the
United States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, and
subject to supervision or examination by federal or state authority. If such
corporation or 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 8.06 the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of 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 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, and the
Rating Agencies, 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)
acceptance by a successor trustee in accordance with Section 8.08 meeting the
qualifications set forth in Section 8.06. 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 8.06 hereof and shall fail to resign after
written request thereto 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
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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 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. Notice of any removal of the
Trustee and acceptance of appointment by the successor trustee shall be given to
the Rating Agencies.
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 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 and its appointment
shall not adversely affect the then current rating of the Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Trustee 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 Trustee fails to mail such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.
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SECTION 8.09 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 business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such Person 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 Authentication 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 or association 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
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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 Agency 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 Agency 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
Registers. 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: __________________________
As Authenticating Agent
By: _________________________"
Authorized Officer
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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 the
time be located, 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 Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the applicable 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 Depositor and the
Trustee may consider necessary or desirable. If the Depositor shall not have
joined in such appointment within 15 days after the receipt by it of a request
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, except for any obligation of the Trustee under this Agreement
to advance funds on behalf of any Servicer, 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 agree to be performed by the Trustee (whether as Trustee
hereunder or as successor to a Servicer), 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
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(iii) 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
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 Paying Agent.
------------
The Trustee may appoint a Paying Agent hereunder. In the event of any
such appointment, no less than one Business Day prior to each Distribution Date,
the Trustee shall to the extent required by this Agreement deposit or cause to
be deposited with the Paying Agent a sum sufficient to make the payments to
Certificateholders in the amounts and in the manner provided for in
Section 4.02, such sum to be held in trust for the benefit of the
Certificateholders. The Trustee shall cause the Paying Agent to perform each of
the obligations of the Paying Agent set forth herein, including making such
calculations required of the Paying Agent herein as are required in connection
with distributions on the Certificates and shall be liable to the
Certificateholders for failure of the Paying Agent to perform such obligations.
The Trustee shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums held by
it for the payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders.
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SECTION 8.13 Certificate Register.
--------------------
The Certificate Registrar is _______________________. The office of
the Certificate Registrar for purposes of receipt of notices and demands is
_____________________.
SECTION 8.14 Monthly Advances.
----------------
In the event that any Servicer fails to make a Monthly Advance
required to be made pursuant to the related Warranty and Servicing Agreement on
or before 8 a.m., __________ time, on the Servicer Advance Date, the Trustee
shall provide to such Servicer by telecopy notice of such failure and the amount
of any such shortfall on or before 12 noon, __________ time on such date. If
such Servicer fails to make the Monthly Advance on or prior to 12 noon,
__________ time, on the next Business Day, the Trustee shall provide to such
Servicer by telecopy notice of such an Event of Default and shall present a
claim under the Pool Insurance Policy in order to receive an amount equal to
such Monthly Advance from the Pool Insurer at least one Business Day prior to
the Distribution Date and (ii) to the extent the coverage of the Pool Insurance
Policy has been exhausted, deposit in the Certificate Account an amount equal to
the excess of (a) Monthly Advances required to be made by such Servicer pursuant
to the related Warranty and Servicing Agreement over (b) the amount of Monthly
Advances made by such Servicer with respect to such Distribution Date; provided
that the Trustee shall not be required to make such Monthly Advances if
prohibited by law or if it determines that such Monthly Advance would be a
Nonrecoverable Advance. The Trustee shall be entitled to be reimbursed from the
Certificate Account for Monthly Advances and Nonrecoverable Advances made by it
pursuant to this section 8.14 in like manner as if it were the Servicer.
ARTICLE IX
TERMINATION
SECTION 9.01 Termination upon Liquidation or
-------------------------------
Repurchase of All Mortgage Loans.
--------------------------------
Subject to Section 9.04, the obligations and responsibilities of the
Depositor and the Trustee created hereby with respect to 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 on
any Distribution Date on or after the date on which the aggregate Principal
Balances of such Mortgage Loans at the time of purchase is less than 10% of the
aggregate Principal Balances of the Mortgage
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Loans on the Cut-off Date (an "Optional Termination Date"), and (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
required to be distributed to them pursuant to this Agreement. 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 Mortgage Loan Repurchase Price for any such Optional Termination
of the Trust Fund shall be equal to the sum of (1) the greater of: (a) the
aggregate Principal Balance of the Mortgage Loans as of the date of repurchase,
together with accrued and unpaid interest thereon at the applicable Net Mortgage
Rate with respect to each Mortgage Loan through the last day of the month of
such repurchase or (b) the fair market value thereof as determined by the
applicable Servicer and (2) the appraised value of any property acquired in
respect of the Mortgage Loans. The Trustee shall give notice to the Rating
Agencies of Depositor's election to purchase the Mortgage Loans pursuant to this
Section 9.01 and of the Optional Termination Date. The right of the Depositor
to repurchase the Mortgage Loans is conditioned on the Depositor's having
previously given notice of termination as required by Section 9.02.
SECTION 9.02 Procedure Upon Optional Termination.
-----------------------------------
(a) In case of any Optional Termination pursuant to Section 9.01, the
Depositor shall, at least 20 days prior to the date notice is to be mailed to
the affected Certificateholders (unless a shorter period shall be satisfactory
to the Trustee) notify the Trustee of such Optional Termination Date, and of the
applicable repurchase price of the Mortgage Loans to be repurchased.
(b) Any repurchase of the Mortgage Loans by the Depositor shall be
made on an Optional Termination Date by deposit of the applicable repurchase
price into the Certificate Account, as applicable, on or before the Distribution
Date on which such repurchase is effected. Upon receipt by the Trustee of an
Officers' Certificate of the Depositor certifying as to the deposit of such
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 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 Mortgage Loans so
purchased and shall transfer or deliver to the Depositor the repurchased
Mortgage Loans. Any
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distributions on the Mortgage Loans received by the Trustee subsequent to the
Optional Termination Date shall be promptly remitted by it to the Depositor.
(c) Notice of the Distribution Date on which the Depositor anticipates
that the final distribution shall be made (whether upon Optional Termination or
otherwise), shall be given promptly by the Depositor to the Trustee and by the
Trustee by first class mail to Holders of the affected 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 affected Certificates will be made upon
presentation and surrender of such Certificates at the office or agency 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 such
Certificates at the office or agency maintained for such purposes (the address
of which shall be set forth in such notice). The Trustee shall give such notice
to the Certificate Registrar at the time such notice is given to Holders of the
affected Certificates.
(d) In the event that any Certificateholders shall not surrender
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 such 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 Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain subject to
the Trust Fund. If the remaining Certificateholders do not surrender their
Certificates for cancellation and receipt of the final distribution with respect
thereto within two years, the Trustee shall pay the amount of such unclaimed
final distribution to the Class 1-R Certificateholders and no other
Certificateholders shall have any further claim to such amounts.
SECTION 9.03 Termination of Remic II.
-----------------------
REMIC II shall be terminated on the earlier of the Final Scheduled
Distribution Date and the date on which it is deemed to receive the last deemed
distributions on the Uncertificated REMIC Regular Interests and the last
distribution due on the Class 1-M Certificates, Priority Certificates and Class
1-RS Certificates is made.
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SECTION 9.04 Additional Termination Requirements.
-----------------------------------
(a) In the event the Depositor exercises its purchase option pursuant
to Section 9.01, REMIC I and REMIC II shall be terminated in accordance with the
following additional requirements, unless the Trustee has received an Opinion of
Counsel to the effect that the failure of REMIC I and REMIC II, as the case may
be, to comply with the requirements of this Section 9.04 will not (i) result in
the imposition of taxes on a "prohibited transaction" of REMIC I or REMIC II, as
the case may be, as described in Section 860F of the Code, or (ii) cause either
REMIC I or REMIC II to fail to qualify as a REMIC at any time that any Priority
Certificates or Class 1-M Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date set forth
in the notice given by the Depositor under Section 9.02, the Class 1-RS
Certificateholder shall adopt a plan of complete liquidation of the REMIC I or
REMIC II, as the case may be, and
(ii) At or after the time of adoption of any such plan of complete
liquidation for the REMIC I or REMIC II and at or prior to the final
Distribution Date, the Trustee shall sell all of the assets of the Trust Fund to
the Depositor for cash; provided, however, that in the event that a calendar
quarter ends after the time of adoption of such a plan of complete liquidation
but prior to the final Distribution Date, the Trustee shall not sell any of the
assets of the Trust Fund prior to the close of that calendar quarter.
(b) By its acceptance of the Class 1-RS Certificate, the Holder
thereof hereby agrees to adopt such a plan of complete liquidation and to take
such other action in connection therewith as may be reasonably required to
liquidate and otherwise terminate the Trust Fund.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor
and the Trustee, without the consent of any of the Certificateholders, (i) to
cure any ambiguity, (ii) to correct or supplement any provisions herein which
may be inconsistent with any other provisions herein, (iii) to maintain the
qualification of the Trust Fund as a REMIC, or (iv) to make any other provisions
with respect to matters or questions arising under this Agreement, provided that
such action shall not adversely
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affect in any material respect the interests of any Certificateholder.
(b) This agreement may be amended from time to time by the Depositor
and the Trustee with the consent of the Holders of Certificates evidencing, in
the aggregate, not less than 66-2/3% of the 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 (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 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 of Certificates in
a manner other than as set forth in (i) above without the consent of the Holders
of Certificates evidencing not less than 66-2/3% of the Voting Rights of such
Class, or (iii) reduce the aforesaid percentages of Voting Rights, the holders
of which are required to consent to any such amendment without the consent of
100% of the Holders of Certificates of the Class affected thereby.
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 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.
Notwithstanding any contrary provisions of this Agreement, the Trustee
shall not consent to any amendment to this Agreement pursuant to this Section
10.01(b) unless it shall have first received an Opinion of Counsel to the effect
that such amendment will not cause the Trust Fund to fail to qualify as a REMIC
at any time that any Certificates are outstanding.
(c) Promptly after the execution of any amendment to this Agreement,
the Trustee shall furnish written notification of the substance of such
amendment to each Certificateholder and the Rating Agencies.
SECTION 10.02 Recordation of Agreement; Counterparts.
--------------------------------------
(a) 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 only upon direction of the Depositor at the
expense of the Certificateholders accompanied by an
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Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders of the Trust Fund.
(b) 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.
--------------------
(a) The execution and delivery of this Agreement shall constitute an
acknowledgement by the Trustee on behalf of the Certificateholders that the
Depositor intends hereby to establish (for federal income tax purposes) two
separate trusts each of which will qualify as a REMIC. The powers granted and
obligations undertaken in this Agreement shall be construed so as to further
such intent.
(b) It is the express intent of the Depositor that the conveyance by
the Depositor to the Trustee of (i) the Mortgage Loans as provided for in
Section 2.01; and (ii) the Uncertificated REMIC I Regular Interests as provided
for in Section 2.07 be, and be construed as, a sale by the Depositor to the
Trustee of (i) the Mortgage Loans, and (ii) the Uncertificated REMIC I Regular
Interests for the benefit of the Certificateholders. Further, it is not
intended that any such conveyance be deemed to be a pledge of (i) the Mortgage
Loans or (ii) the Uncertificated REMIC I Regular Interests by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor. However, in
the event that (i) the Mortgage Loans or (ii) the Uncertificated REMIC I Regular
Interests are held to be property of the Depositor, or if for any reason this
Agreement is held or deemed to create a security interest in (i) the Mortgage
Loans or (ii) the Uncertificated REMIC I Regular Interests, then it s intended
that (a) this Agreement shall also be deemed to be a security agreement within
the meaning of Articles 8 and 9 of the New York Uniform Commercial Code and the
Uniform Commercial Code of any other applicable jurisdiction; (b) each of the
conveyances provided for in Sections 2.01 and 2.07 shall be deemed to be (1) a
grant by the Depositor to the Trustee of a security interest in all of the
Depositor's right, title and
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interest, whether now owned or hereafter acquired, in and to (A) the Mortgage
Loans, including the Mortgage Notes, the Mortgages and all other documents in
the related Mortgage Files, (B) all amounts payable to the holders of the
Mortgage Loans in accordance with the terms thereof, (C) the Uncertificated
REMIC I Regular Interests, and (D) 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 any other
agent of the Trustee of Mortgage Notes or such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be a "possession by the secured party", or possession by a purchaser
or a person designated by such secured party, for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code (including, without
limitation, Sections 9-305, 8-313 or 8-321 thereof); and (d) notifications to
persons holding such property, and acknowledgements, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgements, 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.
SECTION 10.05 Notices.
-------
In addition to other notices provided under this Agreement, the
Trustee shall notify the Rating Agencies in writing: (a) of any substitution or
repurchase of any Mortgage Loan; (b) of any payment or draw on any insurance
policy applicable to the Mortgage Loans; (c) of the final payment of any amounts
owing to a Class of Certificates; (d) any Event of Default under this Agreement;
and (e) in the event any Mortgage Loan is purchased at a Purchase Price in
accordance with this Agreement less than the sum of 100% of the Principal
Balance of the Mortgage Loan on the date of such purchase and accrued and unpaid
interest thereon at the Net Mortgage Rate to the first day of the month
following such purchase.
All directions, 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, 55 East 52nd Street, New York, New York 10055,
Attention: President and (b) in the case of the Trustee, ________________,
Attention: ______________, or such other address as may hereafter be furnished
to the Depositor in writing by the Trustee; and (c) in the case of the Rating
Agencies, Standard & Poor's Corporation, 25 Broadway, New York, New York 10004
and Fitch Investors Service, Inc., One State Street Plaza, 33rd Floor, New York,
New York 10004, Attention Structured
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Finance. Notices to Certificateholders shall be deemed given when mailed, first
class postage prepaid.
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 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 any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
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
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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 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 10.08 Certificates Nonassessable and
-------------------------------
Fully Paid.
----------
It is the intention of the Depositor 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.
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IN WITNESS WHEREOF, the Depositor and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly authorized
and their respective seals, duly attested, to be hereunto affixed, all as of the
day and year first above written.
ASSET BACKED SECURITIES CORPORATION,
as Depositor
By:_________________________________
Name:
Title:
____________________________________
as Trustee
By:_________________________________
Name:
Title:
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State of New York )
) ss.:
County of New York )
On this ____ day of ________, 199_ before me personally appeared
______________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument as
____________________ of _______________, and 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 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 ____ day of ________, 199_ before me, a Notary Public in and
for said State, personally appeared ______________, personally known to me to
be ____________________ of Asset Backed Securities Corporation, one of the
corporations that executed the within instrument and also know 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 affixed my official
seal the day and year in this certificate first above written.
____________________________
Notary Public
[Notarial Seal]
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EXHIBIT A
[Form of Priority and Class 1-M Certificates]
[ANY SALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS 1-R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDED A TRANSFER AFFIDAVIT TO THE
TRUSTEE TO THE EFFECT THAT (1) SUCH TRANSFEREE AGREES TO BE BOUND BY THE TERMS
OF THE AGREEMENT AND ALL RESTRICTIONS SET FORTH ON THE FACE HEREOF, (2) SUCH
TRANSFEREE IS NOT EITHER (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR
ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION
(OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT
FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION
DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY SUCH PERSON DESCRIBED IN
THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A
"DISQUALIFIED ORGANIZATION") OR (D) AN AGENT OF A DISQUALIFIED ORGANIZATION, (3)
NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX AND
(4) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF SUCH TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS 1-
R CERTIFICATE TO A DISQUALIFIED ORGANIZATION, OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, OR TO ANY OTHER PROHIBITED TRANSFEREE AS PROVIDED IN THE
AGREEMENT, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT
WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY
PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS
ON THIS CERTIFICATE. EACH HOLDER OF A CLASS 1-R CERTIFICATE BY ACCEPTANCE OF
THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.]
[THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.]
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE CODE.]
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY THEIR
AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS CERTIFICATE IS
NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR INSTRUMENTALITY.
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<PAGE>
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING FEDERAL
INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS INSTRUMENT/*/:
a. OID..............................
b. Issue Date.......................
c. Rate At Which Interest is Payable
As Of the Issue Date...........
d. Yield to Maturity................
e. OID Allocable to Short Period
f. Short Period Yield Computation
Method.........................
________________________
/*/ The numbers set forth here have been calculated using a prepayment
assumption under Code Section 1272(a)(6)(B)(iii) equal to a Standard
Prepayment Assumption ("SPA") of ___%, which represents an assumed rate of
prepayment each month relative to the then-outstanding principal balance of
the mortgage loans. The ___% SPA assumes prepayment rates of .__% per annum
of the then outstanding principal balance of such mortgage loans in the
first month increased by .___% per annum each month thereafter until the
30th such month. For the 30th month and for each month thereafter during
the lives of the mortgage loans, ___% of SPA assumes a constant prepayment
rate of ___% per annum.]
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<PAGE>
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES _______, CLASS ___
______% CERTIFICATE RATE
Evidencing an undivided interest in a Trust Fund whose assets consists of a pool
of conventional, level-payment, fixed-rate, fully amortizing mortgage loans
transferred by
ASSET BACKED SECURITIES CORPORATION
CUSIP $______________ INITIAL CERTIFI-
CATE PRINCIPAL
BALANCE
Certificate No. _________ $____________ INITIAL CLASS ___
PRINCIPAL BALANCE
First Distribution Final Scheduled
Date: Distribution Date:
THIS CERTIFIES THAT __________________________is the registered owner
of a beneficial interest in the Trust Fund referred to below consisting of a
pool of conventional, level-payment, fixed-rate, fully-amortizing mortgage loans
(the "Mortgage Loans") transferred to the Trust Fund by Asset Backed Securities
Corporation (the "Depositor"), and certain related property transferred to the
Trust Fund by the Depositor. The Trust Fund was created pursuant to the
Standard Terms and Provisions of Pooling and Servicing and Reference Agreement,
dated as of _________1, 199__ (the "Agreement"), between the Depositor and
__________________________, as trustee (the "Trustee", which term includes any
successor entity under the Agreement), summary of certain of the pertinent
provisions of which is set forth herein. The aggregate principal balance of the
Mortgage Loans included in the Trust Fund as of _________, 199__ (the "Cut-off
Date"), after application of payments due on or before such date, was
approximately $___________________. 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.
This Certificate is one of a duly authorized issue of certificates of
Asset Backed Securities Corporation designated as its Conduit Mortgage Pass-
Through Certificates, Series ____, which is comprised of eleven classes of
Certificates: the Class 1-R, 1-A, 1-B, 1-C, 1-D, 1-E and 1-M Certificates (the
"Fixed Rate Certificates"), the Class 1-F and 1-G Certificates (the "Variable
Rate Certificates"), the Class 1-H Certificates (the "Principal Only
Certificates") and the Class 1-RS Certificates (the "REMIC I Residual Interest
Certificates"). The Certificates (other than the Class 1-M Certificates) are
sometimes referred to
A-3
<PAGE>
as the "Priority Certificates." Reference is hereby made to the Agreement for a
statement of the respective rights thereunder of the Depositor, the Trustee and
the Holders of the Certificates and the terms upon which the Certificates are
authenticated and delivered. This Certificate represents an interest in the
Trust Fund, which Trust Fund consists of (i) the Mortgage Loans and all
distributions thereon payable after the Cut-off Date, net of any amounts payable
to the Trustee and any premiums for the Pool Insurance Policy, the Special
Hazard Insurance Policy and the Mortgagor Bankruptcy Bond 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
amounts payable to the Trustee or any Servicer and any premiums for the Pool
Insurance Policy, the Special Hazard Insurance Policy and the Mortgagor
Bankruptcy Bond, as provided in the Agreement, (iii) property acquired by
foreclosure, deed in lieu of foreclosure or otherwise with respect to the
Mortgage Loans, (iv) the interest of the Trust Fund in any insurance policies
with respect to the Mortgage Loans, and (v) all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquid
property.
The Priority Certificates initially evidence in the aggregate an
approximate ___% beneficial interest in the Trust Fund. The Class 1-M
Certificates initially evidence in the aggregate the remaining approximate ___%
beneficial interest in the Trust Fund. The interests of the Priority
Certificateholders in the Trust Fund will vary as described herein and in the
Agreement.
The Trustee or Paying Agent shall distribute from the Certificate
Account, to the extent of available funds, on the 25th day of each calendar
month, or, if such 25th day is not a Business Day, the Business Day immediately
following such 25th 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 (each a "Record Date"), a principal amount equal to
the product of the Percentage Interest evidenced by this Certificate and that
portion of the Available Distribution Amount allocated to such Class of
Certificates on such Distribution Date. Distributions of interest will be made
on each Distribution Date, to the extent of available funds, in an amount equal
to thirty days' interest accrued at a rate of _____% per annum (the "Certificate
Rate") on a balance equal to the outstanding Certificate Principal Balance of
this Certificate as of the day immediately preceding the related Distribution
Date reduce by its pro rata portion of the aggregate shortfalls of interest
allocated to such class of Certificates.
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<PAGE>
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made to Certificateholders.
The rights of the Class 1-M Certificateholders to receive
distributions in respect of the Class 1-M Certificates on any Distribution Date
are subordinated to the rights of the Priority Certificateholders to receive
distributions in respect of the Priority Certificates to the extent set forth in
the Agreement. On each Distribution Date, the Priority Certificateholders will
be paid prior to the payments to the Class 1-M Certificateholders. The Priority
Percentage is equal to the aggregate Certificate Principal Balance of the
Priority Certificates divided by the aggregate Certificate Principal Balance of
all the Certificates. The class 1-M Percentage is equal to 100% minus the
Priority Percentage. In the event that coverage under the Mortgage Pool
Insurance Policy is exhausted or the Pool Insurer fails to pay valid claims for
any reason, the Class 1-M Percentage and the Priority Percentage will vary due
to the allocation of Depletion Losses first to the Class 1-M Certificates by
reducing the Certificate Principal Balance of such Certificates. After the
Certificate Principal Balance of the Class 1-M Certificates has been reduced to
zero, Depletion Losses will be allocated pro rata (by Certificate Principal
Balance) to all of the Classes of Certificates then outstanding.
If at any time the Priority Percentage increases to 100%, all future
losses or delinquencies on the Mortgage Loans will be borne by the Priority
Certificateholders.
There shall be a Pool Insurance Policy, a Special Hazard Insurance
Policy and a Mortgagor Bankruptcy Bond with respect to the Mortgage Loans. The
Pool Insurance Policy will be initially issued by ______ and will cover losses
by reason of default on the Mortgage Loans in an amount of approximately ___% of
the aggregate principal balance of those Mortgage Loans on the Cut-off Date
which are not covered as to their entire principal balances by Primary Mortgage
Insurance Policies. The Special Hazard Insurance Policy will be initially
issued by ____ in an amount equal to ____________________________________. A
Mortgagor Bankruptcy Bond will be issued by ___ and will cover, up to the amount
of coverage thereunder from time to time, (i) certain losses resulting form a
reduction by a bankruptcy court of the principal balance of a Mortgage Loan or
the scheduled payments of principal and interest on a Mortgage Loan and (ii) the
unpaid interest on the amount of any principal reduction during the pendency of
a proceeding under the Bankruptcy Code.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Holder hereof entitled
thereto at the address appearing in the Certificate Register or, if such Holder
holds one or more of the
A-5
<PAGE>
Certificates with an aggregate initial Certificate Principal Balance or Notional
Amount of at least $5,000,000 by wire transfer in immediately available funds to
the account of such Certificateholder designated in writing to the Trustee at
least five Business Days prior to the applicable Record Date. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice 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.
The Agreement permits, with certain exceptions as 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
Agreement at any time by the Depositor and the Trustee with the consent of the
Holders of Certificates evidencing Voting Rights aggregating not less than
66-2/3% of the Voting Rights of all the Certificates; 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 Mortgage Loans are required
to be distributed in respect of any Certificates without the consent of the
Holder of such Certificate, (ii) adversely affect in any material respect the
interests of the Holders of a Class of Certificates in a manner other than in
(i) above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class, or (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the Depositor
and the Trustee to amend certain terms and conditions set forth in the Agreement
without the consent of Holders of the Certificates. At any time that any of the
Priority Certificates or that Class 1-M Certificates are outstanding, ___% of
all Voting Rights will be allocated among the holders of the Class 1-A,
Class 1-B, Class 1-C, Class 1-E, Class 1-H, Class 1-M and Class 1-R
Certificates, in proportion to their then outstanding Certificate Principal
Balances, and __%, __%, __% and __% of all Voting Rights will be allocated among
holders of the Class 1-D, Class 1-F, Class 1-G and Class 1-RS Certificates,
respectively, in proportion to the percentage interests evidenced by their
respective Certificate Principal Balances or interests.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register upon surrender of this Certificate for registration of
transfer at, _____________________
A-6
<PAGE>
_______________________, and at any agency of the trustee located at
________________________________________________________________________________
________, 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 the same Class and of authorized denominations, and for the same
aggregate interest in the Trust Fund will be issued to the designated transferee
or transferees.
The Certificates will be issued in fully registered form in minimum
denominations of $25,000 principal or notional amount, and in integral multiples
of $1000 in excess of such amount; provided, however, that one Certificate of
each Class may be issued in such lesser amount as is required so that the
aggregate of each Class of Certificates equals its respective Certificate
Principal Balance. As provided in the Agreement and subject to certain
limitations therein set forth, this Certificate is exchangeable for one or more
new Certificates of the same Class and of authorized denominations evidencing a
like aggregate Certificate Principal Balance or Notional Amount and a like
interest in the Trust Fund, as requested by the Holder surrendering the same.
No service charge will be made for such registrations of 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
Certificate Registrar, the Trustee and any agent of 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 Certificate Registrar, the
Trustee nor any such agent thereof shall be effected by notice to the contrary.
An election will be made to treat certain assets of the Trust Fund
("REMIC I") as a real estate mortgage investment conduit ("REMIC") for federal
income tax purposes. The regular interests in REMIC I in the aggregate will
encompass the rights to all amounts distributable with respect to the Mortgage
Loans and certain related property (the "REMIC I Regular Interests"). An
election will be made to treat the REMIC I Regular Interests as a REMIC ("REMIC
II"). The Certificates (other than the REMIC I Residual Interest Certificates)
will be regular interests in REMIC II. As such, the Certificates will be
treated for federal income tax purposes as debt instruments issued by REMIC II.
The Class 1-RS Certificate will be the residual interest in REMIC I. The Class
1-R Certificate will be the residual interest in REMIC II.
The obligations and responsibilities of the Depositor and the Trustee
created hereby with respect to the Trust Fund created hereby shall terminate
upon the earlier of (a) the repurchase by the Depositor of all Mortgage Loans
and all
A-7
<PAGE>
property acquired in respect of any Mortgage Loan remaining in the Trust Fund,
and (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 required to be distributed to them pursuant to this Agreement.
As provided in the Agreement, the right 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 10% of the aggregate Principal Balances as of the Cut-off Date.
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. If the terms hereof are inconsistent with the
Agreement, the Agreement shall control.
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.
A-8
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed under its corporate seal.
Date: ASSET BACKED SECURITIES CORPORATION,
as Depositor
By:________________________________
Name:
Title:
[SEAL]
ATTEST
________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class ____ Certificates referred to in the within-mentioned
Agreement
______________________________,
as Trustee
By:___________________________
Authorized Officer
A-9
<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 Master 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 the
same Class and of a like Initial Certificate Principal Balance and undivided
interest in the Master Trust Fund to the above-named assignee and to deliver
such Certificate to the following address ______________________________________
________________________________________________________________________________
________________________________________________________________________________
Dated: ______________, ______
Social Security or ___________________________________
other Tax Identification Signature by or on behalf of
No. of Assignee: assignor (signature must be
signed as registered)
__________________________ ___________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by check mailed to ________________________
________________________________________________________________________________
_________________________, or if the principal balance of this Certificate is at
least $5,000,000 and the Trustee shall have received appropriate wiring
instructions in accordance with the Agreement, 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-10
<PAGE>
EXHIBIT B
[Form of Class 1-RS Certificate]
PRINCIPAL IN RESPECT OF THIS CERTIFICATE IS DISTRIBUTABLE MONTHLY AS SET FORTH
HEREIN; ACCORDINGLY, THE CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE INITIAL CERTIFICATE PRINCIPAL BALANCE SET FORTH ON THIS
CERTIFICATE. THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF ASSET BACKED SECURITIES CORPORATION OR THE TRUSTEE REFERRED TO BELOW, OR OF
ANY OF THEIR AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE AGREEMENT. THIS
CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY.
THIS CLASS 1-RS CERTIFICATE IS SUBORDINATE TO THE OTHER CERTIFICATES OF THIS
SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE AGREEMENT. THIS CLASS 1-RS
CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER
DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OF QUALIFICATION MAY
ONLY BE MADE IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11.20 OF THE
AGREEMENT.
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G and 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN SUBJECT
TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), UNLESS THE TRANSFEREE PROVIDES A
CERTIFICATION OR AN OPINION OF COUNSEL, OR BOTH, SATISFACTORY TO THE DEPOSITOR
AND THE TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE BY OR ON BEHALF OF SUCH
PLAN IS PERMISSIBLE UNDER APPLICABLE LAW AND WILL NOT VIOLATE THE PROHIBITED
TRANSACTION PROVISIONS OF SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE.
ANY SALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS 1-R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDED A TRANSFER AFFIDAVIT TO THE
TRUSTEE TO THE EFFECT THAT (1) SUCH TRANSFEREE AGREES TO BE BOUND BY THE TERMS
OF THE AGREEMENT AND ALL RESTRICTIONS SET FORTH ON THE FACE HEREOF, (2) SUCH
TRANSFEREE IS NOT EITHER (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR
ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION
(OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT
FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
B-1
<PAGE>
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO
AS A "DISQUALIFIED ORGANIZATION") OR (D) AN AGENT OF A DISQUALIFIED
ORGANIZATION, (3) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
COLLECTION OF TAX AND (4) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF SUCH TRANSFEREE.
NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER,
SALE OR OTHER DISPOSITION OF THIS CLASS 1-R CERTIFICATE TO A DISQUALIFIED
ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, OR TO ANY OTHER
PROHIBITED TRANSFEREE AS PROVIDED IN THE AGREEMENT, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF A
CLASS 1-R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE
CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
B-2
<PAGE>
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES _____, CLASS 1-RS
Evidencing an undivided interest in REMIC I whose assets consist of a pool of
conventional, level-payment, fixed-rate, fully-amortizing mortgage loans
transferred by
ASSET BACKED SECURITIES CORPORATION
THIS CERTIFICATE HAS NO CERTIFICATE PRINCIPAL BALANCE
Certificate No.______________
First Distribution Final Scheduled
Date: Distribution Date:
THIS CERTIFIES THAT ____________________ is the registered owner of a
beneficial interest in REMIC I. REMIC I is part of the Trust Fund referred to
below consisting of a pool of conventional, level-payment, fixed-rate, fully-
amortizing mortgage loans (the "Mortgage Loans") transferred to the Trust Fund
by Asset Backed Securities Corporation (the "Depositor"), and certain related
property transferred to the Trust Fund by the Depositor. The Trust Fund and
REMIC I were created pursuant to the Standard Terms and Provisions of Pooling
and Servicing and Reference Agreement, dated as of _______________, 199_ (the
"Agreement"), between the Depositor and _______________________________ (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.
The aggregate principal balance of the Mortgage Loans included in REMIC I as of
_________________, 199_ (the "Cut-off Date"), after application of payments due
on or before such date, was approximately $_______________. 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.
This Certificate is one of a duly authorized issue of certificates of
Asset Backed Securities Corporation designated as its Conduit Mortgage Pass-
Through Certificates, Series _________, which is comprised of eleven classes of
Certificates: the Class 1-R, 1-A, 1-B, 1-C, 1-D, 1-E and 1-M Certificates (the
"Fixed Rate Certificates"), the Class 1-F and 1-G Certificates (the "Variable
Rate Certificates"), the Class 1-H Certificates (the "Principal Only
Certificates") and the Class 1-RS Certificates (the "REMIC I Residual Interest
Certificates"). The Certificates (other than the Class 1-M Certificates) are
sometimes referred to as the "Priority Certificates". Reference is hereby made
to the Agreement for a statement of the respective rights thereunder of the
Depositor, the Trustee and the Holders of the Certificates
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<PAGE>
and the terms upon which the Certificates are authenticated and delivered.
The Priority Certificates initially evidence in the aggregate an
approximate __% beneficial interest in the Trust Fund. The Class 1-M
Certificates initially evidence in the aggregate the remaining approximate __%
beneficial interest in the Trust Fund. The interests of the Priority
Certificateholders in the Trust Fund will vary as described herein and in the
Agreement.
The Holder of this Certificate shall be entitled to receive only the
distributions set forth in the Agreement, which generally provide for a
distribution upon termination of the obligations created by the Agreement and
REMIC I created thereby and the amounts which remain on deposit in the
Certificate Account, after payment to the holders of all other Certificates of
all amounts as set forth in Section 13.02 of the Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Holder hereof entitled
thereto at the address appearing in the Certificate Register or, if such Holder
holds one or more of the Certificates with an aggregate initial Certificate
Principal Balance or Notional Amount of at least $5,000,000 by wire transfer in
immediately available funds to the account of such Certificateholder designated
in writing to the Trustee at least five Business Days prior to the applicable
Record Date. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice 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.
The Agreement permits, with certain exceptions as 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
Agreement at any time by the Depositor and the Trustee with the consent of the
Holders of Certificates evidencing Voting Rights aggregating not less than
66-2/3% of the Voting Rights of all the Certificates; 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 Mortgage Loans are required
to be distributed in respect of 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 of Certificates in a manner other than in
(i) above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class, or (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected
B-4
<PAGE>
thereby. Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the Depositor and the Trustee to amend
certain terms and conditions set forth in the Agreement without the consent of
Holders of the Certificates. At any time that any of the Priority Certificates
or the Class 1-M Certificates are outstanding, __% of all Voting Rights will be
allocated among the holders of the Class 1-A, Class 1-B, Class 1-C, Class l-E,
Class 1-H, Class 1-M and Class 1-R Certificates, in proportion to their then
outstanding Certificate Principal Balances, and __%, __%, __% and __% of all
Voting Rights will be allocated among holders of the Class 1-D, Class 1-F, Class
1-G and Class 1-RS Certificates, respectively, in proportion to the percentage
interests evidenced by their respective Certificate Principal Balances or
interests.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register upon surrender of this Certificate for registration of
transfer at, ___________________ __________________________________, and at any
agency of the trustee located at _____________________________________________
________________________________________________________, 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 the same
Class and of authorized denominations, and for the same aggregate interest in
the Trust Fund will be issued to the designated transferee or transferees.
This Certificate is issuable only as a registered Certificate without
coupons or any Denomination. As provided in the Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for a
new Class 1-RS Certificate evidencing the same rights and obligations, as
requested by the Holder surrendering the same.
No service charge will be made for such registrations of 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
Certificate Registrar, the Trustee and any agent of 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 Certificate Registrar, the
Trustee nor any such agent thereof shall be affected by notice to the contrary.
An election will be made to treat certain assets of the Trust Fund
("REMIC I") as a real estate mortgage investment
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<PAGE>
conduit ("REMIC") for federal income tax purposes. The regular interests in
REMIC I in the aggregate will encompass the rights to all amounts distributable
with respect to the Mortgage Loans and certain related property (the "REMIC I
Regular Interests"). An election will be made to treat the REMIC I Regular
Interests as a REMIC ("REMIC II"). The Certificates (other than the REMIC I
Residual Interest Certificates) will be regular interests in REMIC II. As such,
the Certificates will be treated for federal income tax purposes as debt
instruments issued by REMIC II. The Class 1-RS Certificate will be the residual
interest in REMIC I. The Class 1-R Certificate will be the residual interest in
REMIC II.
The obligations and responsibilities of the Depositor and the Trustee
created hereby with respect to 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, and (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 required to be distributed to them pursuant to this Agreement.
As provided in the Agreement, the right 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 10% of the aggregate Principal Balances as of the Cut-off Date.
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. If the terms hereof are inconsistent with the
Agreement, the Agreement shall control.
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-6
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed under its corporate seal.
Date: ASSET BACKED SECURITIES
CORPORATION, as Depositor
By:___________________________
Name:
Title:
[SEAL]
ATTEST
__________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class 1-RS Certificates referred to in the within-mentioned
Agreement
___________________________,
as Trustee
By:_________________________
Authorized Officer
B-7
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfers) unto _______________________________________________________________
_______________________________________________________________________________
________________________________________________________________ (Please print
or typewrite name and address, including postal zip code, or assignee) the
undivided interest in the Master Trust Fund evidenced by that 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 the
same Class and of a like Initial Certificate Principal Balance and undivided
interest in the Master Trust Fund to the above-named assignee and to deliver
such Certificate to the following address
______________________________________________
________________________________________________________________
________________________________________________________________
Dated:___________, ___
Social Security or ______________________________
other Tax Identification Signature by or on behalf of
No. of Assignee: assignor (signature must be
signed as registered)
__________________________ ______________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by check mailed to ________________________
________________________________________________________________________________
____________________________________________________, or if the principal
balance of this Certificate is at least $5,000,000 and the Trustee shall have
received appropriate wiring instructions in accordance with the Agreement, 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.
B-8
<PAGE>
EXHIBIT D-1
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[Date]
[To be addressed to the
Depositor]
Re: Standard Terms and Provisions of Pooling and Servicing and Reference
Agreement (together, the "Pooling and Servicing Agreement") relating
to Asset Backed Securities Corporation Conduit Mortgage Pass-Through
Certificates, Series
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of the above-
referenced Pooling and Servicing Agreement the undersigned, as Trustee, hereby
certifies that, with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule and subject to the exceptions noted hereto it has (a) received the
original Mortgage Note, endorsed as provided in Section 2.01(i) of the Pooling
and Servicing Agreement and (b) received but has not reviewed (except as set
forth in (a) above) a Mortgage File. Attached hereto is the Loan Exception
Report, which indicates the document exceptions. The Trustee has made no
independent examination of any documents contained in each Mortgage File beyond
the review specifically required in the above-referenced Pooling and Servicing
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in each Mortgage File or any of the Mortgage Loans identified in the
Mortgage Loan Schedule, or (ii) the collectibility, insurability, effectiveness
or suitability of any such Mortgage Loan.
The Trustee acknowledges receipt of notice that the Depositor has
granted to the Trustee for the benefit of the Certificateholders a security
interest in all of the Depositors' right, title and interest in and to the
Mortgage Loans.
Capitalized terms used herein without definition have the meanings
ascribed to them in the Pooling and Servicing Agreement.
_____________________________
_______, as Trustee
By:__________________________
Authorized Representative
D-1-1
<PAGE>
EXHIBIT D-2
FORM OF INTERIM CERTIFICATION OF TRUSTEE
[Date]
[To be addressed to the
Depositor]
Re: Standard Terms and Provisions of Pooling and Servicing and Reference
Agreement (together, the "Pooling and Servicing Agreement") relating
to Asset Backed Securities Corporation Conduit Mortgage Pass-Through
Certificates, Series
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of the above-
referenced Pooling and Servicing Agreement the undersigned, as Trustee, hereby
certifies that, with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule and subject to the exceptions noted hereto it has received the original
Mortgage (or a certified copy of such Mortgage, as provided in Section 2.01(ii).
Attached hereto is the Loan Exception Report, which indicates the document
exceptions. The Trustee has made no independent examination of and documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File or any of
the Mortgage Loans identified in the Mortgage Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized terms used herein without definition have the meanings
ascribed to them in the Pooling and Servicing Agreement.
_____________________________
_______, as Trustee
By:__________________________
Authorized Representative
D-2-1
<PAGE>
EXHIBIT E
FORM OF FINAL CERTIFICATION OF TRUSTEE
[Date]
[To be addressed to the
Certificateholders
of record]
Re: Standard Terms and Provisions of Pooling and Servicing and Reference
Agreement (together, the "Pooling and Servicing Agreement") relating
to Asset Backed Securities Corporation Conduit Mortgage Pass-Through
Certificates, Series
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of the above-
referenced Pooling and Servicing Agreement the undersigned, as Trustee, hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule it
has reviewed the Mortgage File and has determined that (i) all documents
required to be delivered to it pursuant to the Pooling and Servicing Agreement
are in its possession, (ii) such documents have been reviewed by it and have not
been mutilated, damaged, defaced, torn or otherwise physically altered and such
documents relate to such Mortgage Loan, (iii) based on an examination and only
as to the foregoing documents, the information set forth in the Mortgage Loan
Schedule respecting such Mortgage Loans accurately reflects the information
contained in the documents in the Mortgage File, and (iv) each Mortgage Note has
been endorsed and each Assignment of Mortgage has been prepared as provided in
Section 2.01 of the Pooling and Servicing Agreement. The Trustee has made no
independent examination of any documents contained in each Mortgage File beyond
the review specifically required in the above-referenced Pooling and Servicing
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in each Mortgage File or any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectibility, insurability, effectiveness
or suitability of any such Mortgage Loan.
E-1
<PAGE>
Capitalized terms used herein without definition have the meanings
ascribed to them in the Pooling and Servicing Agreement.
_____________________________
_______, as Trustee
By:__________________________
Authorized Representative
E-2
<PAGE>
EXHIBIT F
FORM OF REQUEST FOR RELEASE
To:
[Date]
In connection with the administration of the Mortgages held by you as
Trustee under the Standard Terms and Provisions of Pooling and Servicing and
Reference Agreement dated as of _______________ 1, 199_, between Asset Backed
Securities Corporation, as Depositor and you, as Trustee (the "Pooling and
Servicing Agreement"), the undersigned, as Servicer under the Warranty and
Servicing Agreement, dated as of ____________ __, 199_, between
____________________ and the undersigned, hereby requests a release of the
Mortgage File held by you as Trustee with respect to the following described
Mortgage Loan for the reason indicated below.
Mortgagor's Name:
Address:
Loan No.:
Reason for requesting file:
_____ 1. Mortgage Loan paid in full.
(The Servicer hereby certifies that all amounts received in
connection with the Mortgage Loan have been or will be credited to
the Certificate Account pursuant to the Pooling and Servicing
Agreement.)
_____ 2. Mortgage Loan repurchased.
(The Servicer hereby certifies that the Purchase Price has been
credited to the Certificate Account pursuant to the Pooling and
Servicing Agreement.)
_____ 3. Mortgage Loan substituted.
(The Servicer hereby certifies that a Replacement Mortgage Loan
has been assigned and delivered to you along with the related
Mortgage File pursuant to the Pooling and Servicing Agreement.)
_____ 4. The Mortgage Loan is being foreclosed.
_____ 5. Other. (Describe)
F-1
<PAGE>
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Pooling and
Servicing Agreement and will be returned within 21 days of our receipt of the
Mortgage File, except if the Mortgage Loan has been paid in full, or repurchased
or substituted for a Replacement Mortgage Loan (in which case the Mortgage File
will be retained by us permanently) and except if the Mortgage Loan is being
foreclosed (in which case the Mortgage File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them
in the Pooling and Servicing Agreement.
[SERVICER]
_____________________________
By:
Name:
Title:
F-2
<PAGE>
EXHIBIT J
TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] or [Name of Owner] (record or
beneficial owner of the Class [1-RS][1-R] Certificates (the "Owner")), a
[savings institution] [corporation] duly organized and existing under the laws
of (the State of ___________________] [the United States], on behalf of which he
makes this affidavit and agreement.
2. That the Owner (i) is and will be a "Permitted Transferee" as
of [date of transfer] within the meaning of Section 860(e)(5) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) is acquiring the Class
[1-RS][1-R] Certificates for its own account or for the account of another Owner
from which it has received an affidavit and agreement in substantially the same
form as this affidavit and agreement. A "Permitted Transferee" is any person
other than a "disqualified organization" within the meaning of Section 860(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), or a possession
of the United States. (Section 860E(e)(5) of the Code defines a "disqualified
organization", as (A) the United States, any State or political subdivision
thereof, any foreign government, any international organization, or any agency
or instrumentality of any of the foregoing, (B) any organization (other than a
cooperative described in section 521) which is exempt from federal income tax
unless such organization is subject to the tax imposed by Section 511, and (C)
any organization described in Section 1381(a)(2)(C) of the Code.
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of Class [1-RS][1-R] Certificates to disqualified organizations under
the Code, that applies to all transfers of Class [1-RS][1-R] Certificates after
March 31, 1988; (ii) that such tax would be on the transferor, or, if such
transfer is through an agent (which person includes a broker, nominee or
middleman) for a non-Permitted Transferee, on the agent; (iii) that the person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnishes to such person an affidavit that the transferee is a
Permitted Transferee and, at the time of transfer, such person does not have
actual knowledge that the affidavit is false; and (iv) that the Class [1-RS]
[1-R] may be "noneconomic residual interests" within the meaning of proposed
Treasury regulations promulgated pursuant to the Code and that the transferor of
a noneconomic
J-1
<PAGE>
residual interest will remain liable for any taxes due with respect to the
income on such residual interest, unless no significant purpose of the transfer
was to impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding Class [1-RS][1-R] Certificates if at any time during the taxable
year of the pass-through entity a non-Permitted Transferee is the record holder
of an interest in such entity. (For this purpose, a "pass through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain cooperatives.)
5. That the Owner is aware that the Trustee will not register
the Transfer of any Class [1-RS][1-R] Certificates unless the transferee, or the
transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. The
Owner expressly agrees that it will not consummate any such transfer if it knows
or believes that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set forth on the
face of the Class [1-RS][1-R] Certificates and the provisions of Section 11.20
of the Standard Terms and Provisions of the Pooling and Servicing and Reference
Agreement under which the Class [1-RS][l-R] Certificates were issued. The Owner
expressly agrees to be bound by and to comply with such restrictions and
provisions.
7. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class [l-RS][1-R] Certificates will
only be owned, directly or indirectly, by an Owner that is a Permitted
Transferee.
8. That the Owner's Taxpayer Identification Number is
_______________.
9. That no purpose of the Owner relating to the purchase of any
of the Class [l-RS][1-R] Certificates by the Owner is or will be to impede the
assessment or collection of any tax.
10. That the Owner has no present knowledge or expectation that
it will be unable to pay any United States taxes owed by it so long as any of
the Class [1-RS][1-R] Certificates remain outstanding.
11. That the Owner has no present knowledge or expectation that
it will become insolvent or subject to a
J-2
<PAGE>
bankruptcy proceeding for so long as any of the Class [1-RS][1-R] Certificates
remain outstanding.
12. That no purpose of the Owner relating to any sale of any of the
Class [1-RS][1-R] Certificates by the Owner will be to impede the assessment or
collection of tax.
13. That the Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includable in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
[14. This affidavit and agreement relates only to the Class [1-RS]
[1-R] Certificates held by the Owner and not to any other holder or the Class
[1-RS][1-R] Certificates. The Owner understands that the liabilities described
herein relate only to the Class [1-RS][1-R] Certificates].
J-3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this __ day of ____________________, _______.
[NAME OF OWNER)
By:__________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
________________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Owner, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Owner.
Subscribed and sworn before me this __ day of ___________________, __.
_____________________________
NOTARY PUBLIC
COUNTY OF____________________
STATE OF_____________________
My Commission expires the ___
day of ____________, 19__
J-4
<PAGE>
EXHIBIT K
Form of Transferor Certificate
__________________, 19__
Asset Backed Securities Corporation
Park Avenue Plaza
New York, New York 10055
[Trustee]
Attention: Corporate Trust Administration
Re: Conduit Mortgage Pass-Through Certificates, Series
, Class [1-R][1-RS]
--------------------------------------------------
Dear Sirs:
This letter is delivered to you in connection with the sale by
_________________________ (the "Seller") to ___________________________________
(the "Purchaser") of $_________________ Initial Certificate Principal Balance of
Conduit Mortgage Pass-Through Certificates, Series ______, Class [1-R][1-RS]
(the "Certificates"), pursuant to Section 11.20 of the Standard Terms and
Provisions of Pooling and Servicing and Reference Agreement (the "Pooling and
Servicing Agreement"), dated as of ____________ 1, 199_ among Asset Backed
Securities Corporation as depositor (the "Depositor") and
__________________________, as trustee (the "Trustee"). All terms used herein
and not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Seller hereby certifies, represents and warrants to,
and covenants with, the Depositor and the Trustee that:
1. No purpose of the Seller relating to sale of the Certificate by
the Seller to the Purchaser is or will be to impede the assessment or collection
of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit S.
The Seller does not know or believe that any representation contained therein is
false.
K-1
<PAGE>
3. The Seller has no actual knowledge that the proposed Transferee
is not a Permitted Transferee.
Very truly yours,
(Seller)
By:__________________________
Name:
Title:
K-2
<PAGE>
EXHIBIT L
Form of Investor Representation Letter
________________, 19__
Asset Backed Securities Corporation
Park Avenue Plaza
New York, New York 10055
[Trustee]
Attention: Corporate Trust Administration
RE: Conduit Mortgage Pass-Through Certificates, Series
, Class 1-RS
--------------------------------------------------
Dear Sirs:
_______________________ (the "Purchaser") intends to purchase from
__________________ (the "Seller") $____________ Initial Certificate Principal
Balance of Conduit Mortgage Pass-Through Certificates, Series _________, Class
1-RS (the "Certificates"), issued pursuant to the Standard Terms and Provisions
of Pooling and Servicing and Reference Agreement (the "Pooling and Servicing
Agreement"), dated as of ___________1, 199_ among Asset Backed Securities
Corporation as depositor (the "Depositor") and ______________________, as
trustee (the "Trustee"). All terms used herein and not otherwise defined shall
have the meanings set forth in the Pooling and Servicing Agreement. The
Purchaser hereby certifies, represents and warrants to, and covenants with, the
Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
and will not be registered or qualified under the Securities Act of 1933,
as amended (the "Act") or any state securities law, (b) the Company is not
required to so register or qualify the Certificates, (c) the Certificates
may be resold only if registered and qualified pursuant to the provisions
of the Act or any state securities law, or if an exemption from such
registration and qualification is available, (d) the Pooling and Servicing
Agreement contains restrictions regarding the transfer of the Certificates
and (e) the Certificates will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account
for investment only and not with a view to or for sale in connection with
any distribution thereof in
L-1
<PAGE>
any manner that would violate the Act or any applicable state securities
laws.
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business
matters, and, in particular, in such matters related to securities similar
to the Certificates, such that it is capable of evaluating the merits and
risks of investment in the Certificates, (b) able to bear the economic
risks of such an investment and (c) an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity
to review a copy of the Pooling and Servicing Agreement and such other
information concerning the Certificates, the Mortgage Loans and the
Depositor as has been requested by the Purchaser from the Depositor or the
Seller and is relevant to the Purchaser's decision to purchase the
Certificates. The Purchaser has had any questions arising from such review
answered by the Depositor or the Seller to the satisfaction of the
Purchaser.
5. The Purchaser has not and will not nor has it authorized or will
it authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate any other similar
security to any person in any manner, (b) solicit any offer to buy or to
accept a pledge, disposition to other transfer of any Certificate, any
interest in any Certificate or any other similar security from any person
in any manner, (c) otherwise approach or negotiate with respect to any
Certificate or any interest in any Certificate any other similar security
with any person in any manner, (d) make any general solicitation by means
of general advertising or in any other manner or (e) take any other action,
that (as to any of (a) through (e) above) would constitute a distribution
of any Certificate under the Act, that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities
law, or that would require registration or qualification pursuant thereto.
The Purchaser will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing
Agreement.
6. The Purchaser is not any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986, as amended (the "Code"), nor a Person
acting, directly or indirectly, on behalf of any such plan, and understands
that registration of transfer of any Certificate to any such employee
benefit plan, or to any person acting on behalf of such plan, will not be
made unless such employee benefit
L-2
<PAGE>
plan delivers an opinion of its counsel, addressed and satisfactory to the
Trustee and the Depositor, to the effect that the purchase and holding of a
Certificate by or on behalf of such employee benefit plan would not result
in the assets of the Trust Fund being deemed to be "plan assets" and
subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of the Code (or comparable provisions of
any subsequent enactments), would not constitute or result in a prohibited
transaction under Section 405 of ERISA or Section 4975 of the Code, and
would not subject the Depositor or the Trustee to any obligation or
liability (including liabilities under ERISA or Section 4975 of the Code)
in addition to those undertaken in the Pooling and Servicing Agreement or
any other liability. The Purchaser understands that under current law such
an opinion cannot be rendered.
Very truly yours,
_____________________________
By:__________________________
Name:________________________
Title:_______________________
L-3
<PAGE>
EXHIBIT M
Form of Transferor Representation Letter
_______________, 19__
Asset Backed Securities Corporation
Park Avenue Plaza
New York, New York 10055
[Trustee]
Attention: Corporate Trust Administration
Re: Conduit Mortgage Pass-Through Certificates,
Series Class 1-RS
-------------------------------------------
Dear Sirs:
In connection with the sale by ________________ (the "Seller") to
_________________ (the "Purchaser") of ___________$ Initial Certificate
Principal Balance of Mortgage Pass-Through Certificates, Series ________, Class
1-RS (the "Certificates"), issued pursuant to the Standard Terms and Provisions
of Pooling and Servicing and Reference Agreement (the "Pooling and Servicing
Agreement"), dated as of ____________ 1, 199_ among Asset Backed Securities
Corporation, as depositor (the "Depositor") and _______________________, as
trustee (the "Trustee"). All terms used herein and not otherwise defined shall
have the meanings set forth in the Pooling and Servicing Agreement. The Seller
hereby certifies, represents and warrants to, and covenants with, the Depositor
and the Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a)
M-1
<PAGE>
through (e) above) would constitute a distribution of the Certificates under the
Securities Act of 1933 (the "Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities law, or
that would require registration or qualification pursuant thereto. The Seller
will not act, in any manner set forth in the foregoing sentence with respect to
any Certificate. The Seller has not and will not sell or otherwise transfer any
of the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
Very truly yours,
_____________________________
(Seller)
By:__________________________
Name:________________________
Title:_______________________
M-2
<PAGE>
Exhibit 4.3.1
================================================================================
FORM OF SERIES 199[ ]-[ ] SUPPLEMENT,
Dated as of [ ], 199[ ]
to
POOLING AND SERVICING AGREEMENT
Dated as of [ ], 199[ ]
$[ ]
----------------------------------------------------------
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>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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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 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 "Card Account
Master Trust, Series 199[ ]- [ ]". The Series 199[ ]-[ ] Certificates shall be
issued in [one] [two] Class[es], [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[ ]].
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[(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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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).
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["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
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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
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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
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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
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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.]
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["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).]
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["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
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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 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.]
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["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 Finance Charge Collections" shall have the meaning specified in
Section 4.07(l).
"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
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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 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.
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"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, 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.]
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"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 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
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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 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]
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[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 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
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respect to the [Accumulation Period] [Controlled Amortization Period] [early
Accumulation Period] or the Rapid Amortization Period.
"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).]
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["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 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[ ]-[ ].
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<PAGE>
"Series 199[ ]-[ ] Allocation Percentage" shall mean the Series Allocation
Percentage with respect to Series 199[ ]-[ ].
"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 [____]%.
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<PAGE>
["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 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" shall 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.
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(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, 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 B 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,
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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
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 199[ ]-[ ] 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 Depositor'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 amounts deposited 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.
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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 isthe 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
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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 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.
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(d) Control of Interest Funding Account.
(i) The Trustee shall possess all right, title and interest in and to
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 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
[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 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 $[ ]. [Collateral 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 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 [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
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360, times (B)] 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). 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.]
(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].
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(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 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 Investment 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.
(d) Control of Principal Funding Account.
(i) The Trustee shall possess all right, title and interest in and to
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
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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.]
[ (e) 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 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 earliest to occur 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.
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[(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 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.
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(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
[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
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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];
(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 4.15(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
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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 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. If 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
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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 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];
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(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;
(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
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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;]
[(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
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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 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[ ]-[ ]
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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:
(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
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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 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 and to 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
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<PAGE>
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 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.]
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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
(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
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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.
(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 B 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
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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 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
and to 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[ ]-
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[ ] Certificateholders 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, 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
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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 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).
(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 B 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
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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 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
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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 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
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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, 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 of the 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 4.16. 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 4.16, 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.
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(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].
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
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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[ ]-[ ]
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.
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(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 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
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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 2.09(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 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
2.09(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), (c), (d),
(e), (f), or (g)], 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.]
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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.
(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
53
<PAGE>
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 or 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
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.
54
<PAGE>
(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 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
55
<PAGE>
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 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.
56
<PAGE>
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.
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.]
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>
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 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
199[ ]-[ ] 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.]
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
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>
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 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 4.3.4
VERSION A
---------
================================================================================
ASSET BACKED SECURITIES CORPORATION,
Depositor
[MASTER SERVICER NAME],
Master Servicer
and
[TRUSTEE NAME],
Trustee
-------------------------------------------------
REFERENCE AGREEMENT
incorporating by reference
CERTAIN STANDARD TERMS AND CONDITIONS
OF POOLING AND SERVICING
Dated as of [ ], 199[ ]
-------------------------------------------------
Conduit Mortgage Pass-Through Certificates, Series ___
[___]% Pass-Through Rate
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE XI
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
<S> <C>
SECTION 11.01. Designation...................................................1
-----------
SECTION 11.02. Conveyance of Trust Fund; Issuance of Certificates............2
--------------------------------------------------
SECTION 11.03. Delivery of Documents.........................................2
---------------------
SECTION 11.04. Denominations.................................................5
-------------
SECTION 11.05. Principal Balance.............................................5
-----------------
SECTION 11.06. Distributions on the Certificates.............................6
---------------------------------
SECTION 11.07. Place and Notice for Final Distribution on Certificates.......6
-------------------------------------------------------
SECTION 11.08. Pass-Through Rate.............................................6
-----------------
SECTION 11.09. Distribution Dates............................................6
------------------
SECTION 11.10. Record Dates..................................................6
------------
SECTION 11.11. Mortgage Loans................................................6
--------------
SECTION 11.12. Forms Generally...............................................6
---------------
SECTION 11.13. Termination at Option of the Depositor........................7
--------------------------------------
SECTION 11.14. Substitution..................................................7
------------
SECTION 11.15. Wire Transfer Eligibility.....................................7
-------------------------
SECTION 11.16. Required Rating...............................................7
---------------
SECTION 11.17. Pool Insurance Policy.........................................7
---------------------
SECTION 11.18. Special Hazard Insurance Policy...............................7
-------------------------------
SECTION 11.19. Mortgagor Bankruptcy Bond.....................................8
-------------------------
SECTION 11.20. Performance Bond..............................................8
----------------
SECTION 11.21. Warranty and Servicing Agreements.............................8
---------------------------------
SECTION 11.22. Custodial Agreements..........................................8
--------------------
SECTION 11.23. Retained Yield; Administrative Fee; Servicing Compensation....8
----------------------------------------------------------
SECTION 11.24. Cut-off Date..................................................8
------------
SECTION 11.25. Certificate Registrar.........................................8
---------------------
SECTION 11.26. Authenticating Agent..........................................9
--------------------
SECTION 11.27. Paying Agent..................................................9
------------
SECTION 11.28. Applicability of Certain Provisions of Standard Terms.........9
-----------------------------------------------------
ARTICLE XII
DEFINITIONS
<S> <C>
Administrative Fee............................................................9
- ------------------
Agreement.....................................................................9
- ---------
Authenticating Account........................................................9
- ----------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Certificate....................................................................9
- -----------
Certificate Registrar..........................................................9
- --------------------
Certificateholder..............................................................9
- -----------------
Deleted Mortgage Loan..........................................................9
- ---------------------
Delivery Date..................................................................9
- -------------
Denomination..................................................................10
- ------------
Distribution Date.............................................................10
- -----------------
Due Date......................................................................10
- --------
Insurance Policy..............................................................10
- ----------------
Insurer.......................................................................10
- -------
Mortgage Loans................................................................10
- --------------
Mortgage Loan Schedule........................................................10
- ----------------------
Mortgage Rate.................................................................10
- -------------
Optional Termination..........................................................10
- --------------------
Optional Termination Date.....................................................10
- -------------------------
Pass-Through Rate.............................................................10
- -----------------
Performance Bond..............................................................10
- ----------------
Pool Insurance Policy.........................................................10
- ---------------------
Repurchase Price..............................................................10
- ----------------
Retained Yield................................................................11
- --------------
Single Certificate............................................................11
- ------------------
Special Hazard Insurance Policy...............................................11
- -------------------------------
Special Hazard Insurer........................................................11
- ----------------------
Substitute Mortgage Loan......................................................11
- ------------------------
Trust Fund....................................................................11
- ----------
Voting Rights.................................................................11
- -------------
<CAPTION>
ARTICLE XIII
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS
<S> <C>
SECTION 13.01. Certificate Account...........................................12
-------------------
SECTION 13.02. Distributions.................................................12
-------------
SECTION 13.03. Monthly Statements to Certificateholders......................12
----------------------------------------
<CAPTION>
ARTICLE XIV
OPTIONAL TERMINATION
<S> <C>
SECTION 14.01. Repurchase at the Option of the Depositor.....................13
-----------------------------------------
SECTION 14.02. Procedure Upon Optional Termination...........................14
-----------------------------------
</TABLE>
-ii-
<PAGE>
ARTICLE XV
MISCELLANEOUS
<TABLE>
<S> <C>
SECTION 15.01. Standard Terms................................................15
--------------
SECTION 15.02. Ratification of Standard Terms................................15
------------------------------
SECTION 15.03. Amendment.....................................................15
---------
SECTION 15.04. Counterparts..................................................16
------------
SECTION 15.05. Governing Law.................................................16
-------------
SECTION 15.06. Recordation of Agreement......................................16
------------------------
SECTION 15.07. Severability of Provisions....................................16
--------------------------
</TABLE>
-iii-
<PAGE>
REFERENCE AGREEMENT, dated as of _______________, 19__, by and among ASSET
BACKED SECURITIES CORPORATION, a Delaware corporation, as Depositor (the
"Depositor"), [MASTER SERVICER NAME], a [ ] corporation, as master
servicer (the "Master Servicer"), and [TRUSTEE NAME], a [ ] banking
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
Mortgage 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
Mortgage Loans (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:
ARTICLE XI
CONVEYANCE OF TRUST FUND;
DESCRIPTION OF THE CERTIFICATES
SECTION 11.01. Designation.
-----------
The Certificates shall be designated generally as the Conduit Mortgage
Pass-Through Certificates, Series ______, ______% Pass-Through Rate (the
"Certificates").
<PAGE>
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 Mortgage Loans
listed in Schedule I to this Agreement, which the Depositor causes to be
delivered to the Trustee, together with the Mortgage Files relating to the
Mortgage Loans and the other property in respect of such Mortgage Loans, as
specified in Section 2.01, and the proceeds thereof payable after the Cut-off
Date, net of any amounts payable to the Servicer, the Master Servicer and the
Depositor in accordance with the provisions of the Standard Terms, (b) property
that secured a Mortgage Loan and has been acquired by foreclosure or deed in
lieu of foreclosure, (c) the Performance Bond and the proceeds thereof, as
provided in Section 3.17, (d) the Depositor's rights under the Warranty and
Servicing Agreements with respect to the Mortgage Loans, (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 11.22, and (f) 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 Mortgage
Loans and the delivery of the Mortgage Files to it (or, with respect to Mortgage
Loans 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 Mortgage
Loans, 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 benefit of all present and future Holders of the Certifi cates 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:
-2-
<PAGE>
(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 Mortgage
Loans and other property included in the Trust Fund to the Trustee pursuant
to this Agreement;
(e) such action has been taken with respect to delivery of possession
of the Mortgage Loans 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 Mortgage Loans 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
-3-
<PAGE>
(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 provi sion 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 in strument
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 Mortgage Loans. The Mortgage Loans included in the Trust Fund,
------------------
in the manner specified in Section 2.01.
(3) Mortgagor Bankruptcy Bond, Performance Bond, Special Hazard
-----------------------------------------------------------
Insurance Policy and Pool Insurance Policy. The Mortgagor Bankruptcy Bond, the
- ------------------------------------------
Performance Bond, the Special Hazard Insurance Policy and the Pool Insurance
Policy.
(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 Mortgage Loans
specified in such Officers' Certificate, an Officers' Certificate of the Special
Hazard Insurer and of the issuer of the Mortgagor Bankruptcy Bond, 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 Mortgage Loans 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
-4-
<PAGE>
(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, insol vency, 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 date of 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 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 encum brance
upon any of its property pursuant to the terms of any 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.
-------------
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 Mortgage
Loans on the Cut-off Date.]
SECTION 11.05. Principal Balance.
-----------------
The Principal Balance of the Mortgage Loans on the Cut-Off Date, exclusive
of principal payments due and payable on such date, is $______________.
-5-
<PAGE>
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 [ ]th 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. Mortgage Loans.
--------------
The Mortgage Loans transferred and assigned to the Trustee by the Depositor
are the Mortgage Loans identified in the Mortgage Loan 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,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters,
-6-
<PAGE>
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
Mortgage Loans remaining outstanding on any Distribution Date on or after the
date on which the Principal Balance of such Mortgage Loans is less than [10%] of
the Principal Balance of the Mortgage Loans 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 Mortgage Loan may substitute for such
Mortgage Loan a Substitute Mortgage Loan or Loans, pursuant to Section 2.02,
2.04 or 2.05, which substitution shall be accomplished in the manner and subject
to the conditions set forth in Section 2.04.
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 Mortgage
Loans, naming the Trustee as loss payee, is attached hereto as Exhibit B. The
Pool Insurer is _______________, a _______________ corporation.
SECTION 11.18. Special Hazard Insurance Policy.
-------------------------------
A specimen of the Special Hazard Insurance Policy with respect to the
Mortgage Loans, naming the Trustee as loss payee, is attached as Exhibit C
hereto. The Special Hazard Insurer is _____________________, a
________________corporation.
-7-
<PAGE>
SECTION 11.19. Mortgagor Bankruptcy Bond.
-------------------------
A specimen of the Mortgagor Bankruptcy Bond with respect to the
Mortgage Loans is attached as Exhibit D hereto. The Mortgagor Bankruptcy Bond
has been issued by _____________, a __________________ corporation.
SECTION 11.20. Performance Bond.
----------------
A specimen of the Performance Bond is attached as Exhibit E hereto.
The Performance Bond has been issued by _____________________, a
____________________ corporation.
SECTION 11.21. Warranty and Servicing Agreements.
---------------------------------
The Warranty and Servicing Agreements with respect to the Mortgage
Loans included in the Trust Fund are listed on Schedule II hereto.
SECTION 11.22. Custodial Agreements.
--------------------
The Custodial Agreements with respect to the Mortgage Loans included
in the Trust Fund are listed on Schedule III hereto.
SECTION 11.23. 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 Mortgage Loans
deposited in the Certificate Account a Retained Yield equal to [ %] of the
Principal Balance of each Mortgage Loan and an Administrative Fee equal to [
%] of the Principal Balance of each Mortgage Loan as provided in Section 3.19.
The Master Servicer shall be entitled to retain an amount in respect of each
interest payment on a Mortgage Loan equal to the excess of each interest payment
on such Mortgage Loan 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 11.24. Cut-off Date.
------------
The Cut-off Date is [ ], 199[ ].
SECTION 11.25. Certificate Registrar.
---------------------
The Certificate Registrar is the Trustee.
-8-
<PAGE>
SECTION 11.26. Authenticating Agent.
--------------------
The Authenticating Agent is the Trustee.
SECTION 11.27. Paying Agent.
------------
The Paying Agent is the Master Servicer.
SECTION 11.28. Applicability of Certain Provisions of Standard Terms.
-----------------------------------------------------
The provisions of Section 2.03(b) shall be applicable to the
Certificates; the provisions of Sections 3.24 and 3.26 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:
Administrative Fee: The percentage rate per annum of the Principal
------------------
Balance from time to time of each Mortgage Loan that is payable to the Depositor
out of each interest payment on a Mortgage Loan 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.
Authenticating Account: 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.
-----------------
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by
---------------------
a Substitute Mortgage Loan.
Delivery Date: [ ], 199[ ].
-------------
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<PAGE>
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 Mortgage Loans on the
Cut-off Date, exclusive of principal payments due and payable on such date.
Distribution Date: The [ ]th 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, Special
----------------
Hazard Insurance Policy, Mortgagor Bankruptcy Bond and the Performance Bond.
Insurer: Any one of the Pool Insurer, the Special Hazard Insurer and
-------
the issuers of the Mortgagor Bankruptcy Bond and the Performance Bond, as the
context may require.
Mortgage Loans: The Mortgage Loans listed on the Mortgage Loan
--------------
Schedule attached hereto.
Mortgage Loan Schedule: The list of Mortgage Loans transferred on the
----------------------
Delivery Date to the Trustee as part of the Trust Fund for the Certificates,
attached hereto as Schedule I.
Mortgage Rate: The interest rate on a Mortgage Loan.
-------------
Optional Termination: The repurchase of the Mortgage Loans by the
--------------------
Depositor pursuant to Section 14.01.
Optional Termination Date: The Distribution Date fixed by the
-------------------------
Depositor for the repurchase of the Mortgage Loans pursuant to Article XIV.
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
Mortgage Loan divided by twelve.
Performance Bond: The performance letter issued by ____________, a
----------------
specimen of which is attached hereto as Exhibit E.
Pool Insurance Policy: The policy of mortgage pool insurance, naming
---------------------
the Trustee as loss payee, a specimen of which is attached hereto as Exhibit B
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
Mortgage Loans pursuant to an Optional Termination.
-10-
<PAGE>
Retained Yield: The percentage rate per annum of the Principal
--------------
Balance from time to time of each Mortgage Loan that is retained by the
Depositor and payable out of each interest payment on a Mortgage Loan, which
percentage is set forth in Article XI and in the Mortgage Loan 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 C 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 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, (i) have an outstanding Principal Balance, after
deduction of the principal portion of the monthly payment due in the month of
substitution (or in the case of a substitution of more than one Mortgage Loan
for a Deleted Mortgage Loan, an aggregate Principal Balance), not in excess of
the Principal Balance of the Deleted Mortgage Loan [and not less than [ %] of
Principal Balance of the Deleted Mortgage Loan] (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 a Mortgage Rate not less than the Mortgage Rate of the
Deleted Mortgage Loan but not greater than [ %] in excess of the Mortgage
Rate of the Deleted Mortgage Loan; (iii) have a remaining term to maturity not
greater than [ ] years and not greater than [ ] years less than the
remaining term of the Deleted Mortgage Loan; 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 Mortgage Loans described in the Mortgage Loan 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
Mortgage Loan 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 Insurance Policies, the Pool
Insurance Policy, the Special Hazard Insurance Policy and any other insurance
policies with respect to the Mortgage Loans, (vi) the rights of the
Certificateholders in the Mortgagor Bankruptcy Bond and the proceeds thereof,
(vii) the rights of the Certificateholders in the Performance Bond and the
proceeds thereof and (viii) the Depositor's rights under the Warranty and
Servicing Agreements with respect to the Mortgage Loans 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.
-11-
<PAGE>
ARTICLE XIII
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS
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. 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 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 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
Mortgage Loans, separately identifying the aggregate amount of any
Principal Prepayments including therein, and the portion of such
distribution, if any, representing an Advance of principal;
(ii) the amount of such distribution representing interest on the
Mortgage Loans and the portion of such distribution, if any resenting an
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.
-12-
<PAGE>
(iv) the amount of Retained Yield and the Administrative Fee paid
to the Depositor;
(v) the aggregate Principal Balance of the Mortgage Loans on the
Due Date of the month of such distribution, after giving effect to payments on
the Mortgage Loans 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 foreclosure or grant of deed in lieu of foreclosure
or otherwise of any Mortgage Loan;
(vii) the number and aggregate Principal Balance of Mortgage Loans
(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, the Special Hazard Insurance Policy and the Mortgagor Bankruptcy Bond
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 Mortgage Loans 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
-13-
<PAGE>
OPTIONAL TERMINATION
SECTION 14.01. Repurchase at the Option of the Depositor.
-----------------------------------------
To the extent specified in Article XI, the Mortgage Loans 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.
Unless otherwise specified in Article XI, the Repurchase Price for any
such Optional Termination shall be equal to the aggregate Principal Balance of
the Mortgage Loans 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 Mortgage Loans 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 Mortgage
Loans to be repurchased.
(b) Any repurchase by the Depositor of the Mortgage Loans 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 Mortgage Loans 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 Mortgage Loans. Any distributions on the Mortgage Loans 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 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
-14-
<PAGE>
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 Mortgage Loans 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 which payments
received on Mortgage Loans 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.
-15-
<PAGE>
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 New York] [State of ]
applicable to agreements made and to be performed in the [State of New York]
[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 real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgaged
Properties 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 accompa nied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of
Certificateholders.
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.
-16-
<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:____________________________
Name:
Title:
[SEAL]
ATTEST:
[TRUSTEE NAME], as Trustee
By:____________________________
Name:
Title:
[SEAL]
ATTEST:
[MASTER SERVICER NAME], as Master
Servicer
By:___________________________
Name:
Title:
[SEAL]
ATTEST:
-17-
<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 ____________, 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 [Trustee Name], the banking 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]
-18-
<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 [Master Servicer Name], 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]
-19-
<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 MORTGAGE
LOANS 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 MORTGAGE PASS-THROUGH CERTIFICATES, SERIES ___
______% PASS-THROUGH RATE
evidencing an undivided interest in a trust fund consisting of certain
conventional mortgage loans 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: ___________, 19__
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: ______, 19__ Distribution Date: _________, 19__
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 mortgage loans (the "Mortgage Loans") sold to the
Trust by Asset Backed Securities Corporation (the "Depositor"), exclusive of a
portion of the interest payable on each Mortgage Loan 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,
A-1
<PAGE>
together with the Standard Terms, the "Agreement") each among the Depositor,
[Master Servicer Name], as master servicer (the "Master Servicer") and [Trustee
Name], 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 Mortgage Loans
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 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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its corporate seal.
Date:
[TRUSTEE NAME], as Trustee
By:_________________________
Name:
Title:
[SEAL]
ATTEST
_____________________________
Authorized officer of
[Trustee Name]
[Form of Certificate of Authentication]
THIS IS ONE OF THE CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED AGREEMENT
[TRUSTEE NAME]
- --------------------------------
REGISTRAR
By:_____________________________
AUTHORIZED OFFICER
A-2
<PAGE>
[FORM OF REVERSE OF CERTIFICATE]
ASSET BACKED SECURITIES CORPORATION
CONDUIT MORTGAGE 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 Mortgage 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 re
spective 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 Denomination of all Certificates in (i) the Mortgage Loans and the
proceeds hereof 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 foreclosure, deed in lieu of foreclosure or otherwise with
respect to the Mortgage Loans and (iv) the interest of the Certificateholders in
the Pool Insurance Policy, the Special Hazard Insurance Policy, the Mortgagor
Bankruptcy Bond, the Performance Bond, and all proceeds thereof as provided in
the Agreement (such Mortgage Loans, funds, property and interests are herein
collectively called the "Trust Fund").
The Master Servicer shall distribute on the [ ]th day of each month,
or, if such [ ]th day is not a Business Day, the Business Day immediately
following such [ ]th 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 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 Mortgage Loans, 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
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 Mortgage Loans 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
respecting 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 Mortgage Loan in
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<PAGE>
excess of interest at the Pass-Through Rate set forth above on the unpaid
principal balance of such Mortgage Loan 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 Mortgage Loans 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 Mortgage Loans through foreclosure, sale, deed in lieu
of foreclosure or otherwise shall be deemed to be payments on account of
principal of Mortgage Loans.
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
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 Mortgage Loans 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 herefor 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
A-4
<PAGE>
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations 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 Mortgage Loans an 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.
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
Mortgage Loans 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 Mortgage Loan subject thereto and the disposition of all property
acquired upon foreclosure or deed-in-lieu of foreclosure of any Mortgage Loans
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 Mortgage Loans 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 Mortgage
Loans at the time of purchase is less than to [10%] of the aggregate Princi pal
Balance of the Mortgage Loans 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.
A-5
<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-named
assignee and to deliver such Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Dated:___________________
Social Security or _________________________________
other Tax Identifica- Signature by or on behalf
cation No. of Assignee: of assignor (signature must
be signed 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.
A-6
<PAGE>
Schedule I
MORTGAGE LOAN SCHEDULE
[Each Mortgage Loan shall be identified by loan number, address of the
mortgaged property and name of the Mortgagor. The following details shall be set
forth as to each Mortgage Loan: (i) the Principal Balance at the time of its
origination, (ii) the adjusted Principal Balance as of the Cut-off Date, (iii)
the Mortgage Rate, (iv) the scheduled monthly payment of principal and interest,
(v) the first payment date, (vi) the original term, (vii) 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,
(viii) 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, (ix) a code indicating the number of units in the
residential dwelling, (x) the Loan-to-Value Ratio at origination and (xi) the
Retained Yield.]
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<PAGE>
EXHIBIT B
FORM OF CUSTODIAN INTERIM CERTIFICATION
[date]
[Trustee Name], as Trustee
______________________________
______________________________
Attention:____________________
Re: Custodial Agreement dated as of [ ], 199[ ] by and among [Trustee
Name], as Trustee, Asset Backed Securities Corporation, as
Depositor, [Master Servicer Name], as Master Servicer and
[Custodian Name], as Custodian, Asset Backed Securities
Corporation Conduit Mortgage Pass Through Certificates,
Series [ ]
-----------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.3(b) of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule it has reviewed the
Mortgage File and the Mortgage Loan Schedule and has determined that: (i) all
documents required to be included in the Mortgage File are in its possession;
(ii) such documents have been reviewed by it and appear regular on their face
and relate to such Mortgage Loan; and (iii) based or examination, and only as to
such documents, the information set forth in the Mortgage Loan Schedule with
respect to such Mortgage Loan is correct.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.
__________________________
as Custodian
By:_______________________
Title:____________________
<PAGE>
EXHIBIT C
FORM OF CUSTODIAN INTERIM CERTIFICATION
[date]
[Trustee Name], as Trustee
_____________________________
_____________________________
Attention:___________________
Re: Custodial Agreement dated as of [ ], 199[ ] by and among [Trustee
Name], as Trustee, Asset Backed Securities Corporation, as
Depositor, [Master Servicer Name], as Master Servicer and
[Custodian Name], as Custodian, Asset Backed Securities
Corporation Conduit Mortgage Pass-Through Certificates,
Series [ ]
-----------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.3(b) of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that as to
each Mortgage Loan listed in the Replacement Mortgage Loan Schedule it has
reviewed the Mortgage File and the Replacement Mortgage Loan Schedule and has
determined that: (i) all documents required to be included in the Mortgage File
are in its possession; (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Replacement Mortgage Loan; and (iii)
based on examination, and only as to such documents, the information set forth
in the Replacement Mortgage Loan Schedule with respect to such Mortgage Loan is
correct.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.
_________________________
as Custodian
By:______________________
Title:___________________
<PAGE>
EXHIBIT D
FORM OF CUSTODIAL AGREEMENT
CUSTODIAL AGREEMENT (as amended and supplemented from time to time,
the "Agreement"), dated as of [ ], 199[ ], by and among [TRUSTEE NAME],
as trustee under the Pooling and Servicing Agreement referred to hereinbelow
(the "Trustee"), ASSET BACKED SECURITIES CORPORATION, a Delaware corporation, as
depositor under the Pooling and Servicing Agreement (the "Depositor"), [MASTER
SERVICER NAME], a [ ] corporation, as master servicer under the Pooling
and Servicing Agreement (the "Master Servicer"), and [CUSTODIAN NAME], as
custodian hereunder (the "Custodian").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, the Depositor, the Master Servicer and the Trustee have
entered into a Reference Agreement dated as of [ ], 199[ ] (the
"Reference Agreement"), which incorporates by reference, to the extent provided
therein, the Standard Terms and Provisions of Pooling and Servicing, dated as of
[ ], 199[ ] (the "Standard Terms," and, together with the Reference
Agreement, the "Pooling and Servicing Agreement") among the Depositor, the
Master Servicer and the Trustee, pursuant to which the Depositor shall transfer,
assign, set-over and otherwise convey to the Trustee, without recourse, the
Depositor's right, title and interest (to the extent provided in the Pooling and
Servicing Agreement) in and to the Mortgage Loans identified in Schedule I
attached hereto (the "Mortgage Loan Schedule"); and
WHEREAS, the Custodian has agreed to act as agent for the Trustee for
the purposes of receiving and holding certain documents and other instruments
delivered by the Depositor under the Pooling and Servicing Agreement, all upon
the terms and conditions and subject to the limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Trustee, the Depositor, the
Master Servicer and the Custodian hereby agree as follows:
ARTICLE I
Definitions
Capitalized words and phrases used but not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the Pooling and
Servicing Agreement.
<PAGE>
ARTICLE II
Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent; Acceptance of Mortgage Files.
-------------------------------------------------------
The Custodian, as the duly appointed agent and bailee of the Trustee for these
purposes, acknowledges receipt as of the Delivery Date of the following
documents pertaining to each of the Mortgage Loans identified on Schedule I
hereto:
(a) the original Mortgage Note, endorsed by the Depositor without
recourse to the Trustee in the following form: "Pay to the order of [Trustee
Name], as trustee under the Pooling and Servicing Agreement dated as of [ ],
199[ ], Asset Backed Securities Corporation, Conduit Mortgage Pass-Through
Certificates, Series __, without recourse," with all intervening endorsements
showing a complete chain of title from the originator to the Depositor;
(b) the original recorded Mortgage or, if the original Mortgage has
not been returned from the applicable public recording office, a copy of the
Mortgage certified by the Depositor to be a true and complete copy of the
original Mortgage submitted for recording;
(c) an executed assignment (which may be included in a blanket
assignment) of the Mortgage from the Depositor to "[Trustee Name], as trustee
under the Pooling and Servicing Agreement dated as of ___________, 19__, Asset
Backed Securities Corporation Conduit Mortgage Pass-Through Certificates,
Series __________";
(d) the original recorded assignment or assignments of the Mortgage
showing a complete chain of title from the originator to the Depositor or, if
any such Assignment has not been returned from the applicable public recording
office, a copy of such assignment certified by the Depositor to be a true and
complete copy of the original assignment submitted for recording;
(e) 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;
(f) the original of each assumption, modification, written assurance
or substitution agreement, if any; and
(g) the original Primary Insurance Policy, if any.
The Depositor shall, promptly upon receipt thereof, deliver to the
Custodian: (i) the original recorded Mortgage in those instances where a copy
thereof certified by the Depositor was delivered to the Custodian; (ii) the
original recorded assignment of the Mortgage from the Depositor to the Trustee;
and (iii) the original recorded assignment or assignments of the Mortgage
showing a complete chain of title from the originator to the Depositor in those
instances where copies thereof certified by the Depositor were delivered to the
Custodian. Notwithstanding anything to the contrary contained in this Section
2.1, in those instances where the public recording office retains the original
Mortgage or assignment after it has been recorded, the Depositor shall be deemed
to have satisfied
2
<PAGE>
its obligations hereunder upon delivery to the Custodian of a copy of such
Mortgage or assignment certified by the public recording office to be a true and
complete copy of the recorded original thereof. From time to time the Master
Servicer may forward to the Custodian additional original documents evidencing
an assumption or modification of a Mortgage Loan. All Mortgage Loan documents
held by the Custodian as to each Mortgage Loan shall hereinafter be referred to
as the "Mortgage File."
Section 2.2. Recordation of Assignments. The Custodian shall
--------------------------
promptly cause to be recorded, at the expense of the Depositor in the
appropriate public office for real property records, each assignment referred to
in Section 2.1(c) above. In the event that any such assignment is lost or
returned unrecorded because of a defect therein, the Depositor shall prepare a
substitute assignment or cure such defect, as the case may be, and deliver such
substitute assignment to the Custodian, which shall thereafter cause each such
assignment to be duly recorded.
Section 2.3. Review of Mortgage Files.
------------------------
(a) On or prior to the Delivery Date, the Custodian shall deliver to
the Trustee an Initial Certification in the form annexed hereto as Exhibit A
evidencing receipt of a Mortgage File for each Mortgage Loan listed on the
Mortgage Loan Schedule.
(b) Within 60 days of the Closing Date the Custodian shall ascertain
that all documents required to be delivered to it are in its possession, and
shall deliver to the Trustee an Interim Certification in the form annexed hereto
as Exhibit B to the effect that, as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
this Agreement are in its possession, (ii) such documents have been reviewed by
it and appear regular on their face and relate to such Mortgage Loan, and (iii)
based on its examination and only as to the foregoing documents, the information
set forth in the Mortgage Loan Schedule respecting each such Mortgage Loan is
correct. The Custodian shall be under no duty or obligation to inspect, review
or examine said documents, instruments, certificates or other papers to
determine that the same are genuine, enforceable, or appropriate for the
represented, purpose or that they have actually been recorded or that they are
other than that which they purport to be on their face.
(c) Any Replacement Mortgage Loan delivered to the Custodian shall be
delivered to the Custodian accompanied by the documents relating to such
Replacement Mortgage Loan, as specified in Section 2.1 hereof, and in accordance
with the provisions of Section 2.02, 2.04 or 2.05, as applicable. On the date
of delivery of such Replacement Mortgage Loan (the "Subsequent Delivery Date"),
the Custodian, upon review of the Mortgage File shall deliver to the Trustee an
Interim Certification in the form annexed hereto as Exhibit C to the effect as
to each Replacement Mortgage Loan listed in the Mortgage Loan Schedule with
respect thereto (the "Replacement Mortgage Loan Schedule") (i) all documents
required to be delivered to it pursuant to this Agreement are in its possession,
(ii) such documents have been reviewed by it and appear regular on their face
and relate to such Mortgage Loan, and (iii) based on its examination and only as
to the foregoing documents, the information set forth in the Replacement
Mortgage Loan Schedule respecting each
3
<PAGE>
such Replacement Mortgage Loan is correct. The Custodian shall be under no duty
or obligation to inspect, review or examine said documents, instruments,
certificates or other papers to determine that the same are genuine, enforceable
or appropriate for the represented purpose, that they have actually been
recorded or that they are other than that which they purport to be on their
face.
(d) Prior to the first anniversary date of this Agreement the
Custodian shall deliver to the Trustee a Final Certification in the form annexed
hereto as Exhibit D evidencing the completeness of the Mortgage Files.
Section 2.4. Notification of Defects. Upon discovery by the
-----------------------
Custodian of a defect with respect to a Mortgage File, the Custodian shall give
prompt written notice specifying such defect to the Trustee.
Section 2.5. Release of Mortgage Files. Upon (i) the payment in full
-------------------------
of any Mortgaged Loan, or (ii) the repurchase of any Mortgage Loan pursuant to
Section 2.02, 2.03(b), 2.04, 2.05, 2.06, 3.15 or 9.01 of the Pooling and
Servicing Agreement, or (iii) substitution of a re placement Mortgage Loan for a
Deleted Mortgage Loan, and upon receipt by the Custodian of a certificate signed
by a Servicing officer stating that all amounts required by the Pooling and
Servicing Agreement in connection with such payment, repurchase or substitution
have been deposited in the Certificate Account pursuant to Section 3.08 of the
Pooling and Servicing Agreement, the Custodian shall promptly release the
related Mortgage File to the related Servicer, Seller or the Master Servicer, as
the case may be.
From time to time as is appropriate for the servicing or foreclosure
of any Mortgage Loan, the Custodian is hereby authorized to release to the
Master Service the related Mortgage File upon receipt by the Custodian of a
certificate signed by a Servicing Officer requesting possession of such Mortgage
File and certifying as to the reason for such release. The Master Servicer
shall cause each Mortgage File so released to be returned to the Custodian when
the need there or by the Master Servicer no longer exists, unless: (i) the
Mortgage Loan has been liquidated and the Liquidation Pro ceeds relating to the
Mortgage Loan have been deposited in the Certificate Account; or (ii) the
Mortgage File has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Custodian a certificate of a Servicing officer certifying as to the name and
address of the Person to which such Mortgage File or such documents were
delivered and the purpose or purposes of such delivery.
Section 2.6. Audit and Examination of Mortgage Files. Upon
---------------------------------------
reasonable notice to the Custodian, the Trustee, the Master Servicer, the
Depositor or any agent of any of them will be permitted, during normal business
hours, to examine the Mortgage Files, documents, records and other papers in
possession of or under the control of the Custodian relating to any or all of
the Mortgage Loans.
Section 2.7. Copies of Mortgage Files. Upon the request of the
------------------------
Trustee, the Master Servicer or the Depositor, the Custodian shall provide the
Trustee, the Master Servicer or the
4
<PAGE>
Depositor, as the case may be, with copies of the documents which constitute the
Mortgage Files. The party requesting such copies shall pay all costs and
expenses incurred by the Custodian in preparing such copies.
ARTICLE III
Concerning the Custodian
Section 3.1. Duties of Custodian. With respect to the Mortgage Note,
-------------------
the Mortgage and each assignment of Mortgage and other documents constituting
the Mortgage File that are delivered to the Custodian or that at any time come
into the possession of the Custodian, the Cus todian shall be the custodian for
and the bailee of the Trustee, for the benefit of the Certificateholders, until
the release of such Mortgage Loans in accordance with the provisions of Section
2.5 hereof. The Custodian shall hold all documents constituting each Mortgage
File received by it for the exclusive use and benefit of the Trustee, on behalf
of the Certificateholders, until such time as the Mortgage Loans held by it are
released pursuant to the provisions of Section 2.5 and shall make dis position
thereof only in accordance with the instructions furnished by the Trustee,
except otherwise provided herein.
In connection with its duties as Custodian, the Custodian shall have
such duties and responsibilities as are specifically provided herein and in
addition shall: (i) review the Mortgage Files, and the Mortgage Files with
respect to any Replacement Mortgage Loan, as provided in Section 2.3, to
determine whether the requirements of Section 2.3 are satisfied and accept
Replacement Mortgage Loans in accordance with the provisions of such Sections
2.02, 2.04 or 2.05 of the Pooling and Servicing Agreement as applicable; (ii)
segregate and maintain continuous custody of all documents, instruments and
certificates constituting each Mortgage File that is received and held by it in
accordance with the provisions of this Agreement in secure facilities in
accordance with customary standards for such custody; (iii) subject to the
provisions of this Agreement, hold the Mortgage Loans for the benefit of the
Trustee, on behalf of the Certificateholders, and keep such Mortgage Loans free
and clear of all liens, claims and encumbrances whatsoever arising out of or
through claims of creditors of the Custodian; (iv) not release or deliver any of
the Mortgage Loans, except as provided in this Agreement or in accordance with
the direction of the Trustee; (v) record, or cause to be recorded, each
assignment of Mortgage as required by, and in accordance with, the applicable
provisions of this Agreement, (vi) execute such documents, instruments and
assignments, and take such further action, as is necessary to vest title in the
Sellers, the Servicers, the Master Servicer or the Depositor, as applicable, to
the Mortgage Loans, to be released in accordance with the applicable provisions
of this Agreement, in each case as required by, and in accordance with, the
applicable pro visions of this Agreement; and (vii) do all such further acts and
things with respect to the Mortgage Loans as are specifically provided for in
this Agreement or as the Custodian may be instructed to do by the Trustee, in
accordance with the terms of this Agreement.
Section 3.2. Indemnification. The Trustee hereby agrees to indemnify
---------------
and hold harmless the Custodian from and against all claims, liabilities,
losses, actions, suits or proceedings at law or in equity, or any other
expenses, fees or charges of any character or nature, which the
5
<PAGE>
Custodian may incur or with which the Custodian may be threatened by reasons of
its acting as Custodian under this Agreement, including indemnification of the
Custodian against any and all expenses, including attorneys' fees if counsel for
the Custodian has been approved by the Trustee, and the cost of defending any
action, suit or proceedings or resisting any claim. Notwithstanding the
foregoing, it is specifically understood and agreed that in the event any such
claim, liability, loss, action, suit or proceeding or other expense, fees or
charge shall have been caused by reason of any negligent act, negligent failure
to act, or willful misconduct on the part of the Custodian, or shall constitute
a willful breach of the Custodian's duties hereunder, the indemnification
provisions of this Agreement shall not apply.
Section 3.3. Custodian May Own Certificates. The Custodian 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 Custodian.
Section 3.4. Master Servicer to Pay Custodian's Fees and Expenses.
----------------------------------------------------
The Master Servicer covenants and agrees to pay to the Custodian from time to
time, and the Custodian shall be entitled to receive, reasonable, compensation
for all services rendered by it in the exercise and performance of any of the
powers and duties hereunder of the Custodian, and the Master Servicer will pay
or reimburse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian 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 or bad faith.
Section 3.5. Custodian May Resign; Trustee May Remove Custodian. The
--------------------------------------------------
Custodian may resign from the obligations and duties hereby imposed upon it as
such obligations and duties relate to its acting as Custodian of the Mortgage
Loans by giving written notice thereof to the Depositor, the Master Servicer and
the Trustee. Upon receiving such notice of resignation, the Trustee shall either
take custody of the Mortgage Files itself and give prompt notice thereof to the
Depositor, the Master Servicer and the Custodian or promptly appoint a successor
custodian by written instrument, in duplicate, which instrument shall be
delivered to the resigning Custodian and to the successor custodian. If the
Trustee shall not have taken custody of the Mortgage Files and no successor
custodian shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Custodian may
petition any court of competent jurisdiction for the appointment of a successor
custodian.
The Trustee may remove the Custodian at any time. In such event, the
Trustee shall appoint, or petition a court of competent jurisdiction to appoint,
a successor custodian hereunder. Any successor custodian shall be a depository
institution subject to supervision or examination by federal or state authority
and shall be able to satisfy the other requirements contained in Section 3.7.
Any resignation or removal of the Custodian and intent of a successor
custodian pursuant to any of provisions of this Section 3.5 shall become
effective upon acceptance of appointment by the successor custodian. The
Trustee shall give prompt notice to the Depositor and the Master Servicer of the
appointment of any successor custodian. Upon its receipt of such notice,
6
<PAGE>
the Master Servicer shall notify each Seller or Servicer of the appointment and
the identity of such successor Custodian. No successor custodian shall be
appointed by the Trustee without the prior approval of the Depositor and the
Master Servicer.
Section 3.6. No Adverse Interests. By its acceptance of each
--------------------
Mortgage File, the Custodian covenants and warrants to the Depositor, the Master
Servicer and Trustee that: (i) as of the Delivery Date the Custodian holds no
adverse interest, by way of security or otherwise, in any Mortgage Loan and (ii)
the execution of this Agreement and the creation of the custodial relationship
hereunder does not create any interest of the Custodian, by way of security or
otherwise, in and to any Mortgage Loan, other than the Custodian's rights as
Custodian hereunder.
Section 3.7. Merger or Consolidation of Custodian. Any Person into
------------------------------------
which the Custodian 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 Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 3.8. Eligibility of the Custodian. Any Custodian or
----------------------------
successor custodian appointed pursuant to this Agreement shall be a depository
institution subject to supervision or examination by a federal or state
authority, have a combined capital and surplus of at least $10,000,000 and be
qualified to do business in the jurisdiction in which it will hold any Mortgage
File. If the Custodian publishes reports of condition at least annually pursuant
to law or the requirements of the aforesaid supervising or examining authority,
then for purposes of this Section, the combined capital and surplus of the
Custodian shall be deemed to be its combined capital and surplus as set forth in
its most recent published report of condition.
If at any time the Custodian shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect specified in this Article.
Section 3.9. Insurance. The Custodian shall, at its own expense
---------
maintain in full force and effect at all times during the existence of this
Agreement (1) fidelity insurance, (2) theft of documents insurance, (3) forgery
insurance subject to deductibles and (4) errors and omissions insurance. All
such insurance shall be in amounts with standard coverage and subject to
deductibles as is customary for insurance typically maintained by banks that act
as custodians and with Insurance companies not objectionable to the Trustee.
The Custodian shall, upon written request, provide the Depositor, the Master
Servicer or the Trustee with a copy of any policy or certificate of insurance
required to be maintained by the Custodian pursuant to this Agreement. In the
event that such insurance coverage is to be terminated, the Custodian shall give
notice thereof to the Depositor, the Master Servicer and the Trustee and shall
procure a substitute policy or policies of insurance coverage meeting the
requirements set forth above.
7
<PAGE>
ARTICLE IV
Miscellaneous Provisions
Section 4.1. Notices. All notices, requests, consents and demands
-------
and other communications required under this Agreement or pursuant to any other
instrument or document delivered hereunder shall be in writing and, unless
otherwise specifically provided, may be delivered personally, by telegram or
telex, or by registered or certified mail, postage prepaid, return receipt
requested,
(a) if to the Trustee, to:
[Trustee Name]
________________________________
________________________________
________________________________
Attention:______________________;
(b) if to the Master Servicer, to:
[Master Servicer Name]
________________________________
________________________________
________________________________
Attention:______________________;
(c) if to the Depositor, to:
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
(d) if to the Custodian, to:
________________________________
________________________________
________________________________
Attention:______________________;
or to such other addresses as may hereafter be furnished by each party to each
other party hereto.
Section 4.2. Amendments. No modification or amendment of or
----------
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto, and
8
<PAGE>
neither the Depositor, the Master Servicer nor the Trustee shall enter into any
amendment hereof except as permitted by the Pooling Agreement. The Trustee
shall give prompt notice to the Custodian of any amendment or supplement to the
Pooling Agreement and shall furnish the Custodian with written copies thereof.
Section 4.3. Governing Law. This Agreement shall be deemed a
-------------
contract made under the laws of the State of ______________ and shall be
construed and enforced in accordance with and governed by the laws of the State
of ______________ .
Section 4.4. Recordation of Agreement. To the extent permitted by
------------------------
applicable law, 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 and at its expense on
direction by the Trustee, but only upon direction accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.
9
<PAGE>
IN WITNESS WHEREOF, the Trustee, the Master Servicer, the Depositor
and the Custodian 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.
[TRUSTEE NAME], as Trustee
By:________________________________
Name:
Title:
[SEAL]
ATTEST:____________________
Secretary
[MASTER SERVICER NAME], as Master
Servicer
By:________________________________
Name:
Title:
[SEAL]
ATTEST:____________________
Secretary
ASSET BACKED SECURITIES
CORPORATION, as Depositor
By:________________________________
Name:
Title:
[SEAL]
ATTEST:____________________
Secretary
[CUSTODIAN NAME], as Custodian
By:________________________________
Name:
Title:
[SEAL]
ATTEST:____________________
Secretary
10
<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 a________of
[Trustee Name], 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
[SEAL]
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 a__________of [Master
Servicer Name], 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
[SEAL]
11
<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 a________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 an
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
[SEAL]
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 a
_____________________ of [Custodian Name] 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
[SEAL]
12
<PAGE>
EXHIBIT D
FORM OF CUSTODIAN FINAL CERTIFICATION
[date]
[Trustee Name], as Trustee
______________________________
______________________________
Attention:____________________
Re: Custodial Agreement dated as of [ ], 199[ ] by and among [Trustee
Name], as Trustee, Asset Backed Securities Corporation, as
Depositor, [Master Servicer Name], as Master Servicer and
[Custodian Name], as Custodian, Asset Backed Securities
Corporation Conduit Mortgage Pass-Through Certificates, Series []
-----------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.3(c) of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto) it has received:
(i) the original recorded Mortgage, or a certified copy of the
Mortgage in those instances where the public recording office retains the
original; and
(ii) an original recorded assignment of the Mortgage from the
Depositor to the Trustee together with the original recorded assignment or
assignments of the Mortgage showing a complete chain of title from the
originator to the Depositor, or a certified copy of such assignments in those
instances where the public recording office retains the original.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.
__________________________
as Custodian
By:_______________________
Title:____________________
<PAGE>
EXHIBIT A
FORM OF CUSTODIAN INITIAL CERTIFICATION
[date]
[Trustee Name], as Trustee
________________________________
________________________________
Attention:______________________
Re: Custodial Agreement dated as of [ ], 199[ ] by and among
[Trustee Name], as Trustee, Asset Backed Securities Corporation,
as Depositor, [Master Servicer Name], as Master Servicer and
[Custodian Name] as Custodian, Asset Backed Securities
Corporation Conduit Mortgage Pass-Through Certificates, Series[ ]
-----------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.3(a) of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-referenced Custodial
Agreement.
__________________________
as Custodian
By:_______________________
Title:____________________
<PAGE>
SCHEDULE 1
----------
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT 4.3.5
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
-2-
<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;
-3-
<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.
-4-
<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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(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 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 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 Certi-ficates, 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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<PAGE>
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 pur-suant 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 De-positor 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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<PAGE>
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
-22-
<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 Certificate,
without the consent of the Holder of such
-24-
<PAGE>
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
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<PAGE>
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 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,
A-2
<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 ______________________________________________________
Tax Identification (signature must be signed as registered)
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
B-4
<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>
Exhibit 4.3.6
VERSION C
---------
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_
--------------------------------
Conduit Mortgage Pass-Through Certificates
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PRELIMINARY STATEMENT...................................................... 1
ARTICLE XI
THE CERTIFICATES............................ 2
SECTION 11.01 Designation............................................ 2
SECTION 11.02 Conveyance of Trust Fund; Issuance of
Certificates; REMIC Election and
Designation............................................ 2
SECTION 11.03 Delivery of Documents.................................. 3
SECTION 11.04 Forms Generally........................................ 12
SECTION 11.05 Aggregate Initial Stated Principal
Balance; Final Scheduled Distribution
Date; Classes; Terms................................... 12
SECTION 11.06 LIBOR Calculation...................................... 14
SECTION 11.07 Distributions.......................................... 16
SECTION 11.08 Place and Notice for Final Distribution
in Reduction of Outstanding Stated
Principal Balance...................................... 17
SECTION 11.09 Denominations.......................................... 18
SECTION 11.10 Distribution Dates..................................... 18
SECTION 11.11 Regular Record Dates................................... 18
SECTION 11.12 Special Record Dates................................... 18
SECTION 11.13 Early Termination...................................... 18
SECTION 11.14 Wire Transfer Eligibility.............................. 19
SECTION 11.15 Required Rating........................................ 19
SECTION 11.16 Pool Insurance Policy.................................. 19
SECTION 11.17 Special Hazard Insurance Policy........................ 19
SECTION 11.18 Mortgagor Bankruptcy Bond.............................. 19
SECTION 11.19 Servicing Agreements; Warranty and
Subservicing Agreements................................ 19
SECTION 11.20 Custodial Agreements................................... 19
SECTION 11.21 Distribution of Excess Cashflow on the
Multi-Class Certificates............................... 19
SECTION 11.22 Certain Defined Terms.................................. 19
SECTION 11.23 Applicability of Certain Provisions of
Standard Terms......................................... 22
ARTICLE XII
DEFINITIONS RELATING TO THE CERTIFICATES;
ASSUMPTIONS AS TO TRUST FUND;
MORTGAGE CERTIFICATES......................... 22
SECTION 12.01 Definitions............................................ 22
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 12.02 Calculations and Respecting Mortgage
Assets and Trust Fund.................................. 36
SECTION 12.03 Representations and Warranties of the
Depositor with Respect to the Mortgage
Certificates........................................... 39
SECTION 12.04 Administration of the Mortgage
Certificates........................................... 41
SECTION 12.05 Substitution of Mortgage Assets........................ 41
ARTICLE XIII
DISTRIBUTIONS............................. 44
SECTION 13.01 Distributions.................................. 44
SECTION 13.02 Reports by Trustee to Certificateholders............... 47
ARTICLE XIV
OPTIONAL TERMINATION.......................... 49
SECTION 14.01 Repurchase at the Option of the
Depositor.............................................. 49
SECTION 14.02 Procedure Upon Optional Termination.................... 50
ARTICLE XV
SPECIAL DISTRIBUTIONS......................... 52
SECTION 15.01 Special Distributions.................................. 52
SECTION 15.02 Notice of Special Distribution by the
Trustee................................................ 52
[ARTICLE XVI
DEFICIENCY EVENTS........................... 53
SECTION 16.01 Occurrence; Trustee's Determinations................... 53
SECTION 16.02 Distributions Upon a Determination of
Sufficiency............................................ 54
SECTION 16.03 Distributions Upon a Determination of
Insufficiency.......................................... 55
SECTION 16.04 Sale of Trust Fund..................................... 56
ARTICLE XI
THE CERTIFICATES
ARTICLE XVII
ACCOUNTS AND ACCOUNTINGS........................ 57
SECTION 17.01 GPM Fund............................................... 57
SECTION 17.02 Reserve Fund........................................... 58
SECTION 17.03 Buy-Down Fund.......................................... 59
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 17.04 Certificate Account.................................... 60
SECTION 17.05 Investments............................................ 61
SECTION 17.06 Custodial Account; Other Accounts...................... 62
SECTION 17.07 Accountings............................................ 63
SECTION 17.08 Trust Estate........................................... 70
ARTICLE XVIII
MISCELLANEOUS............................. 71
SECTION 18.01 Standard Terms......................................... 71
SECTION 18.02 Ratification of Standards Terms........................ 71
SECTION 18.03 Amendment.............................................. 71
SECTION 18.04 Counterparts........................................... 72
SECTION 18.05 Governing Law.......................................... 72
SECTION 18.06 Severability of Provisions............................. 72
SECTION 18.07 REMIC Treatment........................................ 73
</TABLE>
(iii)
<PAGE>
REFERENCE AGREEMENT dated as of ________________, 199_ (the "Reference
Agreement") among ASSET BACKED SECURITIES CORPORATION, a Delaware corporation,
as depositor (the "Depositor"), [NAME OF MASTER SERVICER], a [ ]
corporation, as master servicer (the "Master Servicer") and [NAME OF TRUSTEE], 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 (which incorporates by reference herein the Standard Terms
and Conditions of Pooling and Servicing (the "Standard Terms") attached hereto),
to provide for the issuance of its Conduit Mortgage 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 and Articles shall mean the Sections and Articles of the Reference
Agreement or the Standard Terms, as the 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 Mortgage Assets
(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" (a "REMIC") pursuant to
Section 860D of the Internal Revenue Code of 1986 (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 Agreement and the Trustee is accepting the trusts created hereby, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
<PAGE>
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
ARTICLE XI
THE CERTIFICATES
SECTION 11.01 Designation.
-----------
The Certificates shall be designated generally as the Conduit Mortgage
Pass-Through Certificates, Series A. The Multi-Class Certificates shall be
designated generally as the Multi Class Conduit Mortgage Pass-Through
Certificates, Series A. The Residual Certificates shall be designated as the
Residual Certificates, Series A. [The Multi-Class Certificates are Sequential
Distribution Certificates.] [The Class A-3 and Class A-4 Certificates are
Sequential Distribution Certificates.]
SECTION 11.02 Conveyance of Trust Fund; Issuance of
Certificates; REMIC Election and Designation.
---------------------------------------------
(a) 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 in
and to (a) the Mortgage Loans listed in Schedule I to this Agreement, which the
Depositor causes to be delivered to the Trustee, together with the Mortgage
Files relating thereto and the other property in respect thereof, and the
proceeds thereof payable after the Cut-off Date net of any amounts payable to
the Servicers and the Master Servicer in accordance with the provisions of the
Standard Terms, as specified in Section 2.01, (b) the Mortgage Certificates
listed on Schedule I hereto, and all distributions on such Mortgage Certificates
payable to holders of record after the Cut-off Date, as specified in Section
12.04, (the Mortgage Loans and the Mortgage Certificates are hereinafter
collectively referred to as the "Mortgage Assets") (c) funds held from time to
time in the Custodial Account, net of any amounts payable to the Master
Servicer, as provided herein, (d) the Depositor's rights under the Warranty and
Sub-servicing Agreements and the Servicing Agreements with respect to the
Mortgage Loans listed on Schedule I hereto, (e) the Certificate Account,
including all income from the investment of funds therein, (f) the Reserve Fund,
including all income from investment of funds therein, (g) the Buy-Down Fund,
including all income from the investment of funds therein, (h) the GPM Fund,
including all income from the investment of funds therein, (i) the Pool
Insurance Policy and the proceeds thereof, as provided in Section 3.13, (j) the
Special Hazard Insurance Policy and the proceeds thereof, as provided in Section
-2-
<PAGE>
3.14, (k) the Mortgagor Bankruptcy Bond and the proceeds thereof, as provided in
Section 3.15 and (1) 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
Mortgage Assets and the delivery of the Mortgage Files relating to the Mortgage
Loans to it (or, with respect to Mortgage Loans subject to a Custodial
Agreement, to the respective Custodian on its behalf) and the Mortgage
Certificates 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
Certificates duly authenticated and duly executed by the Trustee in authorized
denominations evidencing the entire ownership of the Trust Fund.
(b) The Depositor agrees that it will, and is hereby authorized and
directed to, elect to treat the Trust Fund as a REMIC within the meaning of
section 860D of the Code. Such election shall be included in the partnership
information return to be filed by the Depositor on behalf of the REMIC
constituted by the Trust Fund for its first taxable year, which will be its
first Fiscal Year.
(c) The Residual Certificates are being issued in a single Class and
are hereby designated by the Depositor as constituting in the aggregate the sole
class of "residual interests" in the Trust Fund for purposes of section
860G(a)(2) of the Code.
(d) The Delivery Date is hereby designated as the "start-up day" of
the REMIC constituted by the Trust Fund within the meaning of Section 860G(a)(9)
of the Code.
(e) After the Delivery Date, the Trustee shall not accept any
contribution of assets to the Trust Fund unless it has first received a REMIC
Qualification Opinion with respect to the inclusion of such assets in the Trust
Fund.
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, the
Depositor hereby delivers to and/or deposits with the Trustee the following
documents, instruments and property related to the Multi-Class Certificates and
the Residual 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
-3-
<PAGE>
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 by 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 Mortgage
Assets and other property included in the Trust Fund to the Trustee
pursuant to this Agreement;
(e) such action has been taken with respect to delivery of
possession of the Mortgage Assets and other property included in the Trust
Fund on the Closing 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 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 Mortgage Assets and other
property included in the Trust Fund on the Delivery Date;
(g) this Agreement is not required to be qualified under the TIA;
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
-4-
<PAGE>
knowledge, no stop order suspending such effectiveness has been issued;
[and the offer and sale of the Residual Certificates is a transaction not
required to be registered under the Securities Act];
(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;
(i) the issue and sale of the Certificates and the fulfillment of
the terms of this Agreement do 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 bylaws 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; and
(j) assuming compliance with the pertinent provisions of this
Agreement, the Trust Fund will qualify to be treated as a REMIC under the
Code; the Multi-Class Certificates will be treated as "regular interests"
in such REMIC; and the Residual Certificates will be treated, in the
aggregate, as the single Class of "residual interests" in such REMIC.
(2) Accountant's Letter. A letter, addressed to the Trustee, of a
-------------------
firm of Independent Accountants of recognized national reputation to the
effect that:
(a) they have performed the following procedures (which need not
constitute an examination in accordance with generally accepted auditing
standards):
(i) they have read Schedule I to this Agreement, and in the case of
Mortgage Certificates listed thereon, have examined each such
Mortgage Certificate, and have compared the pool number,
original principal amount, Maturity Date and coupon rate set
forth in each such Mortgage Certificate, to the corresponding
item in such Schedule I;
(ii) they have computed the principal balance of each Mortgage
Certificate as of the date as of which
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<PAGE>
such balance is set forth in such Schedule I, using a pool
balance and factor reference source (specified in such letter),
or, in the event that no such pool balance and factor reference
source is available, on the basis of information supplied by
the Servicer of such Mortgage Certificate;
(iii) they have compared the principal balance computed by them for
each such Mortgage Certificate as described in paragraph (ii)
above to the principal balance thereof shown on such Schedule
I;
(iv) they have read Schedule I to this Agreement, and, in the case
of the Mortgage Loans listed thereon, have verified the
accuracy of the information contained in Schedule I with
respect to such Mortgage Loans by comparing such information to
data contained in selected mortgage files and by reference to
such other sources as shall be specified in such letter;
(v) they have compared the outstanding principal balance of each
Mortgage Loan as of the date as of which such balances are set
forth in such Schedule I, information supplied by the Servicer
of such Mortgage Loan;
(vi) they have examined each other asset, if any, included in the
Trust Fund and have compared (to the extent applicable) the
principal amount, interest rate and maturity date thereof and
other information with respect thereto to the information with
respect to such asset set forth in Article XI;
(vii) using the formula and methodology specified in the applicable
definition of "Asset Value" in Article XI of this Agreement,
and the assumptions set forth in Section 12.02 hereof, they
have calculated the aggregate of the Asset Values for all of
the Mortgage Assets and have compared the total of the Asset
Values for the Trust Fund calculated by the Depositor to the
aggregate of the Asset Values calculated by them to the
Aggregate Initial Stated Principal Balance of the Certificates
proposed to be authenticated and delivered;
(viii) in accordance with the provisions of Section 12.02 hereof, they
have computed the amount of cash that will be deposited in the
Certificate
-6-
<PAGE>
Account during each Due Period (or on or prior to the
Distribution Date immediately following the end of each such
Due Period) as a result of:
(A) the distributions due and payable on such Mortgage Assets
during each such Due Period;
(B) the amount, if any, to be deposited in the Certificate Account
on the Delivery Date pursuant to Section 11.03(9) hereof;
(C) the amounts, if any, of the GPM Shortfalls or GPM Prepayment
Shortfalls available to be withdrawn from the GPM Fund and
deposited in the Certificate Account on or prior to the
Distribution Date immediately following the end of each such
Due Period pursuant to Section 17.01 hereof;
(D) the amounts, if any, of the Buy-Down Shortfalls available to be
withdrawn from the Buy-Down Fund and deposited in the
Certificate Account on or prior to the Distribution Date
immediately following the end of each such Due Period pursuant
to Section 17.08 hereof; and
(E) all other amounts available for such purpose and required
hereby or by Article XI to be deposited in the Certificate
Account on or prior to the Payment Date immediately following
the end of each such Due Period;
(ix) in accordance with Section 12.02 hereof, they have computed the
income that can be earned and deposited in the Certificate
Account in each Due Period through the reinvestment of each of
the amounts described in paragraph (viii) above;
(x) if applicable, they have computed the scheduled reductions in
Asset Value, if any, for each month for each Due Period and the
amount required to be deposited by the Depositor on the Closing
Date in the GPM Fund and Buy-Down Fund pursuant to Sections
11.03(11) and 11.03(10) hereof, respectively;
(xi) they have computed the Requisite Amount of the Reserve (to the
extent each such amount is applicable to such Certificates) and
the amounts, if any, required to be deposited by the Depositor
on the Closing Date in the Reserve Fund in respect of such
amount pursuant to Section 11.03(12); and
-7-
<PAGE>
(xii) on the assumption that the aggregate of the amounts computed by
them pursuant to paragraphs (viii) through (x) above is the
aggregate of the amounts that will actually be deposited in the
Certificate Account in each Due Period and that such amounts
are applied, in accordance with the terms hereof, to
distributions of interest on and in reduction of the Aggregate
Stated Principal Balance of the Multi-Class Certificates
proposed to be authenticated and delivered, they have computed
the amounts to be distributed with respect to interest on and
in reduction of Aggregate Stated Principal Balance of the
Multi-Class Certificates on each Distribution Date for such
Certificates, using the Assumed Maximum Interest Rate (in the
case of Certificates subject to Special Distributions, such
calculations may be based upon the assumption that Special
Distributions are made on any one or more Special Distribution
Dates); and
(b) based upon the above-specified procedures, such firm has
determined that:
(i) the information set forth on Schedule I, which was read by them
as described in paragraphs (a)(i) and (a)(iv) above, accurately
reflects the terms of each Mortgage Asset (subject, in the case
of Mortgage Certificates, to the accuracy of the pool factors
set forth in the reference source used by them, and, in the
case of Mortgage Loans, the degree of certainty specified in
such letter) and the information with respect to any other
assets included in the Trust Fund set forth in Article XI which
was read by them as described in paragraph (a)(vi) above,
accurately reflects the terms of such assets;
(ii) the aggregate of the Asset Values for the Trust Fund calculated
by the Depositor does not exceed the aggregate of the Asset
Values for the Trust Fund calculated by them in accordance with
the terms of this Agreement and the aggregate of the Asset
Values calculated by them for the Trust Fund is not less than
the Aggregate Initial Stated Principal Balance of the
Certificates proposed to be authenticated and delivered;
(iii) the Depositor's calculations of the aggregate of the amounts
described in clauses (a)(viii) and (a)(ix) above and of each
amount described in
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<PAGE>
clauses (a)(x) through (a)(xii) above agree with the results of
their calculations of such amounts and are mathematically
correct;
(iv) for each Due Period, the aggregate of the amounts described in
clauses (a)(viii), (a)(ix), (a)(x) and (a)(xi) above as
calculated by the Depositor and as computed by them equals or
exceeds the aggregate amount distributable with respect to
interest on and in reduction of Aggregate Outstanding Stated
Principal Balance of the Multi-Class Certificates on the
following Distribution Date (and, if applicable, on each
Special Distribution Date within such Due Period), as set forth
in the Depositor's calculations of the amounts described in
clause (a)(xii) above and in their calculations of such
amounts; and
(v) the Depositor's calculations of the amounts described in clause
(a)(xii) above indicate that the aggregate of such anticipated
distributions in reduction of Aggregate Outstanding Stated
Principal Balance of each Class of such Multi-Class
Certificates distributable on each Distribution Date (and, if
applicable, on any Special Distribution Date) is an amount
sufficient to reduce the Aggregate Outstanding Stated Principal
Balance of each such Class to zero on or before the Final
Scheduled Distribution Date.
(3) The Mortgage Certificates. The Mortgage Certificates included
-------------------------
in the Trust Fund, which Mortgage Certificates have been registered in the
name of the Trustee prior to the Closing Date (or if requested by the
Trustee, in the name of its nominee).
(4) The Mortgage Loans. All of the Mortgage Loans included in the
------------------
Trust Fund, in the manner specified in Section 2.01.
(5) Mortgagor Bankruptcy Bond, Performance Bond, Special Hazard
-----------------------------------------------------------
Insurance Policy and Pool Insurance Policy. Evidence of the execution and
------------------------------------------
delivery of the Mortgagor Bankruptcy Bond, the Performance Bond and of the
issuance of the Special Hazard Insurance Policy and the Pool Insurance
Policy.
(6) Officers' Certificate of Insurers and Pool Insurers. An
---------------------------------------------------
Officers' Certificate of the Pool Insurer, to the effect that the Insurance
Policy issued by such Insurer is in full force and effect, subject to its
terms and
-9-
<PAGE>
conditions, with respect to the Mortgage Loans specified in such Officers'
Certificate; an Officers' Certificate of the Special Hazard Insurer and the
issuer of the Mortgagor Bankruptcy Bond, 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 Mortgage Loans specified in such
Officers' Certificate; 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.
(7) 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 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
which 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
general by or by general principles of equity.
-10-
<PAGE>
(8) Opinion of Counsel to the Master Servicer. An Opinion of Counsel
-----------------------------------------
to the Master Servicer, dated not later than the date of 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 Delaware; 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 of incorporation or bylaws
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 the effect
thereon of applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally and to principles of
equity.
(9) Initial Certificate Account Deposit. Cash in the amount $_______
-----------------------------------
to be deposited in the Certificate Account as part of the Trust Fund and
applied in accordance with Section 17.04.
(10) Initial Buy-Down Fund Deposit. Cash, a Letter of Credit or
-----------------------------
Eligible Investments in the amount of $_______ to be deposited in the Buy-
Down Fund as part of the Trust Fund, to be applied in accordance with
Section 17.03.
(11) Initial GPM Fund Deposit. Cash, a Letter of Credit or Eligible
------------------------
Investments in the amount of $______ to be deposited in the Buy-Down Fund
as part of the Trust Fund, to be applied in accordance with Section 17.01.
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<PAGE>
(12) Initial Reserve Fund Deposit. Cash, a Letter of Credit or
----------------------------
Eligible Investments in the amount of $_______ to be deposited in the
Reserve Fund as part of the Trust Fund, to be applied in accordance with
Section 17.02.
(13) Reinvestment Agreement. The Reinvestment Agreement attached
----------------------
hereto as Exhibit ____.
The Trustee shall hold that portion of the Trust Fund, other than the
Mortgage Files, delivered to the Trustee on the Delivery Date consisting of
Instruments (as such term is defined in Section 9-105 (i) of the Uniform
Commercial Code as in effect on the date hereof) in the State of New York, and
may not remove such Instruments from the State of New York, unless it receives
an Opinion of Counsel that after such transfer, the Trustee will continue to
possess a perfected first priority security interest in such Instrument.
SECTION 11.04 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
Trustee's or the Depositor's judgment 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 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 Multi-Class 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 Multi-Class Certificates may be listed, all as determined by the
officers executing such Certificates, as evidenced by their execution thereof.
The definitive Residual Certificates may be produced in any manner permitted for
the definitive Multi-Class Certificates or may be typewritten, all as determined
by the officers executing such Certificates, as evidenced by their execution
thereof.
SECTION 11.05 Aggregate Initial Stated Principal Balance;
Final Scheduled Distribution Date; Classes;
Terms.
------------------------------------------
(a) The Aggregated Initial Stated Principal Balance of the Multi-
Class Certificates is $_______. Such Aggregate Initial Stated Principal Balance
shall be divided among four Classes
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<PAGE>
having the designations, Initial Stated Principal Balances, Interest Rates,
Final Scheduled Distribution Dates and Initial Reduction Dates as follows:
<TABLE>
<CAPTION>
Initial Final
Stated Scheduled [Initial
Principal Interest Distribution Reduction
Designation Balance Rate Date Date]
- ----------- --------- -------- ------------ ---------
<S> <C> <C> <C> <C>
Class A-1 $ [Variable/1/]
Class A-2 $ [Variable/2/]
Class A-3/2/ $ %
Class A-4/3/(/4/) $ %
</TABLE>
Any distributions of interest and in reduction of Outstanding Stated Principal
Balance shall be made on the Multi-Class Certificates as provided in Section
11.07. [The Interest Rate on the Variable Rate Certificates shall be determined
as provided in Section 11.06.]
(b) Residual Certificates authenticated and delivered under this
Agreement shall evidence Percentage Interests aggregating 100% of the beneficial
ownership of the Residual, except for Residual Certificates authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Residual Certificates pursuant to this Agreement. Any distributions on
the Residual Certificates shall be made on each Distribution Date in an
aggregate amount equal to the Residual Distribution Amount. Provided that no
Deficiency Event shall have occurred and be continuing, the Holder of a
Residual Certificate shall be entitled to receive an amount equal to the
- ------------------
/1/ [The Class A-1 Certificates shall be Variable Rate Certificates and shall
bear interest at the per annum rate of _____% through ____________, 199_, and
thereafter at a variable rate of ___________ of _____% above LIBOR, determined
[quarterly] as set forth in Section 11.06 of this Reference Agreement, subject
to the Maximum Variable Interest Rate.]
/2/ [The Class A-2 Certificates shall be Variable Rate Certificates and shall
bear interest at the per annum rate of _____% through _________, 199_, and
thereafter at a variable per annum rate equal to _____% - (_________ x LIBOR),
determined [quarterly] as set forth in Section 11.06 of this Reference
Agreement, subject to the Minimum Variable Interest Rate.]
/3/ Fixed Rate Certificates.
/4/ Compound Interest Certificates.
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<PAGE>
Percentage Interest evidenced by such Residual Certificate in the Residual
Distribution Amount.
[No transfer of a Residual Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or unless such transfer is made in
accordance with the Securities Act and such laws. In the event that such a
transfer is to be made within three years from the Delivery Date (i) the Trustee
or the Depositor may require an Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee and the Depositor that such transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from the Securities Act and state laws or is being made pursuant
to the Securities Act and state laws, which Opinion of Counsel shall not be an
expense of the Trustee or the Depositor, and (ii) the Trustee shall require the
transferee to execute an investment letter, certifying to the Depositor and the
Trustee the facts surrounding such transfer, which investment letter shall not
be an expense of the Trustee or the Depositor. The Holder of a Residual
Certificate desiring to effect such transfer shall, and by the acceptance of
such Certificate does hereby agree to, indemnify the Trustee and the Depositor
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws. The Residual Certificates
shall have no principal amount and no stated interest rate.]
SECTION 11.06 LIBOR Calculation.
-----------------
(a) Commencing __________, 199_, interest distributions will be made
on the Variable Rate Certificates at the rate determined by [the "Trustee"] on
the basis of the London interbank offered rate quotations for [three-month]
Eurodollar deposits ("LIBOR") provided by _______, ________, and ___________,
(the initial "Reference Banks"). The [Trustee] will determine LIBOR for each
Variable Rate Interest Accrual Period on the Interest Rate Determination Date
for such Variable Rate Interest Accrual Period.
(b) The determination of the Interest Rate borne by the Variable Rate
Certificates shall be made in accordance with the following provisions:
(i) On each Interest Rate Determination Date, [the Trustee] shall
determine LIBOR on the basis of quotations provided by the Reference Banks as of
11:00 a.m. (London Time) as such quotations appear on the Reuters screen LIBO
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] shall be the arithmetic mean of such quotations,
such arithmetic mean rounded upward, if necessary, to the nearest multiple of
____ of 1.00%.
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<PAGE>
(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 [the Trustee] with such offered quotations,
LIBOR shall 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 1/4 of 1.00% above 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, if practicable)]
are quoting on the relevant Interest Rate Determination Date for
[three-] month Eurodollar 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, if practicable)] are
quoting on such Interest Rate Determination Date to leading European
banks for [three-month] Eurodollar deposits; provided, however, that
-------- -------
if the banks selected as aforesaid by [the Trustee] are not quoting as
mentioned above, LIBOR for such Variable Rate Interest Accrual Period
shall be as specified in (A) above.
(iv) In no event will the Variable Interest Rate borne by the Class
A-1 Certificates exceed the Maximum Variable Interest Rate.
(v) In no event will the Variable Interest Rate borne by the Class
A-2 Certificates exceed the Minimum Variable Interest Rate.
(c) 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.
(d) Promptly after each Interest Rate Determination Date, the Trustee
shall cause the Interest Rate for the Variable
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<PAGE>
Rate Interest Accrual Period following such Interest Rate Determination Date to
be published in an English language newspaper of general circulation published
each business day in New York City. In addition, the Trustee shall provide
telephonic advice from the Corporate Trust Office to Certificateholders of such
Interest Rate applicable to the then current and the immediately preceding
Variable Rate Interest Accrual Periods.]
SECTION 11.07 Distributions.
-------------
Distributions made to the Holders of the Multi-Class Certificates
shall be made in the following order of priority. On each Distribution Date,
the Trustee shall, to the extent funds are available in the Certificate Account
therefor, make distributions to the Holders of the Class A-1 Certificates in an
amount equal to the Interest Distribution Amount for such Class, then it shall
make a distribution to the Holders of the Class A-2 in an amount equal to the
Interest Distribution Amount for such Class, then to the Holders of the Class
A-3 Certificates in an amount equal to the Interest Distribution Amount for such
Class and then to the Holders of the Class A-4 Certificates in an amount equal
to the Interest Distribution Amount for such Class; provided, however, that no
distributions of any Interest Distribution Amounts shall be made on any Class
A-4 Certificate until after its Accretion Termination Date. Prior to the
Accretion Termination Date, the Interest Distribution Amount for the Class A-4
Certificates will be added to the Outstanding Stated Principal Balance of such
Class A-4 Certificates. the aggregate amount of each distribution in reduction
of Outstanding Stated Principal Balance on Multi-Class Certificates will be
equal to the Stated Principal Distribution Amount. [On each Distribution Date,
after distribution of the Interest Distribution Amount for each Class of Multi-
Class Certificates, the Stated Principal Distribution Amount shall be allocated
___% to the Class A-1 Certificates, ____% to the Class A-2 Certificates , and
____% to the Class A-3 Certificates. On the Distribution Date on which the
Outstanding Stated Principal Balances of the Class A-1, Class A-2 and Class A-3
Certificates have been reduced to zero, and on each Distribution Date
thereafter, the Trustee shall distribute (after, in the case of the Distribution
Date on which the Outstanding Stated Principal Balances of the Class A-1, Class
A-2 and Class A-3 Certificates have been reduced to zero, applying amounts in
the Certificate Account in respect of the Stated Principal Distribution Amount
to such reduction) the Stated Principal Distribution Amount to the Holders of
the Class A-4 Certificates until the Outstanding Stated Principal Balance
thereof has been reduced to zero.] [On each Distribution Date, after
distribution of the Interest Distribution Amount for each Class of Multi-Class
Certificates, the Stated Principal Distribution Amount shall be distributed to
the Holders of the Multi-Class Certificates in the order of their Final
Scheduled Distribution Dates. Each such distribution to a Class of Multi-Class
Certificates shall not exceed the aggregate
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<PAGE>
Outstanding Stated Principal Balance of such Class. Any excess shall be
distributed on such Distribution Date to the Class of Multi-Class Certificates
having the next earliest Final Scheduled Distribution Date and so on until the
Stated Principal Distribution Amount is distributed. On each succeeding
Distribution Date, the Trustee shall distribute to the Class of Multi-Class
Certificates to which distributions in reduction of Outstanding Stated Principal
Balance are currently being made an amount equal (after distribution of the
Aggregate Interest Distribution Amount for such Distribution Date) to the Stated
Principal Distribution Amount, if any, until distributions have been made to the
Holders of the Multi-Class Certificates of such Class in an aggregate amount
equal to the Initial Stated Principal Balance of such Class (or in the case of a
Compound Interest Certificate, the Compound Value of such Compound Interest
Certificates) and continue to make such distributions on each Distribution Date
until distributions have been made to each Holder of a Multi-Class Certificate
in an amount equal to the Initial Stated Principal Balance of such Certificate
(or in the case of Compound Interest Certificate, the Compound Value of any
Compound Interest Certificate).] Distributions in reduction of Outstanding
Stated Principal Balance to a particular class shall be made on a pro rata basis
among the Certificates of such Class.
On each Distribution Date, provided that no Deficiency Event shall
have occurred or be continuing, the amount, if any, remaining in the Certificate
Account shall be distributed in accordance with the provisions of Section 13.01.
Notwithstanding the foregoing, in the event that a Deficiency Event
has occurred and is continuing, distributions on the Certificates shall be made
in the manner specified in Article XVI hereof.
SECTION 11.08 Place and Notice for Final Distribution in Reduction of
------------
Outstanding Stated Principal Balance.
------------------------------------
(a) The final distribution in reduction of Outstanding Stated
Principal Balance of each Multi-Class Certificate on any Distribution Date,
Optional Termination Date or Special Distribution Date shall be distributable
upon presentation and surrender thereof at the office or agency of the Trustee
maintained for such purposes in the Borough of Manhattan, City and State of New
York.
(b) Notice of final distribution in reduction of Outstanding Stated
Principal Balance of any Certificate on any Distribution Date, Optional
Termination Date or Special Distribution Date shall be mailed no later than the
______ day prior to the applicable Distribution Date or Optional Termination
Date, or the fifth day prior to the applicable Special Distribution Date, as the
case may be.
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<PAGE>
SECTION 11.09 Denominations.
-------------
The Multi-Class Certificates are issuable in minimum denominations of
$____ and in multiples of $_____ in excess thereof (in each case expressed in
terms of the Initial Stated Principal Balance thereof at the Delivery Date).
The Residual Certificates shall have no principal denomination.
SECTION 11.10 Distribution Dates.
------------------
The Distribution Dates for the Certificates are [_________,
_______________, ______________, and _____________, of each year, commencing on
____________, 1987.]
SECTION 11.11 Regular Record Dates.
--------------------
[The Regular Record Date for each Distribution Date will be the close
of business on the [last] Business Day [of the [second] month] preceding the
applicable Distribution Date. [The Record Date for the Variable Rate
Certificates will be the close of business on the ______ Business Day of the
month in which the applicable Distribution Date occurs. The Record Date for the
Fixed Rate Certificate will be the close of business on the ______Business Day
of the month in which the applicable Distribution Date occurs.]
SECTION 11.12 Special Record Dates.
--------------------
The Special Record Date for each Special Distribution Date will be the
close of business on the [last] Business Day [of the [second] month] preceding
the applicable Special Distribution Date. [The Special Record Date for the
Variable Rate Certificates will the close of business on the [ ] Business Day
of the [ ] month in which the applicable Special Distribution Date occurs.
The Special Record Date for the Fixed Rate Certificates will be the close of
business on the _____Business Day of the month in which the applicable Special
Distribution Date occurs.]
SECTION 11.13 Early Termination.
-----------------
On any Distribution Date on or after the [later] of ______ or the date
on which the Outstanding Stated Principal Balance of the [Class A-3]
Certificates has been reduced to zero, or on any Distribution Date on which the
Principal Balance of the Mortgage Assets is less than 10% of the Principal
Balance of the Mortgage Assets included in the Trust Fund on the Cut-off Date,
the Mortgage Assets may be repurchased, at the option of the Depositor, in
whole, but not in part, in the manner and at the Repurchase Price provided in
Article XIV.
SECTION 11.14 Wire Transfer Eligibility.
-------------------------
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<PAGE>
SECTION 11.15 Required Rating.
---------------
The Certificates shall have been rated "___" by [______________].
SECTION 11.16 Pool Insurance Policy.
---------------------
A specimen of the Pool Insurance Policy with respect to the Mortgage
Loans is attached hereto as Exhibit B. The Pool Insurer is
____________________, a _________ corporation.
SECTION 11.17 Special Hazard Insurance Policy.
-------------------------------
A specimen of the Special Hazard Insurance Policy with respect to the
Mortgage Loans is attached hereto as Exhibit C. The Special Hazard Insurer is
_____________________, a _____________ corporation.
SECTION 11.18 Mortgagor Bankruptcy Bond.
-------------------------
A specimen of the Mortgagor Bankruptcy Bond with respect to the
Mortgage Loans is attached hereto as Exhibit D. The Mortgagor Bankruptcy Bond
has been issued by ________________, a __________ corporation.
SECTION 11.19 Servicing Agreements; Warranty and Subservicing Agreements.
----------------------------------------------------------
The Servicing Agreements and Warranty and Subservicing Agreements with
respect to the Mortgage Loans included in the Trust Fund are listed on Schedule
II hereto.
SECTION 11.20 Custodial Agreements.
--------------------
The Custodial Agreements with respect to the Mortgage Loans included
in the Trust Fund are listed on Schedule III hereto.
SECTION 11.21 Distribution of Excess Cashflow on the Multi-Class Certificates.
---------------------------------------------------------------
On each Distribution Date, __% of the Excess Cash Flow shall be
applied to distributions in reduction of Outstanding Stated Principal Balance of
the Multi-Class Certificates and shall be considered, for all purposes hereof,
as an addition to the related Stated Principal Distribution Amount.
SECTION 11.22 Certain Defined Terms.
---------------------
Article One of the Standard Terms and Article XII hereof provide that
the meaning of certain defined terms used in this Agreement shall, when applied
to a particular Series of
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<PAGE>
Certificates, be as defined herein. With respect to such Certificates, the
following definitions shall apply:
"Accretion Termination Date": The Distribution Date on which
---------------------------
Outstanding Stated Principal Balances of the Class A-1, Class A-2 and Class A-3
Certificates have been reduced to zero.
"Accrual Date: [ , 199_, the date upon which interest begins
------------
to accrue on the Multi-Class Certificates, as specified herein, such Date being
specified on the face of such Multi-Class Certificates.] [With respect to the
Class A-1 and Class A-2 Certificates, ____________, 199_; with respect to the
Class A-3 and Class A-4 Certificates, _________, 199_.]
"Asset Value": [The Principal Balance of the Mortgage Assets.] With
-----------
respect to each Mortgage Asset Group included in the Trust Fund, an amount equal
to, as of the date of determination, the lesser of (i) the present value through
the earlier of the Final Scheduled Distribution Date of the Class of Multi-Class
Certificates having the latest Final Scheduled Distribution Date or the
Distribution Date next succeeding the Maturity Date of the latest maturing
Mortgage Asset in such Mortgage Asset Group of the stream of remaining scheduled
principal and interest payments (including the amount of cash to be deposited in
the Certificate Account pursuant to Section ______ hereof), based upon fully
amortizing the Outstanding Mortgage Asset Amount thereof as of the most recent
Principal Determination Date to the Maturity Date of the latest maturing
Mortgage Asset in such Mortgage Asset Group, assuming no prepayments of
principal, and calculated in accordance with Section 12.02 hereof, plus, in the
case of GPM Assets valued on the basis of their respective maximum outstanding
principal balances, the remaining scheduled distributions from the GPM Fund,
plus, in the case of Buy-Down Assets, the remaining scheduled distributions from
the Buy-Down Fund with respect to such Mortgage Assets together, in each case,
with reinvestment income thereon at the Assumed Reinvestment Rate from the
Assumed Deposit Date to the next succeeding Distribution Date, discounted with
the same frequency as distributions are to be made on the Multi-Class
Certificates at the rate of __% per annum, and (ii) the product of the
Outstanding Mortgage Asset Amount of such Mortgage Asset Group as of the most
recent Principal Determination Date and ________________.
"Assumed Reinvestment Rate": ___% per annum through ___________,
-------------------------
199_, ___& per annum from __________, 199_ through _____________, 199_, and ___%
per annum thereafter.
"Cut-off Date": ____________ 1, 199_.
------------
["Deficiency Distribution Date": The __ day of any month beginning
----------------------------
with the first date on which distributions following a Deficiency Event are to
commence pursuant to Section
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<PAGE>
16.02, or 16.03 and ending, in the case of Section 16.02 with any curing of such
Deficiency Event.]
"Delivery Date": ___________, 199__.
-------------
"Designated Interest Accrual Date": [With respect to the Multi-Class
--------------------------------
Certificates, the day preceding the day of the month that is a full month
preceding the applicable Distribution Date or Special Distribution Date.] With
respect to the Class A-1 and Class A-2 Certificates, the day preceding, and with
respect to the Class A-3 and Class A-4 Certificates, the day preceding the day
of the month that is a full month preceding, the applicable Distribution Date or
Special Distribution Date.]
"Due Period": With respect to any current Distribution Date, the
----------
related Due Period shall be the period beginning immediately following the Due
Period applicable to the preceding Distribution Date (or, in the case of the Due
Period that is applicable to the first Distribution Date, beginning on the
Delivery Date) and ending on the day prior to such Distribution Date.
"Highest Interest Rate": __% per annum.
---------------------
"Interest Accrual Period": With respect to the Multi-Class
-----------------------
Certificates, the period from the prior Distribution Date (or, from the
applicable Accrual Date in the case of the first Distribution Date) through the
Designated Interest Accrual Date for such Class preceding the current
Distribution Date or Optional Termination Date, as the case may be.
["Interest Rate Determination Date": With respect to any Class of
--------------------------------
Variable Rate Certificates, the ________ day prior to any Distribution Date or,
if such day is not an International Business Day, the International Business Day
prior thereto. The Interest Rate Determination Date is the date on which the
Interest Rate at which interest will accrue on the Certificates of such Class
during the next succeeding Variable Rate Interest Period is determined.]
"Maximum Rate Assumption": __%.
-----------------------
["Maximum Variable Interest Rate": __% per annum.]
------------------------------
["Minimum Variable Interest Rate": __% per annum.]
------------------------------
"Principal Determination Date": The date of each month on which the
----------------------------
Outstanding Mortgage Asset Amount of a Mortgage Asset Group is determined so
that its Asset Value can be computed. With respect to the Multi-Class
Certificates, the Principal Determination Date is the first day of each month.
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["Special Distribution Date": The day of each month, other than
-------------------------
the month in which a Distribution Date occurs.]
["Special Distribution Determination Date": The day of the month
---------------------------------------
preceding the related Special Distribution Date.]
"Termination Price": With respect to any particular Certificate of a
-----------------
Class of Multi-Class Certificates subject to early termination pursuant to
Section 14.01 hereof or following the final payment of the principal of all of
the Mortgage Assets and the termination of this Agreement pursuant to Article IX
hereof, an amount equal to 100% of the Outstanding Stated Principal Balance of
such Multi-Class Certificate (in the case of any Compound Interest Certificate,
the Compound Value thereof), together with interest on such Outstanding Stated
Principal Balance at the applicable Interest Rate accrued through the Designated
Interest Accrual Date preceding the Distribution Date on which such Optional
Termination Date or final Distribution Date occurs.
SECTION 11.23 Applicability of Certain Provisions of Standard Terms.
-----------------------------------------------------
The provisions of Section 2.03(b) shall be applicable to the
Certificates; the provisions of Sections 3.24 and 3.26 shall not be applicable
to the Certificates.
ARTICLE XII
DEFINITIONS RELATING TO THE CERTIFICATES;
ASSUMPTIONS AS TO TRUST FUND;
MORTGAGE CERTIFICATES
SECTION 12.01 Definitions.
-----------
Whenever used in this Agreement, the following words and phrases,
unless the context requires otherwise, have the following meanings.
"Account": The Certificate Account, the Buy-Down Fund, the GPM Fund,
-------
the Reserve Fund and any other fund or account established pursuant to the
provisions of this Reference Agreement.
"Accountants' Certificates": A certificate of a firm of nationally
-------------------------
recognized Independent certified public accountants.
"Accrual Date": The date on which interest begins to accrue on the
------------
Multi-Class Certificates, as specified in Article XI and on the face of such
Certificates.
-22-
<PAGE>
"Accrual Distribution Amount": Unless otherwise specified in Article
---------------------------
XI, with respect to any Distribution Date, the aggregate amount of interest that
has accrued on the Compound Interest Certificates during the Interest Accrual
Period immediately preceding such Distribution Date that is not then required to
be distributed as provided herein and in Article XI.
"Affiliate" of any specified Person: Any Person controlling or
---------
controlled by or under common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Asset Value": The sum of the Asset Values of the Mortgage
---------------------
Assets included in the Trust Fund on the date of determination.
"Aggregate Initial Stated Principal Balance": With respect to the
------------------------------------------
Multi-Class Certificates, the amount specified in Section 11.05.
"Aggregate Outstanding Stated Principal Balance": With respect to the
----------------------------------------------
Multi-Class Certificates, as of any particular date of calculation, the sum of
(i) the Compound Value of all Compound Interest Certificates, if any,
outstanding on such date, and (ii) the aggregate of the Stated Principal
Balances of all non-Compound Interest Certificates, if any, on such date.
"ARCs" or "Ascending Rate Certificates": A Class of Multi-Class
-------------------------------------
Certificates that bears interest at one Interest Rate until the date on which
such Certificates shall begin to bear a different Interest Rate, as specified in
Article XI.
"Asset Proceeds": With respect to any Mortgage Asset included in the
--------------
Trust Fund, the amount paid to the holder of such Mortgage Asset in accordance
with its terms.
"Asset Value": Unless otherwise specified in Article XI hereof, with
-----------
respect to any Mortgage Asset Group included in the Trust Fund, an amount equal
to, as of the date of such determination, the lesser of (a) the present value,
through the earlier of the Final Scheduled Distribution Date of the Class of
Multi-Class Certificates having the latest Final Scheduled Distribution Date or
the Distribution Date next succeeding the Maturity Date of the latest maturing
Mortgage Asset in such Mortgage Asset Group of the stream of remaining scheduled
principal and interest payments on the Mortgage Assets in such Mortgage Asset
Group, based upon fully amortizing the Outstanding Mortgage Asset Amount thereof
as of the most recent Principal Determination Date through such Maturity Date,
assuming no
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<PAGE>
prepayments of principal and calculated in accordance with Section 12.02 hereof,
plus, in the event that such Mortgage Asset is a GPM Asset valued on the basis
of its maximum outstanding principal balance, the remaining scheduled
distributions with respect to such GPM Asset from the GPM Fund, plus, if the
Mortgage Asset is a Buy-Down Asset, the remaining scheduled distributions with
respect to such Buy-Down Mortgage Asset from the Buy-Down Fund, together in each
case with reinvestment income thereon at the Assumed Reinvestment Rate from the
Assumed Deposit Date to the next succeeding Distribution Date, discounted with
the same frequency as distributions required to be made on the Multi-Class
Certificates at the Highest Interest Rate and (b) the product of the Asset Value
Percentage and the Outstanding Mortgage Asset Amount of such Mortgage Asset
Group. Reinvestment income shall not be calculated on any amounts in any
Reserve Fund, GPM Fund or Buy-Down Fund that are funded by a Letter of Credit,
unless such Letter of Credit has been drawn upon and the cash deposited in the
Reserve Fund, GPM Fund or Buy-Down Fund.
"Asset Value Percentage": When used with respect to the Multi-Class
----------------------
Certificates, shall mean 100%, unless otherwise specified in Article XI.
"Authorized Officer": With respect to the Depositor, any officer of
------------------
the Depositor authorized to act for the Depositor in matters relating to this
Agreement and the Trust Fund and whose name appears on a list of Authorized
Officers furnished by the Depositor to the Trustee, as such list may be amended
or supplemented from time to time.
"Buy-Down Asset": The Buy-Down Certificates and the Buy-Down Mortgage
--------------
Loans included in the Trust Fund.
"Buy-Down Certificate": A Mortgage Certificate backed by buy-down
--------------------
mortgage loans for which funds have been deposited in a buy-down fund to reduce
the Mortgagor's monthly payments during the early period of such mortgage loan.
"Buy-Down Fund": The meaning specified in Section 17.03 hereof.
-------------
"Buy-Down Mortgage Loan": A level payment Mortgage Loan for which
----------------------
funds have been deposited in escrow to reduce the Mortgagor's monthly payments
during the early period of such Mortgage Loan.
"Buy-Down Shortfall": With respect to any Buy-Down Asset, for each
------------------
month, the sum of (1) the difference by which payments on such Buy-Down Asset
are less than the monthly payment scheduled (in computing the Asset Value of
such Buy-Down Asset) to be received from the related Mortgagors plus (2)
interest at the applicable Assumed Reinvestment Rate on such difference from the
applicable Due Date to the next Distribution Date.
-24-
<PAGE>
"Certificate Account": The meaning specified in Section 17.04 hereof.
-------------------
"Certificate of Deposit": A certificate of deposit satisfying the
----------------------
definition of Eligible Investment.
"Class": All of the Certificates having the same characteristics and,
-----
in the case of Multi-Class Certificates, the same Interest Rate and same Final
Scheduled Distribution Date as described herein.
"Code": The Internal Revenue Code of 1986, including any successor or
----
amendatory provisions.
"Compound Interest Certificates": Any Multi-Class Certificate on
------------------------------
which interest accrues and is added to the Outstanding Stated Principal Balance
of such Multi-Class Certificate periodically as provided herein, but with
respect to which distributions in reduction of Outstanding Stated Principal
Balance are not made until the entire Stated Principal Balance of each Multi-
Class Certificate having an earlier Final Scheduled Distribution Date has been
reduced to zero, and with respect to which distributions of interest will not be
made until (unless otherwise specified in Article XI) the first Distribution
Date on which the entire Outstanding Stated Principal Balance of each Multi-
Class Certificate having an earlier Final Scheduled Distribution Date has been
reduced to zero.
"Compound Value": With respect to any Distribution Date, the Initial
--------------
Stated Principal Balance of any Class of Compound Interest Certificates plus all
amounts, if any, previously added to the Outstanding Stated Principal Balance
thereof, compounded at the Interest Rate for such Class, and reduced by any
distributions in reduction of Stated Principal Balance on any Certificates of
such Class; with respect to any calculation on a date other than a Distribution
Date, the Compound Value as of the immediately preceding Distribution Date, or
(if prior to the first Distribution Date) the Initial Stated Principal Balance
of such Class of compound Interest Certificates. The Outstanding Stated
Principal Balance of any Compound Interest Certificate at any time will be equal
to its Compound Value.
["Deficiency Distribution Date": The day of any month specified in
----------------------------
Article XI, beginning with the first date upon which distributions following a
Deficiency Event are to commence pursuant to Section 16.02 or Section 16.03 and
ending, in the case of distributions pursuant to Section 16.02, with any curing
of such Deficiency Event.]
["Deficiency Event": The inability of the Trustee to distribute to
----------------
the Holders of one or more Classes of Multi-Class
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<PAGE>
Certificates in accordance with the terms thereof and of this Agreement:
(i) on any Distribution Date, an amount at least
equal to the Multi-Class Distribution Amount;
(ii) on any Special Distribution Date, an amount at least equal to
the Special Distribution Amount;
(iii) on the Initial Reduction Date, if any, for a Class of Multi-
Class Certificates, a distribution in reduction of Outstanding Stated
Principal Balance of the Certificates of such Class; or
(iv) on the Final Scheduled Distribution Date for a Class, an
amount equal to the entire Outstanding Aggregate Stated Principal Balance
of the Certificates of such Class, together with any Interest Distribution
Amount applicable to such Class for the immediately preceding Interest
Accrual Period;
in each case because of the insufficiency for such purposes of the funds then
available in the Accounts.]
"Delivery Date": The date that Certificates are delivered to the
-------------
original purchasers of such Certificates as specified in Article XI.
"Depositor Order" or "Depositor Request": A written order or request
--------------- -----------------
signed in the name of the Depositor by an Authorized Officer.
"Designated Interest Accrual Date": With respect to any Class of
--------------------------------
Multi-Class Certificates, the date specified in Article XI preceding the
applicable Distribution Date, Optional Termination Date or Special Distribution
Date.
["Determination of Insufficiency": As defined in Section 16.03.]
------------------------------
["Determination of Sufficiency": As defined in Section 16.02.]
----------------------------
"Distribution Date": The dates specified in Article XI, on which
-----------------
distributions on the Certificates will be made.
"Distribution Date Statement": As defined in Section 17.07(b).
---------------------------
"Due Date": Each date on which a payment whether of principal or
--------
interest or both is due and payable to the Trustee or its nominee on a Mortgage
Asset included in the Trust Fund.
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<PAGE>
"Due Period": With respect to each Distribution Date, the related Due
----------
Period shall be the period specified in Article XI.
"Eligible Investments": Any one or more of the following obligations
--------------------
or securities:
(i) direct obligations of, and obligations fully guaranteed by,
the United States of America, FHLMC, FNMA or any agency or instrumentality
of the United States of America the obligations of which are backed by the
full faith and credit of the United States of America; provided that
obligations of, or guaranteed by, FHLMC or FNMA shall be Eligible
Investments only if, at the time of investment, they are acceptable to the
Rating Agency as collateral for securities having ratings equivalent to
their respective ratings of the Multi-Class Certificates that were in
effect at the Delivery Date;
(ii) (a) demand and time deposits in, and bankers' acceptances
issued by, and depository institution or trust company incorporated under
the laws of the United States of America (including the Trustee acting in
its commercial banking capacity) or any state thereof and subject to
supervision and examination by federal and/or state banking authorities so
long as the commercial paper and/or the 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 debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment have the highest
credit rating or ratings from the Rating Agency and (b) any other demand or
time deposit or certificate of deposit that is fully insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation;
(iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or
guaranteed by an agency or instrumentality of the United States of America,
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
(ii)(a) above where the Trustee holds the security therefor;
(iv) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States of America
or any state thereof that have the highest credit rating or ratings from
the Rating Agency at the time of such investment or contractual
-27-
<PAGE>
commitment providing for such investment; provided, however, that
securities issued by any particular corporation will not be Eligible
Investments to the extent that investments therein will cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the Trust to exceed 10% of the aggregate outstanding
principal balances and amounts of all the Mortgage Assets and Eligible
Investments held as part of the Trust;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or
on a specified date not more than one year after the date of issuance
thereof) having the highest rating or ratings from the Rating Agency at the
time of such investment;
(vi) a Reinvestment Agreement issued by any bank, insurance
company or other corporation or entity acceptable to the Rating Agency; and
(vii) any other demand, money market or time deposit, obligation,
security or investment as may be acceptable to the Rating Agency as
collateral for securities having ratings equivalent to their respective
ratings of the Certificates that were in effect at the Delivery Date.
"Excess Cash Flow": With respect to any Distribution Date, the
----------------
excess, if any, of (a) the aggregate of (i) all payments received from the
Mortgage Assets included in the Trust Fund in the Due Period preceding such
Distribution Date (including, for purposes of the first Due Period, any amount
deposited in the Certificate Account on the Delivery Date and income or gain
that will be in the Certificate Account for such Series on such Distribution
Date from the reinvestment of such amounts, (ii) any withdrawals since the
preceding Distribution Date for such Series from the GPM Fund and the Buy-Down
Fund and (iii) any withdrawals since such preceding Distribution Date from any
Reserve Fund for such Series over (b) the sum of (i) the Stated Principal
Distribution Amounts (net of any Excess Cash Flow included in the Stated
Principal Distribution Amounts), (ii) the Interest Distribution amounts and
(iii) if applicable, any distributions in reduction of Outstanding Stated
Principal Balance of Certificates of such Series pursuant to one or more Special
Distributions pursuant to Section 15.02 hereof since the preceding Distribution
Date.
"Final Scheduled Distribution Date": With respect to any Multi-Class
---------------------------------
Certificate, the date specified in such Certificate as the fixed date on or
before which the Outstanding Stated Principal Balance thereof is to be reduced
to zero.
"Fixed Rate Certificate": A Multi-Class Certificate on which interest
----------------------
accrues at the fixed rate specified in Section
-28-
<PAGE>
11.05 and in such Certificate for the entire term of such Certificate.
"Fixed Rate Interest Accrual Period": With respect to any
----------------------------------
Distribution Date any Class of Fixed Rate Certificates, the period specified in
Article XI.
"GPM Asset": Any Mortgage Asset backed by or evidencing a fractional
---------
undivided interest in a pool of mortgage loans that provide, or any Mortgage
Loan that provides, for monthly installments during a portion of their terms
that are less than the actual amount of principal and interest payable on a
level debt service basis.
"GPM Fund": The meaning specified in Section 17.01.
--------
"GPM Prepayment Shortfall": With respect to any Mortgage Asset Group
------------------------
comprised of GPM Assets valued on the basis of their scheduled maximum principal
payments in calculating the initial Asset Value of such Mortgage Asset Group,
the amount by which such scheduled maximum principal amount, exceeds the
principal amount as of the date of determination, plus 30 days interest on such
amount, calculated at the Highest Interest Rate.
"GPM Shortfall": With respect to any Mortgage Asset Group comprised
-------------
of GPM Assets valued on the basis of their scheduled maximum principal balances
in calculating the initial Asset Value of such Mortgage Asset Group, the sum of
the amounts for each Due Date, if any, by which payments of principal of and
interest on such GPM Assets assumed in calculating Asset Value exceed scheduled
payments on such GPM Assets according to the related graduated payment mortgage
plan for the period during which such excess occurs.
"Highest Interest Rate": The per annum rate of interest determined as
---------------------
specified in Article XI.
"Independent": When used with respect to any specified Person means a
-----------
Person who (1) is in fact independent of the Depositor or an Affiliate of the
Depositor or the Trustee or an Affiliate of the Trustee, (2) does not have any
direct financial interest or any material indirect financial interest in the
Depositor or in an Affiliate of the Depositor or the Trustee, and (3) is not
connected with the Depositor or the Trustee as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is provided herein that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be appointed by
Depositor Request or Order and approved by the Trustee in the exercise of
reasonable care and such opinion or certificate shall state that the signer has
read this definition and that the signer is Independent within the meaning
hereof.
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<PAGE>
"Initial Reduction Date": With respect to any Class of Multi-Class
----------------------
Certificates that are Sequential Distribution Certificates, the Distribution
Date, if any, specified in Article XI on which the Holders of Certificates of
such Class are entitled to begin receiving distributions in reduction of Stated
Principal Balance, if such distributions have not already begun.
"Initial Stated Principal Balance": With respect to any Multi-Class
--------------------------------
Certificate, the Outstanding Stated Principal Balance as shown on the face
thereof.
"Interest Accrual Period": With respect to any Class of Multi-Class
-----------------------
Certificates and any Distribution Date, Optional Termination Date or Special
Distribution Date, the period specified in Article XI.
"Interest Distribution Amount": With respect to any date on which a
----------------------------
distribution is to be made on any Class of Multi-Class Certificates, an amount
equal to the amount of interest that accrues on the Outstanding Principal Stated
Balance of such Class from the date on which the previous distribution was made
to the Designated Interest Accrual Date for such Class. For the purposes of
this calculation, the Outstanding Stated Principal Balance of such Class shall
be determined as of the previous Distribution Date or Special Distribution Date.
The Interest Rate shall be determined, for any Class of Variable Rate
Certificates, on the related Variable Rate Interest Determination Date as
specified in Article XI hereof. Unless otherwise specified in Article XI, all
computations of interest accruals shall be made on the basis of a year
consisting of twelve months having 30 days each.
"Interest Rate": With respect to any Variable Rate Certificate for
-------------
any Variable Rate Interest Accrual Period, the rate of interest for such
Variable Rate Interest Accrual Period determined pursuant to Section 11.06 and
the terms of such Variable Rate Certificate. With respect to any Fixed Rate
Certificate, the fixed annual rate at which interest accrues on such Fixed Rate
Certificate, as specified in Section 11.05 and such Fixed Rate Certificate.
"Interest Rate Determination Date": With respect to any Class of
--------------------------------
Variable Rate Certificates, the date specified in Article XI on which the
Interest Rate at which interest will accrue on the Certificates of such Class
during the succeeding Variable Rate Interest Accrual Period is determined.
"International Business Day": shall mean any day on which banks in
--------------------------
London and New York City are open for the transaction of international business.
"Letter of Credit": An irrevocable and transferable letter of credit
----------------
issued solely to the Trustee and its successors
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<PAGE>
or assigns by any banking corporation situated in the United States the
commercial paper or other short-term debt obligations of which have received the
highest rating from the Rating Agency and are otherwise acceptable to the Rating
Agency. Any such Letter of Credit shall provide that (a) it is conditional only
on certification by the Trustee of its authority to draw on the Letter of Credit
under the terms of this Agreement and (b) it is subject to termination upon not
less than 60 days' prior written notice to the Trustee, in which case, unless
such Letter of Credit is renewed or a substitute Letter of Credit in the
requisite amount is provided, upon receipt of any such written notice the
Trustee shall promptly, and in no case more than 15 days after such notice, draw
on the Letter of Credit for the entire unutilized balance thereof and deposit
such amount in the related fund. Any such Letter of Credit also shall provide
for written notice by a qualified bank to the Trustee of any change in the
rating of the commercial paper or other short-term debt obligations of the
banking corporation issuing the Letter of Credit, in which case upon receipt of
any such written notice the Trustee shall promptly, and in no case more than 30
days after such notice, draw on the Letter of Credit for the entire unutilized
balance thereof and deposit such amount in the related fund, unless prior
thereto the Trustee shall replace such Letter of Credit with a Letter of Credit
issued by a qualified bank.
For purposes of the definition of "Letter of Credit," a qualified bank
shall be deemed to have commercial paper that has received the highest rating
from the Rating Agency if the bank is the principal subsidiary of a bank holding
company and the commercial paper of the bank holding company has received the
highest rating from such Rating Agency. A bank shall be deemed the principal
subsidiary of a bank holding company, if the bank's net worth exceeds 66-2/3% of
the consolidated net worth of the bank holding company.
"Maturity Date": With respect to any Mortgage Asset included in the
-------------
Trust Fund, the date on which the last payment of principal of such Mortgage
Asset shall be due and payable. In determining the Maturity Date of such
Mortgage Asset, all prepayments received prior to the date of determination
shall be taken into account.
"Multi-Class Certificate": A Certificate issued hereunder having an
-----------------------
Interest Rate and an Outstanding Stated Principal Balance.
"Multi-Class Distribution Amount": With respect to any Distribution
-------------------------------
Date, the sum of (i) the Interest Distribution Amounts and (ii) the Stated
Principal Distribution Amount.
"Non-Compound Interest Certificates": Multi-Class Certificates,
----------------------------------
including PDC Certificates, other than Compound Interest Certificates.
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"Officers' Certificate": A certificate signed by two Authorized
---------------------
Officers of the Depositor.
"Optional Termination Date": The date of an optional termination as
-------------------------
specified by the Depositor as provided in Section 14.02.
"Original Mortgage Asset Group": All or a portion of a Mortgage Asset
-----------------------------
Group, which may be a single Mortgage Asset, that is being substituted for
pursuant to Section 12.05.
"Outstanding": With respect to the Certificates, as of the date of
-----------
determination, all Certificates theretofore authenticated and delivered under
this Agreement except:
(i) Certificate theretofore cancelled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(ii) Certificates or portions thereof for the retirement of which
money in the necessary amount has been theretofore deposited with the
Trustee in trust for the Holders of such Certificates; provided, however,
that if such Certificates are to be retired pursuant to Article XII, notice
of such retirement has been duly given pursuant to this Agreement or
provision therefor, satisfactory to the Trustee, has been made;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement unless proof satisfactory to the Trustee is presented that any
such Certificates are held by a bona fide purchaser; and
---- ----
(iv) Certificates alleged to have been destroyed, lost, stolen or
mutilated and surrendered to the Trustee for which replacement Certificates
have been issued as provided for in Section 4.03;
provided, however, that in determining whether the Holders of the requisite
percentage of the Outstanding Stated Principal Balance of the Outstanding Multi-
Class Certificates or any Class thereof or, as to Residual Certificates, of the
requisite Percentage Interest, have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Certificates owned by the
Depositor or any Affiliate of the Depositor 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 that the Trustee knows to be so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee that the pledgee is
entitled so to act with respect
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<PAGE>
to such and that the pledgee is not the Depositor or any Affiliate of the
Depositor.
"Outstanding Mortgage Asset Amount": With respect to any Mortgage
---------------------------------
Asset Group, the aggregate of the Outstanding Mortgage Certificate Amounts and
the Outstanding Mortgage Loan Amounts.
"Outstanding Mortgage Certificate Amount": With respect to any
---------------------------------------
Mortgage Certificate, the outstanding principal amount of such Mortgage
Certificate, based on information provided by the Servicer.
"Outstanding Mortgage Loan Amount": With respect to any Mortgage
--------------------------------
Loan, the outstanding principal amount of such Mortgage Loan, less any principal
advances on such Mortgage Loan, based on information provided by the Servicer or
the Master Servicer.
"Outstanding Stated Principal Balance": With respect to any Multi-
------------------------------------
Class Certificate, as of any particular date of calculation, the Initial Stated
Principal Balance (plus with respect to any Compound Interest Certificate, any
additions to the Compound Value thereof) less any distributions in reduction of
Outstanding Stated Principal Balance made with respect thereto.
"[PDC] Certificate": A Multi-Class Certificate having a specified
-----------------
schedule for distributions in reduction of Outstanding Stated Principal Balance.
"Percentage Interest": As to any Residual Certificate, the percentage
-------------------
ownership interest in the Residual evidenced thereby as set forth on the face
thereof.
"Person": Any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Certificate": With respect to any particular
-----------------------
Certificate, every previous Certificate of the same Class evidencing all or a
portion of the same interest in the Trust Fund as evidenced by such particular
Certificate, and, for the purpose of this definition, any Certificate
authenticated and delivered under Section 4.03 in lieu of a lost, destroyed or
stolen Certificate (or a mutilated Certificate delivered to the Certificate
Registrar) shall be deemed to evidence the same interest in the Trust Fund as
the lost, destroyed or stolen Certificate (or the mutilated Certificate
delivered to the Certificate Registrar).
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<PAGE>
"Principal Determination Date": With respect to an accounting
----------------------------
pursuant to Section 17.07, the first day of the month for which the accounting
is given.
"Proceeding": Any suit in equity, action at law or other judicial or
----------
administrative proceeding.
"Rating Agency": The rating agency or agencies specified in Article
-------------
XI hereof, or any successor Person thereto.
"Regular Record Date": With respect to a Distribution Date, the close
-------------------
of business on the calendar day specified in Article XI that precedes the
applicable Distribution Date.
"Reinvestment Agreements": One or more Reinvestment Agreements listed
-----------------------
in a schedule to this Reference Agreement or one or more replacement
Reinvestment Agreements on substantially the same terms, from a bank, insurance
company or other corporation or entity meeting the credit rating requirements
(or the parent company of which meets the requirements) set forth in the
definition of Eligible Investments. If Reinvestment Income pursuant to a
Reinvestment Agreement is used to determine Asset Value, then, provided that
such Reinvestment Agreement initially qualified as an Eligible Investment, such
Reinvestment Agreement will continue to be an Eligible Investment even if such
use might result in the Rating Agency lowering the outstanding rating of the
Certificates; provided, however, that in such event, such Reinvestment Agreement
shall not be terminated unless (1) the Trustee determines, based on a
certificate from an Independent certified public accounting firm of national
reputation, that such termination would not [cause a Deficiency Event hereunder
or] result in a decrease in the Asset value or extension of the final Scheduled
Distribution Date of any class of the Multi-Class Certificates, or (2) a
replacement Reinvestment agreement is substituted and such substitution does not
result in the Rating Agency lowering the outstanding rating of the Certificates.
"Reinvestment Income": Any interest or other earnings on funds and
-------------------
accounts that are part of the Trust.
"REMIC": As defined in the Preliminary Statement hereto.
-----
"Requisite Amount of the Reserve": With respect to any Distribution
-------------------------------
Date, the amount, if any, specified in Article XI.
"Reserve Fund": The meaning specified in Section 17.02.
------------
"Residual": With respect to any Distribution Date, the excess of
--------
amounts in the Certificate Account (after taking into account applicable
deposits from the Reserve Fund, Buy-Down Fund
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<PAGE>
and GPM Fund) over the Multi-Class Distribution Amount of such Distribution
Date.
"Residual Certificate": A Certificate issued hereunder which
--------------------
represents an interest on any Distribution Date in the Residual.
"Sequential Distribution Certificates": Any Class of Multi-Class
------------------------------------
Certificates as to which distributions in reduction of Outstanding Stated
Principal Balance are applied in the order of the respective Final Scheduled
Distribution Dates of the Multi-Class Certificates.
"Servicer": For each Mortgage Certificate, the issuer of such
--------
Mortgage Certificate or the Person specified as such with respect thereto in the
agreement under which such Mortgage Certificate was issued; for any Mortgage
Loan, as defined in Article I.
"Single Certificate": A Certificate issued in the minimum
------------------
denomination of $1,000.
"Special Distribution": A distribution on the Multi-Class
--------------------
certificates other than on a Distribution Date, as provided in Sections 15.01
and 17.07(d).
"Special Distribution Amount": The amount determined under Section
---------------------------
17.07(d).
"Special Distribution Date": With respect to any Multi-Class
-------------------------
Certificate, the date in any month (other than a month in which a Distribution
Date occurs) on which Special Distributions may be made, as provided in Sections
15.01 and 17.07(d).
"Special Distribution Determination Date": With respect to any Multi-
---------------------------------------
Class Certificate, the date in any month (other than a month in which a
Distribution Date occurs) on which Special Distributions may be made, as
provided in Section 15.01 and 17.07(d).
"Special Distribution Statement": As defined in Section 17.07(d)
------------------------------
hereof.
"Special Record Date": With respect to any Special Distribution Date,
-------------------
the date as of which the Holders of Multi-Class Certificates entitled to receive
a Special Distribution are to be determined, as provided in Sections 15.01,
17.07(d) and Article XI hereof.
"Standard Certificate": A Multi-Class Certificate that is not a
--------------------
Compound Interest Certificate or a [PDC] Certificate.
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<PAGE>
"Stated Principal Distribution Amount": Unless otherwise specified in
------------------------------------
Article XI, with respect to any Distribution Date for the Multi-Class
Certificates, as of the end of the Due Period preceding such Distribution Date,
the sum of (i) the Accrual Distribution Amount, if any, (ii) the amount, if any,
by which the Aggregate Outstanding Stated Principal Balance of the Multi-Class
Certificates (before taking into account the amount of interest accrued on the
compound Interest Certificates to be added to the Outstanding Stated Principal
Balance thereof on the Distribution Date and before giving effect to any
distributions in reduction of Outstanding Stated Principal Balance to be made on
the Multi-Class Certificates on such Distribution Date) exceeds the Asset Value
of the Mortgage Assets as of such Distribution Date and (iii) the percentage of
Excess Cash Flow, if any, specified in Article XI to be applied to the reduction
of Outstanding Stated Principal Balance of the Multi-Class Certificates.
"Substitute Mortgage Asset Group": All or any portion of a Mortgage
-------------------------------
Asset Group, which may be a single Mortgage Asset, that is being substituted
into the Trust Fund pursuant to Section 12.05.
"Substitution Date": Any date not later than three months after the
-----------------
Delivery Date, or, in the case of substitution of "defective obligations" under
Section 860 G(a)(4)(B)(ii) of the Code, the date chosen by the Depositor as the
date for the substitution of Mortgage Assets pursuant to Section 12.05 hereof.
"TIA": The Trust Indenture Act of 1939.
---
"Trust Fund": All money, instruments and other property delivered to
----------
the Trustee under this Agreement for the benefit of the Holders of the
Certificates as of any particular time, including all proceeds thereof.
"Variable Rate Interest Accrual Period": With respect to any Class of
-------------------------------------
Variable Rate Certificates, the period commencing immediately subsequent to the
preceding Variable Rate Interest Accrual Period (or, in the case of the Variable
Rate Interest Accrual Period applicable to the first Distribution Date,
commencing on the Accrual Date for such Class) and ending on the Designated
Interest Accrual Date preceding the related Distribution Date, during which
interest shall accrue on a Class of Variable Rate Certificates, payable on the
immediately succeeding Distribution Date, at the Interest Rate determined on the
immediately preceding Interest Rate Determination Date.
SECTION 12.02 Calculations Respecting Mortgage Assets and
Trust Fund.
-------------------------------------------
(a) In connection with all calculations required to be made pursuant
to this Agreement with respect to distributions on
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<PAGE>
any Mortgage Assets, any payments on the mortgage loans included in or
underlying the Mortgage Assets or any payments on any other assets included in
the Trust Fund, and with respect to the income that can be earned from the
reinvestment of distributions on the Mortgage Assets and of any other amounts
receivable for deposit in an Account, the provisions set forth in this Section
12.02 shall be applied except to the extent supplemented or modified herein or
in Article XI.
(b) If Article XI provides that calculations with respect to
distributions on all or any part of the Mortgage Assets included in the Trust
Fund shall be made on a mortgage loan by mortgage loan basis, then such
calculations shall be based upon current information as to the terms of such
mortgage loans and reports of payments received on such mortgage loans supplied
to the Trustee or the Depositor, as the case may be, by the Servicer or the
Master Servicer and satisfying such requirements, if any, as may be set forth in
Article XI.
(c) For any Mortgage Certificate with respect to which calculations
required to be made pursuant to this Agreement are not required to be made on a
mortgage loan by mortgage loan basis, such calculations shall be made on the
basis of information or accounting as to distributions on such Mortgage
Certificate furnished by the Servicer thereof.
(d) Unless otherwise specified in Article XI, all calculations with
respect to distributions on the Mortgage Loans shall be based upon current
information as to the terms of the Mortgage Loans and the reports of payments
received on such Mortgage Loans and payments to be remitted to the Trustee, as
supplied to the Trustee by the Master Servicer.
To the extent they are not patently incorrect on their face, such
information or accounting may be conclusively relied upon in making such
calculations.
(e) Unless Article XI provides otherwise, all calculations with
respect to future distributions on the Mortgage Asset or future payments on the
mortgage loans underlying a Mortgage Asset included in a Mortgage Asset Group
shall be made on the assumption that all of the mortgage loans underlying or
included in a Mortgage Asset included in a Mortgage Asset Group constitute a
single, fully-amortizing, fixed rate mortgage loan:
(i) bearing interest at a fixed rate equal to the highest rate that
might be borne by any of the mortgage loans underlying or included in any
of the Mortgage Assets included in such Mortgage Asset Group (such highest
rate being the sum of (A) the certificate rate for the Mortgage
Certificates in such Mortgage Asset Group or the Pass-Through Rate for
Mortgage Loans in such Mortgage Asset Group and (B) either (1) the highest
servicing fee (including any
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<PAGE>
master servicing fee and retained yield) and guaranty fee, if any,
applicable to any of such mortgage loans or (2) in the case of a Mortgage
Certificate, if the exact servicing fee and guaranty fee, if any,
applicable to such underlying mortgage loans is not known, the highest
possible servicing fee that might be applicable thereto as provided in
applicable guidelines for the program pursuant to which such Mortgage
Certificate was issued), and subject to a servicing fee and guaranty fee,
if any, equal to the amount described above in clause (B)(1) or (B)(2),
whichever is applicable;
(ii) having an outstanding principal balance equal to the Outstanding
Mortgage Asset Amount of the Mortgage Assets included in such Mortgage
Asset Group;
(iii) maturing in the month of the Maturity Date of the latest maturing
Mortgage Asset in such Mortgage Asset Group;
(iv) which either provides for fixed level monthly payments or, in the
case of a Mortgage Asset Group comprised of GPM Assets, provides for
scheduled payment increases equal to the largest percentage increase
possible for any of the mortgage loans included in, or underlying the GPM
Assets included in such Mortgage Asset Group, which payment increases would
become effective for an underlying mortgage loan maturing in the month of
the Maturity Date of the latest maturing GPM Asset of such Mortgage Asset
Group.
(f) All calculations with respect to future distributions on a
Mortgage Asset shall be made on the assumption that none of the mortgage loans
included in, or underlying such Mortgage Asset is prepaid and that all such
mortgage loans paid in accordance with their actual payment schedule, or the
assumed payment schedule calculated pursuant to subsection (e) of this Section
12.02, whichever is applicable, except as may be provided in Article XI.
(g) If any Mortgage Certificate (or mortgage loan underlying such
Mortgage Certificate) bears interest at a rate in excess of the Highest Interest
Rate, then, except as otherwise provided in Article XI, for purposes of any
future distribution on such Mortgage Certificate, it shall be assumed that in
addition to the servicing fee and guaranty fee, if any, actually payable with
respect to the mortgage loans underlying such Mortgage Certificate, or assumed
to be payable with respect thereto as provided in subsection (e) of this Section
12.02, such mortgage loans are subject to an additional servicing fee equal, on
an annual basis, to the difference between (i) the interest rate borne by such
Mortgage Certificate and (ii) the Highest Interest Rate.
(h) If the Pass-Through Rate on any Mortgage Loan included in the
Trust Fund is in excess of the Highest Interest
-38-
<PAGE>
Rate, then, except as otherwise provided in Article XI, for purposes of
calculating the amount of Excess Cash Flow resulting from any future
distribution on such Mortgage Loan, it shall be assumed that in addition to the
servicing fee (including any master servicing fee and retained yield) and
guaranty fee, if any, such Mortgage Loan is subject to an additional servicing
fee equal, on an annual basis, to the difference between (i) the Pass-Through
Rate for such Mortgage Loan and (ii) the Highest Interest Rate.
(i) Each distribution receivable with respect to a Mortgage Asset
included in the Trust Fund shall be assumed to be received, in the case of a
Mortgage Certificate, unless actually received earlier, on the Business Day next
succeeding the date on which such distribution is payable to the holder of the
Mortgage Certificate in accordance with its terms, or in the case of a Mortgage
Loan, unless actually received earlier, on the 25th day of the month succeeding
the date on which such distribution is payable to the holder of such Mortgage
Loan in accordance with its terms and each such distribution shall be assumed to
be immediately deposited in the Certificate Account and reinvested on the next
day at the Assumed Reinvestment Rate specified in Article XI. All principal of
and interest on investments held in the Account shall be assumed to be received
on the date due and immediately deposited therein and reinvested on the next day
at the applicable Assumed Reinvestment Rate. All funds assumed to be reinvested
at the applicable Assumed Reinvestment Rate shall be assumed to remain so
invested until the day next preceding the day on which they are required to be
available in the related Certificate Account for application, in accordance with
the terms hereof and Article XI, to distributions on the Certificates. All
funds eligible to be invested pursuant to a Reinvestment Agreement shall
(subject, however, to any limitations contained in such Reinvestment Agreement)
be assumed to be invested thereunder until such funds are, or might be, required
to be available for, application pursuant to this Agreement.
SECTION 12.03 Representations and Warranties of the Depositor with Respect to
the Mortgage Certificates.
---------------------------------------------------------------
The Depositor hereby represents and warrants to the Trustee with
respect to any Mortgage Certificates included in the Trust Fund that:
(a) the Depositor is the owner of each Mortgage Certificate free and
clear of any liens or the adverse interests of any person;
(b) the Depositor has acquired its ownership in such Mortgage
Certificates in good faith without notice of any adverse claim;
-39-
<PAGE>
(c) the Depositor has not assigned any interest in such Mortgage
Certificate or any distributions thereon, except as contemplated herein (or
if any such interest has been assigned, it has been released);
(d) the information set forth with respect to each Mortgage
Certificate in Schedule I hereto is complete and correct;
The representations and warranties set forth in this Section 12.03
shall survive the transfer and assignment of the Mortgage Certificates to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach of any of
the foregoing representation and warranties, the party discovering such breach
shall give prompt written notice to the other. Within 30 days or, with the
prior written consent of the Trustee, such longer period specified in such
consent, of its discovery or its receipt of the representations and warranties
set forth above, shall cure such breach in all material respects or shall
deliver a Substitute Mortgage Certificate for the Original Mortgage Certificate
in the manner, and under the circumstances, specified in Section 12.05 to cure
such breach. In the event that the Depositor is unable to cure such breach, it
shall repurchase each affected Mortgage Certificate from the Trustee. Any such
repurchase by the Depositor shall be accomplished at a price payable to the
Trustee equal to the lesser of (i) the sum of (a) the Outstanding Mortgage
Certificate Amount of the Mortgage Certificate to be repurchased on the date of
such repurchase, (b) all interest accrued but unpaid to the Trustee on such
principal balance, at the rate of interest borne by such Mortgage Certificate,
through the last day of the month of such repurchase and (ii) the Trust Fund's
adjusted tax basis in such Mortgage Certificate, determined in accordance with
the Code and the regulations promulgated thereunder. The payment of the
purchase price for any repurchased Mortgage Certificates shall be considered a
prepayment in full of the related Mortgage Certificate and shall be deposited by
the Depositor in the Certificate Account in accordance with the provisions of
Section 17.04 hereof and, upon such deposit into the Certificate Account, the
related Mortgage Certificate 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 by the Depositor to vest
in the Depositor, or its designee or assignee, title to any Mortgage Certificate
repurchased pursuant hereto. The obligation of the Depositor to repurchase any
Mortgage Certificate 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. The Trustee
may take legal action to enforce the Depositor's obligation to repurchase such
Mortgage Certificates. The reasonable legal fees and expenses incurred by the
Trustee in connection with any such legal action shall be
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<PAGE>
reimbursable to the Trustee out of the proceeds of any such action and shall be
retained by the Trustee prior to the deposit of any remaining proceeds in the
Certificate Account pending distribution thereof to Certificateholders in
accordance with Section 13.01 hereof. Any distributions received by the Trustee
with respect to such repurchased Mortgage Certificate subsequent to the date of
such repurchase shall be promptly remitted by the Trustee to the Depositor.
SECTION 12.04 Administration of the Mortgage Certificates.
-------------------------------------------
The Trustee shall deposit in the Certificate Account, as soon as
practicable after receipt, each distribution of interest and principal and all
other payments or amounts made to the Trustee with respect to the Mortgage
Certificates. If the Trustee shall not have received a distribution with
respect to a 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, the Trustee shall request the issuer or guarantor, if any,
of such Mortgage Certificate to make such payment as promptly as possible and
legally permitted and shall, subject to the last sentence of this paragraph,
take such legal action against such issuer or guarantor as the Trustee shall
deem appropriate under the circumstances, including the prosection 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 shall be
reimbursable to the Trustee out of the proceeds of any such action and shall be
retained by the Trustee prior to the deposit of any remaining proceeds in the
Certificate Account pending distribution thereof to Certificateholders in
accordance with Section 13.01 hereof. 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 shall notify
the Master Servicer that it is not obligated to pursue any such available
remedies unless adequate indemnity for its legal fees and expenses is provided
to the Trustee, and the Trustee shall take such action as shall be appropriate
under the circumstances.
SECTION 12.05 Substitution of Mortgage Assets.
-------------------------------
(a) The Trustee may, and when required by the provisions of the Escrow
Account shall, execute instruments to release property held by it under this
Agreement, or convey the Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Agreement.
No party relying upon an instrument executed by the Trustee as provided in this
Article XII shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
monies.
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<PAGE>
(b) The Depositor may, within two years following the Delivery Date,
request by Depositor Request to substitute any Substitute Mortgage Asset Group
for any Original Mortgage Asset Group. Such Depositor Request shall state the
Substitution Date for such substitution. Any substitution under this Section
12.05 involving an Original Mortgage Asset Group that contains cash shall occur
prior to the first Distribution Date.
(c) Any number of substitutions may occur on any subsequent Delivery
Date. All substitutions occurring under this Section 12.04 shall in the
aggregate meet the following conditions:
(i) Substitute Mortgage Asset Groups may only be substituted for
Original Mortgage Asset Groups of like kind (e.g., Mortgage Loans
shall only be substituted for Mortgage Loans; any type of
Mortgage Assets may be substituted for an Original Mortgage Asset
Group containing cash;
(ii) No more than 40% in the Aggregate Outstanding Trustee Asset
Amount (not including any cash held in the Certificate Account)
making up the Trust Fund on the Closing Date may be substituted
for;
(iii) There may be no substitutions for any Mortgage Assets that made
up part of a Substitute Mortgage Asset Group;
(iv) Any substitute Mortgage Asset Group must have an aggregate Asset
Value at least equal to that of the Original Mortgage Asset Group
for which it will be substituted; the Asset Value of cash shall
be determined by the Rating Agency and shall be evidenced by an
Officer's Certificate of the Depositor executed on the Closing
Date;
(v) No substitution will be permitted that would delay the Final
Scheduled Distribution Date of any Class of Multi-Class
Certificates;
(vi) After the expiration of a period of 90 days from the Delivery
Date, Mortgage Assets may only be substituted for in the event of
a default or late payment on or defect in the Mortgage
Certificates or Mortgage Loans being substituted for; and
(vii) No Rating Agency shall, as a consequence of such substitution,
downgrade its rating of the Multi-Class Certificates.
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<PAGE>
(d) In connection with any such substitution, on the Substitution Date
the Depositor shall deliver to the Trustee the following:
(i) The Mortgage Certificates included in the Substitute Mortgage
Asset Group;
(ii) The Mortgage Files with respect to each of the Mortgage Loans
included in the Substitute Mortgage Asset Group;
(iii) Cash, if any, to be deposited in the related Certificate Account,
in an amount equal to the sum of (A) the payment of principal and
interest paid or to be paid on any Trustee Asset in such
Substitute Trustee Asset Group during the month of such
Substitution Date, (B) if so required by the Rating Agency, an
amount equal to the amount set forth pursuant to clause (A)
multiplied by a fraction, the numerator of which is the
applicable Assumed Reinvestment Rate multiplied by the number of
days, if any, from the immediately preceding Due Date to the
Substitution Date and the denominator of which is 360 and (C) the
amounts, if any, required to be deposited in the GPM Fund, the
Buy-Down Fund and the Reserve Fund as a result of such
substitution;
(iv) An Officer's Certificate, dated as of the Substitution Date:
(A) certifying with respect to the Mortgage Loans in the Substitute
Mortgage Asset Group that the representation and warranties of the Depositor
with respect to the Mortgage Loans in the Original Mortgage Asset Group
contained in Section 2.01 hereof are true and correct, as of the Substitution
Date, with respect to such Mortgage Loans;
(B) certifying with respect to the Mortgage Certificates in the
Substitute Mortgage Asset Group that the representation and warranties of the
Depositor with respect to the Mortgage Certificates in the Original Mortgage
Asset Group contained in Section 12.03 hereof are true and correct, as of the
Substitution Date, with respect to such Mortgage Certificates;
(C) certifying that such substitution on such Substitution Date will
be in compliance with the provisions hereof;
(D) setting forth calculations demonstrating that such substitution on
such Substitution Date will be in compliance with Sections 12.05(c)(i), (ii),
(iv) and (v) hereof;
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(v) An Opinion of Counsel stating that (A) such substitution will not
result in the disqualification of the Trust Fund as a REMIC, (B)
such substitution is in compliance with the provisions hereof,
(C) the Trust Fund will not as a result of such substitution
become an "investment company," as such term is used in the
Investment Company Act of 1940, as amended; and (D) the
Substitute Mortgage Assets constitute "qualified replacement
mortgages" as defined in Section 860G(a)(4) of the Code; and
(vi) A certificate of a firm of Independent Accounts verifying the
calculation of the Asset Value of the Substitute Mortgage Asset
Group and the Original Mortgage Asset Group to be released and
the amount of principal prepayments, if any, with respect to the
Mortgage Assets in such Substitute Mortgage Asset Group since the
immediately preceding Due Date and verifying the amount, if any,
required to be deposited into or released from the Certificate
Account, GPM Fund, Buy-Down Fund and Reserve Fund as a result of
such substitution and stating that such substitution will not
result in an extension of the Final Scheduled Distribution Date
of any Class of Multi-Class Certificates.
(e) Upon such substitution, the Trustee shall deliver to the Depositor
the Original Mortgage Asset Group, all distributions on such Original Mortgage
Asset Group received by the Trustee on the Due Date prior to such Substitution
Date, all amounts in the Certificate Account with respect to such Original
Mortgage Asset Group on the Substitution Date and any investment earning on such
amounts.
ARTICLE XIII
DISTRIBUTIONS
SECTION 13.01 Distributions.
-------------
(a) On any Distribution Date, the total amount of distributions that
shall be made to the Certificateholders shall equal the sum of the total amount
of funds available in the Certificate Account and available to be released from
any Reserve Fund, GPM Fund, or Buy-Down Fund, as specified in the related
Distribution Date Accounting (the "Amount Available"). The Trustee shall make
the distributions to the Holders of each Class of the Multi-Class Certificates
and the Residual Certificates on the basis hereof and as specified in Article
XI.
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(b) Unless otherwise specified in Article XI, all distributions made
with respect to any Multi-Class Certificate shall be applied first to the
interest then accrued and distributable on such Multi-Class Certificate and then
to effect reductions in the Outstanding Stated Principal Balance thereof.
Unless otherwise specified in Article XI, distribution of interest shall be
made in the order of the Final Scheduled Distribution Dates of each Class of
Multi-Class Certificates, until the Interest Distribution Amount for each such
Class has been distributed. No distribution of any Interest Distribution
Accounts shall be made on any Compound Interest Certificate until after its
Accretion Termination Date.
(c) Interest at the applicable Interest Rate shall accrue on the
Outstanding Stated Principal Balance of each Outstanding Compound Interest
Certificate from the Accrual Date, but none of such accrued interest shall be
distributable until the Accretion Termination Date for such Compound Interest
Certificate. Unless otherwise specified in Article XI, on each Distribution
Date prior to the Accretion Termination Date for any Class of Compound Interest
Certificate, interest that has accrued (determined as described above) on such
Certificate during the preceding Interest Accrual Period shall be added to the
outstanding Stated Principal Balance of such Certificate and shall thereafter
accrue interest from such Distribution Date. On the Accretion Termination Date
for any Class of such Certificates, interest accrued on such Class of Compound
Interest Certificates during the preceding Interest Accrual Period shall be
distributable in an amount equal to the lesser of (a) the Multi-Class
Distribution Amount for such Accretion Termination Date less the aggregate
amount to be distributed with respect to interest and in reduction of
Outstanding Stated Principal Balance on all other Multi-Class Certificates
required to be so distributed on such date, and (b) the amount of interest so
accrued on such Class of Compound Interest Certificates. The portion, if any,
of such interest that is not distributed on such Accretion Termination Date
shall be added to the Compound Value of such Class of Compound Interest
Certificates and shall hereafter accrue interest as set forth above. On any
Distribution Date after the Accretion Termination Date distributions of interest
shall be made on any Class of Compound Interest Certificates in the manner set
forth in subsection (b) above.
(d) Unless otherwise specified in Article XI, on each Distribution
Date, the Trustee shall make distributions in reduction of Outstanding Stated
Principal Balance to the Holders of the Outstanding Class of Multi-Class
Certificates having the earliest Final Scheduled Distribution Date in an amount
equal to the sum of the Stated Principal Distribution Amount with respect to
such Distribution Date. With respect to any Class of Multi-Class Certificates,
such distribution shall not exceed the then Aggregate Outstanding Stated
Principal Balance of such Class.
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Any excess of the Stated Principal Distribution Amount over such Aggregate
Outstanding Stated Principal Balance shall be distributed on such Distribution
Date to the Class of Multi-Class Certificates having the next earliest Final
Scheduled Distribution Date and so on until the full amount of such sum is so
distributed. On each succeeding Distribution Date, after the Trustee has
distributed all Interest Distribution Amounts with respect to the Class of
Multi-Class Certificates then Outstanding and entitled to receive such a
distribution, the Trustee shall distribute the Stated Principal Distribution
Amount with respect to such Distribution Date in the same manner. The Trustee
shall continue to make distributions in this manner until the Aggregate
Outstanding Stated Principal Balance of all Multi-Class Certificates has been
reduced to zero.
[(e) If so specified in Article XI, distributions of the Principal
Distribution Amount shall be made on a Class of [PDC] Certificates beginning on
the First [PDC] Paydown Date, in an Amount not in excess of the [PDC] Amount of
such Class. Any excess of the sum of the Stated Principal Distribution Amount
over the [PDC] Amount shall be distributed in the order of priority provided in
subsection (d) above. Any excess of the [PDC] Amount over the Stated Principal
Distribution Amount shall be added to the [PDC] Amount applicable to the next
succeeding Distribution Date or Special Distribution Date and may be carried
forward until all distributions with respect thereto have been made. If prior
to such Distribution Date, distributions have been made such that the Aggregate
Outstanding Stated Principal Balance of all other Classes of Multi-Class
Certificates has been reduced to zero, distributions shall be made to such [PDC]
Certificates as set forth in subsection (d) above.]
(f) Unless otherwise specified in Article XI, any amounts remaining in
the Certificate Account after the distribution of the Multi-Class Distribution
Amount shall be distributed to the Holders of the Residual Certificates on the
basis of the Percentage Interest evidenced by such Residual Certificate in the
Residual.
(g) Unless otherwise specified in Article XI, all distributions
hereunder shall be made on a pro rata basis among all of the Certificates of any
Class.
[(h) Notwithstanding any of the foregoing provisions with respect to
distributions of interest on and in reduction of Outstanding Stated Principal
Balance of the Certificates, if a Deficiency Event shall have occurred, then
distributions in reduction of Outstanding Stated Principal Balance of and of
interest on the Certificates subsequent to the Distribution Date upon which such
Deficiency Event first occurred shall be made in accordance with Article VI.]
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(i) Distributions in reduction of Outstanding Stated Principal Balance
of the Multi-Class Certificates shall begin no later than the Initial Reduction
Date for such Class and shall end no later than the Final Scheduled Distribution
Date therefor, unless the Outstanding Stated Principal Balance of such
Certificate becomes distributable at an earlier date by reason of [the
occurrence of a Deficiency Event or] the termination of the Trust Fund pursuant
to Article XIV or Article IX.
(j) Except for the final distribution with respect to a Certificate,
which shall be made as specified in Article XI, any distribution of interest on
or in reduction of Outstanding Stated Principal Balance of a Certificate shall
be made to the Person in whose name such Certificate (or one or more Predecessor
Certificates) is registered at the close of business on the Regular Record Date
for such Distribution Date by check mailed to such Certificateholder at the
address appearing in the Certificate Register, or upon written request by the
Certificateholder, by wire transfer (in the event that such Certificateholder
meets the requirements specified in Article XI) or by such other means of
payment as such Certificateholder and the Trustee may agree.
SECTION 13.02 Reports by Trustee to Certificateholders.
----------------------------------------
(a) On each Distribution Date, the Trustee shall deliver a written
report:
(i) to each Holder of Multi-Class Certificates of a Class on
which a distribution of interest and in reduction of Outstanding Stated
Principal Balance is then being made, setting forth the amount of such
distribution that represents interest and the amount applied to reduce such
Outstanding Stated Principal Balance, and the Outstanding Stated Principal
Balance of a Single Certificate of each such Class after giving effect to
the distribution in reduction of Outstanding Stated Principal Balance made
on such Distribution Date;
(ii) to each Holder of Multi-Class Certificates of a Class on
which a distribution of interest only is then being made, setting forth the
Aggregate Outstanding Stated Principal Balance of each Class of Multi-Class
Certificates after giving effect to the distribution in reduction of
Outstanding 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 Outstanding Stated Principal Balance
of any Class of Compound Interest Certificates the amount of any accrued
interest added to the Compound Value thereof on such Distribution Date;
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(iii) to each Holder of a Compound Interest Certificate (but
only if such Holder shall not have received on such Distribution Date a
distribution of interest equal to the entire amount of interest accrued on
such Certificate during the preceding Interest Accrual Period) setting
forth:
(x) the information contained in the report delivered
pursuant to subsection (ii) above,
(y) the interest accrued on a Single Certificate of such
Class of Compound Interest Certificates during the preceding Interest
Accrual Period and added to the Compound Value of such Compound
Interest Certificate, and
(z) the Outstanding Stated Principal Balance of a Single
Certificate of such Class of Compound Interest Certificates after
giving effect to the addition thereto of all interest accrued thereon
during the preceding Interest Accrual Period; and
(iv) to each Holder of a Residual Certificate, a report containing
the information delivered to Holders of Multi-Class Certificates pursuant
to subsections (i), (ii) and (iii) above and setting forth the aggregate
amount of distributions received on the Mortgage Assets and the
reinvestment income earned thereon during the preceding Due Period and the
applications of all such amounts, the Outstanding Stated Principal Balance
of each Class of Outstanding Multi-Class Certificates after giving effect
to the distributions then being made to Holders of Multi-Class
Certificates, the Outstanding Mortgage Asset Amount at the end of the
immediately preceding Due Period, and the amount, if any (in the aggregate
and per Single Certificate), then being distributed to Holders of Residual
Certificates.
(b) In addition to the information set forth above, the report
delivered to each Certificateholder shall set forth:
(i) the amount of servicing compensation received by the
Servicers and the Master Servicer during the Due Period preceding the
related Distribution Date and such other customary information as the
Trustee deems necessary or desirable to enable Certificateholders to
prepare their tax returns;
(ii) the book value of any collateral acquired on behalf of the
Certificateholders through foreclosure or grant of deed in lieu of
foreclosure or otherwise of any Mortgage Loan (or any mortgage loan in
which a Participation Certificate evidences an interest);
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(iii) the number and aggregate principal amount of Mortgage Loans
(or mortgage loans in which a Participation Certificate evidences an
interest) delinquent 30 days and 60 or more days; and
(iv) 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.
(c) Whenever the Trustee believes that the entire remaining
Outstanding Stated Principal Balance of any Class of Multi-Class Certificates
will become distributable on the next Distribution Date (or, in the case of the
final distribution upon a Residual Certificate upon termination of the Trust
Fund), the Trustee shall, no later than the fifth day preceding such
Distribution Date, mail or cause to be mailed to each Person in whose name a
Certificate to be so retired is registered at the close of business on the
applicable Record Date a notice to the effect that:
(i) it is expected that funds sufficient to make a distribution
that will reduce the Outstanding Stated Principal Balance of such Multi-
Class Certificate to zero (or in the case of a Residual Certificate, the
amount of such final distribution) will be available in the Certificate
Account on such Distribution Date, and
(ii) if such funds are available, (A) such final distribution will
be payable on such Distribution Date, but only upon presentation and
surrender of such Certificate at the office or agency of the Trustee
maintained for such purpose pursuant to Section 3.06 (the address of which
shall be set forth in such notice) and that the Record Date otherwise
applicable to such Distribution Date will not be applicable, and in the
case of a Multi-Class Certificate, that (B) no interest shall accrue on
such Certificate after the end of the Interest Accrual Period with respect
to such Distribution Date.
ARTICLE XIV
OPTIONAL TERMINATION
SECTION 14.01 Repurchase at the Option of the Depositor.
-----------------------------------------
To the extent specified in Article XI, the Mortgage Assets included in
the Trust Fund shall be repurchaseable at the option of the Depositor as
permitted herein on any Optional Termination Date at the Repurchase Price
specified herein.
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Unless otherwise specified in Article XI, the Repurchase Price for any
such Optional Termination shall be equal to the greater of (a) the Outstanding
Mortgage Asset Amount as of the date of repurchase, together with accrued and
unpaid interest thereon at the Pass-Through Rate for the related Mortgage Pool,
or at the rate of interest borne by a Mortgage Certificate or a Participation
Certificate 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 Mortgage Assets (as specified below).
[For purposes of this Section 14.01, the fair market value of a
Mortgage Asset shall be deemed to be (1) the most recent bid price for such
Mortgage Asset in the over-the-counter securities market if such Mortgage Asset
is traded in such market, (2) if such Mortgage Asset is traded on a securities
exchange, the average closing sale price for such Mortgage Asset on such
securities exchange for the last five trading days of such exchange immediately
preceding such repurchase, (3) if such Mortgage Asset is not so traded, a value
determined on the basis of current prices of securities deemed by the Depositor
to be most comparable to such Mortgage Asset or (4) in the case of Mortgage
Loans and Participation Certificates, the product of (a) the Outstanding
Mortgage Loan Amount of such Mortgage Loan or the Outstanding Participation
Certificate Amount of such Participation Certificate, based on the information
provided by the Servicer, and (b) the lower of the bid prices as quoted by two
nationally-recognized dealers selected by the Depositor (one of which may be an
Affiliate of the Depositor) which are at the time making a market in comparable
mortgage notes or participation certificates.] The right of the Depositor to
repurchase the Mortgage Assets shall be subject to the conditions specified in
Article XI and is conditioned upon the Depositor's having previously given
notice of termination as required by Section 14.02(a).
SECTION 14.02 Procedure Upon Optional Termination.
-----------------------------------
(a) In case of any Optional Termination pursuant to Section 14.01, the
Depositor shall, at least ten days prior to the date notice is to be mailed to
the Certificateholders (unless a shorter period shall be satisfactory to the
Trustee), notify the Trustee of such Optional Termination Date, and of the
Repurchase Price of the Mortgage Assets to be purchased.
(b) Any repurchase by the Depositor of the Mortgage Assets 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 from the Depositor of the Repurchase
Price, the Trustee and each co-trustee and separate trustee, if any, then acting
as such under this Agreement, shall, upon Depositor Request and at the expense
of the Depositor, execute and deliver all such
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instruments of transfer or assignment, in each case without recourse, as shall
be reasonably requested by the Depositor to vest title in the Mortgage Assets so
repurchased to the Depositor and shall transfer or deliver to the Depositor or
its designee the repurchased Mortgage Assets. Any distributions on the Mortgage
Assets received by the Trustee with respect to such repurchased Mortgage Assets
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 Trustee by first
class mail to Holders of the Certificates mailed no later than ______ days
preceding the Optional Termination Date. Such notice shall constitute the
adoption by the Trustee of a complete liquidation within the meaning of Section
860(F)(a)(4)(A)(i) of the Code on the date such notice is given. Such notice
shall specify (A) the Distribution Date (which, in any event, shall be no later
than 90 days from the date the Trustee sent such notice to the
Certificateholders) upon which final distribution on the Certificates will be
made upon presentation and surrender of the Certificates at the office or agency
of the Trustee therein designated, (B) the Termination Price or, in the case of
the Residual Certificates, the Residual Distribution, (C) in the case of a
Multi-Class Certificate, that interest shall cease to accrue after the end of
the Interest Accrual Period with respect to such Optional Termination Date and
(D) that the Record Date otherwise applicable to such Optional Termination Date
is not applicable, such distribution being made only upon presentation and
surrender of the Certificates at the office or agency of the Trustee maintained
for such purposes (the address of which shall be set forth in such notice). The
Trustee 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 Optional Termination Date of an amount equal to the Repurchase
Price pursuant to Section 14.03 and presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to each Holder of a
Multi-Class Certificate an amount equal to the Termination Price for such
Certificate. Funds remaining in the Certificate Account after allocation of
funds to Holders of Multi-Class Certificates shall be distributed to the holders
of the Residual Certificates.
(d) Following receipt of notice of termination from the Depositor
pursuant to Section 14.02(a), the Trustee shall, prior to the Optional
Termination Date, sell any Eligible Investments then held in the Accounts that
mature subsequent to such Distribution Date, deposit the proceeds of such sale
into the related Account and reinvest such proceeds in accordance with the
applicable provisions of Article XVII. Any amounts remaining in the Accounts
after making, or providing for, final distributions to the Holders of the Multi-
Class Certificates
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shall be distributed to the Holders of the Residual Certificates on the Optional
Termination Date.
ARTICLE XV
SPECIAL DISTRIBUTIONS
SECTION 15.01 Special Distributions.
---------------------
All or a portion of the Multi-Class Certificates (having other than
monthly Distribution Dates) shall be subject to Special Distributions in
reduction of Outstanding Stated Principal Balance pursuant to this Section 15.01
on the day of the month specified in Article XI, in the event that the Trustee
makes the determinations specified in Section 17.07(d).
SECTION 15.02 Notice of Special Distribution by the Trustee.
---------------------------------------------
Notice of distributions pursuant to Section 15.01 shall be given by
first class mail, postage prepaid, mailed not less than five days prior to the
applicable Special Distribution Date to each Holder of all Classes of the Multi-
Class Certificates affected at the address for such Holder specified in the
Certificate Register.
All notices of such distributions shall state: (i) Special
Distribution Date; (ii) the Special Distribution Amount; (iii) that on the
Special Distribution Date, if the affected Class of Multi-Class Certificates is
not to receive a final distribution in reduction of its Outstanding Stated
Principal Balance, the Special Distribution Amount will be distributed as shall
be specified in such notice, that accruals of interest will cease with respect
to principal amounts upon which distributions are to be made on the date
specified on the notice of distribution and that, subject to clause (vi) below,
distribution of the Special Distribution Amount will be made by check mailed to
the Person whose name appears as the registered Holder thereof on the
Certificate Register on the Special Distribution Record Date applicable to such
Special Distribution Date and identified in such notice of distribution; (iv)
that on a Special Distribution Date, if distributions on the affected Multi-
Class Certificates will cause such Certificates to have received total
distributions equal to the Initial Stated Principal Balance of such Certificates
and in the case of any Compound Interest Certificates, the Compound Value of
such Certificate will have been paid in full, the fact of such distribution in
full and that all interest distributions in respect thereof shall cease on the
date specified on the notice of redemption; (v) if such payment is the final
distribution on the affected Class of Multi-Class Certificates that the Special
Distribution Record Date otherwise applicable to the Certificates is not
otherwise applicable; and (vi) the place where such Certificates are to be
surrendered for
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distribution of the applicable portion of the Special Distribution Amount if
such Certificates are to receive their final distribution in reduction of
Outstanding Stated Principal Balance, which shall be the office or agency of the
Trustee to be maintained as provided in Section 3.06.
Notice of distribution of Multi-Class Certificates shall be given by
the Trustee at its expense. Failure to give notice of distribution, or any
defect therein, to any Holder of any Multi-Class Certificate selected for
Special Distribution shall not impair or affect the validity of such
distributions with respect to any other Certificate.
[ARTICLE XVI
DEFICIENCY EVENTS
SECTION 16.01 Occurrence; Trustee's Determinations.
------------------------------------
Upon the occurrence of a Deficiency event, the Trustee shall, promptly
after the Distribution Date on which such Deficiency Event occurs, determine
whether or not the application on a monthly basis of all future distributions on
the Mortgage Assets and other amounts receivable with respect to the Trust Fund
towards distributions on the Multi-Class Certificates in accordance with the
priorities as to distributions of principal set forth in such Certificates and
Article XI will result in the retirement of the entire Aggregate Stated
Principal Balance of and the distribution of all interest accrued on the Multi-
Class Certificates under the Maximum Rate Assumption, if applicable. In making
any such determination, the Trustee shall ignore all Initial Reduction Dates
and, except for the Final Scheduled Distribution Date applicable to the Class or
Classes of Multi-Class Certificates having the latest Final Scheduled
Distribution Date, all Final Scheduled Distribution Dates, to the effect that a
positive determination under this Section 16.01 can be made if the Trustee can
determine that such distributions will be sufficient to pay interest at the
applicable Interest Rates under the Maximum Rate Assumption, if applicable and
to reduce the entire Outstanding Stated Principal Balance of each Certificate to
zero on or before such latest Final Scheduled Distribution Date.
The Trustee shall obtain and rely upon an opinion or report of a firm
of Independent Accountants of nationally recognized reputation as to the
sufficiency of the amounts receivable with respect to the Trust Fund to make
such distributions in reduction of Outstanding Stated Principal Balance of and
interest on the Multi-Class Certificates, which opinion or report shall be
conclusive evidence as to such sufficiency.
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Pending the making of any determination pursuant to this Section
16.01, distributions on the Multi-Class Certificates shall continue to be made
in accordance with Articles XI and XIII.
As promptly as practicable following any determination pursuant to
this Section 16.01, the Trustee shall notify all Holders of Certificates as to
such determination and the effect thereof upon future distributions on the
Certificates as set forth in Sections 16.02 and 16.03.
SECTION 16.02 Distributions Upon a
Determination of Sufficiency.
----------------------------
In the event that the Trustee shall have made a positive determination
pursuant to Section 16.01 (a "Determination of Sufficiency"), the Trustee shall,
beginning on the first Deficiency Distribution Date which occurs more than ten
days subsequent to the date upon which the Trustee made such Determination of
Sufficiency, withdraw from the Certificate Account on each Deficiency
Distribution Date all amounts at the time held therein (after any withdrawal as
provided in the following paragraph) and shall distribute such amounts to
Holders of Multi-Class Certificates as of the related Special Record Date in
accordance with the priorities and allocations as to principal and interest set
forth below in this Section 16.02. In the event that the Accretion Termination
Date has not occurred with respect to a Class of Compound Interest Certificates,
interest accrued but not required to be distributed on such Class shall be added
to the Compound Value of each Certificate of such Class in the same manner as
prior to the occurrence of the Deficiency Event.
Each such monthly distribution on a Deficiency Distribution Date shall
be made without regard to any calculations as to the Multi-Class Distribution
Amount and, so long as such monthly distributions continue pursuant to this
Section 16.02, no withdrawals from the Certificate Account shall be made for the
purpose of distributions to Holders of Residual Certificates until either such
Deficiency Event is declared to be not continuing pursuant to the following
paragraph or until the Outstanding Stated Principal Balance of all Multi-Class
Certificates has been reduced to zero. All amounts available for distribution
from the Certificate Account on each Deficiency Distribution Date pursuant to
this Section 16.02 shall be applied, first, to the payment of all interest
-----
accrued but undistributed on the Multi-Class Certificates to [the Designated
Interest Accrual Date with respect to] such Deficiency Distribution Date (other
than accrued interest on any Class of Compound Interest Certificates for which
the Accretion Termination Date has not yet occurred) and, second, to the
------
reduction of the Outstanding Stated Principal Balance of the Outstanding Multi-
Class Certificates in the order of priority set forth in Article XI.
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In the event that, subsequent to the making of any distribution on a
Deficiency Distribution Date that would otherwise be a Distribution Date, the
Trustee determines (and a firm of Independent Accountants of nationally
recognized reputation confirms) that (i) it could make a Determination of
Sufficiency pursuant to Section 16.01 which included taking into consideration
the making of distributions on the basis specified in Article XI as well as all
applicable Initial Reduction Dates and Final Scheduled Distribution Dates and
(ii) the Asset Value of all Mortgage Asset Groups as of the related Principal
Determination Date is greater than the Aggregate Outstanding Stated Principal
Balance of the Multi-Class Certificates (after giving effect to the distribution
in reduction of Stated Principal Balance made on such Deficiency Distribution
Date), the Trustee shall notify all Certificateholders and declare such
Deficiency Event to no longer be continuing and resume distributions on the
Certificates (including, to the extent applicable, Residual Certificates) as
provided herein on each Distribution Date as if no such Deficiency Event had
occurred.
SECTION 16.03 Distributions Upon a
Determination of Insufficiency.
------------------------------
In the event that the Trustee shall have made a negative determination
pursuant to Section 16.01 (a "Determination of Insufficiency"), the Trustee
shall, beginning on the first Deficiency Distribution Date that occurs more than
ten days subsequent to the date upon which the Trustee made such Determination
of Insufficiency, withdraw from the Certificate Account on each Deficiency
Distribution Date all amounts at the time held therein and shall distribute such
amounts to the Holders of Multi-Class Certificates in the following order and
priorities:
first: To the payment of amounts then accrued and undistributed on all
-----
Multi-Class Certificates (including any Compound Interest Certificates) for
interest on the Outstanding Stated Principal Balance of each such
Certificate at the Highest Interest Rate (notwithstanding the Interest Rate
borne by such Multi-Class Certificate) from the date with respect to which
interest on such Certificate was last distributed or in the case of any
Compound Interest Certificates, added to the Compound Value thereof) to
such Deficiency Distribution Date; and
second: To the reduction of the Outstanding Stated Principal Balance
------
of each Multi-Class Certificate, ratably among all Multi-Class Certificate,
without preference or priority of any kind and without regard to the
sequence in which the distribution in reduction of Outstanding Stated
Principal Balance of Multi-Class Certificates is otherwise paid.
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Each such monthly distribution on a Deficiency Distribution Date shall
be made without regard to any calculations as to the Multi-Class Certificate
Distribution Amount and, so long as such monthly distributions continue pursuant
to this Section 16.02, no withdrawals from the Certificate Account shall be made
for the purpose of distributions to Holders of Residual Certificates until the
Outstanding Stated Principal Balance of all Multi-Class Certificates has been
reduced to zero.
So long as distributions on Multi-Class Certificates are being made
pursuant to this Section 16.03, the Holders of Multi-Class Certificates
representing more than 50% of the Aggregated Outstanding Stated Principal
Balance of all Classes of the Multi-Class Certificates may direct the Trustee to
sell the Trust Fund pursuant to Section 16.04, any such direction being
irrevocable and binding (subject, however, to satisfaction of the conditions set
forth in Section 16.04) upon the Holders of all such Multi-Class Certificates as
well as upon the Holders of all Residual Certificates. Pending any such sale,
monthly distributions shall continue to be made on the Multi-Class Certificates
on each Deficiency Distribution Date pursuant to this Section 16.03. In the
absence of such a direction, the Trustee shall not sell all or a portion of the
Trust Fund.
SECTION 16.04 Sale of Trust Fund.
------------------
Upon receipt of a direction for the sale of the Trust Fund from
Holders of Multi-Class Certificates representing more than 50% of the Aggregate
Stated Principal Balance of all Classes of the Multi-Class Certificates, the
Trustee shall proceed to sell the Trust Fund in one or more separate, private or
public sales, the method, manner, time, place and terms of any such sale being
in the sole discretion of the Trustee, provided that (1) any such sale shall be
conducted in a commercially reasonable manner and (2) except as hereinafter
provided (a) any such sale and the distribution of the proceeds thereof to
Holders of the Certificates shall be conducted in such a manner as to constitute
a "qualified liquidation" for purposes of Section 860F(a)(4)(A) of the Code and
(b) there shall have been delivered to the Trustee an Opinion of Counsel with
respect to such proposed sale and the distribution of the proceeds thereof to
Certificateholders, stating that such sale will not disqualify the Trust Fund as
a REMIC under the Code. In the event that there shall be delivered to the
Trustee an Opinion of Counsel to the effect that the net proceeds of any sale of
the Trust Fund after payment of all taxes on "prohibited transactions" as
defined in Section 860F of the Code would not be less than the amount that would
be distributable to the Holders of the Multi-Class Certificates pursuant to
Section 16.03 on the next Deficiency Distribution Date following such sale, then
clause (2) of the proviso to the immediately preceding sentence shall be
inapplicable to such sale.
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The proceeds of any such sale (after reimbursement to the Trustee of
its reasonable expenses and disbursements) shall be distributed promptly to
Holders of Multi-Class Certificates upon presentation and surrender of the
Certificates at the office or agency specified in the notice to the Holders of
the Certificates of such final distribution. Such proceeds shall be applied in
the order and priority set forth in Section 16.03 for monthly distributions
thereunder. In the event that proceeds remaining after the retirement of the
Outstanding Stated Principal Balance of each Multi-Class Certificate together
with accrued and undistributed interest thereon at the Highest Interest Rate,
such remaining net proceeds shall be distributed to Holders of Residual
Certificates in accordance with the respective Percentage Interests evidenced
thereby upon presentation and surrender of such Residual Certificates at the
office or agency of the Trustee maintained pursuant to Article XI.
ARTICLE XVII
ACCOUNTS AND ACCOUNTINGS
SECTION 17.01 GPM Fund.
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(a) If so specified in Article XI, the Trustee shall establish, on or
before the Delivery Date, one or more accounts collectively designated as the
GPM Fund. All monies received by the Trustee pursuant to Article XI with
respect to the GPM Fund, together with any Eligible Investments in which such
monies are or will be invested or reinvested during the term of this Agreement,
shall be held by the Trustee in the GPM Fund as part of the Trust Fund subject
to disbursement and withdrawal as herein provided. Monies shall be subject to
withdrawal pursuant to Subsections (d) and (e) of this Section 17.01.
(b) Upon Depositor Request, all or a portion of the GPM Fund shall be
invested and reinvested at the direction of the Depositor in one or more
Eligible Investments. If the Depositor shall not have given any direction
pursuant to this Section 17.01(b), the GPM Fund shall be invested and reinvested
by the Trustee pursuant to Section 17.05, as fully as practicable in such manner
as the Trustee shall from time to time determine in its sole discretion, but
only in one or more Eligible Investments. All income or other gain from such
investments shall be credited to such GPM Fund and any loss resulting from such
investments shall be charged to such GPM Fund. The Trustee shall not in any way
be held liable by reason of any insufficiency of such GPM Fund resulting from
any loss of investment in any Eligible Investment.
(c) If any amounts of investments as provided in Section 17.01(b)
shall be needed for disbursement from the GPM
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Fund as set forth in Section 17.01(d), the Trustee shall cause a sufficient
amount of such investments to be sold or otherwise converted to cash to the
credit of such GPM Fund. The Trustee shall not in any way be held liable by
reason of the inability of the Trustees to make any required payment from the
GPM Fund because of any insufficiency of such GPM Fund either resulting from any
loss of investment in any Eligible Investment or resulting from disbursements
made pursuant to Section 17.01(d).
(d) Disbursements from the GPM Fund shall be made, to the extent funds
therefore are available, pursuant to instructions contained in the Distribution
Date Statements prepared in accordance with Section 17.07.
(e) The amount required to be maintained in the GPM Fund as of any
date shall be an amount equal to the greater of the remaining aggregate of GPM
Shortfalls for all GPM Assets (when taken together with Reinvestment Income
thereon at the applicable Assumed Reinvestment Rate if the GPM Fund is funded
with a Letter of Credit) or the aggregate of GPM Prepayment Shortfalls with
respect to such GPM Assets. Upon receipt by the Trustee of an Accountants'
Certificate to the effect that with respect to all of the GPM Assets, the amount
required to be maintained in the GPM Fund at such time, pursuant to this Section
17.01, is less than the amount of such GPM Fund then held by the Trustee, the
Trustee shall on the next succeeding Distribution Date pay to the Holders of the
Residual Certificates an amount equal to the difference between the amount of
such GPM Fund then held by the Trustee and the amount set forth in such
Accountants' Certificate.
SECTION 17.02 Reserve Fund.
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(a) If so specified in Article XI, the Trustee shall establish, on or
before the Delivery Date, one ore more accounts designated as the Reserve Fund.
All monies received by the Trustee pursuant to Article XI with respect to the
Reserve Fund, together with any Eligible Investments in which such monies are or
will be invested or reinvested during the term of this Agreement, and any income
or other gain realized from such investment shall be held by the Trustee in the
Reserve Fund as part of the Trust subject to disbursement and withdrawal as
herein provided. Monies shall be subject to withdrawal pursuant to Subsection
(d) of this Section 17.02.
(b) Upon Depositor Request all or a portion of the Reserve Fund shall
be invested and reinvested at the Depositor's direction in one or more Eligible
Investments. If the Depositor shall not have given any directions pursuant to
this Section 17.02(b), the Reserve Fund shall be invested and reinvested by the
Trustee pursuant to Section 17.05, as fully as practicable, in such manner as
the Trustee shall from time to time determine in its sole discretion, but only
in one or more Eligible
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Investments. All income or other gain from such investments shall be credited
to such Reserve Fund and any loss resulting from such investments shall be
charged to such Reserve Fund. The Trustee shall not in any way be held liable
by reason of any insufficiency of such Reserve Fund resulting from any loss of
investment in any Eligible Investment.
(c) If any amounts invested as provided in Section 17.02(b) shall be
needed for disbursement from the Reserve Fund as set forth in Section 17.02(d),
the Trustee shall cause a sufficient amount of such investments of such Reserve
Fund to be sold or otherwise converted to cash to the credit of such Reserve
Fund. The Trustee shall not in any way be held liable by reason of the
inability of the Trustee to make any required payment from such Reserve Fund
because of any insufficiency of such Reserve Fund either resulting from any loss
of investment in any Eligible Investment or resulting from disbursements made
pursuant to Section 17.02(d).
(d) Disbursements from the Reserve Fund shall be made, to the extent
funds therefor are available, pursuant to instructions contained in the
Distribution Date Statements prepared in accordance with Section 17.07. Upon
receipt by the Trustee of an Accountants' Certificate to the effect that the
amount required to be maintained in the Reserve Fund as of the next succeeding
Distribution Date is less than the amount of such Reserve Fund then held by the
Trustee, the Trustee shall on the next succeeding Distribution Date pay to the
Holders of the Residual Certificates an amount equal to any excess over such
required amount.
SECTION 17.03 Buy-Down Fund.
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(a) If so specified in Article XI, the Trustee shall establish, on or
before the Delivery Date, one or more accounts designated as the Buy-Down Fund.
All monies received by the Trustee pursuant to Article XI with respect to the
Buy-Down Fund, together with any Eligible Investments in which such monies are
or will be invested or reinvested during the term of this Agreement, and any
income or other gain realized from such investment shall be held by the Trustee
in the Buy-Down Fund as part of the Trust subject to disbursement and withdrawal
as herein provided. Monies shall be subject to withdrawal pursuant to
Subsection (d) of this Section 17.03.
(b) Upon Depositor Request, all or a portion of the Buy-Down Fund
shall be invested and reinvested at the Depositor's direction in one or more
Eligible Investments. If the Depositor shall not have given any directions
pursuant to this Section 17.03 (b), the Buy-Down Fund shall be invested and
reinvested by the Trustee pursuant to Section 17.05, as fully as practicable, in
such manner as the Trustee shall from time to time determine in its sole
discretion, but only in one or more Eligible
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Investments. All income or other gain from such investments shall be credited
to such Buy-Down Fund and any loss resulting from such investments shall be
charged to such Buy-Down Fund. The Trustee shall not in any way be held liable
by reason of any insufficiency of such Buy-Down Fund resulting from any loss of
investment in any Eligible Investment.
(c) If any amounts invested as provided in Section 17.03(b) shall be
needed for disbursement from the Buy-Down Fund as set forth in Section 17.03(d),
the Trustee shall cause a sufficient amount of such investments of such Buy-Down
Fund to be sold or otherwise converted to cash to the credit of such Buy-Down
Fund. The Trustee shall not in any way be held liable by reason of the
inability of the Trustee to make any required payment from such Buy-Down Fund
because of any insufficiency of such Buy-Down Fund either resulting from any
loss of investment in any Eligible Investment or resulting from disbursements
made pursuant to Section 17.03(d).
(d) Disbursements from the Buy-Down Fund shall be made, to the extent
funds therefor are available, pursuant to instructions contained in the
Distribution Date Statements prepared in accordance with Section 17.07. Upon
receipt by the Trustee of an Accountants' Certificate and to the effect that the
amount required to be maintained in the Buy-Down Fund as of the next succeeding
Distribution Date is less than the amount of such Buy-Down Fund then held by the
Trustee, the Trustee shall on the next succeeding Distribution Date pay to the
Holders of the Residual Certificates an amount equal to any excess over such
required amount which amount shall thereupon be deemed not to be part of the
Trust Fund.
SECTION 17.04 Certificate Account.
-------------------
(a) The Trustee shall, prior to the Deliver Date, establish the
Certificate Account into which the Trustee shall from time to time deposit all
Asset Proceeds and all proceeds transferred from the GPM Fund, the Reserve Fund
or Buy-Down Fund. All monies deposited from time to time in the Certificate
Account pursuant to this Agreement shall be held by the Trustee as part of the
Trust Fund as herein provided.
(b) All payments to be made from time to time to the Holders out of
funds in the Certificate Account pursuant to this Agreement shall be made by the
Trustee.
(c) Upon Depositor Request, all or a portion of the monies in the
Certificate Account shall be invested and reinvested at the Depositor's
direction in one or more Eligible Investments. If the Depositor shall not have
given any directions pursuant to this Section 17.04(c), the Trustee shall,
pursuant to Section 17.05, invest and reinvest such monies as fully as
practicable, in such manner as the Trustee shall from
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time to time determine in its sole discretion, but only in one or more Eligible
Investments. All income or other gain from such investments shall be credited
to such Certificate Account and any loss resulting from such investments shall
be charged to such Certificate Account. All such investments shall mature prior
to the next Distribution Date or Special Distribution Date. The Trustee shall
not in any way be held liable by reason of any insufficiency in any Certificate
Account resulting from any loss on any Eligible Investments.
SECTION 17.05 Investments.
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(a) Notwithstanding anything to the contrary in this Agreement,
investments of funds held by the Trustee under the Agreement shall be made
pursuant to any applicable Reinvestment Agreements to the extent provided in
such agreements, and the Trustee shall deposit funds as required by any such
Reinvestment Agreements to the extent provided in such agreements, and the
Trustee shall deposit funds as required by any such Reinvestment Agreements. No
change shall be made in the terms and conditions of any such Reinvestment
Agreements if such change would result in the Rating Agency lowering the
outstanding rating of the Certificates.
(b) Each Account shall relate solely to the Certificates with respect
to which it was established and to the Mortgage Assets and other property which
make up the Trust Fund. The Trustee may hold any funds or other property
received or held by it as part of an Account in collective amounts maintained by
it in the normal course of its business and containing funds or property held by
it for other Persons, provided that such Accounts are under the sole control of
the Trustee and the Trustee maintains adequate records indicating the ownership
of all such funds or property and the portions thereof held for credit to each
Account.
(c) The Residualholders shall not direct the Trustee to make any
investment of any funds in an Account or to sell any investment held in an
Account except under the following terms and conditions:
(i) each such investment shall be made in the name of the Trustee
(in its capacity as such) or in the name of its nominee;
(ii) the Trustee shall have sole control over such investment, the
income thereon and the proceeds thereof;
(iii) any certificate or other instrument evidencing such
investment shall be delivered directly to the Trustee or its agent; and
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(iv) the proceeds of each sale of such an investment shall be
remitted by the purchaser thereof directly to the Trustee for deposit in
the Account in which such investment was held.
(d) If any amounts are needed for disbursement from an Account and
sufficient uninvested funds are not available therein to make such disbursement,
in the absence of a Depositor Request for the liquidation of investments held
therein in an amount sufficient to provide the required funds, the Trustee shall
cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such account or fund.
(e) The Trustee shall not in any way be held liable by reason of any
insufficiency in any account or fund except for losses on investments which are
liabilities of the Trustee.
(f) All investments of funds in an account or fund and all sales of
investments held in an account or fund shall, except as provided below, be made
by the Trustee in accordance with a Depositor Request. Subject to compliance
with the requirements of Section 17.01, 17.02, 17.03 and 17.04, whichever is
applicable, such Depositor Request may authorize the Trustee to make the
specific investments set forth therein, to make investments from time to time
consistent with the general instructions set forth therein, or to make specific
investments pursuant to written or telegraphic instructions of the employees or
agents of the Depositor identified therein, in each case in such accounts as
such Depositor Request shall specify.
(g) In the event that the Depositor shall have failed to give
investment directions to the Trustee by 11:00 p.m. Eastern Time on any Business
Day authorizing the Trustee to invest the funds then in an Account the Trustee
shall invest and reinvest the funds then in each related Account to the fullest
extent practicable, in such manner as the Trustee shall from time to time
determine, but only in one or more Eligible Investments bearing interest or sold
at a discount. All such investments shall mature on the next Business Day
following the date of such investment.
SECTION 17.06 Custodial Account; Other Accounts.
---------------------------------
(a) In lieu of establishing the Certificate Account pursuant to
Section 3.08, the Master Servicer shall, no later than the Delivery Date,
establish the Custodial Account in which it shall deposit the amounts required
to be deposited pursuant to Section 3.08. On the 25th day of each month, or if
such 25th day is not a Business Day, the next preceding Business Day, the Master
Servicer shall remit to the Certificate Account by wire transfer of immediately
available funds the amounts deposited in the Custodial Account pursuant to
Section 3.08, net of the amounts permitted to be withdrawn by the Master
Servicer pursuant
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to Section 3.12. Notwithstanding anything to the contrary contained in this
Reference Agreement, the Master Servicer's obligations with respect to the
Custodial Account shall be the same as those imposed by the Standard Terms.
Amounts deposited from time to time in the Custodial Account shall be held by
the Master Servicer for the benefit of the Certificateholders, subject to the
rights of the Master Servicer to reimbursement and withdrawal, as provided in
the Standard Terms.
(b) To the extent provided herein, the Trustee shall, prior to the
Delivery Date, establish other funds and accounts to secure the Certificates.
Disbursements from such other funds and accounts shall be made as provided
herein.
SECTION 17.07 Accountings.
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The Trustee shall render the accounting and perform the activities
called for below by the dates stated below.
(a) Monthly. Not later than the second Business Day prior to the
-------
end of each month, the Trustee shall render to the Depositor the monthly
Accounting Report which shall contain the following information with respect to
the Mortgage Assets:
(1) The Outstanding Mortgage Asset Amount as of the Principal
Determination Date for the current month:
(2) The principal payments with respect to the Mortgage Assets
received or to be received by the Trustee during the current month;
(3) The payment of interest on the Mortgage Assets received or to be
received by the Trustee during the current month;
(4) The Buy-Down Shortfall, if any, with respect to the Buy-Down
Assets;
(5) The GPM Shortfall, if any, with respect to the GPM Assets;
(6) The GPM Prepayment Shortfall, if any, with respect to the GPM
Assets;
(7) The amount of uninsured loss, if any, with respect to any Mortgage
Asset; and
(8) The amount, if any, to be paid to a Servicer or the Master
Servicer in reimbursement for a Nonrecoverable Advance.
(b) Distribution Date Statement. Not later than the second
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Business Day preceding a Distribution Date, the
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Trustee shall render to the Depositor an accounting which it shall make
available to all Certificateholders. The Distribution Date Statement shall
contain the following information with respect to the Mortgage Assets:
(1) For the GPM Fund:
(i) the balance in the GPM Fund immediately after the last
Distribution Date;
(ii) the net Reinvestment Income, if any, earned and to be earned
from the last Distribution Date to the next succeeding Distribution Date on
amounts in the GPM Fund;
(iii) any withdrawals from the GPM Fund during the period since
the Distribution Date pursuant to any Special Distributions;
(iv) any withdrawals from the GPM Fund during the period from the
last Distribution Date to the next succeeding Distribution Date based upon
the Accountants' Certificate as described in Section 17.01(e);
(v) any balance in the GPM Fund, prior to any distributions
therefrom, at the next succeeding Distribution Date as calculated in
accordance with (i) through (iv) above;
(vi) the required balance of the GPM Fund as of the next
succeeding Distribution Date based on the principal balances of the
Mortgage Assets as of the most recent Principal Determination Date;
(vii) the amount by which the balance in the GPM Fund as
calculated in (v) above will exceed the required balance as of the next
succeeding Distribution Date as calculated in (vi) above, if any;
(viii) the amount of the greater of the GPM Shortfall or GPM
Prepayment Shortfall, to be withdrawn from the GPM Fund and deposited into
the Certificate Account on the next succeeding Distribution Date; and
(ix) the sum of the amounts in (vii) and (viii) above, which must
be transferred to the Certificate Account.
(2) For the Reserve Fund:
(i) the balance in the Reserve Fund immediately after the last
Distribution Date;
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(ii) the net Reinvestment Income, if any, earned and to be earned
from the last Distribution Date to the next succeeding Distribution Date on
amounts in the Reserve Fund;
(iii) any withdrawals from the Reserve Fund since the last
Distribution Date pursuant to any Special Distributions;
(iv) any withdrawals from the Reserve Fund during the period from
the last Distribution Date to the next succeeding Distribution Date based
upon the Accountants' Certificate as described in Section 17.02(d);
(v) any balance in the Reserve Fund, prior to any distributions
therefrom, at the next succeeding Distribution Date, as calculated in
accordance with (i) through (iv) above;
(vi) the required balance of the Reserve Fund as set forth in
Article XI;
(vii) the amount by which the balance in the Reserve Fund as
calculated in (v) above, will exceed the required balance as of the next
succeeding Distribution Date as calculated in (vi) above, in any;
(viii) any amount required to be withdrawn from the Reserve Fund as
described in Article XI on the next succeeding Distribution Date and
deposited in the Certificate Account; and
(ix) the sum of the amounts in (vii) and (viii) above, which must
be transferred to the Certificate Account.
(3) For the Buy-Down Fund:
(i) the balance in the Buy-Down Fund immediately after the last
Distribution Date;
(ii) the net Reinvestment Income, if any, earned and to be earned
from the last Distribution Date to the next succeeding Distribution Date on
amounts in the Buy-Down Fund;
(iii) any withdrawals from the Buy-Down Fund since the last
Distribution Date pursuant to any Special Distributions;
(iv) any withdrawals from the Buy-Down Fund during the period from
the last Distribution Date to the next succeeding Distribution Date based
upon the Accountants' Certificate as described in Section 17.03(d);
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(v) any balance in the Buy-Down Fund, prior to any distributions
therefrom, at the next succeeding Distribution Date, as calculated in
accordance with (i) through (iv) above;
(vi) the required balance of the Buy-Down Fund as of the next
succeeding Distribution Date, based on the principal balances of the Buy-
Down Assets as of the most recent Principal Determination Date;
(vii) the amount by which the balance in the Buy-Down Fund as
calculated in (v) above, will exceed the required balance as of the next
succeeding Distribution Date as calculated in (vi) above, if any;
(viii) the amount of the Buy-Down Shortfall to be withdrawn from
the Buy-Down Fund and deposited in the Certificate Account on the next
succeeding Payment Date; and
(ix) the sum of the amounts in (vii) and (viii) above, which must
be transferred to the Certificate Account.
(4) The Interest Distribution Amount to be made on each Class of
Multi-Class Certificates on the next succeeding Distribution Date.
(5) The amount of accrued interest, if any, for the most recent
Interest Accrual Period on each Class of Compound Interest Certificates
that is to be added to the principal of those Certificates on the next
succeeding Distribution Date.
(6) The Aggregate Outstanding Stated Principal Balance of each Class
of Multi-Class Certificates.
(7) The Stated Principal Distribution Amount to be made on the next
succeeding Distribution Date.
(8) Based on the Outstanding Mortgage Asset Amount of the Mortgage
Assets as of the most recent Principal Determination Date, the Aggregate
Asset Value of the Mortgage Assets as of the next succeeding Distribution
Date.
(9) The amount of Excess Cash Flow on such Distribution Date and the
portion, if any, thereof that is to be added pursuant to the provisions of
this Reference Agreement to the Stated Principal Distribution Amount on the
Outstanding Multi-Class Certificates.
(10) For the Certificate Account:
(i) the balance in the Certificate Account immediately after the
last Distribution Date;
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(ii) the net Reinvestment Income earned and to be earned from the
last Distribution Date to the next succeeding Distribution Date on amounts
in such Certificate Account (after giving effect to any withdrawals
pursuant to Paragraph (vi) below);
(iii) collections of interest and principal from Mortgage Assets
from the last Distribution Date to the next succeeding Distribution Date;
(iv) the amount to be withdrawn from the GPM Fund, Reserve Fund
and Buy-Down Fund and deposited into the Certificate Account on the next
succeeding Distribution Date as calculated in Section 17.07(b)(1)(ix),
17.07(b)(2)(ix) and 17.07(b)(3)(ix);
(v) the Interest Distribution Amount on each Class of Multi-
Class Certificates and the Stated Principal Distribution Amount on the next
succeeding Distribution Date;
(vi) withdrawals from the Certificate Account since the last
Distribution Date to the next succeeding Distribution Date pursuant to any
Special Distributions; and
(vii) the Residual Distribution for the period from the last
Distribution Date to the next succeeding Distribution Date.
(c) Distribution Date Actions. The Trustee shall, pursuant to
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the Distribution Date Statement referred to in clause (b):
(1) deposit on the next succeeding Distribution Date to the
Certificate Account from the GPM Fund, the amount set forth pursuant to
Section 17.07(b)(1)(ix), from the Reserve Fund, the amount set forth
pursuant to Section 17.07(b)(2)(ix) and from the Buy-Down Fund, the amount
set forth pursuant to Section 17.07(b)(3)(ix);
(2) withdraw on the next succeeding Distribution Date from the
Certificate Account and pay to the Holders of the Multi-Class Certificates
the amount which is set forth pursuant to Section 17.07(b)(10)(v); and
(3) withdraw on the next succeeding Distribution Date from the
Certificate Account and pay to the Holders of the Residual Certificates the
amount set forth pursuant to Section 17.07(b)(10)(vii).
If the actual amount of distributions received by the Trustee during
the last month of a related Due Period differs from the expected amount of
distributions used by the Trustee in
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accordance with this Article XVII in determining the distribution requirement
for a Distribution Date, the Trustee shall immediately following the end of such
Due Period (i) recompute all amounts in the related Accounting Report and
Distribution Date Statement to reflect the actual amount of distributions
received during the last month of such Due Period, (ii) revise such Accounting
Report and Distribution Date Statement accordingly, and (iii) deliver such
revised Accounting Report and Distribution Date Statement to the Depositor.
Upon such delivery, such revised Accounting Report and Distribution Date
Statement shall be controlling for all purposes under this Agreement.
Each Distribution Date Statement shall be delivered by the Trustee to
the firm of Independent Accountants of recognized national reputation appointed
by the Depositor. If such firm of Independent Accountants sets forth any
exceptions to the Distribution Date Statement in its certificate or opinion
delivered to the Trustee, the Distribution Date Statement shall be deemed to
have been amended to reflect such exceptions and such amended Distribution Date
Statement shall be controlling for all purposes under this Agreement.
(d) Special Distribution Statement. For Multi-Class Certificates that
------------------------------
do not provide for monthly distributions, the Trustee shall render to the
Depositor and make available to Holders of Certificates a Special Distribution
Statement by the Special Distribution Determination Date. In such Special
Distribution Statement the Trustee shall:
(i) Set forth the amount in the Certificate Accounts as of the
most recent Special Distribution Determination Date;
(ii) Determine and set forth the amounts to be credited to the
Certificate Account from such Special Distribution Determination Date to
the next succeeding Distribution Date as a result of anticipated payments
in respect of the Mortgage Assets for all Assumed Deposit Dates in such
period (based on the published information regarding such payments, if
available, or scheduled payments), deposits into the Certificate Account
from the GPM Fund Buy-Down Fund and Reserve Fund during such period, and
projected earnings during such period from the investment of the funds in
the Certificate Account, GPM Fund, Buy-Down Fund and Reserve Fund (based on
the applicable Assumed Reinvestment Rate or on Actual and available
reinvestment rates if such investment is made at such rates immediately
following the calculation of such projected earnings);
(iii) Determine and set forth the Multi-Class Certificate
Distribution Amount on all Certificates Outstanding from the prior
Distribution Date to the next
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succeeding Distribution Date, net of any distributions in respect of the
Outstanding Stated Principal Balance of the Multi-Class Certificates or
interest thereof;
(iv) State the amount of distributions in respect of reduction of
Outstanding Stated Principal Balance of the Multi-Class Certificates to be
distributed on such Special Distribution Date (which amount shall not
exceed the portion of the principal distribution received with respect to
the related Mortgage Assets that would otherwise be includable in the
Stated Principal Distribution Amount for the following Distribution Date);
(v) State the amount of distributions in respect of interest to
be distributed on such Special Distribution Date in respect of the
Outstanding Stated Principal Balance of Multi-Class Certificates to be
distributed; and
(vi) State the amounts included in such statement pursuant to
clauses (iv) and (v) above expressed in each case per Single Certificate,
to be distributed on such Special Distribution Date.
If the amount set forth in Clause (iii) above exceeds the aggregate of
the amounts set forth pursuant to clauses (i) and (ii) above, the Trustee shall
be required to make a Special Distribution from the Certificate Account to the
Multi-Class Certificates in an amount equal to the Special Distribution Amount
as of the most recent Special Distribution Determination Date. If the aggregate
of the amounts set forth pursuant to clauses (i) and (ii) above equals or
exceeds the amount set forth in clause (iii) above, no Special Distribution is
required. The Special Distribution Amount shall equal the minimum amount of
funds in the Certificate Account that would have to be distributed to make the
excess of the amount set forth in clause (iii) above, over the amount set forth
in clauses (i) and (ii) above, equal zero.
In each month in which a Special Distribution Date Statement is
required to be prepared, on the last date in such month on which notice of a
special redemption may be mailed, the Trustee shall verify that the amount of
the current month's distributions on Mortgage Assets that were assumed by it to
be due on such Mortgage Assets in connection with the preparation of the related
Special Distribution Date Statement are consistent with the amounts of
distributions received, or reported to it as being due, in that month, in each
case based upon receipts and information received by the Trustee as of the close
of business on the immediately preceding Business Day. If there is any
discrepancy between the assumed distributions used in preparing such Special
Distribution Date Statement and the receipts and information received by the
Trustee received as of such time, the Trustee shall revise its Special
Distribution Date Statement
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accordingly and deliver it to the Depositor. Such revised Special Distribution
Date Statement shall supersede the previous Special Distribution Date Statement
and be controlling for all purposes under this Indenture.
Each Special Distribution Date Statement shall be delivered by the
Trustee to the firm of Independent Accountants of recognized national reputation
appointed by the Depositor. If such firm sets forth any exceptions to the
Distribution Date Statement in its certificate or opinion, delivered to the
Trustee, the Special Distribution Date Statement shall be deemed to have been
amended to reflect such exceptions and such amended Special Distribution Date
Statement shall be deemed to be controlling for all purposes of this Agreement.
SECTION 17.08 Trust Estate.
------------
The Trustee may, and when required by the provisions of this Agreement
shall, execute instruments to release property held by it under this Agreement,
or convey the Trustee's interest in the same, in a manner and under
circumstances which are not inconsistent with the provisions of this Agreement.
No party relying upon an instrument executed by the Trustee as provided in this
Article XVII shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
monies.
-70-
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.01 Standard Terms.
--------------
The Standard Terms attached hereto are hereby incorporated herein by
reference and hereby form 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 18.02 Ratification of Standards 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 18.03 Amendment.
---------
In addition to the amendments permitted by Section 9.01, 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, as
to each Class of Multi-Class Certificates, Outstanding Stated Principal Balances
aggregating not less than 66% of the Aggregate Outstanding Stated Principal
Balance of such Class and, as to Residual Certificates, Percentage Interests
aggregating not less than 66% 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 any Certificates
under this Agreement; provided, however, that no such amendment shall, without
the consent of the Holder of each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
distribution on a Certificate required to be made hereunder or reduce the
Outstanding Stated Principal Balance of or the Interest Rate on a Multi-
Class Certificate or the Termination Price with respect thereto or change
any place of payment where, or the coin or currency in which, distributions
on any Certificate are payable;
(2) modify any of the provisions of this Section 18.03, except to
increase any percentage specified therein or to provide that certain other
provisions of this Agreement cannot be modified without the consent of the
Holder of each Outstanding Certificate affected thereby;
-71-
<PAGE>
(3) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(4) permit the creation of any lien with respect to any party on the
Trust Fund;
(5) modify any of the provisions of this Agreement in such manner as
to affect the calculation of the Multi-Class Distribution Amount for any
Distribution Date (including the calculation of any of the individual
components of such Multi-Class Distribution Amount);
(6) modify any of the provisions of Article XVIII in such a way to
permit an earlier retirement of the Certificates and termination of the
Trust Fund and this Agreement pursuant to said Article.
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 18.04 Counterparts.
------------
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 be one and the same instrument.
SECTION 18.05 Governing Law.
-------------
This Reference 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 of the
Certificateholders shall be determined in accordance with such laws.
SECTION 18.06 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Reference 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 Reference
-72-
<PAGE>
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.
SECTION 18.07 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.
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused this Agreement to be duly executed 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.
[Seal] ASSET BACKED SECURITIES
CORPORATION,
as Depositor
Attest:
By:
---------------------- -----------------------
Authorized Officer Name:
Title:
[Seal] [NAME OF MASTER SERVICER]
as Master Servicer
Attest:
By:
---------------------- -----------------------
Authorized Officer Name:
Title:
[Seal] [NAME OF TRUSTEE]
as Trustee
Attest:
By:
---------------------- -----------------------
Authorized Officer Name:
Title:
-73-
<PAGE>
STATE OF _________________ )
) ss.
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ________________ and
_________________, known to me to be the persons and officers whose names are
subscribed to the foregoing instrument and acknowledged to me that the same was
the act of the said ASSET BACKED SECURITIES CORPORATION, a Delaware corporation,
and that they executed the same as the act of said corporation for the purposes
and consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of ____________,
199_.
----------------------------------------
Notary Public in and for the
State of
[SEAL]
My commission expires:
- ---------------------
-74-
<PAGE>
STATE OF __________________ )
) ss.
COUNTY OF _________________ )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _____________ and
____________, known to me to be the persons and officers whose names are
subscribed to the foregoing instrument and acknowledged to me that the same was
the act of the said [NAME OF TRUSTEE], a ________________ corporation, as
trustee, and that they executed the same as the act of said corporation for the
purposes and consideration therein expressed, and in the capacities therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of ____________,
199_.
----------------------------------------
Notary Public in and for the
State of
[SEAL]
My commission expires:
- ---------------------
-75-
<PAGE>
STATE OF __________________ )
) ss.
COUNTY OF _________________ )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _____________ and
____________, known to me to be the persons and officers whose names are
subscribed to the foregoing instrument and acknowledged to me that the same was
the act of the said [NAME OF MASTER SERVICER], a _______________ corporation,
and that they executed the same as the act of said corporation for the purposes
and consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of ____________,
199_.
----------------------------------------
Notary Public in and for the
State of
[SEAL]
My commission expires:
- ---------------------
-76-
<PAGE>
Exhibit A
(a) The form of the face of any Variable Rate Certificate is as
follows:
PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING STATED PRINCIPAL BALANCE
OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF.
Conduit Mortgage Pass-Through
Certificates [Class A], Series __
FINAL SCHEDULED DISTRIBUTION DATE: ____________,
ACCRUAL DATE: ____________, ____
[INSERT TO COME]
$________ No. ___________
This Certificate evidences an undivided interest in a portion of the
distributions receivable with respect to 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], which pool was created and sold by
ASSET BACKED SECURITIES CORPORATION
This Certificate does not represent an obligation or interest in Asset
Backed Securities Corporation or the Trustee referred to below or any of their
affiliates. This certificate is not guaranteed or insured by any governmental
agency or instrumentality.
This Certificate certifies that ________________________ is the
registered owner of an undivided interest in a portion of the distributions
receivable with respect to 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]
(collectively, the "Trust Fund"), which pool was created and sold by Asset
Backed Securities Corporation (hereinafter called the
A-1
<PAGE>
"Depositor", which term includes any successor entity under the Agreement
referred to below). The Trust Fund was created pursuant to the Standard terms
and Provisions of Pooling and Servicing (the "Standard Terms") as amended and
Supplemented by a Reference Pooling and Servicing Agreement dated as of
_______________, ____, 199_ (the "Reference Agreement" and, together with the
Standard Terms, the Agreement") between the Depositor, _________, as master
servicer ("the Master Servicer"), and ________________, as trustee (the
"Trustee", which term includes any successor trustee under the Pooling and
Servicing Agreement). To the extent not defined herein, the capitalized terms
used herein have the meanings assigned in the Pooling and Servicing Agreement.
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which reference is hereby
made for a statement of the respective rights thereunder of the Depositor,
Master Servicer, the Trustee and the Holders of all Certificates issued
thereunder and to which Agreement the holder of this Certificate by virtue of
the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, the Trustee is required to
distribute to the registered Holder of this Certificate, but only out of the
distributions received with respect to the Trust Fund and only to the extent
such distributions are adequate for such purpose, the Stated Principal Balance
of ____________ - _________ Dollars in [quarterly] installments on __________,
___________, ____________ and _________________ (the "Distribution Dates") in
each year, commencing no later than the Final Scheduled Distribution Date of any
Class of Multi-Class Certificates having any earlier Final Scheduled
Distribution Date and ending on or before ___________, (the "Final Scheduled
Distribution Date") of this Certificate and interest (computed on the basis of a
360-day year of twelve 30-day months) [monthly] [quarterly] at a variable rate
determined in the manner described on the reverse hereof, in an amount equal to
the interest accrued on the outstanding principal balance of this Certificate
during the [three]-month period ending [one month prior to] [on] each such
Distribution Date [each such period being hereinafter referred to as a "Variable
Rate Interest Accrual Period") or, in the case of the first Distribution Date,
in an amount equal to the interest accrued from the Accrual Date set forth above
to _____________, 199_. [Interest accrued on this Certificate in any Variable
Rate Interest Accrual Period will be calculated on the assumption that any
distribution of principal made with respect to this Certificate on a
Distribution Date that occurs during such Variable Rate Interest Accrual Period
was instead made one month prior to such Distribution Date.] Installments of
the Stated Principal Balance of this Certificate will be distributable in the
amounts and on the dates described on the reverse hereof.
A-2
<PAGE>
Distributions in respect of the Stated Principal Balance of and
interest on this Certificate 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 distributions made by the Trustee with respect to
this Certificate shall be applied first to interest accrued on this Certificate
as provided above and then to the reduction of the Outstanding Stated Principal
Balance of this Certificate. Except as provided on the reverse hereof, any
installment of principal or interest that is not distributed when and as due
shall accrue interest at the rate at which interest accrues on the principal
balance of this Certificate from the date due to the date of distribution
thereof.
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 hereof has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
_________________________
as Trustee
[SEAL]
By_______________________
Authorized Officer
(b) The form of the face of any Multi-Class Certificate having a
fixed rate of interest is as follows:
PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING STATED PRINCIPAL BALANCE OF THIS
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
A-3
<PAGE>
Conduit Mortgage Pass-through
Certificates, [Class A], Series ____
FINAL SCHEDULED DISTRIBUTION DATE:
________________, _____
ACCRUAL DATE: ________________, _____
$________ No. ___________
This Certificate evidences an undivided interest in a portion of the
distributions receivable with respect to 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], which pool was sold by
ASSET BACKED SECURITIES CORPORATION
This Certificate does not represent an obligation or interest in Asset
Backed Securities Corporation or the Trustee referred to below or any of their
affiliates. This Certificate is not guaranteed or insured by any governmental
agency or instrumentality.
This Certificate certifies that ________________________________ is
the registered owner of an undivided interest in a portion of the distributions
receivable with respect to 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]
(collectively, the "Trust Fund"), which pool was created and sold by Asset
Backed Securities Corporation (hereinafter called the "Depositor", which term
includes any successor entity under the Agreement referred to below). The Trust
was created pursuant to the Standard Terms and Provisions of Pooling and
Servicing (the "Standard Terms") as amended and supplemented by a Reference
Pooling and Servicing Agreement dated as of ________________, ___ 199_ (the
"Reference Agreement" and, together with the Standard Terms, the "Agreement")
between the Depositor, _____________, as master servicer (the "Master Servicer")
and ______________, as trustee (the "Trustee", which term includes any successor
trustee under the Agreement). To the extent not defined herein, the
A-4
<PAGE>
capitalized terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which reference is hereby made for a statement
of the respective rights thereunder of the Depositor, Master Servicer, the
Trustee and the Holders of all Certificates issued thereunder and to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, the Trustee is required to
distribute to the registered Holder of this Certificate, but only out of the
distributions received with respect to the Trust Fund and only to the extent
such distributions are adequate for such purpose, the Stated Principal Balance
of __________ Dollars in [quarterly] installments on __________, ___________,
____________ and _________________ (the "Distribution Dates") in each year,
commencing no later than the Final Scheduled Distribution Date of any Class of
Multi-Class Certificates having any earlier Final Scheduled Distribution Date
and ending on or before ____________, _____ (the "Final Scheduled Distribution
Date") of this Certificate and interest (computed on the basis of a 360-day year
of twelve 30-day months) [quarterly] [monthly] on such Distribution Dates at the
rate of ____ percent (____%) per annum, in an amount equal to the interest
accrued on the Outstanding Stated Principal Balance of this Certificate during
the [three]-month period ending [one month prior to] [on] each such Distribution
Date (each such period being hereinafter referred to as an "Interest Accrual
Period") or, in the case of the first Distribution Date, in an amount equal to
the interest accrued from the Accrual Date set forth above to __________ ____,
199_. [Interest accrued on this Certificate in any Interest Accrual Period will
be calculated on the assumption that any distribution in respect of the Stated
Principal Balance of this Certificate on a Distribution Date that occurs during
such Interest Accrual Period was instead made one month prior to such
Distribution Date.] Installments of principal of this Certificate will be
distributable in the amounts and on the dates described on the reverse hereof.
All distributions made by the Trustee with respect to this Certificate shall be
applied first to interest accrued on this Certificate as provided above and then
to the reduction of the Outstanding Stated Principal Balance of this
Certificate. Except as provided on the reverse hereof, any installment of
principal or interest that is not distributed when and as due shall accrue
interest at the rate at which interest accrues on the principal balance of this
Certificate from the date due to the date of distribution thereof.
Distributions in respect of the Stated Principal Balance of and
interest on this Certificate 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.
A-5
<PAGE>
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 hereof has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
_______________________
as Trustee
[SEAL]
By_______________________
Authorized Officer
(c) The form of the face of any Multi-Class Certificate that is a
Compound Interest Certificate is as follows:
INTEREST DISTRIBUTIONS ON THIS CERTIFICATE MAY NOT BE DISTRIBUTABLE
FOR A CONSIDERABLE PERIOD. UNTIL DISTRIBUTABLE, SUCH DISTRIBUTIONS
ARE ADDED TO THE STATED PRINCIPAL BALANCE OF THIS CERTIFICATE.
THEREAFTER, PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE IN
INSTALLMENTS. ACCORDINGLY, THE OUTSTANDING STATED PRINCIPAL BALANCE
OF THIS CERTIFICATE AT ANY TIME MAY BE SIGNIFICANTLY DIFFERENT FROM
THE AMOUNT SHOWN ON THE FACE HEREOF.
Conduit Mortgage Pass-through
Certificates, [Class A], Series __
A-6
<PAGE>
FINAL SCHEDULED DISTRIBUTION DATE:
____________, ____
ACCRUAL DATE: ____________, ____
[INSERT TO COME]
$________ No. ___________
This Certificate evidences an undivided interest in a portion of the
distributions receivable with respect to 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], which pool was created and sold by
ASSET BACKED SECURITIES CORPORATION
This Certificate does not represent an obligation or interest in Asset
Backed Securities Corporation or the Trustee referred to below or any of their
affiliates. This Certificate is not guaranteed or insured by any governmental
agency or instrumentality.
This Certificate certifies that ________________________________ is
the registered owner of an undivided interest in a portion of the distributions
receivable with respect to 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]
(collectively, the "Trust Fund"), which pool was created and sold by Asset
Backed Securities Corporation (hereinafter called the "Depositor", which term
includes any successor entity under the Agreement referred to below). The Trust
Fund was created pursuant to the Standard Terms and Provisions of Pooling and
Servicing (the "Standard Terms") as amended and supplemented by a Reference
Pooling and Servicing Agreement dated as of ________________, ____ 199_ (the
"Reference Agreement" and, together with the Standard Terms, the "Agreement")
between the Depositor, _____________, as master servicer (the "Master
Servicer"), and ____________, as trustee (the "Trustee", which term includes any
successor trustee under the Agreement). To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Pooling and
Servicing Agreement. This Certificate is issued
A-7
<PAGE>
under and is subject to the terms, provisions and conditions of the Agreement,
to which reference is hereby made for a statement of the respective rights
thereunder of the Depositor, the Master Servicer, the Trustee and the Holders of
all Certificates issued thereunder and to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder
is bound.
Pursuant to the terms of the Agreement, the Trustee is required to
distribute to the registered Holder of this Certificate, but only out of the
distributions received with respect to the Trust Fund and only to the extent
such distributions are adequate for such purpose, the Stated Principal Balance
of __________ Dollars in [quarterly] installments on __________, ___________,
____________ and _________________ (the "Distribution Dates") in each year,
commencing no later than the Final Scheduled Distribution Date of any Class of
Multi-Class Certificates having any earlier Final Scheduled Distribution Date
and ending on or before ____________, _____ (the "Final Scheduled Distribution
Date") of this Certificate and interest (computed on the basis of a 360-day year
of twelve 30-day months) [quarterly] [monthly] on such Distribution Dates at the
rate of ____ percent (____%) per annum, in an amount equal to the interest
accrued on the outstanding principal balance of this Certificate (including in
such unpaid principal balance the amount, if any, of interest accrued but not
distributed on this Certificate and added to the Stated Principal Balance hereof
as described below) during the [three]-month period ending [one month prior to]
[on] each such Distribution Date (each such period being hereinafter referred to
as an "Accrual Period") or, in the case of the first Distribution Date, in an
amount equal to the interest accrued from the Accrual Date set forth above to
__________ ____, 199_.
Prior to the Distribution Date on which all Classes of Multi-Class
Certificates having an earlier Final Scheduled Distribution Date have been paid
in full (the "Accretion Termination Date") for this Certificate, interest on
this Certificate shall not be distributable to the holder of this Certificate
but shall instead accrue from the Interest Accrual Date at the rate stated
above. On each Distribution Date prior to the Accretion Termination Date, an
amount equal to the interest accrued on the Outstanding Stated Principal Balance
of this Certificate (including in such Outstanding Stated Principal Balance any
interest accrued but not distributable on this Certificate) during the
immediately preceding Interest Accrual Period shall be added to the Outstanding
Stated Principal Balance of this Certificate. [Interest accrued on this
Certificate in any Interest Accrual Period will be calculated on the assumption
that any distribution in respect of the Stated Principal Balance made with
respect to this Certificate any accrued interest added to the outstanding
principal balance of this Certificate on a Distribution Date that occurs during
such Interest Accrual Period
A-8
<PAGE>
was instead made and/or added one month prior to such Distribution Date.]
Installments of the Stated Principal Balance of this Certificate will
be distributable in the amounts and on the dates described on the reverse
hereof.
Distributions in respect of the Stated Principal Balance of and
interest on this Certificate 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 distributions made by the Trustee with respect
to this Certificate shall be applied first to interest accrued on this
Certificate as provided above and then to the reduction of the Outstanding
Stated Principal Balance of this Certificate. Except as provided on the reverse
hereof, any installment of principal or interest that is not distributed when
and as due shall accrue interest at the rate at which interest accrues on the
principal balance of this Certificate from the date due to the date of
distribution thereof.
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 hereof has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated:
-------------------------
as Trustee
[SEAL]
By_______________________
Authorized Officer
(d) The form of the reverse of all Multi-Class Certificates which do
not include any Variable Rate Certificate is as follows:
A-9
<PAGE>
This Certificate is one of a duly authorized issue of Certificates
designated as Conduit Mortgage Pass-through Certificates, Series ___ (herein
collectively called the "Multi-Class Certificates"), issued in ______ Classes
(Classes ___, ___, ____, and ___) under the Agreement.
The aggregate amount of distributions in respect of the Stated
Principal Balance of the Multi-Class Certificates on each Distribution Date is
equal to the lesser of (i) funds remaining in the Certificate Account on such
Distribution Date after the subtraction of an amount equal to the amount
distributable as interest on all classes of Multi-Class Certificates on such
Distribution Date (the "Interest Distribution Amounts") and (ii) the Multi-Class
Certificate Distribution Amount with respect to such Distribution Date. Such
distributions are distributable [pro rata amount the Multi-Class Certificates of
all Classes.] [_____% to the Certificates of Class ____ and ____% to the Multi-
Class Certificates of Class ____.] [The amount distributable on the
Certificates on any Distribution Date is distributable first on the Multi-Class
Certificates of Class ____, until distributions in respect of the entire Stated
Principal Balance of such Class ____ Certificates have been made. On the Stated
Distribution Date on which the entire Stated Principal Balance of the Class ____
Certificates has been retired, any remaining amounts required to be distributed
on such Distribution Date in respect of such Stated Principal Balance of the
Multi-Class Certificates shall be distributed on the Class ____ Certificates.
Thereafter, all amounts required to be distributed on each Distribution Date in
respect of such Stated Principal Balance of the Multi-Class Certificates shall
continue to be distributed as principal of the Class ____ Certificates until the
entire Stated Principal Balance thereof has been distributed. Distributions in
respect of the Stated Principal Balance of the remaining Classes of Certificates
shall be made in a similar manner, with the required Stated Principal
Distribution Amount on each Distribution Date always being applied first to the
reduction of the Aggregate Outstanding Stated Principal Balance of the then
Outstanding Class of the Multi-Class Certificates having the earliest Final
Scheduled Distribution Date of all Multi-Class Certificates then Outstanding.]
Distributions in respect of the Stated Principal Balance of a Class of Multi-
Class Certificates shall in all cases be made pro rata among all Outstanding
Multi-Class Certificates of such Class, without preference or priority of any
kind.
Notwithstanding the foregoing, the Agreement provides that a
Deficiency Event thereunder will occur, if (i) there are insufficient amounts in
the Certificate Account on any Distribution Date to distribute to Holders of
Multi-Class Certificates all Interest Distribution Amounts and the Principal
Distribution Amount, (ii) the entire Stated Principal Balance of each Class of
Multi-Class Certificates shall not have been
A-10
<PAGE>
completely distributed on or before the Final Scheduled Distribution Date for
such Class or (iii) with respect to each Class of Multi-Class Certificates that
is still Outstanding on the Final Scheduled Distribution Date of any Class of
Multi-Class Certificates having an earlier Final Scheduled Distribution Date, an
installment of principal shall not have been distributed by such date.
Distribution of the then remaining undistributed Stated Principal
Balance of this Multi-Class Certificate on its Final Scheduled Distribution Date
or on such earlier date as payments received with respect to the assets included
in the Trust Fund are required to be distributed with respect to the then
remaining Stated Principal Balance of this Multi-Class Certificate, or payment
of the Termination Price payable on the Optional Termination Date, shall be made
only upon presentation of this Certificate to the office or agency of the
Trustee maintained for such purpose. Distributions in respect of interest on
this Certificate on each Distribution Date, together with any installment of the
Stated Principal Balance of this Certificate on such Date, and any Special
Distribution required to be made on this Certificate on any Special Distribution
Date to the extent distribution is not made in full of the Stated Principal
Balance of this Certificate, shall be made by check mailed to the Person whose
name appears as the registered Holder of this Certificate (or one or more
predecessor Certificates) on the Certificate Register as of the Record Date
preceding such Distribution Date or such Special Distribution Date.
Checks for amounts that include distributions in respect of the Stated
Principal Balance of this Certificate shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Certificate Register
as of the applicable Record Date without requiring that this Certificate be
submitted for notation of payment and checks returned undelivered will be held
for payment to the Person entitled thereto, subject to the terms of the
Agreement, at the office or agency in the United States of America designated
for such purpose pursuant to the Agreement. Any reduction in the Stated
Principal Balance of this Certificate (or any one or more predecessor
Certificates) effected by any distributions made on any Distribution Date,
Special Distribution Date or Deficiency Distribution Date shall be binding upon
all Holders of this Certificate and of any Multi-Class Certificate issued upon
the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not noted hereon.
If funds are expected to be available, as provided in the Agreement,
to make a distribution in full of the then remaining undistributed Stated
Principal Balance of this Certificate on a Distribution date or Special
Distribution Date that is prior to the Final Scheduled Distribution Date, then
the
A-11
<PAGE>
Trustee will notify the Person who was the registered Holder hereof on the ____
day of the month [prior to the month] in which such Distribution Date or Special
Distribution Date occurs, by notice mailed no later than the ____ day of such
month, and the amount then distributable shall, if sufficient funds therefor are
available, be distributable only upon presentation of this Certificate to the
office or agency maintained for such purpose.
Any portion of any installment in respect of the Stated Principal
Balance of or interest on this Certificate that was distributable but was not
distributed or duly provided for on a Distribution Date shall forthwith cease to
be payable to the Person who was the registered Holder of this Certificate on
the applicable Record Date, and shall be distributed, in whole or in part, to
the extent funds are available for such payment, on each Deficiency Distribution
Date thereafter until all such overdue amounts are paid or duly provided for, to
the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered on the Record Date applicable to each such
Deficiency Distribution Date or at any other time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Agreement.
If a Deficiency Event, as defined in the Agreement and as described
above, shall occur and be continuing, the Agreement provides that, to the extent
distributions are being made as described in the penultimate sentence of this
paragraph, the Holders of Multi-Class Certificates aggregating not less than 50%
of the Aggregate Outstanding Stated Principal Balance of each Class thereof may
direct the Trustee to see the Trust Fund in the manner and subject to the
conditions described in the Agreement. In such event, the net proceeds of such
sale would be distributed as a final distribution on the Multi-Class
Certificates and Holders thereof may receive less than, but in no event more
than, the undistributed Stated Principal Balance thereof and undistributed
Interest thereon to the date [one more prior to the date] of such final
distribution. The Agreement also provides that, notwithstanding the occurrence
of a Deficiency Event, under certain circumstances specified in the Agreement,
all amounts collected as proceeds of the Trust Fund or otherwise shall continue
to be applied to monthly distributions in respect of the Stated Principal
Balance of and interest on the Multi-Class Certificates in the same order of
priority as if such Deficiency Event had not occurred. In all other
circumstances, following the occurrence of a Deficiency Event, all amounts
collected as proceeds of the Trust Fund or otherwise shall be distributed
monthly pro rata among all Multi-Class Certificates, without preference or
priority, first as distributions of interest and then as distributions in
reduction of such Stated Principal Balance. In such event, interest on the then
Outstanding Stated
A-12
<PAGE>
Principal Balance of this Certificate shall accrue at the Highest Interest Rate.
As provided in the Agreement and only under special circumstances
specified therein, the principal of the Multi-Class Certificates is subject to
being fully paid pursuant to Special Distribution at 100% of the Outstanding
Stated Principal Balance thereof to be so retired by such Special Distribution
(including interest accrued but not distributed on a Class of Compound Interest
Certificates and added to the Stated Principal Balance thereof) together with
undistributed interest distributions on such Principal Balance to be so retired
from the end of the preceding Interest Accrual Period (or the Accrual Date if no
Distribution Date has yet occurred) to the date [one month prior to the date] of
such Special Distribution. Any such Special Distribution with respect to the
Multi-Class Certificates will be made on the applicable Special Distribution
Date and in the manner hereinabove set forth. As provided in the Agreement, all
Special Distributions will be in the same proportions and on the same priorities
as hereinabove set forth for distributions of principal on a Distribution Date.
If provision is made for a Special Distribution in respect of the Stated
Principal Balance of this Certificate in accordance with the Agreement, the
portion of the Stated Principal Balance of this Certificate retired in such
Special Distribution shall thereupon cease to accrue interest from and after the
date [one month prior to the date] set for such distribution.
The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon distribution to Certificate holders of all amounts
held by or on behalf of the Trustee and required to be distributed to them
pursuant to the Agreement following the later of (i) the maturity or other
liquidation of the last Mortgage Certificate subject thereto, and (ii) the
repurchase by the Depositor from the Trust Fund of all remaining Mortgage
Certificates. The Agreement permits, but does not require, the Depositor to
repurchase all remaining Mortgage Certificates at a price determined as provided
in the Agreement. The exercise of such right will effect Optional Termination,
but the Seller's right to repurchase such remaining Mortgage Certificates may
not be exercised prior to (a) the time that the aggregate Mortgage Asset Amount
is less than ___% of the Aggregate Mortgage Asset Amount at the Closing Date or
(b) ________________ ____, 20__. In the event of such a Termination, the amount
distributable to the Holder of a Multi-Class Certificate will be ___% of the
Stated Principal Balance thereof together with accrued interest to [the date one
month prior to] the Distribution Date on which the proceeds of such repurchase
are required to be distributed.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate
A-13
<PAGE>
may be registered on the Certificate Register, upon surrender of this
Certificate for registration or transfer at the office or agency of the Trustee
designated for that purpose pursuant to the Agreement, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Certificate Registrar duly authorized in writing, and thereupon one or more new
Multi-Class Certificates of the same Class, of authorized denominations and in
the same aggregate initial principal balance, will be issued to the designated
transferee or transferees.
Prior to the due presentment for registration of transfer of this
Certificate, the Trustee, the Certificate Registrar and any agent of the Trustee
or the Certificate Registrar may treat the Person in whose name this Certificate
is registered (i) on any Record Date, for purposes of making distributions, and
(ii) on any other date for any other purpose, as the owner hereof, whether or
not any distribution required to be made on this Certificate shall be overdue,
and neither the Trustee, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Trustee and the Seller and the rights of the Holders of the Certificates under
the Agreement at any time by the Trustee with the consent of the Holders of
Certificates of each Class, voting as a Class, evidencing, in the aggregate, not
less than 66 2/3% of the Voting Rights of such Class and, as to Residual
Certificates, Percentage Interests aggregating not less than 66 2/3%. Any such
consent by the Holder, at the time of the giving thereof, of this Certificate
(or any one or more predecessor Certificates) shall be conclusive and binding
upon such Holder and upon all future Holders of this Certificate and of any
Multi-Class Certificate issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Certificate. The Agreement also permits the amendment
or waiver of certain terms and conditions set forth in the Agreement without the
consent of Holders of any Multi-Class Certificates issued thereunder.
The Multi-Class Certificates are issuable only in registered form in
denominations as provided in the Agreement and subject to certain limitations
therein set forth. The Multi-Class Certificates are exchangeable for a like
Aggregate Initial Stated Principal Balance of Multi-Class Certificates of the
same Class of different authorized denominations, as requested by the Holder
surrendering same.
The Trustee has executed this Certificate solely as trustee under the
Agreement and the Trustee shall be liable
A-14
<PAGE>
hereunder only in respect of the assets of the Trust Fund created by such
Agreement.
The remedies of the Holder hereof as provided herein, or in the
Agreement, shall be cumulative and concurrent but may be pursued solely against
the assets of the Trust Fund. No failure on the part of the Holder in
exercising any right or remedy hereunder shall operate as waiver or release
thereof, nor shall any single or partial exercise of any such right or remedy
preclude any other further exercise thereof or the exercise of any other right
or remedy hereunder.
As provided in the Agreement, this Certificate and the Agreement shall
be construed in accordance with, and governed by, the laws of the State of [New
York] [Massachusetts] applicable to agreements made and to be performed therein.
(e) The form of the reverse of any Variable Rate Certificate is
as follows:
This Certificate is one of a duly authorized issue of Certificates
designated as Conduit Mortgage Pass-Through Certificates, Series __ )herein
collectively called the "Multi-Class Certificates") issued in ____________
Classes (Classes ___, ____, ___ and ___) under the Agreement. Distributions in
respect of interest on the Class ___, Class ___ and Class ___ Multi-Class
Certificates will be made at the fixed rates per annum specified on the faces
thereof.
During the initial Interest Accrual Period, the Certificate Interest
Rate of the Class ___ Multi-Class Certificates will be ___% per annum. During
such subsequent Variable Rate Interest Accrual Period, the Class ___ Multi-Class
Certificates will accrue interest, subject to the Variable Interest Rate Cap of
___% per annum, at a rate per annum determined for such Variable Rate Interest
Accrual Period by the Trustee in the manner described below.
On ________________, 199_, and thereafter on the ______ business day
preceding each Distribution Date so long as the Class ___ Multi-Class
Certificates are still outstanding (each such date a "Variable Interest
Determination Date"), the Trustee will request each of _________________,
_________________, _________________, and _________________ or any duly
appointed substitute reference bank (the "Reference Banks"), to inform the
Trustee of the lowest quotation offered by its principal London office for
making immediate [three-month] United States dollar deposits in leading banks in
the London interbank market, as of 11:00 a.m. (London time) on such Variable
Rate Interest Determination Date. (As used herein, "business day" means a day
on which banks are open for dealing in foreign currency and exchange in London
and New York.)
A-15
<PAGE>
The establishment of the Interest Rate by the Trustee and the
Trustee's subsequent calculation of the Interest Rate applicable to Variable
Rate Certificates for the relevant Variable Rate Interest Accrual Period shall
(in the absence of manifest error) be final and binding. The Trustee shall
cause each Interest Rate established as aforesaid for each Interest Accrual
Period to be published promptly after the determination thereof in a newspaper
of general circulation in New York City.
[The remainder of the form of the reverse of a Variable Rate
Certificate shall be as set forth in subsection (d) hereof beginning with the
second paragraph thereof]
(f) The form of any Residual Certificate is as follows:
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE MULTI-
CLASS CERTIFICATES DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
[THE CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 1.05 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.]
Conduit Mortgage Pass-Through
Certificates, [Class A], Series
Percentage Interest: __%
This Certificate evidences a percentage interest in any distributions
allocable to the Residual Certificates with respect to a pool of [conventional]
[fixed rate] [mortgage loans and] [mortgage participation certificates,
evidencing participation interests in such mortgage loans and meeting the
requirement 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], which pool was created and sold by
ASSET BACKED SECURITIES CORPORATION
This Certificate does not represent an obligation of or interest in
Asset Backed Securities Corporation or the Trustee refereed to below or any of
their affiliates. This Certificate is not guaranteed or insured by any
governmental agency or instrumentality.
A-16
<PAGE>
This Certificate certifies that______________________________________
______ is the registered owner of the Percentage Interest evidenced by this
Certificate as set forth above in a portion of the distributions receivable
with respect to 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]
(collectively, the "Trust Fund"), which pool was created and sold by Asset
Backed Securities Corporation (hereinafter called the "Depositor", which term
includes any successor entity under the Agreement referred to below). The
Trust Fund was created pursuant to Standard Terms and Provisions of Pooling and
Servicing (the "Standard Terms") as amended and supplemented by a Reference
Pooling and Servicing Agreement dated as of __________, 199_ (the "Reference
Agreement" and together with the Standard Terms, the "Agreement") between the
Depositor, __________, as master servicer (the "Master Servicer"), and ________
___, as trustee (the "Trustee", which term includes any successor trustee under
the Pooling and Servicing Agreement). To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement.
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement reference is hereby made for a
statement of the respective rights thereunder of the Depositor, the Master
Servicer, the Truster and the Holders of all Certificates issued hereunder and
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Pooling and Servicing Agreement, the
Trustee is required to distribute on the ___ day of [each month] or, if such ___
day is not a Business Day, the Business Day immediately following (the
"Distribution Date"), commencing on ___________, 199_, to the Person in whose
name this Certificate is registered at the close of business on the ___ day (or
if such _____ day is not a Business Day, the Business Day immediately preceding
such _________ day) of the [second] month next preceding the month of such
distribution (the "Record Date"), an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the portion of the
distributions received with respect to the assets in the Trust Fund that are
distributable to holders of Residual Certificates, as provided in the Agreement.
The interests of holders of Residual Certificates in the assets in the Trust
Fund are in all cases subordinate and subject to the prior rights of holders of
Multi-Class Certificates as specified in the Agreement.
A-17
<PAGE>
Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register, unless such Person requests by written
notice to the Trustee that such payments be made thereafter by wire transfer of
immediately available funds to the account specified by such Person. Such wire
transfers shall be made at the expense of such Person. Notwithstanding the
above, the final distribution on this Certificate will be made after due notice
by the Trustee of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency maintained for that
purpose in the City and State of New York.
[No transfer of this Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and any applicable state securities laws or is made in accordance with
said Act and laws. In the event that such a transfer is to be made within three
years from the day of initial issuance of the Certificates pursuant to the
Agreement (i) the Trustee or the Depositor may require an Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor that such transfer is exempt (describing the applicable exemption and
the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, and of any applicable
statute of any state, and (ii) the transferee shall execute an investment letter
in the form described by the Agreement. The holder hereof desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee and the
Depositor against any liability that may result if the transfer is not so exempt
or is not made in accordance with such Federal and state laws.]
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its official seal.
Dated: _________________________
as Trustee
[SEAL] By_______________________
Authorized Officer
A-18
<PAGE>
Exhibit 4.4.2
- --------------------------------------------------------------------------------
FORM OF TRUST AGREEMENT
between
ASSET BACKED SECURITIES CORPORATION,
as Company,
and
[_____________________]
as Owner Trustee
CS FIRST BOSTON AUTO RECEIVABLES
SECURITIES TRUST
199_ - __
Dated as of _________________
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
ARTICLE I
Definitions............................................................................................... 2
-----------
SECTION 1.01. Defined Terms.............................................................................. 2
-------------
SECTION 1.02. Other Definitional Provisions.............................................................. 9
-----------------------------
ARTICLE II
Organization............................................................................................. 10
------------
SECTION 2.01. Name...................................................................................... 10
----
SECTION 2.02. Office.................................................................................... 10
------
SECTION 2.03. Purposes and Powers....................................................................... 10
-------------------
SECTION 2.04. Appointment of Owner Trustee.............................................................. 11
----------------------------
SECTION 2.05. Conveyance of Underlying Securities....................................................... 11
-----------------------------------
SECTION 2.06. Declaration of Trust...................................................................... 12
--------------------
SECTION 2.07. Liability of the Owners................................................................... 12
-----------------------
SECTION 2.08. Title to Trust Property................................................................... 13
-----------------------
SECTION 2.09. Situs of Trust............................................................................ 13
--------------
SECTION 2.10. Representations and Warranties of the Company............................................. 13
---------------------------------------------
SECTION 2.11. Maintenance of the Demand Note............................................................ 14
------------------------------
SECTION 2.12. Federal Income Tax Allocations............................................................ 14
------------------------------
ARTICLE III
Trust Certificates and Transfer of Interests............................................................. 15
--------------------------------------------
SECTION 3.01. Initial Ownership......................................................................... 15
-----------------
SECTION 3.02. The Trust Certificates.................................................................... 15
----------------------
SECTION 3.03. Authentication of Trust Certificates...................................................... 15
------------------------------------
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates............................... 16
-----------------------------------------------------------
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates................................... 16
-------------------------------------------------------
SECTION 3.06. Persons Deemed Owners..................................................................... 17
---------------------
SECTION 3.07. Access to List of Certificateholders' Names and Addresses................................. 17
---------------------------------------------------------
SECTION 3.08. Maintenance of Office or Agency........................................................... 17
-------------------------------
SECTION 3.09. Appointment of Paying Agent............................................................... 17
---------------------------
SECTION 3.10. Ownership by Company of Trust Certificates................................................ 18
------------------------------------------
SECTION 3.11. Book-Entry Trust Certificates............................................................. 18
-----------------------------
SECTION 3.12. Notices to Clearing Agency................................................................ 19
--------------------------
SECTION 3.13. Definitive Trust Certificates............................................................. 19
-----------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
Actions by Owner Trustee. ............................................................................... 20
------------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.................................... 20
------------------------------------------------------
SECTION 4.02. Action by Owners with Respect to Sale of Owner Trust Estate............................... 20
-----------------------------------------------------------
SECTION 4.03. Action by Owners with Respect to Bankruptcy............................................... 20
-------------------------------------------
SECTION 4.04. Restrictions on Owners' Power............................................................. 20
-----------------------------
SECTION 4.05. Majority Control.......................................................................... 21
----------------
ARTICLE V
Collections; Distributions; Certain Duties............................................................... 21
------------------------------------------
SECTION 5.01. Establishment of Trust Accounts........................................................... 21
-------------------------------
SECTION 5.02. Collections............................................................................... 23
-----------
SECTION 5.03. Application of Trust Funds................................................................ 23
--------------------------
SECTION 5.04. Reserve Account........................................................................... 24
---------------
SECTION 5.05. Distributions............................................................................. 25
-------------
SECTION 5.06. Method of Payment......................................................................... 26
-----------------
SECTION 5.07. Accounting and Reports to the Noteholders, Owners, the Internal Revenue Service and Others 26
------------------------------------------------------------------------------------------
SECTION 5.08. Signature on Returns; Tax Matters Partner................................................. 26
-----------------------------------------
SECTION 5.09. Statements to Certificateholders and Noteholders.......................................... 26
------------------------------------------------
ARTICLE VI
Authority and Duties of Owner Trustee.................................................................... 27
-------------------------------------
SECTION 6.01. General Authority......................................................................... 27
-----------------
SECTION 6.02. General Duties............................................................................ 27
--------------
SECTION 6.03. Action upon Instruction................................................................... 27
-----------------------
SECTION 6.04. No Duties Except as Specified in this Agreement or in Instructions........................ 28
------------------------------------------------------------------
SECTION 6.05. No Action Except Under Specified Documents or Instructions................................ 29
----------------------------------------------------------
SECTION 6.06. Restrictions.............................................................................. 29
------------
ARTICLE VII
Concerning the Owner Trustee............................................................................. 29
----------------------------
SECTION 7.01. Acceptance of Trust and Duties............................................................ 29
------------------------------
SECTION 7.02. Furnishing of Documents................................................................... 30
-----------------------
SECTION 7.03. Representations and Warranties............................................................ 30
------------------------------
SECTION 7.04. Reliance; Advice of Counsel............................................................... 31
---------------------------
SECTION 7.05. Not Acting in Individual Capacity......................................................... 31
---------------------------------
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or Underlying Securities.................. 31
------------------------------------------------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes........................................ 32
--------------------------------------------------
ARTICLE VIII
Compensation of Owner Trustee............................................................................ 32
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses......................................................... 32
---------------------------------
SECTION 8.02. Indemnification........................................................................... 32
---------------
SECTION 8.03. Payments to the Owner Trustee............................................................. 33
-----------------------------
ARTICLE IX
Termination of Trust Agreement........................................................................... 33
------------------------------
SECTION 9.01. Termination of Trust Agreement............................................................ 33
------------------------------
SECTION 9.02. Dissolution upon Bankruptcy of the Company................................................ 35
------------------------------------------
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees................................................... 36
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee............................................... 36
------------------------------------------
SECTION 10.02. Resignation or Removal of Owner Trustee.................................................. 36
---------------------------------------
SECTION 10.03. Successor Owner Trustee.................................................................. 36
-----------------------
SECTION 10.04. Merger or Consolidation of Owner Trustee................................................. 37
----------------------------------------
SECTION 10.05. Appointment of CoTrustee or Separate Trustee............................................. 37
--------------------------------------------
ARTICLE XI
Miscellaneous............................................................................................ 38
-------------
SECTION 11.01. Supplements and Amendments............................................................... 38
--------------------------
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners........................................... 40
----------------------------------------------
SECTION 11.03. Limitations on Rights of Others.......................................................... 40
-------------------------------
SECTION 11.04. Notices.................................................................................. 40
-------
SECTION 11.05. Severability............................................................................. 40
------------
SECTION 11.06. Separate Counterparts.................................................................... 40
---------------------
SECTION 11.07. Successors and Assigns................................................................... 40
----------------------
SECTION 11.08. Covenants of the Company................................................................. 41
------------------------
SECTION 11.09. No Petition.............................................................................. 41
-----------
SECTION 11.10. No Recourse.............................................................................. 41
-----------
SECTION 11.11. Headings................................................................................. 41
--------
SECTION 11.12. GOVERNING LAW............................................................................ 41
-------------
SECTION 11.13. Trust Certificate Transfer Restrictions.................................................. 41
---------------------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SCHEDULE I - UNDERLYING SECURITIES...................................................................... S-1
EXHIBIT A - FORM OF TRUST CERTIFICATE................................................................... A-1
EXHIBIT B - CERTIFICATE OF TRUST OF CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-_....................... B-1
EXHIBIT C - FORM OF CERTIFICATE DEPOSITORY AGREEMENT.................................................... C-1
EXHIBIT D - FORM OF STATEMENT........................................................................... D-1
</TABLE>
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
-----------
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.
"Available Amount" means, with respect to any Distribution Date, the amount
----------------
of funds on deposit in the Reserve Account on such Distribution Date before
giving effect to any reduction thereto on such date.
"Basic Documents" shall mean 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 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.
"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 Balance" equals, initially, $___________ and, thereafter,
-------------------
equals such initial Certificate Balance reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"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,
-1-
<PAGE>
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 (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, 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.
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- ---------------------
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" shall mean a Person in whose name a Trust Certificate
-----------------
is registered.
"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
-2-
<PAGE>
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 in full, that portion
of all collections on Underlying Securities allocable to principal received
during the related Collection Period (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 equal 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.
"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.
"Closing Date" means __________________________.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder .
"Collection Account" shall have the meaning assigned to such term in
------------------
Section 5.01.
"Collection Period" means a calendar month.
-----------------
"Company" shall mean Asset Backed Securities Corporation, a Delaware
-------
corporation, and any successor in interest.
-3-
<PAGE>
"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.
"Cutoff Date" means ___________________________.
-----------
"Definitive Trust Certificates" shall have the meaning set forth in Section
-----------------------------
3.11.
"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 Owner Trustee or its nominee or
custodian by physical delivery to the Owner Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Owner 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 Owner
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 Owner 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 Owner 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 Owner 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 Owner 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 Owner 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 Owner 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
-4-
<PAGE>
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 Owner Trustee or its nominee or custodian
of the purchase by the Owner 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
Owner Trustee or its nominee or custodian and indicating that such custodian
holds such Trust Account Property solely as agent for the Owner 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 Owner 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 Owner 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 Owner Trustee or its nominee or custodian.
"Demand Note" shall mean, in the case of _____________, the Demand
-----------
Note dated __________, from [CS First Boston Corporation] to ________________.
"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 _______________.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-----
"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
-5-
<PAGE>
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
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 P-1 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 P-1 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 Notes.
"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.
--------
-6-
<PAGE>
"Final Scheduled Distribution Date" means the _______________ Distribution
---------------------------------
Date.
"Holder" means, with respect to any Certificate, the Person in whose
------
name such Certificate is registered on the Certificate Register, and, with
respect to any Note, the Person in whose name such Note is registered on the
Note Register.
"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.
"Interest Accrual Period" has the meaning set forth in the Indenture.
-----------------------
"Initial Certificate Balance" shall mean $________________.
---------------------------
"Lien" means any security interest, lien, charge, pledge, equity or
----
encumbrance of any kind, other than tax liens, mechanics' liens and any lien
that attach to any Underlying Security by operation of law.
"Moody's" means Moody's Investors Service, Inc., or its successor.
-------
"Note" shall mean any of the Notes issued pursuant to the Indenture.
----
"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.
"Note 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 principal
balance of the Notes (after giving effect to any reductions therein to be made
on the immediately following Distribution Date) divided by the initial principal
balance of the Notes. The Note Pool Factor will be 1.0000000 as of the Closing
Date; thereafter, the Note Pool Factor will decline to reflect reduction sin the
principal balance.
"Noteholder" shall mean a Person in whose name a Note is registered.
----------
"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.
"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
-7-
<PAGE>
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 Accrual 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) that portion of all collections on
Underlying Securities allocable to prinicipal received during the related
Collection Period plus (ii) any accelerated payments of principal required to be
made from amounts on deposit in the Reserve Account pursuant to Section
5.04(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 on such Distribution Date and allocable to principal) to
reduce the Outstanding Amount of the Class A-2 Notes to zero.
"Obligor" means, with respect to any Underlying Security, the Person
-------
obligated to make payments under the terms of such Underlying Security.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
---------------------
-8-
<PAGE>
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Accounts" shall mean any or all of the Certificate
--------------------
Distribution Account, the Collection Account or the Reserve Account, as
applicable.
"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
and all funds on deposit from time to time in the Owner Trust Accounts.
"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.
"Pass-Through Rate" means _____________% per annum.
-----------------
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09, which initially shall be ________________.
"Payment Determination Date" means, with respect to any Distribution Date,
--------------------------
the Business Day immediately preceding such Distribution Date.
"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 Underlying Securities
as of such day.
"Purchase Amount" means the amount, as of the close of business on the last
---------------
day of a Collection Period, required to pay an Underlying Security in full under
the terms thereof, including interest to the end of the month of purchase.
"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.
"Record Date" shall mean, with respect to any Distribution Date, the close
-----------
of business on the day immediately preceding such Distribution Date.
"Reserve Account" shall have the meaning assigned to such term in Section
---------------
5.01.
"Reserve Account Initial Deposit" means an amount equal to the Specified
-------------------------------
Reserve Account Balance on the Closing Date (which is equal to $______________).
-9-
<PAGE>
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Specified Reserve Account Balance" means [state formula].
---------------------------------
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
-----------------
McGraw Hill, Inc., or its successor.
"Total Distribution Amount" means, for each Distribution Date, the
-------------------------
aggregate of all distributions received by the Owner Trustee on the Underlying
Securities, for the Collection Period immediately preceding such Distribution
Date.
"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 Accounts" shall mean any or all of the Certificate Distribution
--------------
Account, the Collection Account or the Reserve Account, as applicable.
"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.
"Underlying Security" means any one of the securities described on
-------------------
Schedule I hereto, transferred to the Trustee by the Company pursuant to Section
2.05 and held as part of the Owner Trust Estate.
"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.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
-----------------------------
and not otherwise defined herein shall 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.
(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
-10-
<PAGE>
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 Securities 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.
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 Underlying Securities, 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;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the
-11-
<PAGE>
terms hereof 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. Conveyance of Underlying Securities. (a) In consideration
-----------------------------------
of the Owner Trustee's delivery on the Closing Date to or upon the order of the
Company of $__________, the Company, 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
Company including any security interest therein, in, to and under the Underlying
Securities, all payments and all proceeds therefrom, and all other assets
constituting the Owner Trust Estate.
(b) It is intended that the conveyance of the Company's right, title and
interest in and to the Underlying Securities and all other assets constituting
the Owner Trust Estate pursuant to this Agreement shall constitute, and be
construed as, an absolute sale of the Underlying Securities by the Depositor to
the Trustee for the benefit of the Certificateholders. Furthermore, it is not
intended that such conveyance be deemed a pledge of the Underlying Securities
and the other assets constituting the Owner Trust Estate by the Company to the
Trustee to secure a debt or other obligation of the Company. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Underlying Securities and the other assets constituting the Owner Trust Estate
are held to be the property of the Company, or if for any other reason this
Agreement is held or deemed to create a security interest in the Underlying
Securities and the other assets constituting the Owner Trust Estate, 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 States of New York and Delaware; (b) the
conveyance provided for in this Section shall be deemed to be a grant by the
Company to the Owner Trustee of a security interest in all the Company's right,
title and interest in and to the Underlying Securities and all amounts payable
to the holders of
-12-
<PAGE>
the Underlying Securities 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 any Owner
Trust Account, whether in the form of cash, instruments, securities or other
property; (c) the possession by the Owner Trustee or its agent of the Underlying
Securities 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
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Owner 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 Underlying
Securities and all such other assets constituting the Owner Trust Estate by the
Company to 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 Underlying Securities 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.
-13-
<PAGE>
(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 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
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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; and
(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) 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 Underlying
Securities 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 [9.01(e)(iii)] (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 Underlying Securities 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
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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.
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.
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SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates.
-----------------------------------------------------------
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. _______________ shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.08, the Owner Trustee shall
execute, authenticate and deliver, 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.
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SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a Trust
---------------------
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar or any Paying Agent may treat the Person in whose name any Trust
Certificate is registered in the Certificate Register as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.05
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 Company, within
15 days after receipt by the Owner Trustee of a written request therefor from
the Company, a list, in such form as 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 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 5.05 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
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<PAGE>
agree with the Owner Trustee that, as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders. The
Paying Agent shall return all unclaimed funds to the Owner Trustee and upon
removal of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and
8.01 shall apply to the Owner Trustee also in its role as Paying Agent for so
long as the Owner Trustee shall act as Paying Agent and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 3.10. Ownership by Company of Trust Certificates. The Company
------------------------------------------
shall on the Closing Date purchase from the 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, the Owner Trustee and the Paying Agent
shall be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on the Trust
Certificates and the giving of instructions or directions hereunder) as the sole
Holder of the Trust Certificates and shall have no obligation to the Certificate
Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants. Pursuant to the Certificate Depository
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<PAGE>
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, 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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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 or the compromise
of any action, claim or lawsuit brought by or against the Trust;
(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 Sale of Owner Trust Estate.
-----------------------------------------------------------
The Owner Trustee shall not have the power, except upon the direction of the
Owners and as expressly provided in the Basic Documents, to sell the Underlying
Securities after the termination of the Indenture. The Owner Trustee shall take
the action referred to in the preceding sentence only upon written instructions
signed by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not direct
-----------------------------
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic
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<PAGE>
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
Collections; Distributions; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Accounts. (a)(i) The Owner Trustee,
-------------------------------
for the benefit of the Noteholders and the Certificateholders, shall establish
and maintain in the name of the Owner 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 Owner Trustee, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the Owner
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.
(iii) 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.
(b) Funds on deposit in the Owner Trust Accounts shall be invested (1) by
the Owner Trustee in Eligible Investments selected in writing by the Company or
an investment manager selected by the Company, 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 by such investment manager, provided that (A) such investment manager
shall be selected by the Company, (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 Owner Trustee and shall be settled by a Delivery to the Owner
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 Owner Trustee shall affirm that such
investment is an Eligible Investment. It is understood and agreed that the Owner
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 Owner Trustee for the benefit of the
Certificateholders or the Noteholders, as applicable; provided, that on each
Payment Determination Date all interest
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and other investment income (net of losses and investment expenses) on funds on
deposit in the Owner 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 Owner Trust Accounts 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 applicable Owner Trust Account 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 Owner Trustee
(so long as the short-term unsecured debt obligations of the Owner 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 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
Owner 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 the Owner Trust
Accounts 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 Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Owner Trust Accounts and in all
proceeds thereof. Except as otherwise expressly provided herein, the Owner
Trust Accounts shall be under the sole dominion and control of the Owner Trustee
for the benefit of the Certificateholders and the Noteholders. If, at any time,
any of the Owner Trust Accounts ceases to be an Eligible Deposit Account, the
Owner Trustee 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
Owner Trust Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Owner Trust Account.
(ii) With respect to the Trust Account Property, the Owner Trustee
agrees that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in 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
Owner Trustee, and the Owner Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Owner Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely
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by the Owner Trustee or a financial intermediary (as such term is
defined in Section 8-313(4)) of the UCC acting solely for the Owner
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 Owner 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 Owner Trustee in accordance
with paragraph (c) of the definition of "Delivery" and shall be
maintained by the Owner Trustee, pending maturity or disposition,
through continued registration of the Owner Trustee's (or its
nominee's) ownership of such security.
SECTION 5.02. Collections. The Owner Trustee shall remit within two
-----------
Business Days of receipt thereof, but in no event later than the Payment
Determination Date immediately preceding each Distribution Date, to the
Collection Account all payments by or on behalf of the Obligors with respect to
the Underlying Securities as collected during the Collection Period.
SECTION 5.03. Application of Trust Funds. (a) On each Payment Determination
--------------------------
Date, the Owner Trustee shall calculate all amounts required to be deposited in
the Note Distribution Account and the Certificate Distribution Account as
follows:
(i) to the Note Distribution Account, from the Total Distribution
Amount, the Noteholders' Interest Distributable Amount;
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Principal Distributable Amount;
(iii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iii), the Certificateholders' Principal Distributable Amount;
(v) to the Reserve Account, the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (i) through
(iv).
(b) On each Distribution Date, the Owner Trustee shall make distributions
from the Collection Account for deposit in the applicable account by 11:00 a.m.
(New York time), to the
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extent of the Total Distribution Amount, to the accounts and in the order of
priority listed in clauses (a)(i) though (v) above.
SECTION 5.04. 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 Owner Trustee shall 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 5.03(a) and
withdrawals therefrom on such date pursuant to Section 5.04(c) or (d)) is
greater than the Specified Reserve Account Balance for such Distribution Date,
then the Owner Trustee shall include the amount of such excess in the
Noteholders' Monthly Principal Distribution Amount and 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) (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 5.03(a)(i) and (ii) on such
Distribution Date, the Owner Trustee shall 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 5.03(a)(ii) on such Distribution Date,
the Owner Trustee shall 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.
(d) (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 5.03(a)(iii) and (iv) on
such Distribution Date, the Owner Trustee shall 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
paragraph (c) above, and deposit such amount into the Certificate Distribution
Account on such Distribution Date.
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<PAGE>
(ii) 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
5.03(a)(iv), the Owner Trustee shall 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 (c) and (d)(i) above, and
deposit such amount into the Certificate Distribution Account.
(e) Subject to Section 9.01, amounts will continue to be applied pursuant
to Section 5.03(a) 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 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.
(f) 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 (e)) 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:
(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 5.05. Distributions. (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 5.03 and
5.04 with respect to such Distribution Date.
(b) 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
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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 (b).
SECTION 5.06. 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 5.07. 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 5.05(b) 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
Underlying Securities. The Owner Trustee shall not make the election provided
under Section 754 of the Code.
SECTION 5.08. 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.
SECTION 5.09. Statements to Certificateholders and Noteholders. (a) On
------------------------------------------------
each Distribution Date, the Owner Trustee 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
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Record Date and shall forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibit D 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 balance of the Reserve Account on the related Payment
Determination Date after giving effect to deposits and withdrawals to be made on
the next following Distribution Date, if any; and
(v) 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 (i) above.
Each amount set forth reconciling amounts on the Distribution Date
statement under clauses (i) or (ii) above shall be expressed as a dollar amount
per $1,000 of original principal balance of a Certificate or Note, as
applicable.
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
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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 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
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<PAGE>
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.
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
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<PAGE>
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 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 or the Indenture Trustee 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 Company; 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.
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<PAGE>
(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.
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
--------------------------------------------------
Underlying Securities. 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 Underlying Security 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 Underlying Security,
or the perfection and priority of any security interest created by any
Underlying Security or the maintenance of any such perfection
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<PAGE>
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 and contents of any Underlying
Security on any computer or other record thereof; the validity of the assignment
of any Underlying Security to the Trust or of any intervening assignment; the
completeness of any Underlying Security; the performance or enforcement of any
Underlying Security; the compliance by the Company 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 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 and the
Indenture Trustee 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 Article V and the Indenture, (ii) at the time provided in Section 9.02
or (iii) at the time provided in Section 9.03. 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 Certificateholders and the Indenture
Trustee mailed within five Business Days of receipt of notice of such
termination from the Company given pursuant to Section 9.03, 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 5.05.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
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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.
(e) Upon any sale of the assets of the Trust pursuant to Section 9.02, the
Owner Trustee shall 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 Owner Trustee shall 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 5.03 and 5.04) 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 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.
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<PAGE>
(f) 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 5.04(a) and the Owner Trustee will succeed to the rights of, and
assume the obligations of, the Indenture Trustee pursuant to this Agreement.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. (a) 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 Underlying
Securities 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 this Agreement.
SECTION 9.03 Optional Purchase of All Underlying Securities. 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 Company shall have
the option to purchase the Owner Trust Estate, other than the Owner Trust
Accounts. To exercise such option, the Company shall deposit in the Collection
Account an amount equal to the aggregate Purchase Amount for the Underlying
Securities, plus the appraised value of any such other property held by the
Trust other than the Owner Trust Accounts, such value to be determined by an
appraiser mutually agreed upon by the Owner Trustee and the Indenture Trustee,
and shall succeed to all interests in and to the Trust. Notwithstanding the
foregoing, the Company 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.
-36-
<PAGE>
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 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
-37-
<PAGE>
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 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 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.
-38-
<PAGE>
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(c) The 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
-39-
<PAGE>
changing in any manner or eliminating any of the provisions in this Agreement 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 Underlying Securities 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 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.
-40-
<PAGE>
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 Asset Backed Securities Corporation,
_______________, 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.
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.
-41-
<PAGE>
SECTION 11.08. Covenants of the Company. In the event that 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 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.
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
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<PAGE>
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.
-43-
<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:
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<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 SECURITIES 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 Underlying Securities.
(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 Securities 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 Indenture dated as of
___________________ (as amended and supplemented from time to time, the
"Indenture"), between the Trust, and ________________, as Indenture Trustee (the
"Indenture Trustee"), 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 the Indenture 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 all monies due under such
Underlying Securities on or after the Cutoff Date, certain bank accounts and the
proceeds thereof, and certain other rights under the Trust Agreement and the
Indenture 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 Indenture.
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 Indenture.
It is the intent of the Company and the Certificateholders that, for
purposes of federal income, state and local income and single business tax and
any other income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Company) will be treated as partners in that
partnership. The Company and the other Certificateholders, by acceptance of a
Trust Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Trust Certificates for such tax purposes as partnership
interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a Trust
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Company, or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceedings under
A-3
<PAGE>
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 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
SECURITIES 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 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 collections with
respect to the Underlying Securities (and certain other amounts), all as more
specifically set forth herein and in the Trust Agreement. A copy of 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 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.
A-6
<PAGE>
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
Indenture and the disposition of all property held as part of the Owner Trust
Estate. The Company may at its option purchase the Owner Trust Estate at the
price specified in the Trust Agreement, and such purchase of the Underlying
Securities 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 Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity 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 SECURITIES TRUST 199__-__
THIS Certificate of Trust of CS FIRST BOSTON AUTO RECEIVABLES SECURITIES
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 SECURITIES 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
C-1
<PAGE>
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.
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:
C-2
<PAGE>
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 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
C-3
<PAGE>
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 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 ___________________________________
as well as Issuer must sign this Letter. (Issuer)
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 (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-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.
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
C-8
<PAGE>
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>
EXHIBIT D
FORM OF STATEMENT
[To be supplied]
D-1
<PAGE>
SCHEDULE I
Schedule of Underlying Securities
---------------------------------
[To be Delivered to the Owner Trustee at Closing]
S-1
<PAGE>
Exhibit 4.4.3
- --------------------------------------------------------------------------------
FORM OF TRUST AGREEMENT
between
ASSET BACKED SECURITIES CORPORATION,
as Company,
and
[_____________________]
as Trustee
CS FIRST BOSTON AUTO RECEIVABLES
SECURITIES TRUST
199_ - __
Dated as of _________________
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
ARTICLE I
Definitions............................................................................... -1-
-----------
SECTION 1.01. Defined Terms.............................................................. -1-
-------------
SECTION 1.02. Other Definitional Provisions.............................................. -7-
-----------------------------
ARTICLE II
Organization.............................................................................. -8-
------------
SECTION 2.01. Name....................................................................... -8-
----
SECTION 2.02. Office..................................................................... -8-
------
SECTION 2.03. Purposes and Powers........................................................ -8-
-------------------
SECTION 2.04. Appointment of Trustee..................................................... -9-
----------------------
SECTION 2.05. Conveyance of Underlying Securities........................................ -9-
-----------------------------------
SECTION 2.06. Declaration of Trust....................................................... -9-
--------------------
SECTION 2.07. Liability of the Owners.................................................... -10-
-----------------------
SECTION 2.08. Title to Trust Property.................................................... -10-
-----------------------
SECTION 2.09. Situs of Trust............................................................. -10-
--------------
SECTION 2.10. Representations and Warranties of the Company.............................. -10-
---------------------------------------------
SECTION 2.11. Maintenance of the Demand Note............................................. -11-
------------------------------
SECTION 2.12. Federal Income Tax Allocations............................................. -12-
------------------------------
ARTICLE III
Trust Certificates and Transfer of Interests.............................................. -12-
--------------------------------------------
SECTION 3.01. Initial Ownership.......................................................... -12-
-----------------
SECTION 3.02. The Trust Certificates..................................................... -12-
----------------------
SECTION 3.03. Authentication of Trust Certificates....................................... -13-
------------------------------------
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates................ -13-
-----------------------------------------------------------
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.................... -14-
-------------------------------------------------------
SECTION 3.06. Persons Deemed Owners...................................................... -14-
---------------------
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.................. -14-
---------------------------------------------------------
SECTION 3.08. Maintenance of Office or Agency............................................ -15-
-------------------------------
SECTION 3.09. Appointment of Paying Agent................................................ -15-
---------------------------
SECTION 3.10. Ownership by Company of Trust Certificates................................. -15-
------------------------------------------
SECTION 3.11. Book-Entry Trust Certificates.............................................. -15-
-----------------------------
SECTION 3.12. Notices to Clearing Agency................................................. -16-
--------------------------
SECTION 3.13. Definitive Trust Certificates.............................................. -16-
-----------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
Actions by Trustee........................................................................ -17-
------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters..................... -17-
------------------------------------------------------
SECTION 4.02. Action by Owners with Respect to Sale of Trust Estate...................... -17-
-----------------------------------------------------
SECTION 4.03. Action by Owners with Respect to Bankruptcy................................ -17-
-------------------------------------------
SECTION 4.04. Restrictions on Owners' Power.............................................. -17-
-----------------------------
SECTION 4.05. Majority Control........................................................... -18-
----------------
ARTICLE V
Collections; Distributions; Certain Duties................................................ -18-
------------------------------------------
SECTION 5.01. Establishment of Trust Accounts............................................ -18-
-------------------------------
SECTION 5.02. Collections................................................................ -20-
-----------
SECTION 5.03. Application of Trust Funds................................................. -20-
--------------------------
SECTION 5.04. Reserve Account............................................................ -20-
---------------
SECTION 5.05. Distributions.............................................................. -22-
-------------
SECTION 5.06. Method of Payment.......................................................... -22-
-----------------
SECTION 5.07. Accounting and Reports to the Owners, the Internal Revenue Service and
----------------------------------------------------------------------
Others............................................................................... -22-
------
SECTION 5.08. Signature on Returns; Tax Matters Partner.................................. -22-
-----------------------------------------
SECTION 5.09. Statements to Certificateholders........................................... -23-
--------------------------------
ARTICLE VI
Authority and Duties of Trustee........................................................... -23-
-------------------------------
SECTION 6.01. General Authority.......................................................... -23-
-----------------
SECTION 6.02. General Duties............................................................. -23-
--------------
SECTION 6.03. Action upon Instruction.................................................... -24-
-----------------------
SECTION 6.04. No Duties Except as Specified in this Agreement or in
------------------------------------------------------
Instructions......................................................................... -24-
------------
SECTION 6.05. No Action Except Under Specified Documents or Instructions................. -25-
----------------------------------------------------------
SECTION 6.06. Restrictions............................................................... -25-
------------
ARTICLE VII
Concerning the Trustee.................................................................... -25-
----------------------
SECTION 7.01. Acceptance of Trust and Duties............................................. -25-
------------------------------
SECTION 7.02. Furnishing of Documents.................................................... -26-
-----------------------
SECTION 7.03. Representations and Warranties............................................. -26-
------------------------------
SECTION 7.04. Reliance; Advice of Counsel................................................ -27-
---------------------------
SECTION 7.05. Not Acting in Individual Capacity.......................................... -27-
---------------------------------
SECTION 7.06. Trustee Not Liable for Trust Certificates or Underlying Securities......... -27-
------------------------------------------------------------------
SECTION 7.07. Trustee May Own Trust Certificates......................................... -28-
----------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
Compensation of Trustee................................................................... -28-
-----------------------
SECTION 8.01. Trustee's Fees and Expenses................................................ -28-
---------------------------
SECTION 8.02. Indemnification............................................................ -28-
---------------
SECTION 8.03. Payments to the Trustee.................................................... -28-
-----------------------
ARTICLE IX
Termination of Trust Agreement............................................................ -28-
------------------------------
SECTION 9.01. Termination of Trust Agreement............................................. -28-
------------------------------
SECTION 9.02. Dissolution upon Bankruptcy of the Company................................. -30-
------------------------------------------
ARTICLE X
Successor Trustees and Additional Trustees................................................ -31-
------------------------------------------
SECTION 10.01. Eligibility Requirements for Trustee...................................... -31-
------------------------------------
SECTION 10.02. Resignation or Removal of Trustee......................................... -31-
---------------------------------
SECTION 10.03. Successor Trustee......................................................... -32-
-----------------
SECTION 10.04. Merger or Consolidation of Trustee........................................ -32-
----------------------------------
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee............................. -32-
---------------------------------------------
ARTICLE XI
Miscellaneous............................................................................. -33-
-------------
SECTION 11.01. Supplements and Amendments................................................ -33-
--------------------------
SECTION 11.02. No Legal Title to Trust Estate in Owners.................................. -34-
----------------------------------------
SECTION 11.03. Limitations on Rights of Others........................................... -35-
-------------------------------
SECTION 11.04. Notices................................................................... -35-
-------
SECTION 11.05. Severability.............................................................. -35-
------------
SECTION 11.06. Separate Counterparts..................................................... -35-
---------------------
SECTION 11.07. Successors and Assigns.................................................... -35-
----------------------
SECTION 11.08. Covenants of the Company.................................................. -35-
------------------------
SECTION 11.09. No Petition............................................................... -36-
-----------
SECTION 11.10. No Recourse............................................................... -36-
-----------
SECTION 11.11. Headings.................................................................. -36-
--------
SECTION 11.12. GOVERNING LAW............................................................. -36-
-------------
SECTION 11.13. Trust Certificate Transfer Restrictions................................... -36-
---------------------------------------
SCHEDULE I - UNDERLYING SECURITIES............................................................. S-1
EXHIBIT A - FORM OF TRUST CERTIFICATE.......................................................... A-1
EXHIBIT B - CERTIFICATE OF TRUST OF
CS FIRST BOSTON AUTO RECEIVABLES TRUST 199_-_............................................. B-1
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
EXHIBIT C - FORM OF CERTIFICATE DEPOSITORY AGREEMENT........................................... C-1
EXHIBIT D - FORM OF STATEMENT.................................................................. D-1
</TABLE>
iv
<PAGE>
TRUST AGREEMENT dated as of _______________________, between ASSET BACKED
SECURITIES CORPORATION, a Delaware corporation (the "Company"), and
________________, a Delaware banking corporation, as trustee (the "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.
"Available Amount" means, with respect to any Distribution Date, the amount
----------------
of funds on deposit in the Reserve Account on such Distribution Date before
giving effect to any reduction thereto on such date.
"Basic Documents" shall mean 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 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.
"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 Balance" equals, initially, $___________ and, thereafter,
-------------------
equals such initial Certificate Balance reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Depository Agreement" shall mean the agreement dated
--------------------------------
_______________, among the Trust, the 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.
-1-
<PAGE>
"Certificate Distribution Account" shall have the meaning assigned to such
--------------------------------
term in Section
5.01.
"Certificate of Trust" shall mean the Certificate of Trust, 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 (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, 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.
"Certificate Register" and "Certificate Registrar" shall mean the register
-------------------- ---------------------
mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" shall mean a Person in whose name a Trust Certificate
-----------------
is registered.
"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).
-2-
<PAGE>
"Certificateholders' Monthly Principal Distributable Amount" means that
----------------------------------------------------------
portion of all collections on Underlying Securities allocable to principal
received during the related Collection Period.
"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 equal 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.
"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.
"Closing Date" means ________________________.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Collection Account" shall have the meaning assigned to such term in
------------------
Section 5.01.
"Collection Period" means a calendar month.
-----------------
"Company" shall mean Asset Backed Securities Corporation, a Delaware
-------
corporation, and any successor in interest.
"Corporate Trust Office" shall mean, with respect to the Trustee, the
----------------------
principal corporate trust office of the Trustee located at
_____________________, or at such other address as the Trustee may designate by
notice to the Owners and the Company, or the principal corporate trust office of
any successor Trustee at the address designated by such successor Trustee by
notice to the Owners and the Company.
-3-
<PAGE>
"Cutoff Date" means ________________________.
-----------
"Definitive Trust Certificates" shall have the meaning set forth in Section
-----------------------------
3.11.
"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 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
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 corporation's 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 Trust Account Property (as defined herein) 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 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 Trustee or its nominee or custodian of the purchase by the Trustee
-4-
<PAGE>
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 Trust Account Property solely as
agent for the 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 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 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 Trustee or its nominee or custodian.
"Demand Note" shall mean, in the case of _____________, the Demand Note
-----------
dated __________, from [CS First Boston Corporation] to ________________.
"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 _______________.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-----
"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 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.
-5-
<PAGE>
"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.
"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.
--------
"Final Scheduled Distribution Date" means the _______________ Distribution
---------------------------------
Date.
"Holder" means the Person in whose name such Certificate is registered on
------
the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such term in
-----------
Section 8.02.
-6-
<PAGE>
"Initial Certificate Balance" shall mean $________________.
---------------------------
"Lien" means any security interest, lien, pledge, equity or encumbrance of
----
any kind, other than tax liens, mechanics' liens and any liens that attach to an
Underlying Security by operation of law.
"Moody's" means Moody's Investors Service, Inc., or its successor.
-------
"Obligor" means, with respect to any Underlying Security, the Person
-------
obligated to make payments under the terms of such Underlying Security.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
---------------------
"Owner" shall mean each Holder of a Trust Certificate.
-----
"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.
"Pass-Through Rate" means __________% per annum.
-----------------
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09, which initially shall be ________________.
"Payment Determination Date" means, with respect to any Distribution Date,
--------------------------
the Business Day immediately preceding such Distribution Date.
"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 Underlying Securities
as of such day.
"Purchase Amount" means the amount, as of the close of business on the last
---------------
day of a Collection Period, required to pay an Underlying Security in full under
the terms thereof, including interest to the end of the month of purchase.
"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.
"Record Date" shall mean, with respect to any Distribution Date, the close
-----------
of business on the day immediately preceding such Distribution Date.
-7-
<PAGE>
"Reserve Account" shall have the meaning assigned to such term in Section
---------------
5.01.
"Reserve Account Initial Deposit" means an amount equal to the Specified
-------------------------------
Reserve Account Balance on the Closing Date (which is equal to $______________).
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Specified Reserve Account Balance" means [state formula].
---------------------------------
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
-----------------
McGraw-Hill, Inc.
"Total Distribution Amount" means, for each Distribution Date, the
-------------------------
aggregate of all distributions received by the Trustee on the Underlying
Securities, for the Collection Period immediately preceding such Distribution
Date.
"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 Accounts" shall mean any or all of the Certificate Distribution
--------------
Account, the Collection Account or the Reserve Account, as applicable.
"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.
"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 and all
funds on deposit from time to time in the Trust Accounts.
"Trustee" shall mean _______________, a Delaware banking corporation, not
-------
in its individual capacity but solely as Trustee under this Agreement, and any
successor Trustee hereunder.
"Underlying Security" means any one of the securities described on Schedule
-------------------
I hereto, transferred to the Trustee by the Company pursuant to Section 2.05 and
held as part of the Trust Estate.
"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.
-8-
<PAGE>
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
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 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.
(c) 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".
(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
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as "CS First
----
Boston Auto Receivables Securities Trust 199_-_", in which name the Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
------
Trustee at the Corporate Trust Office or at such other address in Delaware as
the 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:
-9-
<PAGE>
(i) to issue the Trust Certificates pursuant to this Agreement and to
sell the Trust Certificates;
(ii) with the proceeds of the sale of the Trust Certificates, to
purchase the Underlying Securities, 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;
(iii) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(iv) 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
(v) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Trust Estate and the making of distributions to the Owners.
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 Trustee. The Company hereby appoints the
----------------------
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. Conveyance of Underlying Securities. (a) In consideration
-----------------------------------
of the Trustee's delivery on the Closing Date to or upon the order of the
Company of $__________, the Company, 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
Company including any security interest therein, in, to and under the Underlying
Securities, all payments and all proceeds therefrom, and all other assets
constituting the Trust Estate.
(b) It is intended that the conveyance of the Company's right, title and
interest in and to the Underlying Securities and all other assets constituting
the Trust Estate pursuant to this Agreement shall constitute, and be construed
as, an absolute sale of the Underlying Securities by the Depositor to the
Trustee for the benefit of the Certificateholders. Furthermore, it is not
intended that such conveyance be deemed a pledge of the Underlying Securities
and the other assets constituting the Trust Estate by the Company to the Trustee
to secure a debt or other obligation of the Company. However, in the event that,
notwithstanding the aforementioned intent of the parties, the Underlying
Securities and the other assets constituting the Trust Estate are held to be the
property of the Company, or if for any other reason this Agreement is held or
deemed to create a security interest in the Underlying Securities and the other
assets constituting the Trust Estate, then it is intended as follows: (a) this
Agreement shall also be deemed to be a security agreement within the meaning of
-10-
<PAGE>
Articles 8 and 9 of the Uniform Commercial Code as in effect from time to time
in the States of New York and Delaware; (b) the conveyance provided for in this
Section shall be deemed to be a grant by the Company to the Trustee of a
security interest in all the Company's right, title and interest in and to the
Underlying Securities and all amounts payable to the holders of the Underlying
Securities 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 any Trust Account, whether in
the form of cash, instruments, securities or other property; (c) the possession
by the Trustee or its agent of the Underlying Securities 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 persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the
Trustee for the purpose of perfecting such security interest under applicable
law. 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 Underlying Securities and all such other assets constituting the Trust
Estate by the Company to the Trustee.
SECTION 2.06. Declaration of Trust. The Trustee hereby declares that it
--------------------
will hold the 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 Underlying Securities and other assets held by the Trust,
the partners of the partnership being the Certificateholders. 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 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 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. 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
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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 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 Trust Estate to be vested in a trustee or trustees, in which case title
shall be deemed to be vested in the 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 Trustee on behalf
of the Trust shall be located in the State of Delaware or the State of New York.
The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the 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 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
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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; and
(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) 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 Underlying
Securities 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 [9.01(e)(i)] (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 Underlying Securities 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
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<PAGE>
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.
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 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 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 Trustee by manual signature;
such authentication
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<PAGE>
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 Trustee shall
provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. _______________ shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.08, the 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 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 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 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 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 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 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 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 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.
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SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a Trust
---------------------
Certificate for registration of transfer, the Trustee, the Certificate Registrar
or any Paying Agent may treat the Person in whose name any Trust Certificate is
registered in the Certificate Register as the owner of such Trust Certificate
for the purpose of receiving distributions pursuant to Section 5.05 and for all
other purposes whatsoever, and none of the 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 Trustee shall furnish or cause to be furnished to the Company, within 15
days after receipt by the Trustee of a written request therefor from the
Company, a list, in such form as 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
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 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 Certificate
Registrar or the 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 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 Trustee in
respect of the Trust Certificates and the Basic Documents may be served. The
Trustee initially designates ______________ as its office for such purposes. The
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 5.05 and shall report the amounts of such distributions to
the 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 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
in any material respect. The Paying Agent initially shall be _______________,
and any co-paying agent chosen by _______________ and acceptable to the Trustee.
_______________ shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Trustee. In the event that _______________ shall no
longer be the Paying Agent, the Trustee shall appoint a successor to act as
Paying Agent (which shall be a bank or trust company). The Trustee shall cause
such successor Paying Agent or any additional Paying Agent appointed by the
Trustee to execute and deliver to the Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Trustee
that, as Paying Agent, such successor Paying Agent or additional Paying Agent
will hold all sums, if any, held by it for payment to the
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<PAGE>
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 Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to
the Trustee also in its role as Paying Agent for so long as the 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 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, the Trustee and the Paying Agent shall be
entitled to deal with the Clearing Agency for all purposes of this Agreement
(including the payment of principal of and interest on the Trust Certificates
and the giving of instructions or directions hereunder) as the sole Holder of
the Trust Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Trust Certificates are issued pursuant to Section 3.13, the
initial Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest on
the Trust Certificates to such Clearing Agency Participants; and
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<PAGE>
(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 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 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 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 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, 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 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
Trustee of the typewritten Trust Certificate or Trust Certificates representing
the Book-Entry Trust Certificates by the Clearing Agency, accompanied by
registration instructions, the Trustee shall execute and authenticate the
Definitive Trust Certificates in accordance with the instructions of the
Clearing Agency. Neither the Certificate Registrar nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Trust Certificates, the 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 Trustee, as evidenced by
its execution thereof.
ARTICLE IV
Actions by Trustee
------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters. With
------------------------------------------------------
respect to the following matters, the Trustee shall not take action unless at
least 30 days before the taking of such action, the Trustee shall have notified
the Certificateholders in writing of the proposed action and the Owners shall
not have notified the Trustee in writing prior to the 30th day after such notice
is given that such Owners have withheld consent or provided alternative
direction:
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<PAGE>
(a) the initiation of any claim or lawsuit by the Trust or the compromise
of any action, claim or lawsuit brought by or against the Trust;
(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); or
(c) the appointment of a successor Certificate Registrar, or the consent
to the assignment by the Certificate Registrar of its obligations under this
Agreement.
SECTION 4.02. Action by Owners with Respect to Sale of Trust Estate. The
-----------------------------------------------------
Trustee shall not have the power, except upon the direction of the Owners and as
expressly provided herein or in the Basic Documents, to sell the Underlying
Securities.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The 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 Trustee by each such Owner of a certificate certifying that such
Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not direct
-----------------------------
the 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 Trustee under
this Agreement or any of the Basic Documents or would be contrary to Section
2.03, nor shall the 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
Collections; Distributions; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Accounts. (a)(i) The Trustee, 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.
(ii) The Trustee, for the benefit of the Certificateholders, shall
establish and maintain in the name of the 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 Certificateholders.
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<PAGE>
(iii) The 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.
(b) Funds on deposit in the Trust Accounts shall be invested (1) by the
Trustee in Eligible Investments selected in writing by the Company or an
investment manager selected by the Company, 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 by
such investment manager, provided that (A) such investment manager shall be
selected by the Company, (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 Trustee and shall be settled by a Delivery to the 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
Trustee shall affirm that such investment is an Eligible Investment. It is
understood and agreed that the 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 Trustee for the
benefit of the Certificateholders; 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 Trust Accounts 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 applicable Trust Account 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 Trustee (so
long as the short-term unsecured debt obligations of the 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 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 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 the Trust Accounts on a
day which immediately precedes a Distribution Date upon the maturity of any
Eligible Investments are not required to be invested overnight.
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(c)(i) The 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.
Except as otherwise expressly provided herein, the Trust Accounts shall be under
the sole dominion and control of the Trustee for the benefit of the
Certificateholders. If, at any time, any of the Trust Accounts ceases to be an
Eligible Deposit Account, the Trustee 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 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 Trustee agrees that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in 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 Trustee,
and the Trustee shall have sole signature authority with respect
thereto;
(B) any Trust 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 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 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 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 nominee's) ownership of such
security.
SECTION 5.02. Collections. The Trustee shall remit within two Business
-----------
Days of receipt thereof, but in no event later than the Payment Determination
Date immediately preceding each Distribution Date, to the Collection Account all
payments by or on behalf of the Obligors with respect to the Underlying
Securities as collected during the Collection Period.
SECTION 5.03. Application of Trust Funds. (a) On each Payment
--------------------------
Determination Date, the Trustee shall calculate all amounts required to be
deposited in the Certificate Distribution Account as follows:
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(i) to the Certificate Distribution Account, from the Total
Distribution Amount, the Certificateholders' Interest Distributable Amount;
(ii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Certificateholders' Principal Distributable Amount;
(iii) to the Reserve Account, the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (i) and
(ii).
(b) On each Distribution Date, the Trustee shall make distributions from
the Collection Account for deposit in the applicable account by 11:00 a.m. (New
York time), to the extent of the Total Distribution Amount, to the accounts and
in the order of priority listed in clauses (a)(i) though (iii) above.
SECTION 5.04. Reserve Account. (a) On the Closing Date, the 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 Certificates.
(b) 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 Trustee shall distribute the amount of such
excess to the Company.
(c) (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 5.03(a)(i) and (ii) on such
Distribution Date, the Trustee shall 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
Certificate Distribution Account on such Distribution Date.
(ii) 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 5.03(a)(ii), the
Trustee shall 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 paragraph (c)(i) above, and deposit such amount into the
Certificate Distribution Account.
(d) Subject to Section 9.01, amounts will continue to be applied pursuant
to Section 5.03(a) following payment in full of the Certificate Balance until
the Pool Balance is reduced to zero. Following the payment in full of the
Certificate Balance and of all other amounts owing or to be distributed
hereunder to Certificateholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the Company.
(e) 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
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Section have been made, other than paragraphs (b) and (d)) 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:
(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 5.05. Distributions. (a) On each Distribution Date, the Trustee
-------------
will distribute to Certificateholders, on a pro rata basis, amounts deposited in
the Certificate Distribution Account pursuant to Sections 5.03 and 5.04 with
respect to such Distribution Date.
(b) 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
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 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 Trustee may in its sole discretion
withhold such amounts in accordance with this paragraph (b).
SECTION 5.06. 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
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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 5.07. Accounting and Reports to the Owners, the Internal Revenue
----------------------------------------------------------
Service and Others. 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, (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 5.05(b) with respect to income or distributions to
Owners. The Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Underlying
Securities. The Trustee shall not make the election provided under Section 754
of the Code.
SECTION 5.08. Signature on Returns; Tax Matters Partner. (a) The 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.
SECTION 5.09. Statements to Certificateholders. (a) On each Distribution
--------------------------------
Date, the Trustee shall provide to each certificateholder of record as of the
most recent Record Date (with a copy to the Rating Agencies and each Paying
Agent) a statement substantially in the form of Exhibit D setting forth at least
the following information as to the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal allocable to
the Certificates;
(ii) the amount of such distribution allocable to interest allocable to
the Certificates;
(iii) 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 balance of the Reserve Account on the related Payment
Determination Date after giving effect to deposits and withdrawals to be made on
the next following Distribution Date, if any; and
(v) 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 (i) above.
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Each amount set forth reconciling amounts on the Distribution Date
statement under clauses (i) or (ii) above shall be expressed as a dollar amount
per $1,000 of original principal balance of a Certificate.
ARTICLE VI
Authority and Duties of Trustee
-------------------------------
SECTION 6.01. General Authority. The 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
Trustee's execution thereof. In addition to the foregoing, the Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The 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 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 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 Trustee shall not be required to take any action hereunder or
under any Basic Document if the 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 Trustee or is contrary to the terms hereof or of
any Basic Document or is otherwise contrary to law.
(c) Whenever the 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 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 Trustee acts in good
faith in accordance with any written instruction received from the Owners, the
Trustee shall not be liable on account of such action to any Person. If the
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.
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<PAGE>
(d) In the event that the 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 Trustee or is silent or is incomplete as to the course of
action that the Trustee is required to take with respect to a particular set of
facts, the 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 Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Trustee shall not be liable with respect to any
such action or inaction to any Person. If the 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 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 Trust Estate, or to otherwise take or refrain from taking any
action under, or in connection with, any document contemplated hereby to which
the Trustee is a party, except as expressly provided by the terms of this
Agreement or in any document or written instruction received by the Trustee
pursuant to Section 6.03; and no implied duties or obligations shall be read
into this Agreement or any Basic Document against the Trustee. The 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 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 Trust Estate that result from actions by,
or claims against, the Trustee that are not related to the ownership or the
administration of the Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or Instructions.
----------------------------------------------------------
The Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Trustee pursuant to Section
6.03.
SECTION 6.06. Restrictions. The 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 Trustee, would result in the Trust's
becoming taxable as a corporation for federal income tax purposes. The Owners
shall not direct the Trustee to take action that would violate the provisions of
this Section.
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ARTICLE VII
Concerning the Trustee
----------------------
SECTION 7.01. Acceptance of Trust and Duties. The 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 Trustee also agrees
to disburse all moneys actually received by it constituting part of the Trust
Estate upon the terms of the Basic Documents and this Agreement. The 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 Trustee. In particular, but not
by way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) The Trustee shall not be liable for any error of judgment made by a
Trust Officer of the Trustee;
(b) The 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
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 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 Trustee be liable for indebtedness
evidenced by or arising under any of the Basic Documents;
(e) The 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 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 Trustee shall in no event assume or incur any liability,
duty or obligation to any Owner, other than as expressly provided for herein or
expressly agreed to in the Basic Documents;
(f) The Trustee shall not be liable for the default or misconduct of the
Company under any of the Basic Documents or otherwise, and the 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
Company; and
(g) 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 or
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<PAGE>
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 Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities that may be incurred by the Trustee therein or
thereby. The right of the Trustee to perform any discretionary act enumerated in
this Agreement or in any Basic Document shall not be construed as a duty, and
the Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The 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 Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The 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 Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or bylaws or any indenture, mortgage,
contract, agreement or instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The 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 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 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 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 Trustee (i) may act directly or through its agents or attorneys
pursuant to agreements entered into with any of them, and the
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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 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
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 Trustee hereunder and not in its individual capacity, and all
Persons having any claim against the Trustee by reason of the transactions
contemplated by this Agreement or any Basic Document shall look only to the
Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Trustee Not Liable for Trust Certificates or Underlying
-------------------------------------------------------
Securities. The recitals contained herein and in the Trust Certificates (other
- ----------
than the signature and countersignature of the Trustee on the Trust
Certificates) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness thereof. The 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 Trustee on the Trust Certificates) or of any Underlying
Security or any related documents. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Underlying Security, or the perfection and priority of any
security interest created by any Underlying Security or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of the
Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence and contents of any Underlying Security on any computer or other
record thereof; the validity of the assignment of any Underlying Security to the
Trust or of any intervening assignment; the completeness of any Underlying
Security; the performance or enforcement of any Underlying Security; or the
compliance by the Company with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation.
SECTION 7.07. Trustee May Own Trust Certificates. The Trustee in its
----------------------------------
individual or any other capacity may become the owner or pledgee of Trust
Certificates and may deal with the Company in banking transactions with the same
rights it would have if it were not Trustee.
ARTICLE VIII
Compensation of Trustee
-----------------------
SECTION 8.01. Trustee's Fees and Expenses. The 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 Trustee, and the Trustee
shall be entitled to be reimbursed by the Company for its other reasonable
expenses hereunder, including the reasonable compensation,
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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 its duties hereunder.
SECTION 8.02. Indemnification. The Company shall be liable as primary
---------------
obligor for, and shall indemnify the 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 Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the Basic Documents, the Trust Estate, the
administration of the Trust Estate or the action or inaction of the 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 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 Trustee's choice of legal counsel shall be subject to the
approval of the Company, which approval shall not be unreasonably withheld.
SECTION 8.03. Payments to the Trustee. Any amounts paid to the Trustee
-----------------------
pursuant to this Article VIII shall be deemed not to be a part of the 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 Trustee of all moneys or other
property or proceeds of the Trust Estate in accordance with the terms of Article
V, (ii) at the time provided in Section 9.02 or (iii) at the time provided in
Section 9.03. 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 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 Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Company given
pursuant to Section 9.03, 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
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<PAGE>
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 Trustee shall give such notice to the Certificate Registrar (if other than
the 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 5.05.
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 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 Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Trust Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the 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 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.
(e) Upon any sale of the assets of the Trust pursuant to Section 9.02, the
Trustee shall 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 Trustee shall 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 5.03 and 5.04) 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 Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited into
the Certificate Distribution Account on such Distribution Date; and
(ii) 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 which will not mature on or
before such Distribution Date shall be sold by the Trustee at such time as will
result in the Trustee receiving the proceeds from such sale not later than the
Payment Determination Date preceding such Distribution
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Date. Any Insolvency Proceeds remaining after the deposits described above shall
be paid to the Company.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. (a) 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
Trustee shall have received written instructions from 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) to the effect that each such party disapproves of the liquidation of
the Underlying Securities and termination of the Trust. Promptly after the
occurrence of any Insolvency Event with respect to the Company, (A) the Company
shall give the Trustee written notice of such Insolvency Event and (B) the
Trustee shall, upon receipt of such written notice from the Company, give prompt
written notice to the Certificateholders 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 Trustee shall promptly 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 this
Agreement.
SECTION 9.03 Optional Purchase of All Underlying Securities. 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, the Company shall have the option to purchase the Trust Estate, other
than the Trust Accounts. To exercise such option, the Company shall deposit in
the Collection Account an amount equal to the aggregate Purchase Amount for the
Underlying Securities, plus the appraised value of any such other property held
by the Trust other than the Trust Accounts, such value to be determined by an
appraiser approved by the Trustee, and shall succeed to all interests in and to
the Trust. Notwithstanding the foregoing, the Company 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
Certificate Balance and all accrued but unpaid interest (including any overdue
interest and premium) thereon.
ARTICLE X
Successor Trustees and Additional Trustees
------------------------------------------
SECTION 10.01. Eligibility Requirements for Trustee. The 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 aforesaid supervising or
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<PAGE>
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 10.02.
SECTION 10.02. Resignation or Removal of Trustee. The Trustee may at any
---------------------------------
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Company. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the 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 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 its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Company may remove the
Trustee. If the Company shall remove the Trustee under the authority of the
immediately preceding sentence, the Company 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 10.03 and payment of all fees and expenses owed to the outgoing Trustee.
The Company shall provide notice of such resignation or removal of the Trustee
to each of the Rating Agencies.
SECTION 10.03. Successor Trustee. Any successor Trustee appointed
-----------------
pursuant to Section 10.02 shall execute, acknowledge and deliver to the Company
and to its predecessor Trustee an instrument accepting such appointment 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 upon payment of
its fees and expenses deliver to the successor Trustee all documents, statements
and monies held by it under this Agreement; and the Company 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.
-33-
<PAGE>
No successor Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor Trustee shall be eligible
pursuant to Section 10.01.
Upon acceptance of appointment by a successor Trustee pursuant to this
Section, the Company shall mail notice thereof to all Certificateholders and the
Rating Agencies. If the Company shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Company.
SECTION 10.04. 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, 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 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 Trust Estate may at the time be located, the Company 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 Company and Trustee
to act as co-trustee, jointly with the Trustee, or as separate trustee or
separate trustees, of all or any part of the 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 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 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 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 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 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 Trustee;
-34-
<PAGE>
(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 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. 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
Company.
Any separate trustee or co-trustee may at any time 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 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.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be amended
--------------------------
by the Company and the Trustee, with prior written notice to the Rating
Agencies, without the consent of any 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
of the provisions in this Agreement or modifying in any manner the rights of 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 Certificateholder.
This Agreement may also be amended from time to time by the Company and the
Trustee, with prior written notice to the Rating Agencies, 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) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Underlying
Securities or distributions that shall be required to be made for the benefit of
the Certificateholders or (b) reduce the aforesaid percentage of the Certificate
-35-
<PAGE>
Balance required to consent to any such amendment, without the consent of the
holders of all the outstanding Certificates.
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 each of 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 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
Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the 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 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 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.
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
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 precedent in the Basic Documents for the
execution and delivery thereof by the Issuer or the Trustee, as the case may be,
have been satisfied.
SECTION 11.02. No Legal Title to Trust Estate in Owners. The Owners shall
----------------------------------------
not have legal title to any part of the 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 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 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 Trustee, the
Company and the Owners 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 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
-36-
<PAGE>
or three Business Days after mailing if mailed by certified mail, postage
prepaid (except that notice to the Trustee shall be deemed given only upon
actual receipt by the Trustee), if to the Trustee, addressed to the Corporate
Trust Office; and if to the Company, addressed to Asset Backed Securities
Corporation, _______________, 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.
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 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 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 Trust Agreement or any of the Basic
Documents.
-37-
<PAGE>
SECTION 11.09. No Petition. The Trustee, by entering into this Agreement,
-----------
and each Owner, by accepting a Trust Certificate or a beneficial interest
therein, 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, 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 Company, the 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.
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.
-38-
<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 Trustee,
By ___________________________
Name:
Title:
-39-
<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 SECURITIES 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 Underlying Securities.
(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 Securities 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 Trustee (the "Trustee").
A-1
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
__________________________________
as 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.
This Certificate is one of the duly authorized Certificates designated as
the _______% Asset Backed Certificates (herein called the "Trust Certificates")
issued by the Trust. 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 all monies due under such Underlying Securities on or
after the Cutoff Date, certain bank accounts and the proceeds thereof, and
certain other rights under the Trust Agreement and all proceeds of the
foregoing.
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.
It is the intent of the Company and the Certificateholders that, for
purposes of federal income, state and local income and single business tax and
any other income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Company) will be treated as partners in that
partnership. The Company and the other Certificateholders, by acceptance of a
Trust Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Trust Certificates for such tax purposes as partnership
interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a Trust
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Company, or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation 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 Trust
Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the 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 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 Trustee
in the Borough of Manhattan, The City of New York.
A-3
<PAGE>
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 Trustee, by manual signature, this Trust
Certificate shall not entitle the Holder hereof to any benefit under the Trust
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 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
SECURITIES TRUST 199__-__
By: __________________________, not in its individual
capacity but solely as 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 Company, 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 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 collections with
respect to the Underlying Securities (and certain other amounts), all as more
specifically set forth herein and in the Trust Agreement. A copy of 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 Trustee with the consent of Holders of the Trust
Certificates evidencing not less than a majority of the Certificate Balance.
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 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 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 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 Certificate is
registered as the owner hereof for all purposes,
A-6
<PAGE>
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 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
disposition of all property held as part of the Trust Estate. The Company may
at its option purchase the Trust Estate at the price specified in the Trust
Agreement, and such purchase of the Underlying Securities 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 Original
Pool Balance.
The Trust Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity 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 SECURITIES TRUST 199__-__
THIS Certificate of Trust of CS FIRST BOSTON AUTO RECEIVABLES SECURITIES
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 SECURITIES 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, however, the aggregate
principal amount of any maturity exceeds $200 million, one Certificate will be
issued with
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<PAGE>
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
711 Stewart Avenue
Garden City, NY 11530-4719
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<PAGE>
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 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
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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.
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
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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.
<TABLE>
<CAPTION>
Notes: Very truly yours,
- -----
<S> <C>
A. If there is a Trustee (as defined in this
Letter of Representations), Trustee as well as ___________________________________________
Issuer must sign this Letter. If there is no Trustee, (Issuer)
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 (Trustee)
DTC, and certain related matters.
By: _______________________________________
(Authorized Officer's Signature)
</TABLE>
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: _______________________________
cc: Underwriter
Underwriter's Counsel
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SCHEDULE A
----------
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
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<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.
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
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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.
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.
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<PAGE>
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.
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<PAGE>
EXHIBIT D
FORM OF STATEMENT
[To be supplied]
D-1
<PAGE>
SCHEDULE I
Schedule of Underlying Securities
---------------------------------
[To be Delivered to the Trustee at Closing]
S-1
<PAGE>
Exhibit 4.4.5
[FORM OF TRUST AGREEMENT]
between
ASSET BACKED SECURITIES CORPORATION,
Depositor
and
[TRUSTEE NAME],
as Trustee
Dated as of [ ], 199[ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<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
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V: The Trustee................................................................................ 23
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>
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<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.
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<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.
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<PAGE>
"[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 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 [ ] issue 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.
3
<PAGE>
"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.
"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 Four Albany Street, New York, New York 10006.
"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.
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"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):
(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.
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"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.
"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.
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"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.
"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
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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.
"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.
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(b) In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee the following:
(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.
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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 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
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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 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
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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 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 of (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:
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(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 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 an 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;
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(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:
(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 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.
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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.
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.
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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 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.
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ARTICLE IV
The Certificates
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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.
(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
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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.
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 he 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.
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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 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,
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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:
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
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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
only to the extent that is 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
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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.
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
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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 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
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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
(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
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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.
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
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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 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
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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.
(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.
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<PAGE>
(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 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.
28
<PAGE>
(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:
(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 the 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
29
<PAGE>
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
(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
30
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
(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.
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,
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<PAGE>
_______________________________
_______________________________
_______________________________
_______________________________
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
(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
36
<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.
A-2
<PAGE>
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 [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
B-2
<PAGE>
Agreement. This 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 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
B-3
<PAGE>
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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 4.4.6
================================================================================
ASSET BACKED SECURITIES CORPORATION
Depositor
and
________________________________
Trustee
_____________________________
DEPOSIT TRUST AGREEMENT
Dated as of ____, 199__
_____________________________
Conduit Mortgage Pass-Through Certificates
Series
$______ Class A-1 Certificates
$______ Class A-2 Certificates (Notional Amount)
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
Definitions................. 1
ARTICLE II.
Conveyance of the Mortgage Certificates; Original
Issuance of Certificates.......... 5
Section 2.01. Conveyance of the Mortgage Certificates. 5
Section 2.02. Representations and Warranties of the
Depositor......................................... 5
Section 2.03. Issuance of Certificates................ 8
Section 2.04. Payment to Depositor.................... 9
ARTICLE III.
Administration of the Mortgage Certificates... 9
Section 3.01. Collection of Payments on the Mortgage
Certificates; Certificate Account....... 9
Section 3.02. Distributions........................... 10
Section 3.03. Statements to Certificateholders........ 10
Section 3.04. Annual Statement as to Compliance....... 11
Section 3.05. Annual Independent Public Accountants'
Report............................................ 11
Section 3.06. Access to Certain Documentation and
Information....................................... 12
ARTICLE IV.
The Certificates.............. 12
Section 4.01. The Certificates........................ 12
Section 4.02. Registration of Transfer and Exchange of
Certificates............................ 13
Section 4.03. Mutilated, Destroyed, Lost or Stolen
Certificates............................ 13
Section 4.04. Persons Deemed Owners................... 14
ARTICLE V.
The Trustee................ 14
Section 5.01. Liability of the Trustee................ 14
Section 5.02. Representations and Warranties of the
Trustee................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.03. Merger or Consolidation of the Trustee.. 15
Section 5.04. Limitation on Liability of the Trustee
and Others.............................. 15
Section 5.05. Delegation of Duty by Trustee........... 16
Section 5.06. Trustee's Fees and Expenses............. 16
Section 5.07. Resignation and Removal of the Trustee.. 17
Section 5.08. Successor Trustee....................... 18
Section 5.09. Qualification of Trustee and Corporate
Trust Office............................ 19
Section 5.10. Trustee or Depositor May Own
Certificates...................................... 19
ARTICLE VI.
Termination................ 20
Section 6.01. Termination Upon Final Distribution to
Certificateholders...................... 20
Section 6.02. Failure of Certificateholders to
Surrender Certificates.................. 20
ARTICLE VII.
Miscellaneous Provisions.......... 21
Section 7.01. Amendment............................... 21
Section 7.02. Limitation on Rights of
Certificateholders...................... 21
Section 7.03. Limitation on Liability of the Depositor
and Others.............................. 22
Section 7.04. Governing Law........................... 23
Section 7.05. Notices................................. 23
Section 7.06. Severability of Provisions.............. 23
Section 7.07. Certificates Nonassessable and Fully
Paid............................................... 24
</TABLE>
Signatures and Seals
Acknowledgements
Exhibit A - Form of Certificate
Exhibit B - Schedule of Mortgage Certificates
ii
<PAGE>
DEPOSIT TRUST AGREEMENT (the "Agreement"), dated as of _______, 199__
by and between ASSET BACKED SECURITIES CORPORATION, a Delaware Corporation,
as depositor (the "Depositor"), and _________________________, a
________________ corporation, as trustee (the "Trustee").
In consideration of the mutual agreements herein contained, the
Depositor and the Trustee agree 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:
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which commercial banking institutions in New York, New York or
_____________, ______________________ are authorized or obligated by law or
executive order to be closed.
Certificate: Any one of the Class A-1 Certificates or Class A-2
-----------
Certificates, each evidencing undivided percentage ownership interests in the
Class A-1 Distribution Amount and Class A-2 Distribution Amount, respectively,
and executed by the Trustee in substantially the form set forth in Exhibit A
hereto.
Certificate Account: The custodial account created and maintained
-------------------
with the Trustee pursuant to Section 3.01. Funds deposited in the Certificate
Account shall be held in trust for the Certificateholders for the uses and
purposes set forth in Article III hereof.
Certificate Register: The meaning provided in Section 4.02.
--------------------
Certificateholder or Holder: The person in whose name a Certificate
---------------------------
is registered in the Certificate Register, except that, solely for the purpose
of giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor or the Trustee or any affiliate of either of them
shall be deemed not to be outstanding.
Class A-1 Certificates: A Certificate designated as a Class A-1
----------------------
Certificate and evidencing a Percentage Interest in each Class A-1 Distribution
Amount.
Class A-2 Certificates: A Certificate designated as a Class A-2
----------------------
Certificate and evidencing a Percentage Interest in each Class A-2 Distribution
Amount.
-1-
<PAGE>
Class A-1 Distribution Amount: As to any Distribution Date, an amount
-----------------------------
equal to (i) ___% of the Mortgage Certificate Principal Distribution and (ii)
___% of the Mortgage Certificate Interest Distribution.
Class A-2 Distribution Amount: As to any Distribution Date, an amount
-----------------------------
equal to (i) ___% of the Mortgage Certificate Principal Distribution and (ii)
___% of the Mortgage Certificate Interest Distribution.
Closing Date: ____, 199__
------------
Corporate Trust Office: The principal corporate trust office of the
----------------------
Trustee in the City of New York at which at any particular time its corporate
----------------
trust business shall be administered, which office at the date of the execution
of this instrument is located at ______________________________________.
Cut-off Date: ______, 199__.
------------
Deleted Mortgage Certificate: A Mortgage Certificate replaced or to
----------------------------
be replaced by a Replacement Mortgage Certificate.
Denomination: For each Certificate, the amount designated as such on
------------
the face thereof. The aggregate of the Denominations of Class A-1 Certificates
is equal to the aggregate of the principal balances of the Mortgage Certificates
as of the month of the Closing Date net of any distributions of principal
scheduled to be made thereon during such month. 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
outstanding principal balance of the Mortgage Certificates for that month.
Depositor: Asset Backed Securities Corporation, a Delaware
---------
Corporation, or its successor in interest.
Determination Date: The Business Day preceding any Distribution Date.
------------------
Distribution Date: The __th day of each month, or if such day is not
-----------------
a Business Day, the Distribution Date with respect to the payments affected
shall be the following Business Day.
Distribution Period: As to any Distribution date, the period
-------------------
beginning at 1:00 p.m., _________ time, on the last day of the previous
Distribution Period (or, in the case of the first Distribution Date, beginning
on the Closing Date) and ending at 12:59 p.m., __________ time, on such
Distribution Date.
-2-
<PAGE>
Mortgage Certificate Interest Distribution: As to each Distribution
------------------------------------------
Date, the distributions of interest with respect to the Mortgage Certificates
that have become cleared funds in the hands of the Trustee during the related
Distribution Period, net of any amounts retained by the Trustee pursuant to
Section 5.06 hereof.
Mortgage Certificate Principal Distribution: As to each Distribution
-------------------------------------------
Date, the distributions of principal with respect to the Mortgage Certificates
that have become cleared funds in the hands of the Trustee during the related
Distribution Period.
Mortgage Certificates: The conventional mortgage pass-through
---------------------
certificates transferred to the Trustee by the Depositor described in the
Mortgage Certificate Schedule.
Mortgage Certificate Schedule: The schedule attached as Exhibit B
-----------------------------
hereto, such schedule setting forth as to each Mortgage Certificate (i) the
issuer thereof and the series designation, (ii) its guarantor, if any, (iii) the
original balance, (iv) the pass-through rate, (v) the principal balance at the
Cutoff Date after giving effect to the principal component of the scheduled
distribution for the month of the Closing Date, (vi) the maturity date and (vii)
its issue date, as from time to time amended by the Trustee to reflect the
addition of Replacement Mortgage Certificates and the deletion of Deleted
Mortgage Certificates.
New York Presenting Agent: ________________________, or such office
-------------------------
located within the Borough of Manhattan, City and State of New York of a bank or
trust company as the Trustee may designate.
Notional Amount: With respect to the Class A-2 Certificates, their
---------------
Denominations. The aggregate original Notional Amount for the Class A-2
Certificates for any month will be equal to the aggregate outstanding principal
balance of the Mortgage 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 A-2 Certificates, and Holders of Class A-2
Certificates shall not have any interest in, or be entitled to any payment with
respect to, principal payments on the Mortgage Certificates.
Officers' Certificate: A certificate signed by the Chairman of the
---------------------
Board, the President or a Vice President, Assistant Vice President and by the
Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Trustee, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Trustee.
-3-
<PAGE>
Outstanding: With respect to the Certificates, as of the date of
-----------
determination, all Certificates theretofore executed and delivered under this
Agreement except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant this Agreement
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a holder in due course.
Percentage Interest: As to any Class A-1 Certificates or Class A-2
-------------------
Certificates, the percentage interest in each Class A-1 Distribution Amount or
Class A-2 Distribution Amount represented thereby, such percentage interest
being equal to the percentage obtained by dividing the Denomination of such
Class A-1 Certificates or Class A-2 Certificates by the aggregate Denominations
of all Class A-1 Certificates or Class A-2 Certificates, respectively.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency of political subdivision thereof.
Rating Agencies: [Standard & Poor's Ratings Group] and [Moody's
---------------
Investors Services Inc.], and any successors thereto, respectively.
Record Date: The last Business Day of the month preceding the month
-----------
of the related Distribution Date.
Replacement Mortgage Certificate: A Mortgage Certificate substituted
--------------------------------
by the Depositor for a Deleted Mortgage Certificate which must, on the date of
such substitution, meet the requirements for a Replacement Mortgage Certificate
set forth in Section 2.02 hereof.
Responsible Officer: With respect to the Trustee, the Chairman or
-------------------
Vice Chairman of the Board of Directors or any Vice President (Executive,
Senior, Regular, Assistant or other), any Trust Officer or any Banking Officer
in its Corporate Trust Department.
Servicing Fee: The fee payable to the Trustee pursuant to Section
-------------
5.06 hereof.
Single Certificate: With respect to the Class A-1 Certificates, a
------------------
Certificate in a Denomination of $____. With respect to the Class A-2
Certificates, a Certificate in a Denomination of $___________.
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<PAGE>
Trust Fund: At any time, the corpus of the trust created by this
----------
Agreement consisting of (i) the Mortgage Certificates described in the Mortgage
Certificate Schedule, (ii) all distributions thereon other than as provided
herein, and (iii) amounts paid from time to time by the Trustee in the
Certificate Account.
Trustee: __________________________________, a banking corporation or
-------
its successor in interest, or any successor trustee appointed as herein
provided.
ARTICLE II.
Conveyance of the Mortgage Certificates; Original
Issuance of Certificates
Section 2.01. Conveyance of the Mortgage Certificates.
---------------------------------------
The Depositor, concurrently with the execution and delivery hereof,
does hereby sell, transfer, assign, set-over and otherwise convey to Trustee, in
trust, for the use and benefit of the Certificateholders, without recourse, all
the rights, title and interest of the Depositor in and to the Mortgage
Certificates and all distribution with respect thereto and received subsequent
to the Cutoff Date, except as otherwise provided herein. The Depositor has
caused each Mortgage Certificate to be delivered to, and has caused each
Mortgage Certificate to be delivered to, and has used its best efforts to cause
each Mortgage Certificate to be registered in the name of, the Trustee or its
nominee. The transfer of the Mortgage Certificates is absolute and is intended
by the parties hereto as a sale. The Trustee acknowledges that each Mortgage
Certificates has been so delivered on or before the Closing Date. Except as
provided in Sections 2.02, 3.01, 5.08 and 6.01 hereof, the Trustee shall not
assign, sell, dispose of or transfer any interest in any Mortgage Certificate or
permit the Mortgage Certificates to be subjected to any lien, claim or
encumbrance arising by, through or under the Trustee or any person claiming by,
through or under Trustee. In conjunction with such sale, the Depositor shall
deliver to the Trustee a certificate of an independent firm of nationally
recognized certified public accountants verifying that (a) the principal amount
of the Mortgage Certificates equals or exceeds the principal amount of the
Certificates (not including any notional principal amount of the Class A-2
Certificates) and (b) the coupon rate of all of the Mortgage Certificates equals
or exceeds ___%.
Section 2.02. Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Trustee that:
-5-
<PAGE>
(a) the Depositor is the owner of each Mortgage Certificate free and
clear of any liens or the adverse interests of any person:
(b) the Depositor has acquired its ownership in such Mortgage
Certificates in good faith without notice of any adverse claim;
(c) the Depositor has not assigned any interest in such Mortgage
Certificates or any distributions thereon, except as contemplated herein
(or if any such interest has been assigned, it has been released);
(d) the information set forth with respect to each Mortgage
Certificate in the Mortgage Certificate Schedule is correct;
(e) the Depositor is a corporation organized, 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 and the
transactions contemplated thereby, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement;
and
(f) this Agreement has been duly executed and delivered by the
Depositor and constitutes the valid, legal and binding agreement of the
Depositor, enforceable in accordance with its terms, except that (a) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) the remedy of specific performance and
other forms of equitable relief may be subject to certain equitable
defenses and to the discretion of the court before which any proceeding
thereof may be brought.
The representations and warranties set forth in this Section 2.02
shall survive the transfer and assignment of the Mortgage Certificates. Upon
discovery by the Depositor or the Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other. Within 30 days or, with the prior written
consent of a Responsible Officer of the Trustee, such longer period specified in
such consent, of its discovery or its receipt of notice of breach, the
Depositor, with respect to breaches of the representations and warranties set
forth in clauses (a) through (d) inclusive, shall cure such breach in all
material respects or shall repurchase each affected Mortgage Certificate from
the Trustee, and, with respect to breaches of the representations and warranties
set forth in clauses (e) and (f), shall repurchase all the Mortgage Certificates
from the
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<PAGE>
Trustee to the extent such breach or breaches, individually or in the aggregate,
materially and adversely affect the interest of the Certificateholders in the
Mortgage Certificates. Any such repurchase by the Depositor shall be
accomplished at a price payable to the Trustee equal to the sum of (i) the
outstanding principal balance of the Mortgage Certificates to be repurchased on
the date of such repurchase, and (ii) all interest accrued but unpaid to the
Trustee on such principal balance, at the rate of interest borne by such
Mortgage Certificate, through the distribution date for such Mortgage
Certificate of the Distribution Period in which such repurchase was made. The
payment of the purchase price for any repurchased Mortgage Certificate shall be
considered a prepayment in full of the related Mortgage Certificate and shall be
deposited by the Depositor in the Certificate Account in accordance with the
provisions of Sections 3.01 hereof and, upon such deposit into the Certificate
Account, the related Mortgage Certificate 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 by
the Depositor to vest in the Depositor, or its designee or assignee, title to
any Mortgage Certificate repurchased pursuant hereto.
In lieu of its obligation to repurchase a Mortgage Certificate as to
which a breach has occurred and is continuing, the Depositor may remove such
Mortgage Certificate (a "Deleted Mortgage Certificate") from the Trust Fund and
substitute in its place a Replacement Mortgage Certificate; provided, however,
-------- -------
that no such substitution pursuant to this Section 2.02 may be effected unless
the Trustee shall have received: (i) an Opinion of Counsel satisfactory to it
to the effect that such substitution would not result in the Trust being
considered an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended, and (ii) an Opinion of Counsel satisfactory to
it that such substitution will not result in the classification of the Trust as
an association taxable as a corporation for federal or state income tax purposes
and that each holder of a Certificate will be treated as an owner of an
undivided interest in the income and corpus attributable to the Trust and as the
equitable owner of the Percentage Interest in the Mortgage Certificates and
other property included in the Trust evidenced by such Certificate.
[Each such replacement Mortgage Certificate shall, on the date of
substitution, have (i) a pass-through rate equal to the pass-through rate of the
Deleted Mortgage Certificate for which it is substituted, (ii) an outstanding
principal balance equal to or greater than the principal balance of the Deleted
Mortgage Certificate for which it is substituted, (iii) a remaining term to
maturity no less than the remaining term to maturity of the Deleted Mortgage
Certificate for which it is substituted and (iv) the same or an equivalent
rating as the
-7-
<PAGE>
rating of the Deleted Mortgage Certificate for which it is substituted.]
Monthly payments due with respect to a replacement Mortgage
Certificate in the month of substitution are not part of the Trust Fund and will
be retained by the Trustee and remitted by the Trustee to the Depositor on the
next succeeding Distribution Date. For the month of substitution, distributions
to Certificateholders will include the monthly payment due on the related
Deleted Mortgage Certificate for such month and thereafter the Depositor shall
be entitled to retain all amounts received in respect of such Deleted Mortgage
Certificate. The Trustee shall amend the Mortgage Certificate Schedule to
reflect the removal of such Deleted Mortgage Certificate and the substitution of
the Replacement Mortgage Certificate or Certificates. Upon such substitution,
the Replacement Mortgage Certificate or Certificates shall be subject to the
terms of this Agreement in all respects, and the Depositor shall be deemed to
have made with respect to such Replacement Mortgage Certificate or Certificates,
as of the Date of Substitution, the covenants, representations and warranties
set forth in this Section 2.02, and the Trustee shall release such Deleted
Mortgage Certificate to the Depositor 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 Depositor or its designee, as the case may be,
to any Deleted Mortgage Certificate substituted for pursuant to this Section
2.02.
The obligation of the Depositor to repurchase or to substitute for any
Mortgage Certificate 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. The Trustee
may take legal action to enforce the Depositor's obligation to repurchase or
substitute for such Mortgage Certificates. The reasonable legal fees and
expenses incurred by the Trustee in connection with any such legal action shall
be reimbursable to the Trustee out of the proceeds of any such action and shall
be retained by the Trustee prior to the deposit of any remaining proceeds in the
Certificate Account pending distribution thereof to Certificateholders in
accordance with Section 3.02 hereof.
Section 2.03. Issuance of Certificates.
------------------------
The Trustee acknowledges the transfer and delivery to it of the
Mortgage Certificates and declares that it holds and will hold such Mortgage
Certificates in trust for the benefit of all present and future
Certificateholders and, that concurrently with such transfer and delivery, it
has caused to be executed and delivered to or upon the order of the Depositor,
the Certificates duly executed by the Trustee in authorized Denominations,
registered in such names as the Depositor has requested. If so requested by the
Depositor and conditioned upon receipt by the
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<PAGE>
Trustee of registration instructions and blank Certificates from the Depositor
at least three Business Days prior to such date, the Trustee shall make such
Certificates available to the Depositor or its agent at least one full Business
Day prior to the Closing Date.
Section 2.04. Payment to Depositor.
--------------------
The Trustee hereby acknowledges that interest and principal payments
on the Mortgage Certificates due on or prior to the Cutoff Date are not the
property of the Trust Fund. The Trustee shall remit any such interest or
principal to the Depositor in immediately available funds no later than the
Business Day on which such interest or principal is received by the Trustee as
long as such funds are cleared funds in the hands of the Trustee by 1 p.m.,
__________ time, on such Business Day and, if not so received on such date or if
not received in immediately available funds, on the next succeeding Business
Day.
ARTICLE III.
Administration of the Mortgage Certificates
Section 3.01. Collection of Payments on the Mortgage
--------------------------------------
Certificates; Certificate Account.
---------------------------------
The Trustee, for the benefit of the Certificateholders, shall
establish and maintain a separate non-interest-bearing custodial account in the
trust department of a depository institution (which may be the Trustee)
organized under the laws of the United States or any state thereof the deposits
of which are insured to the full extent permitted by law by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation (the
"Certificate Account"). The Trustee shall deposit in the Certificate Account,
as soon as practicable after receipt, each distribution of interest and
principal and all other payments or amounts made to the Trustee with respect to
the Mortgage Certificates. If the Trustee shall not have received a
distribution with respect to a Mortgage Certificate by the [ ] Business
Day after the date on which such distribution was due and payable pursuant to
the terms of such Mortgage Certificate, the Trustee shall request the issuer or
guarantor, if any, of such Mortgage Certificate to make such payment as promptly
as possible and legally permitted and shall, subject to the penultimate sentence
of this paragraph, take such legal action against such issuer or guarantor, if
any, as the Trustee shall deem 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 shall be reimbursable to the Trustee out of the proceeds
of any such action and shall be retained by the Trustee prior to the deposit
-9-
<PAGE>
of any remaining proceeds in the Certificate Account pending distribution
thereof to Certificateholders in accordance with Section 3.02 hereof. Any
amounts retained by the Trustee shall reduce the Mortgage Certificate Interest
Distribution and the Mortgage Certificate Principal Distribution in an amount
equal to the product obtained by multiplying the amount retained by the
percentage of the total distribution represented by the Mortgage Certificate
Interest Distribution and Mortgage Certificate Principal Distribution,
respectively. 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 shall notify the
Certificateholders that it is not obligated to pursue any such available
remedies unless adequate indemnity for its legal fees and expenses is provided
to the Trustee, and the Trustee shall take such action as shall be appropriate
under the circumstances, provided however, that nothing herein shall effect the
rights of the Trustee under the second paragraph of Section 5.06 hereof. All
income or gain on the amounts deposited in the Certificate Account shall be for
the benefit of the Trustee.
Section 3.02. Distributions.
-------------
On each Distribution Date, the Trustee shall distribute to each
Certificateholder of record on the preceding Record Date 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
shall be made only upon presentation and surrender of such Certificate at the
office of the Trustee specified in the notice to Certificateholders of such
final distribution. Wire transfers shall be made at the expense of
Certificateholders requesting such wire transfers by deducting a wire transfer
fee from the related transfer.
Section 3.03. Statements to Certificateholders.
--------------------------------
With or prior to each distribution on the Certificates the Trustee
shall forward by mail a statement to each Certificateholder stating:
(i) the amount of principal distributable on such Distribution
Date to the Holder of a Single Certificate of the same Class as the Certificate
held by the Certificateholder receiving such notice;
(ii) the amount of interest distributable on such Distribution
Date to the Holder of a Single Certificate of the same Class as the Certificate
held by the Certificateholder receiving such notice;
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<PAGE>
(iii) the total amount of principal distributed;
(iv) the total amount of interest distributed;
(v) the aggregate principal balance of the Mortgage Certificates
as of such Distribution Date after giving effect to the distribution of
principal made thereon in the prior Distribution Period;
(vi) the amount, if any, retained by the Trustee pursuant to
Section 3.01 and the reductions in the Mortgage Certificate Interest
Distribution and the Mortgage Certificate Principal Distribution resulting
therefrom; and
(vii) the amount of fees deducted by the Trustee in accordance
with Section 5.06 hereof.
On or before March 1st of each calendar year, beginning with calendar
year 199__, the Trustee shall prepare and deliver by first class mail to each
Person who at any time during the previous calendar year was a Certificateholder
of record a statement containing the information required to be contained in the
regular monthly report to Certificateholders, as set forth in subclauses (i),
(ii), (iii), (iv), (vi), (vii) and (viii) above aggregated for such calendar
year or the applicable portion thereof during which such Person was a
Certificateholder, together with such other information as the Trustee deems
necessary or desirable to enable the Certificateholders to prepare their tax
returns. The Depositor shall provide to the Trustee any reasonable and
necessary information to enable Certificateholders to prepare their tax returns.
Section 3.04. Annual Statement as to Compliance.
---------------------------------
The Trustee shall deliver, with each annual report delivered pursuant
to Section 3.03 above, an Officers' Certificate stating that (a) a review of the
activities of the Trustee during the preceding calendar year and of its
performance under this Agreement has been made under the supervision of the
officer signing such certificate and (b) to the best of such officer's
knowledge, based on such review, the Trustee has fully performed its obligations
under this Agreement throughout such year, or, if there has been a default in
the performance of any such obligation, specifying each such default known to
such officer, the nature and status thereof and the steps, if any, taken to
remedy such default.
Section 3.05. Annual Independent Public Accountants' Report.
---------------------------------------------
On or before December 31 of each calendar year, beginning with
December 31, 199__, the Trustee, at its expense, shall cause a firm of
nationally recognized independent public accountants to prepare and furnish a
statement to each
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<PAGE>
Certificateholder to whom reports are mailed pursuant to Sections 3.03 hereof to
the effect that such firm has examined the necessary documents and records
relating to the Mortgage Certificates and the Certificates, including, but not
limited to, the Agreement, and the statements prepared and delivered by the
Trustee pursuant to Section 3.03 hereof and that, on the basis of such
examination, nothing came to their attention that caused them to believe that
the statements prepared and delivered pursuant to Section 3.03 have not been
prepared in accordance with such Section except for (a) such exceptions as such
firm shall believe to be immaterial and (b) such other exceptions as shall be
set forth in such statement.
Section 1.036. Access to Certain Documentation and Information.
-----------------------------------------------
The Trustee shall provide access to the Certificateholders of a copy
of each report received by it with respect to each of the Mortgage Certificates
and access to all reports, documents and records maintained by the Trustee in
respect of its duties hereunder, such access being afforded without charge but
only upon reasonable request and during normal business hours at offices
designated by the Trustee.
ARTICLE IV.
The Certificates
Section 1.041. The Certificates.
----------------
The Certificates shall be substantially in the form set forth in
Exhibit A hereto. The Class A-1 Certificates will be offered in fully
registered form, in minimum denominations of $_________ original principal
amount and multiples of $_________ in excess thereof. The Class A-2
Certificates will be offered in fully registered form, in minimum denominations
of $________ original notional amount and multiples of $_______ in excess
thereof. The Certificates shall, on original issue, be executed by the Trustee,
not in its individual capacity but solely as Trustee, and countersigned and
delivered by the Trustee to or upon the order of the Depositor upon receipt by
the Trustee of the Mortgage Certificates registered in its name. The
Certificates shall be executed by manual or facsimile signature on behalf of the
Trustee by an authorized officer under its seal imprinted thereon. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of them
have ceased to be so authorized prior to the execution and delivery of such
Certificates. No Certificates shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless such Certificate shall have been
executed by the Trustee and authenticated by the
-12-
<PAGE>
Registrar substantially in the form set forth in Exhibit A hereto, and such
executed authentication upon any Certificate shall be conclusive evidence, and
the only evidence, that such Certificate has been duly authorized and delivered
hereunder. All Certificates shall be dated the date of their execution and
delivery.
Section 4.02. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
The Trustee shall cause to be kept as its Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and of
transfers of Certificates as herein provided.
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.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized Denominations upon surrender of the
Certificates to be exchanged at the Corporate Trust Office of the Trustee.
Whenever any Certificates are so surrendered for exchange, the Trustee shall
execute 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.
All Certificates surrendered for registration of transfer and exchange
shall be destroyed by the Trustee without liability on its part.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (i) any mutilated Certificate is surrendered to the Trustee or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and of the ownership thereof, and (ii) there is delivered to
the Trustee such security or indemnity as may be required by it to save it
harmless, then, in the absence of receipt by the Trustee 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. 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
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<PAGE>
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 ownership of a like Percentage
Interest as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time. All Certificates surrendered to the
Trustee under the terms of this Section 4.03 shall be destroyed by the Trustee
without liability on its part.
Section 4.04. Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of
transfer, the Trustee and any agent of the Trustee 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 3.02 and for all other
purposes whatsoever, and neither the Trustee nor any agent of the Trustee shall
be affected by notice to the contrary.
ARTICLE V.
The Trustee
Section 5.01. Liability of the Trustee.
------------------------
The Trustee shall be liable in accordance herewith only to the extent
provided in Section 5.04 and only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein.
The Trustee, upon receipt of all certificates, opinions, documents or
other instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall determine whether
they are in the form required by this Agreement; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any such
certificate, opinion, document or other instrument furnished pursuant to this
Agreement.
The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties.
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
-14-
<PAGE>
hereunder in good faith and in accordance with such Opinion of Counsel.
Section 5.02. Representations and Warranties of the Trustee.
---------------------------------------------
The Trustee represents and warrants that:
(i) the Trustee is a banking corporation organized, existing and
in good standing under the laws of the _____________________________;
(ii) the Trustee has full power, authority and right to execute,
deliver and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement; and
(iii) this Agreement has been duly executed and delivered by the
Trustee and constitutes the valid, legal and binding agreement of the Trustee,
enforceable in accordance with its terms, except that (a) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
Section 5.03. Merger or Consolidation of the Trustee.
--------------------------------------
Any Person into which the Trustee may be merged or 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 business of the
Trustee shall be the successor of the Trustee 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. The Trustee may sell
and any Person may purchase all or substantially all of the assets of the
Trustee; provided that such Person assumes in writing all of the obligations and
--------
liabilities of the Trustee hereunder.
Section 5.04. Limitation on Liability of the Trustee and Others.
-------------------------------------------------
In entering into this Agreement the Trustee acts solely as trustee
hereunder and not in its individual capacity; and all persons having any claim
under this Agreement by reason of the transactions contemplated hereby shall
look only to the Trust Fund for payment or satisfaction thereof, subject to this
Section 5.04. The Trustee shall not be responsible for the validity or
sufficiency of any assignment or registration of the Mortgage Certificates, or
for any depreciation in the value of the Trust Fund, subject to this Section
5.04.
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<PAGE>
Neither the Trustee nor any of the directors, officers, employees or
agents of the Trustee shall be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee or any such
- -------- -------
person against liability for any breach of warranty or representations made
herein or against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Trustee
and any director, officer, employee or agent of the Trustee shall be indemnified
by the Trust Fund and held harmless against any loss, liability or expense,
including reasonable attorneys' fees, incurred in connection with investigating,
preparing or defending any legal action, commenced or threatened, relating to
this Agreement or the Mortgage Certificates, 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 willful disregard of
obligations and duties hereunder. The Trustee shall not be under any obligation
to appear in, prosecute or defend any legal action which is not incidental to a
default by the issuer or guarantor, if any, of the Mortgage Certificates under
the circumstances described in Section 3.01 or of the Depositor pursuant to
Section 2.02; provided, however, that the Trustee shall at the request of
-------- -------
Holders of Certificates evidencing Percentage Interests aggregating not less
than 66-2/3% of each Class of Certificates undertake any legal action that the
Trustee or the Certificateholders making such request shall specify with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event the legal fees and
expenses of such action and any liability therefrom shall be borne by
Certificateholders pursuant to indemnity furnished by them as a precondition to
the Trustee's obligation to take any such action pursuant to any such request.
Section 5.05. Delegation of Duty by Trustee.
-----------------------------
In carrying out its obligations under this Agreement, the Trustee may
employ agents, attorneys, accountants and auditors, and shall not be answerable
for the default or misconduct of any such agents, attorneys, accountants or
auditors if such agents, attorneys, accountants or auditors shall have been
selected with reasonable care.
Section 5.06. Trustee's Fees and Expenses.
---------------------------
On each Distribution Date, the Trustee shall deduct, from
distributions of interest with respect to the Mortgage Certificates, a servicing
fee equal to the product of one-twelfth of ____% and the aggregate unpaid
principal balance of the Mortgage Certificates during the Distribution Period
prior to the
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<PAGE>
Distribution Date, on the basis of the applicable pool factors (or, if such pool
factors are not available, on the basis of reports provided to the Trustee by
the services of such Mortgage Certificates) for the Mortgage Certificates during
such Distribution Period (the "Servicing Fee"). The Servicing Fee payable on
each Distribution Date shall be reduced to the extent that the aggregate amount
in the Certificate Account is less than the amount required to make the Mortgage
Certificate Principal Distribution and the Mortgage Certificate Interest
Distribution. In the event that on any Distribution Date the Trustee does not
receive the full amount of the Servicing Fee described in the preceding
sentence, the amount of the deficiency shall be carried forward and included as
part of the Servicing Fee to be deducted by the Trustee from the Servicing
Account on each succeeding Distribution Date until paid in full. The Trustee
shall in no event acquire any lien upon the Trust Fund, or any claim against the
Holders, by reason of its nonreceipt of the Servicing Fee, and the Trustee
shall, unless and until the effective date of any resignation of the Trustee
under Section 5.07, continue to perform its obligations hereunder
notwithstanding such nonreceipt.
The Trustee shall be required to pay all expenses, except as expressly
provided herein, incurred by it or its agents in connection with its activities
hereunder (including expenses relating to retaining the independent accountants
referred to in Section 3.05, the annual fees for maintaining the rating of the
Certificates and compensation of any registrar or coregistrar) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
No provision of this Agreement or of the Certificates shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or thereunder, or in
the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
Section 5.07. Resignation and Removal of the Trustee.
--------------------------------------
The Trustee may at any time resign and be discharged of the trust
created by this Agreement by (1) executing an instrument in writing resigning as
Trustee of such trust, filing the same with the Depositor and mailing a copy of
a notice of resignation to all Holders then of record, the Certificate Registrar
(if other than the Trustee) and any coregistrar, not less than 60 days before
the date specified in such instrument when, subject to Section 5.08, such
registration is to take effect, and (2) appointing a successor Trustee in the
manner and meeting the qualifications hereinafter provided. Upon any such
resignation or discharge, the Trustee shall notify the Rating Agencies.
-17-
<PAGE>
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 to
the successor trustee.
The Holders of Certificates evidencing Percentage Interests
aggregating not less than 66-2/3% of each Class of Certificates may at any time
remove the Trustee and appoint a successor trustee by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, one complete set to the Trustee so removed and one complete set
to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee and the
satisfaction of the other conditions as provided in Section 5.08 hereof.
Section 5.08. Successor Trustee.
-----------------
Any successor trustee, appointed as provided in Section 5.07 hereof,
shall execute, acknowledge and deliver to the Depositor and to the 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 like effect as if originally named as Trustee
herein. The predecessor Trustee shall transfer to the successor trustee the
Mortgage Certificates in accordance with the requirements of applicable law and
shall turn over all related documents and statements held hereunder. In
addition, the predecessor Trustee and, upon request of the successor trustee,
the Depositor, 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, subject, however, to the payment of all amounts due the predecessor
Trustee under this Agreement.
Upon acceptance of appointment by a successor trustee as provided in
this Section 5.08, the Depositor shall mail notice of the succession of such
Trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register. If the Depositor fails to mail such notice within 10
days after acceptance of appointment by the successor trustee,
-18-
<PAGE>
the successor trustee shall cause such notice to be mailed at the expense of the
Depositor.
No successor trustee shall accept appointment as provided in this
Section unless (1) at the time of such acceptance such successor trustee shall
be qualified to serve as trustee under Section 5.09, (2) at such time, it shall
accept compensation, as evidenced in writing, not in excess of that provided
under Section 5.06 and (3) it has been determined, as evidenced by a letter from
each of the Rating Agencies that initially rated the Certificates, that the then
current rating of the Certificates by such Rating Agencies or, in the absence of
any such rating, as evidenced by a letter from each nationally recognized rating
agency then rating the Certificates, the then current ratings of the
Certificates by such rating agency would not be affected thereby.
Section 5.09. Qualification of Trustee and Corporate Trust Office.
---------------------------------------------------
The Trustee hereunder shall at all times be a banking corporation
having its principal office in New York, New York or _________________________
and organized and doing business under the laws of the United States, or any
state thereof, authorized under such laws to exercise corporate trust powers,
having at all times a combined capital and surplus of not less than $50,000,000
and subject to examination or supervision by Federal or state authority. In
case at any time the Trustee shall cease to be qualified in accordance with this
Section, the Trustee shall immediately resign in the manner and with the effect
specified in Section 5.07. So long as this Agreement remains in effect, the
Trustee shall make arrangements with the New York Presenting Agent to maintain
in New York, New York an office where Certificates may be presented for payment.
The Trustee shall give each Certificateholder at least thirty days' notice by
first-class mail of any change in the location of its Corporate Trust Office or
in the location of the New York Presenting Agent where Certificates may be
presented for transfer, exchange and payment.
No Trustee hereunder shall be personally liable hereunder by reason of
any act or failure to act of any predecessor or successor trustee hereunder.
Section 5.10. Trustee or Depositor May Own Certificates.
-----------------------------------------
The Trustee and the Depositor, in their individual, or in any other,
capacities may become the owners or pledgees of the Certificates with the same
rights as either of them would have if they were not Trustee or Depositor.
ARTICLE VI.
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<PAGE>
Termination
Section 6.01. Termination Upon Final Distribution to Certificateholders.
---------------------------------------------------------
This Agreement and the respective obligations and responsibilities of
the Depositor and the Trustee created hereby shall terminate upon the final
distribution to Certificateholders of all amounts required to be distributed
pursuant to Article III; provided, however, that in no event shall the trust
-------- -------
created hereby continue beyond the expiration of 21 years from the death of the
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James, living on the date hereof. Payment of
such final distribution shall only be made to Certificateholders upon surrender
of Certificates as provided in Section 6.02. The Trustee shall notify the
Rating Agencies of the Distribution Date on which the final distribution on the
Certificates is made within five days of such Distribution Date.
Section 6.02. Failure of Certificateholders to Surrender Certificates.
-------------------------------------------------------
Written 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 by the Trustee to
Certificateholders mailed not earlier than the 1st day and not later than the
10th day of the month of such final distribution specifying (a) the Distribution
Date upon which final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office therein designated, (b) the amount
of any such final payment and (c) 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 therein specified.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the final
Distribution Date specified pursuant to this Section, the Trustee 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 one year after such notice all the Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the final distribution due such Certificateholder.
-20-
<PAGE>
ARTICLE VII.
Miscellaneous Provisions
Section 7.01. Amendment.
---------
This Agreement may be amended from time to time by the Trustee and the
Depositor, 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 from time to time by the Trustee and the Depositor with the
consent of the Holders of Certificates evidencing Percentage Interests
aggregating not less than 66-2/3% of each Class of Certificates affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; 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 Mortgage Certificates
are required to be distributed on any Certificate without the consent of the
Holder of such Certificate or (ii) reduce the aforesaid percentage of the
Certificates of each Class the Holders of which are required to consent to any
such amendment without the consent of the Holders of all Certificates 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 and to
the Rating Agencies.
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 7.02. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, or entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Fund, nor
-21-
<PAGE>
otherwise affect the rights, obligations and liabilities of any of the parties
hereto.
No Certificateholder shall have any right to vote (except as provided
in Section 7.01) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
Except in the case of an action, suit or proceeding against the
Trustee in respect to a breach or alleged breach of its duties and
responsibilities hereunder, no Certificateholder shall have any right by virtue
of any provisions of this Agreement to institute an action, suit 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 the basis
of such action, suit or proceeding, and unless also the Holders of Certificates
evidencing Percentage Interests aggregating not less than 51% of the same Class
of Certificates shall have made written request upon the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to the Trustee such 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 Holder of a
Certificate of the same Class and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates of the same Class, or to obtain or
seek to obtain priority over or preference to any other such Holder of
Certificates of the same Class, or to enforce any right under this Agreement,
except in the manner herein provided and for the equal, ratable and common
benefit of all Holders of Certificates of the same Class. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 7.03. 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 Fund or the
Certificateholders for any
-22-
<PAGE>
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
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. Except as provided in Section
2.02, the Depositor shall not have any responsibility or liability for any
action or failure to act by the Trustee or by the issuer or the guarantee, if
any, of the Trustee or by the issuer or the guarantor, if any, of the Mortgage
Certificates and is not obligated to supervise the performance of the Trustee or
of such issuer or the guarantor, if any, under this Agreement or otherwise.
Section 7.04. Governing Law.
-------------
This Agreement shall be construed in accordance with the 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 7.05. Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by registered mail, postage prepaid, to (a) in the case of the Depositor, Asset
Backed Securities Corporation, Attention: _______________, __________, or to
such other address as may hereafter be furnished to the Trustee, or (b) in the
case of the Trustee, _________________, Attention: ___________________,
______________, or (c) in the case of the Rating Agencies,
________________________, Attention: _________________________ or to such other
address as may hereafter be furnished to the Depositor in writing by the Trustee
or such Rating Agencies. 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 7.06. 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
-23-
<PAGE>
other provisions of this Agreement or of the Certificates or the rights of the
Holders thereof.
Section 7.07. Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is intended that Certificateholders shall not be personally liable
for obligations of the Trust, that the Percentage Interests 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 2.02 are and shall be deemed fully paid for by
such Certificateholder.
-24-
<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 CORPORATION,
as Depositor
By_________________________________
___________________________________
as Trustee
By_________________________________
-25-
<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; and that he signed his name thereto by
order of the Board of Directors of said corporation.
___________________________________
Notary Public
[NOTARIAL SEAL]
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
__________________________, the banking corporation described in and which
executed the above instrument; and that he signed his name thereto by order of
the Board of Directors of said corporation.
_________________________________
Notary Public
[NOTARIAL SEAL]
-26-
<PAGE>
Exhibit A
(Form of Face of Certificate)
CONDUIT MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES
("Certificates") CLASS ___ -___
Evidencing an undivided Percentage Interest in the Class ___ -___
Distribution Amount from a Trust, the corpus of which consists of certain
mortgage pass-through certificates issued by one or more trusts established by
one or more private entities (the "Mortgage Certificates") and transferred to
such Trust 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, __________ OR ANY OF ITS
AFFILIATES OR OF ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
[THE NOTIONAL AMOUNT FOR THE CLASS A-2 CERTIFICATES IS EQUAL TO THE UNPAID
PRINCIPAL BALANCE OF THE MORTGAGE 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 MORTGAGE CERTIFICATES].
No. _______________________ ISSUE DATE: ___________________, 199__
ISSUE PRICE:_________________________%
Denomination $________________
Aggregate Denominations of all
Class __ -__ Certificates $_________________
A-1
<PAGE>
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 ___ -___
Certificates specified above in each Class ___ -___ Distribution Amount from the
property of a trust (the "Trust") consisting of certain mortgage pass-through
certificates (the "Mortgage Certificates") and transferred to the Trust by Asset
Backed Securities Corporation (the "Depositor"). The Trust was created pursuant
to a deposit trust agreement dated as of _____, 199___ (the "Agreement") between
the Depositor 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. To the extent not
defined herein, capitalized terms used herein have the meanings assigned to them
in the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
The Agreement requires the distribution on each monthly Distribution
Date (as defined in the Agreement) 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 preceding the month of such distribution (the "Record
Date"), an amount equal to the product of the Percentage Interest evidenced by
this Certificate and the Class ___ -___ Distribution Amount for such
Distribution Date. Pursuant to the Agreement, the Class __ -__ Distribution
Amount for a particular Distribution Date consists of ___% of the principal
distributions on the Mortgage Certificates that become cleared funds in the
hands of the Trustee during the related Distribution Period and ___% of the
interest distributions, net of the Servicing Fee, as set forth in Section 5.06
of the Agreement, on the Mortgage Certificates received during such Distribution
Period.
Distributions on this Certificate will be made, after deducting any
amounts retained by the Trustee pursuant to Section 3.01 and any amounts payable
to the Trustee pursuant to Section 5.06 of the Agreement, 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 the Certificates will be made only upon presentation and surrender of the
Certificates at the office of the New York Presenting Agent 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.
A-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof which provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be duly
executed as of the date hereof.
Date: ______________________________
not in its individual capacity
but solely as Trustee
By_________________________________
[Title]
A-3
<PAGE>
(Form of Certificate of Authentication)
THIS IS ONE OF THE CERTIFICATES REFERRED TO IN
THE WITHIN-MENTIONED AGREEMENT
______________________________
REGISTRAR
BY ____________________________________
AUTHORIZED SIGNATORY
A-4
<PAGE>
(Form of Reverse of the Certificates)
This Certificate is one of a duly authorized issue of Conduit Mortgage
Pass-Through Certificates, Series 199__-___ ("Certificates") (herein called the
"Certificates") issued in two classes (the "Class A-1 Certificates" and the
Class A-2 Certificates"), all under the Agreement to which reference is hereby
made for a statement of the respective rights thereunder of the Depositor, the
Trustee and the Holders of the Certificates and the terms upon which the
Certificates are authenticated and delivered. The Certificates are limited in
right of payment to the Percentage Interests represented thereby in
distributions on the underlying Mortgage Certificates, all as more specifically
set forth herein and in the Agreement.
The Class A-1 Certificates will be offering in fully registered form,
in minimum denominations of $___ original principal amount and multiples of $___
in excess thereof. The Class A-2 Certificates will be offered in fully
registered form, in minimum denominations of $____ original notional amount and
multiples of $____ in excess thereof. The transfer of any Certificate may be
registered in the Certificate Register of the Trustee upon surrender of such
Certificate at the office of the New York Presenting Agent, or the Corporate
Trust Office of the Trustee in __________________________, duly endorsed by, or
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, and thereupon one or more new Certificates in registered form and
authorized Denominations will be issued to the designated transferee or
transferees.
The Trustee may deem and treat the person in whose name this Certificate is
registered as the absolute owner thereof for all purposes, whether or not such
Certificate shall be overdue and notwithstanding any notation of ownership or
other writing thereon, and the Trustee shall not be affected by any notice to
the contrary.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Holders of the Certificates under the Agreement at
any time by the Depositor and the Trustee with the consent of the Holders of
Certificates evidencing Percentage Interests aggregating not less than 66-2/3%
of each Class of Certificates affected thereby; 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 the 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
A-5
<PAGE>
required to consent to any such amendment. The Agreement also contains
provisions permitting the Holders of Certificates evidencing aggregate specified
Percentage Interests of each Class of Certificates to waive compliance by the
Trustee with certain provisions of the Agreement and certain past defaults under
the Agreement and their consequences. Any such consent and waiver 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 hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Certificate. The
Agreement also permits the Trustee to amend or waive certain terms and
conditions set forth in the Agreement without the consent of Holders of the
Certificates issued thereunder.
A-6
<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, of
assignee)
the Percentage Interest in each Class -__ 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
Percentage Interest to the above named assignee and to deliver such Certificate
to the following
address:__________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Dated:_______________________
_________________________________________
Tax Identification: Signature by or on behalf of assignor
No. of Assignee: (signature must be signed as registered)
_____________________________ _________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Trustee:
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 ___________________________, or its agent.
A-7
<PAGE>
Exhibit 10.1.1
================================================================================
FORM OF RECEIVABLES PURCHASE AGREEMENT
Dated as of [ ], 199[ ]
between
ASSET BACKED SECURITIES CORPORATION,
as Company
and
[SELLER NAME],
as Seller
CS FIRST BOSTON AUTO
RECEIVABLES TRUST
199[ ]-[ ]
================================================================================
<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 the ("Company").
W I T N E S S E T H:
WHEREAS, the Company desires to purchase the Receivables (hereinafter
defined) from Seller;
WHEREAS, the Seller desires to sell and assign the Receivables to the
Company upon the terms and conditions hereinafter set forth;
WHEREAS, it is contemplated that the Receivables purchased hereunder
will be transferred by the Company to the Trust (hereinafter defined) in
connection with the issuance of certain Certificates [and certain Notes]; and
WHEREAS, the Seller agrees that all covenants and agreements made by
the Seller herein with respect to the Receivables shall also be for the benefit
of the Trustee (hereinafter defined) and all beneficiaries of the Trust,
including the holders of the Certificates [and the Notes].
NOW, THEREFORE, it is hereby agreed by and between the Company 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][Sale] and Servicing Agreement; in addition, the
following words and phrases shall have the following meanings:
"Agreement" shall mean this Receivables Purchase Agreement and all
---------
amendments hereof and supplements hereto.
"Closing Date" shall mean _____________ __, 199__.
------------
"Company" shall mean Asset Backed Securities Corporation, a Delaware
-------
corporation.
"Conveyance" shall have the meaning specified in subsection 2.01(a).
----------
-1-
<PAGE>
"Conveyance Papers" shall have the meaning specified in subsection
-----------------
4.01(c).
"Cutoff Date" means _____________________________.
-----------
"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.
["Indenture" shall mean the Indenture dated as of [___________],
---------
199[ ], between the Trust, as Issuer, and the Indenture Trustee.]
"Insolvency Event" shall have the meaning specified in Section 8.02.
----------------
["Indenture Trustee" shall have the meaning set forth in the
-----------------
Indenture.]
"Obligor" shall mean, with respect to each Receivable, the purchaser
-------
or co-purchasers of the Financed Vehicle and any other Person who owes payments
under the Receivable.
["Pooling and Servicing Agreement" shall mean the Pooling and
-------------------------------
Servicing Agreement, dated as of [ ], 199[ ], among [Servicer Name], as
servicer, the Company, as depositor and the Trustee, and all amendments and
supplements thereto.]
"Purchase Price" shall have the meaning set forth in Section 3.01.
--------------
"Purchased Assets" shall have the meaning set forth in Section 2.01.
----------------
"Receivables" shall mean Receivables as defined in the [Pooling]
-----------
[Sale] and Servicing Agreement, existing or created after the Cut Off Date.
"Repurchase Price" 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.
["Sale and Servicing Agreement" shall mean the Sale and Servicing
----------------------------
Agreement, dated as of [ ], 199[ ], among the Trust, as issuer, the
Company and ________________________, as Servicer.]
-2-
<PAGE>
"Seller" shall mean [Seller Name], a [______________] corporation and
------
its successors and permitted assigns.
"Trust" shall mean the trust created by [the Pooling and Servicing
-----
Agreement] [Trust Agreement].
["Trust Agreement" shall mean the Trust Agreement, dated as of [ ],
---------------
199[ ], between the Company and the Trustee.]
"Trustee" shall mean [Trustee Name], a [_____________] banking
-------
corporation, the institution executing the [Pooling and Servicing
Agreement][Trust 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] [Trust Agreement].
SECTION 1.012. 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 balance of Receivables, and
of any collections thereof, shall be made in accordance with the [Pooling]
[Sale] and Servicing Agreement.
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 the Company (collectively,
the "Conveyance"), without recourse except as provided herein, all its right,
title and interest in, to and under the following (the "Purchased Assets"):
(i) 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
-3-
<PAGE>
after the Cutoff Date, in the case of Simple Interest Receivables;
(ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the
Seller in such Financed Vehicles;
(iii) 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;
(iv) any Financed Vehicle that shall have secured any such
Initial Receivable and shall have been acquired by or on behalf of the
Seller, the Servicer or the Trust;
(v) all other assets comprising the estate of the Trust; and
(vi) the proceeds of any and all of the foregoing.
(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 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 the
Company, (ii) that such financing statements shall name the Seller, as seller,
and the Company, 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
the Company 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 the Closing Date indicate
in its computer files that the Receivables have been conveyed to the Company in
accordance with this Agreement and have been conveyed by the Company to the
Trustee pursuant to the [Pooling and Servicing] [Trust] Agreement for the
benefit of the Certificateholders [and the Noteholders] and (ii) on or prior to
the Closing Date deliver to the Company a computer file or microfiche list
containing a true and complete list of the Receivables specifying for each
Receivable, as of the Cutoff Date, (A) its account number, (B) the aggregate
amount outstanding on such Receivable. Such file or list shall be marked as
Schedule I to this Agreement, shall be delivered to the Company, and is hereby
incorporated into and made a part of this
-4-
<PAGE>
Agreement. The Seller further agrees not to alter the indication referenced in
clause (i) of this paragraph with respect to any Receivable during the term of
this Agreement.
(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 the Company. 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 the Company 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 the Company hereunder and the
obligations of the Seller hereunder.
ARTICLE III.
CONSIDERATION AND PAYMENT
-------------------------
SECTION 3.01. Purchase Price. The "Purchase Price" for the
--------------
Receivables conveyed to the Company under this Agreement shall be payable on the
Closing Date and shall be an amount equal to [100% of the aggregate balance of
Receivables so conveyed, adjusted to reflect such factors as the Seller and the
Company mutually agree will result in a Purchase Price determined to be the fair
market value of such Receivables].
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
- -------------
the Company as of the Closing Date that:
(a) Organization and Good Standing. The Seller 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,
-5-
<PAGE>
the corporate power, authority and legal right to acquire, own and sell the
Receivables.
(b) Due Qualification. The Seller 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 Seller has the corporate power and
-------------------
authority to execute and deliver this Agreement and to carry out its terms; the
Seller has full power and authority to sell and assign the property to be sold
and assigned to the Company and deposited with the Trustee as part of the Trust,
and the Seller shall have duly authorized such sale and assignment to the Seller
by all necessary corporate action; and the execution, delivery and performance
of this Agreement shall have been duly authorized by the Seller by all necessary
corporate action.
(d) Binding Obligation. This Agreement when executed and delivered by
------------------
the Seller shall constitute a legal, valid and binding obligation of the Seller
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 Seller or any material term of any indenture,
agreement or other instrument to which the Seller 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 Seller's knowledge, any order, rule or regulation applicable to
the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Seller's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties: (1) asserting the
invalidity of this Agreement; (2) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
-6-
<PAGE>
contemplated by this Agreement; (3) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement; or (4)
relating to the Seller and that might materially and adversely affect the
federal income tax attributes of the Certificates [or the Notes].
(g) Corporate Existence. During the term of this Agreement, the
-------------------
Seller 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.
The representations and warranties set forth in this Section 4.01
shall survive the transfer and assignment of the Receivables to the Company.
Upon discovery by the Seller or the Company 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 the Company as of the date of this Agreement and as of the Closing
Date that:
(i) Characteristics of Receivables. Each Receivable (1)
------------------------------
was originated by the Seller or acquired from a motor vehicle dealer or
another financial institution by the Seller in the ordinary course of the
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 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 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.
-7-
<PAGE>
(ii) 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.
(iii) 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.
(iv) 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).
(v) 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.
(vi) 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 Seller 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 Seller as secured party.
-8-
<PAGE>
(vii) 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.
(viii) 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 Seller with respect thereto.
(ix) 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.
(x) No Defenses. No facts are known to the Seller 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.
(xi) No Liens. To the best of the Seller'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.
(xii) 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 Seller has not waived and shall not waive
any of the foregoing.
(xiii) Insurance. The 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.
(xiv) Title. It is the intention of the Seller that the
-----
transfer and assignment herein contemplated constitute a sale of the
Receivables from the Seller to the Company 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 Seller.
No Receivable has been sold, transferred,
-9-
<PAGE>
assigned or pledged by the Seller to any Person other than the Seller.
Immediately prior to the transfer and assignment herein contemplated, the
Seller had good and marketable title to each Receivable conveyed by it
hereunder to the Seller, free and clear of all Liens and rights of others
and, immediately upon the transfer thereof, the Company 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 Company has
been perfected under the UCC.
(xv) 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.
(xvi) 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.
(xvii) One Original. There shall be only one original
------------
executed copy of each Receivable.
(xviii) 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.
(xix) Location of Receivable Files. The Receivable Files are
----------------------------
kept at one or more of the locations listed in Schedule II.
(xx) No Bankruptcies. No Obligor on any Receivable as of the
---------------
Cutoff Date was noted in the related Receivable File as having filed for
bankruptcy.
(xxi) No Repossessions. No Financed Vehicle securing any
----------------
Receivable is in repossession status.
(xxii) Maturity of Receivables. The weighted average
-----------------------
remaining term of the Initial Receivables as of the Initial Cutoff Date is
_______ months.
(xxiii) 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
-10-
<PAGE>
Receivables as of the Cutoff Date represent Precomputed Receivables and the
remainder of the Receivables represent Simple Interest Receivables. The
aggregate Principal Balance of the Receivables as of the Cutoff Date is
$_____________.
(xxiv) Chattel Paper. Each Receivable constitutes "chattel
-------------
paper" under the UCC.
(xxv) APR. The weighted average Annual Percentage Rate of
---
the Receivables as of the Cutoff Date is approximately ___%.
(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 the Company. Upon discovery by either the Seller or the Company 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 promptly upon such discovery. The Seller hereby acknowledges that
the Company intends to rely on the representations hereunder in connection with
representations made by the Company to secured parties, assignees or subsequent
transferees including but not limited to transfers made by the Company to the
Trust pursuant to the [Pooling] [Sale] and Servicing Agreement.
SECTION 4.03. Representations and Warranties of the Company. As of
---------------------------------------------
the Closing Date, the Company hereby represents and warrants to, and agrees
with, the Seller that:
(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 purchase, 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.
(c) Power and Authority. The Company 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 shall have been duly
authorized by the Company by all necessary corporate action.
-11-
<PAGE>
(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, 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 Proceedings. 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; (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 (4) relating to the Company
and that might materially and adversely affect the federal income tax attributes
of the Certificates.
(g) 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.
The representations and warranties set forth in this Section 4.03
shall survive the Conveyance of the Receivables to the Company. Upon discovery
by the Company or the Seller of a
-12-
<PAGE>
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 the Company as follows:
(a) 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 the Company'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 the Company in, to and under the
Receivables, whether now existing or hereafter created, against all claims of
third parties claiming through or under the Seller.
(b) Delivery of Collections or Recoveries. In the event that the
-------------------------------------
Seller receives any collections or recoveries relating to the Receivables, the
Seller agrees to pay to the Company (or to the Servicer if the Company so
directs) all such amounts as soon as practicable after receipt thereof.
(c) Notice of Liens. The Seller shall notify the Company promptly
---------------
after becoming aware of any Lien on any Receivable other than the conveyances
hereunder under the [Pooling] [Sale] and Servicing Agreement.
(d) 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 the Company.
ARTICLE VI.
REPURCHASE OBLIGATION
---------------------
SECTION 6.01. Repurchase Upon Breach. In the event any
----------------------
representation or warranty under Section 4.02(a) is not true and correct in any
material respect as of the date specified therein with respect to any
Receivable, unless any such breach is cured in all material respects by the last
day of the second Collection Period following the discovery thereof, the Seller
shall be obligated to repurchase, as of such last day (or, at the
-13-
<PAGE>
Company's option, the last day of the first Collection Period following such
discovery), any Receivable conveyed by it to the Company if (in the reasonable
opinion of the Company) the interest of the Trust in such Receivable is
materially and adversely affected by such breach. In consideration of the
repurchase of any such Receivable, the Seller shall remit the Repurchase Amount
to or upon the order of the Company. The Company 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 Receivables
pursuant to this section.
ARTICLE VII.
CONDITIONS PRECEDENT
--------------------
SECTION 7.01. Conditions to the Company's Obligations. The
---------------------------------------
obligations of the Company to purchase the Receivables 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 Receivables provided to the
Company shall be true and correct as of the Cutoff Date in all material
respects;
(c) The Seller shall have (i) delivered to the Company a computer
file or microfiche list containing a true and complete list of all Receivables
identified by account number and by balance as of the Cutoff Date and (ii)
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 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 the Company, and shall deliver a file-stamped
copy of such financing statements or other evidence of such filings to the
Company;
(e) On or before the Closing Date, the Company and the Trustee shall
have entered into the [Pooling and Servicing Agreement] [Sale and Servicing
Agreement and Trust Agreement] and
-14-
<PAGE>
the closing under such agreement[s] shall take place simultaneously with the
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 the Company, and the Company shall have
received from the Seller copies of all documents (including, without limitation,
records of corporate proceedings) relevant to the transactions herein
contemplated as the Company may reasonably have requested.
SECTION 1.072. Conditions Precedent to the Seller's Obligations. The
------------------------------------------------
obligations of the Seller to sell the Receivables on the Closing Date shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Company 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 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 the Company copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Seller may reasonably have requested.
ARTICLE VIII.
TERM AND PURCHASE TERMINATION
-----------------------------
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 the [Pooling and Servicing] [Trust] Agreement.
SECTION 8.02. 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
-15-
<PAGE>
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 give notice to the Company
----------------
and the Trustee of such Insolvency Event. Notwithstanding any such notice,
Receivables transferred to the Company prior to the occurrence of such event and
collections in respect of such Receivables and accrued in respect of such
Receivables, shall continue to be the property of the Company available for
transfer by the Company to the Trust pursuant to the [Pooling] [Sale] 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 the Company and the
Seller in accordance with this Section 9.01. This Agreement and any Conveyance
Papers may be amended from time to time by the Company 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 the Company; provided, however, that
-------- -------
no amendment pursuant to clause (v) of this Section 9.01 shall be effective
unless the Seller and the Company have been notified in writing that the Rating
Agency Condition has been satisfied; provided, further, 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
Certificateholders [or the Noteholders], unless the Trustee shall consent
thereto. Any reconveyance executed in accordance with the provisions hereof
shall not be considered to be an amendment
-16-
<PAGE>
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 the Company:
Asset Backed Securities Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Ms. Gina Hubbell,
Director and Vice President
Facsimile No.: _________________________________________________;
(c) in the case of the Trustee:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Attention: ______________________________________________________
Facsimile No.: _________________________________________________;
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
-17-
<PAGE>
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 the Company'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 [and the
Noteholders] as contemplated by the [Pooling and Servicing Agreement] [Trust
Agreement and the Indenture] 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
the Company which assumes the obligations of this Agreement or (iii) to any
entity that assumes this Agreement provided that the Rating Agency has advised
the Company 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 the
Company's right, title, and interest in, to, and under this Agreement,
including, without limitation, all of the Company's right, title, and interest
in and to the Receivables purchased pursuant to this Agreement, shall be
assigned by the Company to the Trustee for the benefit of the beneficiaries of
the Trust, including the Certificateholders [and the Noteholders], 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 the Company, due to a breach by the Company of this Agreement or
for any other reason, and notwithstanding the bankruptcy of the Company or any
other event whatsoever, the Seller's sole remedy shall be a claim against the
Company for money damages and, then only to the extent of funds received by the
Company pursuant to the [Pooling] [Sale] 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 the Company hereunder which are to be paid by the
Company to the Trustee for the benefit of the Certificateholders [and the
Noteholders] shall be paid by the Seller, on behalf of the Company, directly to
the Trustee.
SECTION 9.07. Further Assurances. The Company 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
-18-
<PAGE>
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 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 the Company 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
-19-
<PAGE>
Conveyance, shall remain operative and in full force and effect and shall
survive conveyance of the Receivables by the Company to the Trustee pursuant to
the [Pooling] [Sale] 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 the Company to invoke the process of any
governmental authority for the purpose of commencing or sustaining a case
against the Company 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 Company or any substantial part of
its property or ordering the winding-up or liquidation or the affairs of the
Company.
-20-
<PAGE>
IN WITNESS WHEREOF, the Company 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: _______________________________
Name:
Title:
ASSET BACKED SECURITIES
CORPORATION
By: _______________________________
Name:
Title:
-21-
<PAGE>
Schedule I
----------
LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
<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>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Other Definitional Provisions..................................4
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
SECTION 2.01. Purchase.......................................................5
SECTION 2.02. Addition of Aggregate Addition Accounts........................6
SECTION 2.03. Addition of New Accounts.......................................7
SECTION 2.04. Representations and Warranties.................................8
SECTION 2.05. Delivery of Documents..........................................8
ARTICLE III
CONSIDERATION AND PAYMENT
SECTION 3.01. Purchase Price.................................................9
SECTION 3.02. Adjustments to Purchase Price..................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller Relating
to the Seller.................................................10
SECTION 4.02. Representations and Warranties of the Seller Relating
to the Agreement and the Receivables..........................11
SECTION 4.03. Representations and Warranties of ABSC........................13
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Seller.......................................14
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.01. Reassignment of Ineligible Receivables........................16
SECTION 6.02. Reassignment of Certificateholders' Interest in Trust
Portfolio.....................................................16
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to ABSC's Obligations Regarding Initial
Receivables....................................................17
SECTION 7.02. Conditions Precedent to the Seller's Obligations...............17
ARTICLE VIII
TERM AND PURCHASE TERMINATION
SECTION 8.01. Term...........................................................18
SECTION 8.02. Purchase Termination...........................................18
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01. Amendment......................................................19
SECTION 9.02. Governing Law..................................................19
SECTION 9.03. Notices........................................................19
SECTION 9.04. Severability of Provisions.....................................20
SECTION 9.05. Assignment.....................................................20
SECTION 9.06. Acknowledgment and Agreement of the Seller.....................20
SECTION 9.07. Further Assurances.............................................21
SECTION 9.08. No Waiver; Cumulative Remedies.................................21
SECTION 9.09. Counterparts...................................................21
SECTION 9.10. Binding; Third-Party Beneficiaries.............................21
SECTION 9.11. Merger and Integration.........................................21
SECTION 9.12. Headings.......................................................22
SECTION 9.13. Schedules and Exhibits.........................................22
SECTION 9.14. Survival of Representations and Warranties.....................22
SECTION 9.15. Nonpetition Covenant...........................................22
<PAGE>
RECEIVABLES PURCHASE AGREEMENT, dated as of _______, 199[ ], by and
between [SELLER NAME], a [ ] [corporation] [banking association] (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 (hereinafter defined); 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
<PAGE>
an account into which an Account has been transferred, but shall exclude (g) any
Account that (x) after the Removal Date, the newly generated Receivables in
which are reassigned to the Seller pursuant to Section 2.06 hereof, (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 hereof, 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 hereof.
"Addition Date" shall mean (i) 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 hereof and (ii) 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 hereof 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 hereof.
"Agreement" shall mean this Receivables Purchase Agreement and all
amendments hereof and supplements hereto.
"Certificates" shall have the meaning specified in the Pooling and
Servicing Agreement.
"Closing Date" shall mean [ ], 199[ ].
"Conveyance" shall have the meaning specified in subsection 2.01(a)
hereof.
"Conveyance Papers" shall have the meaning specified in subsection
4.01(c) hereof.
"Credit Adjustment" shall have the meaning specified in subsection
3.02 hereof.
"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
-2-
<PAGE>
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.
"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 hereof 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 hereof.
"New Principal Receivables" shall have the meaning specified 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 [Trustee Name] , as 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 specified in Section 3.01
hereof.
-3-
<PAGE>
"Purchased Assets" shall have the meaning specified in Section 2.01
hereof.
"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 specified in Section 6.01(b)
hereof.
"Seller" shall mean [Seller Name], a [______________] and its
successors and permitted assigns.
"Supplemental Conveyance" shall have the meaning specified in Section
2.02 hereof.
"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 hereof, 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) hereof, 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. 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
perform with respects to the Receivables in such Aggregate Addition Accounts all
actions specified in Section 2.09(c) of the Pooling and Servicing Agreement
required to be performed by ABSC, as Depositor under the Pooling and Servicing
Agreement.
(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 such Aggregate Addition Accounts (and such
Aggregate Addition Accounts shall
-6-
<PAGE>
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;
(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) hereof, 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) hereof, 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 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
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Agreement required to be performed by ABSC, as Depositor, under 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 (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.
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) herein above and that, in
the case of Additional Accounts, the list delivered pursuant to Section 2.05
herein 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 hereof with
respect to such Additional Accounts on the date such file or list is required to
be delivered pursuant to Section 2.01 hereof (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) herein above.
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ARTICLE III
CONSIDERATION AND PAYMENT
-------------------------
SECTION 3.01. Purchase Price.
(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 which 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 hereof 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.
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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 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
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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 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;
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(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 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.
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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.
(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.
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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 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.
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(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 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 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, the Seller [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).
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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 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.
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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 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:
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(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
-----------------------------
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.
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RIDER 18A
ARTICLE IX
MISCELLANEOUS PROVISIONS
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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, 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.:_________________________
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(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.:________________________;
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,
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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 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
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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 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.
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: _________________________________
Name: _________________________________
Title: _________________________________
ASSET BACKED SECURITIES CORPORATION
By: _________________________________
Name: _________________________________
Title: _________________________________
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EXHIBIT A
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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:
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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
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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 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.
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(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 in and 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
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delivered to ABSC the computer file or microfiche list described in Section 2 of
this Supplemental Conveyance.
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 and to 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;
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(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;
(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.
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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:
-------------------------
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Schedule I to Supplemental Conveyance
Additional Accounts
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Schedule I
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LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
