<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-25751
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 12, 1997
$1,293,736,000
(APPROXIMATE)
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
DEPOSITOR
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
MORTGAGE LOAN SELLER
Commercial Mortgage Pass-Through Certificates,
Series 1997-C2
--------------
The Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage
Pass-Through Certificates, Series 1997-C2 (the "Certificates") will consist
of (i) the Class A-1, Class A-2, Class A-3 and Class A-X Certificates
(collectively, the "Senior Certificates"), (ii) the Class B, Class C, Class D
and Class E Certificates (collectively, the "Mezzanine Certificates" and,
together with the Senior Certificates, the "Offered Certificates"), (iii) the
Class F, Class G, Class H, Class I and Class J Certificates (collectively,
the "Private Certificates" and, together with the Offered Certificates, the
"Regular Certificates"), (iv) the Class R and Class LR Certificates
(together, the "Residual Certificates") and (v) the Class V-1 Certificates.
Only the Offered Certificates are offered hereby. It is a condition of the
issuance of the Offered Certificates that, upon issuance, each Class thereof
be rated by Fitch IBCA, Inc. ("Fitch"), Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc. ("S&P" and, together with Fitch and Moody's, the "Rating
Agencies"), as set forth in the table below. The Certificates will evidence
beneficial ownership interests in a trust fund (the "Trust Fund") to be
created by Credit Suisse First Boston Mortgage Securities Corp. (the
"Depositor") pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") to be dated as of December 11, 1997 among the
Depositor, First Union National Bank, as servicer (the "Servicer"), Lennar
Partners, Inc., as special servicer (the "Special Servicer"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee"). The assets
of the Trust Fund will consist primarily of 185 loans with an initial
aggregate principal balance of approximately $1,465,990,190 and secured by
mortgages or deeds of trust on multifamily and commercial properties (the
"Mortgage Loans"). The Mortgage Loans, all of which bear interest at fixed
rates, were originated by Credit Suisse First Boston Mortgage Capital LLC
(the "Mortgage Loan Seller") or were acquired by the Mortgage Loan Seller
from third-party originators or in the secondary market, and will be sold by
the Mortgage Loan Seller to the Depositor on the Closing Date (as defined
herein). The Mortgage Loans are described more fully in this Prospectus
Supplement.
<TABLE>
<CAPTION>
INITIAL
INITIAL CERTIFICATE PASS- ASSUMED FINAL WEIGHTED
BALANCE OR NOTIONAL THROUGH DISTRIBUTION RATING AVERAGE
CLASS BALANCE(A) RATE DATE(B) (MOODY'S/FITCH/S&P)(C) LIFE(D)
- ----------- ------------------- ----------- ----------------- ---------------------- ----------
<S> <C> <C> <C> <C> <C>
Class A-1 .. $ 151,212,000 6.40% February 17, 2004 Aaa/AAA/AAA 3.96
Class A-2 .. $ 322,346,000 6.52% July 17, 2007 Aaa/AAA/AAA 7.80
Class A-3 .. $ 523,315,000 6.55% November 17, 2007 Aaa/AAA/AAA 9.79
Class A-X .. $1,465,990,190 1.215%(e) November 17, 2022 Aaa/AAA/NR 9.82
Class B..... $ 95,289,000 6.72% November 17, 2007 Aa2/AA/NR 9.91
Class C..... $ 80,630,000 6.85% December 17, 2007 A2/A/NR 9.94
Class D..... $ 95,289,000 7.27% April 17, 2011 Baa2/BBB-/NR 10.56
Class E..... $ 25,655,000 7.46% November 17, 2012 Baa3/NR/NR 14.34
</TABLE>
(Notes to table on next page)
The Offered Certificates are being offered by Credit Suisse First Boston
Corporation (the "Underwriter") from time to time in negotiated transactions
or otherwise at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Proceeds to
the Depositor from the sale of the Offered Certificates will be approximately
109.68% of the initial principal balance thereof as of the Cut-off Date (as
defined herein) plus accrued interest from such date before deducting
issuance expenses payable by the Depositor.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" COMMENCING ON PAGE S-29 HEREIN AND COMMENCING ON PAGE
4 IN THE PROSPECTUS BEFORE PURCHASING ANY OFFERED CERTIFICATES.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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 Offered Certificates are offered by the Underwriter when, as and if
issued by the Depositor, delivered to and accepted by the Underwriter and
subject to its right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC") on or about
December 19, 1997 against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
Prospectus Supplement dated December 12, 1997
<PAGE>
CREDIT SUISSE FIRST BOSTON
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
<TABLE>
<S> <C> <C> <C>
COLORADO MAINE SOUTH CAROLINA ARIZONA
3 properties 2 properties 5 properties 3 properties
$18,025,122 $4,483,836 $11,346,318 $21,214,793
1.2% of total 0.3% of total 0.8% of total 1.4% of total
KANSAS MASSACHUSETTS GEORGIA CALIFORNIA
1 property 9 properties 9 properties 37 properties
$2,595,544 $44,890,693 $37,226,794 $457,378,228
0.2% of total 3.1% of total 2.5% of total 31.2% of total
MISSOURI CONNECTICUT FLORIDA NEVADA
2 properties 6 properties 10 properties 1 property
$8,054,328 $23,062,753 $44,530,301 $7,200,000
0.5% of total 1.6% of total 3.0% of total 0.5% of total
ILLINOIS PENNSYLVANIA TENNESSEE OREGON
6 properties 10 properties 2 properties 1 property
$32,118,301 $41,581,912 $21,533,866 $996,899
2.2% of total 2.8% of total 1.5% of total 0.1% of total
WISCONSIN NEW JERSEY ALABAMA WASHINGTON
8 properties 13 properties 2 properties 4 properties
$23,866,092 $120,330,015 $8,992,778 $33,673,399
1.6% of total 8.2% of total 0.6% of total 2.3% of total
MICHIGAN DELAWARE MISSISSIPPI
1 property 1 property 1 property
$17,541,461 $5,343,901 $2,947,880
1.2% of total 0.4% of total 0.2% of total
INDIANA MARYLAND LOUISIANA
3 properties 3 properties 1 property
$9,774,097 $21,408,838 $2,205,392
0.7% of total 1.5% of total 0.2% of total
OHIO DIST. OF COLUMBIA ARKANSAS
6 properties 2 properties 4 properties
$31,023,511 $46,536,244 $19,989,012
2.1% of total 3.2% of total 0.7% of total
KENTUCKY VIRGINIA TEXAS
4 properties 2 properties 12 properties
$14,006,214 $6,389,552 $55,553,502
1.0% of total 0.4% of total 3.8% of total
NEW YORK WEST VIRGINIA OKLAHOMA
16 properties 1 property 1 property
$241,121,094 $1,596,647 $5,196,086
16.4% of total 0.1% of total 0.4% of total
NEW HAMPSHIRE NORTH CAROLINA NEW MEXICO
1 property 7 properties 3 properties
$1,880,945 $20,732,154 $9,641,685
0.1% of total 1.4% of total 0.7% of total
</TABLE>
PROPERTY TYPE % BY TOTAL PRINCIPAL BALANCE
- ------------------------------------------
Retail Hotel Industrial
21.3% 17.1% 4.1%
Mobile Home Park Other Multifamily
2.7% 1.7% 10.4%
Net Lease Office
14.4% 28.3%
LEGEND
equal to or greater than 10% of Initial Pool Balance [ ]
3 - 9.9% of Initial Pool Balance [ ]
1 - 2.9% of Initial Pool Balance [ ]
equal to or less than 1% of Initial Pool Balance [ ]
<PAGE>
[Photograph of The Paramount Hotel, a hotel.]
3. THE PARAMOUNT HOTEL
New York NY
[Photograph of Gift Center, a retail property.]
5. GIFT CENTER
San Francisco CA
[Photograph of Beverly Connection, a shopping center.]
4. BEVERLY CONNECTION
Los Angeles CA
[Photograph of MGM Plaza, an office complex.]
1. MGM PLAZA
Santa Monica CA
[Photograph of Buena Vista Plaza, an office building.]
12. BUENA VISTA PLAZA
Burbank CA
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL THE MORTGAGED PROPERTIES INCLUDED IN
ANY POOL LOAN OR OF ANY PARTICULAR TYPE OF MORTGAGED PROPERTY.
<PAGE>
[Photograph of Market Post Tower, an office building.]
8. MARKET POST TOWER
San Jose CA
[Photograph of Ramada Suites Hotel, a hotel.]
7. RAMADA SUITES HOTEL
Weehawken NJ
[Photograph of 131 State Street, an apartment building.]
17. 131 STATE STREET
Boston MA
[Photograph of 78 Corporate Center, an office building.]
9. 78 CORPORATE CENTER
Bedminster NJ
[Photograph of 135 East 57th Street, an office building.]
2. 135 EAST 57TH STREET
New York NY
Numbers indicate Loan Number; see Annex A.
<PAGE>
- ------------
(Notes to Table)
(a) The initial aggregate Certificate Balances of the respective Classes of
Offered Certificates are subject to a permitted variance of plus or
minus 5%, depending on the aggregate principal balance of the Mortgage
Loans actually transferred to the Trust Fund. Any variance in such
principal balance may or may not be apportioned pro rata among the
Classes of Offered Certificates.
(b) The "Assumed Final Distribution Date" with respect to any Class of
Offered Certificates other than the Class A-X Certificates is the
Distribution Date (as defined herein) on which the last principal
payment would be made on such Class based on the Mortgage Loan
Assumptions and Prepayment Assumptions at 0% CPR (each as defined
herein). The "Assumed Final Distribution Date" with respect to the
Class A-X Certificates is the Distribution Date on which the Notional
Balance of such Class would be reduced to zero based on the Mortgage
Loan Assumptions and Prepayment Assumptions at 0% CPR. The actual
performance and experience of the Mortgage Loans will likely differ
from such assumptions. See "Prepayment and Yield Considerations"
herein.
(c) It is a condition to their issuance that each Class of Offered
Certificates be assigned the ratings by Moody's, Fitch and S&P set
forth above. The ratings on the Offered Certificates do not represent
any assessment of (i) the likelihood or frequency of voluntary or
involuntary principal prepayments on the Mortgage Loans, (ii) the
degree to which such prepayments might differ from those originally
anticipated or (iii) the possibility that the holders of the Offered
Certificates might realize a lower than anticipated yield.
(d) The weighted average life of a Class refers to the average amount of
time that will elapse from the Closing Date to the date of distribution
of each dollar in reduction of Certificate Balance that is to be
distributed, calculated as provided herein under "Prepayment and Yield
Considerations -- Weighted Average Life of Offered Certificates," to
such Class based on the Mortgage Loan Assumptions and Prepayment
Assumptions assuming 0% CPR.
(e) The Pass-Through Rate on the Class A-X Certificates for any
Distribution Date will be a per annum rate, expressed as a percentage,
equal to the weighted average of the Component Rates (as defined
herein) for such Distribution Date.
Interest and principal will be distributed to the holders of Offered
Certificates on the 17th day of each month (or, if such day is not a business
day, on the following business day), commencing in January 1998 (each, a
"Distribution Date"); provided, however, that no Distribution Date will fall
on a date that is fewer than four business days after the related
Determination Date (as defined herein).
During each Interest Accrual Period (as defined herein), the Class A-1,
Class A-2, Class A-3, Class B, Class C, Class D and Class E Certificates will
bear interest at fixed per annum rates (the "Class A-1 Pass-Through Rate,"
the "Class A-2 Pass-Through Rate," the "Class A-3 Pass-Through Rate," the
"Class B Pass-Through Rate," the "Class C Pass-Through Rate," the "Class D
Pass-Through Rate" and the "Class E Pass-Through Rate," respectively) shown
on the cover page hereof.
A portion of all Prepayment Premiums and Yield Maintenance Charges will be
distributed to the Offered Certificates, as described herein. See
"Description of the Offered Certificates -- Allocation of Prepayment Premiums
and Yield Maintenance Charges" herein.
The rights of the holders of the Private Certificates to receive
distributions of principal and interest on or in respect of the Mortgage
Loans will be subordinate to those of the holders of the Mezzanine
Certificates (together with the Private Certificates, the "Subordinate
Certificates"). The rights of the holders of the Mezzanine Certificates to
receive distributions of principal and interest on or in respect of the
Mortgage Loans will be subordinate to those of the holders of the Senior
Certificates. The rights of the holders of the Residual Certificates to
receive distributions of amounts collected or advanced on in respect of the
Mortgage Loans will also be subordinate to those of the holders of the
Offered Certificates, in each case to the extent described herein.
THE YIELD TO INVESTORS, IN PARTICULAR INVESTORS IN THE MEZZANINE
CERTIFICATES, WILL BE SENSITIVE TO THE TIMING OF PREPAYMENTS, REPURCHASES OR
PURCHASES OF MORTGAGE LOANS, AND THE MAGNITUDE OF LOSSES ON THE MORTGAGE
LOANS DUE TO LIQUIDATIONS. NO REPRESENTATION IS MADE AS TO THE RATE OF
PREPAYMENTS ON, OR RATE OR AMOUNT OF LIQUIDATIONS OF, THE MORTGAGE LOANS OR
AS TO THE ANTICIPATED YIELD TO MATURITY OF ANY OFFERED CERTIFICATE. THE YIELD
TO MATURITY ON EACH CLASS OF THE OFFERED CERTIFICATES WILL BE SENSITIVE TO,
AND THE YIELD TO MATURITY OF THE CLASS A-X CERTIFICATES WILL BE EXTREMELY
SENSITIVE TO, THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING BOTH
VOLUNTARY AND INVOLUNTARY PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE
MORTGAGE LOANS AND PAYMENTS WITH RESPECT TO REPURCHASES THEREOF THAT ARE
APPLIED IN REDUCTION OF THE CERTIFICATE BALANCE OR NOTIONAL BALANCE OF SUCH
CLASS. A RAPID RATE OF SUCH PRINCIPAL PAYMENTS COULD RESULT IN THE FAILURE OF
INVESTORS IN THE CLASS A-X CERTIFICATES TO FULLY RECOVER THEIR INITIAL
INVESTMENTS. SEE "PREPAYMENT AND YIELD CONSIDERATIONS" HEREIN.
There is currently no secondary market for the Offered Certificates. The
Underwriter expects to make a secondary market in the Offered Certificates
but has no obligation to do so. There can be no assurance that a secondary
market for the Offered Certificates will develop, or if it does develop, that
it will continue. See "Risk Factors -- The Offered Certificates -- Limited
Liquidity and Market Value" herein.
S-2
<PAGE>
As described herein, two separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes. The Offered Certificates will be treated as
REMIC "regular interests," except to the extent described herein. See
"Certain Federal Income Tax Consequences" herein and in the Prospectus.
The Offered Certificates will be available to investors only in book-entry
form through the facilities of The Depository Trust Company ("DTC").
Beneficial interests in the Offered Certificates will be shown on, and
transfers thereof will be effected only through, records maintained by DTC
and its participants. Physical certificates for the Offered Certificates will
be available only under certain limited circumstances as described herein.
See "Description of the Offered Certificates -- Book-Entry Registration and
Definitive Certificates" herein.
For a discussion of certain significant matters affecting investments in
the Offered Certificates, see "Risk Factors" herein and "Certain Legal
Aspects of the Mortgage Loans" in the Prospectus.
THE OFFERED CERTIFICATES REPRESENT AN INTEREST ONLY IN THE MORTGAGE LOANS
AND CERTAIN OTHER ASSETS OF THE TRUST FUND AND DO NOT REPRESENT AN INTEREST
IN OR OBLIGATION OF THE DEPOSITOR, THE MORTGAGE LOAN SELLER, THE SERVICER,
THE SPECIAL SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THE OFFERED CERTIFICATES CONSTITUTE PART OF A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE DEPOSITOR FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED DECEMBER 12, 1997, WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT AND OF WHICH THIS PROSPECTUS SUPPLEMENT FORMS A PART. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS
NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail monthly reports (including Distribution Date
Statements (as defined herein)) concerning the Offered Certificates and the
Mortgage Loans to all registered and, if requested in writing, prospective
Offered Certificateholders and will make all such reports available to any
interested party electronically, via the Trustee's Website, electronic
bulletin board and/or, with respect to Distribution Date Statements only, its
fax-on-demand service. The Trustee's Website will be located at
"www.trustlink.com". Prior to June 1, 1998, such information will be
available at "www.securitieslink.net/cmbs". The Trustee's electronic bulletin
board may be accessed by calling (301) 815-6670, and its fax-on-demand
service may be accessed by calling (301) 815-6660. For assistance with regard
to the above-mentioned services, investors may call (301) 846-8130.
S-3
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. This Executive Summary does not include all
relevant information relating to the securities and collateral described
herein, particularly with respect to the risks and special considerations
involved with an investment in such securities, and is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the Prospectus. Prior to making an investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in this
Prospectus Supplement and the Prospectus. See "Index of Significant
Definitions" in this Prospectus Supplement.
<TABLE>
<CAPTION>
% OF
AGGREGATE
INITIAL CERTIFICATE INITIAL APPROXIMATE
BALANCE OR CERTIFICATE CREDIT
CLASS RATINGS(1) NOTIONAL BALANCE BALANCE SUPPORT
- ------- -------------- ------------------- ------------- -------------
<S> <C> <C> <C> <C>
Offered Certificates
- -------------------------------------------------------------------------
A-1 Aaa/AAA/AAA $ 151,212,000 10.31% 32.00%
- ------- -------------- ------------------- ------------- -------------
A-2 Aaa/AAA/AAA $ 322,346,000 21.99% 32.00%
- ------- -------------- ------------------- ------------- -------------
A-3 Aaa/AAA/AAA $ 523,315,000 35.70% 32.00%
- ------- -------------- ------------------- ------------- -------------
A-X Aaa/AAA/NR $1,465,990,190 NAP NAP
- ------- -------------- ------------------- ------------- -------------
B Aa2/AA/NR $ 95,289,000 6.50% 25.50%
- ------- -------------- ------------------- ------------- -------------
C A2/A/NR $ 80,630,000 5.50% 20.00%
- ------- -------------- ------------------- ------------- -------------
D Baa2/BBB-/NR $ 95,289,000 6.50% 13.50%
- ------- -------------- ------------------- ------------- -------------
E Baa3/NR/NR $ 25,655,000 1.75% 11.75%
- ------- -------------- ------------------- ------------- -------------
Private Certificates(3)
- -------------------------------------------------------------------------
F NR/BB/NR $ 73,299,000 5.00% 6.75%
- ------- -------------- ------------------- ------------- -------------
G NR/BB-/NR $ 14,660,000 1.00% 5.75%
- ------- -------------- ------------------- ------------- -------------
H B2/B/NR $ 29,320,000 2.00% 3.75%
- ------- -------------- ------------------- ------------- -------------
I B3/B-/NR $ 14,660,000 1.00% 2.75%
- ------- -------------- ------------------- ------------- -------------
J NR/NR/NR(5) $ 40,315,190 2.75% NAP
- ------- -------------- ------------------- ------------- -------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PASS-THROUGH WEIGHTED
RATE AS AVERAGE
OF CUT-OFF LIFE(2) PRINCIPAL
CLASS DESCRIPTION DATE (YEARS) WINDOW(2)
- ------- ------------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Offered Certificates
- ---------------------------------------------------------------------
A-1 Fixed Rate 6.40% 3.96 1/98-2/04
- ------- ------------------- -------------- ---------- ------------
A-2 Fixed Rate 6.52% 7.80 2/04-7/07
- ------- ------------------- -------------- ---------- ------------
A-3 Fixed Rate 6.55% 9.79 7/07-11/07
- ------- ------------------- -------------- ---------- ------------
(Component
Structure) Interest
A-X Only 1.215% 9.82 1/98-11/22
- ------- ------------------- -------------- ---------- ------------
B Fixed Rate 6.72% 9.91 11/7-11/7
- ------- ------------------- -------------- ---------- ------------
C Fixed Rate 6.85% 9.94 11/7-12/7
- ------- ------------------- -------------- ---------- ------------
D Fixed Rate 7.27% 10.56 12/7-4/11
- ------- ------------------- -------------- ---------- ------------
E Fixed Rate 7.46% 14.34 4/11-11/12
- ------- ------------------- -------------- ---------- ------------
Private Certificates(3)
- --------------------------------------------------------------------
Lesser of Fixed and
Weighted Average Net
F Mortgage Rate(4) 7.46% 15.09 11/12-5/14
- ------- ------------------- -------------- ---------- ------------
Lesser of Fixed and
Weighted Average Net
G Mortgage Rate 7.46% 16.41 5/14-5/14
- ------- ------------------- -------------- ---------- ------------
Lesser of Fixed and
Weighted Average Net
H Mortgage Rate 7.46% 17.40 5/14-5/16
- ------- ------------------- -------------- ---------- ------------
Lesser of Fixed and
Weighted Average Net
I Mortgage Rate 7.46% 19.02 5/16-8/17
- ------- ------------------- -------------- ---------- ------------
Lesser of Fixed and
Weighted Average Net
J Mortgage Rate 7.46% 22.26 8/17-11/22
- ------- ------------------- -------------- ---------- ------------
</TABLE>
(1) Ratings shown are those of Moody's, Fitch and S&P, respectively.
Classes marked "NR" will not be rated by the applicable Rating
Agency.
(2) Based on the Mortgage Loan Assumptions and Prepayment Assumptions,
assuming 0% CPR (each as defined in "Prepayment and Yield
Considerations" herein).
(3) Not offered hereby.
(4) As defined herein.
(5) Not rated by any Rating Agency.
S-4
<PAGE>
MORTGAGE LOAN EXECUTIVE SUMMARY
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (1) .................................................................... $1,465,990,190
Number of Mortgage Loans .................................................................... 185
Number of Mortgaged Properties .............................................................. 203
Average Mortgage Loan Balance ............................................................... $7,924,271
Maximum Mortgage Loan Principal Balance ..................................................... $145,894,648
Minimum Mortgage Loan Principal Balance ..................................................... $545,003
Weighted Average Mortgage Rate .............................................................. 8.027%
Range of Mortgage Rates ..................................................................... 6.528% to 9.590%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated Repayment Date ... 11.34 years
Range of Remaining Term to the Earlier of Maturity or Anticipated Repayment Date ........... 69 to 299 months
Weighted Average Original Amortization Term (2) ............................................. 27.37 years
Range of Original Amortization Terms (2) .................................................... 80 to 422 months
Weighted Average DSCR (2)(3) ................................................................ 1.43x
Range of DSCRs (2)(3) ....................................................................... 1.06x to 1.89x
Weighted Average LTV (2)(3) ................................................................. 67.73%
Range of LTVs (3) ........................................................................... 38% to 84%
Weighted Average LTV at Earlier of Anticipated Repayment Date or Maturity (2)(3) ........... 56.63%
Percentage of Initial Pool Balance made up of:
ARD Loans ................................................................................. 86.05%
Fully Amortizing Loans (other than ARD Loans) ............................................. 12.45%
Balloon Loans ............................................................................. 1.50%
Pool Loans................................................................................. 5.19%
Crossed Loans.............................................................................. 2.20%
Credit Lease Loans......................................................................... 14.35%
Number of Mortgage Loans Delinquent as of Cut-off Date ...................................... 0
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) As defined or described in "Description of the Mortgage Loans --
Additional Mortgage Loan Information" herein.
(3) Excluding the Credit Lease Loans (as defined herein).
Certain additional information regarding the Mortgage Loans, including the
Servicer Reports attached hereto as Annex C, will be available on the
Servicer's Website at "www.firstunion.com" under "Capital Markets". Such
information should be available on the first Distribution Date and will be
updated periodically thereafter.
S-5
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Reports to Certificateholders....................... S-3
Executive Summary................................... S-4
Mortgage Loan Executive Summary .................... S-5
Summary of Prospectus Supplement.................... S-8
Risk Factors........................................ S-29
The Mortgage Loans................................. S-29
The Offered Certificates........................... S-50
Description of the Mortgage Loans................... S-55
General............................................ S-55
Security for the Mortgage Loans.................... S-56
Underwriting Standards............................. S-57
Significant Mortgage Loans......................... S-60
Certain Terms and Conditions of the Mortgage
Loans............................................. S-77
Additional Mortgage Loan Information............... S-89
Changes in Mortgage Loan Characteristics .......... S-109
Description of the Offered Certificates............. S-109
General ........................................... S-109
Book-Entry Registration and Definitive
Certificates...................................... S-110
Distributions...................................... S-112
Assumed Final Distribution Date; Rated Final
Distribution Date................................. S-122
Subordination; Allocation of Collateral Support
Deficits and Certificate Deferred Interest ....... S-122
Prepayment and Yield Considerations................. S-125
Yield.............................................. S-125
Modeling Assumptions............................... S-126
Yield on the Class A-X Certificates ............... S-127
Rated Final Distribution Date...................... S-128
Weighted Average Life of Offered Certificates ..... S-128
The Pooling and Servicing Agreement................. S-137
General............................................ S-137
Assignment of the Mortgage Loans................... S-137
Representations and Warranties; Repurchase ........ S-137
Servicing of the Mortgage Loans; Collection of
Payments.......................................... S-145
Advances........................................... S-147
Appraisal Reductions............................... S-148
Accounts........................................... S-150
Withdrawals from the Certificate Account .......... S-152
Enforcement of "Due-on-Sale" and
"Due-on-Encumbrance" Clauses...................... S-152
Inspections; Collection of Operating
Information....................................... S-153
Insurance Policies................................. S-153
Evidence as to Compliance.......................... S-154
Certain Matters Regarding the Depositor, the
Trustee, the Servicer and the Special Servicer ... S-154
Events of Default ................................. S-155
Rights Upon Event of Default....................... S-156
Amendment.......................................... S-157
Voting Rights...................................... S-157
Realization Upon Mortgage Loans.................... S-158
Modifications...................................... S-160
Optional Termination............................... S-162
The Trustee........................................ S-162
Certificate Registrar and Authenticating Agent .... S-163
Duties of the Trustee.............................. S-163
The Servicer....................................... S-163
Servicing Compensation and Payment of Expenses .... S-163
Prepayment Interest Shortfalls..................... S-165
The Special Servicer............................... S-165
Servicer and Special Servicer Permitted to Buy
Certificates...................................... S-166
Reports to Certificateholders; Available
Information....................................... S-166
Use of Proceeds..................................... S-170
Certain Federal Income Tax Consequences............. S-170
ERISA Considerations................................ S-172
Senior Certificates................................ S-172
Mezzanine Certificates............................. S-173
Legal Investment.................................... S-174
Underwriting........................................ S-174
Legal Matters....................................... S-175
Rating.............................................. S-175
Index of Significant Definitions.................... S-177
Annex A--Loan Characteristics....................... A-1
Annex B--Credit Lease Loan Characteristics ......... B-1
Annex C--Servicer Reports........................... C-1
Annex D--Weighted Average Net Mortgage Rates ....... D-1
</TABLE>
S-6
<PAGE>
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Supplement ............................. 2
Additional Information ............................ 2
Incorporation of Certain Information by Reference 3
Risk Factors....................................... 4
Limited Liquidity................................. 4
Limited Assets.................................... 4
Prepayments and Effect on Average Life of
Certificates and Yields.......................... 5
Limited Nature of Ratings......................... 5
Risks Associated with Mortgage Loans and
Mortgaged Properties............................. 6
Risks Associated with Mortgage Loans and Leases .. 6
Balloon Payments.................................. 7
Junior Mortgage Loans............................. 7
Obligor Default................................... 7
Mortgagor Type.................................... 8
Enhancement Limitations........................... 8
Enforceability.................................... 8
Environmental Risks............................... 9
Delinquent and Non-Performing Mortgage Loans ..... 9
ERISA Considerations.............................. 10
Certain Federal Tax Considerations Regarding
Residual Interest Certificates................... 10
Control........................................... 10
Book-Entry Registration........................... 10
The Depositor...................................... 11
Use of Proceeds.................................... 11
Description of the Certificates.................... 11
General........................................... 11
Distribution on Certificates...................... 12
Accounts.......................................... 13
Amendment......................................... 15
Termination; Repurchase of Mortgage Loans ........ 16
Reports to Certificateholders..................... 16
The Trustee....................................... 16
The Mortgage Pools................................. 17
General........................................... 17
Assignment of Mortgage Loans...................... 18
Mortgage Underwriting Standards and Procedures ... 19
Representations and Warranties.................... 20
Servicing of the Mortgage Loans.................... 22
General........................................... 22
Collections and Other Servicing Procedures ....... 22
Insurance......................................... 22
Fidelity Bonds and Errors and Omissions
Insurance........................................ 24
Servicing Compensation and Payment of Expenses ... 24
Advances.......................................... 24
Modifications, Waivers and Amendments............. 24
Evidence of Compliance............................ 25
Certain Matters With Respect to the Master
Servicer, the Special Servicer and the Trustee .. 25
Events of Default................................. 26
Enhancement........................................ 27
General........................................... 27
Subordinate Certificates.......................... 27
Cross-Support Features............................ 28
Letter of Credit.................................. 28
Certificate Guarantee Insurance................... 28
Reserve Funds .................................... 28
Certain Legal Aspects of the Mortgage Loans ...... 29
Mortgages and Deeds of Trust Generally............ 29
Installment Contracts............................. 30
Junior Mortgages; Rights of Senior Mortgagees or
Beneficiaries.................................... 30
Foreclosure....................................... 32
Environmental Risks............................... 34
Statutory Rights of Redemption.................... 35
Anti-Deficiency Legislation....................... 36
Bankruptcy Laws................................... 36
Enforceability of Certain Provisions.............. 38
Applicability of Usury Laws....................... 40
Alternative Mortgage Instruments.................. 40
Leases and Rents.................................. 40
Secondary Financing; Due-on Encumbrance
Provisions....................................... 41
Certain Laws and Regulations...................... 41
Type of Mortgaged Property........................ 41
Americans with Disabilities Act .................. 42
Certain Federal Income Tax Consequences............ 43
General........................................... 43
Taxation of the REMIC and its Holders............. 43
Taxation of Regular Interests..................... 44
REMIC Expenses.................................... 48
Sale or Exchange of REMIC Regular Interest
Certificates..................................... 49
Taxation of the REMIC............................. 49
Taxation of Holders of Residual Interest
Certificates..................................... 50
Excess Inclusions................................. 51
Restrictions on Ownership and Transfer of
Residual Interest Certificates................... 52
Administrative Matters............................ 53
Tax Status as a Grantor Trust..................... 53
Miscellaneous Tax Aspects......................... 57
Tax Treatment of Foreign Investors................ 57
State Tax Considerations........................... 58
ERISA Considerations............................... 58
Prohibited Transactions........................... 59
Unrelated Business Taxable Income--Residual
Interests........................................ 60
Legal Investment................................... 60
Plan of Distribution............................... 62
Legal Matters...................................... 63
Index of Defined Terms............................. 64
</TABLE>
S-7
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the accompanying Prospectus. The following Summary of
Prospectus Supplement does not include all relevant information relating to
the securities and assets described herein, particularly with respect to the
risks and special considerations involved with an investment in such
securities, and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus. Prior to making an investment decision, a prospective investor
should carefully review this Prospectus Supplement and the Prospectus.
Capitalized terms used and not otherwise defined herein have the respective
meanings assigned to them in the Prospectus. See "Index of Significant
Definitions" herein and "Index of Defined Terms" in the Prospectus.
TITLE OF CERTIFICATES ......... Credit Suisse First Boston Mortgage
Securities Corp. Commercial Mortgage
Pass-Through Certificates, Series 1997-C2
(the "Certificates").
CERTIFICATE BALANCE ........... Each Class of Offered Certificates has the
approximate aggregate initial Certificate
Balance or Notional Balance set forth on the
cover page of this Prospectus Supplement,
subject to a permitted variance of plus or
minus 5%. The Offered Certificates, together
with the Private Certificates, will be
issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 11,
1997 (the "Pooling and Servicing Agreement")
among the Depositor, the Servicer, the
Special Servicer and the Trustee.
DEPOSITOR ..................... Credit Suisse First Boston Mortgage
Securities Corp., a Delaware corporation and
an affiliate of the Mortgage Loan Seller and
of Credit Suisse First Boston Corporation,
the Underwriter. See "The Depositor" in the
Prospectus.
SERVICER ...................... First Union National Bank, a national
banking association (the "Servicer").
Although the Servicer may employ agents,
including sub-servicers, the Servicer will
remain liable for its servicing obligations
under the Pooling and Servicing Agreement.
See "The Pooling and Servicing Agreement --
The Servicer" herein. The Servicer will be
permitted to purchase any Class of
Certificates. See "Risk Factors -- The
Offered Certificates --Servicer or Special
Servicer May Purchase Certificates; Conflict
of Interest" herein.
SPECIAL SERVICER .............. Lennar Partners, Inc., a Florida corporation
(the "Special Servicer"). The Special
Servicer will be responsible for servicing
Mortgage Loans that, in general, are in
default or as to which default is imminent
and administering any REO Property (as
defined herein). The holders of greater than
50% of the Percentage Interests of the most
subordinate Class of Certificates then
outstanding and having a Certificate Balance
equal to or greater than 25% of the initial
Certificate Balance of such Class (or, if no
such Class exists, the most subordinate
Class then outstanding) (the "Controlling
Class") will be entitled to remove the
Special Servicer as special servicer of the
Mortgage Loans, and appoint a successor
special servicer with respect to such
Mortgage Loans, provided that each Rating
Agency
S-8
<PAGE>
confirms in writing that such removal and
appointment, in and of itself, would not
cause a downgrade, qualification or
withdrawal of the then-current ratings
assigned to any Class of Certificates. The
Special Servicer will be permitted to
purchase any Class of Certificates. See
"Risk Factors -- The Offered Certificates --
Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest" herein.
TRUSTEE ....................... Norwest Bank Minnesota, National
Association, a national banking association
(the "Trustee"). See "The Pooling and
Servicing Agreement -- The Trustee" herein.
MORTGAGE LOAN SELLER .......... Credit Suisse First Boston Mortgage Capital
LLC, a Delaware limited liability company
(the "Mortgage Loan Seller"), an affiliate
of the Depositor and an affiliate of Credit
Suisse First Boston Corporation, the
Underwriter.
CUT-OFF DATE .................. December 11, 1997.
CLOSING DATE .................. On or about December 19, 1997.
DUE DATE ...................... With respect to all but 35 Mortgage Loans
(which collectively represent approximately
13.7% of the Initial Pool Balance), the 11th
day of each month and, in the case of such
other Mortgage Loans, various days from the
first day through the 10th day of each
month. Except for Loan No. 112, as described
herein, no Mortgage Loan has a grace period
for payment defaults that extends beyond the
related Determination Date. See "Description
of the Mortgage Loans -- Certain Terms and
Conditions of the Mortgage Loans -- Due
Dates" and "The Pooling and Servicing
Agreement -- Advances" herein.
DETERMINATION DATE ............ With respect to each Distribution Date, the
close of business on the 11th day of the
month in which such Distribution Date occurs
or, if such 11th day is not a business day,
the business day immediately following such
11th day.
DISTRIBUTION DATE ............. The 17th day of each month or, if such 17th
day is not a business day, the business day
immediately following such 17th day,
commencing in January 1998; provided,
however, that no Distribution Date will fall
on a date that is fewer than four business
days after the related Determination Date. A
business day is any day other than a
Saturday, a Sunday or any day on which
banking institutions in the States of New
York, North Carolina, Minnesota, Maryland or
Florida are authorized or obligated by law,
executive order or governmental decree to
close.
RECORD DATE ................... With respect to each Distribution Date, the
close of business on the last business day
of the month immediately preceding the month
in which such Distribution Date occurs.
INTEREST ACCRUAL PERIOD ....... With respect to any Distribution Date, the
period commencing on the 11th day of the
calendar month preceding the month in which
such Distribution Date occurs and ending on
the 10th day of the month in which such
Distribution Date occurs. Each Interest
Accrual Period is deemed to consist of 30
days.
S-9
<PAGE>
ASSUMED FINAL DISTRIBUTION
DATE ......................... As to each Class of Offered Certificates,
the date set forth on the cover page hereof.
RATED FINAL DISTRIBUTION
DATE ......................... As to each Class of Offered Certificates,
January 17, 2035, the first Distribution
Date following the date that is two years
after the latest Assumed Maturity Date of
any of the Mortgage Loans. The "Assumed
Maturity Date" of (a) any Mortgage Loan that
is not a Balloon Loan is the maturity date
of such Mortgage Loan and (b) any Balloon
Loan is the date on which such Balloon Loan
would fully amortize, assuming interest were
calculated on such Mortgage Loan on a 30/360
(as defined herein) basis.
DUE PERIOD .................... With respect to each Distribution Date, the
period beginning on the day following the
Determination Date in the month immediately
preceding the month in which such
Distribution Date occurs and ending at the
close of business on the Determination Date
of the month in which such Distribution Date
occurs.
DENOMINATIONS ................. The Offered Certificates (other than the
Class A-X Certificates) will be issuable in
registered form, in denominations of initial
Certificate Balance of $10,000 and multiples
of $1,000 in excess thereof. The Class A-X
Certificates will be maintained and
transferred on the book-entry records of DTC
and its Participants and issued in
denominations of $100,000 initial Notional
Balance and integral multiples of $10,000 in
excess thereof. A single additional Class
A-X Certificate may be issued in a
denomination of authorized initial Notional
Balance that includes the excess of (i) the
initial Notional Balance of Class A-X over
(ii) the largest integral multiple of
$10,000 that does not exceed such amount.
CLEARANCE AND SETTLEMENT ...... The Offered Certificates will be issued in
book-entry form and, so long as they are
Book-Entry Certificates (as defined herein),
will be evidenced by one or more
certificates registered in the name of Cede
& Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC"). The Depositor may
elect to terminate the book-entry system
through DTC with respect to all or any
portion of any Class of the Offered
Certificates. See "Description of the
Offered Certificates -- Book-Entry
Registration and Definitive Certificates"
herein.
REPORTS TO
CERTIFICATEHOLDERS ........... On each Distribution Date, the Trustee will
be required to prepare and forward to each
Certificateholder, the Depositor, the
Servicer, the Special Servicer, each Rating
Agency and, if requested in writing, any
potential investors in the Certificates a
Distribution Date Statement as described
under "The Pooling and Servicing Agreement
-- Reports to Certificateholders; Available
Information -- Trustee Reports." In
addition, the Servicer (in the case of
Specially Serviced Mortgage Loans (as
defined herein) and REO Properties, based
solely on the information provided by the
Special Servicer) will be required
S-10
<PAGE>
to deliver to the Trustee, and the Trustee
will be required to deliver to each
Certificateholder, the Depositor, each
Rating Agency and, if requested in writing,
any potential investor in the Certificates,
on each Distribution Date, a Comparative
Financial Status Report, a Delinquent Loan
Status Report, a Historical Loan
Modification Report, a Historical Loss
Estimate Report, an REO Status Report and a
Watch List, each as described under "The
Pooling and Servicing Agreement -- Reports
to Certificateholders; Available Information
-- Servicer Reports." The Trustee will also
be required to make available at its
offices, upon reasonable advance written
notice, during normal business hours, for
review by any Holder of a Certificate, the
Depositor, the Special Servicer, the
Servicer, any Rating Agency, any potential
investor in the Certificates or any other
Person to whom the Depositor believes such
disclosure is appropriate, among other
things, the following items, to the extent
delivered to the Trustee: Mortgaged Property
operating statements, rent rolls, retail
sales information, Mortgaged Property
inspection reports and all modifications,
waivers and amendments of the terms of a
Mortgage Loan entered into by the Servicer
or the Special Servicer. See "The Pooling
and Servicing Agreement -- Reports to
Certificateholders; Available Information --
Other Information" herein. A Current Report
on Form 8-K (the "Form 8-K") will be filed
by the Depositor, together with the Pooling
and Servicing Agreement, with the Securities
and Exchange Commission (the "Commission")
within fifteen days after the initial
issuance of the Offered Certificates. In the
event Mortgage Loans are removed from the
Trust Fund, such removal will be noted in
the Form 8-K. Such Form 8-K will be
available to purchasers and potential
purchasers of the Offered Certificates.
THE MORTGAGE LOANS ............ The Trust Fund will consist primarily of 185
loans with an aggregate principal balance,
as of the Cut-off Date, of approximately
$1,465,990,190 (collectively, the "Mortgage
Loans" and, individually, a "Mortgage
Loan"). The Mortgage Loans encumber land
improved by Retail Properties, Office
Properties, Hospitality Properties,
Multifamily Properties, Senior Housing
Properties, Industrial Properties, Self
Storage Facility Properties, Cooperative
Properties, Mobile Home/Recreational Vehicle
Park Properties and Other Properties (each,
as defined herein). The Mortgage Loan Seller
will sell the Mortgage Loans to the
Depositor and, in connection therewith, will
make certain representations and warranties,
as more fully described herein. The
Depositor will assign the Mortgage Loans,
together with its rights and remedies in
respect of breaches of the Mortgage Loan
Seller's representations and warranties to
the Trustee for the benefit of
Certificateholders. See "The Pooling and
Servicing Agreement -- Representations and
Warranties; Repurchase" herein. All
statistical information presented herein
with respect to the Mortgage Loans is
presented on an approximate basis.
S-11
<PAGE>
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE, UNLESS OTHERWISE
INDICATED)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (1) .......... $1,465,990,190
Number of Mortgage Loans .......... 185
Number of Mortgaged Properties ... 203
Average Mortgage Loan Balance .... $7,924,271
Maximum Mortgage Loan Principal
Balance .......................... $145,894,648
Minimum Mortgage Loan Principal
Balance .......................... $545,003
Weighted Average Mortgage Rate ... 8.027%
Range of Mortgage Rates ........... 6.528% to 9.590%
Weighted Average Remaining Term to
the Earlier of Maturity or
Anticipated Repayment Date ....... 11.34 years
Range of Remaining Term to the
Earlier of Maturity or
Anticipated Repayment Date........ 69 to 299 months
Weighted Average Original
Amortization Term (2) ............ 27.37 years
Range of Original Amortization
Terms (2) ........................ 80 to 422 months
Weighted Average DSCR (2)(3) ...... 1.43x
Range of DSCRs (2)(3) ............. 1.06x to 1.89x
Weighted Average LTV (2)(3) ...... 67.73%
Range of LTVs (3) ................. 38% to 84%
Weighted Average LTV at Earlier of
Anticipated Repayment Date or
Maturity (2)(3) .................. 56.63%
Percentage of Initial Pool Balance
made up of:
ARD Loans ........................ 86.05%
Fully Amortizing Loans
(other than ARD Loans) .......... 12.45%
Balloon Loans .................... 1.50%
Pool Loans........................ 5.19%
Crossed Loans..................... 2.20%
Credit Lease Loans................ 14.35%
Number of Mortgage Loans
Delinquent as of Cut-off Date .... 0
</TABLE>
(1) Subject to a permitted variance of plus
or minus 5%.
(2) As defined or described in "Description
of the Mortgage Loans
-- Additional Mortgage Loan Information"
herein.
(3) Excluding the Credit Lease Loans (as
defined herein).
S-12
<PAGE>
Security for the Mortgage Loans
Each Mortgage Loan is secured by one or more
first priority mortgages, deeds of trust, or
other similar security instruments
(collectively, "Mortgages") on the
borrower's interest (as set forth below) in
certain land used for commercial or
multifamily residential purposes, all
buildings and improvements thereon and
certain personal property located thereon,
and, in certain cases, reserve funds
(collectively, "Mortgaged Properties").
<TABLE>
<CAPTION>
INTEREST OF % OF NUMBER OF
BORROWER INITIAL POOL MORTGAGED
ENCUMBERED BALANCE(1) PROPERTIES
- ----------------- -------------- ------------
<S> <C> <C>
Fee Simple
Estate (2) ...... 90.9% 193
Leasehold Estate 9.1% 10
-------------- ------------
TOTAL............. 100.0% 203
============== ============
</TABLE>
(1) Based on the principal balance of the
Mortgage Loan or, for any Pool Loan (as
defined herein), the Allocated Loan
Amount (as defined herein) with respect
to each portion of the related Mortgaged
Property.
(2) For any Mortgaged Property where the
ground lessee and ground lessor are both
parties to the Mortgage, the Mortgaged
Property has been categorized as a fee
simple estate. For any Mortgaged
Property that partially consists of a
leasehold interest, the encumbered
interest has been categorized as a fee
simple interest if the leasehold
interest does not constitute a material
portion of the Mortgaged Property.
Credit Lease Loans
Certain of the Mortgage Loans (described in
the table contained in the section entitled
"Description of the Mortgage Loans -- Credit
Lease Loans"), representing approximately
14.35% of the Mortgage Loans by Initial Pool
Balance, are backed by net lease obligations
("Credit Leases") of, or net lease
obligations guaranteed by, various
corporations (the "Credit Lease Loans").
Scheduled monthly rent payments thereunder
(the "Monthly Rental Payments") by the
tenants (each, a "Tenant" and collectively,
the "Tenants") under the Credit Leases are,
except with respect to Loan No. 36,
sufficient to pay in full and on a timely
basis all interest and principal and other
sums scheduled to be paid with respect to
the related Credit Lease Loans. See
"Description of the Mortgage Loans --Certain
Terms and Conditions of the Mortgage Loans
-- Credit Lease Loans."
All of the Credit Lease Loans are secured by
assignments of leases and rents (the "Credit
Lease Assignments") on properties (the
"Credit Lease Properties") net-leased to the
Tenants pursuant to the Credit Leases.
Except with respect to 12 Credit Lease
Properties which are subject to Double Net
Leases (as defined herein), each Credit
Lease Loan provides that the related Tenant
is responsible for all costs and expenses
incurred in connection with the maintenance
and operation of the related
S-13
<PAGE>
Mortgaged Property and that, in the event of
a casualty or condemnation of the related
Mortgaged Property, (i) the Tenant is
obligated to continue making payments, (ii)
the Tenant must make an offer to purchase
the applicable Credit Lease Property for an
amount not less than the unpaid principal
balance plus accrued interest on the related
Credit Lease Loan in the event of a casualty
to or condemnation of a material portion of
the related Mortgaged Property or (iii) the
Trustee on behalf of the Certificateholders
will have the benefit of certain
non-cancelable credit lease enhancement
insurance policies (the "Lease Enhancement
Policies") obtained to cover certain
casualty and/or condemnation risks. See
"Description of the Mortgage Loans --Credit
Lease Loans."
Pool Loans and Crossed Loans
The Mortgage Loans identified on Annex A
hereto as having more than one related
"Asset No.", which Mortgage Loans represent
approximately 5.19% of the Initial Pool
Balance, are each secured by liens on
multiple properties (the "Pool Loans"). The
Mortgage Loans identified on the table
entitled "Mortgage Loans Secured by More
Than One Mortgaged Property" under "Risk
Factors -- The Mortgage Loans --
Concentration of Mortgage Loans; Borrowers"
as "Crossed Loans" are cross-defaulted and
cross-collateralized with the other Mortgage
Loans in the same group and, in the
aggregate, represent approximately 2.20% of
the Initial Pool Balance. A default under
one of the mortgages that secures a group of
Crossed Loans or a Pool Loan will result in
a default under all of the mortgages
securing such Mortgage Loan. The Mortgage
Loans identified under the table entitled
"Related Borrower Loans" under "Risk Factors
-- The Mortgage Loans -- Concentration of
Mortgage Loans; Borrowers on Related
Mortgage Loans (the "Related Borrower
Loans") are not cross-collateralized or
cross-defaulted with each other (unless
otherwise noted in this Prospectus
Supplement) but do have borrowers that are
affiliated with borrowers under other
Mortgage Loans. Each Pool Loan requires that
prior to the release of a related Mortgaged
Property, 125% of the Allocated Loan Amount
(as defined herein) of such Mortgaged
Property be defeased or prepaid and that the
DSCR (as defined herein) with respect to the
remaining Mortgaged Properties after
defeasance or prepayment, as applicable, be
no less than the greater of (x) a specified
DSCR (generally the DSCR at origination) and
(y) the DSCR immediately prior to such
defeasance or prepayment, as applicable. The
Crossed Loans generally prohibit the release
of Mortgaged Properties or require that if
an individual Crossed Loan is to be prepaid
(or, if applicable, defeased) and the
Mortgaged Property released from the liens
of the related Crossed Loans, the borrower
must prepay (or, if applicable, defease)
125% of the outstanding principal balance of
such Crossed Loan, and the excess, if any,
of such payment over such principal balance
will be applied to prepay (or, with respect
to a defeasance, will
S-14
<PAGE>
provide additional collateral for) the other
Crossed Loan(s) secured by such Mortgaged
Property.
Lockbox Terms
The Mortgage Loans identified on Annex A
hereto as having a Lockbox generally provide
that all rents, credit card receipts,
accounts receivable payments and other
income derived from the related Mortgaged
Properties will be (i) paid directly to a
Lockbox Account (as defined herein)
controlled by the Servicer on behalf of the
Trust Fund (a "Hard Lockbox"), (ii) paid to
the manager of the Mortgaged Properties,
which will deposit all sums collected into a
Lockbox Account on a regular basis (a
"Modified Lockbox") or (iii) collected by
the borrower until such time (if any) as a
triggering event (such as the failure to pay
the related Mortgage Loan in full on or
before the related Anticipated Repayment
Date or the net operating income declines by
a specified amount) occurs, at which time
all rents derived from the related Mortgaged
Property shall be deposited into a Lockbox
Account (a "Springing Lockbox"). For any
Hard Lockbox, income deposited directly into
the related Lockbox Account will not include
amounts paid in cash or paid
"over-the-counter". Such cash or
"over-the-counter" monies will be paid to
the manager of the Mortgaged Properties,
which will deposit all sums collected, into
a Lockbox Account on a regular basis.
Lockbox Accounts will not be assets of the
Trust Fund. Overall, the Mortgage Loans
provide for Lockbox Accounts as follows:
<TABLE>
<CAPTION>
% OF NUMBER OF
TYPE OF INITIAL MORTGAGE
LOCKBOX POOL BALANCE LOANS
- ------------------ -------------- -----------
<S> <C> <C>
Hard Lockbox ...... 52.5% 64
Modified Lockbox . 24.9 65
Springing Lockbox 21.5 55
No Lockbox ........ 1.1 1
-------------- -----------
TOTAL ............. 100.0% 185
============== ===========
</TABLE>
Payment Terms
The Mortgage Loans provide for scheduled
payments of principal and interest ("Monthly
Payments") to be due from the first day
through the 11th day of each month, although
in the case of all but 35 of the Mortgage
Loans, such payments are due on the 11th day
of each month. Except for Loan No. 112, no
Mortgage Loan that is due on the 11th day of
each month has a grace period for payment
defaults that extends beyond the related
Determination Date. Loan No. 112 has a
five-day grace period for payment defaults.
Each Mortgage Loan accrues interest at the
per annum rate set forth for such Mortgage
Loan on Annex A (the "Mortgage Rate"), which
is fixed for the entire term of such loan,
except as discussed below. Such interest
accrues on a 30/360 basis or on an
Actual/360 basis (each as defined herein).
S-15
<PAGE>
ARD Loans
139 of the Mortgage Loans (86.05% by Initial
Pool Balance) are "ARD Loans," which
generally accrue interest at a higher rate
following the applicable Anticipated
Repayment Date (as defined below). As used
herein, the term "Mortgage Rate" does not
include the portion of the interest rate
attributable to the rate increase. The
excess of interest at such higher rate over
interest at the Mortgage Rate (together with
interest thereon) is referred to herein as
"Excess Interest." As described below, all
of the Mortgage Loans that provide for
Excess Interest permit the related borrower
to prepay the related Mortgage Loan without
payment of a Prepayment Premium or Yield
Maintenance Charge beginning on, or up to
six months prior to, the date on which
Excess Interest begins accruing. The date on
which any such Mortgage Loan begins accruing
Excess Interest is referred to herein as the
"Anticipated Repayment Date." The
Anticipated Repayment Date for any such ARD
Loan is set forth on Annex A. The ARD Loans
substantially fully amortize over their
stated terms, which are at least 60 months
after their related Anticipated Repayment
Dates. If the related borrower elects to
prepay an ARD Loan in full on the related
Anticipated Repayment Date, a substantial
amount of principal will be due. If a
borrower elects not to prepay an ARD Loan on
or before its Anticipated Repayment Date,
all or a substantial portion of Excess Cash
Flow (as defined herein) collected after
such date shall be applied towards the
prepayment of such ARD Loan and, once the
principal balance thereof has been reduced
to zero, to the payment of accrued Excess
Interest. With respect to any ARD Loan,
payment of Excess Interest will be deferred
until the principal of such ARD Loan has
been paid in full. Substantially all of the
ARD Loans for which a Lockbox Account has
not been established on or before the
Closing Date provide that a Lockbox Account
must be established on or prior to the
applicable Anticipated Repayment Date. See
"Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage
Loans -- Excess Interest" herein.
Balloon Loans
Mortgage Loans representing 1.50% of the
Initial Pool Balance provide for Monthly
Payments based on amortization schedules at
least 180 months longer than the remaining
stated terms of such Mortgage Loans (such
Mortgage Loans, the "Balloon Loans"), such
that substantial amounts of principal are
due and payable on the respective maturity
dates (each such amount, after application
of all constant Monthly Payments due on or
prior to the respective maturity date, a
"Balloon Payment"), unless prepaid prior
thereto.
Fully Amortizing Loans
Mortgage Loans representing 12.45% of the
Initial Pool Balance fully amortize, or in
the case of any such Mortgage Loans that
S-16
<PAGE>
accrue interest on an Actual/360 basis,
substantially fully amortize over their
terms and are not ARD Loans.
Prepayment Characteristics of the Mortgage
Loans
Each Mortgage Loan restricts voluntary
prepayments in one or more of the following
ways: (i) by prohibiting any prepayments for
a specified period of time after the date of
origination of such Mortgage Loan (a
"Lockout Period"), (ii) by requiring that
any principal prepayment made during a
specified period of time after the date of
origination of such Mortgage Loan or, in the
case of a Mortgage Loan also subject to a
Lockout Period, after the date of expiration
of such Lockout Period (a "Yield Maintenance
Period") be accompanied by a Yield
Maintenance Charge (as defined below) and
(iii) by imposing fees or premiums equal to
a percentage of the then outstanding
principal balance of such Mortgage Loan
("Prepayment Premiums") in connection with
full or partial principal prepayments for a
specified period of time after the
expiration of the related Yield Maintenance
Period or Lockout Period, as the case may be
(in either case, a "Prepayment Premium
Period"). The Mortgage Loans also generally
permit prepayments to be made only on the
date upon which regularly scheduled Monthly
Payments can be made.
As of the Cut-off Date, approximately 100%
of the Mortgage Loans were within their
respective Lockout Periods, and the weighted
average of such Lockout Periods was 123
months.
For a description of the Yield Maintenance
Periods, Yield Maintenance Charges,
Prepayment Premium Periods and Prepayment
Premiums of the Mortgage Loans, see "Risk
Factors -- The Offered Certificates --
Special Prepayment and Yield Considerations"
and "Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage
Loans -- Prepayment Provisions" and
"--Property Releases" herein.
Defeasance
One hundred seventy-seven Mortgage Loans,
representing 84.8% of the Initial Pool
Balance, provide that after a specified
period (a "Defeasance Lockout Period"), the
applicable borrower may obtain the release
of the related Mortgaged Property (or, in
the case of any Pool Loan or Crossed Loans,
one or more of the related Mortgaged
Properties) from the lien of the related
Mortgages (a "Defeasance Option") upon the
pledge to the Trustee of noncallable U.S.
government obligations that provide payments
on or prior to all successive scheduled
payment dates upon which interest and
principal payments are due under the related
Mortgage Note and in amounts due on such
dates, and upon satisfaction of certain
other conditions. The Servicer will purchase
such U.S. government obligations on behalf
of a borrower exercising a Defeasance
Option. The Pool Loans and Crossed Loans
require that if fewer than all of the
Mortgaged Properties are being released, the
defeasance amount must equal 125% of the
Allocated Loan Amount for each Mortgaged
S-17
<PAGE>
Property released and certain DSCR tests
must be satisfied. The related borrower
will, at the request of the Servicer,
generally be required (or, in the case of
certain of the Mortgage Loans, permitted) to
transfer the pledged U.S. government
obligations together with all obligations
under the related Mortgage Loan or defeased
portion thereof to a successor limited
purpose borrower, and such successor
borrower will assume the obligations under
the Mortgage Loan or defeased portion
thereof.
Additional Collateral Loans
Three Mortgage Loans (each, an "Additional
Collateral Loan"), representing 4.87% of the
Initial Pool Balance, are additionally
secured by cash reserves or irrevocable
letters of credit that will be released upon
satisfaction by the borrower of certain
leasing-related conditions, including, in
certain cases, achieving certain debt
service coverage ratios. Failure to satisfy
such conditions within the time periods
specified therefor will result in the
application of the related credit
enhancement amount (each, a "Required
Prepayment") to partially prepay the related
Mortgage Loan, and such partial prepayment
is not required to be accompanied by payment
of a Prepayment Premium or Yield Maintenance
Charge. The holders of the Class A-X
Certificates and any Class of Offered
Certificates receiving any such prepayment
will be entitled to receive payments ("Yield
Protection Payments") to compensate them for
the absence of any such Prepayment Premium
or Yield Maintenance Charge payments. With
respect to any Class of Offered Certificates
receiving a distribution of principal in
connection with a Required Prepayment, the
Yield Protection Payment will equal 2% of
such distribution of principal. With respect
to the Class A-X Certificates, the Yield
Protection Payment will be in the nature of
a yield-maintenance payment which will be
described more fully in the Pooling and
Servicing Agreement. The Servicer will be
required to advance such Yield Protection
Payments on the related Servicer Remittance
Date and will be reimbursed therefor, and
will be paid interest thereon at the
Reimbursement Rate, by the Mortgage Loan
Seller. The rights of any Class of Offered
Certificates to receive Yield Protection
Payments, to the extent described herein,
will be treated as assets separate from the
REMIC regular interest represented by each
such Class. See "Certain Federal Income Tax
Consequences" herein. See "Description of
the Offered Certificates -- Distributions --
Yield Protection Payments" herein.
For the purposes of this Prospectus
Supplement and the statistical information
presented herein, the entire principal
balance of each Additional Collateral Loan
is deemed to be subject to a Lockout Period
for the related "Remaining Lockout" period
set forth on Annex A hereto, notwithstanding
the fact that Required Prepayments could
occur under such loans during such Lockout
Period.
The characteristics of each of the Mortgage
Loans are more particularly described in
Annex A hereto.
S-18
<PAGE>
None of the Mortgage Loans are insured or
guaranteed by the United States, any
governmental agency or instrumentality or
any private mortgage insurer. See
"Description of the Mortgage Loans --
General" herein.
THE CERTIFICATES .............. The Certificates will be issued pursuant to
a Pooling and Servicing Agreement, to be
dated as of December 11, 1997, among the
Depositor, the Servicer, the Special
Servicer and the Trustee (the "Pooling and
Servicing Agreement"), and will represent in
the aggregate the entire beneficial
ownership interest in the Trust Fund, which
will consist of the Mortgage Loans and
certain related assets.
The aggregate of the Certificate Balances of
the Regular Certificates (other than the
Class A-X Certificates) as of the Closing
Date will equal the sum of the Initial Pool
Balance.
The Offered Certificates
Each Class of Offered Certificates will have
the initial Certificate Balance or Notional
Balance and the initial Pass-Through Rate
set forth on the cover page hereof (subject,
in the case of each such Certificate Balance
or Notional Balance, to a permitted variance
of plus or minus 5%).
The Class A-X Certificates will not have a
Certificate Balance or entitle their holders
to distributions of principal. The Class A-X
Certificates will, however, represent the
right to receive distributions of interest
accrued as described herein on a notional
balance (the "Notional Balance"). The Class
A-X Certificates will have an initial
Notional Balance of approximately
$1,465,990,190, which is equal to the
aggregate Certificate Balance of the Regular
Certificates (other than the Class A-X
Certificates) as of the Closing Date. With
respect to any Distribution Date, the
Notional Balance of the Class A-X
Certificates will be equal to the aggregate
Certificate Balance of the Regular
Certificates (other than the Class A-X
Certificates) as of the first day of the
related Interest Accrual Period. The
Notional Balance of the Class A-X
Certificates is used solely for purposes of
describing the amounts of interest payable
on the Class A-X Certificates and does not
represent an interest in principal payments
on the Mortgage Loans. The Class V-1, Class
R and Class LR Certificates will not have
Certificate Balances or Notional Balances.
The Private Certificates (not offered
hereby)
The Private Certificates will have the
initial Certificate Balances and
Pass-Through Rates set forth in the
"Executive Summary" above (subject, in the
case of such Certificate Balances, to a
permitted variance of plus or minus 5%).
None of the Class F, Class G, Class H, Class
I, Class J, Class V-1, Class R or Class LR
Certificates are offered hereby.
S-19
<PAGE>
DISTRIBUTIONS OF
PRINCIPAL AND INTEREST ....... Available Distribution Amount
The "Available Distribution Amount" for any
Distribution Date is, as described herein
under "Description of the Offered
Certificates -- Distributions -- Method,
Timing and Amount," generally, the total of
all payments or other collections (or
available advances) on or in respect of the
Mortgage Loans that are available for
distribution on the Certificates on such
date. The Trust Fund will include two
separate REMICs. Collections on the Mortgage
Loans will be used to make payments of
principal and interest on certain interests
in one of the REMICs and on the Class LR
Certificates. Those payments in turn will be
used to make distributions on the
Certificates (other than the Class LR
Certificates), which represent interests in
a second REMIC. For purposes of simplicity,
distributions on the Offered Certificates
will generally be described herein as if
made directly from collections on the
Mortgage Loans to the holders of the Offered
Certificates.
Interest Distributions
On each Distribution Date, to the extent of
the Available Distribution Amount and
subject to the distribution priorities
described herein, each Class of Offered
Certificates will be entitled to receive
distributions of interest in an aggregate
amount equal to the Monthly Interest
Distributable Amount with respect to such
Class for such Distribution Date and, to the
extent not previously paid, for all prior
Distribution Dates (such amount, for such
Class, the "Optimal Interest Distribution
Amount"). No interest will accrue on such
overdue amounts. See "Description of the
Offered Certificates -- Distributions"
herein. The "Monthly Interest Distributable
Amount" in respect of any Class of Offered
Certificates for any Distribution Date will
equal interest accrued during the related
Interest Accrual Period (as defined herein)
at the then-applicable Pass-Through Rate on
the Certificate Balance of such Class of
Certificates immediately prior to such
Distribution Date, reduced by such Class's
allocable share of (i) the Uncovered
Prepayment Interest Shortfall Amount (as
defined herein), (ii) Certificate Deferred
Interest (as defined herein) and (iii)
certain indemnification expenses of the
Trust Fund. See "--Subordination" below. For
each Distribution Date, interest will accrue
with respect to the Certificates on the
basis of a 360-day year for the Interest
Accrual Period to which such Distribution
Date relates. Each Interest Accrual Period
will be deemed to consist of 30 days.
See "Description of the Offered Certificates
-- Distributions" herein.
Principal Distributions
On each Distribution Date, to the extent of
the Available Distribution Amount remaining
after the distribution of interest
S-20
<PAGE>
to be made on the Offered Certificates on
such date and subject to the distribution
priorities described herein, each Class of
Offered Certificates (other than the Class
A-X Certificates) will be entitled to
distributions of principal (until the
Certificate Balance of such Class of
Certificates is reduced to zero) in an
aggregate amount up to the Principal
Distribution Amount for such Distribution
Date. See "Description of the Offered
Certificates -- Distributions" herein.
Priority
On each Distribution Date, the Trustee will
apply amounts on deposit in the Upper-Tier
Distribution Account (as defined herein), to
the extent of the Available Distribution
Amount, in the following order of priority:
(A) concurrently, to the Class A-1, Class
A-2, Class A-3 and Class A-X Certificates,
in respect of interest, such Classes'
respective Optimal Interest Distribution
Amounts for such Distribution Date, any
insufficiency therein being allocated among
such Classes in proportion to such Optimal
Interest Distribution Amounts;
(B) to the Class A-1, Class A-2 and Class
A-3 Certificates, in reduction of the
Certificate Balances thereof, an amount up
to the Principal Distribution Amount for
such Distribution Date, in the following
order of priority:
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero;
second, to the Class A-2 Certificates, until
the Certificate Balance thereof has been
reduced to zero; and
third, to the Class A-3 Certificates, until
the Certificate Balance thereof has been
reduced to zero;
(C) to the Class A-1, Class A-2 and Class
A-3 Certificates, pro rata (based upon the
aggregate unreimbursed Collateral Support
Deficit previously allocated to each such
Class), until all amounts of such Collateral
Support Deficit previously allocated to such
Classes, but not previously reimbursed, have
been reimbursed in full;
(D) to the Class B Certificates, in respect
of interest, the Optimal Interest
Distribution Amount for such Class for such
Distribution Date;
(E) to the Class B Certificates, in
reduction of the Certificate Balance
thereof, an amount up to the Remaining
Principal Distributable Amount for such
Distribution Date until such Certificate
Balance has been reduced to zero;
(F) to the Class B Certificates, until all
amounts of Collateral Support Deficit
previously allocated to the Class B
Certificates, but not previously reimbursed,
have been reimbursed in full;
(G) to the Class C Certificates, in respect
of interest, the Optimal Interest
Distribution Amount for such Class for such
Distribution Date;
S-21
<PAGE>
(H) to the Class C Certificates, in
reduction of the Certificate Balance
thereof, an amount up to the Remaining
Principal Distributable Amount for such
Distribution Date until such Certificate
Balance has been reduced to zero;
(I) to the Class C Certificates, until all
amounts of Collateral Support Deficit
previously allocated to the Class C
Certificates, but not previously reimbursed,
have been reimbursed in full;
(J) to the Class D Certificates, in respect
of interest, the Optimal Interest
Distribution Amount for such Class for such
Distribution Date;
(K) to the Class D Certificates, in
reduction of the Certificate Balance
thereof, an amount up to the Remaining
Principal Distributable Amount for such
Distribution Date until such Certificate
Balance has been reduced to zero;
(L) to the Class D Certificates, until all
amounts of Collateral Support Deficit
previously allocated to the Class D
Certificates, but not previously reimbursed,
have been reimbursed in full;
(M) to the Class E Certificates, in respect
of interest, the Optimal Interest
Distribution Amount for such Class for such
Distribution Date;
(N) to the Class E Certificates, in
reduction of the Certificate Balance
thereof, an amount up to the Remaining
Principal Distributable Amount for such
Distribution Date until such Certificate
Balance thereof has been reduced to zero;
and
(O) to the Class E Certificates, until all
amounts of Collateral Support Deficit
previously allocated to the Class E
Certificates, but not previously reimbursed,
have been reimbursed in full.
The Private Certificates and the Class A-X
Certificates will be entitled to receive
distributions from the Available
Distribution Amount remaining after giving
effect to the distributions made on such
Distribution Date pursuant to clauses (A)
through (O) above, all as described herein.
See "Description of the Offered Certificates
-- Distributions -- Priority" herein.
Capitalized terms used in clauses (A)
through (O) above are defined in
"Description of the Offered Certificates --
Distributions --Definitions" herein.
Prepayment Premiums and Yield Maintenance
Charges
On each Distribution Date, any Prepayment
Premiums and Yield Maintenance Charges
collected on the Mortgage Loans during the
related Due Period will be distributed
separately from the Available Distribution
Amount for such Distribution Date to the
Offered Certificates (and to certain other
Classes of Regular Certificates) in the
manner and priority described herein under
"Description of the Offered Certificates --
Allocation of Prepayment Premiums and Yield
Maintenance Charges" herein.
S-22
<PAGE>
Other Distributions
Except as described in the next sentence,
the holders of the Class V-1, Class R and
Class LR Certificates will not be entitled
to distributions of interest or principal.
The Class V-1 Certificates will be entitled
to all distributions of Excess Interest,
subject to the limitations set forth in the
Pooling and Servicing Agreement. The holders
of the Class R Certificates will be entitled
to receive that portion of the Available
Distribution Amount remaining in the
Upper-Tier Distribution Account (as defined
herein) on any Distribution Date after the
distribution to the holders of the Regular
Certificates of all amounts which they are
entitled to receive. The Class LR
Certificateholders will be entitled to
receive (i) any funds remaining in the
Lower-Tier Distribution Account (as defined
herein) on any Distribution Date after all
distributions to which the regular interests
in the Lower-Tier REMIC (as defined herein)
are entitled on such Distribution Date have
been made and (ii) the remaining assets in
the Trust Fund, if any, after the
Certificate Balances of the Regular
Certificates have been reduced to zero and
the holders of the Regular Certificates have
received all other distributions to which
they are entitled. It is not anticipated
that there will be any assets remaining in
the Trust Fund on such date. Additionally,
the holders of 100% of the Percentage
Interests in the Class LR Certificates will
have the option to purchase at the purchase
price specified herein any ARD Loan on or
after its Anticipated Repayment Date under
the circumstances described under
"Description of the Mortgage Loans --Certain
Terms and Conditions of the Mortgage Loans."
SUBORDINATION ................. Except as described below, as a means of
providing protection to the holders of the
Offered Certificates against losses
associated with delinquent and defaulted
Mortgage Loans, the rights of the holders of
the Private Certificates to receive
distributions of principal and interest on
or in respect of the Mortgage Loans will be
subordinate to those of the holders of the
Mezzanine Certificates, and the rights of
the holders of the Mezzanine Certificates to
receive distributions of principal and
interest on or in respect of the Mortgage
Loans will be subordinate to those of the
holders of the Senior Certificates and each
Class of Mezzanine Certificates with an
earlier alphabetical designation, other
than, in each case, with respect to
Uncovered Prepayment Interest Shortfalls and
certain indemnification expenses. This
subordination will be effected in two ways:
(i) by the preferential right of holders of
a Class of Offered Certificates to receive
on any Distribution Date the amounts of
interest and principal distributable in
respect of such Offered Certificates on such
date prior to any distribution on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii)
by the allocation of Collateral Support
Deficits (as defined herein) to the Private
Certificates before allocation to the
Offered Certificates. No other form of
credit enhancement will be available for the
benefit of the holders of the Offered
Certificates, and the
S-23
<PAGE>
Offered Certificates are not insured or
guaranteed by any government agency or
instrumentality or by any other party. See
"Description of the Offered Certificates"
herein.
The payment of servicing compensation other
than the Servicing Fee and Primary Servicing
Fee (as defined herein), interest on
Advances (to the extent not covered by
Penalty Charges (as defined herein) on the
related Mortgage Loans), extraordinary
expenses of the Trust Fund (other than
indemnification expenses), a reduction in
the interest rate of a Mortgage Loan by a
bankruptcy court pursuant to a plan of
reorganization or pursuant to any of its
equitable powers, a reduction in the
interest rate or a forgiveness of the
principal of a Mortgage Loan as described
herein under "The Pooling and Servicing
Agreement -- Modifications" or otherwise
will result in reductions in the interest
entitlements of certain Classes and may
result in Collateral Support Deficits, in
each case affecting Classes in reverse
alphabetical order, as described herein.
Shortfalls in the Available Distribution
Amount resulting from Uncovered Prepayment
Interest Shortfalls (as defined herein) and
indemnification expenses of the Trust Fund
will generally be allocated to all Classes
of the Regular Certificates. In each case
such allocations will be made pro rata to
such Classes on the basis of their Monthly
Interest Distributable Amounts (before
giving effect to any reductions therefrom
for such Uncovered Prepayment Interest
Shortfalls or indemnification expenses or
for Certificate Deferred Interest) and will
reduce such Classes' respective interest
entitlements.
ADVANCES ...................... The Servicer is required to make advances of
principal and interest (each, a "P&I
Advance") with respect to delinquent Monthly
Payments on the Mortgage Loans, subject to
the limitations described herein. P&I
Advances will generally equal the delinquent
portion of the Monthly Payment as specified
in the related Mortgage Note, less (i) the
Servicing Fee and Primary Servicing Fee
(except to the extent that the related
borrower is required to reimburse such
amounts) and (ii) if applicable, the related
Workout Fee (as defined herein). If a
borrower defaults on its obligation to pay
amounts due on the maturity date of the
related Mortgage Loan, the Servicer will be
required to advance only an amount equal to
the interest and principal portion of the
constant Monthly Payment (or portion thereof
not received) that was due prior to the
maturity date, subject to the limitations
described above. The Servicer will not be
required or permitted to make any P&I
Advance in respect of Excess Interest. The
amount required to be advanced in respect of
delinquent Monthly Payments on a Mortgage
Loan that has been subject to an Appraisal
Reduction Event will equal the amount
required to be advanced by the Servicer
without giving effect to the related
Appraisal Reduction (as defined herein)
minus the related Appraisal Reduction Amount
(as defined herein). See "The Pooling and
Servicing Agreement -- Distributions --
Advances" herein. If the Servicer fails to
S-24
<PAGE>
make a required P&I Advance, the Trustee
will be required to make the P&I Advance, in
each case subject to a determination of
recoverability. See "The Pooling and
Servicing Agreement --Advances" and
"--Appraisal Reductions" herein.
OPTIONAL TERMINATION .......... The Mortgage Loan Seller will have the
option to purchase, at the Purchase Price
specified herein, all of the Mortgage Loans
and all property acquired through exercise
of remedies in respect of any Mortgage Loan
remaining in the Trust Fund, and thereby
effect termination of the Trust Fund and
early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans remaining in the Trust
Fund is less than 3.75% of the initial
aggregate principal balance of the Mortgage
Loans. If the Mortgage Loan Seller does not
exercise such option within 60 days after it
becomes exercisable, the holders of a
majority of the Percentage Interests in the
Controlling Class can notify the Mortgage
Loan Seller of their intention to exercise
such option and if the Mortgage Loan Seller
does not exercise such option within ten
Business Days thereafter, such holders of
the Controlling Class will be entitled to
exercise such option. If the holders of the
Controlling Class do not exercise such
option within the time period described
herein, the Servicer will be entitled to
exercise such option. See "The Pooling and
Servicing Agreement -- Optional Termination"
herein.
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS ........... Two separate elections will be made to treat
the Trust Fund (exclusive of the Excess
Interest and certain assumption fees and the
right to receive Yield Protection Payments
and the corresponding collateral pledged to
support the obligation to make such payments
as described below) as real estate mortgage
investment conduits (each, a "REMIC" or, in
the alternative, the "Upper-Tier REMIC" and
the "Lower-Tier REMIC," respectively) for
federal income tax purposes. The Class A-1,
Class A-2, Class A-3, Class A-X, Class B,
Class C, Class D, Class E, Class F, Class G,
Class H, Class I and Class J Certificates
(collectively, the "Regular Certificates")
will constitute "regular interests" in the
Upper-Tier REMIC, except as described below.
The Class R and Class LR Certificates (the
"Residual Certificates") will represent the
beneficial ownership of the sole Class of
the "residual interest" in the Upper-Tier
REMIC and the sole Class of residual
interest in the Lower-Tier REMIC. The Class
V-1 Certificates will represent the right to
receive Excess Interest. The interest in the
Trust Fund described in the preceding
sentence will be treated as a grantor trust
for federal income tax purposes and not as
an asset of either the Upper Tier REMIC or
the Lower Tier REMIC. The Offered
Certificates will generally be treated as
newly originated debt instruments for
federal income tax purposes. Beneficial
owners of the Offered Certificates will be
required to report income thereon in
accordance with the accrual method of
accounting. Based on expected issue prices,
it is anticipated that the Class
S-25
<PAGE>
A-X Certificates will be issued with
original issue discount and no other Class
of Offered Certificates will be issued with
original issue discount. See "Certain
Federal Income Tax Consequences" herein and
"Certain Federal Income Tax Consequences --
Taxation of the REMIC and its Holders" in
the Prospectus. Although not free from
doubt, it is anticipated that any Prepayment
Premiums and Yield Maintenance Charges
allocable to the Offered Certificates will
be ordinary income to the related
Certificateholders as such amounts accrue.
See "Description of the Offered Certificates
-- Distributions" herein.
The rights of any Class of Offered
Certificates to receive Yield Protection
Payments, to the extent described herein,
will be treated as assets separate from the
REMIC regular interest represented by each
such Class. The purchase price paid for each
such Class must be allocated between the
right to receive Yield Protection Payments
and the REMIC regular interest represented
by such Class. See "Certain Federal Income
Tax Consequences" herein.
ERISA CONSIDERATIONS .......... The acquisition of an Offered Certificate by
a pension or other employee benefit plan (a
"Plan") subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could, in some instances, result
in a prohibited transaction or other
violation of the fiduciary responsibility
provisions of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended
(the "Code").
The United States Department of Labor has
granted to the Underwriter an administrative
exemption, Prohibited Transaction Exemption
89-90 (the "Exemption"), for certain
mortgage-backed and asset-backed
certificates underwritten in whole or in
part by the Underwriter. The Exemption might
be applicable to the initial purchase, the
holding, and the subsequent resale by a Plan
of certain certificates, such as the Senior
Certificates, underwritten by the
Underwriter, representing interests in
pass-through trusts that consist of certain
receivables, loans and other obligations,
provided that the conditions and
requirements of the Exemption are satisfied.
The loans described in the Exemption include
mortgage loans such as the Mortgage Loans.
The Underwriter believes that the conditions
to the applicability of the Exemption will
generally be met with respect to the Senior
Certificates, other than possibly those
conditions which are dependent on facts
unknown to the Underwriter or which it
cannot control, such as those relating to
the circumstances of the Plan purchaser or
the Plan fiduciary making the decision to
purchase any such Class of Certificates.
However, before purchasing a Senior
Certificate, a fiduciary of a Plan should
make its own determination as to the
availability of the exemptive relief
provided by the Exemption or the
availability of any other prohibited
transaction exemptions, and whether the
conditions of any such exemption will be
applicable to the Senior Certificates.
S-26
<PAGE>
Any Plan fiduciary considering whether to
purchase any Offered Certificate on behalf
of a Plan should consult with its counsel
regarding the applicability of the
provisions of ERISA and the Code. See "ERISA
Considerations" herein and in the
Prospectus.
RATINGS ....................... It is a condition to the issuance of the
Offered Certificates that they receive the
following credit ratings from Moody's
Investors Service, Inc. ("Moody's"), Fitch
IBCA, Inc. ("Fitch") and Standard & Poor's
Ratings Services, a division of The McGraw
Hill Companies, Inc. ("S&P" and, together
with Fitch and Moody's, the "Rating
Agencies"):
<TABLE>
<CAPTION>
MOODY'S FITCH S&P
----------- --------- -------
<S> <C> <C> <C>
Class A-1 ..... Aaa AAA AAA
Class A-2...... Aaa AAA AAA
Class A-3...... Aaa AAA AAA
Class A-X ..... Aaa AAA NR
Class B ....... Aa2 AA NR
Class C ....... A2 A NR
Class D ....... Baa2 BBB- NR
Class E ....... Baa3 NR NR
</TABLE>
The Rated Final Distribution Date for each
Class of Offered Certificates is January 17,
2035. For a description of the limitations
of the ratings of the Offered Certificates,
see "Rating" herein. A security rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning
rating organization. The Rating Agencies'
ratings on the Offered Certificates address
the likelihood of the timely payment of
interest and the ultimate repayment of
principal by the Rated Final Distribution
Date. A security rating does not address the
frequency of prepayments (both voluntary and
involuntary) or the possibility that
Certificateholders might suffer a lower than
anticipated yield, nor does a security
rating address the likelihood of receipt of
Prepayment Premiums, Yield Maintenance
Charges, Yield Protection Payments or Excess
Interest. With respect to Credit Lease
Loans, a downgrade in the credit rating of
the related Tenants or Guarantors (as
defined herein) and/or of the issuer of the
Lease Enhancement Policy may have a related
adverse effect on the rating of the Offered
Certificates. A security rating does not
represent any assessment of the yield to
maturity that investors may experience or
the possibility that the holders of the
Class A-X Certificates might not fully
recover their initial investment in the
event of delinquencies or rapid prepayments
of the Mortgage Loans (including both
voluntary and involuntary prepayments). As
described herein, the amounts payable with
respect to the Class A-X Certificates
consist only of interest. If the entire pool
were to prepay in the initial month, with
the result that the Class A-X
Certificateholders receive only a single
month's interest and thus suffer a nearly
complete loss of their investment, all
amounts "due" to such holders will
nevertheless
S-27
<PAGE>
have been paid, and such result is
consistent with the rating received on the
Class A-X Certificates. Accordingly, the
ratings of the Class A-X Certificates should
be evaluated independently from similar
ratings on other types of securities. There
can be no assurance that another rating
agency that assigns a rating to any Class of
Offered Certificates would assign a rating
consistent with those described herein. See
"Risk Factors," "Rating" and "Prepayment and
Yield Considerations" herein.
LEGAL INVESTMENT .............. The Offered Certificates will not constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. The appropriate
characterization of the Offered Certificates
under various legal investment restrictions,
and thus the ability of investors subject to
these restrictions to purchase the Offered
Certificates, may be subject to significant
interpretive uncertainties. All investors
whose investment authority is subject to
legal restrictions should consult their own
legal advisors to determine whether and to
what extent the Offered Certificates
constitute legal investments for them. See
"Legal Investment" herein and in the
Prospectus.
RISK FACTORS .................. See "Risk Factors" immediately following
this Summary of Prospectus Supplement for a
discussion of certain factors that should be
considered in connection with the purchase
of the Offered Certificates.
S-28
<PAGE>
RISK FACTORS
Prospective holders of Offered Certificates should consider, among other
things, the following factors in connection with the purchase of the Offered
Certificates.
THE MORTGAGE LOANS
Risks Associated with Commercial and Multifamily Lending Generally. The
Mortgage Loans are secured by Retail Properties, Office Properties,
Hospitality Properties, Multifamily Properties, Senior Housing Properties,
Industrial Properties, Self Storage Facility Properties, Cooperative
Properties, Mobile Home/Recreational Vehicle Park Properties and Other
Properties (each, as defined herein). Mortgage Loans secured by commercial
and multifamily properties are markedly different from one-to four-family
residential mortgage loans. Commercial and multifamily lending is generally
viewed as exposing a lender to a greater risk of loss than one-to four-family
residential lending. The repayment of loans secured by commercial or
multifamily properties is typically dependent upon the successful operation
of the related real estate project, the businesses operated by the tenants
and the creditworthiness of such tenants, i.e., the ability of the applicable
property to produce cash flow. Even the liquidation value of a commercial or
multifamily residential property is determined more by capitalization of the
property's cash flow than any absolute value of buildings and improvements
thereon. Lenders typically look to the debt service coverage ratio (that is
the ratio of net cash flow to debt service) of a loan secured by
income-producing property as an important measure of the risk of default on
such a loan. Commercial and multifamily lending also typically involves
larger loans to a single obligor than one-to four-family residential lending.
Volatility. Commercial and multifamily property values and cash flows from
such properties are subject to volatility and may be sufficient or
insufficient to cover debt service on the related Mortgage Loan at any given
time. The volatility of property values and cash flows depends upon a number
of factors, including (i) the volatility of property revenue and (ii) the
property's "operating leverage," which generally refers to (a) the percentage
of total property operating expenses in relation to property revenue, (b) the
breakdown of property operating expenses between those that are fixed and
those that vary with revenue and (c) the level of capital expenditures
required to maintain the property and retain or replace tenants. The net
operating income and value of the Mortgaged Properties may be adversely
affected by a number of factors, including but not limited to, national,
regional and local economic conditions (which may be adversely impacted by
plant or military base closings, industry slowdowns and other factors); local
real estate conditions (such as an oversupply of housing, nursing home beds,
retail space, hotel rooms, office space, mobile home and recreational vehicle
space or self-storage facilities); changes or continued weakness in specific
industry segments; changes in applicable healthcare regulations, including
reimbursement requirements or legal requirements such as rent stabilization
laws; perceptions by prospective tenants and, in the case of retail
properties, retailers and shoppers, of the safety, convenience, services and
attractiveness of the property or the relative convenience of alternatives
such as direct mail, video shopping networks and the Internet; the
willingness and ability of the property's owner to provide capable management
and adequate maintenance; demographic factors; retroactive changes to
building or similar codes; increases in operating expenses (such as energy
costs); the number of tenants or, if applicable, the diversity of types of
business operated by such tenants; and laws regulating the maximum rental
permitted to be charged to a residential tenant. Properties with short-term,
less dependable revenue sources and/or relatively high operating leverage,
such as health care related facilities, hotels and motels can be expected to
have more volatile cash flows, and to respond more quickly to changes in
general economic conditions, than properties with medium to long-term tenant
commitments from creditworthy tenants and/or relatively low operating
leverage. A decline in the real estate market, in the financial condition of
a major tenant or, with respect to hotels and motels, the financial condition
or public perception of a franchiser, or a general decline in the local or
national economy will tend to have a more immediate effect on the net
operating income of such properties and may lead to higher rates of
delinquency or defaults. Historical operating results of the Mortgaged
Properties may not be comparable to future operating results. In addition,
other factors may adversely affect the Mortgaged Properties' value without
affecting their current net operating income, including changes in
governmental regulations, zoning or tax laws; potential environmental or
other legal liabilities; the availability of refinancing; and changes in
interest rate levels.
S-29
<PAGE>
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The effects of poor construction quality or design will
increase over time in the form of increased maintenance and capital
improvements. Even good construction will deteriorate over time if the
property managers do not schedule and perform adequate maintenance in a
timely fashion. If, during the terms of the Mortgage Loans, competing
properties of a similar type are built in the areas where the Mortgaged
Properties are located or similar properties in the vicinity of the Mortgaged
Properties are substantially updated and refurbished, the value and net
operating income of such Mortgaged Properties could be reduced. There is no
assurance that the value of any Mortgaged Property during the term of the
related Mortgage Loan will equal or exceed the appraised value determined in
connection with the origination of such Mortgage Loan. However, the Mortgage
Loans generally provide for deferred maintenance reserves in an amount
sufficient to remedy any deficiencies identified by the engineering report
issued in connection with the origination of the related Mortgage Loan. In
addition, 68.34% of the Mortgage Loans, by Initial Pool Balance (excluding
Credit Lease Loans), require reserves for ongoing Capital Items (as defined
herein).
Additionally, some of the Mortgaged Properties may not readily be
converted to alternative uses if such Mortgaged Properties become
unprofitable due to competition, age of the improvements, decreased demand,
zoning restrictions or other factors. The conversion of Self-Storage Facility
Properties, Senior Housing Properties or Hospitality Properties (or, in the
case of the Other Properties, any of the racquet clubs, movie theaters and
health clubs) to alternative uses would generally require substantial capital
expenditures. Thus, if the operation of any such Mortgaged Properties becomes
unprofitable such that the borrower becomes unable to meet its obligations on
the related Mortgage Loan, the liquidation value of any such Mortgaged
Property may be substantially less, relative to the amount owing on the
related loan, than would be the case if such property were readily adaptable
to other uses.
Other multifamily residences, hotels, retail properties, office buildings,
nursing homes, assisted living facilities, mobile home parks and industrial
properties located in the areas of the Mortgaged Properties compete with the
Mortgaged Properties of such types to attract residents, retailers,
customers, patients and tenants. Increased competition frequently leads to
lowering of rents in a market and could adversely affect income from and
market value of the Mortgaged Properties.
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans are not
insured or guaranteed by any governmental entity, by any private mortgage
insurer, or by the Depositor, the Mortgage Loan Seller, the Servicer, the
Special Servicer, the Trustee or any of their respective affiliates.
Substantially all of the Mortgage Loans are nonrecourse loans as to which,
in the event of a default under such Mortgage Loans, recourse generally may
be had only against the specific properties and other assets that have been
pledged to secure such Mortgage Loans. See "Description of the Mortgage
Loans" herein. Consequently, payment on each such Mortgage Loan prior to
maturity is dependent primarily on the sufficiency of the net operating
income of the related Mortgaged Property, and at maturity (whether at
scheduled maturity or, in the event of a default under the related Mortgage
Loan, upon the acceleration of such maturity), upon the then-current market
value of the related Mortgaged Property (taking into account any adverse
effect of a foreclosure proceeding on such market value) or the ability of
the related borrower to refinance the Mortgaged Property. Substantially all
of the Mortgage Loans were originated within twelve months before the Cut-off
Date. Consequently, the Mortgage Loans generally do not have as long-standing
a payment history as mortgage loans originated on earlier dates. Even if a
Mortgage Loan provides for recourse to a borrower or its affiliates, there
can be no assurance that the Trust Fund could ultimately collect sums due
under such Mortgage Loan.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of
such project. Different property types vary in the extent to which the
property manager is involved in property marketing, leasing and operations on
a daily basis. Properties deriving revenues primarily from short-term sources
(such as hotels and nursing homes), as well as self-storage facilities and
health-care facilities, are generally more management-intensive than
properties leased to creditworthy tenants under long-term leases. The
property manager is responsible for responding to changes in the local
market, planning and implementing the rental structure, including
S-30
<PAGE>
establishing levels of rent payments, operating the properties and providing
building services, managing operating expenses and advising the borrowers so
that maintenance and capital improvements can be carried out in a timely
fashion. There can be no assurance that the property managers will at all
times be in a financial condition to continue to fulfill their management
responsibilities under the related management agreements throughout the terms
thereof. The property managers are operating companies and, unlike limited
purpose entities, may not be restricted from incurring debt and other
liabilities in the ordinary course of business or otherwise. Moreover,
certain of the Mortgaged Properties are managed by affiliates of the
applicable borrower. Such relationship could raise additional difficulties in
connection with a Mortgage Loan in default or undergoing special servicing.
For example, a dispute between the partners or members of a borrower could
disrupt the management of the underlying property which may cause an adverse
effect on cash flow. However, certain of the Mortgage Loans permit the lender
to remove the manager upon the occurrence of an event of default, or other
specified triggers.
Office Properties. Based on Initial Pool Balance, 28.27% of the Mortgage
Loans are secured by Office Properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein. Significant factors
determining the value of office properties are the quality of the tenants in
the building, the physical attributes of the building in relation to
competing buildings and the strength and stability of the market area as a
desirable business location. Office properties may be adversely affected by
an economic decline in the business operated by the tenants. The risk of such
an adverse effect is increased if revenue is dependent on a single tenant or
if there is a significant concentration of tenants in a particular business
or industry. Based on Initial Pool Balance, 2.82% of the Mortgage Loans are
secured by Office Properties that are single-tenant properties.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation
and ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy that is markedly
different from that of a suburb. The local economy and the financial
condition of the owner will impact on an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting
office space for a new tenant is often more costly than for other property
types.
Retail Properties. Based on Initial Pool Balance, 21.25% of the Mortgage
Loans are secured by Retail Properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein. Significant factors
determining the value of retail properties are the quality of the tenants as
well as fundamental aspects of real estate such as location and market
demographics. The correlation between the success of tenant businesses and
property value is more direct with respect to retail properties than other
types of commercial property because a significant component of the total
rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is "anchored" or "unanchored" is also an important
distinction. Retail properties that are anchored have traditionally been
perceived to be less risky. While there is no strict definition of an anchor,
it is generally understood that a retail anchor tenant is a tenant that is
proportionately large in size and is vital in attracting customers to the
property. The Mortgage Loan Seller has determined that 21 multi-tenant retail
properties, representing 13.68% of the Mortgage Loans (based on Initial Pool
Balance), are "anchored properties." As used herein, an "anchored property"
means a property in which a nationally or regionally recognized tenant, or a
credit tenant occupying a significant portion of the Mortgaged Property, or
any tenant occupying more than 25,000 square feet, is located. The loss of an
anchor tenant, the assignment of an anchor tenant's interest under any lease
to a less desirable tenant or a significant decline in the level of an anchor
tenant's business may have an adverse effect on the overall operation of such
properties. Furthermore, the correlation between the success of tenant
businesses and credit quality of the Mortgage Loan is increased when the
property is a single-tenant property. Based on Initial Pool Balance, 6.66% of
the Mortgage Loans are
S-31
<PAGE>
secured by Retail Properties (excluding Credit Lease Loans) that are
"unanchored properties". Based on Initial Pool Balance, 0.92% of the Mortgage
Loans secured by Retail Properties (other than the Credit Lease Loans secured
by Retail Properties) are secured by single-tenant properties. For a
description of risk factors relating to single-tenant properties, see
"--Tenant Credit Risk" and "--Credit Quality of Tenants and Guarantors"
below.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalog retailers, home
shopping networks, the Internet, telemarketing and outlet centers all compete
with more traditional retail properties for consumer dollars. Continued
growth of these alternative retail outlets (which are often characterized by
lower operating costs) could adversely affect the rents collectible at the
retail properties securing Mortgage Loans in the Trust Fund.
Hospitality Properties. Based on Initial Pool Balance, 17.14% of the
Mortgage Loans are secured by full service hotels, limited service hotels or
extended stay hotels. These hotels comprise hotels associated with national
franchise chains, hotels associated with regional franchise chains and hotels
that are not affiliated with any franchise chain but may have their own brand
identity. See "Description of the Mortgage Loans -- Additional Mortgage Loan
Information" herein for certain statistical information on the Hospitality
Properties and Hospitality Loans.
Various factors, including location, quality and franchise affiliation may
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can be charged
for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. In connection with such concerns, in 100% of the Hospitality Loans,
the related borrower is required to fund FF&E reserves for replacements of
furniture, fixtures and equipment. Because hotel rooms generally are rented
for short periods of time, hotels tend to respond more quickly to adverse
economic conditions and competition than do other commercial properties.
Furthermore, the financial strength and capabilities of the owner and
operator of a hotel may have a substantial impact on such hotel's quality of
service and economic performance. Additionally, in many parts of the country
the hotel and lodging industry is seasonal in nature and this seasonality can
be expected to cause periodic fluctuations in room and other revenues,
occupancy levels, room rates and operating expenses. The demand for
particular accommodations may also be affected by changes in travel patterns
caused by changes in energy prices, strikes, relocation of highways, the
construction of additional highways and other factors.
Certain of the Hospitality Properties are franchisees of national or
regional hotel chains. The viability of any such Hospitality Property depends
in part on the continued existence and financial strength of the franchisor,
the public perception of the franchise service mark and the duration of the
franchise license agreements. The transferability of franchise license
agreements may be restricted and, in the event of a foreclosure on any such
Hospitality Property, the lender may not have the right to use the franchise
license without the franchisor's consent. Conversely, a lender may be unable
to remove a franchisor that it desires to replace following a foreclosure.
Further, in the event of a foreclosure on a Hospitality Property, it is
unlikely that the Trustee (or Servicer or Special Servicer) or purchaser of
such Hospitality Property would be entitled to the rights under any liquor
license for such Hospitality Property and such party would be required to
apply in its own name for such license or licenses. There can be no assurance
that a new license could be obtained or that it could be obtained promptly.
Many of the Hospitality Properties have liquor licenses. The liquor
licenses for some of such properties may be held by the property manager
rather than by the related borrower. In addition, some states do not permit
liquor licenses to be held other than by a natural person and, consequently,
liquor licenses for hotel properties located in such jurisdictions are held
by an individual affiliated with the related borrower or manager.
Furthermore, the applicable laws and regulations relating to such licenses
generally prohibit the transfer of such licenses to any person without the
prior approval of the relevant licensing authority. In the event of a
foreclosure of a Hospitality Property, it is unlikely that the Trustee
S-32
<PAGE>
(or Servicer or Special Servicer) or purchaser in any such sale would be
entitled to the rights under the liquor license for such hotel property. Such
party would be required to apply in its own name for such a license, but
there can be no assurance that a new liquor license could be obtained.
Credit Lease Properties. Based on Initial Pool Balance, 14.35% of the
Mortgage Loans are secured by Credit Lease Properties. See "--Tenant Credit
Risk," "--Credit Quality of Tenants and Guarantors," and "--Factors Affecting
Lease Enhancement Policy Proceeds" below.
Any rating assigned to a Tenant or Guarantor, as applicable, by a rating
agency will reflect such rating agency's assessment of long-term unsecured
debt obligations only. Such rating does not imply an assessment of the
likelihood that the Credit Leases will not be terminated or the Credit Lease
Loans prepaid, that Principal Prepayments on the Credit Lease Loans will be
made by the related Borrowers, or that any Prepayment Premium will be paid
or, if paid, will be sufficient to provide the anticipated yield. As a
result, such rating will not address the possibility that a prepayment of a
Mortgage Loan may cause a Certificateholder to experience a lower than
anticipated yield. See "Prepayment and Yield Considerations" herein. See
"Description of the Mortgage Pool -- Additional Mortgage Loan Information --
Cut-off Date Loan Amount by Property Type" herein, for certain statistical
information on the Credit Lease Loans.
Multifamily Properties. Based on Initial Pool Balance, 10.44% of the
Mortgage Loans are secured by multifamily apartment buildings. See
"Description of the Mortgage Loans -- Additional Mortgage Loan Information"
herein for certain statistical information on such loans.
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and site-built single family
homes), the physical attributes of the multifamily apartment building (such
as its age and appearance) and state and local regulations affecting such
property. In addition, the successful operation of an apartment building will
depend upon other factors, such as its reputation, the ability of management
to provide adequate maintenance and insurance and the types of services it
provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord
may terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent stabilization and/or rent
control on apartment buildings. These ordinances may limit rent increases to
fixed percentages, to percentages of increases in the consumer price index,
to increases set or approved by a governmental agency, or to increases
determined through mediation or binding arbitration. In many cases, the rent
control laws do not permit vacancy decontrol. Local authority to impose rent
control is preempted by state law in certain states, and rent control is
generally imposed at the state level in those states. In some states,
however, local rent control ordinances are not pre-empted for tenants having
short-term or month-to-month leases, and properties there may be subject to
various forms of rent control with respect to those tenants. Any limitations
on a borrower's ability to raise property rents may impair such borrower's
ability to repay its Mortgage Loan from its net operating income or the
proceeds of a sale or refinancing of the related Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely
rent payments or a reduction in occupancy levels. Occupancy and rent levels
may also be affected by construction of additional housing units, local
military base or factory closings and national and local politics, including
current or future rent stabilization and rent control laws and agreements. In
addition, the level of mortgage interest rates may encourage tenants
S-33
<PAGE>
to purchase single-family housing. The location and construction quality of a
particular building may affect the occupancy level as well as the rents that
may be charged for individual units. The characteristics of a neighborhood
may change over time or in relation to newer developments.
Industrial Properties. Based on Initial Pool Balance, 4.13% of the
Mortgage Loans are secured by industrial properties. See "Description of the
Mortgage Loans -- Additional Mortgage Loan Information" herein. Significant
factors determining the value of industrial properties are the quality of
tenants, building design and adaptability and the location of the property.
Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although
industrial properties are more frequently dependent on a single tenant. In
addition, properties used for many industrial purposes are more prone to
environmental concerns than other property types.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics that are valuable to an industrial
property include clear heights, column spacing, zoning restrictions, number
of bays and bay depths, divisibility, truck turning radius and overall
functionality and accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Mobile Home/Recreational Vehicle Park Properties. Based on Initial Pool
Balance, 2.66% of the Mortgage Loans are operated as mobile home parks,
recreational vehicle parks or combinations thereof. See "Description of the
Mortgage Loans -- Additional Mortgage Loan Information" herein for certain
statistical information on such loans. Significant factors determining the
value of mobile home park properties are generally similar to the factors
affecting the value of multifamily residential properties. In addition, the
mobile home park properties are "special purpose" properties that could not
be readily converted to general residential, retail or office use.
Additionally, certain states regulate changes in mobile home park use and
require that the landlord give written notice to its tenants a substantial
period of time prior to the projected change. Consequently, if the operation
of any of the Mobile Home/Recreational Vehicle Properties becomes
unprofitable due to competition, age of the improvements or other factors
such that the borrower becomes unable to meet its obligation on the related
Mortgage Loan, the liquidation value of that Mobile Home/Recreational Vehicle
Property may be substantially less, relative to the amount owed on the
Mortgage Loan, than would be the case if the Mobile Home/Recreational Vehicle
Property were readily adaptable to other uses.
Commercial Other/Mixed Use Properties. Based on Initial Pool Balance,
0.91% of the Mortgage Loans (excluding self-storage facilities) are operated
as mixed use properties. See "--Risks Associated with Commercial and
Multifamily Lending Generally," and "--Volatility" above.
Senior Housing Properties. Based on Initial Pool Balance, 0.44% of the
Mortgage Loans are secured by properties operated as nursing home or assisted
living senior housing and healthcare properties. See "Description of the
Mortgage Loans -- Additional Mortgage Loan Information" herein for certain
statistical information on such loans. Significant factors determining the
value of assisted living senior housing and healthcare properties include
federal and state laws, competition with similar properties on a local and
regional basis and the continued availability of revenue from government
reimbursement programs, primarily Medicaid and Medicare.
Self-Storage Facilities. Based on Initial Pool Balance, 0.41% of the
Mortgage Loans are secured by self-storage facilities. Self-storage
facilities are considered vulnerable to competition because both acquisition
costs and break-even occupancy are relatively low. The conversion of
self-storage facilities to alternative uses would generally require
substantial capital expenditures. Thus, if the operation of any of the
self-storage Mortgaged Properties becomes unprofitable due to decreased
demand, competition, age of improvements or other factors such that the
borrower becomes unable to meet its obligation on the related Mortgage Loan,
the liquidation value of that self-storage Mortgaged Property may be
substantially less, relative to the amount owing on the Mortgage Loan, than
would be the case if the self-storage Mortgaged Property were readily
adaptable to other uses. Tenant privacy, anonymity and efficient access
S-34
<PAGE>
may heighten environmental risks. The environmental assessments discussed
herein did not include an inspection of the contents of the self-storage
units included in the self-storage Mortgaged Properties, and there is no
assurance that all of the units included in the self-storage Mortgaged
Properties are free from hazardous substances or other pollutants or
contaminants or will remain so in the future; however, substantially all of
the lease agreements used in connection with such Mortgaged Properties
prohibit the storage of hazardous substances, pollutants or contaminants.
Tenant Credit Risk. Income from and the market value of retail, office and
industrial Mortgaged Properties would be adversely affected if space in such
Mortgaged Properties could not be leased, if tenants were unable to meet
their lease obligations, if a significant tenant were to become a debtor in a
bankruptcy case under any bankruptcy or other similar law related to
creditors rights or if for any other reason rental payments could not be
collected. If tenant sales in the Mortgaged Properties that contain retail
space were to decline, rents based upon such sales would decline and tenants
may be unable to pay their rent or other occupancy costs. Upon the occurrence
of an event of default by a tenant, delays and costs in enforcing the
lessor's rights could be experienced. Repayment of the Mortgage Loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements, leasing commissions and free rent, could
exceed the amount of any reserves maintained for such purpose and could
reduce cash flow from the Mortgaged Properties. Although certain of the
Mortgage Loans (based on Initial Pool Balance) require the borrower to
maintain escrows for such consideration, there can be no assurance that such
factors will not adversely impact the ability of a borrower to repay a
mortgage loan.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, an anchor tenant's "going dark" or the
cessation of its business, notwithstanding its continued payment of rent, can
have a particularly negative effect on the economic performance of a shopping
center property, given the importance of anchor tenants in attracting traffic
to other stores. In addition, the failure of one or more specified tenants,
such as an anchor tenant, to operate from its premises may give certain
tenants the right to terminate or reduce rents under their leases. For
several Mortgage Loans, the land and improvements utilized by an anchor or
other tenant are not subject to the related mortgage. Additionally, certain
Retail Loans permit undeveloped land adjacent to a Retail Property to be
released from the related Mortgage to be used for an anchor or other tenant.
In either event, the failure to be secured by a lien on the property utilized
by the anchor or other tenant could adversely affect the related Mortgage
Loan.
Credit Quality of Tenants and Guarantors. Interest and principal payments
on the Credit Lease Loans are dependent principally on the payment by each
Tenant or by the guarantor of such Tenant's Credit Lease (the "Guarantor"),
if any, of Monthly Rental Payments and other payments due under the terms of
its Credit Lease. A downgrade in the credit rating of the Tenants and/or the
Guarantors may have a related adverse effect on the rating of the Offered
Certificates.
If a Tenant or Guarantor defaults on its obligation to make Monthly Rental
Payments under a Credit Lease or the associated guarantee, as the case may
be, the borrower under a Credit Lease Loan may not have the ability to make
required payments on such Credit Lease Loan. If a payment default on the
Credit Lease Loan occurs, the Special Servicer may be entitled to foreclose
upon or otherwise realize upon the related Credit Lease Property to recover
amounts due under the Credit Lease Loan, and will also be entitled to pursue
any available remedies against the defaulting Tenant and any Guarantor, which
may include rights to all future Monthly Rental Payments. If the default
occurs before significant amortization of the Credit Lease Loan has occurred
and no recovery is available from the related borrower, the Tenant or any
Guarantor, it is unlikely in most cases that the Special Servicer will be
able to recover in full the amounts then due under the Credit Lease Loan. See
"Description of the Mortgage Loans -- Credit Lease Loans" herein.
S-35
<PAGE>
Based on Initial Pool Balance, 4.92% of the Mortgage Loans are Credit
Lease Loans that are secured by Mortgaged Properties leased to, or the lease
with respect to which is fully guaranteed by, Kmart Corporation, which, as of
the Cut-off Date, has senior unsecured debt ratings of "B+" and "Ba3" from
S&P and Moody's, respectively, and 2.48% of the Mortgage Loans are Credit
Lease Loans that are secured by Mortgaged Properties the lease with respect
to which is fully guaranteed by CVS Corporation, which, as of the Cut-off
Date, has senior unsecured debt ratings of "A-" and "A3" from S&P and
Moody's, respectively.
Factors Affecting Lease Enhancement Policy Proceeds. With respect to each
Credit Lease Loan not secured by the assignment of a Bond-Type Lease (as
defined herein), the Trustee is generally the beneficiary of non-cancelable
Lease Enhancement Policies obtained to cover certain lease termination (and
abatement with respect to losses arising out of a condemnation) events
arising out of a casualty to, or condemnation of, a Credit Lease Property
issued by Chubb Custom Insurance Company ("Chubb") (or, in the case of Loan
No. 79, by American International Specialty Lines Insurance Company, an
affiliate of American International Group, Inc. ("AISLIC" and, together with
Chubb, the "Enhancement Insurers")). As of the Cut-off Date, Chubb was rated
"AAA" and "Aaa" by S&P and Moody's, respectively, and AISLIC was rated "AAA"
by S&P. Each Lease Enhancement Policy provides that, in the event of a
permitted termination by a Tenant of a Credit Lease occurring as a result of
a casualty or a condemnation, the related Enhancement Insurer will pay the
Servicer on behalf of the Trustee a payment of all outstanding principal
plus, subject to certain limitations, interest on Credit Lease Loans.
Generally, an Enhancement Insurer is not required to pay any amount due under
a Credit Lease Loan other than principal and, subject to the limitation
above, accrued interest and therefore is not required to pay any Prepayment
Premium or Yield Maintenance Charge due thereunder or any amounts the related
borrower (sometimes referred to herein as a "Mortgagor") is obligated to pay
thereunder to reimburse the Servicer or the Trustee for outstanding Servicing
Advances.
Certificateholders may be adversely affected by any failure by an
Enhancement Insurer to pay under the terms of a Lease Enhancement Policy, and
any downgrade of the credit rating of an Enhancement Insurer may adversely
affect the ratings of the Offered Certificates. See "Description of the
Mortgage Loans -- Credit Lease Loans" herein.
Uncompleted Improvements. The improvements on certain Credit Lease
Properties, representing the security for 2.48% of the Mortgage Loans (based
on Initial Pool Balance) (each, a "New Store Loan"), have not yet been
completed. CVS Corporation has agreed to lease each of such Credit Lease
Properties (each, a "New Store") pursuant to a Bond-Type Lease and will
operate such stores as full-service drug stores. The development of
commercial properties involves significant risks in addition to those
involved in the ownership and operation of such properties, including the
risks that the cost of such development may exceed projections and/or that
construction may not be completed on schedule, thereby resulting in increased
construction costs. CVS Corporation, which is rated "A-" and "A3" by S&P and
Moody's, respectively, has entered into a completion guaranty for each such
Credit Lease Property, in which it guarantees the prompt completion of all
construction work within six months after the origination of the related
Mortgage Loan (the "Outside Completion Date"). In the event a New Store is
not completed by an Outside Completion Date, CVS Corporation may (i) extend
the Outside Completion Date by two months (three months if the failure to
complete the related New Store is due to force majeure) and make lease
payments equal to the related Monthly Payment, (ii) prepay the related Credit
Lease Loan together with a Yield Maintenance Charge (calculated with no
spread to the applicable U.S. Treasury yield) or (iii) substitute such New
Store with a completed property and enter into a lease for such substitute
property upon the same terms as the Credit Lease for the uncompleted New
Store for which it has been substituted. Any substitution of collateral for
an uncompleted New Store will require receipt from each Rating Agency of
written confirmation that such collateral substitution will not cause a
downgrade, withdrawal or qualification by such Rating Agency of any of its
then-current ratings on the Certificates and an opinion of counsel that such
substitution will not cause the related New Store Loan to fail to qualify as
a "qualified mortgage loan" within the meaning of Code Section 860G(a)(3). If
construction is not completed for any reason and CVS Corporation does not
honor its obligations under the completion guaranty and/or under the related
Credit Lease, the value of the related Credit Lease Property could be
substantially less than the value utilized in calculating the LTV for Annex A
(i.e., an as-built, stabilized value).
S-36
<PAGE>
Concentration of Mortgage Loans; Borrowers. Several of the Mortgage Loans
have Cut-off Date Principal Balances that are substantially higher than the
average Cut-off Date Principal Balance. In addition, there are several groups
of Mortgage Loans ("Related Borrower Loans") with respect to which the
borrowers are affiliated. The largest Mortgage Loan has a Cut-off Date
Principal Balance that represents 9.95% of the Initial Pool Balance. The
second largest Mortgage Loan has a Cut-off Date Principal Balance that
represents 5.12% of the Initial Pool Balance. The third largest Mortgage Loan
has a Cut-off Date Principal Balance that represents 5.04% of the Initial
Pool Balance. The nine largest Mortgage Loans have Cut-off Date Principal
Balances that represent, in the aggregate, approximately 36.50% of the
Initial Pool Balance. See "Description of the Mortgage Loans -- Significant
Mortgage Loans" herein for a description of these Mortgage Loans.
In general, concentrations in a mortgage pool in which one or more loans
that have outstanding principal balances that are substantially larger than
the other mortgage loans in such pool can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed among the
mortgage loans in such pool.
The thirteen largest Mortgage Loans or groups of Related Borrower Loans
have Cut-off Date Principal Balances that represent, in the aggregate,
approximately 42.66% of the Initial Pool Balance. See "Description of the
Mortgage Pool -- Significant Mortgage Loans" herein for a description of the
thirteen largest Mortgage Loans or groups of Related Borrower Loans based on
Cut-off Date Principal Balance.
Twenty-one Mortgage Loans representing approximately 7.39% of the Initial
Pool Balance are secured by more than one property. Although securing a
Mortgage Loan with multiple properties generally reduces the risk that the
inability of a Mortgaged Property to generate net operating income sufficient
to pay debt service will result in defaults and ultimate losses, such
Mortgaged Properties will generally be managed by the same managers or
affiliated managers or will be subject to the management of the same
borrowers or affiliated borrowers.
S-37
<PAGE>
Based on the Initial Pool Balance and as set forth in the following
tables, 7.39% of the Mortgage Loans are secured by more than one Mortgaged
Property (5.19% of the Mortgage Loans being Pool Loans and 2.20% of the
Mortgage Loans being Crossed Loans) and 13.91% of the Mortgage Loans were
made to affiliated borrowers that are not cross-collateralized loans
("Related Borrower Loans").
MORTGAGE LOANS SECURED BY MORE THAN ONE MORTGAGED PROPERTY
<TABLE>
<CAPTION>
CUT-OFF % OF
DATE INITIAL
LOAN NUMBER OF PRINCIPAL POOL
NO. LOAN NAME PROPERTIES BALANCE BALANCE RELEASE PRICE (1)
- ------ ----------------------------------------- ------------ ------------- --------- --------------------------------
<S> <C> <C> <C> <C> <C>
POOL LOANS
19 Holiday Inn/One Rt 46--Summary 2 $15,471,333 1.055% None Permitted
32 Fox Creek--Summary 4 9,989,012 0.681 125% of Allocated Loan Amount
33 Delevan/Westdayl--Summary 2 9,592,761 0.654 None Permitted
54 Krasta Hotels--Summary 3 6,538,566 0.446 125% of Allocated Loan Amount
56 Kent Park--Executive House--Summary 3 6,393,623 0.436 None Permitted
59 Donnybrook/Orangeburg Summary 2 6,195,472 0.423 None Permitted
63 Stonehurst/Zenith Summary 2 5,949,616 0.406 None Permitted
73 Motel 6--Summary 3 5,421,033 0.370 None Permitted
76 Select Inn--Summary 4 5,044,699 0.344 125% of Allocated Loan Amount
79 Victoria's Secret/Limited Express--Summary 2 4,400,254 0.300 None Permitted
182 Transcript/Caledonian Corp. 2 1,149,236 0.078 None Permitted
------------- ---------
Total ......................................... $76,145,603 5.194%
============= =========
CROSSED LOANS
42 Best Western Grant Park Hotel $ 7,589,503 0.518% 125% of Stated Principal Balance
43 The Evanston Holiday Inn 7,589,503 0.518 125% of Stated Principal Balance
------------- ---------
Total ......................................... $15,179,006 1.036%
============= ========= ================================
121 Colton--2302 Martin Street $ 2,733,899 0.186% 125% of Stated Principal Balance
134 Colton--18952 MacArthur Blvd. 2,310,515 0.158 125% of Stated Principal Balance
136 Colton--18872 MacArthur Blvd. 2,223,256 0.152 125% of Stated Principal Balance
167 Colton Plaza 1,627,376 0.111 125% of Stated Principal Balance
172 Colton--2222 Martin Street 1,531,351 0.104 125% of Stated Principal Balance
185 Colton--Chanteclair Restaurant 545,003 0.037 125% of Stated Principal Balance
------------- ---------
Total (2) ..................................... $10,971,400 0.748%
============= =========
105 Spartan Business Center $ 3,392,230 0.231% None Permitted
124 Lafayette Business Park 2,695,167 0.184 None Permitted
------------- ---------
Total ......................................... $ 6,087,397 0.415%
============= =========
</TABLE>
- ------------
(1) The release price shown is the amount of debt or, with respect to the
Pool Loans, the percentage of the Allocated Loan Amount, that the
borrower must prepay or defease, as applicable, in order to obtain the
release of a Mortgaged Property from the lien of the related Mortgage.
(2) Loan Nos. 121, 134, 136, 167, 172 and 185 are referred to collectively
herein as the "Colton Loans."
S-38
<PAGE>
RELATED BORROWER LOANS
<TABLE>
<CAPTION>
CUT-OFF
DATE % OF
LOAN PRINCIPAL INITIAL
NO. PROPERTY NAME BALANCE POOL BALANCE
- ------- ------------------------------------- ------------- --------------
<S> <C> <C> <C>
25 Court of Flags Apartments $11,091,562
30 Polo Club Apartments 10,291,853
32 Fox Creek-Summary 9,989,012
40 Eagles Landing 8,493,590
70 Autumn Run Apartments 5,495,902
75 Southern Slope Apartments 5,196,086
95 Emerald Pointe Apartments 3,796,394
175 Casa Del Lago Apartments 1,449,077
-------------
Total ...........................$55,803,476 3.807%
=============
11 Stone Mountain Square Shopping Center $23,981,901
15 Johnson City Crossing Shopping Center 18,236,237
-------------
Total ...........................$42,218,138 2.880%
=============
68 RM--Research Triangle $ 5,558,723
77 RM--Camelot East Apartments 4,896,290
85 RM--St. Rita's Office Building 4,247,241
90 RM--The Fountains Apartments 3,889,671
104 RM--Williamsburg North 3,448,916
113 RM--Wayne Estates 3,086,520
123 RM--Players Club 2,703,147
128 RM--The Villa Apartments 2,642,493
129 RM--Stonegate Townhomes 2,638,649
139 RM--Inducon Columbia 2,195,741
150 RM--O'Hara Apartments 2,020,616
152 RM--Jackson Park 1,930,085
177 RM--Beaver Creek 1,347,430
-------------
Total ...........................$40,605,522 2.770%
=============
14 Mesa Regal RV Resort $18,465,911
29 Sherwood Forest 10,380,836
46 Boulder Cascade Mobile Home Park 7,200,000
-------------
Total ...........................$36,046,747 2.459%
=============
65 Brandywine--Towne North Plaza $ 5,755,860
107 Brandywine--Alexander Plaza II 3,297,628
117 Brandywine--Clear Point Plaza 2,947,880
119 Brandywine--Windward Village 2,897,882
179 Brandywine--Kash N'Karry, Pasadena 1,309,059
-------------
Total ...........................$16,208,309 1.106%
=============
41 Lorraine Apartments $ 8,400,000
78 Bradbury Apartments 4,600,000
-------------
Total ...........................$13,000,000 0.887%
=============
</TABLE>
Concentrations of Mortgage Loans with the same borrower or related
borrowers can pose increased risks. For example, if an entity that owns or
controls several Mortgaged Properties experiences financial difficulty at one
Mortgaged Property, it could defer maintenance at one Mortgaged Property in
order to satisfy current expenses with respect to another Mortgaged Property,
or it could attempt to avert
S-39
<PAGE>
foreclosure by filing a bankruptcy petition that might have the effect of
interrupting Monthly Payments (subject to the Servicer's obligation to make
Advances) for an indefinite period on all of the related Mortgage Loans.
Securing a Mortgage Loan with more than one Mortgaged Property also imposes
certain risks relating to possible fraudulent conveyances. See "--Limitations
on Enforceability of Cross-Collateralization" below and "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans --
Cross-Collateralization and Cross-Default of Certain Mortgage Loans" herein.
Limitations on Enforceability of Cross-Collateralization. Eleven of the
Mortgage Loans representing approximately 5.19% of the Initial Pool Balance
and having Cut-off Date Principal Balances ranging from $1,149,236 to
$15,471,333 are secured by more than one Mortgaged Property. These
arrangements seek to reduce the risk that the inability of a Mortgaged
Property securing each such Mortgage Loan to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
See "--Concentration of Mortgage Loans; Borrowers" above.
Cross-collateralization arrangements involving more than one borrower (as
indicated on the chart entitled "Related Borrowers" above) could be
challenged as a fraudulent conveyance by creditors of a borrower or by the
representative of the bankruptcy estate of a borrower, if a borrower were to
become a debtor in a bankruptcy case. Generally, under federal and most state
fraudulent conveyance statutes, the incurring of an obligation or the
transfer of property by a person will be subject to avoidance under certain
circumstances if the person did not receive fair consideration or reasonably
equivalent value in exchange for such obligation or transfer and (i) was
insolvent or was rendered insolvent by such obligation or transfer, (ii) was
engaged in business or a transaction, or was about to engage in business or a
transaction, for which any property remaining with the person was an
unreasonably small amount of capital or (iii) intended to, or believed that
it would, incur debts that would be beyond the person's ability to pay as
such debts matured. Accordingly, a lien granted by a borrower to secure
repayment of another borrower's Mortgage Loan could be avoided if a court
were to determine that (i) the borrower granting such lien was insolvent at
the time of such grant, was rendered insolvent by the granting of the lien or
was left with inadequate capital or was not able to pay its debts as they
matured and (ii) the borrower did not, when it allowed its Mortgaged Property
to be encumbered by a lien securing the entire indebtedness represented by
the other Mortgage Loan, receive fair consideration or reasonably equivalent
value for pledging such Mortgaged Property for the equal benefit of the other
borrower.
Other Financing. The Mortgage Loans generally prohibit borrowers from
incurring any additional debt that is secured by the related Mortgaged
Property. The Mortgage Loans do, however, generally permit the related
borrower to incur unsecured indebtedness in limited circumstances for the
payment of certain items in connection with the ordinary operation and
maintenance of the related Mortgaged Property, and, in the case of certain of
the Mortgage Loans, limited amounts of secured debt or unsecured debt is
permitted for other purposes, including, without limitation, the purchase of
equipment for use in the ordinary course of business. The existence of such
other indebtedness could adversely affect the financial viability of the
related borrowers or the security interest of the lender in the equipment or
other assets acquired through such financings or could complicate bankruptcy
proceedings and delay foreclosure on the Mortgaged Property. Except as set
forth in the table below, the Mortgage Loan Seller has not permitted any of
such debt to be secured by a Mortgaged Property. If a junior lender files an
involuntary petition for bankruptcy against a borrower, or if a borrower
files a voluntary petition to stay enforcement by a junior lender, the
ability of the Trust Fund to take certain actions such as foreclosure would
be automatically stayed and principal and interest payments might not be made
during the course of a bankruptcy case. The bankruptcy of a subordinate
lender may also operate to stay foreclosure or similar proceedings by the
Trust Fund. See "Certain Legal Aspects of the Mortgage Loans -- Secondary
Financing; Due-on-Encumbrance Provisions" in the Prospectus.
In connection with the origination of the Mortgage Loans set forth in the
table entitled "Secured Subordinate Loans" below, the Mortgage Loan Seller
consented to subordinate debt (a "Secured Subordinate Loan") remaining as an
encumbrance on the related Mortgaged Properties. With respect to Loan Nos. 29
and 34, the holder of each Secured Subordinate Loan has agreed not to
exercise any remedies against the related Mortgaged Property notwithstanding
that an event of default may have occurred under the related subordinate
mortgage. With respect to Loan No. 18, no such "standstill"
S-40
<PAGE>
agreement has been executed (i.e., the holder of the related subordinate
mortgage, National Cooperative Bank (the originator of the related Mortgage
Loan), may foreclose on the related Mortgaged Property upon the occurrence of
an event of default under the related Secured Subordinate Loan) and, in the
event that the holder of the subordinate mortgage did foreclose, it would
take title to the related Mortgaged Property subject to the related first
mortgage. The related second mortgage loan is a credit line that can only be
drawn to finance capital expenses at the related Mortgaged Property. Such
second mortgage loan cannot mature prior to the maturity date of the related
Mortgage Loan and will bear interest at a rate to be determined at the time a
draw is made. See "Certain Legal Aspects of the Mortgage Loans -- Secondary
Financing; Due-on-Encumbrance Provisions" in the Prospectus. The Mortgage
Loan Seller has also made a $43,400,000 secured subordinate loan to the MGM
Plaza Borrower (as defined herein), which debt will convert to a preferred
equity interest in such borrower in April 1998. Such debt is subject to a
standstill agreement. See "Description of the Mortgage Loans -- Significant
Mortgage Loans -- The MGM Plaza Loan."
SECURED
SUBORDINATE LOANS(1)
<TABLE>
<CAPTION>
CUT-OFF DATE ORIGINAL
PRINCIPAL PRINCIPAL CUT-OFF
BALANCE BALANCE DATE
LOAN OF MORTGAGE OF SUBORDINATE PRINCIPAL
NO. PROPERTY NAME LOAN (2) LOAN BALANCE
- -------- ----------------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
18 Dara Gardens Cooperative $16,350,311 $ 750,000 $ 750,000
29 Sherwood Forest $10,380,836 $1,000,000 $1,000,000
34 Logan Industrial Park $ 9,455,544 $1,500,000 $1,500,000
-------------- -------------- ------------
TOTAL: $36,186,691 $3,250,000 $3,250,000
============== ============== ============
Percentage of Initial Pool
Balance: 2.47%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SUBORDINATE FORECLOSEABLE
LOAN CUT-OFF DATE ON
LOAN MATURITY AGGREGATE MORTGAGED
NO. DATE LTV (3) PROPERTY
- -------- ------------- -------------- ---------------
<S> <C> <C> <C>
18 11/1/12 60.00% Yes
29 9/1/98 71.13% No
34 6/11/22 87.64% No
------------- -------------- ---------------
TOTAL:
Percentage of Initial
Pool Balance:
</TABLE>
- ------------
(1) Excluding the subordinate second mortgage on the MGM Plaza Property which
debt will convert to a preferred equity interest in April 1998.
(2) The Original Principal Balance of the Secured Subordinate Loan on the
Dara Gardens Cooperative is the amount of the line of credit made
available by the related originator.
(3) The "Cut-off Date Aggregate LTV" is the ratio of the sum of the Cut-off
Date Principal Balance of the indicated Mortgage Loan and related
subordinate debt to the Value of the related Mortgaged Property. For the
Dara Gardens Cooperative loan, the Cut-off Date Aggregate LTV assumes
that the related credit line has been fully funded.
<PAGE>
Additionally, the Mortgage Loan Seller has made loans (the "Mezzanine
Loans") to affiliates of certain of the borrowers secured by such affiliate's
equity interest in such borrower as set forth in the following table:
MEZZANINE LOANS
<TABLE>
<CAPTION>
CUT-OFF
CUT-OFF DATE ORIGINAL DATE
PRINCIPAL PRINCIPAL PRINCIPAL
BALANCE BALANCE BALANCE OF
LOAN OF MORTGAGE OF MEZZANINE MEZZANINE
NO. PROPERTY NAME LOAN LOAN LOAN
- -------- ------------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
1 MGM Plaza $145,894,648 $66,000,000 $66,000,000
2 135 E. 57th Street $ 75,000,000 $25,000,000 $25,000,000
3 Paramount Hotel $ 73,867,407 $ 7,000,000 $ 3,717,391
4 Beverly Connection $ 63,000,000 $ 1,500,000 $ 1,464,286
-------------- -------------- -------------
TOTAL: $357,762,055 $99,500,000 $96,181,677
============== ============== =============
Percentage of Initial Pool
Balance: 24.40%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FORECLOSEABLE
CUT-OFF DATE ON
LOAN MATURITY AGGREGATE MORTGAGED
NO. DATE LTV (1) PROPERTY
- -------- ---------- -------------- ---------------
<S> <C> <C> <C>
1 11/11/00 65.20% No
2 9/11/07 83.33% No
3 10/11/05 75.33% No
4 9/11/04 76.74% No
TOTAL:
Percentage of
Initial Pool
Balance:
</TABLE>
- ------------
(1) The "Cut-off Date Aggregate LTV" is the ratio of the sum of the Cut-off Date
Principal Balance of the indicated Mortgage Loan and related Mezzanine Loan
to the Value of the related Mortgaged Property.
S-41
<PAGE>
The Mortgage Loan Seller has committed (subject to the satisfaction of
certain conditions) to make a Mezzanine Loan of up to $1,200,000 to
affiliates of the Realmark Borrower in connection with such affiliates'
buyout of the limited partnership interests of certain affiliates of the
Realmark Borrower. The making of such a Mezzanine Loan will not require the
consent of the Servicer or the Special Servicer provided that the Mezzanine
Lender has received written confirmation from each Rating Agency that the
structure (but not the amount) of such Mezzanine Loan will not cause such
Rating Agency to downgrade, qualify or withdraw any of its then-current
ratings on the Certificates.
Upon a default under a Mezzanine Loan, the holder (the "Mezzanine Lender")
of such Mezzanine Loan would be entitled to foreclose upon the equity in the
related mortgagor, which has been pledged to secure payment of such Mezzanine
Loan. Such transfer of equity would not trigger the "due on sale" clause
under the related Mortgage Loan, as described herein. An attempt to foreclose
upon such pledged equity may cause the obligor under such Mezzanine Loan to
file for bankruptcy, which could negatively impact the operation of the
related Mortgaged Property and such mortgagor's ability to pay the Mortgage
Loan in a timely manner.
No Mezzanine Lender has a lien, or can foreclose, on any of the Mortgaged
Properties or on any of the Escrow Accounts, Lockbox Accounts or Cash
Collateral Accounts established under the related Mortgage Loans. The
Mezzanine Lender's sole remedy in the event of non-payment is to foreclose
upon the equity and cash collateral accounts pledged to it and to terminate
the related property manager (subject to the limitations described below).
With respect to the Mezzanine Loan referred to above, the Mortgage Loan
Seller, as lender under the related Mortgage Loan (together with the Trust
Fund as successor thereto, the "Senior Lender"), has entered into an
intercreditor agreement (each, a "Mezzanine Intercreditor Agreement") with
the Mezzanine Lender. Pursuant to each Mezzanine Intercreditor Agreement, the
Mezzanine Lender has expressly subordinated its Mezzanine Loan to the related
Mortgage Loan, including with respect to the application of insurance
proceeds and condemnation awards (provided that any amounts remaining after
payment of such Mortgage Loan in full be applied to the Mezzanine Loan). Each
Mezzanine Intercreditor Agreement also provides that (A) the Mortgage Loan
Seller cannot transfer the related Mezzanine Loan unless (i) the Mortgage
Loan Seller has received written confirmation from each Rating Agency that
such transfer would not cause a downgrade, qualification or withdrawal of any
of its then-current ratings on the Certificates or (ii) the transferee is an
affiliate of the Mortgage Loan Seller, a "qualified institutional buyer" or a
substantial financial institution, insurance company, investment bank or
similar entity; (B) the Mezzanine Lender cannot foreclose upon any of the
equity collateral securing such Mezzanine Loan unless a monetary event of
default has occurred under the related Mortgage Loan or (except in the case
of the 57th Street Mezzanine Loan) the Mezzanine Lender receives the prior
written consent of the Senior Lender and (C) the Mezzanine Lender cannot
cause the related borrower to terminate a manager of a Mortgaged Property
unless the Mezzanine Lender has received written confirmation from each
Rating Agency that such termination would not cause a downgrade,
qualification or withdrawal of any of its then-current ratings on the
Certificates or the related Mortgage Loan is then in default. The Senior
Lender has agreed in each Mezzanine Intercreditor Agreement that, among other
things, it will not amend any documents for the related Mortgage Loan to (i)
increase the principal balance or interest rate of such Mortgage Loan (which
shall not preclude the making of Advances or charging of default interest),
(ii) extend the maturity date of such Mortgage Loan (except in connection
with a work-out of such Mortgage Loan by the Special Servicer) or (iii)
collateralize other loans with the related Mortgaged Property. The Mezzanine
Lender has agreed to consent to the refinancing of the related Mortgage Loan
by an unaffiliated third party provided that (i) the principal balance of the
subsequent senior indebtedness does not exceed the remaining principal
balance of such Mortgage Loan, (ii) the interest rate on the subsequent
indebtedness is no more than the prevailing rate for similar mortgage loans
(as determined by the Servicer in its sole discretion), (iii) the
amortization schedule for such subsequent mortgage loan is no shorter than
that under the related Mortgage Loan, (iv) no event of default exists under
the Mezzanine Loan, (v) the prepayment terms of the subsequent senior
indebtedness are no less favorable to the Mezzanine Lender than those in the
Mortgage Loan, and (vi) the Mezzanine Loan documents and those of the
subsequent senior indebtedness preserve the benefits that the Mezzanine
Lender had with respect
S-42
<PAGE>
to the Mortgage Loan (e.g., establishment of a Hard Lockbox and waiver of
assumption fees and due-on-sale clauses with respect to the Mezzanine
Lender). To the extent that the Mezzanine Lender has the right to approve any
annual budget or lease under the related Mezzanine Loan, if the Senior Lender
rejects the related lease or budget or instructs the Mezzanine Lender to
approve such lease or budget, the Mezzanine Lender will reject or approve, as
applicable, such lease or budget.
Equity Investments by the Mortgage Loan Seller. The Mortgage Loan Seller
has acquired a preferred equity interest in the MGM Plaza Borrower (in such
capacity, the "MGM Special Member"). The MGM Special Member is entitled to
receive certain preferred distributions prior to distributions being made to
the other members of the MGM Plaza Borrower. No monthly distribution to the
MGM Special Member is permitted to be made until all required monthly debt
service payments, reserve payments and other payments under the MGM Plaza
Loan and the MGM Mezzanine Loan (each as defined herein) and any payments due
under the Mezzanine Loan relating to the MGM Plaza Property (as defined
herein) have been made when due and all monthly operating expenses with
respect to the MGM Plaza Property have been paid. After payment of such
amounts, the MGM Special Member is entitled to receive a distribution of a
preferred yield and a monthly return of capital, which, if certain breaches
have occurred, can be 100% of such remaining cash flow.
Under the related operating agreement, the MGM Special Member has certain
specified rights, including, in most cases, the right to terminate and
replace the manager of the MGM Plaza Property upon the breach of certain
specified covenants and representations or, in some cases, if the net
operating income as of certain dates falls below certain levels. However, the
right of the MGM Special Member to terminate any manager is expressly
subordinate to the right of the Servicer to terminate and replace such
manager. If the MGM Special Member is entitled to terminate a manager at a
time when the Servicer does not have such a right, then prior to termination,
the MGM Special Member must receive written confirmation from each of the
Rating Agencies that such termination would not cause any Rating Agency to
withdraw, qualify or downgrade any of its then-current ratings on the
Certificates. Other than the increase in the percentage of the cash flow used
to calculate the monthly return of capital and the right to terminate the
manager as described above, the MGM Special Member has no further remedies
under the relevant operating agreement in the event of nonpayment of its
monthly preferred yield and return of capital.
The MGM Special Member has the right to approve the annual budget of and
leases for more than 20,000 square feet of the MGM Plaza Property, which
rights are subject to any right that the Senior Lender may have to approve
such leases and budget. The MGM Special Member also has the right to approve
certain actions of the MGM Plaza Borrower, including certain transactions
with affiliates, prepayment or refinancing of the MGM Plaza Loan, transfer of
the MGM Plaza Property or improvement of the MGM Plaza Property to a
materially higher standard than comparable properties in the vicinity of the
MGM Plaza Property (unless approved by the Servicer), and the dissolution,
liquidation or taking of certain bankruptcy actions with respect to the MGM
Plaza Borrower. See "Description of the Mortgage Loans -- Significant
Mortgage Loans -- The MGM Plaza Loan".
Tax Considerations Related to Foreclosure. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or delivery of a deed in lieu of foreclosure,
the Special Servicer would be required to retain an independent contractor to
operate and manage the Mortgaged Property. By reference to rules applicable
to real estate investment trusts, such property will be considered
"foreclosure property" for a period of at least two years. An extension of up
to four additional years can be requested from the IRS and recent legislation
would, for federal purposes (but possibly not for certain state tax
purposes), make the initial period three years. Any net income from such
"foreclosure property" other than qualifying "rents from real property," or
any rental income based on the net profits of a tenant or sub-tenant or
allocable to a service that is non-customary in the area and for the type of
building involved, will subject the Lower-Tier REMIC to federal (and possibly
state or local) tax on such income at the highest marginal corporate tax rate
(currently 35%), thereby reducing net proceeds available for distribution to
Certificateholders. See "The Pooling and Servicing Agreement -- Realization
Upon Mortgage Loans" herein.
Risk of Different Timing of Mortgage Loan Amortization. As set forth on
the table below, Mortgage Loans secured by different types of Mortgaged
Properties have varying weighted average terms to
S-43
<PAGE>
maturity (or, in the case of ARD Loans, varying weighted average terms to
Anticipated Repayment Date). As principal payments or prepayments are made on
a Mortgage Loan, the remaining Mortgage Loans may be subject to more
concentrated risk with respect to the diversity of properties, types of
properties, geographic concentration (see "--Geographic Concentration" below)
and with respect to the number of borrowers. Because principal on the Offered
Certificates is payable in sequential order, and because no Class entitled to
distributions of principal receives principal until the Certificate Balance
of each such Class senior thereto has been reduced to zero, Classes that have
a later sequential designation are more likely to be exposed to the risk of
concentration discussed in the preceding sentence than Classes with higher
sequential priority.
WEIGHTED AVERAGE REMAINING TERM TO EARLIER OF MATURITY OR
ANTICIPATED REPAYMENT DATE BY PROPERTY TYPE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING TERM TO
EARLIER OF
MATURITY OR
ANTICIPATED
% OF INITIAL REPAYMENT DATE
PROPERTY TYPE POOL BALANCE (IF APPLICABLE)
- -------------------------------------- -------------- -----------------
<S> <C> <C>
Office
Multi-Tenant ......................... 25.5% 112
Single Tenant ........................ 2.8% 179
-------------- -----------------
Total Office .......................... 28.3% 119
Retail
Anchored.............................. 13.7% 123
Unanchored ........................... 6.7% 119
Single Tenant ........................ 0.9% 118
-------------- -----------------
Total Retail .......................... 21.3% 121
Hospitality
Full Service ......................... 14.2% 118
Limited Service ...................... 2.2% 118
Extended Stay......................... 0.8% 119
-------------- -----------------
Total Hospitality ..................... 17.1% 118
Credit Lease .......................... 14.4% 246
Multifamily
Rental ............................... 9.3% 112
Cooperative .......................... 1.1% 179
-------------- -----------------
Total Multifamily ..................... 10.4% 119
Industrial ............................ 4.1% 115
Mobile Home/Recreational Vehicle Park 2.7% 74
Mixed Use ............................. 0.6% 118
Senior Housing ........................ 0.4% 117
Other
Self-Storage.......................... 0.4% 118
Racquet Club ......................... 0.2% 120
Restaurant............................ 0.0% 115
-------------- -----------------
Total Other............................ 0.7% 119
-------------- -----------------
TOTAL.................................. 100.0% 136
============== =================
</TABLE>
Geographic Concentration. The Mortgaged Properties are located in 37
states and the District of Columbia. The table below sets forth the states in
which a significant percentage of the Mortgaged Properties are located. See
the table entitled "Mortgaged Properties By State" for a description of
geographic location of the Mortgaged Properties. Except as set forth below,
no state contains more than 5.0% (by Cut-off Date Principal Balance or
Allocated Loan Amount) of the Mortgaged Properties.
S-44
<PAGE>
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- ------------- -------------- ------------
<S> <C> <C>
California .. 31.20% 37
New York ..... 16.45% 16
New Jersey .. 8.21% 13
</TABLE>
Repayments by borrowers, as well as the market value of the Mortgaged
Properties, could be adversely affected by economic conditions generally or
in regions where the borrowers and the Mortgaged Properties are located,
conditions in the real estate markets where the Mortgaged Properties are
located, changes in governmental rules and fiscal policies, acts of God
(which may result in uninsured losses), and other factors which are beyond
the control of the borrowers.
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other
areas of the country by certain developments affecting industries
concentrated in such state or region. Moreover, in recent periods, several
regions of the United States have experienced significant downturns in the
market value of real estate. To the extent that general economic or other
relevant conditions in states or regions in which concentrations of Mortgaged
Properties securing significant portions of the aggregate principal balance
of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
Exercise of Remedies. The Mortgage Loans generally contain a due-on-sale
clause, which permits the lender to accelerate the maturity of the Mortgage
Loan if the mortgagor sells, transfers or conveys the related Mortgaged
Property or its interest in the Mortgaged Property. All of the Mortgage Loans
also include a debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults of the
Mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a Mortgage or refuse to
permit the acceleration of the indebtedness as a result of a default deemed
to be immaterial or if the exercise of such remedies would be inequitable or
unjust or the circumstances would render the acceleration unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related borrower assigned its right, title and interest
as landlord under the leases on the related Mortgaged Property and the income
derived therefrom to the lender as further security for the related Mortgage
Loan. The borrower generally retains a license to collect rents for so long
as there is no default. Certain of the Mortgage Loans do, however, require
the related borrower to have all rents deposited by tenants into a Hard
Lockbox. In those Mortgage Loans as to which the borrower retains a license
to collect rents, if the borrower defaults, the license terminates and the
Special Servicer is entitled to collect rents. In some cases, such
assignments may not be perfected as security interests prior to actual
possession of the cash flow. In some cases, state law may require the Special
Servicer to take possession of the Mortgaged Property and obtain the judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans -- Leases and Rents"
in the Prospectus.
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's
liability therefor is generally not limited under such circumstances and
could exceed the value of the property and/or the aggregate assets of the
owner. Under the laws of certain states, contamination of a property may give
rise to a lien on the property to assure the costs of cleanup. In some
S-45
<PAGE>
such states this lien has priority over the lien of an existing mortgage
against such property. In addition, under the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
the United States Environmental Protection Agency ("EPA") may impose a lien
on property where the EPA has incurred costs in investigating and/or cleaning
up contamination. However, a CERCLA lien is subordinate to pre-existing,
perfected security interests. In addition, the presence of hazardous or toxic
substances, or the failure to properly remediate such property, may adversely
affect the owner's or operator's ability to refinance using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation
of such substances at the disposal or treatment facility. Certain laws impose
liability for release of asbestos containing materials ("ACMs") into the air
or require the removal or containment of ACMs and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs or other exposure to chemicals or other hazardous
substances. For all of these reasons, the presence of, or contamination by,
hazardous substances at, on, under, adjacent to, or in a property can
materially adversely affect the value of the property.
Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender (such as the Trust Fund) may be held liable as an "owner" or
"operator" for the costs of addressing releases or threatened releases of
hazardous substances at a Mortgaged Property, even though the environmental
damage or threat was caused by a prior or current owner or operator. CERCLA
imposes liability for such costs on any and all "responsible parties",
including owners and operators. However, CERCLA excludes from the definition
of "owner or operator" a secured creditor who holds indicia of ownership
primarily to protect its security interest, but does not "participate in the
management" of the Mortgaged Property (the "secured creditor exclusion").
Thus, if a lender's activities begin to encroach on the actual management of
a contaminated property, the lender may incur liability as an "owner or
operator" under CERCLA. Similarly, if a lender forecloses and takes title to
a contaminated property, the lender may incur CERCLA liability in various
circumstances, including, but not limited to, when it holds the property as
an investment (including leasing the property to a third party), or fails to
market the property in a timely fashion.
Recently enacted amendments to CERCLA have clarified the range of
activities in which a lender may engage without becoming subject to liability
under CERCLA. However, liability for costs associated with the investigation
and cleanup of environmental contamination may also be governed by state law,
which may not provide any specific protections to lenders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs associated with
releases of petroleum contamination. Federal regulation of underground
petroleum storage tanks (other than heating oil tanks) is governed by
Subtitle I of the federal Resource Conservation and Recovery Act ("RCRA").
The EPA has promulgated a lender liability rule for underground storage tanks
regulated by Subtitle I of RCRA. Under the EPA rule, a holder of a security
interest in an underground storage tank, or real property containing an
underground storage tank, is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed
from the tank. Moreover, recent amendments to RCRA, enacted concurrently with
the CERCLA amendments discussed above, extend to the holders of security
interests in petroleum underground storage tanks the same protections
accorded to secured creditors under CERCLA. It should be noted, however, that
liability for cleanup of petroleum contamination may be governed by state
law, which may not provide any specific protection for lenders. See "Certain
Legal Aspects of the Mortgage Loans -- Environmental Risks" in the
Prospectus.
All of the Mortgaged Properties have been subject to environmental site
assessments or studies within the period of 12 months preceding the Cut-off
Date, except for ten Mortgaged Properties securing 4.7% of the Mortgage Loans
(based on Initial Pool Balance), as to which such assessments or studies were
conducted during the period of 12 to 18 months before the Cut-off Date, and
three Mortgaged Properties securing 1.0% of the Mortgage Loans (based on
Initial Pool Balance), as to which such assessments or studies were conducted
during the period of 18 to 24 months before the Cut-off Date. No assessment
or study revealed any environmental condition or circumstance that the
Depositor believes will have a material adverse impact on the value of the
related Mortgaged Property or the related borrower's ability
S-46
<PAGE>
to pay its debt. In the cases where the environmental assessments revealed
the existence of material amounts of friable and non-friable ACMs and lead
based paint requiring remediation or abatement, the related borrowers agreed
to establish and maintain operations and maintenance or abatement programs
and/or environmental reserves. Certain of the Mortgaged Properties have
off-site leaking underground storage tank sites located nearby which the
environmental consultant has advised are not likely to contaminate the
related Mortgaged Properties but will require future monitoring or with
respect to which the Mortgage Loan Seller has received satisfactory
indemnification. The environmental assessments revealed other adverse
environmental conditions such as the existence of storage tanks needing
replacement or removal, contaminated groundwater, PCBs in equipment on-site
and elevated radon levels, in connection with which environmental reserves
have been established and/or removal or monitoring programs have been
implemented. There can be no assurance that all environmental conditions and
risks have been identified in such environment assessments or studies, as
applicable, or that any such environmental conditions will not have a
material adverse effect on the value or cash flow of the related Mortgaged
Property.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint. In addition, every
contract for the purchase and sale of any interest in residential housing
constructed prior to 1978 must contain a "Lead Warning Statement" that
informs the purchaser of the potential hazards to pregnant women and young
children associated with exposure to lead-based paint. The ingestion of
lead-based paint chips and/or the inhalation of dust particles from
lead-based paint by children can cause permanent injury, even at low levels
of exposure. Property owners can be held liable for injuries to their tenants
resulting from exposure to lead-based paint under various state and local
laws and regulations that impose affirmative obligations on property owners
of residential housing containing lead-based paint. The environmental
assessments revealed the existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have either
implemented operations and maintenance programs or are in the process of
removing the lead-based paint. The Depositor believes that the presence of
lead-based paint at these Mortgaged Properties will not have a material
adverse effect on the value of the related Mortgaged Property or on the
ability of the related borrowers to repay their loans.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Mortgage Loan until a satisfactory environmental
site assessment is obtained (or until any required remedial action is
thereafter taken), but will decrease the likelihood that the Trust Fund will
become liable under any environmental law. However, there can be no assurance
that the requirements of the Pooling and Servicing Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws.
See "The Pooling and Servicing Agreement --Realization Upon Mortgage Loans"
herein and "Certain Legal Aspects of Mortgage Loans -- Environmental Risks"
in the Prospectus.
Balloon Payments. As set forth on the following table, certain of the
Mortgage Loans are Balloon Loans which will have substantial payments of
principal due at their stated maturities unless previously prepaid.
Additionally, all of the ARD Loans will have substantial scheduled principal
balances due on their Anticipated Repayment Date. Loans that require Balloon
Payments involve a greater risk to the lender than fully amortizing loans
because the ability of a borrower to make a Balloon Payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property at a price sufficient to permit the borrower to make the
Balloon Payment. Similarly, the ability of a borrower to repay a loan on the
Anticipated Repayment Date will depend on its ability either to refinance the
Mortgage Loan or to sell the related Mortgaged Property. The ability of a
borrower to accomplish either of these goals will be affected by all of the
factors described above affecting property value and cash flow, as well as a
number of other factors at the time of attempted sale or refinancing,
including the level of available mortgage rates, prevailing economic
conditions and the availability of credit for multifamily or commercial
properties (as the case may be) generally. See "Risk Factors -- Balloon
Payments" in the Prospectus.
S-47
<PAGE>
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL POOL NUMBER OF
TYPE OF LOAN BALANCE MORTGAGE LOANS
- -------------------------------- -------------- --------------
<S> <C> <C>
ARD Loans ....................... 86.05% 139
Fully Amortizing Mortgage Loans 12.45 44
Balloon Loans ................... 1.50 2
-------------- --------------
TOTAL ........................ 100.00% 185
============== ==============
</TABLE>
One Action Considerations. Several states (including California) have laws
that prohibit more than one "judicial action" to enforce a mortgage
obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Special Servicer to obtain advice of counsel prior to enforcing any of the
Trust Fund's rights under any of the Mortgage Loans that include Mortgaged
Properties where the rule could be applicable. In addition, in the case of a
Pool Loan and Crossed Loans secured by Mortgaged Properties located in
multiple states, the Special Servicer may be required to foreclose first on
properties located in states where such "one action" rules apply (and where
non-judicial foreclosure is permitted) before foreclosing on properties
located in states where judicial foreclosure is the only permitted method of
foreclosure. See "Certain Legal Aspects of Mortgage Loans -- Foreclosure" in
the Prospectus.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees, and may not be indicative, of present
or future value. There can be no assurance that another appraiser would not
have arrived at a different valuation, even if such appraiser used the same
general approach to, and the same method of, appraising the property.
Moreover, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Loans" herein for illustrative purposes only.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective borrowers.
These property managers may also manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers and/or the borrowers, or the
managers and/or the borrowers themselves, may also own other properties,
including competing properties. Accordingly, the managers of the Mortgaged
Properties and the borrowers may experience conflicts of interest in the
management and/or ownership of such properties.
Additionally, as described above under "--Other Financing" and "--Equity
Investments by the Mortgage Loan Seller and/or its Affiliates," the Mortgage
Loan Seller and/or its affiliates have acquired preferred equity interests in
certain of the borrowers or their affiliates. In addition, the Mortgage Loan
Seller or affiliates thereof may have other financing arrangements with
affiliates of the borrowers and may enter into additional financing
relationships in the future. In addition, the Mortgage Loan Seller or an
affiliate thereof has an equity interest in Tenants or Guarantors with
respect to one entity which is a Tenant or Guarantor under eight of the
Credit Lease Loans and an equity interest in a borrower with respect to one
Mortgage Loan.
Conflicts Between the Servicer, Special Servicer and the Trust Fund. The
Servicer and Special Servicer have advised the Depositor that they and their
respective affiliates intend to continue to service existing mortgage loans
and new mortgage loans for third parties, including portfolios of mortgage
loans similar to the Mortgage Loans, in the ordinary course of their
business. These mortgage loans and the related mortgaged properties may be in
the same markets as, or have owners, obligors and/or property managers in
common with, certain of the Mortgage Loans and the Mortgaged Properties.
Certain personnel of the Servicer and Special Servicer and their respective
affiliates may, on behalf of the Servicer or Special Servicer, as applicable,
perform services with respect to the Mortgage Loans at the same time
S-48
<PAGE>
as they are performing services, on behalf of other persons, with respect to
other mortgage loans secured by properties in the same markets as the
Mortgaged Properties. In that event, the interests of the Servicer, the
Special Servicer and their respective affiliates and their other clients may
differ from and compete with the interests of the Trust Fund. Under the
Pooling and Servicing Agreement, the Servicer and the Special Servicer are
required to service the Mortgage Loans each of them services in the same
manner, and with the same care, that each of them services similar mortgage
loans for its own portfolio or for the portfolio of third parties.
Ground Leases. Based on Initial Pool Balance, 9.10% of the Mortgage Loans
are secured by leasehold interests and with respect to which the related
owner of the fee estate has not mortgaged such fee estate as security for the
related Mortgage Loan. For the purposes of this Prospectus Supplement, any
Mortgaged Property a material portion of which consists of a leasehold estate
is considered a leasehold interest unless the Trust Fund also holds a
mortgage on the fee, in which case it is considered a fee interest.
Each Mortgage Loan secured by mortgages on leasehold estates was
underwritten taking into account payment of the ground lease rent, except in
cases where such Mortgage Loan has a lien on both the ground lessor's and
ground lessee's interest in the Mortgaged Property. Certain Mortgage Loans
secured by leasehold interests (including the 57th Street Property) provide
for the resetting of ground lease rents based upon certain factors, which may
include the fair market value of the related Mortgaged Property and
prevailing interest rates. Increases in ground rents may adversely impact a
borrower's ability to make payments under the related Mortgage Loan. On the
bankruptcy of a lessor or a lessee under a ground lease, the debtor entity
has the right to assume (i.e., continue) or reject (i.e., terminate) the
ground lease. Pursuant to Section 365(h) of the Bankruptcy Code, as it is
currently in effect, a ground lessee whose ground lease is rejected by a
debtor ground lessor has the right to remain in possession of its leased
premises under the rent reserved in the lease for the term (including
renewals) of the ground lease but is not entitled to enforce the obligation
of the ground lessor to provide any services required under the ground lease.
In the event a ground lessee/borrower in bankruptcy rejects any or all of its
ground leases, the leasehold mortgagee would have the right to succeed to the
ground lessee/borrower's position under the lease only if the ground lessor
had specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the bankrupt ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the mortgage.
Zoning Compliance; Inspections. As a consequence of, among other things,
changes in applicable building and zoning ordinances and codes ("Zoning
Laws") affecting certain of the Mortgaged Properties which have come into
effect after the construction of improvements on such Mortgaged Properties,
certain improvements may not comply fully with current Zoning Laws, including
density, use, parking and set-back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability of the borrower to
rebuild the premises "as is" in the event of a substantial casualty loss with
respect thereto and may adversely affect the ability of the borrower to meet
its Mortgage Loan obligations from cash flow. While it is expected that
insurance proceeds would be available for application to the related Mortgage
Loan if a substantial casualty were to occur, no assurance can be given that
such proceeds would be sufficient to pay off such Mortgage Loan in full or,
if the Mortgaged Property were to be repaired or restored in conformity with
current law, what its value would be relative to the remaining balance on the
related Mortgage Loan, whether the Mortgaged Property would have a value
equal to that before the casualty, or what its revenue-producing potential
would be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements
S-49
<PAGE>
related to access and use by disabled persons. To the extent the Mortgaged
Properties do not comply with the ADA, the borrowers may be required to incur
costs of complying with the ADA. In addition, noncompliance could result in
the imposition of fines by the federal government or an award of damages to
private litigants.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the borrowers or their affiliates relating to the business
of or arising out of the ordinary course of business of the borrowers and
their affiliates. There can be no assurance that such litigation will not
have a material adverse effect on the distributions to Certificateholders.
Obligor Default. In order to maximize recoveries on defaulted Mortgage
Loans, the Special Servicer may, under certain limited circumstances, extend
and/or modify Mortgage Loans that are in default or as to which a payment
default is reasonably foreseeable, including in particular with respect to
Balloon Payments. While the Special Servicer will have a duty to determine
whether any such extension or modification is likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that such flexibility with respect to extensions or modifications will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to which a default is reasonably foreseeable.
Additional Collateral Loans. Three Mortgage Loans representing 4.87% of
the Initial Pool Balance are Additional Collateral Loans that could
experience partial prepayments ("Required Prepayments") if certain
leasing-related performance tests, including the achievement of certain debt
service coverage ratios, have not been satisfied. If any such test is not met
and a Required Prepayment of the related Mortgage Loan results, such Required
Prepayment will not be subject to payment of a Prepayment Premium or Yield
Maintenance Charge. See "--The Offered Certificates -- Special Prepayment and
Yield Considerations" herein. The holders of the Class A-X Certificates and
any Class of Offered Certificates receiving any such Required Prepayment will
be entitled to receive payments ("Yield Protection Payments") to compensate
them for the absence of any such Prepayment Premium or Yield Maintenance
Charge payments. With respect to any Class of Offered Certificates receiving
a distribution of principal in connection with a Required Prepayment, the
Yield Protection Payment will equal 2% of such distribution of principal.
With respect to the Class A-X Certificates, the Yield Protection Payment will
be in the nature of a yield-maintenance payment which will be described in
the Pooling and Servicing Agreement. The Servicer will be required to advance
such Yield Protection Payments on the related Servicer Remittance Date and
will be reimbursed therefore, and will be paid interest thereon at the
Reimbursement Rate, by the Mortgage Loan Seller. Although such Yield
Protection Payments are intended to offset any loss of yield experienced by
an investor in the Offered Certificates as the result of a Required
Prepayment, the Depositor makes no representation that such Yield Protection
Payments will fully offset the effect of any such Required Prepayment on a
Certificateholder's yield to maturity. See "Prepayment and Yield
Considerations" herein.
For the purposes of this Prospectus Supplement and the statistical
information presented herein, the entire principal balance of each Additional
Collateral Loan is deemed to be subject to a Lockout Period for the related
"Remaining Lockout" period set forth on Annex A hereto, notwithstanding the
fact that Required Prepayments could occur under such loans during such
Lockout Period.
THE OFFERED CERTIFICATES
Limited Assets. If the assets of the Trust Fund are insufficient to make
payments on the Offered Certificates, no other assets will be available for
payment of the deficiency. See "Risk Factors -- Limited Assets" in the
Prospectus.
Special Prepayment and Yield Considerations. The yield to maturity on the
Offered Certificates will depend on, among other things, the rate and timing
of principal payments (including both voluntary prepayments, in the case of
Mortgage Loans that permit voluntary prepayment, and involuntary prepayments,
such as prepayments resulting from casualty or condemnation, defaults and
liquidations) on the Mortgage Loans and the allocation thereof to reduce the
Certificate Balances of the Offered Certificates entitled to distributions of
principal. In addition, in the event of any repurchase of a Mortgage Loan
from the Trust Fund by the Mortgage Loan Seller or the Depositor under the
circumstances
S-50
<PAGE>
described under "The Pooling and Servicing Agreement -- Representations and
Warranties; Repurchase" herein or the purchase of the Mortgage Loans by the
Mortgage Loan Seller, the holders of a majority of the Percentage Interests
in the Controlling Class or the Servicer under the circumstances described
under "The Pooling and Servicing Agreement -- Optional Termination" herein,
the Purchase Price paid would be passed through to the holders of the
Certificates with the same effect as if such Mortgage Loan had been prepaid
in full (except that no Prepayment Premium or Yield Maintenance Charge would
be payable with respect to any such repurchase). No representation is made as
to the anticipated rate of prepayments (voluntary or involuntary) on the
Mortgage Loans or as to the anticipated yield to maturity of any Certificate.
See "Prepayment and Yield Considerations" herein and "Risk Factors --
Prepayments and Effect on Average Life of Certificates and Yields" in the
Prospectus.
In general, if an Offered Certificate is purchased at a premium and
principal distributions thereon occur at a rate faster than anticipated at
the time of purchase, to the extent that the required Prepayment Premiums or
Yield Maintenance Charges are not received, the investor's actual yield to
maturity may be lower than that assumed at the time of purchase. Conversely,
if an Offered Certificate is purchased at a discount and principal
distributions thereon occur at a rate slower than that assumed at the time of
purchase, the investor's actual yield to maturity may be lower than that
assumed at the time of purchase.
The investment performance of the Offered Certificates may vary materially
and adversely from the investment expectations of investors due to
prepayments on the Mortgage Loans that are higher or lower than anticipated
by investors. The actual yield to the holder of an Offered Certificate may
not be equal to the yield anticipated at the time of purchase of the Offered
Certificate or, notwithstanding that the actual yield is equal to the yield
anticipated at that time, the total return on investment expected by the
investor or the expected weighted average life of the Offered Certificate may
not be realized. In deciding whether to purchase any Offered Certificates, an
investor should make an independent decision as to the appropriate prepayment
assumptions to be used. See "Prepayment and Yield Considerations" herein.
Most of the Mortgage Loans provide for a Lockout Period during which
voluntary prepayment is prohibited. The table below sets forth certain
information relating to the Lock-out Periods. For further statistical
information on a loan-by-loan basis, see Annex A hereto.
As of the Cut-off Date, approximately 100% of the Mortgage Loans were
within their respective Lockout Periods, and the weighted average of such
Lockout Periods was 123 months.
The rate at which voluntary prepayments are made on the Mortgage Loans
will be affected by a variety of factors, including, without limitation, the
terms of the Mortgage Loans, the level of prevailing interest rates as
compared to the applicable Mortgage Rate, the availability of mortgage credit
and economic, demographic, tax, legal and other factors. In general, however,
if prevailing interest rates are at or above the rates borne by such Mortgage
Loans, such Mortgage Loans may be the subject of lower principal prepayments
than if prevailing rates fall significantly below the mortgage rates of the
Mortgage Loans. The rate of principal payments on the Offered Certificates
may be affected by the rate of principal payments on the Mortgage Loans and
is likely to be affected by the Lockout Period, Prepayment Premium and Yield
Maintenance Charge provisions applicable to the Mortgage Loans and by the
extent to which the Servicer is able to enforce such provisions. Mortgage
Loans with Lockout Period, Prepayment Premium or Yield Maintenance Charge
provisions, to the extent enforceable, generally would be expected to
experience a lower rate of principal prepayments than otherwise identical
mortgage loans without such provisions, with shorter Lockout Periods or with
lower Prepayment Premiums or Yield Maintenance Charges.
All of the Mortgage Loans provide that after the applicable Defeasance
Lockout Period, the borrower may obtain the release of the related Mortgaged
Property from the lien of the related Mortgage upon the pledge to the Trustee
of noncallable U.S. Treasury or other noncallable U.S. government obligations
which provide payments on or prior to all successive payment dates through
maturity (or, in the case of the ARD Loans, through the related Anticipated
Repayment Dates) in the amounts due on such dates (or, in the case of ARD
Loans, the amount outstanding on the related Anticipated Repayment Dates),
and upon the satisfaction of certain other conditions. All Mortgage Loans
containing defeasance provisions have a Defeasance Lockout Period of not less
than two years after the Closing Date. See "Description of the Mortgage Loans
- -- Certain Terms and Conditions of the Mortgage Loans -- Property Releases"
herein.
S-51
<PAGE>
Provisions requiring Prepayment Premiums or Yield Maintenance Charges may
not be enforceable in some states and under federal bankruptcy law, and may
constitute interest for usury purposes. Accordingly, no assurance can be
given that the obligation to pay a Prepayment Premium or a Yield Maintenance
Charge will be enforceable under applicable state or federal law or, if
enforceable, that the foreclosure proceeds will be sufficient to pay such
Prepayment Premium or Yield Maintenance Charge. Additionally, although the
collateral substitution provisions related to defeasance are not intended to
be, and do not have the same effect on the Certificateholders as, prepayment,
there can be no assurance that a court would not interpret such provisions as
requiring a Prepayment Premium or Yield Maintenance Charge and thus
unenforceable or usurious under applicable law.
Effect of Mortgagor Defaults. The aggregate amount of distributions on the
Offered Certificates, the yield to maturity of the Offered Certificates, the
rate of principal payments on the Offered Certificates and the weighted
average life of the Offered Certificates will be affected by the rate and
timing of delinquencies and defaults on the Mortgage Loans. Delinquencies on
the Mortgage Loans, if the delinquent amounts are not advanced, may result in
shortfalls in distributions of interest and/or principal to the Offered
Certificates for the current month. Any late payments received on or in
respect of the Mortgage Loans will be distributed to the Certificates in the
priorities described more fully herein, but no interest will accrue on such
shortfall during the period of time such payment is delinquent. Thus, because
the Offered Certificates will not accrue interest on shortfalls,
delinquencies may result in the allocation of losses and shortfalls to the
Offered Certificates, which will reduce the amounts distributable to the
Offered Certificates and thereby adversely affect the yield to maturity of
such Certificates.
If a purchaser of an Offered Certificate of any Class calculates its
anticipated yield based on an assumed rate of default and an assumed amount
of losses on the Mortgage Loans that are lower than the default rate and the
amount of losses actually experienced, and if such losses are allocated to
such Class of Certificates, such purchaser's actual yield to maturity will be
lower than the yield so calculated and could, under certain scenarios, be
negative. The timing of any loss on a liquidated Mortgage Loan will also
affect the actual yield to maturity of the Offered Certificates to which all
or a portion of such loss is allocable, even if the rate of defaults and
severity of losses are consistent with an investor's expectations. In
general, the earlier a loss borne by an investor occurs, the greater the
effect on such investor's yield to maturity. See "Prepayment and Yield
Considerations" herein.
As and to the extent described herein, the Servicer, the Special Servicer
or the Trustee, as applicable, will be entitled to receive interest on
unreimbursed Advances and unreimbursed servicing expenses that (a) are
recovered out of amounts received on the Mortgage Loan as to which such
Advances were made or such servicing expenses were incurred, which amounts
are in the form of reimbursement from the related borrower, late payments,
liquidation proceeds, insurance proceeds, condemnation proceeds or amounts
paid in connection with the purchase of such Mortgage Loan out of the Trust
Fund or (b) are determined to be nonrecoverable Advances. Such interest will
accrue from (and including) the date on which the related Advance is made or
the related expense incurred to (but excluding) the date on which (x) in the
case of clause (a) above, such amounts are recovered and (y) in the case of
clause (b) above, a determination of nonrecoverability is made to the extent
that there are funds available in the Certificate Account for reimbursement
of such Advance. The Servicer's, the Special Servicer's or the Trustee's
right, as applicable, to receive such payments of interest is senior to the
rights of Certificateholders to receive distributions on the Offered
Certificates and, consequently, may result in losses being allocated to the
Offered Certificates that would not have resulted absent the accrual of such
interest. In addition, certain circumstances, including delinquencies in the
payment of principal and interest, may result in a Mortgage Loan being
specially serviced. The Special Servicer is entitled to additional
compensation for special servicing activities which may result in losses
being allocated to the Offered Certificates that would not have resulted
absent such compensation. See "The Pooling and Servicing Agreement --
Servicing Compensation and Payment of Expenses" herein.
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such investor's Certificates. Losses on
the Mortgage Loans, to the extent not allocated to such Class of Offered
S-52
<PAGE>
Certificates, may result in a higher percentage ownership interest evidenced
by such Certificates than would otherwise have resulted absent such loss. The
consequent effect on the weighted average life and yield to maturity of the
Offered Certificates will depend upon the characteristics of the remaining
Mortgage Loans.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the distribution of payments to
the holder of an Offered Certificate, to the extent that Advances or the
subordination of another Class of Certificates does not fully offset the
effects of any such delinquency or default. The Available Distribution Amount
generally consists of, as more fully described herein, principal and interest
on the Mortgage Loans actually collected or advanced.
As described under "Description of the Offered Certificates --
Distributions" herein, if the portion of the Available Distribution Amount
distributable in respect of interest on any Class of Offered Certificates on
any Distribution Date is less than the Optimal Interest Distribution Amount
then payable to such Class, the shortfall will be distributable without
interest on such shortfall to holders of such Class on subsequent
Distribution Dates, to the extent of the Available Distribution Amount for
each such Distribution Date.
Servicer or Special Servicer May Purchase Certificates; Conflict of
Interest. The Servicer or Special Servicer or an affiliate thereof will be
permitted to purchase any Class of Certificates. It is anticipated that the
Special Servicer or an affiliate of the Special Servicer will purchase all or
a portion of the Class I and Class J Certificates. However, there can be no
assurance that the Special Servicer or an affiliate of the Special Servicer
will purchase such Certificates. Following any such purchase of Certificates,
the Servicer or Special Servicer will have rights as a holder of
Certificates, including certain Voting Rights, which are in addition to such
entity's rights as Servicer or Special Servicer under the Pooling and
Servicing Agreement. Consequently, any purchase of Certificates by the
Servicer or Special Servicer, as the case may be, could cause a conflict
between such entity's duties pursuant to the Pooling and Servicing Agreement
and its interest as a holder of a Certificate, especially to the extent that
certain actions or events have a disproportionate effect on one or more
Classes of Certificates. In addition to the foregoing, the holders of a
majority of the Percentage Interests of the Controlling Class (initially
certain of the Private Certificates) will be entitled, at their option, to
remove the Special Servicer, with or without cause, and appoint a successor
Special Servicer, provided that each Rating Agency confirms in writing that
such removal and appointment, in and of itself, would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. The Pooling and Servicing Agreement provides that the
Mortgage Loans shall be administered in accordance with the servicing
standard set forth therein without regard to ownership of any Certificate by
the Servicer, the Special Servicer or any affiliate thereof. See "The Pooling
and Servicing Agreement -- Amendment" herein.
Consents. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the outstanding Certificates will be
required to direct, and will be sufficient to bind all Certificateholders to,
certain actions, including amending the Pooling and Servicing Agreement. See
"The Pooling and Servicing Agreement -- Amendment" herein.
Book-Entry Registration. Each Class of Offered Certificates will be
initially represented by one or more certificates registered in the name of
Cede & Co., as the nominee for DTC, and will not be registered in the names
of the related holders of Certificates or their nominees. As a result, unless
and until Definitive Certificates are issued, holders of Offered Certificates
will not be recognized as "Certificateholders" for certain purposes. Hence,
until such time, those beneficial owners will be able to exercise the rights
of holders of Certificates only indirectly through DTC, and its participating
organizations. A beneficial owner holding a certificate through the
book-entry system will be entitled to receive the reports described under
"The Pooling and Servicing Agreement -- Reports to Certificateholders;
Available Information" herein and notices only through the facilities of DTC
and its respective participants or from the Trustee (if the Depositor has
provided the name of such beneficial owner to the Certificate Registrar). For
additional information on the book-entry system, see "Description of the
Offered Certificates -- Book-Entry Registration and Definitive Certificates"
herein. Upon presentation of evidence satisfactory to the Trustee of their
beneficial ownership interest in the Offered Certificates, such beneficial
owners are entitled to receive, upon request in writing, copies of monthly
reports to Certificateholders from the Trustee.
S-53
<PAGE>
Limited Liquidity and Market Value. There is currently no secondary
market for the Offered Certificates. Although the Underwriter has advised the
Depositor that it currently intends to make a secondary market in the Offered
Certificates, it is under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Offered Certificates will
develop. Moreover, if a secondary market does develop, there can be no
assurance that it will provide holders of Offered Certificates with liquidity
of investment or that it will continue for the life of the Offered
Certificates. The Offered Certificates will not be listed on any securities
exchange. Lack of liquidity could result in a precipitous drop in the market
value of the Offered Certificates. The market value of the Offered
Certificates at any time may be affected by many other factors, including
then prevailing interest rates, and no representation is made by any person
or entity as to what the market value of any Offered Certificate will be at
any time. See "Risk Factors -- Limited Liquidity" in the Prospectus.
Pass-Through Rate Considerations. The Pass-Through Rate on the Class A-X
Certificates will change as the Weighted Average Net Mortgage Pass-Through
Rate (as defined herein) fluctuates over time. Because certain Mortgage Loans
will amortize their principal more quickly than others, or will be prepaid or
have their principal balances reduced on account of liquidations and losses,
such rate and, consequently, such Pass-Through Rates, may fluctuate over the
lives of the Class A-X Certificates. See "Prepayment and Yield Considerations
- -- Yield" herein and Annex D.
Subordination. As and to the extent described below under "Description of
the Offered Certificates -- Subordination; Allocation of Collateral Support
Deficits and Certificate Deferred Interest," the rights of the holders of the
Mezzanine Certificates are subordinate in right of payment to each class of
Senior Certificates and to each class of Mezzanine Certificates with an
earlier alphabetical designation.
Allocation of Collateral Support Deficits on the Mortgage Loans. All
Collateral Support Deficits (as defined below under "Description of the
Offered Certificates -- Subordination; Allocation of Collateral Support
Deficit and Certificate Deferred Interest") in collections on the Mortgage
Loans will be allocated in the following order of priority: first, to the
Private Certificates until the Certificate Balances thereof have been reduced
to zero, second, to the Class E Certificates until the Certificate Balance of
such Class has been reduced to zero, third, to the Class D Certificates until
the Certificate Balance of such Class has been reduced to zero, fourth, to
the Class C Certificates until the Certificate Balance of such Class has been
reduced to zero and fifth, to the Class B Certificates until the Certificate
Balance of such Class has been reduced to zero. If the Certificate Balances
of all such Classes were to be reduced to zero, the Trustee would be required
to allocate any remaining portion of such Collateral Support Deficit to the
Class A-1, Class A-2 and Class A-3 Certificates, pro rata (based upon such
Classes' respective Certificate Balances), until the remaining Certificate
Balances of such Classes were reduced to zero.
Allocation of Certificate Deferred Interest. On any given Distribution
Date, an amount representing Certificate Deferred Interest, which (i) will
result with respect to Loan No. 67, which is subject to negative amortization
and (ii) would result from the modification of Mortgage Loans to reduce their
interest payment rates and accrual of interest on any interest deferred, is
allocated to the Classes of Regular Certificates (other than the Class A-X
Certificates) to reduce the Monthly Interest Distributable Amount for each
such Class in order of their subordination (i.e., to the Class J, Class I,
Class H, Class G, Class F, Class E, Class D, Class C and Class B
Certificates, in that order). Any Certificate Deferred Interest in excess of
the Monthly Interest Distributable Amount for any Class to which such
Certificate Deferred Interest is allocable will be allocated to the next most
senior Class of Certificates, in the manner set forth in the preceding
sentence. If the Certificate Balance of at least one Class of Senior
Certificates has not been reduced to zero, then any amounts representing
Certificate Deferred Interest after allocation thereof to the Offered Private
Certificates in accordance with the preceding sentence will be allocated to
the Senior Certificates (other than the Class A-X Certificates) pro rata on
the basis of such Classes' respective interest entitlements on such date
(before giving effect to any reduction therefrom on such Distribution Date).
The effect of such an allocation of Certificate Deferred Interest is to
reduce the interest otherwise distributable to such Classes of Certificates.
Because of the subordination of the Offered Certificates to each other Class
of Offered Certificates with an earlier alphabetical Class designation, the
yields to maturity on the Offered Certificates will be sensitive in varying
degrees to the allocation of Certificate Deferred Interest to such
Certificates. See "Description of the Offered Certificates -- Subordination;
Allocation of Collateral Support Deficits and Certificate Deferred Interest"
herein.
S-54
<PAGE>
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
The Trust Fund will consist primarily of 185 fixed-rate loans secured by
203 multifamily and commercial properties, the Mortgage Loans will have an
aggregate Cut-off Date Principal Balance of approximately $1,465,990,190 (the
"Initial Pool Balance"), subject to a variance of plus or minus 5%. For the
purposes of this Prospectus Supplement, any loan evidenced by one note (each,
a "Note" or a "Mortgage Note") is considered to be one Mortgage Loan. Any
loans made to affiliated borrowers, whether or not cross-collateralized, are
considered separate Mortgage Loans. For purposes of describing the property
type of Mortgaged Properties, allocated loan amounts, as shown on Annex A,
are used for Mortgage Loans secured by more than one property. All numerical
information provided herein with respect to the Mortgage Loans is provided on
an approximate basis. All percentages of the Trust Fund, or of any specified
sub-group thereof, referred to herein without further description are
approximate percentages by aggregate Cut-off Date Principal Balance.
Descriptions of the terms and provisions of the Mortgage Loans are
generalized descriptions of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgage Loan is evidenced by a Mortgage Note and secured by one or
more mortgages, deeds of trust or other similar security instruments (a
"Mortgage").
Each of the Mortgages creates a first lien on the interests of the related
borrower in the related Mortgaged Property, as set forth on the following
table:
SECURITY FOR THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
POOL BALANCE MORTGAGED
INTEREST OF BORROWER ENCUMBERED (1) PROPERTIES
- ------------------------------- -------------- ------------
<S> <C> <C>
Fee Simple Estate(2) ........... 90.9% 193
Leasehold ...................... 9.1% 10
-------------- ------------
TOTAL........................... 100.0% 203
============== ============
</TABLE>
- ------------
(1) Based on the principal balance of the Mortgage Loan or, for any Pool
Loan (as defined herein), the Allocated Loan Amount with respect to
each portion of the related Mortgaged Property.
(2) For any Mortgaged Property where the ground lessee and ground lessor
are both parties to the Mortgage, the Mortgaged Property was
categorized as a fee simple estate. For any Mortgaged Property that
partially consists of a leasehold interest, the encumbered interest has
been categorized as a fee simple interest if the leasehold interest
does not constitute a material portion of the Mortgaged Property.
Each Mortgaged Property consists of land improved by (i) a retail property
(a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an office building (an "Office Property," and any Mortgage Loan
secured thereby, an "Office Loan"), (iii) a full or limited service or
extended stay hotel property (a "Hospitality Property," and any Mortgage Loan
secured thereby, a "Hospitality Loan"), (iv) an apartment building or complex
consisting of five or more rental units (a "Multifamily Property," and any
Mortgage Loan secured thereby, a "Multifamily Loan"), (v) a nursing home or
assisted living facility (each, a "Senior Housing Property," and any Mortgage
Loan secured thereby, a "Senior Housing Loan"), (vi) an industrial property
(an "Industrial Property," and any Mortgage Loan secured thereby, an
"Industrial Loan"), (vii) a self-storage facility (a "Self-Storage Facility
Property," and any Mortgage Loan secured thereby, a "Self-Storage Facility
Loan"), (viii) a cooperative apartment building (a "Cooperative Property",
and any Mortgage Loan secured thereby, a "Cooperative Loan"), (ix) a mobile
home community or recreational vehicle park or a combination thereof (a
"Mobile Home/Recreational Vehicle Property," and any Mortgage Loan secured
thereby, a "Mobile Home/Recreational Vehicle Loan") or (x) certain other
properties (each, an "Other Property" and any Mortgage Loan secured thereby,
an "Other
S-55
<PAGE>
Loan"). Certain statistical information relating to the various types of
Mortgaged Properties is set forth in the table under "--Additional Mortgage
Loan Information -- Mortgaged Properties by Property Type" herein.
Twenty-one of the Mortgage Loans representing 7.39% of the Initial Pool
Balance are secured by two or more Mortgaged Properties, either pursuant to
cross-collateralization with other Mortgage Loans in the Trust Fund or
pursuant to a single Mortgage Note by a single borrower secured by multiple
Mortgaged Properties, or both. See "Risk Factors -- The Mortgage Loans --
Concentration of Mortgage Loans; Borrowers" herein.
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or
by the Depositor, the Mortgage Loan Seller, the Servicer, the Special
Servicer, the Trustee or any of their respective affiliates. Most of the
Mortgage Loans are non-recourse loans so that, in the event of a borrower
default on any Mortgage Loan, recourse may generally be had only against the
specific Mortgaged Property or Mortgaged Properties securing such Mortgage
Loan and such limited other assets as have been pledged to secure such
Mortgage Loan, and not against the borrower's other assets. However, in
certain cases the Mortgage Loans may become recourse upon the occurrence of
certain events of default under the Mortgage Loans, including, in several
cases, the transfer or voluntary encumbrance of the Mortgaged Property
without the consent of the mortgagee. Although certain of the Mortgage Loans
provide for recourse to the related borrower or affiliates thereof, no
assurance can be made that such parties will have any assets with which to
pay all or a portion of the Mortgage Loans.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described under "Description of the Mortgage Loans --
Underwriting Standards." The Depositor will purchase the Mortgage Loans to be
included in the Trust Fund on or before the Closing Date from the Mortgage
Loan Seller pursuant to a Mortgage Loan Purchase Agreement (the "Mortgage
Loan Purchase Agreement") to be dated as of the Cut-off Date between the
Mortgage Loan Seller and the Depositor. The Mortgage Loan Seller will be
obligated under the Mortgage Loan Purchase Agreement to repurchase a Mortgage
Loan in the event of (i) a breach of a representation or warranty of the
Mortgage Loan Seller with respect to such Mortgage Loan as described under
"The Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase" herein or (ii) certain instances of missing or defective
documents. The Depositor will assign the Mortgage Loans, together with the
Depositor's rights and remedies against the Mortgage Loan Seller in respect
of breaches of representations or warranties regarding the Mortgage Loans, to
the Trustee, for the benefit of the Certificateholders, pursuant to the
Pooling and Servicing Agreement. First Union National Bank, in its capacity
as Servicer, will service the Mortgage Loans pursuant to the Pooling and
Servicing Agreement. The Depositor will make no representations or warranties
with respect to the Mortgage Loans and will have no obligation to repurchase
or substitute for Mortgage Loans with deficient documentation or which are
otherwise defective. The Mortgage Loan Seller, as seller of Mortgage Loans to
the Depositor, is selling such Mortgage Loans without recourse, and,
accordingly, in such capacity, will have no obligations with respect to the
Certificates other than pursuant to the limited representations, warranties
and covenants made by it to the Depositor and assigned by the Depositor to
the Trustee for the benefit of the Certificateholders. See "The Pooling and
Servicing Agreement -- Assignment of the Mortgage Loans" herein and "The
Mortgage Pools -- Representations and Warranties" in the Prospectus.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Properties. Each Mortgage Loan is also secured by an
assignment of the related borrower's interest in the leases, rents, issues
and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more Escrow Accounts
(as defined herein) for, among other things, necessary repairs, replacements
and environmental remediation, real estate taxes and insurance premiums,
deferred maintenance and/or scheduled capital improvements, re-leasing
reserves and seasonal working capital reserves. Additionally, certain of the
S-56
<PAGE>
Credit Lease Loans have the benefit of Lease Enhancement Policies. The
Mortgage Loans generally provide for the indemnification of the mortgagee by
the borrower for the presence of any hazardous substances affecting the
Mortgaged Property. Each Mortgage constitutes a first lien on a Mortgaged
Property, subject generally only to (i) liens for real estate and other taxes
and special assessments not yet due and payable, (ii) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of the related Mortgage, such
exceptions having been acceptable to the Mortgage Loan Seller in connection
with the purchase or origination of the related Mortgage Loan, and (iii) such
other exceptions and encumbrances on Mortgaged Properties as are reflected in
the related title insurance policies. See "Description of the Mortgage Loans
- -- Certain Terms and Conditions of the Mortgage Loans -- Escrows" herein.
UNDERWRITING STANDARDS
The Mortgage Loan Seller has implemented guidelines establishing certain
procedures with respect to underwriting the Mortgage Loans. The Mortgage
Loans were generally originated in accordance with such guidelines, provided,
however, that the underwriting standards for the Mortgage Loans which are
secured by cooperative apartments, mobile home/recreational vehicle parks,
racquet clubs, restaurants and self-storage facilities were originated
utilizing prudent underwriting practices for mortgage loans secured by
similar mortgaged properties and may differ from the standards described
below. With respect to the Mortgage Loans which were acquired by the Mortgage
Loan Seller, the Mortgage Loan Seller applied its general guidelines to such
loans provided that the Mortgage Loan Seller often relied on information
provided to it by the originators of such loans without independent
investigation. In some instances, one or more provisions of the guidelines
were waived or modified where it was determined not to adversely affect the
Mortgage Loans in any material respect. The underwriting standards for the
Mortgage Loans addressed, with respect to each Mortgaged Property,
environmental conditions, physical conditions, property valuations, property
financial performance, code compliance, property management, title insurance,
borrower evaluation and property insurance, as described below.
Environmental Assessments. All of the Mortgaged Properties have been
subject to environmental site assessments or studies within the period of 12
months preceding the Cut-off Date, except for ten Mortgaged Properties
securing 4.7% of the Mortgage Loans (based on Initial Pool Balance), as to
which such assessments or studies were conducted during the period of 12 to
18 months before the Cut-off Date, and three Mortgaged Properties securing
1.0% of the Mortgage Loans (based on Initial Pool Balance), as to which such
assessments or studies were conducted during the period of 18 to 24 months
before the Cut-off Date. Additionally, all borrowers were required to provide
environmental representations and warranties and covenants relating to the
existence and use of hazardous substances on the Mortgaged Properties.
Property Condition Assessments. Inspections of the related Mortgaged
Properties were conducted by licensed engineers prior to origination of the
Mortgage Loans. Such inspections were generally commissioned to assess the
structure, exterior walls, roofing, interior constructions, mechanical and
electrical systems and general conditions of the site, buildings and other
improvements located at each Mortgaged Property. The resulting reports
indicated a variety of deferred maintenance items and recommended capital
improvements with respect to each Mortgaged Property. The estimated cost of
the necessary repairs or replacements at each Mortgaged Property was included
in each property condition report. In each instance, the originator of the
Mortgage Loan either determined that the necessary repairs or replacements
were being addressed by the related borrowers in a satisfactory manner, or
required that they be addressed post-closing and, in most instances, that
reserves be established to cover the cost of such repairs or replacements.
See "Description of the Mortgage Loans" herein for descriptions of the
reserves or other security provided for repairs and capital improvements to
each property.
Appraisals. An appraisal of each of the related Mortgaged Properties was
performed. The appraisals were generally performed by independent MAI
appraisers and indicated that at the time of the respective appraisals the
aggregate value of the related Mortgaged Properties exceeded the original
principal amount of each Mortgage Loan. The appraisals were also used as a
source of information for rental and vacancy rates. In general, appraisals
represent the analysis and opinion of qualified experts and
S-57
<PAGE>
are not guarantees of present or future value. Moreover, appraisals seek to
establish the amount a typically motivated buyer would pay a typically
motivated seller. Such amount could be significantly higher than the amount
obtained from the sale of a Mortgaged Property under a distress or
liquidation sale.
Operating and Occupancy Statements. In connection with the origination of
the Mortgage Loans (other than the Credit Lease Loans), the originator
reviewed current rent rolls (and, where available, up to three years of prior
rent rolls) and related information or statements of occupancy rates, census
data, financial data, historical operating statements, and, with respect to
the Mortgage Loans secured by Office Properties, Industrial Properties and
Retail Properties, a selection of major tenant leases. In underwriting each
Mortgage Loan, income and operating information provided by the related
borrower was examined by the originator of the Mortgage Loan. Neither the
Depositor nor the Mortgage Loan Seller make any representation as to the
accuracy of such information; provided, however, that, with respect to
several of the Mortgage Loans, the originator thereof or the related borrower
engaged independent accountants to review or perform certain procedures to
verify such information.
Zoning and Building Code Compliance. All of the borrowers have, under the
related Mortgage or loan agreement, generally represented as of the date on
which the Mortgage Loan was originated, and, in connection with substantially
all of the Mortgage Loans, provided other evidence to the effect, that the
use and operation of the related Mortgaged Properties are in compliance in
all material respects with all applicable zoning, land-use, environmental,
building, fire and health ordinances, rules, regulations and orders
applicable to the related Mortgaged Properties. For a discussion of zoning
issues, see "Risk Factors -- Zoning Compliance; Inspections."
Property Management. Generally, for all Mortgage Loans (other than Credit
Lease Loans), a manager is responsible for responding to changes in the local
rental or lodging market, planning and implementing the rental rate or
operating structure, which may include establishing levels of rent payments
or rates, and insuring that maintenance and capital improvements are carried
out in a timely fashion. Management errors may adversely affect the
performance and long-term viability of a project. All of the original
managers were approved by the originator of each Mortgage Loan in connection
with the origination of the related Mortgage Loan. In most cases, the Special
Servicer may cause the borrower to terminate management contracts upon
certain events specified in the documents executed in connection with the
Mortgage Loans and generally any change in a manager must be approved by the
Special Servicer. No change in a manager may be effected by the Special
Servicer unless the Rating Agencies have confirmed in writing that such
change will not cause any withdrawal, qualification or downgrade in the then
current ratings of each Class of Certificates. For a discussion of property
management issues, see "Risk Factors -- Property Management, -- Conflicts of
Interest."
Title Insurance Policy. Each borrower has provided, and the Mortgage Loan
Seller has obtained, a title insurance policy for each Mortgaged Property.
Each title insurance policy generally complies with the following
requirements: (a) the policy must be written by a title insurer licensed to
do business in the jurisdiction where the Mortgaged Property is located, (b)
the policy must be in an amount equal to the original principal balance of
the related Mortgage Loan, (c) the protection and benefits must run to the
mortgagee and its successors and assigns, (d) the policy should be written on
a standard policy form of the American Land Title Association or equivalent
policy promulgated in the jurisdiction where the Mortgaged Property is
located and (e) the legal description of the Mortgaged Property in the policy
must conform to that shown on the survey of the Mortgaged Property, where a
survey has been required.
Property Insurance. Each borrower has provided, and the Mortgage Loan
Seller has reviewed, certificates of required insurance with respect to each
Mortgaged Property. Such insurance generally may include: (1) commercial
general liability insurance for bodily injury or death and property damage;
(2) an "All Risk of Physical Loss" policy; (3) if applicable, boiler and
machinery coverage; (4) if the Mortgaged Property is located in a flood
hazard area, flood insurance; (5) if the Mortgaged Property is located in an
earthquake prone area, earthquake insurance may be required; and (6) such
other coverage as the Mortgage Loan Seller may require based on the specific
characteristics of the Mortgaged Property.
S-58
<PAGE>
Evaluation of Borrower. The Mortgage Loan Seller evaluates each borrower
and its principals with respect to credit history and prior experience as an
owner and operator of commercial real estate properties. The evaluation
generally includes obtaining and reviewing a credit report or other reliable
indication of the borrower's financial capacity; obtaining and verifying
credit references and/or business and trade references; and obtaining and
reviewing certifications provided by the borrower as to prior real estate
experience and current contingent liabilities. Except with respect to Loan
No. 180 (representing 0.09% of the Initial Pool Balance) and the Colton Loans
(representing 0.75% of the Initial Pool Balance), all of the borrowers are
single asset special purpose entities. In addition, in general, in connection
with each Mortgage Loan with an original principal balance in excess of
$20,000,000 and each Credit Lease Loan, each borrower is required to be
organized as a bankruptcy-remote entity, and the Mortgage Loan Seller has
reviewed the organizational documents of the borrower to verify compliance
with such requirement. With respect to Loan No. 180, the borrower consists of
two individuals who are tenants in common with respect to the related
Mortgaged Property. The borrower with respect to one or more of the Colton
Loans has the right to become a tenant in common with an entity other than a
special purpose entity, and as soon as reasonably practicable will
re-constitute itself as a special purpose entity.
DSCR and LTV Ratio. The Mortgage Loan Seller's underwriting standards
generally require, for all Mortgage Loans other than Credit Lease Loans, the
following minimum DSCR and Loan-to-Value Ratios for each of the indicated
property types:
<TABLE>
<CAPTION>
DSCR LTV RATIO
PROPERTY TYPE GUIDELINE GUIDELINE
- ------------------------------------ ----------- -----------
<S> <C> <C>
Anchored Retail ..................... 1.25x 75%
Unanchored Retail ................... 1.25x 75%
Multifamily (excluding Cooperative) 1.20x 80%
Industrial........................... 1.25x 75%
Office............................... 1.25x 75%
Hotel................................ 1.35x 70%
</TABLE>
The DSCR guidelines listed above are calculated based on Net Cash Flow at
the time of origination. Therefore, the DSCR for each Mortgage Loan as
reported elsewhere in this Prospectus Supplement may differ from the amount
calculated at the time of origination. The foregoing guidelines were applied
generally in connection with the origination of the Mortgage Loans but
certain Mortgage Loans, as indicated on Annex A hereto, may deviate from
these guidelines. For Credit Lease Loans, the Mortgage Loan Seller's
underwriting standards generally require that the DSCR will be no less than
1.00x and the Leased LTV (as set forth on Annex B) will be no greater than
100%.
Escrow Requirements. The Mortgage Loan Seller generally requires a
borrower to fund various escrows (each, an "Escrow Account") for taxes and
insurance, ground rent, replacement of furniture, fixtures and equipment
and/or capital expenditures, and tenant improvements and leasing commissions
(with respect to Office Properties and Retail Properties). Escrow Accounts
must generally be held at Eligible Banks (as defined herein). Generally, the
required escrows for Mortgage Loans originated by the Mortgage Loan Seller
are as follows:
Taxes and Insurance -- Typically, a pro rated initial deposit and monthly
deposits equal to 1/12 of the annual property taxes (based on the most recent
property assessment and the current tax rate) and annual property insurance
premium relating to the Mortgaged Property.
Capital Item Reserves -- Monthly deposits generally based on the greater
of the amount recommended pursuant to a building condition report prepared
for the Mortgage Loan Seller or the following minimum amounts:
<TABLE>
<CAPTION>
<S> <C>
Retail .................................. $0.15 per square foot
Multifamily (excluding Cooperative) .... $250 per Unit
Industrial .............................. $0.15 per square foot
Office .................................. $0.20 per square foot
Hotel ................................... 5% of gross revenues
</TABLE>
The actual reserve deposits for periodic replacement, capital expenditures
and FF&E (collectively, "Capital Items") required under each Mortgage Loan
are set forth on Annex A.
S-59
<PAGE>
Tenant Improvements and Leasing Commission Reserves -- Monthly deposits
generally based upon anticipated lease turnover rates, estimated costs for
tenant improvements and leasing commissions in the related market.
In certain cases, the Mortgage Loan Seller allowed a borrower to post a
letter of credit in lieu of funding ongoing reserves for Capital Items and/or
tenant improvements and leasing commissions. Even if the actual funded
reserves under a Mortgage Loan are less than the foregoing amounts, the
Mortgage Loan Seller generally deducted such amounts from Net Operating
Income when calculating Net Cash Flow.
Deferred Maintenance/Environmental Remediation -- An initial deposit, upon
funding of a Mortgage Loan, in an amount equal to no less than 100%, and as
much as 125%, of (i) the estimated cost of the recommended substantial
repairs or replacements pursuant to a building condition report completed by
a licensed engineer and (ii) the estimated cost of environmental remediation
expenses as recommended by an independent environmental assessment.
Credit Lease Loans. Generally each Monthly Payment due under a Credit
Lease Loan will be paid entirely from the rent due from the Tenant at the
related Credit Lease Property. The Mortgage Loan Seller's underwriting
criteria for a Credit Lease Loan generally depend on whether such Credit
Lease Loan is secured by a Bondable Lease, a Triple Net Lease or a Double Net
Lease.
<TABLE>
<CAPTION>
DSCR LTV RATIO
LEASE TYPE GUIDELINE GUIDELINE
- ------------- ----------- -----------
<S> <C> <C>
Bondable ..... 1.00x 100%
Triple Net .. 1.02x 95%
Double Net .. 1.05x 90%
</TABLE>
Generally, when calculating the DSCR guidelines set forth above, the
Mortgage Loan Seller did not adjust the rental income payments in the manner
described herein with respect to the calculation of Net Cash Flow. In
addition, the Mortgage Loan Seller did not require the escrowing of amounts
for taxes, insurance, Capital Items, tenant improvements or leasing
commissions for Bondable Leases. The Mortgage Loan Seller did require, in
many instances, the escrowing of amounts for taxes, insurance, Capital Items,
tenant improvements and/or leasing commissions for Double Net Leases and
Triple Net Leases. The actual DSCR and Loan to Value Ratios (both "Leased
Value" and "Dark Value") for the Credit Lease Loans is set forth on Annex B
hereto.
SIGNIFICANT MORTGAGE LOANS
The thirteen largest Mortgage Loans or groups of Related Borrower Loans by
Initial Pool Balance (each, a "Significant Loan Concentration") are as
follows:
The MGM Plaza Loan
The Loan. The largest Significant Loan Concentration is a Mortgage Loan
(the "MGM Plaza Loan") that represents approximately 9.95% of the Initial
Pool Balance. The MGM Plaza Loan was originated by the Mortgage Loan Seller
on October 1, 1997 and has a principal balance, as of the Cut-off Date, of
$145,894,648. The MGM Plaza Loan is secured by a first mortgage (the "MGM
Plaza Mortgage") encumbering the MGM Plaza office complex in Santa Monica,
California (the "MGM Plaza Property"). The MGM Plaza Loan was made to
Colorado Place Partners, LLC (the "MGM Plaza Borrower"), a Delaware limited
liability company. The MGM Plaza Borrower has been structured as a single
purpose, bankruptcy remote entity, with a single purpose, bankruptcy remote
managing member whose board contains an independent director.
Payment and prepayment terms and reserves for annual Capital Items for the
MGM Plaza Loan are as set forth on Annex A hereto.
The Property. The MGM Plaza Property, located on approximately 15 acres in
Santa Monica, California, encompasses an entire city block and contains six
low-rise office buildings surrounding an open-air plaza and extensive on-site
amenities, including a health and fitness center, a 3.5-acre park with
S-60
<PAGE>
two tennis courts, a basketball court, a volleyball court, a running path,
several specialty retail shops, restaurants and a child care center. The
parking for the MGM Plaza Property is located in a three-level, subterranean
parking structure containing approximately 3,225 spaces. Three of the office
buildings were constructed in 1984 and the other three office buildings were
constructed in 1987, 1990 and 1991, respectively. The six office buildings
comprising the MGM Plaza Property contain approximately 1,039,052 rentable
square feet of office and retail space, and approximately 40,023 rentable
square feet of storage space. The major tenants of the MGM Plaza Property are
Metro-Goldwyn-Mayer, Inc., Aurora National Life Assurance Company, Symantec
Corporation, Value Health, Inc. and Rysher Entertainment, Inc. Based on the
MGM Plaza Borrower's August, 1997 rent roll, the MGM Plaza Property was 99%
occupied at an average annual rental per square foot of $30.91, primarily on
a triple net basis.
Operating History. The following table shows certain information regarding
the operating history of the MGM Plaza Property as provided by the borrower:
NET OPERATING INCOME (000S)
<TABLE>
<CAPTION>
1994 1995 1996 1997 UNDERWRITTEN
NOI NOI NOI NOI (1) NOI
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Total Revenue ........ $36,126 $39,104 $43,633 $45,272 $39,736
Total Expense ........ $13,289 $13,531 $13,767 $14,471 $13,904
--------- --------- --------- --------- --------------
NET OPERATING INCOME $22,836 $25,573 $29,866 $30,800 $25,832
========= ========= ========= ========= ==============
</TABLE>
(1) For the period from January 1997 through June 1997 annualized.
Occupancy History. The following table shows certain historical
information regarding average occupancy of the office and retail portions of
the MGM Plaza Property:
<TABLE>
<CAPTION>
OCCUPANCY PERIOD OCCUPANCY
- ---------------- -----------
<S> <C>
August 1997...... 99.9%
1996............. 99.4%
1995............. 99.2%
1994............. 97.2%
</TABLE>
Major Tenant Summary. The following table shows certain information
regarding the major tenants of the MGM Plaza Property:
<TABLE>
<CAPTION>
TENANT % OF
NET RENTABLE TOTAL NET
TENANT NAME AREA (SF) RENTABLE AREA
- ---------------------------------------------------- -------------- ---------------
<S> <C> <C>
Metro-Goldwyn-Mayer, Inc............................. 321,521 29.8%
Aurora National Life Assurance Company............... 136,357 12.6%
Symantec Corporation................................. 107,695 10.0%
Value Health, Inc.................................... 82,303 7.6%
Rysher Entertainment, Inc. .......................... 61,279 5.7%
-------------- ---------------
TOTAL NET RENTABLE AREA WITH RESPECT TO MAJOR
TENANTS............................................ 709,155 65.7%
-------------- ---------------
Other Tenants........................................ 319,106 29.6%
Storage.............................................. 40,023 3.7%
Vacant .............................................. 10,791 1.0%
-------------- ---------------
TOTAL NET RENTABLE AREA............................. 1,079,075 100.0%
============== ===============
</TABLE>
Rent Credits. Rent credits are or may be due to certain tenants of the MGM
Plaza Property. Metro-Goldwyn-Mayer, Inc. is entitled to substantial rent
credits in the years 2002 and 2003. To ensure
S-61
<PAGE>
that funds are available to pay principal, interest and other sums due under
the MGM Plaza Loan, the MGM Plaza Borrower established an additional debt
service sub-account (see "--Lockbox and Reserves" below), which account will
be funded from (i) payments due to the MGM Plaza Borrower from International
Business Machines Corporation ("IBM"), a former tenant of the MGM Plaza
Property ($620,034 due December 1, 1997 and $1,586,892 due May 31, 1999), and
(ii) monthly deposits by the MGM Plaza Borrower ($44,444.45 due monthly from
January 11, 1999 through December 11, 2002). Additionally, IBM may be
entitled to rent credits in the maximum amount of approximately $1,280,450 on
March 31, 1998 and approximately $1,274,450 on May 31, 1999. Due to the debt
service due under the MGM Plaza Loan and additional financing referred to
below, it is unlikely that IBM will be entitled to a March 31, 1998 rent
credit. The MGM Plaza Borrower has established a debt service reserve in the
amount of $1,274,450 to pay IBM's May 31, 1999 rent credit, should the same
become necessary.
Lease Roll-Over Summary. The following table shows certain information
regarding the expiration of leases of office space in the MGM Plaza Property:
<TABLE>
<CAPTION>
EXPIRING % OF CUMULATIVE
YEAR ENDING JULY SF SF % OF SF
- ---------------- ----------- ------- ------------
<S> <C> <C> <C>
Vacant........... 10,791 1.0% 1.0%
1998............. 62,595 5.8% 6.8%
1999............. 69,410 6.4% 13.2%
2000............. 84,156 7.8% 21.0%
2001............. 137,078 12.7% 33.7%
2002............. 174,433 16.2% 49.9%
2003............. 295,733 27.4% 77.3%
2004............. 32,776 3.0% 80.3%
2005 (or later) . 212,103 19.6% 100.0%
----------- -------
TOTAL ........... 1,079,075 100.0%
=========== =======
</TABLE>
Property Management. The MGM Plaza Property is managed by Maguire Partners
Project Services, Inc. (the "MGM Plaza Manager"), an affiliate of the MGM
Plaza Borrower, pursuant to a management agreement (the "MGM Plaza Management
Agreement'). All fees owed to the MGM Plaza Manager pursuant to the terms of
the MGM Plaza Management Agreement have been subordinated to payments to be
made under the MGM Plaza Loan. The loan documents executed in connection with
the MGM Plaza Loan provide that the MGM Plaza Manager can be terminated (i)
upon the occurrence of any event of default under the MGM Plaza Loan or (ii)
if, subject to certain limitations, as of the last day of any calendar
quarter during the term of the MGM Plaza Loan, the DSCR for the preceding
12-month period is less than 1.1x. Further, subject to certain limitations,
if, as of the last day of any calendar quarter during the term of the MGM
Plaza Loan, the DSCR for the preceding 12-month period is less than 1.5x,
then, upon notice to the MGM Plaza Borrower, the management fees payable
under the MGM Plaza Management Agreement will be suspended and an amount
equal to such management fees will be retained and reserved by the Servicer
in a Lockbox Account until such time, if any, as a DSCR of 1.5x or more is
obtained for the 12-month period ending on the last day of each of any two
consecutive calendar quarters during the term of the MGM Plaza Loan provided
that no event of default is then continuing under the MGM Plaza Loan.
Lockbox and Reserves. All revenues of the MGM Plaza Property are deposited
into a Hard Lockbox. In addition to funding the rent credit and debt service
reserves referred to above, each month funds deposited into the Lockbox
Account are allocated to pay debt service on the MGM Plaza Loan and to fund
reserves for taxes and insurance, Capital Items ($.20 per square foot) and
tenant improvements and leasing commissions ($2,000,000.00 initial deposit,
$82,089.55 per month until 2003).
Approval Rights. For each calendar year, the MGM Plaza Borrower is
required to submit to the Servicer for the Servicer's written approval an
annual budget not later than 75 days prior to the commencement of such
calendar year, in form reasonably satisfactory to the Servicer, setting forth
in
S-62
<PAGE>
reasonable detail budgeted monthly operating income and monthly operating,
capital and other expenses for the MGM Plaza Property. Pursuant to the Loan
Coordination Agreement referred to below, the MGM Plaza Borrower will submit
each annual budget to the MGM Special Member, who will coordinate approval of
such budget between the Servicer, the MGM Special Member and the MGM
Mezzanine Lender. The MGM Plaza Borrower is required to operate the MGM Plaza
Property in accordance with the approved annual budget then in effect and is
not permitted to enter into any contracts or other agreements or make any
expenditures not contemplated by such budget (subject to a permitted variance
of 5% of total budgeted expenditures (not including any contingency line
item)), other than expenditures approved by the Servicer in writing and
certain emergency capital expenditures. Each approved annual budget will be
adjusted to reflect actual increases in real estate taxes, insurance premiums
and utilities expenses.
Mezzanine Loan. MP-Colorado Place Mezzanine, LLC (the "MGM Mezzanine
Borrower"), the regular member of the MGM Plaza Borrower, is the borrower
under a non-recourse Mezzanine Loan in the amount of $66,000,000 (the "MGM
Mezzanine Loan") made by the Mortgage Loan Seller, as mezzanine lender (in
such capacity, the "MGM Mezzanine Lender"), on October 17, 1997. The MGM
Mezzanine Loan is secured by (i) a pledge by the MGM Mezzanine Borrower of
its regular membership interest in the MGM Plaza Borrower, (ii) a pledge by
the owner of 100% of the stock in MP-Colorado Place Manager I, Inc., the
managing member of the MGM Plaza Borrower, of such stock, (iii) a pledge of
accounts created pursuant to a mezzanine deposit agreement and (iv) a pledge
of an interest rate cap agreement entered into in connection with the MGM
Mezzanine Loan. The MGM Mezzanine Lender has no lien on the MGM Plaza
Property or any of the Escrow Accounts, Lockbox Accounts or Cash Collateral
Accounts established under the MGM Plaza Loan. The MGM Mezzanine Lender's
sole remedy in the event of non-payment is to foreclose upon the equity and
cash collateral accounts pledged to it and terminate the MGM Plaza Manager
(subject to the limitations described below).
The MGM Mezzanine Lender has agreed not to foreclose on its interests in
the MGM Plaza Borrower without the consent of the Servicer. After a
foreclosure under the MGM Mezzanine Loan, the MGM Mezzanine Lender would own
the regular membership interest in the MGM Plaza Borrower and the stock of
the managing member of the MGM Plaza Borrower. Such foreclosure would not
violate the "due-on-sale" clause under the MGM Plaza Loan. The MGM Mezzanine
Lender has also agreed not to transfer the MGM Mezzanine Loan unless the MGM
Mezzanine Lender receives written confirmation from each Rating Agency that
such transfer would not cause such Rating Agency to downgrade, qualify or
withdraw any of its then-current ratings on the Certificates.
The MGM Plaza Loan and MGM Mezzanine Loan permit the transfer of the MGM
Plaza Property and the assumption of the MGM Plaza Loan and the MGM Mezzanine
Loan by a real estate investment trust ("REIT") and certain other permitted
institutional transferees subject to written confirmation by each Rating
Agency that such transfer will not result in a downgrade, qualification or
withdrawal of any of the then-current ratings on the Certificates. Any excess
proceeds available as a result of a transfer of the MGM Plaza Property to a
REIT or other entity will be applied to reduce the outstanding amount of the
MGM Mezzanine Loan and the MGM Preferred Equity Interest. However, there can
be no assurance that any such transfer will take place or that there will be
any excess proceeds.
Preferred Equity Interest. The Mortgage Loan Seller made a preferred
equity investment in the MGM Plaza Borrower in an initial amount of $100,000
(the "MGM Preferred Equity Interest") and in return became a special member
of the MGM Plaza Borrower (in such capacity, the "MGM Special Member"). Under
the MGM Plaza Borrower's operating agreement (the "MGM LLC Agreement"), the
MGM Special Member is entitled to receive preferred distributions of amounts
which constitute a monthly preferred rate based upon its preferred equity
investment along with the return of its capital. Simultaneously with the
origination of the MGM Plaza Loan, the MGM Special Member made a non-recourse
subordinate loan in the amount of $43,400,000 (the "MGM Subordinate Loan") to
the MGM Plaza Borrower on October 17, 1997. As of the Cut-off Date, the
outstanding principal balance of the MGM Subordinate Loan was $43,397,224.
The MGM Subordinate Loan is secured primarily by a second lien on the MGM
Plaza Property. Pursuant to a Mezzanine Intercreditor Agreement among the
Mortgage Loan Seller, the MGM Mezzanine Lender and the MGM Special Member
(the "MGM
S-63
<PAGE>
Intercreditor Agreement"), the MGM Special Member must obtain the consent of
the Servicer prior to the exercise of foreclosure or other remedies under the
MGM Subordinate Loan. The MGM Special Member has the right, after April 11,
1998, to convert the MGM Subordinate Loan into an increased amount of MGM
Preferred Equity Interest equal to the outstanding balance of the MGM
Subordinate Loan (the date of such conversion, the "MGM Exercise Date"). Upon
such conversion, the second lien will be released and the MGM Special Member
will have no lien or right to foreclose on the MGM Plaza Property. Pursuant
to the MGM Intercreditor Agreement, the MGM Special Member is obligated to
exercise its conversion right in April 1998. This obligation is secured by a
pledge of the MGM Subordinate Loan to the Trust Fund. The Servicer will be
instructed to exercise this conversion right pursuant to a power of attorney
granted by the MGM Special Member if the MGM Special Member does not exercise
this conversion right on the MGM Exercise Date.
For the purposes of the following discussion, it is assumed that the MGM
Subordinate Loan will be converted on the Exercise Date, as discussed above,
and that all such rights of the MGM Special Member will be exercised
exclusively in its capacity as holder of the MGM Preferred Equity Interest.
Mezzanine and Preferred Equity Payments. The MGM Mezzanine Loan matures
on, and the final distribution in respect of the MGM Preferred Equity
Interest is scheduled to be made on, November 11, 2000. The interest rate on
the MGM Mezzanine Loan and the preferred rate on the MGM Preferred Equity
Interest are both based on 30-day LIBOR. Commencing on November 11, 1997 and
on the 11th day of each month thereafter, the MGM Mezzanine Loan and the MGM
Preferred Equity Interest require monthly payments of interest and, to the
extent of remaining Excess Cash Flow, principal. The amount of principal due
will be determined by the level of the debt service coverage ratio
(calculated based on annual debt service on the MGM Plaza Loan, interest due
on the MGM Mezzanine Loan and the preferred yield due on the MGM Preferred
Equity Interest) and in total can equal as much as 100% of the Excess Cash
Flow from the MGM Plaza Property.
The MGM Mezzanine Lender has also agreed to consent to a refinancing of
the MGM Plaza Loan provided certain conditions are met, including: (i) no
event of default shall have occurred; (ii) the new mortgage loan shall have
(A) an interest rate no higher than prevailing market interest rate for loans
similar to the MGM Plaza Loan (which shall be determined by the Senior Lender
in its sole discretion), (B) a principal balance no more than the principal
balance of the MGM Plaza Loan (plus refinancing costs, including any
Prepayment Premium and/or Yield Maintenance Charge and the exit fee due the
MGM Mezzanine Lender), (C) an amortization schedule no shorter than provided
in the MGM Plaza Loan and (D) prepayment terms not less favorable to the MGM
Mezzanine Lender than the terms of the MGM Plaza Loan, any proceeds of such
refinancing in excess of the amount due under the MGM Plaza Loan are applied
to repay the MGM Mezzanine Loan; (iii) the relevant parties enter into
amendments to the MGM Mezzanine Loan so as to preserve for the MGM Mezzanine
Lender the same benefits it had while the MGM Plaza Loan was outstanding; and
(iv) the MGM Mezzanine Borrower pays to the MGM Mezzanine Lender an exit fee
(the "MGM Exit Fee") equal to 3% of the sum of the initial principal amount
of the MGM Plaza Loan, the MGM Mezzanine Loan, the MGM Subordinate Loan and
the MGM Preferred Equity Interest. The MGM Mezzanine Lender has also agreed
to consent to the transfer of the MGM Plaza Property provided that certain
conditions are met, including: (i) all of the entities which own an interest
in the successor borrower assume the MGM Mezzanine Loan, and agreements
relating thereto; and (ii) the MGM Mezzanine Borrower pays the MGM Mezzanine
Lender the MGM Exit Fee.
Control Rights. The MGM Mezzanine Lender and the MGM Special Member each
have the right to approve annual budgets of the MGM Plaza Borrower, certain
extraordinary operating and affiliated party expenses of the MGM Plaza
Borrower and leases on the MGM Plaza Property for space of over 20,000 square
feet. Additionally, the MGM Plaza Manager can be terminated and replaced by
the MGM Mezzanine Lender upon the occurrence of an event of default under the
MGM Mezzanine Loan, by the MGM Special Member upon the occurrence of a breach
under the MGM LLC Agreement, or by either the MGM Mezzanine Lender or the MGM
Special Member, if the net operating income with respect to the MGM Plaza
Property for the twelve-month period preceding any calendar quarter is less
than 85% of such net operating income for the twelve-month period preceding
the date of origination of the MGM Plaza Loan (subject to certain limitations
relating to lease expirations and the bankruptcy of major
S-64
<PAGE>
tenants). The MGM Mezzanine Lender and the MGM Special Member have agreed not
to exercise their respective rights to terminate the MGM Plaza Manager unless
each Rating Agency confirms that it would not withdraw, qualify or downgrade
any of its then-current ratings on the Certificates as a result of such
termination. The rights of the MGM Special Member and the MGM Mezzanine
Lender to terminate the MGM Plaza Manager, as well as to approve budgets and
leases of the MGM Plaza Borrower, are expressly subordinate to the MGM Plaza
Loan. Pursuant to a Loan Coordination Agreement, the Senior Lender, the MGM
Mezzanine Lender, the MGM Special Member, the MGM Plaza Borrower and the MGM
Mezzanine Borrower have agreed that with respect to those rights exercisable
by both the MGM Special Member and such lenders (such as the rights to
approve budgets and leases of the MGM Plaza Borrower and to terminate and
replace the MGM Plaza Manager), generally only the MGM Special Member shall
exercise such rights, provided that it consults with and obtains the consent
of the Senior Lender prior to exercising such rights. Pursuant to the Loan
Coordination Agreement, the Senior Lender may also direct the MGM Special
Member to approve leases and annual budgets.
The 57th Street Building Loan
The Loan. The second largest Significant Loan Concentration is a Mortgage
Loan (the "57th Street Building Loan") that represents approximately 5.12% of
the Initial Pool Balance. The 57th Street Building Loan was originated by the
Mortgage Loan Seller on September 15, 1997 and has a principal balance as of
the Cut-off Date of $75,000,000. The 57th Street Building Loan is secured by
a first leasehold mortgage encumbering an office building located in midtown
Manhattan (the "57th Street Property"). The 57th Street Building Loan is also
secured by a $5,000,000 letter of credit issued by Morgan Guaranty Trust
Company of New York, which letter of credit shall be released upon the
satisfaction of certain leasing requirements and may be drawn upon the
occurrence of a default under the 57th Street Building Loan. The 57th Street
Building Loan was made to 135 East 57th Street LLC (the "57th Street
Borrower"), a New York limited liability company. Interest-only payments will
be made on the 57th Street Building Loan until September 1999; thereafter,
principal and interest payments will be made based upon a 30-year
amortization schedule.
Payment and prepayment terms and reserves for Capital Items for the 57th
Street Building Loan are as set forth on Annex A hereto.
The Property. The 57th Street Property is an office building located at
the corner of 57th Street and Lexington Avenue in New York City. The 57th
Street Property has approximately 412,436 leasable square feet and was
completed in 1988. Among the larger tenants leasing space at the 57th Street
Property are ING Bank (85,000 square feet), Boston Consulting Group (37,500
square feet) and Eastridge Capital (19,750 square feet). The 57th Street
Property is ground leased by the 57th Street Borrower pursuant to a ground
lease that expires on December 31, 2103. The annual rent payable under the
ground lease will be adjusted on January 1, 2008, January 1, 2020, January 1,
2045, January 1, 2070 and January 1, 2095. The adjusted rent will be equal to
the greatest of (i) the then current annual rent, (ii) 7% of the value of the
initially demised land and (iii) the product of the then average prime rate
(calculated by taking the average of the prime rate (which rate is the
average of the annual interest rates charged on such date by the 3 largest
commercial banks having an office for the receipt of demand deposits in New
York City having the highest credit rating for loans for a term of not more
than 90 days) on the date which is two years prior to the adjusted rent date
and the prime rate on such adjusted rent date) and the current value of the
initially demised land. Based on the 57th Street Borrower's September 1997
rent roll, the 57th Street Property was approximately 99% occupied at an
approximate average rent per square foot of $41.88.
Property Management. The 57th Street Property is managed by Cohen Brothers
Realty Corporation (the "57th Street Manager"), an affiliate of the 57th
Street Borrower. The loan documents executed in connection with the 57th
Street Building Loan provided that the 57th Street Manager can be terminated
upon the occurrence of (i) any event of default under the 57th Street
Building Loan or (ii) any decrease of 25% or more in net operating income
with respect to the 57th Street Property for any twelve-month period.
S-65
<PAGE>
Lockbox and Reserves. A Hard Lockbox is in place with respect to the 57th
Street Building Loan. All rents are paid directly to a Lockbox Account and
transferred periodically to a Cash Collateral Account. Funds deposited in
such Cash Collateral Account are allocated to a debt service sub-account, a
tax, insurance and ground rent sub-account, a Capital Item sub-account, an
operating sub-account and a remaining cash flow sub-account. Amounts on
deposit in the remaining cash flow sub-account for each month are, provided
no default exists under the 57th Street Building Loan, transferred to an
account to be applied towards the 57th Street Mezzanine Loan, provided,
however, if the related Anticipated Repayment Date has occurred, 75% of all
amounts in the remaining cash flow sub-account, after remitting payments to
the holder of the 57th Street Mezzanine Loan, will be applied to amortize the
57th Street Building Loan.
Mezzanine Debt. The Mortgage Loan Seller made a $25,000,000 Mezzanine Loan
(the "57th Street Mezzanine Loan") which is secured by a pledge by 135 East
57th Street Holdings LLC (the "57th Street Mezzanine Borrower") of its 99%
non-managing equity interest in the 57th Street Borrower as well as all of
the stock in the 57th Street Borrower's managing member. The 57th Street
Mezzanine Loan matures on September 11, 2007. No amortization of the 57th
Street Mezzanine Loan is required until October 11, 1999. From and after
October 11, 1999, the 57th Street Mezzanine Borrower is required to make a
constant monthly payment which will be applied first, to the payment of
interest and second, to the payment of principal. Upon a default under the
57th Street Mezzanine Loan, the holder would be entitled to foreclose upon
the pledged equity. A foreclosure of the pledged equity would not trigger the
"due-on-sale" provisions contained in the 57th Street Building Loan or
otherwise constitute a default under the 57th Street Building Loan. With
respect to such Mezzanine Loan, the Mortgage Loan Seller has entered into a
Mezzanine Intercreditor Agreement. See "Risk Factors --Other Financing." The
Mortgage Loan Seller has committed to sell the 57th Street Mezzanine Loan to
an institutional investor. Such purchaser will have the right to foreclose on
the related equity collateral without the prior consent of the Senior Lender
or the receipt of any rating agency confirmation.
The Paramount Hotel Loan
The Loan. The third largest Significant Loan Concentration is a Mortgage
Loan (the "Paramount Hotel Loan") that represents approximately 5.04% of the
Initial Pool Balance. The Paramount Hotel Loan was originated by the Mortgage
Loan Seller on September 22, 1997 and has a principal balance as of the
Cut-off Date of $73,867,407. The Paramount Hotel Loan is secured by a first
mortgage (the "Paramount Mortgage") encumbering a hotel (the "Paramount
Hotel") located in New York City. The Paramount Hotel Loan was made to
Century Paramount LLC (the "Paramount Hotel Borrower"), a New York limited
liability company owned jointly by Ian Schrager and Philip Pilevsky.
Payment and prepayment terms and reserves for Capital Items for the
Paramount Hotel Loan are as set forth on Annex A.
The Property. The Paramount Hotel is a 590 room, full-service boutique
hotel located in New York City, which was constructed in 1927 and fully
renovated in 1997. Based on the Paramount Hotel Borrower's September 1997
operating statement, the 12-month occupancy for calendar year 1996 for the
Paramount Hotel was 85.3% at an average daily rate of $158.26. The Paramount
Hotel contains a fitness center and three leased-out food and beverage
facilities including Coco Pazzo Teatro, the Whiskey Bar and Dean & DeLuca.
Property Management. The Paramount Hotel is managed by Ian Schrager
Hotels, LLC (the "Paramount Manager"), an affiliate of the Paramount Hotel
Borrower. The loan documents executed in connection with the Paramount Hotel
Loan provide that the Paramount Manager can be terminated if an event of
default occurs under the Paramount Hotel Loan. The loan documents further
provide that if the DSCR falls below 1.20x for any trailing four calendar
quarters, the Paramount Manager's fee will be accrued and held by the lender
and that the Paramount Manager will only receive reimbursement for overhead
expenses until the DSCR of 1.20x is achieved for a full calendar quarter.
Lockbox and Reserves. All revenues of the Paramount Hotel are deposited
directly into a Hard Lockbox. Funds deposited into the Lockbox Account are
allocated to a tax and insurance sub-account,
S-66
<PAGE>
a debt service sub-account, a Capital Item sub-account, an operating
sub-account and to the mezzanine cash collateral account (to cover debt
service on the Paramount Mezzanine Loan, as defined below). After the
foregoing sub-accounts have been funded, provided that no event of default
has occurred and is continuing, all excess property income shall be
transferred to the operating account of the Paramount Hotel Borrower until
the related Anticipated Repayment Date, at which time all such sums shall
instead be applied to amortize the Paramount Hotel Loan.
Mezzanine Debt. There is a $7,000,000 Mezzanine Loan, of which $3,394,635
was advanced at origination, from Mortgage Loan Seller to CP-MZ Associates
LLC ("CP-MZ") which is secured by a pledge of CP-MZ's 99% non-managing equity
interest in the Paramount Hotel Borrower as well as all of the stock in the
Paramount Hotel Borrower's managing member (the "Paramount Mezzanine Loan").
The Paramount Mezzanine Loan matures on October 11, 2005. CP-MZ is obligated
to make the following monthly payments under the Paramount Mezzanine Loan:
(a) a payment of $72,916.67 and, if an event of default has occurred under
the Paramount Mezzanine Loan, a payment equal to all excess cash flow and (b)
a payment of interest at a floating rate. Upon a default under the Paramount
Mezzanine Loan, the holder of such debt would be entitled to foreclose upon
the pledged equity, but only with the consent of the Servicer. A foreclosure
of the pledged equity would not trigger the "due-on-sale" provisions
contained in the Paramount Mortgage or otherwise constitute a default under
the Paramount Hotel Loan. With respect to such Mezzanine Loan, the Mortgage
Loan Seller has entered into a Mezzanine Intercreditor Agreement. See "Risk
Factors -- Other Financing."
The Beverly Connection Loan
The Loan. The fourth largest Significant Loan Concentration is a Mortgage
Loan (the "Beverly Connection Loan") that represents approximately 4.30% of
the Initial Pool Balance. The Beverly Connection Loan was originated by the
Mortgage Loan Seller on August 26, 1997 and has a principal balance as of the
Cut-off Date of $63,000,000. The Beverly Connection Loan is secured by a
first mortgage (the "Beverly Mortgage") encumbering an anchored shopping
center commonly known as Beverly Connection located in Los Angeles,
California (the "Beverly Property"). The Beverly Connection Loan was made to
The Beverly Connection LLC, a special purpose California limited liability
company (the "Beverly Borrower"). Interest only payments are made on the
Beverly Connection Loan until August 1999; thereafter principal and interest
payments are made based upon a 28 year amortization schedule.
Payment and prepayment terms and reserves for Capital Items for the
Beverly Connection Loan are as set forth on Annex A hereto.
The Property. The Beverly Property is an anchored shopping center
comprising approximately 254,302 leasable square feet of retail space located
in Los Angeles, California, which was constructed in 1990. Based on the
Beverly Borrower's August 1997 rent roll, the Beverly Property was
approximately 100% leased at an approximate average rent per square foot of
$27.25. Among the larger tenants leasing space at the Beverly Property are
Ralph's Grocery Co. (approximately 50,000 square feet), General Cinema
(approximately 43,385 square feet), Sports Chalet (approximately 22,327
square feet) and Rexall Drug Store (approximately 20,926 square feet).
Property Management. The Beverly Property is managed by the Trident Group
Inc., an affiliate of the Beverly Borrower. The loan documents executed in
connection with the Beverly Connection Loan provide that any future
management agreement entered into by the Beverly Borrower with a third party
will be subject to the execution by the manager of the form of consent and
agreement with respect to managers then being used by the lender.
Lockbox and Reserves. All revenues of the Beverly Property are deposited
into a Hard Lockbox from which funds are swept monthly to a Cash Collateral
Account to fund a tax and insurance sub-account, a debt service sub-account,
a Capital Item sub-account, a leasing reserve sub-account, an operating
expenses sub-account and a borrower remainder sub-account. Funds swept into
the borrower remainder sub-account are then paid to the Mortgage Loan Seller
as the holder of the Mezzanine Note, until the Mezzanine Note has been paid
in full; thereafter, all excess income will be released to the Beverly
Borrower. After the related Anticipated Repayment Date, all sums which would
otherwise have been allocated to the borrower remainder sub-account will
instead be applied to amortize the Beverly Connection Loan.
S-67
<PAGE>
Mezzanine Debt. There is a $1,500,000 Mezzanine Loan from the Mortgage
Loan Seller to the regular members' of the Beverly Borrower, which loan is
secured by a pledge of all (i) the non-managing member's interest in the
Beverly Borrower and (ii) all of the stock of the managing member of the
Beverly Borrower (the "Beverly Mezzanine Loan"). The Beverly Mezzanine Loan
has a maturity date of September 11, 2004 and bears interest at a floating
rate. Interest payments and minimum monthly payments of principal in the
amount of $17,857.14 are due on the first day of each month under the Beverly
Mezzanine Loan. With respect to such Mezzanine Loan, the Mortgage Loan Seller
has entered into a Mezzanine Intercreditor Agreement. Upon a default under
the Beverly Connection Loan, the holder of such debt would be entitled to
foreclose upon the pledged equity with the consent of the Servicer. A
foreclosure of the pledged equity would not trigger the "due-on-sale"
provisions contained in the Beverly Mortgage or otherwise constitute a
default under the Beverly Connection Loan. See "Risk Factors -- Other
Financing."
The Graoch Associates Loans
The Loans. The fifth largest Significant Loan Concentration is a group of
eight Related Borrower Loans (collectively, the "Graoch Associates Loans"),
which, in the aggregate, represent approximately 3.81% of the Initial Pool
Balance and have an aggregate principal balance as of the Cut-off Date of
$55,803,476. The Mortgage Loans which make up the Graoch Associates Loans
were originated by the Mortgage Loan Seller in October 1997. The Graoch
Associates Loans consist of eight separate loans to five different special
purpose Washington limited partnerships that are affiliates of Graoch
Associates Limited Partnership (each a "Graoch Associates Borrower") and each
is secured by a first mortgage encumbering a property located in Arkansas,
Kentucky, Oklahoma or Washington improved by a multifamily apartment complex
(singularly, a "Graoch Associates Property" and collectively, the "Graoch
Associates Properties"). Except for the Pool Loan which is secured by the
properties more particularly described in clause (f) below, the separate
loans which make up the Graoch Associates Loans are neither
cross-collateralized nor cross-defaulted.
Payment and prepayment terms and reserves for Capital Items for the Graoch
Associates Loans are as set forth on Annex A hereto.
The Properties. The Graoch Associates Loan Properties consists of eleven
properties which secure eight loans. The four properties listed in clause (f)
below secure Loan No. 32:
<TABLE>
<CAPTION>
YEAR BUILT/ # OF
PROPERTY NAME RENOVATED LOCATION UNITS OCCUPANCY VALUE
- ---------------------------------- --------------- ---------------------------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(a) Autumn Run Apts. 1972/NA Louisville, Kentucky 204 85% $ 7,800,000
(b) Casa Del Lago Apts. 1972/NA Lake Jackson, Texas 84 88% $ 1,750,000
(c) Court of Flags Apts. 1990/1992 Kent, Washington 218 99% $14,300,000
(d) Eagles Landing 1990/NA Tacoma, Washington 230 90% $10,750,000
(e) Emerald Point Apts. 1990/NA Lacey, Washington 100 98% $ 4,830,000
(f) Fox Creek--Summary
(1) Fox Creek Apts. 1985/NA Texarkana, Arkansas 160 87% $ 5,200,000
(2) Spanish Trace/Spanish Trails 1971, 1984/1997 Texarkana, Arkansas 229 85% $ 4,250,000
(3) Fox Creek Camden 1985/NA Camden, Arkansas 120 99% $ 2,800,000
(4) Fox Creek Magnolia 1983/NA Magnolia, Arkansas 48 94% $ 1,310,000
(g) Polo Club Apts. 1990/NA University Place, Washington 240 98% $12,530,000
(h) Southern Slope Apts. 1983/NA Tulsa, Oklahoma 142 93% $ 6,400,000
</TABLE>
Property Management. The Graoch Associates Properties are managed by
Pinnacle Realty Management Corporation. The loan documents executed in
connection with the Graoch Associates Loans provide that the property manager
can be terminated with respect to a Graoch Associates Property upon an event
of default under the related Graoch Associates Loan.
S-68
<PAGE>
Lockbox and Reserves. A cash management agreement was executed with
respect to each of the Graoch Associates Loans. Each cash management
agreement provides for a Springing Lockbox that becomes operative upon the
earlier to occur of the occurrence of an event of default or the date that is
one month prior to the related Anticipated Repayment Date. Funds deposited
into the Lockbox Account are allocated to a tax and insurance sub-account, a
required repairs sub-account, a monthly debt service sub-account, a Capital
Item sub-account, an operating expense sub-account, a special tenant
improvement sub-account, and a borrower remainder sub-account. After the
related Anticipated Repayment Date, all sums which would otherwise have been
allocated to the borrower remainder sub-account shall instead be applied to
amortize the relevant Graoch Associates Loans.
The Gift Center Loan
The Loan. The sixth largest Significant Loan Concentration is a Mortgage
Loan (the "Gift Center Loan") that represents approximately 2.93% of the
Initial Pool Balance. The Gift Center Loan was originated by the Mortgage
Loan Seller on November 10, 1997 and has a principal balance as of the
Cut-off Date of $42,969,590. The Gift Center Loan is secured by a first
mortgage encumbering a retail property located at Showplace Square in San
Francisco, California (the "Gift Center Property"). The Gift Center Loan was
made to Buchanan Street Associates, LP, a California limited partnership, and
to Lapin Associates, LP, a California limited partnership (collectively, the
"Gift Center Borrower").
Payment and prepayment terms and reserves for Capital Items for the Gift
Center Loan are set forth on Annex A hereto.
The Property. The Gift Center Property is a 311,144 square foot
multi-tenanted wholesale facility catering to jewelry and gift related
businesses located in San Francisco, California, which was constructed in
1920 and renovated in 1996, and consists of 344 tenant suites which are
operated as wholesale and retail showrooms. Based on the Gift Center
Borrower's October 1997 rent roll, the Gift Center Property was approximately
98% leased at an approximate average rent per square foot of $26.11.
Property Management. The Gift Center Property is managed by the Gift
Center Borrower. The loan documents executed in connection with the Gift
Center Loan provide that the property manager can be terminated upon an event
of default under the Gift Center Loan or if the DSCR for the Gift Center
Property falls below 1.10x.
Lockbox and Reserves. A cash management agreement was executed with
respect to the Gift Center Loan. The cash management agreement provides for a
Springing Lockbox that becomes operative in the event the DSCR for the Gift
Center Property falls below 1.10x for the preceding 12-month period and upon
the earlier to occur of an event of default or the date which is six months
prior to the related Anticipated Repayment Date. Funds deposited into the
Lockbox Account are allocated to a tax and insurance sub-account, a ground
rent sub-account, a debt service sub-account, a Capital Item sub-account and
a reletting sub-account.
The Johnson City/Stone Mountain Loans
The Loans. The seventh largest Significant Loan Concentration is a group
of two Related Borrower Loans (collectively, the "Johnson City/Stone Mountain
Loans"), which, in the aggregate, represent approximately 2.88% of the
Initial Pool Balance and have an aggregate principal balance as of the
Cut-off Date of $42,218,139. The Johnson City/Stone Mountain Loans currently
consists of two separate loans to two different special purpose Georgia
limited liability companies sponsored by the same principals (each a "Johnson
City/Stone Mountain Borrower") and were each originated by the Mortgage Loan
Seller on November 10, 1997. One loan is secured by a $18,250,000 first
mortgage encumbering a property in Johnson City, Tennessee (the "Johnson City
Property"), while the other loan (the "Stone Mountain Loan") is secured by a
$24,000,000 first mortgage encumbering a property located in Stone Mountain,
Georgia (the "Stone Mountain Property" and together with the Johnson City
Property, collectively, the "Johnson City/Stone Mountain Properties"). The
separate loans which make up the Johnson City/Stone Mountain Loans are
neither cross-collateralized nor cross-defaulted.
S-69
<PAGE>
A $3,600,000 letter of credit was issued by Union Bank of Switzerland and
delivered as additional collateral for the Stone Mountain Loan. The Servicer
may draw upon the letter of credit upon the occurrence of an event of default
(in which event the proceeds will be used to reduce the then outstanding
principal balance). The letter of credit agreement executed in connection
with the letter of credit provides that The Johnson City/Stone Mountain
Borrower may, on any payment date from December 1997 through May 1998, prepay
the Stone Mountain Loan without Prepayment Premium or Yield Maintenance
Charge with respect to that portion of such prepayment equal to $1,600,000;
provided, however, that any portion of such prepayment exceeding $1,600,000
shall be subject to a Yield Maintenance Charge. In the event of such a
Required Prepayment, a Yield Protection Payment shall be made. Portions of
the letter of credit will be released upon the satisfaction of certain
conditions, including, achievement of a DSCR of 1.20x for any trailing
twelve-month period.
Payment and prepayment terms and reserves for Capital Items for the
Johnson City/Stone Mountain Loans are as set forth on Annex A hereto.
The Properties. The Johnson City Property is a 246,621 square foot Retail
Property located in Johnson City, Tennessee, which was constructed in April
1997. Among the larger tenants leasing space at the Johnson City Property are
Service Merchandise (50,000 square feet), Stein Mart (36,198 square feet),
Circuit City (27,447 square feet) and Petsmart (26,420 square feet). Based on
the Johnson City/Stone Mountain Borrower's September 1997 rent roll, the
Johnson City Property was approximately 88% leased at an approximate average
rent per square foot of $9.44. The Stone Mountain Property is a 336,663
square foot Retail Property located in Stone Mountain, Georgia, which was
constructed in 1991. Among the larger tenants leasing space at the Stone
Mountain Property are Media Play (47,036 square feet), Sportslife (37,000
square feet), T.J. Maxx (32,000 square feet) and Marshall's (27,000 square
feet). Based on the Johnson City/Stone Mountain Borrower's October 1997 rent
roll, the Stone Mountain Property was approximately 84% leased at an
approximate average rent per square foot of $10.44.
Property Management. The Johnson City/Stone Mountain Properties are
managed by CNM Management Associates. The loan documents executed in
connection with the Johnson City/Stone Mountain Loans provide that the
property manager can be terminated upon an event of default under the Johnson
City/Stone Mountain Loan or if the DSCR for the Johnson City Property or the
Stone Mountain Property falls below 1.23x and 1.20x, respectively.
Lockbox and Reserves. A cash management agreement was executed with
respect to each loan comprising the Johnson City/Stone Mountain Loans. Each
cash management agreement provides that all revenues of the Johnson
City/Stone Mountain Properties are deposited into a Modified Lockbox. Funds
deposited into the Lockbox Account are allocated to a tax and insurance
sub-account, a debt service sub-account, a required repairs sub-account, a
Capital Item reserve sub-account, an operating expense sub-account, a leasing
reserve sub-account and a borrower remainder sub-account. After the related
Anticipated Repayment Date, all sums which would otherwise have been
allocated to the borrower remainder sub-account shall instead be applied to
amortize the Johnson City/Stone Mountain Loans.
The Realmark Loans
The Loans. The eighth largest Significant Loan Concentration is a group of
13 Related Borrower Loans (collectively, the "Realmark Loans"), which, in the
aggregate, represent approximately 2.77% of the Initial Pool Balance. The
Realmark Loans were originated by the Mortgage Loan Seller during the period
from May 1997 through November 1997 and have an aggregate principal balance
as of the Cut-off Date of $40,605,521. The Realmark Loans are 13 separate
loans to 13 different special purpose New York limited liability companies
that are subsidiaries of five public limited partnerships which are
affiliates of Realmark Properties, Inc. or J.M. Jason & Co., Inc. (each, a
"Realmark Borrower"). Each Realmark Borrower has a managing member which is a
New York special purpose corporation. Each Realmark Loan is secured by a
first mortgage (each, a "Realmark Mortgage") encumbering a property located
in Alabama, Florida, Indiana, Kentucky, New York, North Carolina, Ohio,
Pennsylvania, or South Carolina improved by a multifamily apartment facility
or an office/warehouse facility (singularly, a "Realmark
S-70
<PAGE>
Property" and collectively, the "Realmark Properties"). The mortgage
encumbering one of the Realmark Properties located in South Carolina
encumbers the Realmark Borrower's leasehold interest in said Realmark
Property. The Realmark Loans are neither cross-collateralized nor
cross-defaulted.
Payment and prepayment terms and reserves for Capital Items for the
Realmark Loans are as set forth on Annex A hereto.
The Properties. The Realmark Properties consist of the following thirteen
properties:
<TABLE>
<CAPTION>
GROSS
YEAR BUILT/ LEASABLE
PROPERTY NAME RENOVATED LOCATION SQUARE FEET MAJOR TENANTS OCCUPANCY VALUE
- ----------------------------- ------------- ----------------- ------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
RM-Inducon Columbia 1991 West Columbia, 90,910 Premier Graphics 98% $4,100,000
South Carolina Contec
RM-St. Rita's Office Building 1991 Amherst, New York 63,359 Voice Technologies 100% $5,500,000
Group
J.M. Jayson & Co.,
Inc.
RM-Research Triangle 1987 Durham, 114,071 PBM Graphics 100% $7,700,000
North Carolina
YEAR BUILT/ # OF
PROPERTY NAME RENOVATED LOCATION UNITS TYPE OF UNITS OCCUPANCY VALUE
- ----------------------------- ------------- ----------------- ------------- ------------------ ----------- ------------
RM-Beaver Creek 1975 Monaca (Center 80 Apartments 88% $1,800,000
Township),
Pennsylvania
RM-Jackson Park 1970 Seymour, Indiana 102 Apartments 92% $2,800,000
RM-O'Hara Apartments 1973 Greenville, South 100 Apartments 96% $2,700,000
Carolina
RM-Player's Club 1986 Lutz, Florida 144 Apartments 94% $4,150,000
RM-Stonegate Townhomes 1983 Mobile, Alabama 130 Apartments 92% $3,540,000
RM-The Fountains Apartments 1971 Union Township, 215 Apartments 92% $5,700,000
Ohio
RM-The Villa Apartments 1971 Greenville, South 192 Apartments 85% $5,100,000
Carolina
RM-Wayne Estates 1975-79 Huber Heights, 158 Apartments 97% $4,100,000
Ohio
RM-Williamsburg North 1965 Columbus, Indiana 192 Apartments 90% $5,000,000
RM-Camelot East Apartments 1970-71 Louisville, 204 Apartments 96% $6,500,000
Kentucky
</TABLE>
Property Management. The Realmark Properties are managed by Realmark
Corporation, an affiliate of the Realmark Borrowers, pursuant to management
agreements that terminate upon sixty (60) days' written notice given by
either the respective Realmark Borrower or the property manager. The loan
documents executed in connection with the Realmark Loan provide that the
property manager can be terminated with respect to a Realmark Property upon
an event of default under the respective Realmark Loan.
Lockbox and Reserves. A cash management agreement was executed with
respect to each of the Realmark Loans. Each cash management agreement
provides for a Springing Lockbox that becomes operative upon the earlier to
occur of twenty (20) days after the occurrence of an event of default or the
date that is one year prior to the related Anticipated Repayment Date. Under
each cash management agreement, tenants of the Realmark Property may be
required to make all payments due to the Realmark Borrowers directly into a
Lockbox Account established under the related cash management agreement.
Funds deposited into the Lockbox Account are allocated to a tax and insurance
sub-account, a debt service payment sub-account, a Capital Item sub-account,
a required repairs sub-account, and a borrower remainder sub-account. After
the related Anticipated Repayment Date, all sums which would otherwise have
been allocated to the borrower remainder sub-account shall instead be applied
to amortize the applicable Realmark Loan.
S-71
<PAGE>
Mezzanine Debt. The Mortgage Loan Seller has committed (subject to the
satisfaction of certain conditions) to provide up to $1,200,000 of Mezzanine
Loans to affiliates of the Realmark Borrower in connection with such
affiliates' buyout of certain limited partnership interests of certain of the
Realmark Borrowers. Such Mezzanine Loans would be supported by the Excess
Cash Flow from at least three Realmark Properties. In connection with such
Mezzanine Loans, the Mortgage Loan Seller would execute a Mezzanine
Intercreditor Agreement.
The Embassy Suites Loan
The Loan. The ninth largest Significant Loan Concentration is a Mortgage
Loan (the "Embassy Suites Loan") that represents approximately 2.53% of the
Initial Pool Balance. The Embassy Suites Loan was originated by the Mortgage
Loan Seller on November 17, 1997 and has a principal balance as of the
Cut-off Date of $37,100,000. The Embassy Suites Loan is secured by a first
mortgage encumbering a hotel (the "Embassy Suites Hotel") located in
Washington, D.C. The Embassy Suites Loan was made to SES/D.C. Venture, a
District of Columbia general partnership (the "Embassy Suites Borrower").
Payment and prepayment terms and reserves for Capital Items for the
Embassy Suites Loan are as set forth on Annex A.
The Property. The Embassy Suites Hotel is a 318 room, full service hotel
located in Washington, D.C., which was constructed in 1987. Based on the
Embassy Suites Borrowers' December 31, 1996 operating statement, the trailing
12-month occupancy for the period ending August 1, 1997 for the Embassy
Suites Hotel is 76% at an average daily rate of $152.06. The Embassy Suites
Hotel is a nine-story hotel with an indoor swimming pool, fitness center,
central atrium, restaurant, lounge and 4,290 square feet of meeting and
ballroom space.
Property Management. The Embassy Suites Hotel is managed by Promus Hotels,
Inc. (the "Embassy Suites Manager"), an affiliate of the Embassy Suites
Borrower. The loan documents executed in connection with the Embassy Suites
Loan provide that the Embassy Suites Manager can be terminated if an event of
default occurs under the Embassy Suites Loan. Doubletree Corporation is
currently negotiating a merger with the Embassy Suites Manager. The Embassy
Suites Loan documents prohibit a change in management without lender's
consent.
Lockbox and Reserves. A cash management agreement was executed with
respect to the Embassy Suites Loan. The cash management agreement provides
for a Springing Lockbox that becomes operative in the event the DSCR for the
Embassy Suites Hotel falls below 1.15x for the preceding 12 month period or
the earliest to occur of (i) an event of default under the Embassy Suites
Loan, (ii) the date on which the Embassy Suites Manager ceases to manage the
Embassy Suites Hotel or (iii) the related Anticipated Repayment Date. Under
the cash management agreement, a clearing bank will be required to make all
payments in connection with the Embassy Suites Loan directly into a Lockbox
Account, which will be swept on a regular basis to a Cash Collateral Account
and allocated to a tax and insurance sub-account, a debt service sub-account,
a Capital Item reserve sub-account, an operating expense sub-account and a
borrower remainder sub-account. After the related Anticipated Repayment Date,
all Excess Cash Flow will be applied to amortize the Embassy Suites Loan.
The ECC Loans
The Loans. The tenth largest Significant Loan Concentration is a group of
three Related Borrower Loans (collectively, the "ECC Loans"), which, in the
aggregate, represent approximately 2.46% of the Initial Pool Balance and have
an aggregate principal balance as of the Cut-off Date of $36,046,747. Two of
the ECC Loans, with an aggregate principal balance as of the Cut-off Date of
$28,846,747, were originated by the Mortgage Loan Seller on August 29, 1996
and one of the ECC Loans, with a principal balance as of the Cut-off Date of
$7,200,000, was originated by the Mortgage Loan Seller on January 7, 1997.
The ECC Loans are three separate loans to three different special purpose
Oregon limited partnerships and one special purpose Nevada limited
partnership (the Boulder Cascade Property (as hereinafter defined) loan was
made to two special purpose limited partnerships, one Oregon and one Nevada;
each of the four, an "ECC Borrower"). One ECC Loan is secured by an
$18,500,000 first
S-72
<PAGE>
mortgage encumbering a property located in Mesa, Arizona (the "Mesa Regal
Property"), another ECC Loan is secured by a $10,400,000 first mortgage
encumbering a property located in Kissimmee, Florida (the "Sherwood Forest
Property") and the third ECC Loan is secured by a $7,200,000 first mortgage
encumbering a property located in Las Vegas, Nevada (the "Boulder Cascade
Property" and together with the Mesa Regal Property and the Sherwood Forest
Property, collectively, the "ECC Properties"). The separate ECC Loans are
neither cross-collateralized nor cross-defaulted.
Payment and prepayment terms and reserves for Capital Items for the ECC
Loans are as set forth on Annex A hereto.
The Properties. The Mesa Regal Property is a 2,005-pad site recreational
vehicle park situated on 110.47 acres of land in Mesa, Arizona. Based on the
ECC Borrower's September 1997 rent roll, the Mesa Regal Property was
approximately 83% leased at an approximate average rent per leased pad of
$2,278.84 per year. Amenities of the Mesa Regal Property include a full
service travel agency, an on-site cafe, barber shop, beauty salon, post
office, four heated swimming pools and one heated lap pool, one sheltered
whirlpool, two volleyball courts, three lighted tennis courts, twenty-four
lighted shuffleboard courts, an amphitheater/softball field, arts and crafts
rooms and laundry facilities. The Sherwood Forest Property consists of 678
fully developed mobile home sites (both single and double-wide) and 91
recreational vehicle sites on a 150.44 acre site. Based on the ECC Borrower's
June 1997 rent roll, the Sherwood Forest Property was approximately 86%
leased at an approximate average rent per leased pad of $3,550.99/ $2,628.62
per year (mobile home pad/recreational vehicle pad). Amenities of the
Sherwood Forest Property include a 4,212 square foot clubhouse, an 8,106
square foot clubhouse (with 1,504 square feet of covered porch area), three
heated swimming pools, four jacuzzis, two bocci ball courts, two tennis
courts, ten shuffleboard courts and a gazebo. The Boulder Cascade Property is
a 299 space mobile home park situated on 38.83 acres of land. Based on the
ECC Borrower's October 1997 rent roll, the Boulder Cascade Property was
approximately 100% leased at an approximate average rent per leased unit of
$409.46 per month. Amenities of the Boulder Cascade Property include a 6,024
square foot clubhouse/ office (with a billiards room, library, card room,
recreation area with kitchen, restrooms, an indoor jacuzzi and laundry
facilities), a heated swimming pool, jacuzzi and a carwash area.
Property Management. The Mesa Regal Property is managed by Leisure Resorts
of America Inc. The Sherwood Forest Property is managed by the Arnold
Management Company. The Boulder Cascade Property is managed by Fuller and
Company. The loan documents executed in connection with the ECC Loan provide
that the property manager can be terminated upon an event of default under
the ECC Loan or if, with respect to the Mesa Regal Property and the Sherwood
Forest Property, there is an operating shortfall, and with respect to the
Boulder Cascade Property, there is an operating shortfall and such operating
shortfall continues for three months.
Lockbox and Reserves. A cash management agreement was executed with
respect to each loan comprising the ECC Loan. Each cash management agreement
provides that all revenues of the ECC Properties are collected by the
respective property manager and deposited into a Modified Lockbox swept into
a Cash Collateral Account on a regular basis and allocated to a tax and
insurance sub-account, a debt service sub-account, an operations and
maintenance sub-account, an impound costs sub-account, a replacement reserve
sub-account, a curtailment reserve sub-account, a prepaid rent sub-account
(with respect to the Mesa Regal Property Loan only) and a borrower remainder
sub-account. After the related Anticipated Repayment Date all sums which
would otherwise have been allocated to the borrower remainder sub-account
shall instead be applied to amortize the related ECC Loan.
Subordinate Debt. There is a $1,000,000 loan (the "Sherwood Forest Junior
Loan"), from the Mortgage Loan Seller to the ECC Borrower under the Sherwood
Forest Property Loan (the "Sherwood Forest Borrower") which loan is secured
by a second mortgage encumbering the Sherwood Forest Property. Upon a default
under the Sherwood Forest Junior Loan the holder thereof will not be entitled
to accelerate the debt, foreclose its lien or pursue any remedies thereunder
at any time that the ECC Loan secured by the Sherwood Property is
outstanding. The Sherwood Forest Junior Loan is subordinate to the Mortgage
Loan secured by the Sherwood Forest Property Loan. The Sherwood Forest Junior
Loan
S-73
<PAGE>
matures on September 1, 1998. So long as the Mortgage Loan secured by the
Sherwood Forest Property is outstanding, the Mortgage Loan Seller may not
accelerate the Sherwood Forest Junior Loan and may not exercise any remedies
under the Sherwood Forest Junior Loan.
Ellenburg Capital Corporation Reorganization. As of June 1997, Ellenburg
Capital Corporation (the original sponsor of the ECC Borrowers) had a
reported principal net worth of approximately $30,000,000. Although each of
the ECC Borrowers has made all payments due the Mortgage Loan Seller pursuant
to the terms of their respective ECC Loans, shareholder disputes resulted in
an involuntary bankruptcy filing for the partnerships controlled by Ellenburg
Capital Corporation, including all of the ECC Borrowers. The ECC Borrower
with respect to the Mesa Regal Property was dismissed from the bankruptcy
proceeding on December 2, 1997. It is anticipated that the ECC Borrowers with
respect to the Boulder Cascade Property Loan and the Sherwood Forest Property
Loan will be dismissed from their respective bankruptcy proceedings.
Notwithstanding the foregoing, there can be no assurance either that such
bankruptcy proceedings will be dismissed or as to the timing of any such
dismissal. At all times during, and since the dismissal of, the bankruptcy
proceedings, each ECC Borrower has timely made all payments due to the
Mortgage Loan Seller pursuant to its ECC Loan. It is currently anticipated
that the ECC Properties will be sold to Manufactured Housing Communities,
Inc., a publicly traded real estate investment trust (the industry's largest
owner of manufactured housing properties).
The Ramada Suites Loan
The Loan. The eleventh largest Significant Loan Concentration is a
Mortgage Loan (the "Ramada Suites Loan") that represents approximately 2.28%
of the Initial Pool Balance. The Ramada Suites Loan was originated by the
Mortgage Loan Seller on November 7, 1997 and has a principal balance as of
the Cut-off Date of $33,462,179. The Ramada Suites Loan is secured by a first
mortgage encumbering the fee and leasehold interests of a hotel (the "Ramada
Suites Hotel") located in Weehawken, New Jersey. The Ramada Suites Loan was
made to River-PW Hotel Limited Partnership, a New Jersey partnership (the
"Ramada Suites Borrower").
Payment and prepayment terms and reserves for Capital Items for the Ramada
Suites Loan are as set forth on Annex A.
The Property. The Ramada Suites Hotel is a 244 room, all suites, full
service hotel located in the Lincoln Harbor development in Weehawken, New
Jersey. The Ramada Suites Property opened in August 1991. The Ramada Suites
Borrower is planning an expansion whereby an additional 108 suites are
scheduled to be completed in March 1999 (the "Ramada Suites Expansion"). The
Ramada Suites Hotel, part of the Lincoln Harbor development, is a nine-story
hotel with a heated indoor swimming pool and locker room facilities, an
exercise/fitness facility, 3,600 square feet of meeting space and a
restaurant. The Lincoln Harbor development is a mixed use development
adjacent to the Lincoln Tunnel encompassing approximately 1.5 million square
feet of office space, a food court and restaurants, condominiums, retail
shops, a marina and parking facilities. Based on the Ramada Suites Borrower's
December 1996 operating statement, the trailing 12-month occupancy for the
period ending July 31, 1997 for the Ramada Suites Hotel was 88% at an average
daily rate of $121.71. The Ramada Suites Hotel Borrower has a contract with
PaineWebber (which terminates in June 2001) which guarantees 16,060 room
nights per year at the rate of $75. Additionally, PaineWebber has guaranteed
reimbursement to the Ramada Suites Borrower of operating expenses over a base
year amount. Such reimbursement was equivalent to approximately $19.38 per
room per night for the 12-month period ending in August 1997.
Property Management. The Ramada Suites Hotel is managed by Prime
Hospitality Corp. (the "Ramada Suites Manager"), a publicly traded hotel
company listed on the New York Stock Exchange. The loan documents executed in
connection with the Ramada Suites Loan provide that the Ramada Suites Manager
can be terminated if an event of default occurs under the Ramada Suites Loan.
Ramada Suites Expansion. The Ramada Suites Expansion consists of the
addition of a nine-story wing containing 108 rooms (all suites). The Ramada
Suites Expansion is being financed using proceeds from the Ramada Suites Loan
and additional equity contributions by the Ramada Suites Borrower. The Ramada
Suites Borrower delivered to the Mortgage Loan Seller a $6,000,000
irrevocable letter of credit
S-74
<PAGE>
issued by The Chase Manhattan Bank, which letter of credit will be released
upon the satisfaction of certain conditions including the completion of the
Ramada Suites Expansion and the achievement and maintenance of a DSCR of
1.35x for two consecutive quarters and which may be drawn upon if
construction is not completed prior to October 10, 1999 or upon an event of
default. Sums drawn under the letter of credit will be applied towards the
payment of the Ramada Suites Loan with any applicable Yield Maintenance
Charge. Hartz Mountain Industries, Inc., an affiliate of the Ramada Suites
Borrower, executed a guaranty of completion relating to the Ramada Suites
Expansion and the payment of any Yield Maintenance Charge due in connection
with a pay-down of the Ramada Suites Loan resulting from a draw of the letter
of credit.
Lockbox and Reserves. A cash management agreement was executed in
connection with the Ramada Suites Loan. The cash management agreement
provides for a Springing Lockbox that becomes operative in the event the DSCR
for the Ramada Suites Hotel falls below 1.20x for the preceding 12-month
period or the earlier to occur of an event of default or the date that is one
month prior to the Anticipated Repayment Date. Under the cash management
agreement, all payments due to the Ramada Suites Borrower are deposited into
a Lockbox Account which is swept on a regular basis to a Cash Collateral
Account and allocated to a ground lease sub-account, a tax and insurance
sub-account, a debt service sub-account, a Capital Item sub-account, an
operating expense sub-account and a borrower remainder sub-account. After the
related Anticipated Repayment Date, all sums which would otherwise have been
allocated to the borrower remainder sub-account shall instead be applied to
amortize the Ramada Suites Loan.
The Market-Post Tower Loan
The Loan. The twelfth largest Significant Loan Concentration is a Mortgage
Loan (the "Market-Post Tower Loan") that represents approximately 2.18% of
the Initial Pool Balance. The Market-Post Tower Loan was originated by the
Mortgage Loan Seller on July 1, 1997, and has a principal balance as of the
Cut-off Date of $31,935,966. The Market-Post Tower Loan is secured by a first
mortgage encumbering a 15-story, multi-tenant Class A office building located
in San Jose, California (the "Market-Post Tower Property"). The Market-Post
Tower Loan was made to Market-Post Tower, Inc, a California corporation (the
"Market-Post Tower Borrower").
A $1,111,000 reserve fund (the "Lease Extension Fund") was established at
the closing of the Market-Post Tower Loan. Funds in the Lease Extension Fund
may be released upon satisfaction of certain conditions, including extension
of the IRS lease described below and achievement, on or before March 31,
1998, of a DSCR of 1.30x. If the release conditions are not met on or before
March 31, 1998, funds in the Lease Extension Fund shall be applied to
amortize the Market-Post Tower Loan without Prepayment Premium or Yield
Maintenance Charge but a Yield Protection Payment shall be made. If the
conditions are met, monies in the Lease Extension Fund will be released to
the Market-Post Tower Borrower.
Payment and prepayment terms and reserves for Capital Items for the
Market-Post Tower Loan are set forth on Annex A hereto.
The Property. The Market-Post Tower Property is a 289,893 square foot
office building located in downtown San Jose, California, which was
constructed in 1985. Among the larger tenants leasing space at the
Market-Post Tower Property are the Internal Revenue Service (136,133 square
feet) ("IRS"), MFS Datanet (27,583 square feet), and MFS Telecom (16,395
square feet). The leases with MFS Datanet and MFS Telecom terminate in 2002
and 2004, respectively. The IRS lease expired November 30, 1997 but has been
extended for 60 days while the IRS and the Market-Post Tower Borrower
complete lease renewal negotiations. If the IRS lease is extended for a term
of less than 10 years, the Market-Post Tower Borrower will be required to
make additional monthly deposits of $6,000 into the leasing escrow
sub-account. Based on the Market-Post Tower Borrower's November 1997 rent
roll, the Market-Post Tower Property was approximately 98% leased at an
approximate average rent per square foot of $22.97.
Property Management. The Market-Post Tower Property is managed by the
Market-Post Tower Borrower. The loan documents executed in connection with
the Market-Post Tower Loan provide that the
S-75
<PAGE>
property manager may be terminated upon an event of default under the
Market-Post Tower Loan or if the DSCR for the Market-Post Tower Property
falls below 1.15x for any trailing twelve-month period.
Lockbox and Reserves. All revenues of the Market-Post Tower Property are
deposited into a Hard Lockbox. Funds deposited into the Lockbox Account are
allocated to a tax and insurance escrow sub-account, a debt service
sub-account, a Capital Item sub-account and a leasing escrow sub-account and
a borrower remainder sub-account. After the related Anticipated Repayment
Date, all sums which would otherwise have been allocated to the borrower
remainder sub-account shall instead be applied to amortize the Market-Post
Tower Loan.
The 78 Corporate Center Loan
The Loan. The thirteenth largest Significant Loan Concentration is a
Mortgage Loan (the "78 Corporate Center Loan") that represents approximately
2.17% of the Initial Pool Balance. The 78 Corporate Center Loan was
originated by the Mortgage Loan Seller on October 23, 1997 and has a
principal balance as of the Cut-off Date of $31,834,631. The 78 Corporate
Center Loan is secured by a first mortgage encumbering the office building
known as 78 Corporate Center located at 180 Washington Valley Road,
Bedminster, New Jersey. The 78 Corporate Center Loan was made to EM Realty
Associates, L.L.C., a New Jersey limited liability company (the "78 Corporate
Center Borrower"), whose managing member is S/K EM Corp., a New Jersey
corporation.
A payment of $283,333.33 shall be due in connection with the 78 Corporate
Center Loan on the eleventh day of each month after the Closing Date through
and including June 2001, and a payment of $291,666.67 shall be due on the
eleventh day of each month commencing July 2001 through and including July
2006, which sums shall be applied first to the payment of interest and then
to the reduction of principal; provided, however, in the event the
outstanding principal balance of the 78 Corporate Center Loan is reduced as a
result of the application of insurance proceeds to $20,000,000, then these
sums shall be adjusted so that during such period interest shall be paid,
together with a constant principal payment sufficient to amortize the sum of
$876,070.00 on a straight line basis of equal monthly payments over a period
of time equal to the number of months remaining until July 11, 2006. A
payment of interest only on the 78 Corporate Center Loan shall be due on the
eleventh day of each month commencing August 2006 through and including
January 2008; thereafter, the 78 Corporate Center Loan shall require monthly
payments of $140,206.52 to fully amortize the 78 Corporate Center Loan by the
January 11, 2033 maturity date.
Reserves for Capital Items for the 78 Corporate Center Loan are set forth
on Annex A hereto.
The Property. The 78 Corporate Center Property is a 176,682 square foot
office building located on 23.2 acres in Bedminster, New Jersey which was
constructed in 1989. The sole tenant of the 78 Corporate Center Property is
CELLCO, a general partnership between Bell Atlantic and NYNEX, d/b/a Bell
Atlantic Mobile ("BAM"), pursuant to a triple-net lease which expires in June
2006 and is utilized as the corporate headquarters of BAM. The CELLCO lease
may be terminated by the tenant thereunder provided a termination payment
equal to the present value of all base rent installments under the CELLCO
lease discounted at the average yield of U.S. Treasuries having maturities
comparable to the balance of the remaining lease term is made. Upon
expiration or extension of BAM's lease, the 78 Corporate Center Borrower may
be permitted, subject to obtaining written confirmation from each Rating
Agency that such additional financing will not result in a downgrade,
withdrawal or qualification of the then-existing ratings of the Certificates,
to borrow up to $4,000,000, on an unsecured basis, to pay for tenant
improvements and leasing commissions, provided, that (i) the aggregate LTV
Ratio of the 78 Corporate Center Loan, together with such additional borrowed
funds, does not exceed 60% and (ii) the aggregate DSCR of the 78 Corporate
Center Loan, together with such additional borrowed funds, is equal to or
greater than 1.25x.
Property Management. The 78 Corporate Center Property is managed by Jack
Brothers Associates, L.L.C., an affiliate of the 78 Corporate Center
Borrower. The loan documents executed in connection with the 78 Corporate
Center Loan provide that the property manager may be terminated if an event
of default occurs under the 78 Corporate Center Loan.
S-76
<PAGE>
Lockbox and Reserves. During the term of the CELLCO Lease, all revenues
of the 78 Corporate Center Property are deposited into a Hard Lockbox. All
sums deposited into the Lockbox Account are allocated to a tax and insurance
escrow sub-account, a debt service sub-account, a Capital Item sub-account,
an operating expense sub-account, a leasing escrow sub-account and borrower
remainder sub-account. After the termination of the CELLCO Lease no Lockbox
Account is in place until the related Anticipated Repayment Date for the 78
Corporate Center Loan, at which time the interest rate will not be increased
(see "--Certain Terms and Conditions of the Mortgage Loans -- Excess
Interest" herein) but 85% of the sums which would otherwise have been
allocated to the borrower remainder sub-account shall instead be applied to
amortize the 78 Corporate Center Loan.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans on a loan-by-loan basis, see Annex A hereto.
Due Dates. The Mortgage Loans provide for scheduled payments of principal
and interest to be due on various days (each, a "Due Date") of each month.
With respect to all but 35 Mortgage Loans (which collectively represent 13.7%
of the Initial Pool Balance), the 11th day of each month and, in the case of
such other Mortgage Loans, various days from the first day through the 10th
day of each month. Except for Loan No. 112, which has a five-day grace period
for payment defaults, no Mortgage Loan has a grace period for payment
defaults that extends beyond the related Determination Date.
Mortgage Rates; Calculations of Interest. Mortgage Loans representing
11.0% of the Initial Pool Balance accrue interest on the basis of a 360-day
year consisting of twelve 30-day months (a "30/360" basis). The balance of
the Mortgage Loans accrue interest on the basis of the actual number of days
elapsed in a 360-day year (an "Actual/360" basis). Each of the Mortgage Loans
accrues interest at the Mortgage Rate, which is fixed for the entire
remaining term of such Mortgage Loan, except as described below under
"--Excess Interest", most of the Mortgage Loans accrue interest at a higher
rate after their respective Anticipated Repayment Dates. Each Mortgage Loan
(other than Credit Lease Loans) generally requires the related Borrower to
make a constant monthly payment of principal and interest (each, a "Monthly
Payment") that is calculated based on the related Mortgage Rate, the
amortization schedule for such Mortgage Loan and the initial principal
balance thereof and assumes that such Mortgage Loan accrues interest on a
30/360 basis. As used herein, the term "Mortgage Rate" does not include the
Revised Rate. Each Credit Lease Loan generally provides for the payment of
principal and interest based on a specified schedule set forth in the related
Mortgage Note, which may include periodic increases in monthly payments.
Loan No. 67 accrues interest at the Mortgage Rate set forth on Annex A but
the related borrower is initially only required to make current payments at a
rate per annum equal to 7.547%. Any interest not paid currently will
"negatively amortize," resulting in the creation of Mortgage Deferred
Interest. See "Description of the Offered Certificates -- Subordination;
Allocation of Collateral Support Deficits and Certificate Deferred Interest"
herein.
Excess Interest. One hundred thirty-nine of the Mortgage Loans,
representing 86.05% of the Initial Pool Balance, bear interest at their
respective Mortgage Rates until an Anticipated Repayment Date. Commencing on
the respective Anticipated Repayment Date each such Mortgage Loan generally
will bear interest at a fixed rate (the "Revised Rate") per annum equal to
the Mortgage Rate plus a specified percentage (generally, no more than 2%, so
long as the Mortgage Loan is included in the Trust Fund). Until the principal
balance of each such Mortgage Loan has been reduced to zero, such Mortgage
Loan will only be required to pay interest at the Mortgage Rate and the
interest accrued at the excess of the related Revised Rate over the related
Mortgage Rate will be deferred (such accrued and deferred interest and
interest thereon, if any, is "Excess Interest"). Excess Interest so accrued
will, except where limited by applicable law, not be added to the principal
balance of the related Mortgage Loan but will accrue interest at the Revised
Rate. Prior to the Anticipated Repayment Date, borrowers under ARD Loans
generally have entered into, or will be required to enter into, a lockbox
agreement whereby all revenue will be deposited directly into a Lockbox
Account controlled by the Servicer. From and after the Anticipated Repayment
Date, in addition to paying interest (at the Mortgage Rate) and principal
(based on the
S-77
<PAGE>
amortization schedule), the related borrower generally will be required to
apply all monthly cash flow from the related Mortgaged Property to pay the
following amounts in the following order of priority: (i) required payments
to the tax and insurance escrow fund and any ground lease escrow fund, (ii)
payment of monthly debt service, (iii) payments to any other required escrow
funds, (iv) payment of operating expenses pursuant to the terms of an annual
budget approved by the Servicer, (v) payment of approved extraordinary
operating expenses or capital expenses not set forth in the approved annual
budget or allotted for in any escrow fund, (vi) principal on the Mortgage
Loan until such principal is paid in full and (vii) to Excess Interest. The
cash flow from the Mortgaged Property securing an ARD Loan after payments of
items (i) through (v) above is referred to herein as "Excess Cash Flow." As
described below, each ARD Loan generally provides that the related borrower
is prohibited from prepaying the Mortgage Loan until one to six months prior
to the Anticipated Repayment Date but, upon the commencement of such period,
may prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The Anticipated Repayment Date for each ARD Loan is listed in Annex
A.
The holder of 100% of the Percentage Interests in the Class LR
Certificates will have the option for up to two months after the Anticipated
Repayment Date for any ARD Loan to purchase such ARD Loan at a price equal to
its outstanding principal balance plus accrued and unpaid interest and
unreimbursed Advances with interest thereon. As a condition to such purchase,
such holders will be required to deliver (i) an opinion of counsel to the
effect that such purchase would not result in a gain which would be subject
to the tax on net income derived from prohibited transactions imposed by Code
Section 860F(a)(1) or otherwise result in the imposition of any other tax on
the Lower-Tier REMIC or Upper-Tier REMIC under the REMIC provisions of the
Code or (ii) an accountant's certification to the effect that such purchase
would not result in the realization of any net income to the Lower-Tier REMIC
or Upper-Tier REMIC.
Amortization of Principal. As set forth in the following table, certain
Mortgage Loans (the "Balloon Loans") provide for monthly payments of
principal based on amortization schedules at least 180 months longer than
their original terms thereby leaving substantial principal amounts due and
payable (each such payment, a "Balloon Payment") on their respective maturity
dates, unless previously prepaid. The remaining Mortgage Loans have remaining
amortization terms that are generally the same as their respective remaining
terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL NUMBER OF
POOL MORTGAGE
TYPE OF LOAN BALANCE (1) LOANS
- ---------------------------------------------- ----------- -----------
<S> <C> <C>
ARD Loans ..................................... 86.05% 139
Fully Amortizing Loans (other than ARD Loans) 12.45% 44
Balloon Mortgage Loans ........................ 1.50% 2
----------- -----------
TOTAL ....................................... 100.00% 185
=========== ===========
</TABLE>
Prepayment Provisions. Each Mortgage Loan restricts voluntary prepayments
in one or more of the following ways: (i) by prohibiting any prepayments for
a specified period of time after the date of origination of such Mortgage
Loan (a "Lockout Period"), (ii) by requiring that any principal prepayment
made during a specified period of time after the date of origination of such
Mortgage Loan or, in the case of a Mortgage Loan also subject to a Lockout
Period, after the date of expiration of such Lockout Period (a "Yield
Maintenance Period") be accompanied by a Yield Maintenance Charge (as defined
below) and (iii) by imposing fees or premiums generally equal to a percentage
of the then outstanding principal balance of such Mortgage Loan ("Prepayment
Premiums") in connection with full or partial principal prepayments for a
specified period of time after the expiration of the related Yield
Maintenance Period or, in the case of Mortgage Loans not subject to a Yield
Maintenance Period, the related Lockout Period (in either case, a "Prepayment
Premium Period"). The Mortgage Loans generally permit prepayments to be made
only on a Due Date. One hundred sixty-seven of the Mortgage Loans,
representing approximately 74.82% of the Initial Pool Balance, specify a
period of time (generally three to six months) prior to the maturity date or
Anticipated Repayment Date, as applicable, of such Mortgage Notes during
S-78
<PAGE>
which there are no restrictions on voluntary prepayments, and the remaining
Mortgage Notes, representing approximately 25.18% of the Initial Pool
Balance, restrict voluntary prepayments prior to the maturity date or
Anticipated Repayment Date, as applicable. For the purposes of this
Prospectus Supplement and the statistical information presented herein, the
entire principal balance of each Additional Collateral Loan is deemed to be
subject to a Lockout Period for the related "Remaining Lockout" period set
forth on Annex A hereto, notwithstanding the fact that Required Prepayments
could occur under such loans during such Lockout Period and that such
prepayments would not be accompanied by payment of a Yield Maintenance Charge
or Prepayment Premium. See "Risks Factors -- The Offered Certificates --
Special Prepayment and Yield Considerations" herein.
The "Yield Maintenance Charge" for any Mortgage Loan providing for such a
charge will generally be equal to the greater of (a) a specified Prepayment
Premium and (b) the present value, as of the date of such prepayment, of the
remaining scheduled payments of principal and interest on the entire Mortgage
Loan (including any Balloon Payment) determined by discounting such payments
at the Yield Rate, less the amount prepaid.
The "Yield Rate" is generally defined as a rate equal to a per annum rate
calculated by the linear interpolation of the yields, as reported in "Federal
Reserve Statistical Release H.15 -- Selected Interest Rates" under the
heading U.S. Government Securities/Treasury constant maturities for the week
ending prior to the date of the relevant prepayment of any Mortgage Loan, of
U.S. Treasury constant maturities with maturity dates (one longer, one
shorter) most nearly approximating the maturity date of the Mortgage Loan
being prepaid; plus, for certain Mortgage Loans, a "spread". Generally, if
Federal Reserve Statistical Release H.15 -- Selected Interest Rates is no
longer published, the Servicer, on behalf of the Trustee, shall select a
comparable publication to determine the Yield Rate with respect to Mortgage
Loans.
The following table sets forth for the Distribution Date in each indicated
month the percentage of the aggregate Stated Principal Balance of all
Mortgage Loans expected to be outstanding (after giving effect to scheduled
principal payments for the Due Date relating to such Distribution Date) with
respect to which (i) a Lockout Period is in effect, (ii) a prepayment must be
accompanied by (A) a Yield Maintenance Charge, (B) a prepayment penalty equal
to the greater of a Yield Maintenance Charge ("YM" on such table) or a
Prepayment Premium ("Premium" on such table) (the percentage used in
calculating which Prepayment Premium is also set forth in such table) or (C)
a Prepayment Premium (the percentage used in calculating which Prepayment
Premium is also set forth in such table) or (iii) no Lockout Period, Yield
Maintenance Period or Prepayment Premium Period is applicable ("Open" on such
table). The following table was prepared on the basis of the Modeling
Assumptions and assumes a 0% CPR. See "Prepayment and Yield Considerations --
Modeling Assumptions" herein.
S-79
<PAGE>
CALL PROTECTION ANALYSIS
<TABLE>
<CAPTION>
TYPE OF CALL PROTECTION DEC-97 DEC-98 DEC-99 DEC-00 DEC-01
- ----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Lockout Period* .............. 100% 100% 100% 100% 89%
Greater of YM and 3% Premium . 0% 0% 0% 0% 1%
Greater of YM and 2% Premium . 0% 0% 0% 0% 0%
Greater of YM and 1% Premium . 0% 0% 0% 0% 5%
Yield Maintenance Charge ..... 0% 0% 0% 0% 0%
5% Premium ................... 0% 0% 0% 0% 5%
4% Premium ................... 0% 0% 0% 0% 0%
3% Premium ................... 0% 0% 0% 0% 0%
2% Premium ................... 0% 0% 0% 0% 0%
1% Premium ................... 0% 0% 0% 0% 0%
Open ......................... 0% 0% 0% 0% 0%
- ----------------------------- ---------- ---------- ---------- ---------- ----------
Total ........................ 100% 100% 100% 100% 100%
- ----------------------------- ---------- ---------- ---------- ---------- ----------
Mortgage Pool Balance (000s) . $1,465,990 $1,451,840 $1,435,855 $1,417,896 $1,397,841
% of Cut-off Date Balance .... 100% 99.0% 97.9% 96.7% 95.4%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TYPE OF CALL PROTECTION DEC-02 DEC-03 DEC-04 DEC-05 DEC-06 DEC-07
- ----------------------------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Lockout Period* .............. 89% 88% 87% 86% 81% 94%
Greater of YM and 3% Premium . 1% 0% 0% 0% 0% 0%
Greater of YM and 2% Premium . 0% 1% 1% 0% 0% 0%
Greater of YM and 1% Premium . 5% 5% 6% 8% 7% 0%
Yield Maintenance Charge ..... 0% 0% 0% 0% 0% 0%
5% Premium ................... 0% 0% 0% 0% 0% 6%
4% Premium ................... 5% 0% 0% 0% 0% 0%
3% Premium ................... 0% 5% 0% 0% 0% 0%
2% Premium ................... 0% 0% 6% 6% 0% 0%
1% Premium ................... 0% 0% 0% 0% 6% 0%
Open ......................... 0% 1% 0% 1% 6% 0%
- ----------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total ........................ 100% 100% 100% 100% 100% 100%
- ----------------------------- ---------- ---------- ---------- ---------- ---------- --------
Mortgage Pool Balance (000s) . $1,375,960 $1,324,836 $1,154,821 $1,111,305 $1,066,065 $228,550
% of Cut-off Date Balance .... 93.9% 90.4% 78.8% 75.8% 72.7% 15.6%
</TABLE>
- ------------
* For the purposes of this Prospectus Supplement and the statistical
information presented herein, the entire principal balance of each
Additional Collateral Loan is deemed to be subject to a Lockout Period
for the related "Remaining Lockout" period set forth on Annex A hereto,
notwithstanding the fact that Required Prepayments could occur under such
loans during such Lockout Period. Any such prepayment will be accompanied
by a Yield Protection Payment. See "Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage Loans -- Additional
Collateral Loans."
S-80
<PAGE>
Prepayment Premiums and Yield Maintenance Charges are distributable as
described herein under "Description of the Offered Certificates -- Allocation
of Prepayment Premiums and Yield Maintenance Charges."
Unless a Mortgage Loan is relatively near its stated maturity date or
unless the sale price or the amount of the refinancing of the related
Mortgaged Property is considerably higher than the current outstanding
principal balance of such Mortgage Loan (due to an increase in the value of
the Mortgaged Property or otherwise), the Yield Maintenance Charge or
Prepayment Premium may, even in a relatively low interest rate environment,
offset entirely or render insignificant any economic benefit to be received
by the borrower upon a refinancing or sale of the Mortgaged Property. The
Yield Maintenance Charge or Prepayment Premium provision of a Mortgage Loan
creates an economic disincentive for the borrower to prepay such Mortgage
Loan voluntarily and, accordingly, the related borrower may elect not to
prepay such Mortgage Loan. However, there can be no assurance that the
imposition of a Yield Maintenance Charge or Prepayment Premium will provide a
sufficient disincentive to prevent a voluntary principal prepayment.
Furthermore, certain state laws limit the amounts that a lender may collect
from a borrower as an additional charge in connection with the prepayment of
a mortgage loan. Even if a borrower does elect to pay a Yield Maintenance
Charge or Prepayment Premium, the Pooling and Servicing Agreement provides
that amounts received from borrowers will be applied to payments of principal
and interest prior to being distributed as Yield Maintenance Charges or
Prepayment Premiums.
Several Mortgage Loans provide that in the event of an involuntary
prepayment made after an event of default has occurred, a Yield Maintenance
Charge or Prepayment Premium will be due. The enforceability, under the laws
of a number of states, of provisions providing for payments comparable to the
Prepayment Premiums and/or Yield Maintenance Charges upon an involuntary
prepayment is unclear. No assurance can be given that, at the time a
Prepayment Premium or a Yield Maintenance Charge is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
pay such Prepayment Premium or Yield Maintenance Charge will be enforceable
under applicable state law. See "Certain Legal Aspects of the Mortgage Loans
- -- Enforceability of Certain Provisions -- Prepayment Provisions" in the
Prospectus.
Neither the Depositor nor the Mortgage Loan Seller makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium or Yield Maintenance Charge, or
of the collectability of any Prepayment Premium or Yield Maintenance Charge.
See "Risk Factors -- The Offered Certificates -- Special Prepayment and Yield
Considerations" herein.
Casualty and Condemnation. The Mortgage Loans generally provide that in
the event of a condemnation or casualty the borrower shall restore the
related Mortgaged Property and the mortgagee may apply the condemnation award
or insurance proceeds to the repayment of debt, which, in the case of
substantially all of the Mortgage Loans, will not require payment of any
Prepayment Premium or Yield Maintenance Charge. In the case of a majority of
the Mortgage Loans, if the award or loss is less than a specified amount or a
specified percentage of the original principal balance of the Mortgage Loan
or affects less than a specified percentage of Mortgaged Property and if in
the reasonable judgment of the mortgagee (i) the Mortgaged Property can be
restored within 12 to 18 months and at least six months prior to the maturity
(or, in the case of an ARD Loan, the related Anticipated Repayment Date) of
the related Mortgage Loan to a property no less valuable or useful than it
was prior to the condemnation or casualty, (ii) after a restoration the
Mortgaged Property would adequately secure the outstanding balance of the
Mortgage Note and (iii) no event of default under such Mortgage Loan has
occurred or is continuing, the proceeds or award may be applied by the
borrower to the costs of repairing or replacing the Mortgaged Property.
A limited number of Mortgage Loans provide that if casualty or
condemnation proceeds are above a specified amount, the borrower will be
permitted to supplement such proceeds with an amount sufficient to prepay the
entire principal balance of the Mortgage Loan. Certain Mortgage Loans may
provide that, in the event of a partial prepayment resulting from the
occurrence of a casualty or condemnation, the constant Monthly Payment may be
reduced. In such event, no Prepayment Premium or Yield Maintenance Charge
would be required to be paid.
S-81
<PAGE>
Defeasance. Based on the Initial Pool Balance, 84.8% of the Mortgage
Loans permit the applicable borrower at any time after a specified period
(the "Defeasance Lockout Period"), which is generally two years from the
Closing Date, provided no event of default exists, to obtain a release of a
Mortgaged Property from the lien of the related Mortgage (a "Defeasance
Option"), provided that, among other conditions, the borrower (a) pays on any
Due Date (the "Release Date") (i) all interest accrued and unpaid on the
principal balance of the Mortgage Note to and including the Release Date,
(ii) all other sums, excluding scheduled interest or principal payments, due
under the Mortgage Loan, (iii) an amount (the "Collateral Substitution
Deposit") equal to the sum of (x) the remaining principal amount of the
Mortgage Loan or, if applicable, 125% of the principal balance of the related
Mortgage Loan (for Crossed Loans) or 125% of the Allocated Loan Amount of the
related Mortgaged Property (for Pool Loans) sought to be released, (y) the
amount, if any, which, when added to such amount, will be sufficient to
purchase direct non-callable obligations of the United States of America
providing payments (1) on or prior to, but as close as possible to, all
successive scheduled payment dates from the Release Date to the related
maturity date, assuming, in the case of an ARD Loan, that such Mortgage Loan
prepays on the related Anticipated Repayment Date and (2) in amounts equal to
the scheduled payments due on such dates under the Mortgage Loan, and (z) any
costs and expenses incurred in connection with the purchase of such U.S.
government obligations and (b) delivers a security agreement granting the
Trust Fund a first priority lien on the Collateral Substitution Deposit and
the U.S. government obligations purchased with the Collateral Substitution
Deposit and an opinion of counsel to such effect. The Servicer will be
responsible for purchasing the U.S. government obligations on behalf of the
borrower at the borrower's expense. Any amount in excess of the amount
necessary to purchase such U.S. government obligations will be returned to
the borrower. Simultaneously with such actions, the related Mortgaged
Property will be released from the lien of the Mortgage Loan and the pledged
U.S. government obligations (together with any Mortgaged Property not
released, in the case of a partial defeasance) will be substituted as the
collateral securing the Mortgage Loan or remaining Crossed Loans, as
applicable.
In certain of the Mortgage Loans which contain a Defeasance Option, a
successor borrower established or designated by the Mortgage Loan Seller will
assume all of the defeased obligations of a borrower exercising a Defeasance
Option under a Mortgage Loan and the borrower will be relieved of all of the
defeased obligations thereunder. If a Mortgage Loan is partially defeased,
the related Mortgage Note will be split and only the defeased portion of the
borrower's obligations will be transferred to the successor borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors -- The Offered
Certificates -- Special Prepayment and Yield Considerations" herein.
Property Releases. Crossed Loans and Pool Loans representing 3.26% of the
Initial Pool Balance permit the applicable borrower at any time after the
related Defeasance Lockout Period, and provided no event of default exists
under the related Mortgage Loan, to obtain a release of a Mortgaged Property
from the lien of the related Mortgage by exercising a Defeasance Option,
provided that, among other conditions, the related borrower defeases 125% of
the Allocated Loan Amount, for Pool Loans, or 125% of the Mortgage Loan
principal balance, for Crossed Loans. The Pool Loans and Crossed Loans
generally require that (i) prior to the release of a related Mortgaged
Property, 125% of the Allocated Loan Amount for such Mortgaged Property be
defeased and (ii) that the DSCR with respect to the remaining Mortgaged
Properties after the defeasance be no less than the greater of (x) a
specified DSCR (generally, the DSCR at origination) and (y) the DSCR
immediately prior to such defeasance.
Lockboxes. The Mortgage Loans identified on Annex A hereto as having a
"Hard," "Modified" or "Springing Lockbox" generally provide that all rents,
credit card receipts, accounts receivables payments and other income derived
from the related Mortgaged Properties will be (i) paid directly into a
Lockbox Account controlled by the Servicer (a "Hard Lockbox"), (ii) paid to
the manager of borrower, which will deposit all sums collected into a Lockbox
Account on a regular basis (a "Modified Lockbox") or (iii) collected by the
borrower until such time (if any) as a triggering event (such as the failure
to pay the related Mortgage Loan in full on the related Anticipated Repayment
Date or a substantial decline in net operating income) occurs, at which time
all rents derived from the related Mortgaged Property shall be
S-82
<PAGE>
deposited into a Lockbox Account (a "Springing Lockbox"). For any Hard
Lockbox, income deposited directly into the related Lockbox Account may not
include amounts paid in cash which are paid directly to the related property
manager (notwithstanding requirements to the contrary) or paid
"over-the-counter" (such as at a Hospitality Property). Mortgage Loans whose
terms call for the establishment of a Lockbox Account require that amounts
paid to the manager of the related Mortgaged Properties or "over-the-counter"
will be deposited into a Lockbox Account on a regular basis. Lockbox Accounts
will not be assets of the Trust Fund. Overall, the Mortgage Loans provide for
Lockbox Accounts as follows:
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF LOCKBOX: POOL BALANCE MORTGAGE LOANS
- ------------------ -------------- --------------
<S> <C> <C>
Hard Lockbox ...... 52.5% 64
Modified Lockbox . 24.9 65
Springing Lockbox 21.5 55
None .............. 1.1 1
-------------- --------------
TOTAL ............. 100.0% 185
============== ==============
</TABLE>
Escrows. A majority of the Mortgage Loans by Initial Pool Balance provide
for monthly escrows to cover property taxes and insurance premiums on the
Mortgaged Properties. Certain of the Mortgage Loans secured by leasehold
interests also provide for escrows to make ground lease payments. Certain
Mortgage Loans require the monthly funding of escrows for Capital Items,
tenant improvement and leasing commission expenses and replacement of
furniture, fixtures and equipment. Certain Mortgage Loans also required the
funding of reserves at the time of origination for deferred maintenance and
environmental remediation. See "--Underwriting Standards" above.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the related borrower sells or otherwise transfers or
encumbers the related Mortgaged Property without the consent of the
mortgagee. Subject to the limitations described herein, the Special Servicer
will determine, in a manner consistent with the Servicing Standard, whether
to exercise any right the mortgagee may have under any such clause to
accelerate payment of the related Mortgage Loan upon, or to withhold its
consent to, any transfer or further encumbrance of the related Mortgaged
Property. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee,
which is generally equal to one percent of the then unpaid principal balance
of the applicable Mortgage Note, in addition to the payment of all costs and
expenses incurred in connection with such assumption. Certain of the
Mortgages provide that such consent may not be unreasonably withheld provided
that (i) no event of default has occurred under the related Mortgage Loan,
(ii) the proposed transferee is creditworthy and has sufficient experience in
the ownership and management of properties similar to the Mortgaged Property,
(iii) the Rating Agencies have confirmed in writing that such transfer will
not result in a qualification, reduction or withdrawal of the then-current
rating of the Certificates, (iv) the transferee has executed and delivered an
assumption agreement evidencing its agreement to abide by the terms of the
Mortgage Loan together with legal opinions and title insurance endorsements
and (v) the assumption fee has been received (which assumption fee will be
paid to the Servicer and the Special Servicer (or, in the case of the ECC
Loans, will be paid to the Mortgage Loan Seller), as provided in the Pooling
and Servicing Agreement, and will not be paid to the Certificateholders). See
"Certain Legal Aspects of Mortgage Loans -- Secondary Financing;
Due-on-Encumbrance Provisions" in the Prospectus and "Risk Factors -- The
Mortgage Loans -- Exercise of Remedies"; "The Pooling and Servicing Agreement
- -- Enforcement of Due-on-Sale and Due-on-Encumbrance Clauses" herein. The
Depositor makes no representation as to the enforceability of any due-on-sale
or due-on-encumbrance provision in any Mortgage Loan.
Mortgage Provisions Relating to Special Servicer's Right to Terminate
Management Agreements. Certain of the Mortgage Loans permit the Special
Servicer to cause the related borrowers to terminate the related management
agreements upon the occurrence of certain events. Generally, each Mortgage
Loan
S-83
<PAGE>
with a Cut-off Date Principal Balance in excess of $20,000,000 and certain
other Mortgage Loans provide that if the Debt Service Coverage Ratio for such
Mortgage Loan falls below a certain level, the Special Servicer will have the
right to cause the termination of the related management agreement and
replace the manager with a manager acceptable to the Special Servicer. The
Mortgage Loans generally allow the Special Servicer to terminate the related
management agreements upon the occurrence of certain events of default under
the related loan agreements or mortgage documents. In addition, the Special
Servicer is generally permitted to cause the termination of a management
agreement if the manager breaches certain provisions of the management
agreement which would permit the termination of such agreement thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage
Loans. Eleven of the Mortgage Loans (the "Pool Loans") with Cut-off Date
Principal Balances ranging from $1,149,236 to $15,471,333 and representing
5.19% of the Initial Pool Balance are secured by more than one Mortgaged
Property. Ten of the Mortgage Loans (the "Crossed Loans"), with Cut-off Date
Principal Balances ranging from $545,003 to $7,589,503, comprise 2.20% of the
Initial Pool Balance and are cross-defaulted and cross-collateralized with
other Mortgage Loans. Because certain states require the payment of a
mortgage recording or documentary stamp tax based upon the principal amount
of debt secured by a mortgage, the Mortgages recorded with respect to certain
Crossed Loans or Pool Loans with properties in such states may secure only a
multiple (generally 150%) of the applicable initial principal balance of the
applicable Mortgage Loan (for Crossed Loans) or a multiple (generally 150%)
of the Allocated Loan Amount of such Mortgaged Property (for Pool Loans)
rather than the entire initial principal balance of the related Mortgage
Note. See "Risk Factors -- The Mortgage Loans -- Limitations on
Enforceability of Cross-Collateralization" herein.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy
in a minimum amount equal to the lesser of (i) the principal balance of the
related Mortgage Loan and (ii) 100% of the full replacement cost of the
improvements and equipment without deduction for physical depreciation, or in
an amount satisfying other similar standards and by a flood insurance policy
if any part of the Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as an area having special flood hazards
and for which flood insurance has been made available under the National
Flood Insurance Program in an amount at least equal to the outstanding
principal amount of the Mortgage Loan (or with respect to certain Pool Loans,
the full insurable value of the related Mortgaged Property) or the maximum
limit of coverage available, whichever is less, or in an amount satisfying
other similar standards. With respect to Mortgaged Properties located in
earthquake risk areas, certain of the related Mortgaged Properties are
insured by earthquake insurance, and certain of such insured Mortgaged
Properties may be insured in amounts less than the outstanding principal
balance of such Mortgage Loans. With respect to Mortgaged Properties located
in areas having special hurricane hazards, certain of the related Mortgaged
Properties are insured by hurricane insurance in amounts less than the
outstanding principal balance of such Mortgage Loans. Additional types of
insurance, including earthquake insurance, may be required. The hazard
insurance policy is required to cover loss or damage by fire and lightning or
other risks and hazards covered by a standard extended coverage insurance
policy including, but not limited to, riot and civil commotion, vandalism,
malicious mischief, burglary and theft.
The Mortgage Loans also generally require that the related borrower obtain
and maintain during the entire term of the Mortgage Loan (i) comprehensive
public liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence as specified in the related Mortgage, (ii) rent loss and/or
business interruption insurance in an amount generally equal to the greater
of (x) estimated annual (or a specified longer period) gross revenues from
the operations of the Mortgaged Property and (y) projected annual (or a
specified longer period) operating expense (including debt service) for the
maintenance and operation of the Mortgaged Property, or in an amount
satisfying other similar standards, (iii) insurance against loss or damage
from leakage of sprinkler systems and explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment, and
pressure vessels, (iv) worker's compensation insurance, (v) during any period
of repair or restoration, builders "all risk" insurance, and (vi) such other
insurance as may from time to time be reasonably required by the mortgagee in
order to protect its interests.
S-84
<PAGE>
Credit Lease Loans. Each Credit Lease (other than the Credit Lease with
respect to Loan No. 36) has a primary lease term (the "Primary Term") that
expires contemporaneously with or after the scheduled final maturity date of
the related Credit Lease Loan. The Credit Lease Loans are scheduled to be
fully repaid from Monthly Rental Payments made over the Primary Term of the
related Credit Lease. Certain of the Credit Leases give the Tenant the right
to extend the term thereof by one or more renewal periods after the end of
the related Primary Term. Each borrower under a Credit Lease Loan is a
single-purpose, bankruptcy-remote entity.
The amount of the Monthly Rental Payments payable by each Tenant is equal
to or greater than the scheduled payment of all principal, interest and other
amounts due each month on the related Credit Lease Loan.
Each Credit Lease generally provides that the related Tenant must pay all
real property taxes and assessments levied or assessed against the related
Credit Lease Property, and except as discussed below in certain of the Double
Net Leases, all charges for utility services, insurance and other operating
expenses incurred in connection with the operation of such Credit Lease
Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant
or agreement of the related Credit Lease (a "Credit Lease Default"), then the
Servicer or Special Servicer on behalf of the Trust may exercise rights under
the related Credit Lease Assignment to require the Mortgagor either (i) to
terminate such Credit Lease or (ii) not to terminate such Credit Lease and
exercise any of its rights thereunder. A default under a Credit Lease will
constitute a default under the related Credit Lease Loan.
While each Credit Lease requires the Tenant to fulfill its payment and
maintenance obligations during the term of the Credit Lease, in some cases
the Tenant has not covenanted to operate the related Credit Lease Property
for the term of the Credit Lease, and the Tenant may at any time cease actual
operations at the Credit Lease Property, but it remains obligated to continue
to meet all of its obligations under the Credit Lease. Garden Ridge L.P., the
tenant of the Credit Lease Property which secures Loan No. 36, has the right
to terminate its Credit Lease approximately four years prior to the full
amortization of the related Credit Lease Loan.
In addition, several of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make such
alterations and construct additional buildings or improvements on the Credit
Lease Property as the Tenant may deem necessary or desirable, and the Tenant
may demolish any part of a building, provided that the Tenant restores the
building to a structure whose value is equal to or greater than that of the
original building. Such actions, if undertaken by the Tenant, will not affect
the Tenant's obligations under the Credit Lease.
Lease termination rights and rent abatement rights, if any, in the Credit
Leases may be divided into three categories: (i) termination and abatement
rights directly arising from certain defined casualties or condemnation
("Casualty or Condemnation Rights"), (ii) termination and abatement rights
arising from a Mortgagor's default relating to its obligations under the
Credit Leases to perform required maintenance, repairs or replacements with
respect to the related Credit Lease Property ("Maintenance Rights") and (iii)
termination and abatement rights arising from a Mortgagor's default in the
performance of various other obligations under the Credit Lease, including
but not limited to remediating environmental conditions not caused by the
Tenant, enforcement of restrictive covenants affecting property owned
directly or indirectly by the Mortgagor in the area of the Credit Lease
Property and complying with laws regulating such Credit Lease Property or
common areas related to such Credit Lease Property ("Additional Rights").
Certain Credit Leases ("Bond-Type Leases" or "Bondable Leases") have neither
Casualty nor Condemnation Rights, Maintenance Rights nor Additional Rights
and the tenants thereunder are required, at their expense, to maintain their
Credit Lease Property, in good order and repair. Other Credit Leases have
Casualty or Condemnation Rights and may have Additional Rights ("Triple Net
Leases"). The tenants under Triple Net Leases are required, at their expense,
to maintain their Credit Lease Property, including the roof and structure, in
good order and repair. Additionally, certain of the Credit Leases have
Casualty or Condemnation Rights and Maintenance Rights, and may have
Additional Rights ("Double Net Leases"). If the borrower defaults in the
performance of certain
S-85
<PAGE>
obligations under Triple Net Leases or Double Net Leases and the Tenant
exercises its Additional Rights or Maintenance Rights, there would be a
disruption in the stream of Monthly Rental Payments available to pay
principal and interest to the Certificateholders.
Credit Leases with respect to 36 of the Credit Lease Properties, which
represent 10.5% of the aggregate Cut-off Date Principal Balance, are
Bond-Type Leases, Credit Leases with respect to five of the Credit Lease
Properties, which represent 2.2% of the aggregate Cut-off Date Principal
Balance, are Triple Net Leases and Credit Leases with respect to 12 of the
Credit Lease Properties, which represent 1.7% of the aggregate Cut-off Date
Principal Balance, are Double Net Leases.
At the end of the term of the Credit Lease, the Tenants are generally
obligated to surrender the Credit Lease Property in good order and in its
original condition received by the Tenant, except for ordinary wear and tear
and repairs required to be performed by the Mortgagor.
The improvements on certain Credit Lease Properties (representing the
security for 2.62% of the Mortgage Loans (based on Initial Pool Balance))
have not yet been completed. All such Credit Lease Properties have been
leased, or are subject to leases which are fully guaranteed, by CVS
Corporation pursuant to Bond-Type Leases and will be operated as full-service
drug stores. CVS Corporation, which is rated "A-" and "A3" by S&P and
Moody's, respectively, has entered into a completion guaranty for each such
Credit Lease Property, in which it guarantees the prompt completion of all
construction work within six months after the origination of the related
Mortgage Loan. In the event a New Store is not completed by such outside
completion date, CVS Corporation may (i) extend the Outside Completion Date
by two months (three months if the failure to complete the related New Store
is due to force majeure) and make lease payments equal to the related Monthly
Payment, (ii) prepay the related Credit Lease Loan together with a Yield
Maintenance Charge (calculated with no spread to the applicable U.S. Treasury
yield) or (iii) substitute such New Store with a completed property and enter
into a lease for such substitute property upon the same terms as the Credit
Lease for the uncompleted New Store for which it has been substituted. Any
substitution of collateral for an uncompleted New Store will require receipt
from each Rating Agency of written confirmation that such collateral
substitution will not cause a downgrade, withdrawal or qualification by such
Rating Agency of any of its then-current ratings on the Certificates.
Certain of the Credit Leases provide that the Tenant thereunder may
terminate its Credit Lease and/or abate rent in the event of an environmental
problem which existed prior to the Credit Lease or which is not caused by the
Tenant. In all such cases an environmental report was prepared in connection
with the origination of the respective Credit Lease Loan which indicated no
significant environmental problems.
Pursuant to the terms of each Credit Lease Assignment, the related
Mortgagor has assigned to the mortgagee of the related Credit Lease Loan, as
security for such Mortgagor's obligations thereunder, such Mortgagor's rights
under the related Credit Lease and its rights to all income and profits to be
derived from the operation and leasing of the related Credit Lease Property,
including, but not limited to, an assignment of any guarantee of the Tenant's
obligations under such Credit Lease and an assignment of the right to receive
all Monthly Rental Payments due under such Credit Lease. Pursuant to the
terms of each Credit Lease Assignment, each Tenant is obligated under the
related Credit Lease to make all Monthly Rental Payments directly to the
Servicer. Repayment of the Credit Lease Loans and other obligations of the
Mortgagors will be funded from such Monthly Rental Payments. Notwithstanding
the foregoing, the Mortgagors remain liable for all obligations under the
Credit Lease Loans (subject to the non-recourse provisions thereof).
Generally, each Credit Lease Loan that has a Casualty or Condemnation
Right has the benefit of a Lease Enhancement Policy issued by an Enhancement
Insurer, which, as described below, will make payments to the Servicer on
behalf of the Trustee in certain cases where the related Credit Lease
Property has sustained damage on account of a casualty or a condemnation
event. The Trustee is a named insured under each Lease Enhancement Policy.
The full premium relating to each Lease Enhancement Policy was paid at the
time of issuance thereof, and each such Lease Enhancement Policy is
non-cancelable.
S-86
<PAGE>
Each Lease Enhancement Policy provides that in the event of a permitted
termination by a Tenant of its Credit Lease as a result of a casualty or
condemnation, the related Enhancement Insurer will pay to the Servicer, on
behalf of the Trustee, the "Loss of Rents" (defined, as to a termination, as
a lump sum payment of all outstanding principal plus, subject to the
limitation below, accrued interest) or with respect to the Lease Enhancement
Policy issued by AISLIC, the "Ascertained Net Loss" (defined, as to a
termination, as the sum of all periodic payments of base rent that would be
payable under the related Credit Lease through the initial term of such
Credit Lease, which sum (a) may be paid either in a lump sum or periodically
on the date base rent payments would have been required under such Credit
Lease and (b) if paid in a lump sum shall in no event exceed the outstanding
principal plus accrued unpaid interest through the date the payments are made
under such Lease Enhancement Policy. All of the Lease Enhancement Policies
were issued by Chubb or, in the case of Loan No. 79, by AISLIC. As of the
Cut-off Date, Chubb was rated "AAA" and "Aaa" by S&P and Moody's,
respectively, and AISLIC was rated "AAA" by S&P. Chubb is not required to pay
interest for a period greater than 75 days past the date of the exercise of a
Casualty or Condemnation Right. If a Credit Lease permits the related Tenant
to abate all or a portion of the rent in the event of a condemnation, the
Loss of Rents will be in an amount equal to the portion of any Monthly Rental
Payments not made by such Tenant for the period from the date the abatement
commences until the earlier of the date the abatement ceases or the
expiration date of the initial term of such Credit Lease. Generally, an
Enhancement Insurer is not required to pay any amount due under a Credit
Lease Loan other than principal and, subject to the limitation above, accrued
interest, and therefore is not required to pay any Prepayment Premium or
Yield Maintenance Charge due thereunder or any amounts the Mortgagor is
obligated to pay thereunder to reimburse the Servicer or the Trustee for
outstanding Servicing Advances.
Each Lease Enhancement Policy contains certain exclusions to coverage,
including losses arising from damage or destruction directly or indirectly
caused by war, insurrection, rebellion, revolution, usurped power, pollutants
or radioactive matter, or from a taking (other than by condemnation).
S-87
<PAGE>
CREDIT LEASE LOANS
<TABLE>
<CAPTION>
CUT-OFF TENANT/
DATE GUARANTOR
LOAN PRINCIPAL RATING (S&P/
NO. PROPERTY NAME/LOCATION BALANCE TENANT/GUARANTOR MOODY'S)(1) LEASE TYPE
- ------ ---------------------- ------- ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
88 BALLY'S -NEWPORT NEWS, VA $ 4,005,484 BALLY TOTAL FITNESS HOLDING CORP. B- B1 BONDABLE
84 BALLY'S -MIAMI, FL $ 4,291,414 BALLY TOTAL FITNESS HOLDING CORP. B- B1 BONDABLE
86 BALLY'S -DAVIE, FL $ 4,148,553 BALLY TOTAL FITNESS HOLDING CORP. B- B1 BONDABLE
24 COBB THEATERS -OCALA, FL $11,257,025 COBB THEATRES II, INC. NA NA TRIPLE NET
96 CVS -NATICK, MA $ 3,671,358 CVS CENTER, INC. NA NA DOUBLE NET
122 CVS PHARMACY -GREENVILLE, SC $ 2,723,636 CVS CORPORATION A- A3 BONDABLE
127 CVS PHARMACY -HYANNIS, MA $ 2,659,530 CVS CORPORATION A- A3 BONDABLE
133 CVS PHARMACY -CULPEPER, VA $ 2,384,068 CVS CORPORATION A- A3 BONDABLE
135 HOOK -SUPERX, INC. -
KNOXVILLE STREET, PEORIA, IL $ 2,232,301 CVS CORPORATION A- A3 BONDABLE
137 CVS -GARFIELD, NJ $ 2,210,521 CVS CORPORATION A- A3 DOUBLE NET
141 CVS PHARMACY -LILBURN, GA $ 2,169,236 CVS CORPORATION A- A3 BONDABLE
142 HOOK -SUPERX, INC. -
PROSPECT ROAD, PEORIA, IL $ 2,167,717 CVS CORPORATION A- A3 BONDABLE
145 CVS PHARMACY -KERNSVILLE, NC $ 2,107,872 CVS CORPORATION A- A3 BONDABLE
148 HOOK -SUPERX, INC. -
BIG HOLLOW ROAD, PEORIA, IL $ 2,046,885 CVS CORPORATION A- A3 BONDABLE
149 REVCO DISCOUNT DRUG CENTER -
ELKIN, NC $ 2,024,659 CVS CORPORATION A- A3 BONDABLE
155 CVS PHARMACY -NORTH CONWAY, NH $ 1,880,945 CVS CORPORATION A- A3 BONDABLE
156 CVS PHARMACY -MONROE, NC $ 1,879,337 CVS CORPORATION A- A3 BONDABLE
158 REVCO DISCOUNT DRUG CENTER -
WASHINGTON COURT HOUSE, OH $ 1,840,312 CVS CORPORATION A- A3 BONDABLE
160 CVS PHARMACY -ANDERSON, SC $ 1,763,832 CVS CORPORATION A- A3 BONDABLE
161 CVS PHARMACY -CUMMING, GA $ 1,763,399 CVS CORPORATION A- A3 BONDABLE
162 CVS PHARMACY -PHILADELPHIA, PA $ 1,761,774 CVS CORPORATION A- A3 BONDABLE
164 CVS PHARMACY -BURNSVILLE, NC $ 1,728,085 CVS CORPORATION A- A3 BONDABLE
168 CVS PHARMACY -ATHENS, WV $ 1,596,647 CVS CORPORATION A- A3 BONDABLE
169 CVS PHARMACY -OXFORD, MA $ 1,575,943 CVS CORPORATION A- A3 BONDABLE
115 ECKERD'S DRUG STORE -PLANO, TX $ 3,015,326 ECKERD CORPORATION A- BAA1 TRIPLE NET
147 ECKERD'S DRUG STORE -ACWORTH, GA $ 2,069,291 ECKERD CORPORATION A- BAA1 DOUBLE NET
64 FURR'S -MESA (946) EL PASO, TX $ 5,855,974 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
91 FURR'S -EUBANK (875) ALBUQUERQUE, NM $ 3,887,373 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
93 FURR'S -LOUISIANA (876)
ALBUQUERQUE, NM $ 3,831,286 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
100 FURR'S -GEO. DIETER (938) EL PASO, TX $ 3,488,345 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
102 FURR'S -VISCOUNT (937) EL PASO, TX $ 3,484,438 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
106 FURR'S AMERICAS (944) EL PASO, TX $ 3,335,814 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
144 FURR'S -MONTANA (934) EL PASO, TX $ 2,120,742 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
153 FURR'S -RUIDOSO (905) RUIDOSO, NM $ 1,923,027 FURR'S SUPERMARKETS, INC. NA NA BONDABLE
36 GARDEN RIDGE -LEWISVILLE, TX $ 9,315,796 GARDEN RIDGE LP NA NA TRIPLE NET
13 KMART STORE #4983 -SAN JOSE, CA $20,026,222 KMART CORPORATION B+ BA3 BONDABLE
16 KMART STORE #4990 -CANTON, MI $17,541,461 KMART CORPORATION B- BA3 BONDABLE
22 KMART STORE #4991 -MAPLE HEIGHTS, OH $13,756,464 KMART CORPORATION B+ BA3 BONDABLE
47 KMART STORE #3718 SKILLMAN -DALLAS, TX $ 7,136,812 KMART CORPORATION B+ BA3 BONDABLE
49 KMART STORE #3863 CYPRESS POINT -
HOUSTON, TX $ 6,957,911 KMART CORPORATION B+ BA3 BONDABLE
50 KMART STORE #3809 WILLOWBROOK -
HOUSTON, TX $ 6,699,331 KMART CORPORATION B+ BA3 BONDABLE
73 MOTEL 6 -SUMMARY $ 5,421,033 MOTEL 6 GP, INC. NA NA TRIPLE NET
132 RITE AID -KINGSTON, NY $ 2,410,663 RITE AID CORPORATION BBB+ BAA1 DOUBLE NET
151 RITE AID -AUGUSTA, ME $ 2,012,829 RITE AID CORPORATION BBB- BAA1 DOUBLE NET
163 RITE AID -JONESBORO,
BATTLE CREEK, GA $ 1,736,367 RITE AID CORPORATION BBB- BAA1 DOUBLE NET
166 RITE AID -GASTONIA, NC $ 1,677,618 RITE AID CORPORATION BBB- BAA1 DOUBLE NET
171 RITE AID -JONESBORO, FLINT, GA $ 1,533,695 RITE AID CORPORATION BBB- BAA1 DOUBLE NET
178 RITE AID -HINESVILLE, GA $ 1,340,932 RITE AID CORPORATION BBB+ BAA1 DOUBLE NET
181 RITE AID -CLAXTON, GA $ 1,237,929 RITE AID CORPORATION BBB+ BAA1 DOUBLE NET
79 VICTORIA'S SECRET/LIMITED
EXPRESS SUMMARY $ 4,400,254 THE LIMITED INC. BBB+ BAA2 DOUBLE NET
126 7-ELEVEN -ANAHEIM, CA $ 2,668,289 THE SOUTHLAND CORPORATION BB+ BA1 TRIPLE NET
67 UNION CAMP -VALLEY VIEW, OH $ 5,625,643 UNION CAMP CORPORATION A- A1 BONDABLE
</TABLE>
- ------------
(1) Reflects the Tenant/Guarantor's senior unsecured long-term debt rating.
S-88
<PAGE>
Additional Collateral Loans. Three Mortgage Loans representing 4.87% of
the Initial Pool Balance are secured partly by cash reserves that would be
released, or by irrevocable letters of credit that would cease to be in
effect, upon achievement by the borrower of certain leasing conditions,
including, in certain cases, achieving certain debt service coverage ratios.
Failure to satisfy such conditions within specified time periods will result
in the application of all or a portion of the related credit enhancement
amount to prepay the related Mortgage Loan in part (a "Required Prepayment"),
and such Required Prepayment will not require payment of a Prepayment Premium
or Yield Maintenance Charge.
ADDITIONAL COLLATERAL LOANS
<TABLE>
<CAPTION>
TYPE OF AMOUNT OF
LOAN ADDITIONAL ADDITIONAL RELEASE
NO. PROPERTY NAME COLLATERAL COLLATERAL CONDITIONS
- ------ ------------------ ---------------- ------------ ----------------------------------
<S> <C> <C> <C> <C>
8 Market-Post Tower Cash Collateral $1,111,000 IRS lease renewal; 1.30x DSCR (on
or before 3/31/98)
11 Stone Mountain Letter of Credit $3,600,000 1.20x DSCR (trailing 12 months) of
which, absent an event of default,
$1,600,000 can be applied to repay
the debt (on or before May 1998)
19 Holiday Inn/One Cash Collateral $1,700,000 Build-out of space by Comp USA (on
Route 46--Summary or before 3/1/98), issuance of
certificate of occupancy (on or
before 10/1/98) and commencement
of payment of rent.
</TABLE>
The Depositor or one of its affiliates will establish a reserve fund, or
provide a guaranty, from which holders of the Class A-X Certificates and any
Class of Offered Certificates receiving a Required Prepayment will be
entitled to receive Yield Protection Payments to compensate them for the
absence of Prepayment Premiums or Yield Maintenance Charges under the related
Additional Collateral Loans. With respect to any Class of Offered
Certificates receiving a distribution of principal in connection with a
Required Prepayment, the Yield Protection Payment will equal 2% of such
prepayment. With respect to the Class A-X Certificates, the Yield Protection
Payment will be in the nature of a yield-maintenance payment and will be as
described in the Pooling and Servicing Agreement. See "Description of the
Offered Certificates -- Distributions -- Yield Protection Payments" herein.
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables and Annex A hereto set forth certain information with
respect to the Mortgage Loans and Mortgaged Properties. The statistics in the
following tables and Annex A were primarily derived from information provided
to the Depositor by the Mortgage Loan Seller, which information may have been
obtained from the borrowers without independent verification. For purposes of
this Prospectus Supplement, including the tables herein and Annex A:
(1) "Net Cash Flow" with respect to a given Mortgage Loan or Mortgaged
Property means cash flow available for debt service, as determined by the
Mortgage Loan Seller based upon borrower supplied information for a recent
period that is generally calendar year 1996 or the most recent twelve-month
period preceding the origination date. Net Cash Flow does not reflect debt
service, subordinated ground rent, non-cash items such as depreciation or
amortization, and does not reflect actual capital expenditures and may have
been adjusted by, among other things, (i) in the case of the Multifamily
Properties, rental revenue shown on a recent rent roll was annualized before
applying a vacancy factor without further regard to the terms (including
expiration dates) of the leases shown thereon, (ii) in the case of certain
Office Properties, Industrial Properties and Retail Properties, determining
current revenues from leases in place, (iii) in the case of certain of the
Hospitality Properties, assuming the occupancy rate was less than the actual
occupancy rate (and generally no more than 75-80%) to account for a high
occupancy rate or to reflect new construction in the market, (iv) assuming a
minimum vacancy rate generally equal to the greatest of (A) actual vacancy,
(B) market vacancy and (C) 5-10%, depending upon property type, (v) in
S-89
<PAGE>
the case of the Retail Properties, excluding certain percentage rent, (vi)
excluding certain non-recurring income and/or expenses, (vii) assuming a
management fee of 3.5-5% for Hospitality Property, 4-5% of revenue for
multi-tenant commercial and multifamily Mortgage Loans and 1-3% of revenue
for single-tenant net leased Mortgage Loans other than the Credit Lease
Loans, (viii) making a 4-6% adjustment to room revenues for franchise fees
(for all franchised Hospitality Properties and most unflagged Hospitality
Properties) payable with respect to the Mortgaged Property, (ix) where such
information was made available to the Mortgage Loan Seller to take into
account new tax assessments and insurance contracts, (x) in certain cases,
assuming that operating expenses with respect to the Mortgaged Property were
greater than actual expenses, (xi) subtracting from net operating income
reserves for Capital Items generally consistent with those identified under
"Underwriting Standards" herein, and, (xii) in the case of the Retail
Properties and Office Properties, subtracting from net operating income an
assumed allowance for tenant improvements and leasing commissions. As
presented herein, Net Cash Flow does not separately take into account
reimbursement of Servicing Fees or Primary Servicing Fees by borrowers, which
should generally be taken into account as expenses when calculating net
operating income.
Net Cash Flow reflects the calculations and adjustments used by the
Mortgage Loan Seller for its underwriting process and may or may not reflect
the amounts calculated and adjusted by the Rating Agencies for their own
analysis. In addition, "Net Cash Flow" and the DSCR derived therefrom are not
a substitute for cash flow as determined in accordance with generally
accepted accounting principles as a measure of the results of the property's
operations or a substitute for cash flows from operating activities
determined in accordance with generally accepted accounting principles as a
measure of liquidity. In certain cases, net cash flow deducts amounts for
Capital Items and tenant improvement and leasing commission reserves but
under the related Mortgage Loan the borrower is not required to fund Escrow
Accounts therefor.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and
expenditures on the actual net operating income, Net Cash Flow and DSCRs of
the Mortgage Loans.
No representation is made as to the future net cash flow of the Mortgaged
Properties, nor is "Net Cash Flow" set forth herein intended to represent
such future net cash flow.
(2) "U/W NOI" or "Underwritten NOI" means Net Cash Flow before deducting
for Capital Items, tenant improvements and leasing commissions.
(3) "1995 NOI", "1996 NOI" and "1997 NOI" (which is for the period ending
as of the date specified in Annex A) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations. 1995 NOI, 1996 NOI and 1997 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such as depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor makes no
representations as to the accuracy of any information provided by any
borrower or with respect to net operating income that may have occurred since
the date of the information provided by each borrower for the related
Mortgaged Property. 1995 NOI, 1996 NOI and 1997 NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1995 NOI, 1996 NOI and 1997 NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations. "Rev" is gross revenues for the
applicable period, as reported by the related borrower, or, for "U/W Rev",
taking into account certain adjustments thereto in accordance with the
Mortgage Loan Seller's underwriting standards.
(4) "Allocated Loan Amount" means, for each Mortgaged Property, the
portion of the principal amount of the related Pool Loan allocated to such
Mortgaged Property for certain purposes (including,
S-90
<PAGE>
without limitation, determining the release prices of properties, if the Pool
Loan permits such releases) under such Pool Loan or for the purpose of
presenting statistical information in this Prospectus Supplement. The
Allocated Loan Amount for each Mortgaged Property securing a Pool Loan was
generally determined based on the ratio of the Net Cash Flow or net operating
income (calculated as provided in the related Pool Loan) or appraised value,
or some combination thereof, of such Mortgaged Property to the aggregate Net
Cash Flow or appraised value, or some combination thereof, of all the
Mortgaged Properties securing such Pool Loan. The Allocated Loan Amount for
each Mortgaged Property may be adjusted upon the payment of principal of the
related Pool Loan, whether upon amortization, prepayment, or otherwise.
"Cut-off Date Allocated Loan Amount" means for each Mortgaged Property the
Allocated Loan Amount of such property as of the Cut-off Date. There can be
no assurance, and it is unlikely, that the Allocated Loan Amounts represent
the current values of individual Mortgaged Properties, the price at which an
individual Mortgaged Property could be sold in the future to a willing buyer
or the replacement cost of the Mortgaged Properties.
(5) "Original Principal Loan Balance" means the principal balance of the
Mortgage Loan as of the date of origination.
(6) "Monthly Payment" means, for any Mortgage Loan, the constant monthly
payment set forth in the related Mortgage Note as being due on the Cut-off
Date and, with respect to any Mortgage Loan that pays only interest on the
Cut-off Date, the constant monthly payment of principal and interest on such
Mortgage Loan after such interest-only period ends (such date being the
"First P&I Date"). Certain Credit Lease Loans provide for periodic increases
in the related Monthly Payments as set forth on Annex B.
(7) "Cut-off Date Principal Loan Balance" means the principal balance of
the Mortgage Loan as of the Cut-off Date and, with respect to the Pool Loans,
the Allocated Loan Amount assigned to each related Mortgaged Property.
(8) "Cut-off Date Principal Balance/Unit" means the principal balance per
unit for multi-family, cooperatives, hotels and self storage or per square
foot for substantially all other property types of measure as of the Cut-off
Date.
(9) "Annual Debt Service" means for any Mortgage Loan the annualized
Monthly Payment on such Mortgage Loan.
(10) "DSCR" or "Debt Service Coverage Ratio" means, with respect to any
Mortgage Loan, (a) the Net Cash Flow for the related Mortgaged Property,
divided by (b) the Annual Debt Service for such Mortgage Loan. The
calculation of "DSCR" may differ from the calculation of the debt service
coverage ratios referred to under "--Description of the Mortgage Loans --
Underwriting Standards." For the following tables, the DSCR for each group of
Crossed Loans is the ratio of the aggregate Net Cash Flow for all of the
Mortgaged Properties securing such Crossed Loans to the aggregate Annual Debt
Service for the Crossed Loans in such group.
(11) "Interest Calc." means the method by which interest accrues on the
related Mortgage Loan. "30/360" means interest is calculated on the basis of
a 360-day year consisting of twelve 30-day months. "Act/360" means interest
is calculated on the basis of a 360-day year and for the actual number of
days elapsed in each interest accrual period.
(12) "Stated Maturity Date" means the maturity date of the Mortgage Loan
as stated in the related Mortgage Note or loan agreement.
(13) "Anticipated Repayment Date" means for ARD Loans, the date on which
interest begins accruing at the Revised Rate and/or excess cash flow is
retained pursuant to the related Lock-box Agreements for application to
payment of principal and Excess Interest.
(14) "Anticipated Remaining Term" means the term of the Mortgage Loan from
the Cut-off Date to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
S-91
<PAGE>
(15) "Remaining Lockout" means the period of the term of the related
Mortgage Loan from the Cut-off Date during which the Mortgage Loan may not be
prepaid. For the purposes of this Prospectus Supplement and the statistical
information presented herein, the entire principal balance of each Additional
Collateral Loan is deemed to be subject to a Lockout Period for the related
"Remaining Lockout" period set forth on Annex A hereto.
(16) "Remaining Lockout and YM" means the period of the term of the
related Mortgage Loan from the Cut-off Date during which the Mortgage Loan
may not be prepaid or a Yield Maintenance Charge will be imposed.
(17) "Seasoning" means, with respect to any Mortgage Loan, the number of
months between the Cut-off Date and the first Due Date on or after the date
on which such Mortgage Loan was originated.
(18) "Value" means for each of the Mortgaged Properties, the appraised
value of such Mortgaged Property as determined by an appraisal thereof and
generally in accordance with MAI standards generally made not more than 18
months prior to the origination date of the related Mortgage Loan. In general
MAI appraisals were obtained on all of the Mortgaged Properties.
(19) "Maturity Date/Anticipated Repayment Date LTV" for any Mortgage Loan
is calculated in the same manner as Cut-off Date LTV, except that the
Mortgage Loan Cut-off Date Principal Balance used to calculate the Cut-off
Date LTV has been adjusted to give effect to the amortization of the
applicable Mortgage Loan to its maturity date or, in the case of a an ARD
Loan, that has an Anticipated Repayment Date, to its Anticipated Repayment
Date. Such calculation thus assumes that the appraised value of the Mortgaged
Property securing a Mortgage Loan on the maturity date or Anticipated
Repayment Date, as applicable, is the same as the appraised value as of the
Cut-off Date. There can be no assurance that the value of any particular
Mortgaged Property has not or will not decline from the appraised value.
(20) "Original Amortization Term" means the number of months, based on the
constant Monthly Payment as stated in the related Mortgage Note or loan
agreement, that would be necessary to reduce the principal balance of the
related Mortgage Note substantially to zero if interest on such Mortgage Note
was calculated based on twelve 30-day months and a 360-day year.
(21) "Year Built/Renovated" means the year in which the respective
Mortgaged Property was built and/or renovated.
(22) "Units" and "Unit of Measure" mean the number of units, pads, rooms
or square footage with respect to the Mortgaged Property.
(23) "Occupancy " means the percentage of gross leasable area, rooms,
units, beds or sites of the Mortgaged Property that are leased. Occupancy
rates are calculated for the specified "Occupancy Period" which is a period
ending on the indicated date. In certain cases, Occupancy reflects the
average occupancy rate over a period of time. The Occupancy Period may be the
trailing twelve months ending on the indicated date, the period from January
1997 to the indicated date or the month indicated.
(24) "U/W Occupancy" means the occupancy rate used in determining Net Cash
Flow.
(25) "Anchor Tenant" means, with respect to the Retail Properties, a
nationally or regionally recognized tenant, or a credit tenant that occupies
a significant portion of such Mortgaged Property, or a tenant that occupies
more than 25,000 square feet.
(26) "Actual Ongoing Capital Item Deposits" means the dollars per Unit or
percentage of revenues required to be deposited in Escrow Accounts annually
under the related Mortgage Loan with respect to Capital Items.
(27) "Tenant 1," "Tenant 2" and "Tenant 3" (each, a "Tenant") mean, with
respect to Office Properties and Retail Properties, the largest, second
largest and third largest Tenants, respectively, with respect to such
properties, as applicable. With respect to Retail Properties, such Tenants
may constitute Anchor Tenants.
(28) "% of Total Square Feet" means the square feet leased to a Tenant as
a percentage of the total square feet of the Mortgaged Property.
S-92
<PAGE>
(29) "Lease Expiration Date" means the year in which a Tenant's lease is
scheduled to expire.
(30) "Loan to Value Ratio" or "LTV" is the outstanding balance of a
Mortgage Loan as of the Cut-off Date divided by the Value of the related
Mortgaged Property. Mortgage Loans that are secured in part by letters of
credit or cash collateral that can be used to prepay such Mortgage Loans if
certain performance tests have not been satisfied are indicated on Annex A
under the heading "LTV" with an asterisk (*). For purposes of computing the
LTV for each such Mortgage Loan, the amount of the related additional
collateral has been subtracted from the Cut-off Date Principal Balance of
such Mortgage Loan before dividing the related Value into such amount. The
LTV for a group of Crossed Loans is the ratio of the aggregate Cut-off Date
Principal Balance for such group of Crossed Loans to the aggregate Value for
all the related Mortgaged Properties. The LTV Ratios on Loan Nos. 7 and 11
are based upon the current balances of such Mortgage Loans reduced by the
respective sums available to be drawn under the related letters of credit
delivered in connection with the origination of such Mortgage Loans.
(31) "Weighted Average LTV" and "Weighted Average DSCR" are the weighted
average of the Loan to Value Ratios and Debt Service Coverage Ratios for each
Mortgage Loan, weighted on the basis of the Cut-off Date Principal Balances
thereof. Such calculations exclude the Credit Lease Loans.
(32) "Net Lease" means "Credit Lease."
(33) "Remaining Amortization Term" for each Mortgage Loan is the related
Original Amortization Term minus the related Seasoning.
(34) "NAP" means not applicable and relates to the omission of Credit
Lease Loans in the calculation of LTV and DSCR.
Due to rounding, percentages in the following tables may not add to 100%
and amounts may not add to indicated total or subtotal.
Mortgaged Properties secured, or partially secured, by a leasehold estate
are indicated on Annex A under the heading "Property Name" with an asterisk
(*). Loan Nos. 7, 48, 54, 73, and 130 are secured by both the fee estate and
related leasehold interest and, for the purpose of presenting certain
statistical information herein, are considered to be secured by fee simple
estates.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A hereto for certain characteristics of Mortgage
Loans on a loan-by-loan basis. All percentages of Initial Pool Balances used
herein and in Annex A are based upon the Cut-off Date Principal Balance of
the related Mortgage Loan or, with respect to each Pool Loan are based upon
the Allocated Loan Amount of the related Mortgaged Property. All weighted
average information regarding the Mortgage Loans reflects weighting of the
Mortgage Loans by their Cut-off Date Principal Balances or, with respect to
Pool Loans, Allocated Loan Amounts. The "Cut-off Date Principal Balance" of
each Mortgage Loan is equal to the unpaid principal balance thereof as of the
Cut-off Date, after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
and in Annex A with respect to the Mortgage Loans is provided on an
approximate basis. Certain statistical information set forth herein may
change prior to the date of issuance of the Certificates due to changes in
the composition of the Trust Fund prior to the Closing Date. See "--Changes
in Mortgage Loan Characteristics" below.
S-93
<PAGE>
MORTGAGE NOTES
<TABLE>
<CAPTION>
CSFB CUT-OFF
LOAN CONTROL DATE
NO. NO. PROPERTY NAME BORROWER NAME BALANCE
- ---- ------- --------------------------------------------- ------------------------------------------ ------------
<S> <C> <C> <C> <C>
1 118 MGM Plaza Colorado Place Partners, LLC $145,894,648
2 003 135 East 57th Street 135 East 57th Street LLC $ 75,000,000
3 128 Paramount Hotel Century Paramount LLC $ 73,867,407
4 025 Beverly Connection The Beverly Connection LLC $ 63,000,000
5 079 The Gift Center & Jewelry Mart Buchanan Street Associates, LP $ 42,969,590
6 073 Embassy Suites Hotel--Washington, DC SES/D.C. Venture $ 37,100,000
7 138 Ramada Suites Hotel at Lincoln Harbor River-PW Hotel Limited Partnership $ 33,462,179
8 115 Market-Post Tower Market-Post Tower, Inc. $ 31,935,966
9 012 78 Corporate Center EM Realty Associates, L.L.C. $ 31,834,631
10 007 240 West 40th Street 240 West 40th LLC $ 25,000,000
11 172 Stone Mountain Square Shopping Center New Ronstone, LLC $ 23,981,901
12 034 Buena Vista Plaza Ryanco Partners, Ltd. No. X $ 21,348,483
13 104 Kmart Store #4983--San Jose CRICKM San Jose Trust $ 20,026,222
14 117 Mesa Regal RV Resort ELL-CAP 84-Associates LP et al. $ 18,465,911
15 094 Johnson City Crossing Shopping Center New Johnson City Crossing, LLC $ 18,236,237
16 099 Kmart Store #4990--Canton, MI CRICKM Canton Township Trust $ 17,541,461
17 002 131 State Street State 131 Limited Partnership $ 16,433,341
18 121 Dara Gardens Cooperative Dara Owners Corp. $ 16,350,311
19 089 Holiday Inn/One RT 46-Summary Holiday 46, LLC $ 15,471,333
20 097 Kendig Square Shopping Center THF Kendig Development, LP $ 15,238,431
21 005 1515 Industrial Way TMT Associates, LLC $ 14,000,000
22 103 Kmart Store #4991--Maple Heights, OH CRICKM Maple Heights Trust $ 13,756,464
23 016 Arapahoe East Arapahoe East Venture et al. $ 12,985,696
24 041 Cobb Theaters--Ocala, FL CobbOcala Realty, LLC $ 11,257,025
25 053 Court of Flags Apartments Graoch Associates #1 Limited Partnership $ 11,091,562
26 113 Malibu Creek Plaza Malibu Creek Preservation Company, LLC $ 10,581,350
27 023 Bannockburn Executive Plaza Bannockburn Executive Plaza LLC $ 10,492,393
28 086 Holiday Inn-Harrisburg West Mechanicsburg GF Investors, LP $ 10,488,447
29 167 Sherwood Forest Ell-Cap 107-Sherwood Forest et al. $ 10,380,836
30 135 Polo Club Apartments Graoch Associates #4 Limited Partnership $ 10,291,853
31 126 NorthTech Business Park Richtree Corporation $ 10,228,345
32 175 Fox Creek-Summary Graoch Associates #55 LP $ 9,989,012
33 066 Delevan/Westdayl-Summary Northmonte Partners LLC $ 9,592,761
34 109 Logan Industrial Park Logan Chatauqua Limited Partnership $ 9,455,544
35 183 Waterfront Centre NBL Associates Limited Partnership $ 9,436,244
36 078 Garden Ridge Gartex Realty, LP $ 9,315,796
37 032 Brighton Beach Shopping Center Brighton Norse Realty, LLC et al. $ 9,290,316
38 051 Commerce Plaza III Group Four Properties, L.L.C. $ 9,093,968
39 088 Timonium Holiday Inn Select Timonium Management, Inc. $ 8,990,810
40 069 Eagles Landing Graoch Associates #53 Limited Partnership $ 8,493,590
41 110 Lorraine Apartments Loraine Limited Partnership $ 8,400,000
42 024A Best Western Grant Park Hotel Pacific Tai LLC $ 7,589,503
43 024B The Evanston Holiday Inn & Conference Center Evanston Northshore Hotel Partners, LLC $ 7,589,503
44 075 Fox Jewelry Plaza and Los Angeles Theatre Fox Investment Company, LLC $ 7,494,707
45 184 Wellington Centre Wellington Centre Company, LLC $ 7,390,724
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
PRIMARY STATED ANTICIPATED REMAINING ANTICIPATED ORIGINAL REMAINING
LOAN MONTHLY MORTGAGE SERVICING INTEREST MATURITY REPAYMENT REMAINING LOCKOUT REMAINING AMORTIZATION AMORTIZATION
NO. PAYMENT RATE FEE RATE CALC. DATE DATE LOCKOUT AND YM TERM TERM TERM
- ---- ---------- -------- --------- -------- -------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,034,886 7.640 0.05 ACT/360 11/11/27 11/11/04 83 83 83 360 359
2 $ 585,211 8.660 0.05 ACT/360 09/11/29 09/11/07 45 117 117 360 360
3 $ 583,948 8.260 0.05 ACT/360 10/11/22 10/11/07 46 46 118 300 298
4 $ 475,639 8.120 0.05 ACT/360 09/11/27 09/11/07 111 111 117 336 336
5 $ 307,760 7.740 0.05 ACT/360 12/11/27 12/11/07 115 115 120 360 359
6 $ 274,649 7.520 0.05 ACT/360 12/11/22 12/11/07 120 120 120 300 300
7 $ 248,871 7.560 0.05 ACT/360 11/11/22 11/11/07 115 115 119 300 299
8 $ 257,710 9.010 0.06 ACT/360 07/11/27 07/11/07 108 108 115 360 355
9 $ 283,333 7.410 0.05 ACT/360 01/11/33 05/11/14 173 173 197 422 421
10 $ 176,175 7.580 0.05 ACT/360 12/11/27 11/11/12 172 172 179 360 360
11 $ 166,499 7.420 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
12 $ 166,679 8.490 0.05 ACT/360 08/11/27 08/11/07 109 109 116 339 335
13 $ 158,664 8.295 0.05 30/360 11/01/22 295 295 299 300 299
14 $ 150,323 8.920 0.05 ACT/360 06/01/24 09/01/03 62 62 69 333 330
15 $ 126,608 7.420 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
16 $ 138,183 8.228 0.05 30/360 11/01/22 295 295 299 300 299
17 $ 135,460 9.110 0.05 ACT/360 08/01/25 04/01/07 40 105 112 342 334
18 $ 116,542 7.690 0.48 30/360 11/01/12 119 119 179 360 359
19 $ 120,660 8.100 0.05 ACT/360 10/11/22 10/11/07 114 114 118 300 298
20 $ 105,484 7.390 0.05 ACT/360 11/11/27 11/11/12 176 176 179 360 359
21 $ 97,507 7.460 0.05 ACT/360 12/11/27 12/11/07 120 120 120 360 360
22 $ 108,366 8.228 0.05 30/360 11/01/22 295 295 299 300 299
23 $ 97,937 7.720 0.04 ACT/360 11/11/22 11/11/07 115 115 119 300 299
24 $ 88,330 8.610 0.05 30/360 10/11/22 298 298 298 300 299
25 $ 76,703 7.380 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
26 $78,519 8.100 0.05 ACT/360 09/11/27 09/11/07 113 113 117 360 357
27 $74,282 7.620 0.05 ACT/360 11/11/27 11/11/12 175 175 179 360 359
28 $79,103 7.720 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
29 $84,506 8.920 0.05 ACT/360 06/01/24 09/01/03 62 62 69 333 330
30 $69,776 7.180 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
31 $77,005 8.250 0.05 ACT/360 08/11/27 08/11/07 109 109 116 360 356
32 $73,935 8.080 0.05 ACT/360 10/11/27 10/11/07 111 111 118 360 358
33 $66,599 7.420 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
34 $79,789 9.010 0.05 ACT/360 06/11/22 06/11/07 107 107 114 300 294
35 $76,689 8.570 0.05 ACT/360 09/11/22 09/11/07 110 110 117 300 296
36 $76,919 8.345 0.05 ACT/360 10/11/20 274 274 274 267 266
37 $72,149 8.060 0.05 30/360 11/11/22 11/11/07 112 112 119 300 299
38 $67,154 8.060 0.05 ACT/360 11/01/27 11/11/07 117 117 119 360 359
39 $70,540 8.180 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
40 $58,968 7.420 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
41 $61,412 7.770 0.05 ACT/360 08/11/27 08/11/07 113 113 116 336 336
42 $61,122 8.680 0.05 ACT/360 10/11/22 10/11/07 118 118 118 300 298
43 $61,122 8.680 0.05 ACT/360 10/11/22 10/11/07 118 118 118 300 298
44 $53,731 7.750 0.04 ACT/360 11/11/27 11/11/12 172 172 179 360 359
45 $52,148 7.580 0.05 ACT/360 10/11/27 10/11/12 176 176 178 360 358
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
FIRST
LOAN P&I
NO. SEASONING DATE
- ---- --------- --------
<S> <C> <C>
1 1 12/11/97
2 3 10/11/99
3 2 11/11/97
4 3 10/11/99
5 1 12/11/97
6 0 01/11/98
7 1 12/11/97
8 5 08/11/97
9 1 12/11/97
10 0 01/11/98
11 1 12/11/97
12 4 09/11/97
13 1 12/01/97
14 15 10/01/97
15 1 12/11/97
16 1 12/01/97
17 8 05/01/97
18 1 12/01/97
19 2 11/11/97
20 1 12/11/97
21 0 01/11/98
22 1 12/01/97
23 1 12/11/97
24 1 12/11/97
25 1 12/11/97
26 3 10/11/97
27 1 12/11/97
28 1 12/11/97
29 15 10/01/97
30 1 12/11/97
31 4 09/11/97
32 2 11/11/97
33 1 12/11/97
34 6 07/11/97
35 4 09/11/97
36 1 12/11/97
37 1 12/11/97
38 1 12/11/97
39 1 12/11/97
40 1 12/11/97
41 4 09/11/99
42 2 11/11/97
43 2 11/11/97
44 1 12/11/97
45 2 11/11/97
</TABLE>
S-94
<PAGE>
<TABLE>
<CAPTION>
CSFB CUT-OFF
LOAN CONTROL DATE
NO. NO. PROPERTY NAME BORROWER NAME BALANCE
- ---- ------- --------------------------------------------- ------------------------------------------ ------------
<S> <C> <C> <C> <C>
46 028 Boulder Cascade Mobile Home Park Boulder Edwards L.P. $ 7,200,000
47 100 Kmart Store #3718--Dallas, TX--Skillman CRICKM Skillman Trust $ 7,136,812
48 122 Residence Inn by Marriott--New Haven, CT Wallfarm Associates, LP $ 7,078,875
49 102 Kmart Store #3863--Houston, TX--Cypress Point CRICKM Cypress Point Trust $ 6,957,911
50 101 Kmart Store #3809--Houston, TX--Willowbrook CRICKM Willowbrook Trust $ 6,699,331
51 112 Los Gatos Lodge Los Gatos Lodge, LLC $ 6,693,508
52 174 Tarzana Medical Office Building Tarzana Medical Office Building Partners $ 6,595,351
53 108 Lenox Plaza Shopping Center Realty Management of NJ, LLC et al. $ 6,586,437
54 176 Kratsa Hotels-Summary Harmar Hotels I, II & III Inc. $ 6,538,566
55 038 The Sedona Apartments Windsor Real Estate Limited Partnership $ 6,500,000
56 008 Kent Park-Executive House-Summary Wilson Properties I, LLC $ 6,393,623
57 123 Newbrite Shopping Center Newbrite Associates Limited Partnership $ 6,393,433
58 087 Holiday Inn-Huntsville, AL Madison Square Hotel LLC $ 6,354,129
59 068 Donnybrook/Orangeburg Summary JLJ Management Co. and 2J Management Co $ 6,195,472
60 182 Washington Centre Washington Centre Shops, L.P. $ 6,195,426
61 067 Dick's Clothing & Sporting Goods Store CMD Columbia Trust and Imperial Assoc. $ 6,114,199
62 081 Hampshire Ambassador Hotel Kensington Hotel Associates LP $ 5,957,845
63 173 Stonehurst/Zenith-Summary Northvale 1997 Associates, L.L.C. $ 5,949,616
64 077A Furr's--Mesa (946) Furr's 5, LLC $ 5,855,974
65 031A Brandywine--Towne North Plaza Northridge Partners $ 5,755,860
66 192 Saddleback Plaza 3501 E. Chapman LLC $ 5,638,000
67 178 Union Camp 1800 Sycamore Rd., LLC $ 5,625,643
68 156 RM-Research Triangle Realmark-Research, LLC $ 5,558,723
69 133 Plaza Arcade Plaza Arcade Realty Co., LLC $ 5,495,943
70 018 Autumn Run Apartments Graoch Associates #33 Limited Partnership $ 5,495,902
71 072 El Paseo North El Paseo Collection North $ 5,486,070
72 009 443 Third Avenue 443 Third Avenue, LLC $ 5,475,550
73 119 Motel 6-Summary Motel Tara Leasing, Inc. $ 5,421,033
74 039 Amazon.com Building 700 Frenchtown Development Corporation $ 5,343,901
75 169 Southern Slope Apartments Graoch Associates #56 Limited Partnership $ 5,196,086
76 165 Select Inn-Summary Select Inn of Janesville, Inc., et al. $ 5,044,699
77 036 RM-Camelot East Apartments Realmark-Camelot, LLC $ 4,896,290
78 030 Bradbury Apartments Regel Real Estate Limited Partnership $ 4,600,000
79 180 Victoria's Secret/Limited Express Summary 1721 Chestnut Realty Associates $ 4,400,254
80 083 Heartland Place Heartland Place LLC $ 4,395,178
81 139 Residence Inn by Marriott--Fishers, IN RI-FISH, L.L.C. $ 4,395,096
82 092 Inland Business Center Inland Corporation $ 4,387,917
83 131 Parkway Plaza Office Building 23945 Calabasas Road Associates $ 4,296,971
84 021 BALLY'S-Miami, Florida Bond-Bally III Delaware Business Trust $ 4,291,414
85 171 RM-St. Rita's Office Building Realmark-St. Rita's, L.L.C. $ 4,247,241
86 020 BALLY'S-Davie, Florida Bond-Bally II Delaware Business Trust $ 4,148,553
87 091 Howard Johnson Hotel Taj International, Inc. $ 4,094,451
88 022 BALLY'S-Virginia Bond-Bally I Delaware Business Trust $ 4,005,484
89 076 Freehold Gardens Hotel Freehold Hotel Associates, L.L.C. $ 3,995,848
90 158 RM-The Fountains Apartments Realmark-Fountains, L.L.C. $ 3,889,671
91 077H Furr's--Eubank (875) Furr's 2, LLC $ 3,887,373
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
PRIMARY STATED ANTICIPATED REMAINING ANTICIPATED ORIGINAL REMAINING
LOAN MONTHLY MORTGAGE SERVICING INTEREST MATURITY REPAYMENT REMAINING LOCKOUT REMAINING AMORTIZATION AMORTIZATION
NO. PAYMENT RATE FEE RATE CALC. DATE DATE LOCKOUT AND YM TERM TERM TERM
- ---- ---------- -------- --------- -------- -------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
46 $56,411 8.705 0.05 ACT/360 02/01/27 02/01/04 67 67 74 360 360
47 $56,220 8.228 0.05 30/360 11/01/22 299 299 299 300 299
48 $66,506 7.670 0.05 ACT/360 11/11/12 11/11/07 115 115 119 180 179
49 $54,811 8.228 0.05 30/360 11/01/22 295 295 299 300 299
50 $52,774 8.228 0.05 30/360 11/01/22 295 295 299 300 299
51 $53,950 8.500 0.125 ACT/360 11/11/22 11/11/07 112 112 119 300 299
52 $47,329 7.760 0.04 ACT/360 11/11/27 11/11/07 112 112 119 360 359
53 $50,048 8.350 0.05 ACT/360 08/11/27 08/11/07 109 109 116 360 356
54 $52,258 8.390 0.05 ACT/360 10/11/22 10/11/07 114 114 118 300 298
55 $46,336 7.500 0.05 ACT/360 11/11/27 11/11/07 116 116 119 336 336
56 $50,803 8.330 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
57 $50,034 8.150 0.05 ACT/360 11/11/22 10/11/07 113 113 118 300 299
58 $52,368 8.740 0.05 ACT/360 08/11/22 08/01/06 97 97 104 300 296
59 $43,691 7.580 0.05 ACT/360 11/11/27 11/11/07 115 115 119 360 359
60 $43,479 7.530 0.05 ACT/360 11/11/27 11/11/07 115 115 119 360 359
61 $47,535 8.610 0.05 ACT/360 10/11/27 10/11/07 111 111 118 360 358
62 $54,570 9.380 0.05 ACT/360 11/11/18 06/11/07 107 107 114 252 246
63 $49,560 8.890 0.05 ACT/360 10/11/22 10/11/07 113 113 118 300 298
64 $47,209 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
65 $40,908 7.660 0.05 ACT/360 11/11/27 11/11/07 116 116 119 360 359
66 $42,771 7.800 0.05 ACT/360 12/01/07 116 116 120 300 300
67 $34,318 7.578 0.05 30/360 05/01/22 293 293 293 299 293
68 $43,251 8.060 0.05 ACT/360 09/11/22 03/11/06 95 95 99 300 297
69 $38,569 7.530 0.05 ACT/360 11/11/27 11/11/07 117 117 119 360 359
70 $38,382 7.480 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
71 $41,320 8.250 0.05 ACT/360 08/11/27 08/11/07 109 109 116 360 356
72 $43,255 8.220 0.05 ACT/360 07/11/22 07/11/07 108 108 115 360 355
73 $40,761 8.491 0.05 ACT/360 05/11/16 217 217 221 222 222
74 $39,536 7.500 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
75 $36,110 7.430 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
76 $39,010 8.010 0.05 ACT/360 11/11/22 12/11/07 113 113 120 300 299
77 $33,927 7.400 0.05 ACT/360 11/11/27 05/11/06 97 97 101 360 359
78 $33,630 7.770 0.05 ACT/360 08/11/27 08/11/07 113 113 116 336 336
79 $69,018 6.528 0.05 ACT/360 02/11/04 74 74 74 80 74
80 $32,562 8.090 0.25 ACT/360 10/11/27 10/11/07 114 114 118 360 358
81 $32,917 7.640 0.05 ACT/360 11/11/22 11/11/07 116 116 119 300 299
82 $35,104 8.390 0.05 ACT/360 09/11/22 09/11/07 110 110 117 300 297
83 $30,835 7.760 0.08 ACT/360 10/11/27 10/11/07 111 111 118 360 359
84 $38,789 9.355 0.05 ACT/360 12/11/17 236 236 240 245 240
85 $30,455 7.820 0.05 ACT/360 11/11/27 11/11/07 115 115 119 370 369
86 $37,498 9.355 0.05 ACT/360 12/11/17 236 236 240 245 240
87 $36,078 9.590 0.05 ACT/360 10/11/22 10/11/07 114 114 118 300 298
88 $36,205 9.355 0.05 ACT/360 12/11/17 236 236 240 245 240
89 $31,085 8.080 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
90 $29,988 8.500 0.05 ACT/360 06/01/27 12/01/05 92 92 96 360 354
91 $32,151 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
FIRST
LOAN P&I
NO. SEASONING DATE
- ---- --------- --------
<S> <C> <C>
46 10 02/01/98
47 1 12/01/97
48 1 12/11/97
49 1 12/01/97
50 1 12/01/97
51 1 12/11/97
52 1 12/11/97
53 4 09/11/97
54 2 11/11/97
55 1 11/11/99
56 1 12/11/97
57 1 12/11/97
58 4 09/11/97
59 1 12/11/97
60 1 12/11/97
61 2 11/11/97
62 6 07/11/97
63 2 11/11/97
64 0 01/11/98
65 1 12/11/97
66 0 01/01/98
67 6 07/01/97
68 3 10/11/97
69 1 12/11/97
70 1 12/11/97
71 4 09/11/97
72 5 08/11/97
73 0 01/11/98
74 1 12/11/97
75 1 12/11/97
76 1 12/11/97
77 1 12/11/97
78 4 09/11/99
79 6 07/11/97
80 2 11/11/97
81 1 12/11/97
82 3 10/11/97
83 1 12/11/97
84 5 08/11/97
85 1 12/11/97
86 5 08/11/97
87 2 11/11/97
88 5 08/11/97
89 1 12/11/97
90 6 07/07/97
91 0 01/11/98
</TABLE>
S-95
<PAGE>
<TABLE>
<CAPTION>
CSFB CUT-OFF
LOAN CONTROL DATE
NO. NO. PROPERTY NAME BORROWER NAME BALANCE
- ---- ------- --------------------------------------------- ------------------------------------------ ------------
<S> <C> <C> <C> <C>
92 027 Boott Mills South and Storage Boott Mills I, LLC $ 3,831,542
93 077G Furr's--Louisiana (876) Furr's 1, LLC $ 3,831,286
94 136 Quakerbridge Shoppes Shopping Center Broadway Associates of Warren, LLC $ 3,828,117
95 074 Emerald Pointe Apartments Graoch Associates #3 Limited Partnership $ 3,796,394
96 061 CVS--Natick, MA Central Speen Limited Partnership $ 3,671,358
97 125 Northgate Plaza Missouri Associates $ 3,659,149
98 129 Paramount Best Western Paramount Hotel Corp. $ 3,596,961
99 111 Los Angeles Fine Arts & Wine Storage Company Los Angeles Fine Arts Company $ 3,596,291
100 077C Furr's--Geo. Dieter (938) Furr's 9, LLC $ 3,488,345
101 084 Heritage Paradise 8777 Corporation $ 3,487,244
102 077D Furr's--Viscount (937) Furr's 8, LLC $ 3,484,438
103 040 Citrus Park Apartments Bryant Real Estate Limited Partnership $ 3,450,000
104 161 RM-Williamsburg North Realmark-Williamsburg, LLC $ 3,448,916
105 170 Spartan Business Center Pelio Properties, LLC $ 3,392,230
106 077B Furr's Americas (944) Furr's 7, LLC $ 3,335,814
107 031C Brandywine--Alexander Plaza II Williamson County Partners, L.P. $ 3,297,628
108 080 Gold River Racquet Club Gold River Racquet Club Venture $3,294,684
109 001 1278-1284 First Avenue 1278-1284 First Avenue Realty, LLC $3,291,600
110 026 Bonita Center Carson Bonita Plaza, LLC. $3,197,787
111 093 Interlaken Inn Interlaken Inn Associates LTD $3,196,822
112 107 Le Reve Hotel Le Reve Hotel, LLC $3,087,300
113 160 RM-Wayne Estates Realmark-Wayne, L.L.C. $3,086,520
114 140 Rite Aid--86th, New York, NY East 86th Street Partners, LLC $3,068,610
115 071 Eckerd's Drug Store--Plano, TX RIC Plano Trust $3,015,326
116 189 Windsor Gardens Windsor Care Center National City, Ltd. $2,997,302
117 031B Brandywine--Clear Point Plaza Gautier Associates $2,947,880
118 082 Havana Park Center Havana and Iliff LLC $2,941,508
119 031E Brandywine--Windward Village Windward Park Limited Partnership $2,897,882
120 116 Maumee Marketplace Reynolds/Dussel Enterprises, LTD. $2,824,901
121 047 Colton-2302 Martin TPF Partners $2,733,899
122 058 CVS Pharmacy--Greenville, SC Greenville SC Business Trust $2,723,636
123 155 RM-Players Club Realmark-Players, L.L.C. $2,703,147
124 105 Lafayette Business Park Lafayette Business Park, LLC $2,695,167
125 050 Comfort Inn--Garland Desai Enterprises, Inc. $2,693,936
126 010 7-Eleven--Anaheim, CA Harbor Katella Investment Company LLC $2,668,289
127 202 CVS Pharmacy--Hyannis, MA Hyannis North Limited Partnership $2,659,530
128 159 RM-The Villa Apartments Realmark-Villa, L.L.C. $2,642,493
129 157 RM-Stonegate Townhomes Realmark-Stonegate L.L.C. $2,638,649
130 114 Marina Lakes Plaza Wichita Shopping Center Associates, L. P $2,595,544
131 013 8 Bow Street Bow Street Realty, LLC $2,471,008
132 148 Rite Aid--Kingston, NY Univest-Kingston, LLC $2,410,663
133 191 CVS Pharmacy--Culpeper, Va Wilton Partners Culpepper LLC $2,384,068
134 045 Colton-18952 MacArthur Blvd. TPF Partners et al $2,310,515
135 206 Hook-SupeRx, Inc.--Knoxville Street, GB Knoxville Developers, LLC $2,232,301
Peoria, IL
136 044 Colton-18872 MacArthur Blvd. TPF Partners $2,223,256
137 057 CVS-Garfield, NJ Garfield-Midland LLC $2,210,521
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
PRIMARY STATED ANTICIPATED REMAINING ANTICIPATED ORIGINAL REMAINING
LOAN MONTHLY MORTGAGE SERVICING INTEREST MATURITY REPAYMENT REMAINING LOCKOUT REMAINING AMORTIZATION AMORTIZATION
NO. PAYMENT RATE FEE RATE CALC. DATE DATE LOCKOUT AND YM TERM TERM TERM
- ---- ---------- -------- --------- -------- -------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
92 $29,655 8.550 0.05 ACT/360 08/11/27 08/11/07 112 112 116 360 356
93 $31,980 9.110 0.05 ACT/360 8/31/19 11/11/07 115 115 119 265 265
94 $28,272 7.480 0.05 ACT/360 11/11/22 11/11/07 117 117 119 300 299
95 $25,486 7.080 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
96 $28,031 7.044 0.05 ACT/360 01/11/18 237 237 241 243 241
97 $29,569 8.510 0.05 ACT/360 09/11/22 09/11/07 112 112 117 300 297
98 $31,029 9.330 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
99 $28,084 8.125 0.1775 ACT/360 11/11/22 11/11/07 115 115 119 300 299
100 $29,114 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
101 $27,502 8.210 0.05 ACT/360 08/11/22 08/11/07 109 109 116 300 296
102 $29,114 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
103 $24,594 7.500 0.05 ACT/360 11/11/27 11/11/07 116 116 119 336 336
104 $25,136 7.900 0.05 ACT/360 08/11/27 01/11/06 93 93 97 360 356
105 $24,759 7.920 0.05 ACT/360 08/11/27 08/11/07 109 109 116 360 356
106 $27,718 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
107 $23,437 7.660 0.05 ACT/360 11/11/27 11/11/07 116 116 119 360 359
108 $28,471 8.420 0.05 ACT/360 12/11/17 12/11/07 113 113 120 240 239
109 $27,220 8.790 0.05 ACT/360 09/11/22 09/11/04 74 74 81 300 297
110 $23,147 7.850 0.05 ACT/360 11/11/27 11/11/07 115 115 119 360 359
111 $25,445 8.350 0.05 ACT/360 11/11/22 11/11/07 117 117 119 300 299
112 $28,492 9.300 0.05 ACT/360 09/11/17 09/11/07 104 104 117 240 237
113 $23,579 8.400 0.05 ACT/360 06/01/27 12/01/05 92 92 96 360 354
114 $23,231 8.310 0.05 ACT/360 08/11/27 08/11/07 109 109 116 360 356
115 $24,242 7.936 0.05 30/360 01/11/17 225 225 229 235 229
116 $25,073 8.950 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
117 $20,951 7.660 0.05 ACT/360 11/11/27 11/11/07 116 116 119 360 359
118 $20,322 7.370 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
119 $20,436 7.580 0.05 ACT/360 11/11/27 11/11/07 116 116 119 360 359
120 $23,425 9.320 0.05 ACT/360 07/11/27 07/11/07 111 111 115 360 355
121 $20,419 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
122 $15,577 6.657 0 30/360 05/06/18 241 241 245 246 245
123 $20,824 8.480 0.05 ACT/360 06/11/27 12/11/05 92 92 96 360 354
124 $19,868 8.030 0.05 ACT/360 09/11/27 09/11/07 110 110 117 360 357
125 $23,459 9.430 0.05 ACT/360 09/11/22 09/11/07 110 110 117 300 297
126 $21,583 8.383 0.05 ACT/360 12/11/13 192 192 192 195 192
127 $15,059 6.589 0 30/360 06/06/18 242 242 246 246 246
128 $20,002 8.300 0.05 ACT/360 06/01/27 12/01/05 92 92 96 360 354
129 $20,207 8.430 0.05 ACT/360 07/11/27 12/11/05 92 92 96 360 355
130 $20,901 8.480 0.05 ACT/360 10/11/22 10/11/07 113 113 118 300 298
131 $21,338 8.410 0.05 ACT/360 11/11/17 11/11/07 112 112 119 240 239
132 $19,250 6.971 0.05 ACT/360 12/11/16 228 228 228 226 224
133 $13,632 6.655 0 30/360 05/06/18 241 241 245 246 245
134 $17,257 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
135 $12,644 6.571 0 30/360 06/06/18 242 242 246 246 246
136 $16,605 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
137 $16,619 6.808 0.05 ACT/360 04/11/17 228 228 232 233 233
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
FIRST
LOAN P&I
NO. SEASONING DATE
- ---- --------- --------
<S> <C> <C>
92 4 09/11/97
93 0 01/11/98
94 1 12/11/97
95 1 12/11/97
96 2 11/11/97
97 3 10/11/97
98 1 12/11/97
99 1 12/11/97
100 0 01/11/98
101 4 09/11/97
102 0 01/11/98
103 1 11/11/99
104 4 09/11/97
105 4 09/11/97
106 0 01/11/98
107 1 12/11/97
108 1 12/11/97
109 3 10/11/97
110 1 12/11/97
111 1 12/11/97
112 3 10/11/97
113 6 07/07/97
114 4 09/11/97
115 6 07/11/97
116 1 12/11/97
117 1 12/11/97
118 1 12/11/97
119 1 12/11/97
120 5 08/11/97
121 5 08/11/97
122 1 12/06/97
123 6 07/11/97
124 3 10/11/97
125 3 10/11/97
126 3 10/11/97
127 0 01/06/98
128 6 07/07/97
129 5 08/11/97
130 2 11/11/97
131 1 12/11/97
132 2 11/11/97
133 1 12/06/97
134 5 08/11/97
135 0 01/06/98
136 5 08/11/97
137 0 01/11/98
</TABLE>
S-96
<TABLE>
<CAPTION>
CSFB CUT-OFF
LOAN CONTROL DATE
NO. NO. PROPERTY NAME BORROWER NAME BALANCE
- ---- ------- --------------------------------------------- ------------------------------------------ ------------
<S> <C> <C> <C> <C>
138 017 Arbor Place Apartments Heritage Place Investments #1 $2,205,392
139 152 RM-Inducon Columbia Realmark-Inducon Columbia, LLC $2,195,741
140 186 Westpark Shopping Center Westpark, LLC $2,189,683
141 059 CVS Pharmacy--Lilburn, Ga Lilburn GA Business Trust $2,169,236
142 207 Hook-SupeRx, Inc--Prospect Road, Peoria, IL GB Prospect Developers, LLC $2,167,717
143 177 Tustin Plaza Tustin Plaza Partners $2,146,355
144 077E Furr's--Montana (934) Furr's 6, LLC $2,120,742
145 194 CVS Pharmacy--Kernsville, NC Kernersville NC Business Trust $2,107,872
146 049 Comfort Inn Hotel Poinco Airport, Inc. $2,097,918
147 070 Eckerd's Drug Store--Acworth Univest-Acworth, L.L.C. $2,069,291
148 205 Hook-SupeRx, Inc--Big Hollow Road, Peoria, IL GB Big Hollow Developers, LLC $2,046,885
149 204 Revco Discount Drug Center--Elkin, NC Elkin NC Business Trust $2,024,659
150 154 RM-O'Hara Apartments Realmark-O'Hara, LLC $2,020,616
151 141 Rite Aid--Augusta, ME Outer Road LLC $2,012,829
152 153 RM-Jackson Park Realmark-Jackson, L.L.C. $1,930,085
153 077F Furr's--Ruidoso (905) Furr's 4, LLC $1,923,027
154 096 Kendall Professional Building Kendall Professional Building, Inc. $1,898,530
155 062 CVS Pharmacy--North Conway, NH Centercorp-North Conway LLC $1,880,945
156 060 CVS Pharmacy--Monroe, NC Monroe NC Business Trust $1,879,337
157 163 Seaman's Furniture Mehran Equities, Ltd. $1,873,174
158 065 Revco Discount Drug Center--Washington Court Tatco Washington, Ltd $1,840,312
House
159 168 South Towne Office Park JDI Monona Limited Partnership $1,837,909
160 054 CVS Pharmacy--Anderson, SC Anderson SC Business Trust $1,763,832
161 056 CVS Pharmacy--Cumming, Ga Cummings Georgia Business Trust $1,763,399
162 064 CVS Pharmacy--Philadelphia, PA Philadelphia PA Business Trust $1,761,774
163 146 Rite Aid--Jonesboro, Battle Creek William R. Winner, Jr., L.L.C. $1,736,367
164 055 CVS Pharmacy--Burnsville, NC Burnsville NC Business Trust $1,728,085
165 015 Airport Plaza Passaic '85 Associates LP $1,701,939
166 143 Rite Aid--Gastonia, NC RA Gastonia WJC Business Trust $1,677,618
167 043 Colton Plaza TPF Partners $1,627,376
168 196 CVS Pharmacy--Athens, WV Athens Square Limited Liability Company $1,596,647
169 063 CVS Pharmacy--Oxford, Ma 302 Main Street LLC $1,575,943
170 162 Saufley Square Shopping Center Pensacola 1997 Associates, L.L.C. $1,549,406
171 147 Rite Aid--Jonesboro, Flint Winner Properties, LLC et al $1,533,695
172 046 Colton-2222 Martin Street TPF Partners $1,531,351
173 006 2192 Martin 2192 Martin Street Partners $1,496,100
174 164 A-Secured Self and Vehicle Storage Facility A-Secured Self & Vehicle Storage I, L.L.C. $1,470,942
175 037 Casa Del Lago Apartments Wentwood Del Lago I, L.P. $1,449,077
176 132 Peachtree Apartments Moores Mill Investors II, LLC $1,394,043
177 151 RM-Beaver Creek Realmark-Beaver, L.L.C. $1,347,430
178 145 Rite Aid--Hinesville PFC Hinesville Associates, LLC $1,340,932
179 031D Brandywine--Kash N'Karry Pasadena Pasadena Partners $1,309,059
180 124 North Ranch Center Samuel A. Keesal, Jr. $1,277,941
181 142 Rite Aid--Claxton, GA Claxton Associates 1996, LLC $1,237,929
182 035 Caldonian/Transcript-Summary Transcript/Caledonian Corporation $1,149,236
183 090 Hollywood Video 5921 University Square, LLC $1,049,295
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
PRIMARY STATED ANTICIPATED REMAINING ANTICIPATED ORIGINAL REMAINING
LOAN MONTHLY MORTGAGE SERVICING INTEREST MATURITY REPAYMENT REMAINING LOCKOUT REMAINING AMORTIZATION AMORTIZATION
NO. PAYMENT RATE FEE RATE CALC. DATE DATE LOCKOUT AND YM TERM TERM TERM
- ---- ---------- -------- --------- -------- -------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
138 $16,303 7.480 0.10 ACT/360 10/11/22 10/11/07 116 116 118 300 298
139 $16,787 7.867 0.05 ACT/360 10/11/22 04/11/06 96 96 100 300 298
140 $18,462 9.000 0.05 ACT/360 06/11/22 06/11/07 107 107 114 300 294
141 $12,669 6.806 0 30/360 05/06/18 241 241 245 246 245
142 $12,278 6.571 0 30/360 06/06/18 242 242 246 246 246
143 $16,532 8.500 0.05 ACT/360 09/11/27 08/11/07 113 113 116 360 357
144 $17,721 9.110 0.05 ACT/360 12/11/19 11/11/07 115 115 119 265 265
145 $11,909 6.573 0 30/360 06/06/18 242 242 246 246 246
146 $16,712 8.360 0.05 ACT/360 11/11/22 11/11/07 117 117 119 300 299
147 $15,955 6.983 0.05 ACT/360 03/11/17 231 231 231 233 231
148 $11,594 6.571 0 30/360 06/06/18 242 242 246 246 246
149 $11,403 6.553 0 30/360 06/06/18 242 242 246 246 246
150 $15,296 8.290 0.05 ACT/360 06/01/27 12/07/05 93 93 96 360 354
151 $15,793 7.016 0.05 30/360 09/11/17 237 237 237 238 237
152 $14,638 8.310 0.05 ACT/360 06/11/27 12/11/05 92 92 96 360 354
153 $15,719 9.110 0.05 ACT/360 12/11/17 11/11/07 115 115 119 241 240
154 $13,013 7.290 0.05 ACT/360 11/11/27 11/11/07 117 117 119 360 359
155 $11,407 7.083 0 30/360 02/06/18 238 238 242 245 242
156 $10,993 6.806 0 30/360 05/06/18 241 241 245 246 245
157 $15,060 8.470 0.05 ACT/360 11/11/22 11/11/07 112 112 119 300 299
158 $10,858 6.877 0.05 30/360 04/06/18 240 240 244 245 244
159 $13,621 7.520 0.05 ACT/360 11/11/22 11/11/07 115 115 119 300 299
160 $10,668 7.057 0 30/360 03/06/18 239 239 243 246 243
161 $10,506 6.944 0 30/360 01/06/18 237 237 241 245 241
162 $10,240 6.767 0 30/360 01/06/18 237 237 241 245 241
163 $13,577 6.946 0.05 30/360 10/11/17 238 238 238 236 234
164 $ 9,906 6.673 0 30/360 05/06/18 241 241 245 246 245
165 $13,443 8.250 0.05 ACT/360 10/11/22 10/11/07 113 113 118 300 298
166 $13,681 7.303 0.05 30/360 02/11/17 226 226 230 229 226
167 $12,155 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
168 $ 9,041 6.589 0 30/360 06/06/18 242 242 246 246 246
169 $ 9,169 6.774 0 30/360 02/06/18 238 238 242 245 242
170 $12,450 8.440 0.05 ACT/360 09/11/22 09/11/07 112 112 117 300 297
171 $11,777 6.742 0.05 ACT/360 11/11/17 239 239 239 240 239
172 $11,438 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
173 $11,174 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
174 $11,758 8.380 0.125 ACT/360 09/11/22 09/11/07 110 110 117 300 297
175 $10,904 8.260 0.05 ACT/360 11/11/27 11/11/07 112 112 119 360 359
176 $11,207 8.430 0.05 ACT/360 07/11/22 07/11/07 108 108 115 300 295
177 $10,137 8.230 0.05 ACT/360 07/11/27 12/11/05 92 92 96 360 355
178 $11,435 8.170 0.05 30/360 07/11/17 231 231 235 240 236
179 $ 9,304 7.660 0.05 ACT/360 11/11/27 11/11/07 116 116 119 360 359
180 $ 9,806 8.460 0.05 ACT/360 09/11/27 08/11/07 109 109 116 360 357
181 $11,035 8.570 0.05 30/360 06/11/17 230 230 234 233 227
182 $ 8,478 8.050 0.05 ACT/360 11/11/27 11/11/07 117 117 119 360 359
183 $ 7,705 8.000 0.13 ACT/360 11/11/27 11/11/07 112 112 119 360 359
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
FIRST
LOAN P&I
NO. SEASONING DATE
- ---- --------- --------
<S> <C> <C>
138 2 11/11/97
139 2 11/11/97
140 6 07/11/97
141 1 12/06/97
142 0 01/06/98
143 3 10/11/97
144 0 01/11/98
145 0 01/06/98
146 1 12/11/97
147 2 11/11/97
148 0 01/06/98
149 0 01/06/98
150 6 07/07/97
151 1 12/11/97
152 6 07/11/97
153 1 12/11/97
154 1 12/11/97
155 3 10/06/97
156 1 12/06/97
157 1 12/11/97
158 1 12/06/97
159 1 12/11/97
160 3 10/06/97
161 4 09/06/97
162 4 09/06/97
163 2 11/11/97
164 1 12/06/97
165 2 11/11/97
166 3 10/11/97
167 5 08/11/97
168 0 01/06/98
169 3 10/06/97
170 3 10/11/97
171 1 12/11/97
172 5 08/11/97
173 5 08/11/97
174 3 10/11/97
175 1 12/11/97
176 5 08/11/97
177 5 08/11/97
178 4 09/11/97
179 1 12/11/97
180 3 10/11/97
181 6 07/11/97
182 1 12/11/97
183 1 12/11/97
</TABLE>
S-97
<PAGE>
<TABLE>
<CAPTION>
CSFB CUT-OFF
LOAN CONTROL DATE
NO. NO. PROPERTY NAME BORROWER NAME BALANCE
- ---- ------- --------------------------------------------- ------------------------------------------ ------------
<S> <C> <C> <C> <C>
184 014 AAA-Discount Storage AAA Discount Storage, LLC $ 996,899
185 048 Colton-Chanteclair Restaurant TPF Partners $ 545,003
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
PRIMARY STATED ANTICIPATED REMAINING ANTICIPATED ORIGINAL REMAINING
LOAN MONTHLY MORTGAGE SERVICING INTEREST MATURITY REPAYMENT REMAINING LOCKOUT REMAINING AMORTIZATION AMORTIZATION
NO. PAYMENT RATE FEE RATE CALC. DATE DATE LOCKOUT AND YM TERM TERM TERM
- ---- ---------- -------- --------- -------- -------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
184 $8,392 9.000 0.05 ACT/360 08/11/22 08/11/07 109 109 116 300 296
185 $4,071 8.160 0.05 ACT/360 07/11/27 07/11/07 112 112 115 360 355
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<CAPTION>
FIRST
LOAN P&I
NO. SEASONING DATE
- ---- --------- --------
<S> <C> <C>
184 4 09/11/97
185 5 08/11/97
</TABLE>
S-98
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
NUMBER CUT-OFF PERCENT BY WEIGHTED
RANGE OF OF LOANS/ DATE CUT-OFF AVERAGE
DEBT SERVICE LOAN PRINCIPAL PRINCIPAL MORTGAGE
COVERAGE RATIOS POOLS BALANCE BALANCE RATE
- --------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
1.00x--1.09x .. 2 $ 33,143,690 2.3% 7.420%
1.10x--1.19x .. 8 $ 46,879,917 3.2% 7.914%
1.20x--1.29x .. 30 $ 253,732,895 17.3% 8.031%
1.30x--1.39x .. 31 $ 334,411,677 22.8% 8.264%
1.40x--1.49x .. 30 $ 258,467,613 17.6% 7.996%
1.50x--1.59x .. 12 $ 113,610,672 7.7% 7.888%
1.60x--1.69x .. 9 $ 35,291,270 2.4% 8.130%
1.70x--1.79x .. 7 $ 25,374,428 1.7% 8.736%
1.80x--1.89x .. 4 $ 154,676,632 10.6% 7.677%
Credit Lease .. 52 $ 210,401,396 14.4% 8.034%
----------- --------------- ------------ ----------
TOTAL ......... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED
DEBT SERVICE REMAINING AMORTIZATION AVERAGE AVERAGE
COVERAGE RATIOS TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- --------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1.00x--1.09x .. 194 419 79 1.06x
1.10x--1.19x .. 136 343 75 1.15x
1.20x--1.29x .. 117 339 74 1.24x
1.30x--1.39x .. 120 341 69 1.34x
1.40x--1.49x .. 117 322 72 1.44x
1.50x--1.59x .. 131 317 66 1.54x
1.60x--1.69x .. 117 323 67 1.63x
1.70x--1.79x .. 117 303 65 1.76x
1.80x--1.89x .. 85 356 46 1.89x
Credit Lease .. 246 265 NAP NAP
----------- -------------- ---------- ----------
TOTAL ......... 136 327 68 1.43x
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
NUMBER CUT-OFF PERCENT BY WEIGHTED
RANGE OF OF LOANS/ DATE CUT-OFF AVERAGE
LOAN TO VALUE LOAN PRINCIPAL PRINCIPAL MORTGAGE
RATIOS POOLS BALANCE BALANCE RATE
- --------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
50% or less ... 5 $ 160,343,219 10.9% 7.729%
51%--60% ....... 12 $ 50,726,389 3.5% 8.083%
61%--70% ....... 45 $ 351,685,918 24.0% 8.443%
71%--75% ....... 42 $ 460,116,531 31.4% 7.963%
76%--80% ....... 24 $ 210,627,781 14.4% 7.743%
81%--85% ....... 5 $ 22,088,955 1.5% 7.442%
Credit Lease .. 52 $ 210,401,396 14.4% 8.034%
----------- --------------- ------------ ----------
TOTAL ......... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED
LOAN TO VALUE REMAINING AMORTIZATION AVERAGE AVERAGE
RATIOS TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- --------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
50% or less ... 86 352 45 1.85x
51%--60% ....... 136 329 56 1.53x
61%--70% ....... 114 338 65 1.37x
71%--75% ....... 121 323 73 1.39x
76%--80% ....... 137 357 78 1.27x
81%--85% ....... 119 351 82 1.29x
Credit Lease .. 246 265 NAP NAP
----------- -------------- ---------- ----------
TOTAL ......... 136 327 68 1.43x
</TABLE>
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF ANTICIPATED REPAYMENT DATES OR
MATURITY
<TABLE>
<CAPTION>
NUMBER CUT-OFF PERCENT BY WEIGHTED
RANGE OF OF LOANS/ DATE CUT-OFF AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIOS POOLS BALANCE BALANCE RATE
- --------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
50% or less ... 23 $ 299,172,404 20.4% 7.741%
51%--60% ....... 49 $ 520,504,834 35.5% 8.278%
61%--70% ....... 56 $ 404,637,533 27.6% 7.938%
71%--75% ....... 5 $ 31,274,023 2.1% 7.695%
Credit Lease .. 52 $ 210,401,396 14.4% 8.034%
----------- --------------- ------------ ----------
TOTAL ......... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED LTV AT ARD
LOAN TO REMAINING AMORTIZATION AVERAGE AVERAGE OR
VALUE RATIOS TERM (MOS.) TERM (MOS.) LTV(%) DSCR MATURITY(%)
- --------------- ----------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
50% or less ... 115 344 55 1.64x 42
51%--60% ....... 122 327 68 1.39x 57
61%--70% ....... 114 346 75 1.32x 66
71%--75% ....... 119 342 80 1.29x 73
Credit Lease .. 246 265 NAP NAP NAP
----------- -------------- ---------- ---------- ------------
TOTAL ......... 136 327 68 1.43x 57
</TABLE>
S-99
<PAGE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
CUT-OFF PERCENT BY WEIGHTED
NUMBER DATE CUT-OFF AVERAGE
OF PRINCIPAL PRINCIPAL MORTGAGE
STATE PROPERTIES BALANCE BALANCE RATE
- --------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Alabama ........ 2 $ 8,992,778 0.6% 8.649%
Arizona ........ 3 $ 21,214,793 1.4% 8.855%
Arkansas ....... 4 $ 9,989,012 0.7% 8.080%
California ..... 37 $ 457,378,228 31.2% 7.982%
Colorado ....... 3 $ 18,025,122 1.2% 7.737%
Connecticut ... 6 $ 23,062,753 1.6% 8.080%
Delaware ....... 1 $ 5,343,901 0.4% 7.500%
Florida ........ 10 $ 44,530,301 3.0% 8.749%
Georgia ........ 9 $ 37,226,794 2.5% 7.390%
Illinois ....... 6 $ 32,118,301 2.2% 7.910%
Indiana ........ 3 $ 9,774,097 0.7% 7.864%
Kansas ......... 1 $ 2,595,544 0.2% 8.480%
Kentucky ....... 4 $ 14,006,214 1.0% 7.713%
Louisiana ...... 1 $ 2,205,392 0.2% 7.480%
Maine .......... 2 $ 4,483,836 0.3% 7.784%
Maryland ....... 3 $ 21,408,838 1.5% 8.297%
Massachusetts . 9 $ 44,890,693 3.1% 8.546%
Michigan ....... 1 $ 17,541,461 1.2% 8.228%
Mississippi ... 1 $ 2,947,880 0.2% 7.660%
Missouri ....... 2 $ 8,054,328 0.5% 8.281%
Nevada ......... 1 $ 7,200,000 0.5% 8.705%
New Hampshire . 1 $ 1,880,945 0.1% 7.083%
New Jersey ..... 13 $ 120,330,015 8.2% 7.746%
New Mexico ..... 3 $ 9,641,685 0.7% 9.110%
New York ....... 16 $ 241,121,094 16.4% 8.265%
North Carolina 7 $ 20,732,154 1.4% 7.360%
Ohio ........... 6 $ 31,023,511 2.1% 8.181%
Oklahoma ....... 1 $ 5,196,086 0.4% 7.430%
Oregon ......... 1 $ 996,899 0.1% 9.000%
Pennsylvania .. 10 $ 41,581,912 2.8% 7.588%
South Carolina 5 $ 11,346,318 0.8% 7.627%
Tennessee ...... 2 $ 21,533,866 1.5% 7.457%
Texas .......... 12 $ 55,553,502 3.8% 8.581%
Virginia ....... 2 $ 6,389,552 0.4% 8.348%
Washington ..... 4 $ 33,673,399 2.3% 7.295%
Washington DC . 2 $ 46,536,244 3.2% 7.733%
West Virginia . 1 $ 1,596,647 0.1% 6.589%
Wisconsin ...... 8 $ 23,866,092 1.6% 7.602%
------------ --------------- ------------ ----------
TOTAL ......... 203 $1,465,990,190 100.0% 8.027%
============ =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
REMAINING AMORTIZATION AVERAGE AVERAGE
STATE TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- --------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Alabama ........ 102 313 71 1.19x
Arizona ........ 75 329 62 1.39x
Arkansas ....... 118 358 74 1.10x
California ..... 116 344 62 1.54x
Colorado ....... 119 309 70 1.40x
Connecticut ... 119 262 68 1.39x
Delaware ....... 119 299 75 1.21x
Florida ........ 174 306 66 1.35x
Georgia ........ 157 318 74 1.22x
Illinois ....... 164 307 70 1.33x
Indiana ........ 107 330 68 1.38x
Kansas ......... 118 298 63 1.16x
Kentucky ....... 139 324 72 1.40x
Louisiana ...... 118 298 79 1.37x
Maine .......... 172 238 72 1.42x
Maryland ....... 117 326 67 1.48x
Massachusetts . 137 315 70 1.30x
Michigan ....... 299 299 NAP NAP
Mississippi ... 119 359 70 1.42x
Missouri ....... 118 330 73 1.40x
Nevada ......... 74 360 74 1.30x
New Hampshire . 242 242 NAP NAP
New Jersey ..... 141 341 73 1.35x
New Mexico ..... 119 260 NAP NAP
New York ....... 129 332 68 1.38x
North Carolina 170 289 76 1.32x
Ohio ........... 232 312 71 1.38x
Oklahoma ....... 119 359 81 1.33x
Oregon ......... 116 296 66 1.46x
Pennsylvania .. 145 293 78 1.37x
South Carolina 155 300 59 1.28x
Tennessee ...... 119 359 76 1.39x
Texas .......... 218 280 67 1.59x
Virginia ....... 242 242 NAP NAP
Washington ..... 119 359 80 1.28x
Washington DC . 119 299 71 1.46x
West Virginia . 246 246 NAP NAP
Wisconsin ...... 137 341 74 1.55x
----------- -------------- ---------- ----------
TOTAL ......... 136 327 68 1.43x
</TABLE>
S-100
<PAGE>
YEAR BUILT OR RENOVATED
<TABLE>
<CAPTION>
CUT-OFF PERCENT BY WEIGHTED
RANGE OF YEAR DATE CUT-OFF AVERAGE
BUILT/ NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
RENOVATED PROPERTIES BALANCE BALANCE RATE
- -------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Pre 1970....... 5 $ 14,106,668 1.0% 8.592%
1970-1974...... 19 $ 63,221,618 4.3% 8.334%
1975-1979...... 13 $ 42,940,781 2.9% 8.035%
1980-1984...... 19 $ 73,455,741 5.0% 8.134%
1985-1987...... 27 $ 138,125,488 9.4% 8.374%
1988-1990...... 24 $ 274,343,531 18.7% 8.096%
1991-1993...... 15 $ 297,029,739 20.3% 7.805%
1994-1997 ..... 61 $ 522,071,107 35.6% 8.045%
Various ....... 1 $ 2,471,008 0.2% 8.410%
Not Available 19 $ 38,224,509 2.6% 6.801%
------------ --------------- ------------ ----------
TOTAL......... 203 $1,465,990,190 100.0% 8.027%
============ =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
RANGE OF YEAR AVERAGE AVERAGE WEIGHTED WEIGHTED YEAR
BUILT/ REMAINING AMORTIZATION AVERAGE AVERAGE BUILT/
RENOVATED TERM (MOS.) TERM (MOS.) LTV(%) DSCR RENOVATED
- -------------- ----------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Pre 1970....... 104 312 70 1.34x 1954
1970-1974...... 108 333 68 1.40x 1972
1975-1979...... 126 330 66 1.46x 1977
1980-1984...... 117 328 72 1.37x 1982
1985-1987...... 130 326 67 1.41x 1986
1988-1990...... 131 341 72 1.27x 1989
1991-1993...... 106 343 59 1.62x 1991
1994-1997 ..... 158 315 71 1.41x 1997
Various ....... 119 239 72 1.42x NA
Not Available 238 247 78 1.35x NA
----------- -------------- ---------- ---------- -----------
TOTAL......... 136 327 68 1.43x 1990
</TABLE>
S-101
<PAGE>
MORTGAGED PROPERTIES BY PROPERTY TYPE
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE
CUT-OFF DATE CUT-OFF AVERAGE REMAINING
PROPERTY NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE TERM
TYPE PROPERTIES BALANCE BALANCE RATE (MOS.)
- ------------ ---------- -------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Office Multi-Tenant 25 $ 373,182,702 25.5% 8.048% 112
Single Tenant 2 $ 41,270,875 2.8% 7.675% 179
---------- -------------- ----------
Total Office 27 $ 414,453,577 28.3% 8.011% 119
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Retail Anchored 21 $ 200,535,482 13.7% 7.853% 123
Unanchored 11 $ 97,600,945 6.7% 7.865% 119
Single Tenant 5 $ 13,414,338 0.9% 8.381% 118
---------- -------------- ----------
Total Retail 37 $ 311,550,765 21.3% 7.879% 121
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Hospitality Full Service 12 $ 207,562,192 14.2% 8.054% 118
Limited Service 13 $ 32,214,047 2.2% 8.787% 118
Extended Stay 2 $ 11,473,971 0.8% 7.659% 119
---------- -------------- ----------
Total Hospitality 27 $ 251,250,210 17.1% 8.130% 118
- ----------------------------- ---------- -------------- ---------- -------- ---------
Credit Lease 55 $ 210,401,396 14.4% 8.034% 246
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Multifamily Rental 31 $ 136,656,885 9.3% 7.925% 112
Cooperative 1 $ 16,350,311 1.1% 7.690% 179
---------- -------------- ----------
Total Multifamily 32 $ 153,007,197 10.4% 7.900% 119
- ----------------------------- ---------- -------------- ---------- -------- ---------
Industrial 11 $ 60,521,206 4.1% 8.123% 115
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Mobile Home/Recreational
Vehicle Park 4 $ 38,944,629 2.7% 8.781% 74
- ----------------------------- ---------- -------------- ---------- -------- ---------
Mixed Use 3 $ 9,472,846 0.6% 8.358% 118
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Senior Housing 2 $ 6,484,546 0.4% 8.552% 117
- ----------------------------- ---------- -------------- ---------- -------- ---------
Other Self-Storage(4) 3 $ 6,064,132 0.4% 8.331% 118
Racquet Club 1 $ 3,294,684 0.2% 8.420% 120
Restaurant 1 $ 545,003 0.0% 8.160% 115
---------- -------------- ----------
Total Other 5 $ 9,903,818 0.7% 8.351% 119
- ----------------------------- ---------- -------------- ---------- -------- ---------
TOTAL 203 $1,465,990,190 100.0% 8.027% 136
========== ============== ========== ======== =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE WEIGHTED WEIGHTED LOAN WEIGHTED AVERAGE
PROPERTY AMORTIZATION AVERAGE AVERAGE PROPERTY PER AVERAGE YEAR BUILT/
TYPE TERM (MOS.) LTV (%) DSCR (X) SIZE (1) SIZE(3) OCCUP(2) RENOVATED
- ------------ ------------ -------- -------- --------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office 357 58% 1.56x 3,249,062 $ 115 98% 1989
392 76% 1.19x 297,520 $ 139 100% 1988
Total Office 360 60% 1.52x 3,546,582 $ 117 98% 1989
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Retail 342 75% 1.29x 2,848,107 $ 70 96% 1991
341 74% 1.39x 934,225 $ 104 96% 1991
349 73% 1.24x 151,925 $ 88 100% 1993
Total Retail 342 75% 1.32x 3,934,257 $ 79 96% 1991
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Hospitality 299 71% 1.45x 2,709 $ 76,619 79% 1994
283 66% 1.65x 1,138 $ 28,308 72% 1992
225 72% 1.38x 190 $ 60,389 87% 1991
Total Hospitality 293 70% 1.47x 4,037 $62,237 79% 1993
- -------------------------- -------- -------- --------- ------- -------- ----------- ----
Credit Lease 265 NAP NAP 1,878,622 $ 112 100% 1993
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Multifamily 348 74% 1.30x 4,055 $ 29,648 95% 1984
359 57% 1.54x 535 $ 30,561 99% 1986
Total Multifamily 349 72% 1.32x 4,590 $29,755 95% 1984
- -------------------------- -------- -------- --------- ------- -------- ----------- ----
Industrial 327 69% 1.42x 1,278,544 $ 47 99% 1988
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Mobile Home/Recreational
Vehicle Park 338 66% 1.34x 3,327 $11,706 86% 1990
- -------------------------- -------- -------- --------- ------- -------- ----------- ----
Mixed Use 298 58% 1.38x 291,812 $ 32 99% 1980
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Senior Housing 297 70% 1.61x 197 $32,916 86%
- -------------------------- -------- -------- --------- ------- -------- -----------
Other 298 64% 1.46x 148,620 $ 41 82% 1992
239 58% 1.56x 22,890 $ 144 100% 1991
355 61% 1.60x 8,000 $ 68 100% 1975
Total Other 282 62% 1.50x 179,510 $ 55 89% 1991 1978
- -------------------------- -------- -------- --------- ------- -------- ----------- ---- -----
TOTAL 327 68% 1.43x NA NA 94% 1990
============ ======== ======== ========= ======= ======== ===========
</TABLE>
- ------------
(1) Property Size refers to total leasable square feet with respect to
retail, office and industrial/warehouse properties, number of units
with respect to multifamily properties and the mobile home/recreational
vehicle parks, number of guest rooms with respect to each hotel
property and the number of beds with respect to each senior housing
property. Excludes Loan No. 17 which consists of both multifamily units
and retail space.
(2) Weighted average of the occupancy percentages for the corresponding
property type determined on the basis of the individual occupancy set
forth on Annex A.
(3) Excludes Loan No. 17 which consists of both multifamily units and
retail space.
(4) For the purposes of this Prospectus Supplement, Loan No. 99, which is a
storage facility, has been categorized as "self-storage."
S-102
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF NUMBER CUT-OFF PERCENT BY WEIGHTED
CUT-OFF DATE OF LOANS/ DATE CUT-OFF AVERAGE
PRINCIPAL LOAN PRINCIPAL PRINCIPAL MORTGAGE
BALANCES POOLS BALANCE BALANCE RATE
- -------------------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
$ 500,000+ - 1,000,000 .. 2 $ 1,541,902 0.1% 8.703%
$1,000,000+ - 2,000,000 . 32 $ 51,132,735 3.5% 7.669%
$2,000,000+ - 3,000,000 . 36 $ 87,181,028 5.9% 7.794%
$3,000,000+ - 4,000,000 . 27 $ 94,207,256 6.4% 8.323%
$4,000,000+ - 5,000,000 . 12 $ 52,158,848 3.6% 8.223%
$5,000,000+ - 6,000,000 . 15 $ 83,300,846 5.7% 8.109%
$6,000,000+ - 7,000,000 . 13 $ 84,217,386 5.7% 8.148%
$7,000,000+ - 8,000,000 . 7 $ 51,480,123 3.5% 8.189%
$8,000,000+ - 9,000,000 . 3 $ 25,884,400 1.8% 7.798%
$9,000,000+ - 10,000,000 7 $ 66,173,641 4.5% 8.219%
$10,000,000+ - 15,000,000 11 $ 125,553,972 8.6% 7.918%
$15,000,000+ - 20,000,000 7 $ 117,737,024 8.0% 8.134%
$20,000,000+ - 30,000,000 4 $ 90,356,607 6.2% 7.911%
$30,000,000+ - 40,000,000 4 $ 134,332,777 9.2% 7.858%
$40,000,000+ - 50,000,000 1 $ 42,969,590 2.9% 7.740%
$50,000,000+ - 70,000,000 1 $ 63,000,000 4.3% 8.120%
$70,000,000+
- 80,000,000............. 2 $ 148,867,407 10.2% 8.462%
$80,000,000+ ............. 1 $ 145,894,648 10.0% 7.640%
----------- --------------- ------------ ----------
TOTAL ................. 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RANGE OF WEIGHTED WEIGHTED
CUT-OFF DATE AVERAGE AVERAGE WEIGHTED WEIGHTED
PRINCIPAL REMAINING AMORTIZATION AVERAGE AVERAGE
BALANCES TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- -------------------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
$ 500,000+ - 1,000,000 .. 116 317 64 1.51x
$1,000,000+ - 2,000,000 . 172 288 69 1.37x
$2,000,000+ - 3,000,000 . 158 296 66 1.43x
$3,000,000+ - 4,000,000 . 123 304 68 1.43x
$4,000,000+ - 5,000,000 . 142 290 70 1.44x
$5,000,000+ - 6,000,000 . 135 311 74 1.41x
$6,000,000+ - 7,000,000 . 147 324 71 1.34x
$7,000,000+ - 8,000,000 . 155 308 74 1.37x
$8,000,000+ - 9,000,000 . 118 331 70 1.35x
$9,000,000+ - 10,000,000 140 319 73 1.37x
$10,000,000+ - 15,000,000 155 333 71 1.40x
$15,000,000+ - 20,000,000 153 334 68 1.39x
$20,000,000+ - 30,000,000 175 340 71 1.27x
$30,000,000+ - 40,000,000 137 342 73 1.36x
$40,000,000+ - 50,000,000 120 359 77 1.38x
$50,000,000+ - 70,000,000 117 336 75 1.23x
$70,000,000+
- 80,000,000............. 117 329 67 1.36x
$80,000,000+ ............. 83 359 45 1.89x
----------- -------------- ---------- ----------
TOTAL ................. 136 327 68 1.43x
=========== ============== ========== ==========
</TABLE>
S-103
<PAGE>
YEAR OF SCHEDULED MATURITY
<TABLE>
<CAPTION>
NUMBER OF CUT-OFF PERCENT BY WEIGHTED
YEAR OF LOANS/ DATE CUT-OFF AVERAGE
SCHEDULED LOAN PRINCIPAL PRINCIPAL MORTGAGE
MATURITY POOLS BALANCE BALANCE RATE
- ----------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
2004 ....... 1 $ 4,400,254 0.3% 6.528%
2007 ....... 1 $ 5,638,000 0.4% 7.800%
2012 ....... 2 $ 23,429,187 1.6% 7.684%
2013 ....... 1 $ 2,668,289 0.2% 8.383%
2016 ....... 2 $ 7,831,696 0.5% 8.023%
2017 ....... 16 $ 40,055,976 2.7% 8.362%
2018........ 20 $ 45,935,380 3.1% 7.089%
2019........ 7 $ 26,003,972 1.8% 9.110%
2020 ....... 1 $ 9,315,796 0.6% 8.345%
2022........ 55 $ 453,802,924 31.0% 8.173%
2024........ 2 $ 28,846,747 2.0% 8.920%
2025 ....... 1 $ 16,433,341 1.1% 9.110%
2027........ 74 $ 694,793,997 47.4% 7.849%
2029........ 1 $ 75,000,000 5.1% 8.660%
2033........ 1 $ 31,834,631 2.2% 7.410%
----------- -------------- ------------ ----------
TOTAL .... 185 $1,465,990,190 100.0% 8.027%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
YEAR OF AVERAGE AVERAGE WEIGHTED WEIGHTED
SCHEDULED REMAINING AMORTIZATION AVERAGE AVERAGE
MATURITY TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- ----------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
2004 ....... 74 74 NAP NAP
2007 ....... 120 300 78 1.21x
2012 ....... 161 305 62 1.48x
2013 ....... 192 192 NAP NAP
2016 ....... 223 223 NAP NAP
2017 ....... 205 236 55 1.50x
2018........ 227 244 74 1.78x
2019........ 119 265 NAP NAP
2020 ....... 274 266 NAP NAP
2022........ 153 299 70 1.44x
2024........ 69 330 64 1.37x
2025 ....... 112 334 65 1.26x
2027........ 115 355 67 1.45x
2029........ 117 360 63 1.30x
2033........ 197 421 80 1.06x
----------- -------------- ---------- ----------
TOTAL .... 136 327 68 1.43x
=========== ============== ========== ==========
</TABLE>
The weighted average year of scheduled maturity is 2024.
S-104
<PAGE>
RANGE OF REMAINING ANTICIPATED TERMS
<TABLE>
<CAPTION>
NUMBER PERCENT
RANGE OF OF CUT-OFF BY WEIGHTED
REMAINING LOANS/ DATE CUT-OFF AVERAGE
ANTICIPATED LOAN PRINCIPAL PRINCIPAL MORTGAGE
TERM POOLS BALANCE BALANCE RATE
- ----------------- -------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
61+ -72 months ... 2 $ 28,846,747 2.0% 8.920%
73+ -84 months ... 4 $ 160,786,501 11.0% 7.681%
85+ -96 months ... 8 $ 20,258,610 1.4% 8.390%
97+ -108 months .. 5 $ 22,453,799 1.5% 8.065%
109+ -120 months . 116 $ 941,769,194 64.2% 8.133%
169+ -180 months . 6 $ 81,966,565 5.6% 7.587%
181+ -192 months . 1 $ 2,668,289 0.2% 8.383%
193+ -204 months . 1 $ 31,834,631 2.2% 7.410%
217+ -228 months . 2 $ 7,831,696 0.5% 8.023%
229+ -240 months . 12 $ 29,279,959 2.0% 8.203%
241+ -252 months . 19 $ 39,977,534 2.7% 6.747%
265+ -276 months . 1 $ 9,315,796 0.6% 8.345%
289+ -300 months . 8 $ 89,000,869 6.1% 8.250%
-------- --------------- ----------- ----------
TOTAL .......... 185 $1,465,990,190 100.0% 8.027%
======== =============== =========== ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OF WEIGHTED WEIGHTED WEIGHTED REMAINING
REMAINING AVERAGE AVERAGE WEIGHTED WEIGHTED AVERAGE LOCKOUT
ANTICIPATED REMAINING AMORTIZATION AVERAGE AVERAGE REMAINING AND YIELD
TERM TERM (MOS.) TERM (MOS.) LTV(%) DSCR LOCKOUT (MOS.) MAINT. (MOS.)
- ----------------- ----------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
61+ -72 months ... 69 330 64 1.37x 62 62
73+ -84 months ... 82 350 47 1.85x 82 82
85+ -96 months ... 96 354 69 1.34x 92 92
97+ -108 months .. 101 319 70 1.31x 96 96
109+ -120 months . 118 327 71 1.38x 101 108
169+ -180 months . 179 359 69 1.38x 163 163
181+ -192 months . 192 192 NAP NAP 192 192
193+ -204 months . 197 421 80 1.06x 173 173
217+ -228 months . 223 223 NAP NAP 220 220
229+ -240 months . 236 236 NAP NAP 233 233
241+ -252 months . 244 244 NAP NAP 240 240
265+ -276 months . 274 266 NAP NAP 274 274
289+ -300 months . 298 299 NAP NAP 296 296
----------- -------------- ---------- ---------- -------------- -------------
TOTAL .......... 136 327 68 1.43x 123 128
=========== ============== ========== ========== ============== =============
</TABLE>
S-105
<PAGE>
ANTICIPATED REPAYMENT BY YEAR
<TABLE>
<CAPTION>
NUMBER CUT-OFF PERCENT WEIGHTED
ANTICIPATED OF LOANS/ DATE BY CUT-OFF AVERAGE
REPAYMENT LOAN PRINCIPAL PRINCIPAL MORTGAGE
BY YEAR POOLS BALANCE BALANCE RATE
- ------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
2003 ......... 2 $ 28,846,747 2.0% 8.920%
2004 ......... 4 $ 160,786,501 11.0% 7.681%
2005 ......... 8 $ 20,258,610 1.4% 8.390%
2006 ......... 5 $ 22,453,799 1.5% 8.065%
2007 ......... 116 $ 941,769,194 64.2% 8.133%
2012 ......... 6 $ 81,966,565 5.6% 7.587%
2013 ......... 1 $ 2,668,289 0.2% 8.383%
2014 ......... 1 $ 31,834,631 2.2% 7.410%
2016 ......... 2 $ 7,831,696 0.5% 8.023%
2017 ......... 12 $ 29,279,959 2.0% 8.203%
2018 ......... 19 $ 39,977,534 2.7% 6.747%
2020.......... 1 $ 9,315,796 0.6% 8.345%
2022 ......... 8 $ 89,000,869 6.1% 8.250%
----------- --------------- ------------ ----------
TOTAL ...... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
ANTICIPATED AVERAGE AVERAGE WEIGHTED WEIGHTED
REPAYMENT REMAINING AMORTIZATION AVERAGE AVERAGE
BY YEAR TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- ------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
2003 ......... 69 330 64 1.37x
2004 ......... 82 350 47 1.85x
2005 ......... 96 354 69 1.34x
2006 ......... 101 319 70 1.31x
2007 ......... 118 327 71 1.38x
2012 ......... 179 359 69 1.38x
2013 ......... 192 192 NAP NAP
2014 ......... 197 421 80 1.06x
2016 ......... 223 223 NAP NAP
2017 ......... 236 236 NAP NAP
2018 ......... 244 244 NAP NAP
2020.......... 274 266 NAP NAP
2022 ......... 298 299 NAP NAP
----------- -------------- ---------- ----------
TOTAL ...... 136 327 68 1.43x
</TABLE>
The weighted average year of anticipated repayment is 2009.
S-106
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENT
NUMBER CUT-OFF BY CUT-OFF WEIGHTED
OF LOANS/ DATE DATE AVERAGE
RANGE OF LOAN PRINCIPAL PRINCIPAL MORTGAGE
MORTGAGE RATES POOLS BALANCE BALANCE RATE
- ------------------ ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
6.000% -6.999% ... 22 $ 47,022,190 3.2% 6.710%
7.000% -7.499% ... 22 $ 184,025,766 12.6% 7.377%
7.500% -7.999% ... 37 $ 466,982,834 31.9% 7.647%
8.000% -8.499% ... 63 $ 451,236,101 30.8% 8.230%
8.500% -8.999% ... 19 $ 193,084,022 13.2% 8.693%
9.000% -9.499% ... 21 $ 119,544,826 8.2% 9.135%
9.500% -9.999% ... 1 $ 4,094,451 0.3% 9.590%
----------- --------------- ------------ ----------
TOTAL ........... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE
MORTGAGE RATES TERM (MOS.) TERM (MOS.) LTV(%) DSCR
- ------------------ ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
6.000% -6.999% ... 226 226 NAP NAP
7.000% -7.499% ... 144 361 76 1.28x
7.500% -7.999% ... 119 339 63 1.56x
8.000% -8.499% ... 151 315 70 1.38x
8.500% -8.999% ... 118 333 66 1.32x
9.000% -9.499% ... 129 301 66 1.42x
9.500% -9.999% ... 118 298 71 1.75x
----------- -------------- ---------- ----------
TOTAL ........... 136 327 68 1.43x
/TABLE>
S-107
<PAGE>
RANGE OF REMAINING LOCKOUT PERIODS AND YIELD MAINTENANCE PERIODS
</TABLE>
<TABLE>
<CAPTION>
REMAINING PERCENT
LOCK-OUT NUMBER CUT-OFF BY CUT-OFF WEIGHTED
AND YIELD OF LOANS/ DATE DATE AVERAGE
MAINTENANCE LOAN PRINCIPAL PRINCIPAL MORTGAGE
PERIODS POOLS BALANCE BALANCE RATE
- ------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
37+ -48 ...... 1 $ 73,867,407 5.0% 8.260%
61+ -72 ...... 3 $ 36,046,747 2.5% 8.877%
73+ -84 ...... 3 $ 153,586,501 10.5% 7.633%
85+ -96 ...... 11 $ 31,461,990 2.1% 8.241%
97+ -108 ..... 10 $ 87,179,691 5.9% 8.895%
109+ -120 .... 108 $ 808,322,826 55.1% 8.031%
169+ -180 .... 6 $ 97,450,885 6.6% 7.512%
181+ -192 .... 1 $ 2,668,289 0.2% 8.383%
217+ -228 .... 5 $ 14,735,161 1.0% 7.741%
229+ -240 .... 16 $ 36,634,057 2.5% 7.864%
241+ -252 .... 12 $ 25,719,972 1.8% 6.633%
265+ -276 .... 1 $ 9,315,796 0.6% 8.345%
289+ -300 .... 8 $ 89,000,869 6.1% 8.250%
----------- --------------- ------------ ----------
TOTAL ...... 185 $1,465,990,190 100.0% 8.027%
=========== =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
REMAINING AVERAGE
LOCK-OUT WEIGHTED WEIGHTED WEIGHTED REMAINING
AND YIELD AVERAGE AVERAGE WEIGHTED WEIGHTED AVERAGE LOCKOUT AND
MAINTENANCE REMAINING AMORTIZATION AVERAGE AVERAGE REMAINING YIELD MAINT.
PERIODS TERM (MOS.) TERM (MOS.) LTV (%) DSCR LOCKOUT (MOS.) (MOS.)
- ------------- ----------- -------------- ---------- ---------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
37+ -48 ...... 118 298 72 1.42x 46 46
61+ -72 ...... 70 336 66 1.36x 63 63
73+ -84 ...... 83 350 46 1.88x 83 83
85+ -96 ...... 97 340 68 1.35x 93 93
97+ -108 ..... 113 326 67 1.39x 93 106
109+ -120 .... 119 331 71 1.38x 107 114
169+ -180 .... 185 379 75 1.24x 174 174
181+ -192 .... 192 192 NAP NAP 192 192
217+ -228 .... 226 226 NAP NAP 223 223
229+ -240 .... 240 239 NAP NAP 236 236
241+ -252 .... 246 246 NAP NAP 242 242
265+ -276 .... 274 266 NAP NAP 274 274
289+ -300 .... 298 299 NAP NAP 296 296
----------- -------------- ---------- ---------- -------------- -----------------
TOTAL ...... 136 327 68 1.43x 123 128
</TABLE>
DELINQUENCY STATUS AS OF THE CUT-OFF DATE
There are no Mortgage Loans for which there are scheduled payments which
have been 30 days or more past due since origination.
S-108
<PAGE>
CHANGES IN MORTGAGE LOAN CHARACTERISTICS
The description in this Prospectus Supplement of the Trust Fund and the
Mortgaged Properties is based upon the Trust Fund as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage
Loan may be removed from the Trust Fund if the Depositor deems such removal
necessary or appropriate or if it is prepaid. This may cause the range of
Mortgage Rates and maturities as well as the other characteristics of the
Mortgage Loans to vary from those described herein.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Trust
Fund as set forth in the preceding paragraph, such removal will be noted in
the Form 8-K. Such Form 8-K will be available to purchasers and potential
purchasers of the Offered Certificates.
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will represent in the aggregate the entire beneficial ownership
interest in the Trust Fund consisting of: (i) the Mortgage Loans and all
payments under and proceeds of the Mortgage Loans received after the Cut-off
Date (exclusive of payments of principal and interest due on or before the
Cut-off Date); (ii) any Mortgaged Property acquired by the Special Servicer
on behalf of the Trust Fund through foreclosure or deed in lieu of
foreclosure (upon acquisition, an "REO Property"); (iii) such funds or assets
as from time to time are deposited in the Certificate Account, the
Distribution Accounts, the Excess Interest Distribution Account, the Interest
Reserve Account, any Servicing Accounts and, if established, the REO Account;
(iv) the rights of the mortgagee under all insurance policies with respect to
the Mortgage Loans; and (v) certain rights of the Depositor under the
Mortgage Loan Purchase Agreement relating to Mortgage Loan document delivery
requirements with respect to the Mortgage Loans and the representations and
warranties of the Mortgage Loan Seller regarding the Mortgage Loans.
The Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates, Series 1997-C2 (the "Certificates") will
consist of the following classes (each, a "Class"): (i) the Class A-1, Class
A-2, Class A-3 and Class A-X Certificates (collectively, the "Senior
Certificates"); (ii) the Class B, Class C, Class D and Class E Certificates
(collectively, the "Mezzanine Certificates" and, together with the Senior
Certificates, the "Offered Certificates"), (iii) the Class F, Class G, Class
H, Class I and Class J Certificates (collectively, the "Private Certificates"
and, together with the Offered Certificates, the "Regular Certificates"),
(iv) the Class R and Class LR Certificates (together, the "Residual
Certificates") and (v) the Class V-1 Certificates.
Only the Offered Certificates are offered hereby. The Class F, Class G,
Class H, Class I, Class J, Class V-1, Class R and Class LR Certificates have
not been registered under the Securities Act of 1933 and are not offered
hereby.
The "Certificate Balance" of any Class of Regular Certificates (other than
the Class A-X Certificates) outstanding at any time represents the maximum
amount which the holders thereof are entitled to receive as distributions
allocable to principal from the cash flow on the Mortgage Loans and the other
assets in the Trust Fund. On each Distribution Date, the Certificate Balance
of each Class of Certificates will be reduced by any distributions of
principal actually made on, and any Collateral Support Deficit actually
allocated to, such Class of Certificates on such Distribution Date and,
except for the purposes of determining Voting Rights and the identity of the
Controlling Class, will be increased by the amount of any Certificate
Deferred Interest (as defined herein) allocated to such Class of Certificates
on such
S-109
<PAGE>
Distribution Date. The initial Certificate Balance or Notional Balance of
each Class of Offered Certificates is expected to be the balance set forth on
the cover of this Prospectus Supplement, subject to a permitted variance of
plus or minus 5%, depending on the aggregate principal balance of the
Mortgage Loans actually transferred to the Trust Fund.
The Offered Certificates (other than the Class A-X Certificates) will be
maintained and transferred on the book-entry records of DTC and its
Participants and issued in denominations of $10,000 initial Certificate
Balance and integral multiples of $1,000 in excess thereof. The Class A-X
Certificates will be maintained and transferred on the book-entry records of
DTC and its Participants and issued in denominations of $100,000 initial
Notional Balance and integral multiples of $10,000 in excess thereof. A
single additional Class A-X Certificate may be issued in a denomination of
authorized initial Notional Balance that includes the excess of (i) the
initial Notional Balance of Class A-X over (ii) the largest integral multiple
of $10,000 that does not exceed such amount. The "Percentage Interest"
evidenced by any Regular Certificate is equal to the initial denomination
thereof as of the Closing Date, divided by the initial Certificate Balance or
Notional Balance of the Class to which it belongs.
The Offered Certificates will initially be represented by one or more
global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
Certificate Owner will be entitled to receive a Definitive Certificate
representing its interest in such Class, except as set forth below under
"--Book-Entry Registration and Definitive Certificates." Unless and until
Definitive Certificates are issued, all references to actions by holders of
the Offered Certificates will refer to actions taken by DTC upon instructions
received from Certificate Owners through its Participants, and all references
herein to payments, notices, reports and statements to holders of the Offered
Certificates will refer to payments, notices, reports and statements to DTC
or Cede & Co., as the registered holder of the Offered Certificates, for
distribution to Certificate Owners through its Participants in accordance
with DTC procedures.
Until Definitive Certificates are issued, interests in any Class of
Offered Certificates will be transferred only on the book-entry records of
DTC and its Participants.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking corporation" 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 Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants," which maintain accounts
with DTC, include securities brokers and dealers, banks, trust companies and
clearing corporations and may include 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 National Association of
Securities Dealers, Inc. 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 Direct Participant, either directly
or indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Certificates on DTC's records. The ownership interest of each
actual purchaser of a Book-Entry Certificate (a "Certificate Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchases, but Certificate Owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which each Certificate Owner entered into the transaction. Transfers of
ownership interest in the Book-Entry Certificates are to be accomplished by
entries made on
S-110
<PAGE>
the books of Participants acting on behalf of Certificate Owners. Certificate
Owners will not receive certificates representing their ownership interests
in the Book-Entry Certificates, except in the event that use of the
book-entry system for the Book-Entry Certificates of any series is
discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited, which may or
may not be the Certificate Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
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 Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related
Distribution 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
such date. Disbursement of such distributions by Participants to Certificate
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 each such
Participant (and not of DTC, the Depositor or any Trustee or Servicer),
subject to any statutory or regulatory requirements as may be in effect from
time to time. Under a book-entry system, Certificate Owners may receive
payments after the related Distribution Date.
The only "Certificateholder" will be the nominee of DTC, and the
Certificate Owners will not be recognized as Certificateholders under the
Pooling and Servicing Agreement. Certificate Owners will be permitted to
exercise the rights of Certificateholders under the Pooling and Servicing
Agreement only indirectly through the Participants, which in turn will
exercise their rights through DTC. The Depositor is informed that DTC will
take action permitted to be taken by a Certificateholder under the Pooling
and Servicing Agreement only at the direction of one or more Participants to
whose account with DTC interests in the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in Book-Entry Certificates to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of its interest in Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing such interest.
Certificate Owners that are not Direct or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
the Offered Certificates may do so only through Direct and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal and of and interest on the Offered Certificates from the Trustee
through DTC and its Direct and Indirect Participants. Accordingly,
Certificate Owners may experience delays in their receipt of payments. Unless
and until Definitive Certificates are issued, it is anticipated that the only
registered Certificateholder of the Offered Certificates will be Cede & Co.,
as nominee of DTC. Except as otherwise provided under "The Pooling and
Servicing Agreement -- Reports to Certificateholders; Certain Available
Information" below, Certificate Owners will not be recognized by the
Certificate Registrar, the Trustee, the Special Servicer or the Servicer as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and Certificate Owners will be permitted to receive information
furnished to Certificateholders and to exercise the rights of
Certificateholders only indirectly through DTC and its Direct and Indirect
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Direct and Indirect Participants with which Certificate Owners have accounts
with respect to the Offered
S-111
<PAGE>
Certificates similarly are required to make book-entry transfers and receive
and transmit such distributions on behalf of their respective Certificate
Owners. Accordingly, although Certificate Owners will not possess physical
certificates evidencing their interests in the Offered Certificates, the
Rules provide a mechanism by which Certificate Owners, through their Direct
and Indirect Participants, will receive distributions and will be able to
transfer their interests in the Offered Certificates.
None of the Depositor, the Servicer, the Certificate Registrar, the
Underwriter, the Special Servicer or the Trustee will have any liability for
any actions taken by DTC or its nominee, including, without limitation,
actions for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Offered Certificates held by Cede &
Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
Definitive Certificates. Certificates initially issued in book-entry form
will be issued in fully registered, certificated form to Certificate Owners
or their nominees ("Definitive Certificates"), rather than to DTC or its
nominee, only if (i) the Depositor advises the Trustee in writing that DTC is
no longer willing or able to discharge properly its responsibilities as
depository with respect to such Certificates and the Depositor is unable to
locate a qualified successor, (ii) the Depositor, at its option, elects to
terminate the book-entry system through DTC with respect to such Certificates
or (iii) the Trustee determines that Definitive Certificates are required
because the Trustee has instituted or has been directed to institute any
judicial proceeding in a court to enforce the rights of the
Certificateholders under the Certificates, and the Trustee has been advised
by counsel that in connection with such proceeding it is necessary or
appropriate for the Trustee to obtain possession of all or any portion of
those Certificates evidenced in book-entry form. Upon the occurrence of
either of the events described in the preceding sentence, the Trustee is
required to notify, through DTC, Direct Participants who have ownership of
Offered Certificates as indicated on the records of DTC of the availability
of Definitive Certificates. Upon surrender by DTC of the Definitive
Certificates representing the Offered Certificates and upon receipt of
instructions from DTC for re-registration, the Certificate Registrar and the
Authenticating Agent will reissue the Offered Certificates as Definitive
Certificates issued in the respective Certificate Balances or Notional
Balances, as applicable, owned by individual Certificate Owners, and
thereafter the Certificate Registrar, the Trustee, the Special Servicer and
the Servicer will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
by the Trustee, to the extent of available funds, on the 17th day of each
month or, if any such 17th day is not a business day, then on the next
succeeding business day, commencing in January 1998 (each, a "Distribution
Date"); provided, however, that no Distribution Date will fall on a date that
is fewer than four business days after the related Determination Date. All
such distributions (other than the final distribution on any Certificate)
will be made to the Certificateholders in whose names the Certificates are
registered at the close of business on each Record Date. With respect to any
Distribution Date, the "Record Date" will be the close of business on the
last business day of the month immediately preceding the month in which such
Distribution Date occurs. The Record Date for the Distribution Date occurring
in January 1998 for all purposes is the Closing Date. Each such distribution
will be made by wire transfer in immediately available funds to the account
specified by the Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder has provided the
Trustee with written wiring instructions no less than five business days
prior to the related Record Date (which wiring instructions may be in the
form of a standing order applicable to all subsequent distributions) and is
the registered owner of Certificates with an aggregate initial Certificate
Balance or Notional Balance, as the case may be, of at least $5,000,000, or
otherwise by check mailed to such Certificateholder. The final distribution
on any Certificate will be made in like manner, but only upon presentation
and surrender of such Certificate at the location that will be specified in a
notice of the pendency of such final distribution. All distributions made
with respect to a Class of Certificates will be allocated pro rata among the
outstanding Certificates of such Class based on their respective Percentage
Interests.
S-112
<PAGE>
The Servicer shall establish and maintain, or cause to be established and
maintained, one or more accounts (collectively, the "Certificate Account") as
described in the Pooling and Servicing Agreement. The Servicer is required to
deposit in the Certificate Account on a daily basis (and in no event later
than the business day following receipt in available funds) all payments and
collections due after the Cut-off Date and other amounts received or advanced
with respect to the Mortgage Loans (including, without limitation, insurance
and condemnation proceeds and liquidation proceeds), and will be permitted to
make withdrawals therefrom as set forth in the Pooling and Servicing
Agreement.
The Trustee will establish and maintain an account (the "Lower-Tier
Distribution Account"), and a second account (the "Upper-Tier Distribution
Account," together with the Lower-Tier Distribution Account, the
"Distribution Accounts") in the name of the Trustee and for the benefit of
the Certificateholders. On each Distribution Date, the Trustee will apply
amounts on deposit in the Upper-Tier Distribution Account (which will include
all funds that were remitted by the Servicer from the Certificate Account
plus, among other things, any P&I Advances, less amounts, if any,
distributable to the Class LR Certificates as set forth in the Pooling and
Servicing Agreement) generally to make distributions of interest and
principal from the Available Distribution Amount to Offered
Certificateholders as described herein. Each of the Certificate Account and
the Distribution Accounts will conform to certain eligibility requirements
set forth in the Pooling and Servicing Agreement.
The aggregate amount available from the Mortgage Loans for distribution to
Offered Certificateholders on each Distribution Date (the "Available
Distribution Amount") will, in general, equal the sum of the following
amounts:
(a) the total amount of all cash received on the Mortgage Loans and any
related REO Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the related
Servicer Remittance Date (including funds released from the Interest Reserve
Account for distribution on such Distribution Date), exclusive of:
(i) all Monthly Payments collected but due on a Due Date subsequent to
the related Due Period;
(ii) all principal prepayments, Balloon Payments, liquidation proceeds,
insurance and condemnation proceeds and other unscheduled recoveries
received subsequent to the related Determination Date;
(iii) all amounts in the Certificate Account and Lower-Tier Distribution
Account that are due or reimbursable to (x) any person other than the
Certificateholders and (y) the Class V-1 Certificates;
(iv) all Prepayment Premiums, Yield Maintenance Charges and Yield
Protection Payments;
(v) all net investment income on the funds in the Certificate Account;
(vi) all Withheld Amounts relating to a subsequent Distribution Date; and
(vii) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error; and
(b) all P&I Advances made with respect to such Distribution Date by the
Servicer or the Trustee, as applicable, with respect to the Mortgage Loans
(net of certain amounts that are due or reimbursable to persons other than
the Certificateholders). See "Description of the Offered Certificates --
Accounts" in the Prospectus.
The "Due Period" for each Distribution Date will be the period beginning
on the day following the Determination Date in the month immediately
preceding the month in which such Distribution Date occurs and ending at the
close of business on the Determination Date of the month in which such
Distribution Date occurs.
Pass-Through Rates. The initial Pass-Through Rate applicable to each Class
of Offered Certificates for any Distribution Date will equal the rates per
annum specified on the cover of this Prospectus Supplement. Interest will
accrue for each Class of Certificates during the related Interest Accrual
Period.
Interest Distributions. On each Distribution Date, to the extent of the
Available Distribution Amount and subject to the distribution priorities
described below under "--Priority," each Class of
S-113
<PAGE>
Offered Certificates will be entitled to receive distributions of interest in
an aggregate amount equal to the Monthly Interest Distributable Amount (as
defined herein) with respect to such Class for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates. No interest
will accrue on such overdue amounts. Interest will accrue with respect to the
Certificates on the basis of a 360-day year consisting of twelve 30-day
months.
Principal Distributions. On each Distribution Date, to the extent of the
Available Distribution Amount remaining after the distribution of interest to
be made on the Offered Certificates on such date and subject to the
distribution priorities described below under "--Priority," each Class of
Offered Certificates will be entitled to distributions of principal (until
the Certificate Balance of such Class of Certificates is reduced to zero) in
an aggregate amount up to the Principal Distribution Amount for such
Distribution Date.
Priority. On each Distribution Date, the Trustee will apply amounts on
deposit in the Upper-Tier Distribution Account, to the extent of the
Available Distribution Amount in the following order of priority:
(A) concurrently, to the Class A-1, Class A-2, Class A-3 and Class A-X
Certificates, in respect of interest, such Classes' respective Optimal
Interest Distribution Amounts for such Distribution Date, any insufficiency
therein being allocated among such Classes in proportion to such Optimal
Interest Distribution Amounts;
(B) to the Class A-1, Class A-2 and Class A-3 Certificates, in reduction
of the Certificate Balances thereof, an amount up to the Principal
Distribution Amount for such Distribution Date, in the following order of
priority:
first, to the Class A-1 Certificates, until the Certificate Balance
thereof has been reduced to zero;
second, to the Class A-2 Certificates, until the Certificate Balance
thereof has been reduced to zero; and
third, to the Class A-3 Certificates, until the Certificate Balance
thereof has been reduced to zero;
(C) to the Class A-1, Class A-2 and Class A-3 Certificates, pro rata
(based upon the aggregate unreimbursed Collateral Support Deficit previously
allocated to each such Class), until all amounts of such Collateral Support
Deficit previously allocated to such Classes, but not previously reimbursed,
have been reimbursed in full;
(D) to the Class B Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(E) to the Class B Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(F) to the Class B Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class B Certificates, but not previously
reimbursed, have been reimbursed in full;
(G) to the Class C Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(H) to the Class C Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(I) to the Class C Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class C Certificates, but not previously
reimbursed, have been reimbursed in full;
(J) to the Class D Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(K) to the Class D Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
S-114
<PAGE>
(L) to the Class D Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class D Certificates, but not previously
reimbursed, have been reimbursed in full;
(M) to the Class E Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(N) to the Class E Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(O) to the Class E Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class E Certificates, but not previously
reimbursed, have been reimbursed in full;
(P) to the Class F Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(Q) to the Class F Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(R) to the Class F Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class F Certificates, but not previously
reimbursed, have been reimbursed in full;
(S) to the Class G Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(T) to the Class G Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(U) to the Class G Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class G Certificates, but not previously
reimbursed, have been reimbursed in full;
(V) to the Class H Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(W) to the Class H Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(X) to the Class H Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class H Certificates, but not previously
reimbursed, have been reimbursed in full;
(Y) to the Class I Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(Z) to the Class I Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(AA) to the Class I Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class I Certificates, but not previously
reimbursed, have been reimbursed in full;
(BB) to the Class J Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(CC) to the Class J Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(DD) to the Class J Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class J Certificates, but not previously
reimbursed, have been reimbursed in full; and
S-115
<PAGE>
(EE) to the Class R Certificates, any remaining amounts.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the Credit Support Crossover Date, the Principal Distribution Amount
will be distributed, pro rata, to the Class A-1, Class A-2 and Class A-3
Certificates in proportion to such Classes' respective Certificate Balances,
in reduction thereof, until the Certificate Balance of each such Class has
been reduced to zero.
Reimbursement of previously allocated Collateral Support Deficits will not
constitute distributions of principal for any purpose and will not result in
an additional reduction in the Certificate Balance of the Class of
Certificates in respect of which any such reimbursement is made.
Definitions
"Class A-1 Pass-Through Rate": 6.40% per annum.
"Class A-2 Pass-Through Rate": 6.52% per annum.
"Class A-3 Pass-Through Rate": 6.55% per annum.
"Class A-X Pass-Through Rate": As to any Distribution Date, the per annum
rate, expressed as a percentage, obtained by dividing (i) the sum of the
products of (a) the Certificate Balance of each class of Regular Certificates
(other than the Class A-X Certificates) and (b) the related Component Rate
for such Distribution Date by (ii) the sum of all such Certificate Balances.
"Class B Pass-Through Rate": 6.72% per annum.
"Class C Pass-Through Rate": 6.85% per annum.
"Class D Pass-Through Rate": 7.27% per annum.
"Class E Pass-Through Rate": 7.46% per annum.
"Class F Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) 7.46% per annum and (ii) the Weighted Average Net
Mortgage Rate for such Distribution Date.
"Class G Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) 7.46% per annum and (ii) the Weighted Average Net
Mortgage Rate for such Distribution Date.
"Class H Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) 7.46% per annum and (ii) the Weighted Average Net
Mortgage Rate for such Distribution Date.
"Class I Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) 7.46% per annum and (ii) the Weighted Average Net
Mortgage Rate for such Distribution Date.
"Class J Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) 7.46% per annum and (ii) the Weighted Average Net
Mortgage Rate for such Distribution Date.
"Component Rate": As to each of the Class A-X Components, the rate set
forth below with respect thereto:
Class A-1 Component: The amount, if any, by which the Weighted Average
Net Mortgage Rate for such Distribution Date exceeds the Class A-1
Pass-Through Rate.
Class A-2 Component: The amount, if any, by which the Weighted Average
Net Mortgage Rate for such Distribution Date exceeds the Class A-2
Pass-Through Rate.
Class A-3 Component: The amount, if any, by which the Weighted Average
Net Mortgage Rate for such Distribution Date exceeds the Class A-3
Pass-Through Rate.
Class B Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class B Pass-Through
Rate.
Class C Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class C Pass-Through
Rate.
S-116
<PAGE>
Class D Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class D Pass-Through
Rate for such Distribution Date.
Class E Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class E Pass-Through
Rate for such Distribution Date.
Class F Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class F Pass-Through
Rate for such Distribution Date.
Class G Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class G Pass-Through
Rate for such Distribution Date.
Class H Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class H Pass-Through
Rate for such Distribution Date.
Class I Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class I Pass-Through
Rate for such Distribution Date.
Class J Component: The amount, if any, by which the Weighted Average Net
Mortgage Rate for such Distribution Date exceeds the Class J Pass-Through
Rate for such Distribution Date.
"Credit Support Crossover Date": The Distribution Date on which (i) the
Certificate Balance of the last outstanding Class of Subordinate Certificates
has been reduced to zero and (ii) the Certificate Balance of at least one
Class of Class A-1, Class A-2 or Class A-3 Certificates is greater than zero.
"Excess Rate": With respect to each ARD Loan after the related Anticipated
Repayment Date, the excess of the Revised Rate thereof over the Mortgage Rate
thereof.
"Interest Accrual Period": As to any Distribution Date, the period
commencing on the 11th day of the calendar month preceding the month in which
such Distribution Date occurs and ending on the 10th day of the month in
which such Distribution Date occurs. Each Interest Accrual Period is deemed
to consist of 30 days.
"Interest Shortfall Amount": As to any Distribution Date and any Class of
Regular Certificates, the amount, if any, by which the amount distributed on
such Class on such Distribution Date in respect of interest is less than the
related Optimal Interest Distribution Amount.
"Monthly Interest Distributable Amount": As to any Distribution Date and
any Class of Regular Certificates other than the Class A-X Certificates, the
amount of interest accrued for the related Interest Accrual Period at the
related Pass-Through Rate on the Certificate Balance of such Class as of such
Distribution Date, reduced by (i) such Class's share of (x) the Uncovered
Prepayment Interest Shortfall Amount and (y) certain indemnification expenses
of the Trust Fund and (ii) any allocations to such Class of any Certificate
Deferred Interest for such Distribution Date. As to any Distribution Date and
the Class A-X Certificates, the amount of interest accrued during the related
Interest Accrual Period at the Class A-X Pass-Through Rate on the Notional
Balance as of such Distribution Date, reduced by such Class's share of (x)
the Uncovered Prepayment Interest Shortfall Amount and (y) certain
indemnification expenses of the Trust Fund, in each case for such
Distribution Date.
"Mortgage Interest Accrual Period": With respect to any Mortgage Loan, the
period during which interest accrues pursuant to the related Mortgage Note.
"Mortgage Pass-Through Rate": With respect to any Mortgage Loan that
provides for calculations of interest based on twelve months of 30 days each
for any Mortgage Interest Accrual Period, the Net Mortgage Rate thereof. With
respect to any Mortgage Loan that provides for interest accrual on an
Actual/360 basis, (a) for any Mortgage Interest Accrual Period relating to an
Interest Accrual Period beginning in any January, February, April, June,
September and November and any December occurring in a year immediately
preceding any year that is not a leap year, the Net Mortgage Rate thereof or
(b) for any Mortgage Interest Accrual Period relating to any Interest Accrual
Period beginning in any March, May, July, August and October and any December
occurring in a year immediately preceding a year that is a leap year, the Net
Mortgage Rate thereof multiplied by a fraction whose numerator is 31 and
whose denominator is 30.
S-117
<PAGE>
The Mortgage Rate for purposes of calculating Mortgage Pass-Through Rates
and the Weighted Average Net Mortgage Rate will be the Mortgage Rate of such
Mortgage Loan without taking into account any reduction in the interest rate
by a bankruptcy court pursuant to a plan of reorganization or pursuant to any
of its equitable powers or any reduction in the interest rate resulting from
a work-out as described herein under "The Pooling and Servicing Agreement --
Modifications." With respect to Loan No. 67, the Mortgage Rate used to
calculate the Mortgage Pass-Through Rate thereof and the Weighted Average Net
Mortgage Rate is the Mortgage Rate set forth for such Mortgage Loan on Annex
A, notwithstanding the fact that such Mortgage Loan pays interest currently
at a lower interest rate and negatively amortizes any additional interest.
"Net Mortgage Pass-Through Rate": With respect to any Mortgage Loan and
any Distribution Date, the Mortgage Pass-Through Rate for such Mortgage Loan
for the related Interest Accrual Period minus the sum of the Servicing Fee
Rate and the Trustee Fee Rate, plus, if such Mortgage Loan is set forth
below, the related Servicing Fee Reimbursement Rate set forth below:
<TABLE>
<CAPTION>
SERVICING FEE
LOAN NO. PROPERTY NAME REIMBURSEMENT RATE
- ---------- -------------------------------------------- ------------------
<S> <C> <C>
3.......... Paramount Hotel 0.02%
35......... Waterfront Centre 0.03%
41......... Lorraine Apartments 0.03%
42......... Best Western Grant Park Hotel 0.03%
43......... The Evanston Holiday Inn & Conference Center 0.03%
48......... Residence Inn 0.03%
62......... Hampshire Ambassador Hotel 0.03%
78......... Bradbury Apartments 0.03%
103........ Citrus Park Apartments 0.03%
116........ Windsor Gardens 0.03%
</TABLE>
"Net Mortgage Rate": With respect to any Interest Accrual Period and any
Mortgage Loan, a per annum rate equal to the Mortgage Rate for such Mortgage
Loan as of the Cut-off Date minus (i) for any Mortgage Loan, the related
Primary Servicing Fee Rate, if any, plus, (ii) if such Mortgage Loan is set
forth below, the related Primary Servicing Fee Reimbursement Rate set forth
below:
<TABLE>
<CAPTION>
PRIMARY SERVICING FEE
LOAN NO. PROPERTY NAME REIMBURSEMENT RATE
- ---------- -------------------------------------------- ---------------------
<S> <C> <C>
3.......... Paramount Hotel 0.05%
35......... Waterfront Centre 0.05%
41......... Lorraine Apartments 0.05%
42......... Best Western Grant Park Hotel 0.05%
43......... The Evanston Holiday Inn & Conference Center 0.05%
48......... Residence Inn 0.05%
62......... Hampshire Ambassador Hotel 0.05%
78......... Bradbury Apartments 0.05%
103........ Citrus Park Apartments 0.05%
116........ Windsor Gardens 0.05%
</TABLE>
In the event that Loan No. 35, 41, 42, 43 or 78 is defeased, the Primary
Servicing Fee Reimbursement Rates and the Servicing Fee Reimbursement Rates
as set forth above will no longer be applicable when calculating the related
Net Mortgage Rates and Net Mortgage Pass-Through Rates.
"Optimal Interest Distribution Amount": As to any Distribution Date and
any Class of Regular Certificates, the sum of the Monthly Interest
Distributable Amount and the Unpaid Interest Shortfall Amount for such Class
for such Distribution Date.
S-118
<PAGE>
"Pass-Through Rate": As to each Class of Certificates, the rate set forth
below:
Class A-1: Class A-1 Pass-Through Rate
Class A-2: Class A-2 Pass-Through Rate
Class A-3: Class A-3 Pass-Through Rate
Class A-X: Class A-X Pass-Through Rate
Class B: Class B Pass-Through Rate
Class C: Class C Pass-Through Rate
Class D: Class D Pass-Through Rate
Class E: Class E Pass-Through Rate
Class F: Class F Pass-Through Rate
Class G: Class G Pass-Through Rate
Class H: Class H Pass-Through Rate
Class I: Class I Pass-Through Rate
Class J: Class J Pass-Through Rate
"Prepayment Interest Excess": With respect to any Distribution Date, for
each Mortgage Loan that was subject to a principal prepayment in full or in
part, or as to which insurance or condemnation proceeds were received by the
Servicer or the Special Servicer for application to such Mortgage Loan, in
each case after the Due Date in the month of such Distribution Date and on or
prior to the related Determination Date, the amount of interest accrued at
the Mortgage Rate (plus, as applicable, the related Servicing Fee
Reimbursement Rate and Primary Servicing Fee Reimbursement Rate) for such
Mortgage Loan on the amount of such principal prepayment, insurance proceeds
or condemnation proceeds after the Mortgage Interest Accrual Period relating
to such Due Date and accruing in the manner set forth in the loan documents
relating to such Mortgage Loan, to the extent such interest is collected by
the Servicer or the Special Servicer.
"Prepayment Interest Shortfall": With respect to any Distribution Date,
for each Mortgage Loan that was subject to a principal prepayment in full or
in part, or as to which insurance or condemnation proceeds were received by
the Servicer or the Special Servicer for application to such Mortgage Loan,
in each case after the Determination Date in the calendar month preceding
such Distribution Date but prior to the Due Date in the related Due Period,
the amount of interest that would have accrued at the Net Mortgage
Pass-Through Rate for such Mortgage Loan on the amount of such principal
prepayment, insurance proceeds or condemnation proceeds during the period
commencing on the date as of which such principal prepayment, insurance
proceeds or condemnation proceeds were applied to the unpaid principal
balance of such Mortgage Loan and ending on (and including) the day
immediately preceding such Due Date.
"Principal Distribution Amount": As to any Distribution Date, the sum of
(i) the amount collected or otherwise received on or in respect of principal
of the Mortgage Loans during the related Due Period and (ii) that portion of
the P&I Advance, if any, made in respect of principal of the Mortgage Loans
with respect to such Distribution Date.
"Remaining Principal Distributable Amount": As to any Distribution Date
and any Class of Regular Certificates other than the Class A-X Certificates,
the amount, if any, by which the Principal Distribution Amount for such
Distribution Date exceeds the aggregate amount distributed in respect of such
amounts on such Distribution Date on all Classes senior to such Class.
"Uncovered Prepayment Interest Shortfall Amount": As to any Distribution
Date, the sum of the Uncovered Prepayment Interest Shortfalls (as defined
herein), if any, for such Distribution Date.
S-119
<PAGE>
"Unpaid Interest Shortfall Amount": As to the first Distribution Date and
any Class of Regular Certificates, zero. As to any Distribution Date after
the first Distribution Date and any Class of Regular Certificates, the
amount, if any, by which the sum of the Interest Shortfall Amounts for such
Class for prior Distribution Dates exceeds the sum of the amounts distributed
on such Class on prior Distribution Dates in respect of such Interest
Shortfall Amounts.
"Weighted Average Net Mortgage Rate": As to any Distribution Date, the
average, as of such Distribution Date, of the Net Mortgage Pass-Through Rates
of the Mortgage Loans, weighted by the Stated Principal Balances thereof.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each Mortgage Loan outstanding at any time represents
the principal balance of such Mortgage Loan ultimately due and payable to the
Certificateholders. The "Stated Principal Balance" of each Mortgage Loan will
initially equal the Cut-off Date Balance thereof and, on each Distribution
Date, will be reduced by the portion of the Principal Distribution Amount for
such date that is attributable to such Mortgage Loan. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a court
presiding over a bankruptcy proceeding in which the related borrower is the
debtor. See "Certain Legal Aspects of the Mortgage Loans -- Bankruptcy Laws"
in the Prospectus. If any Mortgage Loan is paid in full or such Mortgage Loan
(or any Mortgaged Property acquired in respect thereof) is otherwise
liquidated, then, as of the first Distribution Date that follows the end of
the Due Period in which such payment in full or liquidation occurred and
notwithstanding that a loss may have occurred in connection with any such
liquidation, the Stated Principal Balance of such Mortgage Loan shall be
zero. The Stated Principal Balance of Loan No. 67 will be increased by the
application of Mortgage Deferred Interest during the period in which such
loan negatively amortizes, as described herein. Such accretion will be taken
into account when calculating the Weighted Average Net Mortgage Rate for any
Distribution Date.
For purposes of calculating distributions on, and allocations of
Collateral Support Deficit to, the Certificates, as well as for purposes of
calculating the Servicing Fee, Primary Servicing Fee and Trustee Fee payable
each month, each REO Property will be treated as if there exists with respect
thereto an outstanding mortgage loan (an "REO Loan"), and all references to
"Mortgage Loan" and "Mortgage Loans" herein and in the Prospectus, when used
in such context, will be deemed to also be references to or to also include,
as the case may be, any REO Loans. Each REO Loan will generally be deemed to
have the same characteristics as its actual predecessor Mortgage Loan,
including the same fixed Mortgage Rate (and, accordingly, the same Net
Mortgage Pass-Through Rate) and the same unpaid principal balance and Stated
Principal Balance. Amounts due on such predecessor Mortgage Loan, including
any portion thereof payable or reimbursable to the Servicer, will continue to
be "due" in respect of the REO Loan; and amounts received in respect of the
related REO Property, net of payments to be made, or reimbursement to the
Servicer or the Special Servicer for payments previously advanced, in
connection with the operation and management of such property, generally will
be applied by the Servicer as if received on the predecessor Mortgage Loan.
Allocation of Prepayment Premiums and Yield Maintenance Charges. On any
Distribution Date, Prepayment Premiums collected on the Mortgage Loans during
the related Due Period will be distributed as follows by the Trustee to the
holders of the following Classes of Regular Certificates: to each Class of
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and Class E
Certificates, an amount equal to the product of (a) a fraction whose
numerator is the amount distributed as principal to such Class on such
Distribution Date from the Mortgage Loans, and whose denominator is the total
amount distributed as principal to all Classes of Certificates on such
Distribution Date from the Mortgage Loans, (b) 25% and (c) the total amount
of Prepayment Premiums collected during the related Due Period. Any
Prepayment Premiums collected during the related Due Period and remaining
after such distributions will be distributed to the holders of the Class A-X
Certificates.
On any Distribution Date, Yield Maintenance Charges collected on the
Mortgage Loans during the related Due Period will be distributed as follows
by the Trustee to the following Classes of Offered Certificates: each Class
of Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and Class E
S-120
<PAGE>
Certificates, an amount equal to the product of (a) a fraction whose
numerator is the amount distributed as principal to such Class on such
Distribution Date from the Mortgage Loans, and whose denominator is the total
amount distributed as principal to all Classes of Certificates on such
Distribution Date from the Mortgage Loans, (b) the Base Interest Fraction for
the related principal prepayment and such Class of Certificates and (c) the
aggregate amount of Yield Maintenance Charges collected on such principal
prepayment during the related Due Period. Any Yield Maintenance Charges
collected during the related Due Period remaining after such distributions
will be distributed to the holders of the Class A-X Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates
(other than the Class A-X Certificates) is a fraction (a) whose numerator is
the amount, if any, by which (i) the Pass-Through Rate on such Class of
Certificates exceeds (ii)(x) the Yield Rate used in calculating the Yield
Maintenance Charge with respect to such principal prepayment and (b) whose
denominator is the amount, if any, by which the (i) Mortgage Rate on such
Mortgage Loan exceeds (ii) the Yield Rate used in calculating the Yield
Maintenance Charge with respect to such principal prepayment; provided,
however, that under no circumstances shall the Base Interest Fraction be
greater than one. If such Yield Rate is greater than or equal to the lesser
of (x) the Mortgage Rate on such Mortgage Loan and (y) the Pass-Through Rate
described in the preceding sentence, then the Base Interest Fraction shall
equal zero.
No Prepayment Premiums or Yield Maintenance Charges will be distributed to
holders of the Class F, Class G, Class H, Class I, Class J, Class V-1, Class
R or Class LR Certificates. Instead, after the Certificate Principal Balances
of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and Class E
Certificates have been reduced to zero, all Prepayment Premiums and Yield
Maintenance Charges will be distributed to holders of the Class A-X
Certificates. For a description of Prepayment Premiums and Yield Maintenance
Charges, see "Description of the Mortgage Loans -- Certain Terms and
Provisions of the Mortgage Loans -- Prepayment Provisions" herein. See also
"Certain Legal Aspects of the Mortgage Loans -- Enforceability of Certain
Provisions -- Prepayment Provisions" in the Prospectus regarding the
enforceability of Yield Maintenance Charges and Prepayment Premiums.
For a description of Prepayment Premiums and Yield Maintenance Charges,
see "Description of the Mortgage Loans -- Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions" herein.
Yield Protection Payments. The Servicer will be required to make an
advance in an amount equal to the sum of all Yield Protection Payments, if
any, with respect to any Distribution Date. On such Distribution Date, such
Yield Protection Payments will be distributed to the holders of the Class A-X
Certificates and to the holders of any Class of Offered Certificates
receiving a Required Prepayment under the Additional Collateral Loans. Such
Yield Protection Payments are intended to compensate such Classes for the
absence of Prepayment Premiums or Yield Maintenance Charges in connection
with such a Required Prepayment. With respect to any Class of Offered
Certificates receiving a distribution of principal in connection with a
Required Prepayment, the Yield Protection Payment will equal 2% of such
distribution of principal. With respect to the Class A-X Certificates, the
Yield Protection Payment will be in the nature of a yield-maintenance
payment, as described in the Pooling and Servicing Agreement. The rights of
any Class of Offered Certificates to receive Yield Protection Payments, to
the extent described herein, will be treated as assets separate from the
REMIC regular interest represented by each such Class. The purchase price
paid for each such Class must be allocated between the right to receive Yield
Protection Payments and the REMIC regular interest represented by such Class.
See "Description of the Mortgage Loans -- Additional Mortgage Loan
Information -- Additional Collateral Loans" and "Certain Federal Income Tax
Consequences" herein.
Excess Interest. On each Distribution Date, Excess Interest collected
during the related Due Period will be distributed solely to the Class V-1
Certificates to the extent set forth in the Pooling and Servicing Agreement
and will not be available for distribution to holders of the Offered
Certificates. The Class V-1 Certificates are not entitled to any other
distributions of interest, principal, Prepayment Premiums or Yield
Maintenance Charges.
S-121
<PAGE>
The holders of 100% of the Percentage Interests in the Class LR
Certificates will have the limited right to purchase ARD Loans on their
related Anticipated Repayment Dates under the circumstances described under
"The Pooling and Servicing Agreement" herein.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the aggregate Certificate
Balance of such Class of Certificates would be reduced to zero based on the
assumptions set forth below. Such Distribution Date shall in each case be as
follows:
<TABLE>
<CAPTION>
CLASS DESIGNATION ASSUMED FINAL DISTRIBUTION DATE
- --------------------- -----------------------------------
<S> <C>
Class A-1 February 17, 2004
Class A-2 July 17, 2007
Class A-3 November 17, 2007
Class A-X November 17, 2022
Class B November 17, 2007
Class C December 17, 2007
Class D April 17, 2011
Class E November 17, 2012
</TABLE>
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED ON
THE ASSUMPTION THAT ALL ARD LOANS WILL PAY ON THEIR RESPECTIVE ANTICIPATED
REPAYMENT DATES AND ALSO WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF
BALLOON PAYMENTS OR TO ANY LIQUIDATION TIME WITH RESPECT TO ANY MORTGAGE
LOANS THAT MAY BECOME DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS ON
THE MORTGAGE LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE
CLASSES OF THE OFFERED CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY
LATER, THAN THE RELATED ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR. Since the rate of payment (including
prepayments) of the Mortgage Loans may exceed the scheduled rate of payments,
and could exceed such scheduled rate by a substantial amount, the actual
final Distribution Date for one or more Classes of the Offered Certificates
may be earlier, and could be substantially earlier, than the related Assumed
Final Distribution Date(s). The rate of payments (including prepayments) on
the Mortgage Loans will depend on the characteristics of the Mortgage Loans,
as well as on the prevailing level of interest rates and other economic
factors, and no assurance can be given as to actual payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming that
there would not be an early termination of the Trust Fund.
The "Rated Final Distribution Date" for each Class of Offered Certificates
will be January 17, 2035, the first Distribution Date following the date that
is two years after the latest Assumed Maturity Date. The "Assumed Maturity
Date" of (a) any Mortgage Loan that is not a Balloon Loan is the maturity
date of such Mortgage Loan and (b) any Balloon Loan is the date on which such
Balloon Loan fully amortizes, assuming interest is paid on a 30/360 basis.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICITS AND CERTIFICATE
DEFERRED INTEREST
The rights of the holders of the Private Certificates to receive
distributions of principal and interest on or in respect of the Mortgage
Loans will be subordinate to those of the holders of the Mezzanine
Certificates, and the rights of the holders of any class of Mezzanine
Certificates to receive distributions of principal and interest on or in
respect of the Mortgage Loans will be subordinate to those of the holders of
the Senior Certificates and each class of Mezzanine Certificates with an
earlier alphabetical designation, other than, in each case, with respect to
Uncovered Prepayment Interest Shortfalls and certain indemnification
expenses. This subordination is intended to enhance the likelihood of timely
receipt by the holders of the Senior Certificates of the full amount of all
interest payable in respect of the Senior Certificates on each Distribution
Date, and the ultimate receipt by the holders of the Senior Certificates
S-122
<PAGE>
(other than the Class A-X Certificates) of principal in an amount equal to,
in each case, the entire Certificate Balance of such Class of Certificates.
Similarly, but to decreasing degrees, this subordination is also intended to
enhance the likelihood of timely receipt by the holders of Class B, Class C,
Class D and Class E Certificates of the full amount of interest payable in
respect of such Classes of Certificates on each Distribution Date, and the
ultimate receipt by the holders of such Certificates of principal equal to,
in each case, the entire Certificate Balance of each such Class of
Certificates. The protection afforded to the holders of and Class of Offered
Certificates by means of the subordination of each Class of Offered
Certificates, if any, subordinate thereto and by means of the subordination
of the Private Certificates will be accomplished by the application of the
Available Distribution Amount on each Distribution Date in accordance with
the order of priority described under "--Distributions" above and by the
allocation of Collateral Support Deficits in the manner described below. No
other form of credit support will be available for the benefit of the holders
of the Offered Certificates.
Allocation to each class of Offered Certificates (other than the Class A-X
Certificates), in order of declining seniority for so long as such class is
outstanding, of the entire Principal Distribution Amount on a given
Distribution Date will have the effect of reducing the aggregate Certificate
Balance of such class at a proportionately faster rate than the rate at which
the aggregate Stated Principal Balance of the Mortgage Loans will decrease.
Thus, as principal is distributed to each class of Offered Certificates, the
percentage interest in the Trust Fund evidenced by such class will be
decreased (with a corresponding increase in the percentage interest in the
Trust Fund evidenced by the Private Certificates and those classes of Offered
Certificates subordinate to the class of Offered Certificates then receiving
distributions of principal), thereby increasing, relative to their respective
Certificate Balances, the subordination afforded such class by the Offered
Certificates subordinate thereto and by the Private Certificates.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on such date, the Trustee is to calculate the
amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans expected to be outstanding immediately following such
Distribution Date is less than (ii) the aggregate Certificate Balance of the
Certificates after giving effect to distributions of principal on such
Distribution Date (any such deficit, "Collateral Support Deficit"). The
Trustee will be required to allocate any such Collateral Support Deficit
among the respective Classes of Certificates as follows: to the Class J,
Class I, Class H, Class G, Class F, Class E, Class D, Class C and Class B
Certificates in that order, in reduction of the respective Certificate
Balances thereof, in each case until the remaining Certificate Balance of
each such Class has been reduced to zero. Following the reduction of the
Certificate Balances of all such Classes to zero, any remaining Collateral
Support Deficit will be allocated among the Class A-1, Class A-2 and Class
A-3 Certificates, pro rata (based upon such Classes' respective Certificate
Balances), until the remaining Certificate Balances of such Classes have been
reduced to zero. Any Collateral Support Deficit allocated to a Class of
Certificates will be allocated among respective Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.
In general, Collateral Support Deficits could result from the occurrence
of: (i) losses and other shortfalls on or in respect of the Mortgage Loans,
including as a result of defaults and delinquencies thereon, the payment to
the Special Servicer of any compensation as described in "The Pooling and
Servicing Agreement -- Servicing Compensation and Payment of Expenses"
herein, and the payment of interest on Advances (to the extent not covered by
Penalty Charges collected on the related Mortgage Loans), and certain
servicing expenses; and (ii) certain unanticipated, non-Mortgage Loan
specific expenses of the Trust Fund, including certain reimbursements to the
Trustee, the Servicer, the Special Servicer and the Depositor and certain
federal, state and local taxes, and certain tax-related expenses, payable out
of the Trust Fund (but excluding Uncovered Prepayment Interest Shortfalls and
certain indemnification expenses of the Trust Fund, which will be allocated
to all or several of the Classes of Regular Certificates on a pro rata basis
as a reduction of such Classes' interest entitlement, as described below) as
described herein under "The Pooling and Servicing Agreement." Accordingly,
the allocation of Collateral Support Deficit as described above will
constitute an allocation of losses and other shortfalls experienced by the
Trust Fund. A Class of Offered Certificates will be considered outstanding
until its Certificate Balance is reduced to zero; provided, however, that
reimbursement of any previously allocated Collateral Support Deficit may
thereafter be made to such Class.
S-123
<PAGE>
Shortfalls in the Available Distribution Amount resulting from Uncovered
Prepayment Interest Shortfalls and indemnification expenses of the Trust Fund
will generally be allocated to all Classes of the Regular Certificates. In
each case such allocations will be made pro rata to such Classes on the basis
of their Monthly Interest Distributable Amounts (before giving effect to any
reductions therefrom for such Uncovered Prepayment Interest Shortfalls or
indemnification expenses or for Certificate Deferred Interest) and will
reduce such Classes' respective interest entitlements.
Certificate Deferred Interest. On each Distribution Date, the Monthly
Interest Distributable Amount for each Class of Regular Certificates will be
reduced by an amount of Certificate Deferred Interest equal to the aggregate
amount of Mortgage Deferred Interest for all Mortgage Loans for the related
Due Date and allocated to such Class of Certificates, the amount representing
such Certificate Deferred Interest to be allocated first, to the Private
Certificates, second, to the Class E Certificates, third, to the Class D
Certificates, fourth, to the Class C Certificates, and fifth, to the Class B
Certificates. Any Certificate Deferred Interest in excess of the Monthly
Interest Distributable Amount for any Class to which such Certificate
Deferred Interest is allocable will be allocated to the next most senior
Class of Certificates, in the manner set forth above. If the Certificate
Balance of at least one Class of Senior Certificates is not zero, then any
amounts representing Certificate Deferred Interest after allocation thereof
to the Subordinate Certificates in accordance with the preceding sentence,
will be allocated to the Senior Certificates (other than the Class A-X
Certificates) pro rata on the basis of such Classes' respective interest
entitlements on such date (before giving effect to any reduction therefrom on
such Distribution Date). The effect of such an allocation of Certificate
Deferred Interest is to reduce the interest otherwise distributable to such
Classes of Certificates. Additionally, on each Distribution Date, the
Certificate Balance of each Class of Regular Certificates (other than the
Class A-X Certificates) will be increased (except for the purposes of
determining Voting Rights and the identity of the Controlling Class) by the
amount of Certificate Deferred Interest, if any, allocated to such Class of
Certificates.
"Certificate Deferred Interest" means, for any Distribution Date with
respect to any Class of Certificates, the amount of Mortgage Deferred
Interest allocated to such Class as described above.
"Mortgage Deferred Interest" means, (i) with respect to Loan No. 67,
during the period in which it is subject to negative amortization, as
described herein, the amount of accrued unpaid interest that, in accordance
with the terms of the related Mortgage Note, is added to the Stated Principal
Balance of such Mortgage Note on each Due Date and (ii) with respect to any
Mortgage Loan that as of any Due Date has been modified to reduce the rate at
which interest is paid currently below the Mortgage Rate, the excess, if any,
of (a) interest accrued on the Stated Principal Balance thereof during the
related one-month interest accrual period set forth in the related Mortgage
Note at the related Mortgage Rate over (b) the interest portion of the
related Monthly Payment or, if applicable, Assumed Scheduled Payment due on
such Due Date.
S-124
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholder, the rate and timing of the distributions
in reduction of Certificate Balance of such Certificates and the rate, timing
and severity of losses on the Mortgage Loans and the extent to which such
losses are allocable in reduction of the Certificate Balance of such
Certificates, as well as prevailing interest rates at the time of prepayment
or default.
The rate of distributions in reduction of the Certificate Balance of any
Class of Offered Certificates, the aggregate amount of distributions on any
Class of Offered Certificates and the yield to maturity of any Class of
Offered Certificates will be directly related to the rate of payments of
principal (both scheduled and unscheduled) on the Mortgage Loans and the
amount and timing of borrower defaults. In addition, such distributions in
reduction of Certificate Balance may result from repurchases by the Mortgage
Loan Seller due to missing or defective documentation or breaches of
representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling and Servicing Agreement --
Representations and Warranties; Repurchase," purchases of the Mortgage Loans
in the manner described herein under "The Pooling and Servicing Agreement --
Optional Termination" or purchases of ARD Loans by Class LR
Certificateholders as described herein under "Description of the Mortgage
Loans -- Certain Terms and Conditions of the Mortgage Loans."
The Certificate Balance of any Class of Offered Certificates may be
reduced without distributions thereon as a result of the allocation of
Collateral Support Deficits to such Class (or the related Classes), reducing
the maximum amount distributable to such Class in respect of Certificate
Balance, as well as the amount of interest that would have accrued thereon in
the absence of such reduction. A Collateral Support Deficit generally results
when the aggregate principal balance of a Mortgage Loan is reduced without an
equal distribution to Certificateholders in reduction of the Certificate
Balances of the Certificates. Collateral Support Deficits are likely to arise
under the circumstances described in the penultimate paragraph of
"Description of the Offered Certificates -- Subordination; Allocation of
Collateral Support Deficits and Certificate Deferred Interests."
Because the ability of a borrower to make a Balloon Payment or to repay an
ARD Loan in full on its Anticipated Repayment Date will depend upon its
ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Properties, there is a risk that a borrower may default at the
maturity date in the case of a Balloon Loan or fail to fully repay an ARD
Loan at its Anticipated Repayment Date. In connection with a default on the
Balloon Payment, the Special Servicer may agree to extend the maturity date
thereof as described herein under "The Pooling and Servicing Agreement --
Realization Upon Mortgage Loans." In the case of any such default, recovery
of proceeds may be delayed by and until, among other things, work-outs are
negotiated, foreclosures are completed or bankruptcy proceedings are
resolved. In addition, the Directing Holders (as defined below) may instruct
to delay the commencement of any foreclosure proceedings under certain
conditions described herein. Certificateholders are not entitled to receive
distributions of Monthly Payments or the Balloon Payment when due except to
the extent they are either covered by an Advance or actually received.
Consequently, any defaulted Monthly Payment for which no such Advance is made
and a defaulted Balloon Payment will tend to extend the weighted average
lives of the Certificates, whether or not a permitted extension of the due
date of the related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments
S-125
<PAGE>
experienced over time is consistent with such investor's expectation. In
general, the earlier a prepayment of principal on the Mortgage Loans is
applied in reduction of the Certificate Balance of a Class of Offered
Certificates, the greater the effect on such investor's yield to maturity.
All of the Mortgage Loans (excluding Loan No. 92) have Lockout Periods
ranging from 24 months to 299 months following the Cut-off Date. The weighted
average Lockout Period for the Mortgage Loans is approximately 122 months.
The Mortgage Loans (excluding Loan No. 92) are generally locked out until no
earlier than six months preceding their Anticipated Repayment Date or
maturity date, as applicable. See "Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage Loans -- Prepayment Provisions"
herein.
As described herein, all of the Mortgage Loans have one or more
call-protection features (i.e., Lockout Periods, Prepayment Premiums or Yield
Maintenance Charges), which are intended to prohibit or discourage borrowers
from prepaying their Mortgage Loans. Notwithstanding the existence of such
call protection, no representation is made as to the rate of principal
payments on the Mortgage Loans or as to the yield to maturity of any Class of
Offered Certificates. In addition, although Excess Cash Flow is applied to
reduce the principal of the ARD Loans after their respective Anticipated
Repayment Dates and the Mortgage Rates are reset at the Revised Rates, there
can be no assurance that any of such Mortgage Loans will be prepaid on that
date or any date prior to maturity. An investor is urged to make an
investment decision with respect to any Class of Offered Certificates based
on the anticipated yield to maturity of such Class of Offered Certificates
resulting from its purchase price and such investor's own determination as to
anticipated Mortgage Loan prepayment rates under a variety of scenarios. The
extent to which any Class of Offered Certificates is purchased at a discount
or a premium and the degree to which the timing of payments on such Class of
Offered Certificates is sensitive to prepayments will determine the extent to
which the yield to maturity of such Class of Offered Certificates may vary
from the anticipated yield. An investor should carefully consider the
associated risks, including, in the case of any Offered Certificates
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans could result in an actual yield to
such investor that is lower than the anticipated yield and, in the case of
any Offered Certificates purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to
such investor that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of
the principal balance of the Offered Certificates entitled to distributions
of principal may coincide with periods of low prevailing interest rates.
During such periods, the effective interest rates on securities in which an
investor may choose to reinvest amounts distributed in reduction of the
principal balance of such investor's Offered Certificate may be lower than
the Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of
principal balance of the Offered Certificates entitled to distributions of
principal, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal distributions resulting from
prepayments available to an investor in such Certificates for reinvestment at
such high prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
prices because while interest is generally required to be paid by the
borrower on the first day of each month, the distribution of such interest
will not be made until the Distribution Date occurring in such month, and
principal paid on any Distribution Date will not bear interest during the
period after the interest is paid and before the Distribution Date occurs.
Additionally, as described under "Description of the Offered Certificates --
Distributions" herein, if the portion of the Available Distribution Amount
distributable in respect of interest on any Class of Offered Certificates on
any Distribution Date is less than the amount of interest required to be paid
to the holders of such Class, the shortfall will be distributable to holders
of such Class of Certificates on subsequent Distribution Dates, to the extent
of Available Funds on such Distribution Dates. Any such shortfall will not
bear interest, however, and will therefore negatively affect the yield to
maturity of such Class of Certificates for so long as it is outstanding.
MODELING ASSUMPTIONS
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR
S-126
<PAGE>
model represents an assumed constant annual rate of prepayment each month,
expressed as a per annum percentage of the then-scheduled principal balance
of the pool of mortgage loans. As used in the following tables, the column
headed "0% CPR" assumes that none of the Mortgage Loans is prepaid before the
earlier of the Anticipated Repayment Date or maturity date, as applicable.
With respect to all Mortgage Loans except Loan No. 92, the columns headed "5%
CPR", "10% CPR", "15% CPR" and "25% CPR" assume that prepayments on the
Mortgage Loans are made at those levels of CPR following the expiration of
any Lockout Period and Yield Maintenance Period. Loan No. 92 is assumed to
prepay in full on January 11, 1998. All columns in the following tables
assume that all of the ARD Loans are fully prepaid on their related
Anticipated Repayment Date and all of the other Mortgage Loans are paid in
full on their maturity date. There is no assurance, however, that prepayments
of the Mortgage Loans will conform to any level of CPR, and no representation
is made that the Mortgage Loans will prepay at the levels of CPR shown or at
any other prepayment rate. The foregoing assumptions are referred to herein
as the "Prepayment Assumptions."
For purposes of this Prospectus Supplement, the "Mortgage Loan
Assumptions" are the following: (i) each Mortgage Loan will pay principal and
interest in accordance with its terms and scheduled payments will be timely
received on the related Due Date; (ii) all Mortgage Loans have Due Dates on
the eleventh day of each month and accrue interest on the respective basis
described herein; (iii) all prepayments are accompanied by a full month's
interest and there are no Prepayment Interest Shortfalls; (iv) no Prepayment
Premiums or Yield Maintenance Charges are allocated to the Certificates; (v)
distributions on the Certificates are made on the seventeenth day (each
assumed to be a business day) of each month, commencing in January 1998; (vi)
the Mortgage Loan Seller does not repurchase any Mortgage Loan as described
under "The Pooling and Servicing Agreement -- Representations and Warranties
- -- Repurchase"; (vii) there are no delinquencies or defaults with respect to,
and no modifications, waivers or amendments of the terms of, the Mortgage
Loans; (viii) there are no Collateral Support Deficits or Appraisal Reduction
Amounts with respect to the Mortgage Loans or the Trust Fund; (ix) none of
the Mortgage Loan Seller, the Controlling Class or the Servicer exercises the
right to cause the early termination of the Trust Fund; (x) the Servicing Fee
Rate, Trustee Fee Rate and Primary Servicing Fee Rate for each Distribution
Date are the rates set forth herein on the Stated Principal Balance of the
Mortgage Loans as of the related Due Date; and (xi) the date of determination
of weighted average life is December 19, 1997.
YIELD ON THE CLASS A-X CERTIFICATES
The yield-to-call on the Class A-X Certificates will be extremely
sensitive to the rate and timing of principal payments (including
prepayments, defaults and liquidations) and principal losses on the Mortgage
Loans, which may fluctuate significantly from time to time, and to other
factors set forth herein, including the timing of the exercise, if any, of
the optional termination right. Investors should fully consider the
associated risks, including the risk that a rapid rate of principal payments
or principal losses on the Mortgage Loans could result in the failure by
investors in the Class A-X Certificates to fully recoup their initial
investments.
The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields-to-call of the Class A-X Certificates at various prices and
constant prepayment rates. The yields set forth in the table were calculated
by determining the monthly discount rates that, when applied to the assumed
stream of cash flows to be paid on the Class A-X Certificates, would cause
the discounted present value of such assumed stream of cash flows to equal
the assumed purchase prices plus accrued interest of such Class of
Certificates and converting such monthly rates to corporate bond equivalent
rates. Such calculations do 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 distributions on the Class A-X Certificates and
consequently do not purport to reflect the return on any investment in such
Class of Certificates when such reinvestment rates are considered.
The table below has been prepared in accordance with the Mortgage Loan
Assumptions and the Prepayment Assumptions described above (except that the
optional termination right is assumed to be exercised) and with the assumed
respective purchase prices (as a percentage of the Notional Balance) of the
Class A-X Certificates set forth in the table, plus accrued interest thereon
from December 11, 1997
S-127
<PAGE>
to (but not including) December 19, 1997. Such table assumes that no
Prepayment Premiums or Yield Maintenance Charges are distributed to the Class
A-X Certificates in connection with any prepayment.
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX YIELDS TO CALL OF THE
CLASS A-X CERTIFICATES
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE
AS A PERCENTAGE OF NOTIONAL BALANCE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ----------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
8.078125% 8.418% 8.186% 8.080% 7.986% 7.828%
8.109375% 8.320% 8.088% 7.982% 7.888% 7.730%
8.140625% 8.223% 7.991% 7.885% 7.791% 7.633%
</TABLE>
There can be no assurance that the Mortgage Loans will prepay at any of
the rates shown in the table or at any other particular rate, that the cash
flows on any of the Class A-X Certificates will correspond to the cash flows
described herein or that the aggregate purchase price of the Class A-X
Certificates will be as assumed. In addition, it is unlikely that the
Mortgage Loans will prepay at any of the specified percentages of CPR until
maturity or that all the Mortgage Loans will so prepay at the same rate.
Timing of changes in the rate of prepayments may significantly affect the
actual yield to maturity to investors, even if the average rate of principal
prepayments is consistent with the expectations of investors. Investors must
make their own decisions as to the appropriate prepayment assumption to be
used in deciding whether to purchase any Class A-X Certificates.
RATED FINAL DISTRIBUTION DATE
The ratings provided by the Rating Agencies address the likelihood that
all principal due on the Offered Certificates will be received by the Rated
Final Distribution Date, which is January 17, 2035, the first Distribution
Date following the date that is two years after the latest Assumed Maturity
Date. Most of the Mortgage Loans have maturity dates or Anticipated Repayment
Dates that occur earlier than the latest Assumed Maturity Date, and most of
the Mortgage Loans may be prepaid prior to maturity. Consequently, it is
possible that the Certificate Balance of each Class of Offered Certificates
will be reduced to zero significantly earlier than the Rated Final
Distribution Date.
WEIGHTED AVERAGE LIFE OF OFFERED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or
allocation to the investor of each dollar in reduction of Certificate Balance
that is distributed or allocated, respectively. The weighted average lives of
the Offered Certificates will be influenced by, among other things, the rate
at which principal of the Mortgage Loans is paid, which may occur as a result
of scheduled amortization, Balloon Payments, voluntary or involuntary
prepayments or liquidations.
The weighted average lives of the Offered Certificates may also be
affected to the extent that additional distributions in reduction of the
Certificate Balance of such Certificates occur as a result of the repurchase
or purchase of Mortgage Loans from the Trust Fund as described under "The
Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase" or "--Optional Termination" herein. Such a repurchase or purchase
from the Trust Fund will have the same effect on distributions to the holders
of Certificates as if the related Mortgage Loans had prepaid in full, except
that no Prepayment Premiums or Yield Maintenance Charges are made in respect
thereof.
The tables of "Percentage of Initial Certificate Balance Outstanding at
the Respective CPRs Set Forth Below" and "Percentage of Initial Notional
Balance Outstanding at the Respective CPRs Set Forth Below" indicate the
weighted average life of each Class of Offered Certificates and set forth the
percentage of the initial Certificate Balance or Notional Balance of such
Offered Certificates that would be outstanding after each of the dates shown
at the various CPRs and based on the Prepayment Assumptions. The tables have
also been prepared on the basis of the Mortgage Loan Assumptions. The
Mortgage Loan Assumptions made in preparing the previous and following tables
are expected to vary
S-128
<PAGE>
from the actual performance of the Mortgage Loans. It is highly unlikely that
principal of the Mortgage Loans will be repaid consistent with assumptions
underlying any one of the scenarios. Investors are urged to conduct their own
analysis concerning the likelihood that the Mortgage Loans may pay or prepay
on any particular date.
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables indicate the weighted average life of the Offered
Certificates and set forth the percentages of the initial Certificate Balance
or Notional Balance of the Offered Certificates that would be outstanding
after each of the indicated Distribution Dates, at the indicated CPRs.
PERCENTAGE OF INITIAL NOTIONAL BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-X
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 99% 99% 99% 99% 99%
December 17, 1999 ........ 98% 98% 98% 98% 98%
December 17, 2000 ........ 97% 96% 96% 96% 96%
December 17, 2001 ........ 95% 95% 95% 95% 95%
December 17, 2002 ........ 94% 93% 93% 93% 92%
December 17, 2003 ........ 90% 90% 89% 89% 88%
December 17, 2004 ........ 79% 78% 77% 77% 76%
December 17, 2005 ........ 76% 75% 74% 73% 72%
December 17, 2006 ........ 73% 71% 71% 70% 69%
December 17, 2007 ........ 16% 16% 16% 16% 16%
December 17, 2008 ........ 15% 15% 15% 15% 15%
December 17, 2009 ........ 14% 14% 14% 14% 14%
December 17, 2010 ........ 14% 14% 13% 13% 13%
December 17, 2011 ........ 13% 13% 13% 13% 12%
December 17, 2012 ........ 8% 8% 8% 8% 8%
December 17, 2013 ........ 7% 7% 7% 7% 7%
December 17, 2014 ........ 5% 5% 5% 5% 5%
December 17, 2015 ........ 4% 4% 4% 4% 4%
December 17, 2016 ........ 3% 3% 3% 3% 3%
December 17, 2017 ........ 2% 2% 2% 2% 2%
December 17, 2018 ........ 2% 2% 2% 2% 2%
December 17, 2019 ........ 2% 2% 2% 2% 2%
December 17, 2020 ........ 1% 1% 1% 1% 1%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 9.8 9.7 9.7 9.7 9.6
</TABLE>
- ------------
(1) The weighted average life of the Class A-X Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Notional Balance of such Class by the number of years from the Closing
Date to the related Distribution Date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
Notional Balance referred to in clause (i). The weighted average life
data presented above for the Class A-X Certificates is for illustrative
purposes only, as the Class A-X Certificates are not entitled to any
distributions of principal.
S-129
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 91% 88% 88% 88% 88%
December 17, 1999 ........ 80% 78% 78% 78% 78%
December 17, 2000 ........ 68% 66% 66% 66% 66%
December 17, 2001 ........ 55% 52% 52% 51% 50%
December 17, 2002 ........ 40% 35% 33% 30% 25%
December 17, 2003 ........ 7% 0% 0% 0% 0%
December 17, 2004 ........ 0% 0% 0% 0% 0%
December 17, 2005 ........ 0% 0% 0% 0% 0%
December 17, 2006 ........ 0% 0% 0% 0% 0%
December 17, 2007 ........ 0% 0% 0% 0% 0%
December 17, 2008 ........ 0% 0% 0% 0% 0%
December 17, 2009 ........ 0% 0% 0% 0% 0%
December 17, 2010 ........ 0% 0% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 4.0 3.8 3.7 3.7 3.6
</TABLE>
- ------------
(1) The weighted average life of the Class A-1 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-130
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-2
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 98% 96% 92%
December 17, 2004 ........ 50% 46% 43% 41% 37%
December 17, 2005 ........ 37% 32% 29% 26% 22%
December 17, 2006 ........ 23% 17% 13% 10% 6%
December 17, 2007 ........ 0% 0% 0% 0% 0%
December 17, 2008 ........ 0% 0% 0% 0% 0%
December 17, 2009 ........ 0% 0% 0% 0% 0%
December 17, 2010 ........ 0% 0% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17. 2021 ........ 0% 0% 0% 0% 0%
December 17. 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1)............ 7.8 7.6 7.5 7.4 7.3
<FN>
- ------------
(1) The weighted average life of the Class A-2 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
</TABLE>
S-131
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-3
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 100% 100% 100%
December 17, 2004 ........ 100% 100% 100% 100% 100%
December 17, 2005 ........ 100% 100% 100% 100% 100%
December 17, 2006 ........ 100% 100% 100% 100% 100%
December 17, 2007 ........ 0% 0% 0% 0% 0%
December 17, 2008 ........ 0% 0% 0% 0% 0%
December 17, 2009 ........ 0% 0% 0% 0% 0%
December 17, 2010 ........ 0% 0% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 9.8 9.8 9.8 9.8 9.7
</TABLE>
- ------------
(1) The weighted average life of the Class A-3 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-132
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 100% 100% 100%
December 17, 2004 ........ 100% 100% 100% 100% 100%
December 17, 2005 ........ 100% 100% 100% 100% 100%
December 17, 2006 ........ 100% 100% 100% 100% 100%
December 17, 2007 ........ 0% 0% 0% 0% 0%
December 17, 2008 ........ 0% 0% 0% 0% 0%
December 17, 2009 ........ 0% 0% 0% 0% 0%
December 17, 2010 ........ 0% 0% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 9.9 9.9 9.9 9.9 9.9
</TABLE>
- ------------
(1) The weighted average life of the Class B Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-133
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 100% 100% 100%
December 17, 2004 ........ 100% 100% 100% 100% 100%
December 17, 2005 ........ 100% 100% 100% 100% 100%
December 17, 2006 ........ 100% 100% 100% 100% 100%
December 17, 2007 ........ 0% 0% 0% 0% 0%
December 17, 2008 ........ 0% 0% 0% 0% 0%
December 17, 2009 ........ 0% 0% 0% 0% 0%
December 17, 2010 ........ 0% 0% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 9.9 9.9 9.9 9.9 9.9
</TABLE>
- ------------
(1) The weighted average life of the Class C Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-134
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS D
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 100% 100% 100%
December 17, 2004 ........ 100% 100% 100% 100% 100%
December 17, 2005 ........ 100% 100% 100% 100% 100%
December 17, 2006 ........ 100% 100% 100% 100% 100%
December 17, 2007 ........ 32% 32% 32% 32% 32%
December 17, 2008 ........ 23% 22% 22% 21% 19%
December 17, 2009 ........ 14% 12% 11% 9% 7%
December 17, 2010 ........ 3% 1% 0% 0% 0%
December 17, 2011 ........ 0% 0% 0% 0% 0%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 10.6 10.5 10.5 10.5 10.4
</TABLE>
- ------------
(1) The weighted average life of the Class D Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-135
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS E
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15% CPR 25% CPR
- ------------------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percent .......... 100% 100% 100% 100% 100%
December 17, 1998 ........ 100% 100% 100% 100% 100%
December 17, 1999 ........ 100% 100% 100% 100% 100%
December 17, 2000 ........ 100% 100% 100% 100% 100%
December 17, 2001 ........ 100% 100% 100% 100% 100%
December 17, 2002 ........ 100% 100% 100% 100% 100%
December 17, 2003 ........ 100% 100% 100% 100% 100%
December 17, 2004 ........ 100% 100% 100% 100% 100%
December 17, 2005 ........ 100% 100% 100% 100% 100%
December 17, 2006 ........ 100% 100% 100% 100% 100%
December 17, 2007 ........ 100% 100% 100% 100% 100%
December 17, 2008 ........ 100% 100% 100% 100% 100%
December 17, 2009 ........ 100% 100% 100% 100% 100%
December 17, 2010 ........ 100% 100% 97% 91% 81%
December 17, 2011 ........ 69% 60% 52% 45% 34%
December 17, 2012 ........ 0% 0% 0% 0% 0%
December 17, 2013 ........ 0% 0% 0% 0% 0%
December 17, 2014 ........ 0% 0% 0% 0% 0%
December 17, 2015 ........ 0% 0% 0% 0% 0%
December 17, 2016 ........ 0% 0% 0% 0% 0%
December 17, 2017 ........ 0% 0% 0% 0% 0%
December 17, 2018 ........ 0% 0% 0% 0% 0%
December 17, 2019 ........ 0% 0% 0% 0% 0%
December 17, 2020 ........ 0% 0% 0% 0% 0%
December 17, 2021 ........ 0% 0% 0% 0% 0%
December 17, 2022 ........ 0% 0% 0% 0% 0%
Weighted Average Life
(in years)(1) ........... 14.3 14.2 14.0 13.9 13.7
</TABLE>
- ------------
(1) The weighted average life of the Class E Certificates is determined by
(i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
S-136
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 11, 1997 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the Special Servicer
and the Trustee.
Reference is made to the Prospectus for important information in addition
to that set forth herein regarding the terms of the Pooling and Servicing
Agreement and terms and conditions of the Offered Certificates. The Trustee
will provide a copy of the Pooling and Servicing Agreement to a prospective
or actual holder of an Offered Certificate, upon written request and, at the
Trustee's discretion, payment of a reasonable fee for any expenses. The
Pooling and Servicing Agreement will also be made available by the Trustee on
its Website, at the address set forth on page S-3 hereof. The Pooling and
Servicing Agreement will also be filed with the Commission by the Depositor
by means of the EDGAR System and should be available on the Commission's
Website, the address of which is "www.sec.gov".
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise
convey, assign or cause the assignment of the Mortgage Loans, without
recourse, to the Trustee for the benefit of the holders of Certificates. On
or prior to the Closing Date, the Depositor will deliver to the Trustee, with
respect to each Mortgage Loan, a mortgage file ("Mortgage File") containing
certain documents and instruments, including, among other things, the
following: (i) the original Mortgage Note endorsed without recourse to the
order of the Trustee, as trustee; (ii) the original mortgage or counterpart
thereof (or, in either case, a certified copy thereof); (iii) the assignment
of the mortgage in recordable form in favor of the Trustee; (iv) if
applicable, preceding assignments of mortgages; (v) the related security
agreement, if any; (vi) if applicable, the original assignment of the
assignment of leases and rents to the Trustee; (vii) if applicable, preceding
assignments of assignments of leases and rents; (viii) a certified copy of
the UCC-1 Financing Statements, if any, including UCC-3 continuation
statements and UCC-3 assignments; (x) the original loan agreements; (xi) the
original lender's title insurance policy (or marked commitments to insure)
and (xii) the original Lease Enhancement Policies. The Trustee will hold such
documents in trust for the benefit of the holders of the Certificates. The
Trustee is obligated to review such documents for each Mortgage Loan within
60 days after the Closing Date and promptly thereafter (but in no event later
than 90 days after the Closing Date) report any missing documents or certain
types of defects therein (in each such case, a "Defect" in the related
Mortgage File) to the Depositor, the Servicer, the Special Servicer and the
Mortgage Loan Seller.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign the
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the Mortgage Loan Purchase Agreement to the Trustee for the
benefit of the Certificateholders. In the Mortgage Loan Purchase Agreement,
the Mortgage Loan Seller will represent and warrant, among other things, that
(subject to certain exceptions specified in the Mortgage Loan Purchase
Agreement), as of the Closing Date (unless otherwise specified):
(i) Immediately prior to the sale, transfer and assignment to the
Depositor, no Mortgage Note or Mortgage was subject to any assignment (other
than to the Mortgage Loan Seller), participation or pledge, and the Mortgage
Loan Seller had good and marketable title to, and was the sole owner of, the
related Mortgage Loan;
(ii) The Mortgage Loan Seller has full right and authority to sell, assign
and transfer such Mortgage Loan, and the assignment to the Depositor
constitutes a legal, valid and binding assignment of such Mortgage Loan;
(iii) The Mortgage Loan Seller is transferring such Mortgage Loan free and
clear of any and all liens, pledges, charges or security interests of any
nature encumbering such Mortgage Loan;
S-137
<PAGE>
(iv) Each related Mortgage Note, Mortgage, assignment of leases (if any)
and other agreement executed in connection with such Mortgage Loan is the
legal, valid and binding obligation of the related borrower, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and to the Mortgage Loan Seller's knowledge,
there is no valid defense, counterclaim, or right of rescission available to
the related borrower with respect to such Mortgage Note, Mortgage, assignment
of leases and other agreements;
(v) Each related assignment of leases creates a valid collateral or first
priority assignment of, or a valid first priority security interest in,
certain rights under the related lease, subject only to a license granted to
the related borrower to exercise certain rights and to perform certain
obligations of the lessor under such lease, including the right to operate
the related Mortgaged Property; no person other than the related borrower
owns any interest in any payments due under such lease that is superior to or
of equal priority with the mortgagee's interest therein;
(vi) Each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor and related assignment of the assignment of leases, if any, or
assignment of any other agreement executed in connection with such Mortgage
Loan from the Mortgage Loan Seller to the Depositor constitutes the legal,
valid and binding assignment from the Mortgage Loan Seller to the Depositor,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other laws relating
to or affecting creditors' rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(vii) Since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been modified, altered, satisfied, canceled,
subordinated or rescinded and, each related Mortgaged Property has not been
released from the lien of the related Mortgage in any manner which materially
interferes with the security intended to be provided by such Mortgage;
(viii) Each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property (subject to the matters described in clause (xi)
below), and such Mortgaged Property is free and clear of any mechanics' and
materialmen's liens which are prior to or equal with the lien of the related
Mortgage, except those which are insured against by a lender's title
insurance policy (as described below);
(ix) The Mortgage Loan Seller has not taken any action that would cause
the representations and warranties made by each related borrower in the
Mortgage Loan not to be true;
(x) The Mortgage Loan Seller has no knowledge that the material
representations and warranties made by each related borrower in such Mortgage
Loan are not true in any material respect;
(xi) The lien of each related Mortgage is a first priority lien in the
original principal amount of such Mortgage Loan or allocated loan amount of
the portions of the Mortgaged Property covered thereby (as set forth in the
related Mortgage) after all advances of principal and is insured by an ALTA
lender's title insurance policy (or a binding commitment therefor), or its
equivalent as adopted in the applicable jurisdiction, insuring the Mortgage
Loan Seller, its successors and assigns, subject only to (a) the lien of
current real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, materially interferes with
the current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or the value of the Mortgaged Property and
(c) the exceptions (general and specific) set forth in such policy, none of
which, individually or in the aggregate, materially interferes with the
current general use of the Mortgaged Property or materially interferes with
the security intended to be provided by such Mortgage or with the related
borrower's ability to pay its obligations when they become due or the value
of the Mortgaged Property; such policy was issued by a title insurance
company licensed to issue policies in the state in which the related
Mortgaged Property is located and is assignable to the Depositor and the
Trustee without the consent of or any notification to the insurer, and is in
full force and effect upon the consummation of the transactions contemplated
by the
S-138
<PAGE>
Mortgage Loan Purchase Agreement; no claims have been made under such policy
and the Mortgage Loan Seller has not undertaken any action or omitted to take
any action, and has no knowledge of any such act or omission, which would
impair or diminish the coverage of such policy;
(xii) The proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and the Mortgage Loan
Seller covenants that it will not make any future advances under the Mortgage
Loan to the related borrower;
(xiii) As of the later of the closing date for each Mortgage Loan or the
most recent inspection of the related Mortgaged Property by the Mortgage Loan
Seller, each related Mortgaged Property is free of any material damage that
would affect materially and adversely the value of such Mortgaged Property as
security for the Mortgage Loan or reserves have been established to remediate
such damage and, as of the closing date for each Mortgage Loan and, to the
Mortgage Loan Seller's knowledge, as of the date hereof, there is no
proceeding pending for the total or partial condemnation of such Mortgaged
Property;
(xiv) The Mortgage Loan Seller has inspected or caused to be inspected
each related Mortgaged Property within the past twelve months or within three
months of origination of the Mortgage Loan;
(xv) No Mortgage Loan has a shared appreciation feature, any other
contingent interest feature or a negative amortization feature other than the
ARD Loans which may have negative amortization from and after the Anticipated
Repayment Date;
(xvi) Each Mortgage Loan is a whole loan and contains no equity
participation by the Mortgage Loan Seller or the applicable Originator;
(xvii) The Mortgage Rate (exclusive of any default interest, late charges,
or prepayment premiums) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; and any and all other
requirements of any federal, state or local laws, including, without
limitation, truth-in-lending, real estate settlement procedures, equal credit
opportunity or disclosure laws, applicable to such Mortgage Loan have been
complied with as of the date of origination of such Mortgage Loan;
(xviii) Neither the Mortgage Loan Seller, nor, to the Mortgage Loan
Seller's best knowledge, any Originator other than the Mortgage Loan Seller,
committed any fraudulent acts during the origination process of any Mortgage
Loan it originated and to the best of the Mortgage Loan Seller's knowledge,
the origination, servicing and collection of each Mortgage Loan is in all
respects legal, proper and prudent in accordance with customary industry
standards;
(xix) All taxes and governmental assessments that became due and owing
prior to the Closing Date with respect to each related Mortgaged Property
have been paid or an escrow of funds in an amount sufficient to cover such
payments has been established;
(xx) All escrow deposits and payments required pursuant to each Mortgage
Loan are in the possession, or under the control, of the Mortgage Loan Seller
or its agent and there are no deficiencies in connection therewith and all
such escrows and deposits have been conveyed by the Mortgage Loan Seller to
the Depositor and identified as such with appropriate detail;
(xxi) Each related Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by an insurer meeting the requirements of the
Pooling and Servicing Agreement, in an amount not less than the replacement
cost and the amount necessary to avoid the operation of any co-insurance
provisions with respect to the related Mortgaged Property; each related
Mortgaged Property is also covered by business interruption insurance which
covers a period of not less than 12 months and comprehensive general
liability insurance in amounts generally required by institutional lenders
for similar properties; all premiums on such insurance policies required to
be paid as of the date hereof have been paid; such insurance policies require
prior notice to the insured of termination or cancellation, and no such
notice has been received; such insurance names the Mortgagee under the
Mortgage Loan and its successors and assigns as a named or additional
insured; other than the Credit Lease Loans, each related Mortgage Loan
obligates the related borrower to maintain all such insurance and, at such
borrower's failure to do so, authorizes the mortgagee to maintain such
insurance at the borrower's cost and expense and to seek reimbursement
therefor from such borrower;
S-139
<PAGE>
(xxii) There is no monetary default, breach, violation or event of
acceleration existing under the related Mortgage Loan. To the Mortgage Loan
Seller's knowledge, there is no (a) material non-monetary default, breach,
violation or event of acceleration existing under the related Mortgage Loan
or (b) event (other than payments due but not yet delinquent) which, with the
passage of time or with notice and the expiration of any grace or cure
period, would and does constitute a default, breach, violation or event of
acceleration;
(xxiii) No Mortgage Loan has been more than 30 days delinquent since
origination and as of the Cut-off Date no Mortgage Loan is 30 or more days
delinquent;
(xxiv) Each related Mortgage contains provisions so as to render the
rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security, including
realization by judicial or, if applicable, non-judicial foreclosure, and
there is no exemption available to the borrower which would interfere with
such right to foreclose (except as may be imposed by bankruptcy, insolvency,
moratorium, redemption or other similar laws affecting creditors' rights
generally, or by general principles of equity) and to the Mortgage Loan
Seller's knowledge, no borrower is a debtor in a state or federal bankruptcy
or insolvency proceeding;
(xxv) Each borrower represents and warrants that except as set forth in
certain environmental reports and to the best of its knowledge it has not
used, caused or permitted to exist and will not use, cause or permit to exist
on the related Mortgaged Property any hazardous materials in any manner which
violates federal, state or local laws, ordinances, regulations, orders,
directives or policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of hazardous
materials; the related borrower or an affiliate or an affiliate thereof
agrees to indemnify, defend and hold the mortgagee and its successors and
assigns harmless from and against losses, liabilities, damages, injuries,
penalties, fines, expenses, and claims of any kind whatsoever (including
attorneys' fees and costs) paid, incurred or suffered by, or asserted
against, any such party resulting from a breach of certain representations,
warranties or covenants given by the borrower in connection with such
Mortgage Loan. A Phase I environmental report and with respect to certain
Mortgage Loans, a Phase II Environmental Report, was conducted by a reputable
environmental engineer in connection with such Mortgage Loan, which report
did not indicate any material non-compliance or material existence of
hazardous materials. To the best of the Mortgage Loan Seller's knowledge, in
reliance on such environmental reports, each Mortgaged Property is in
material compliance with all applicable federal, state and local laws
pertaining to environmental hazards, and to the best of the Mortgage Loan
Seller's knowledge, no notice of violation of such laws has been issued by
any governmental agency or authority, except as indicated in certain
environmental reports or other documents previously provided to the Rating
Agencies; the Mortgage Loan Seller has not taken any action which would cause
the Mortgaged Property to not be in compliance with all federal, state and
local laws pertaining to environmental hazards;
(xxvi) Each Mortgage Loan contains provisions for the acceleration of the
payment of the unpaid principal balance of such Mortgage Loan if, without
complying with the requirements of the Mortgage Loan, the related Mortgaged
Property, or any controlling interest therein, is directly or indirectly
transferred or sold, or encumbered in connection with subordinate financing;
(xxvii) All improvements included in any MAI appraisals are within the
boundaries of the related Mortgaged Property, except for de minimis
encroachments onto adjoining parcels for which the Mortgage Loan Seller has
obtained title insurance against losses arising therefrom and no improvements
on adjoining parcels encroach onto the related Mortgaged Property except for
de minimis encroachments;
(xxviii) The mortgage loan schedule which is attached as an exhibit to the
Pooling and Servicing Agreement is complete and accurate in all material
respects as of the dates of the information set forth therein;
(xxix) With respect to any Mortgage Loan where all or a material portion
of the estate of the related borrower therein is a leasehold estate, based
upon the terms of the ground lease and any estoppel received from the ground
lessor, the Mortgage Loan Seller represents and warrants that:
S-140
<PAGE>
(A) The ground lease or a memorandum regarding such ground lease has been
duly recorded. The ground lease permits the interest of the lessee to be
encumbered by the related Mortgage and does not restrict the use of the
related Mortgaged Property by such lessee, its successors or assigns in a
manner that would adversely affect the security provided by the related
Mortgage. To the Mortgage Loan Seller's best knowledge, there has been no
material change in the terms of the ground lease since its recordation,
except by any written instruments which are included in the related mortgage
file;
(B) The lessor under such ground lease has agreed in a writing included in
the related mortgage file that the ground lease may not be amended, modified,
canceled or terminated without the prior written consent of the mortgagee and
that any such action without such consent is not binding on the mortgagee,
its successors or assigns;
(C) The ground lease has an original term (or an original term plus one or
more optional renewal terms, which, under all circumstances, may be
exercised, and will be enforceable, by the mortgagee) that extends not less
than 10 years beyond the stated maturity of the related Mortgage Loan;
(D) Based on the title insurance policy (or binding commitment therefor)
obtained by the Mortgage Loan Seller, the ground lease is not subject to any
liens or encumbrances superior to, or of equal priority with, the Mortgage,
subject to exceptions of the types described in clause (xi) above and liens
that encumber the ground lessor's fee interest;
(E) The ground lease is assignable to the mortgagee under the leasehold
estate and its assigns without the consent of the lessor thereunder;
(F) As of the closing date of the related Mortgage Loan, the ground lease
is in full force and effect, the Mortgage Loan Seller has received no notice
that any default beyond applicable notice and grace periods has occurred, and
there is no existing condition which, but for the passage of time or giving
of notice, would result in a default under the terms of the ground lease;
(G) The ground lease or ancillary agreement between the lessor and the
lessee requires the lessor to give notice of any default by the lessee to the
mortgagee;
(H) A mortgagee is permitted a reasonable opportunity (including, where
necessary, sufficient time to gain possession of the interest of the lessee
under the ground lease through legal proceedings, or to take other action so
long as the mortgagee is proceeding diligently) to cure any default under the
ground lease which is curable after the receipt of notice of any default
before the lessor may terminate the ground lease. All rights of the mortgagee
under the ground lease and the related Mortgage (insofar as it relates to the
ground lease) may be exercised by or on behalf of the mortgagee;
(I) The ground lease does not impose any restrictions on subletting that
would be viewed as commercially unreasonable by an institutional investor.
The lessor is not permitted to disturb the possession, interest or quiet
enjoyment of any subtenant of the lessee in the relevant portion of the
Mortgaged Property subject to the ground lease for any reason, or in any
manner, which would adversely affect the security provided by the related
Mortgage;
(J) Under the terms of the ground lease and the related Mortgage, any
related insurance proceeds or condemnation award (other than in respect of a
total or substantially total loss or taking) will be applied either to the
repair or restoration of all or part of the related Mortgaged Property, with
the mortgagee or a trustee appointed by it having the right to hold and
disburse such proceeds as repair or restoration progresses, or to the payment
of the outstanding principal balance of the Mortgage Loan, together with any
accrued interest, except that in the case of condemnation awards, the ground
lessor may be entitled to a portion of such award;
(K) Under the terms of the ground lease and the related Mortgage, any
related insurance proceeds, or condemnation award in respect of a total or
substantially total loss or taking of the related Mortgaged Property will be
applied first to the payment of the outstanding principal balance of the
Mortgage Loan, together with any accrued interest (except as provided by
applicable law or in cases where a different allocation would not be viewed
as commercially unreasonable by any institutional investor, taking into
account the relative duration of the ground lease and the related Mortgage
and the ratio of the market
S-141
<PAGE>
value of the related Mortgaged Property to the outstanding principal balance
of such Mortgage Loan). Until the principal balance and accrued interest rate
are paid in full, neither the lessee nor the lessor under the ground lease
will have an option to terminate or modify the ground lease without the prior
written consent of the mortgagee as a result of any casualty or partial
condemnation, except to provide for an abatement of the rent; and
(L) Provided that the mortgagee cures any defaults which are susceptible
to being cured, the lessor has agreed to enter into a new lease upon
termination of the ground lease for any reason, including rejection of the
ground lease in a bankruptcy proceeding;
(xxx) With respect to Mortgage Loans that are cross-collateralized, all
other loans that are cross-collateralized by such Mortgage Loans are included
in the Trust Fund;
(xxxi) Neither the Mortgage Loan Seller nor any affiliate thereof has any
obligation to make any capital contribution to any borrower under a Mortgage
Loan, other than contributions made on or prior to the Closing Date;
(xxxii) (1) The Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) the fair
market value of such real property, as evidenced by an MAI appraisal
conducted within 12 months of the origination of the Mortgage Loan, was at
least equal to 80% of the principal amount of the Mortgage Loan (a) at
origination (or if the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time when
the Mortgage Loan was not in default or default with respect thereto was not
reasonably foreseeable, the date of the last such modification) or (b) at the
Closing Date; provided that the fair market value of the real property
interest must first be reduced by (A) the amount of any lien on the real
property interest that is senior to the Mortgage Loan (unless such senior
lien also secures a Mortgage Loan, in which event the computation described
in (a) and (b) shall be made on an aggregated basis) and (B) a proportionate
amount of any lien that is in parity with the Mortgage Loan (unless such
other lien secures a Mortgage Loan that is cross-collateralized with such
Mortgage Loan, in which event the computation described in (a) and (b) shall
be made on an aggregate basis);
(xxxiii) There are no subordinate mortgages encumbering the related
Mortgaged Property, nor are there any preferred equity interests held by the
Mortgage Loan Seller or any mezzanine debt related to such Mortgaged
Property, except as set forth herein or in Schedule V to the Mortgage Loan
Purchase Agreement;
(xxxiv) The loan documents executed in connection with each Mortgage Loan
which had an original principal balance in excess of $20,000,000 or which is
a Credit Lease Loan require that the related borrower be a single-purpose
entity. (For this purpose, "single-purpose entity" shall mean an entity,
other than an individual, that is formed or organized solely for the purpose
of owning and operating one or more Mortgaged Properties, is prohibited from
engaging in any business unrelated to such property and the related Mortgage
Loan, does not have any assets other than those related to its interest in
the related Mortgaged Property or its financing, or any indebtedness other
than as permitted under the related Mortgage Loan and the organizational
documents of which contain "separateness" covenants normally contained in
real estate financings of types similar to that of the Mortgage Loans.);
(xxxv) Each Mortgage Loan prohibits the related borrower from mortgaging
or otherwise encumbering the Mortgaged Property and in carrying any
additional indebtedness except in connection with trade debt and equipment
financings in the ordinary course of borrower's business and liens contested
in accordance with the terms of the Mortgage Loans;
(xxxvi) Each borrower covenants in the Mortgage Loan documents that it
shall remain in material compliance with all material licenses, permits and
other legal requirements necessary and required to conduct its business;
(xxxvii) Each Mortgaged Property is located on or adjacent to a dedicated
road, or has access to an irrevocable easement permitting ingress and egress,
is served by public utilities and services generally available in the
surrounding community or otherwise appropriate for the use in which the
Mortgaged Property is currently being utilized, and is a separate tax parcel;
S-142
<PAGE>
(xxxviii) Based solely on a flood zone certification or a survey of the
related Mortgaged Property, if any portion of the improvements on the
Mortgaged Property is located in an area identified by the Federal Emergency
Management Agency, with respect to certain Mortgage Loans, or the Secretary
of Housing and Urban Development with respect to other Mortgage Loans, as
having special flood hazards, the terms of the Mortgage Loan require the
borrower to maintain flood insurance;
(xxxix) To the knowledge of the Mortgage Loan Seller, with respect to each
Mortgage which is a deed of trust, a trustee, duly qualified under applicable
law to serve as such, currently so serves and is named in the deed of trust
or has been substituted in accordance with applicable law, and except in
connection with a trustee's sale after a default by the related Mortgagor, no
fees are payable to such trustee;
(xl) With respect to each Mortgage Loan which is identified in this
Prospectus Supplement as a Credit Lease Loan:
(A) the base rental payments under each Credit Lease are equal to or
greater than the payments due under the loan documents executed in
connection with the related Credit Lease Loan and are payable without
notice or demand, and without setoff, counterclaim, recoupment, abatement,
reduction or defense;
(B) either (i) the obligations of the Tenant under each Credit Lease,
including, but not limited to, the obligation of Tenant to pay fixed and
additional rent, are not affected by reason of any damage to or
destruction of any portion of the related Credit Lease Property; any
taking of such Credit Lease Property or any part thereof by condemnation
or otherwise; or any prohibition, limitation, interruption, cessation,
restriction, prevention or interference of Tenant's use, occupancy or
enjoyment of such Credit Lease Property or (ii) a Lease Enhancement Policy
has been obtained;
(C) every obligation associated with managing, owning, developing and
operating the Credit Lease Property, including, but not limited to, the
costs associated with utilities, taxes, insurance, capital and structural
improvements, maintenance and repairs is an obligation of the Tenant;
(D) no borrower has any monetary obligations under any Credit Lease that
have not been met, or any nonmonetary obligations under any Credit Lease
the breach of which would result in either the abatement of rent, a right
of setoff or the termination of the related Credit Lease;
(E) no Tenant can terminate any Credit Lease for any reason (except for a
default by the related borrower under the Credit Lease) prior to the
payments in full of (a) the principal balance of the related Credit Lease
Loan, (b) all accrued and unpaid interest on such Credit Lease Loan and
(c) any other sums due and payable under such Credit Lease Loan, or a
Lease Enhancement Policy has been obtained with respect to the related
Credit Lease Loan;
(F) if a Tenant assigns its Credit Lease or sublets the related Credit
Lease Property, such Tenant remains primarily obligated under such Credit
Lease unless each Rating Agency has confirmed in writing that such
transfer or sublet will not result in a downgrade, qualification or
withdrawal of the then-current ratings of the Certificates;
(G) each Tenant has agreed to indemnify the related borrower from any
claims of any nature relating to the related Credit Lease and Credit Lease
Property, except for environmental problems that were not created by such
Tenant;
(H) if the obligations of the Tenant under any Credit Lease are
guaranteed by a guarantor pursuant to a guaranty, the guaranty states that
it represents the unconditional obligation of the guarantor and is a
guarantee of payment, not merely of collection; and
(I) the first payment of "base" or "fixed" rent under each Credit Lease,
the Tenant or Guarantor with respect to which is CVS, shall be made as and
when due, subject to any applicable grace periods.
(xli) To the knowledge of the Mortgage Loan Seller, as of the date of the
origination of the related Mortgage Loan, there was no pending action, suit
or proceeding, arbitration or governmental investigation against a borrower
or Mortgaged Property, an adverse outcome of which would materially and
adversely affect such borrower's ability to perform under the related
Mortgage Loan;
S-143
<PAGE>
(xlii) No advance of funds has been made by the Mortgage Loan Seller to
the related borrower (other than Mezzanine Debt and the acquisition of
preferred equity interests by the Preferred Interest Holder) and no funds
have been received from any person other than, or on behalf of, the related
borrower for, or on account of, payments due on the Mortgage Loan;
(xliii) To the extent required under applicable law, as of the Cut-off
Date, the Mortgage Loan Seller was authorized to transact and do business in
the jurisdiction in which each related Mortgaged Property is located;
(xliv) All collateral for the Mortgage Loans is being transferred as part
of the Mortgage Loans;
(xlv) Except in connection with Crossed-Loans and Pool Loans, no Mortgage
Loan requires the mortgagee to release any portion of the Mortgaged Property
from the lien of the related Mortgage except upon (a) payment in full or
defeasance of the related Mortgage Loan, (b) releases of unimproved
out-parcels or (c) releases of portions of the Mortgaged Property which will
not have a material adverse effect on the value of the collateral for the
related Mortgage Loan;
(xlvi) Any insurance proceeds in respect of a casualty loss or taking,
will be applied either to (a) the repair or restoration of all or part of the
related Mortgaged Property, with, in the case of all Mortgage Loans other
than Credit Lease Loans and with respect to all casualty losses or takings in
excess of 10% of the related loan amount, the mortgagee (or a trustee
appointed by it) having the right to hold and disburse such proceeds as the
repair or restoration progresses, or (b) to the payment of the outstanding
principal balance of such Mortgage Loan together with any accrued interest
thereon;
(xlvii) A copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property constituting a part of the related Mortgaged
Property, together with a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement to the Mortgage Loan Seller and a copy of
each Form UCC-2 or UCC-3 assignment, if any, of such financing statement
executed by the Mortgage Loan Seller in blank which the Trustee or its
designee is authorized to complete (and but for the insertion of the name of
the assignee and any related filing information which is not yet available to
the Mortgage Loan Seller) is in suitable form for filing in the filing office
in which such financing statement was filed;
(xlviii) To the Mortgage Loan Seller's knowledge, (a) all material
commercial leases affecting the Mortgaged Properties securing the Mortgage
Loans are in full force and effect and (b) there exists no default under any
such material commercial lease either by the lessee thereunder or by the
related borrower that could give rise to the termination of such lease;
(xlix) The improvements located on or forming part of each Mortgaged
Property comply with applicable zoning laws and ordinances, or constitute a
legal non-conforming use or structure or, if any such improvement does not so
comply, such non-compliance does not materially and adversely affect the
value of the related Mortgaged Property;
(l) With respect to any Mortgage Loan that pursuant to the mortgage
documents can be defeased, the Mortgage Loan cannot be defeased within two
years of the Closing Date, the borrower can pledge only United States
government securities (within the meaning of section 2(a)(16) of the
Investment Company Act of 1940) as the substitute collateral, and the
borrower can be required by the Servicer to establish that the release of the
lien is to facilitate the disposition of the Mortgaged Property or is in
connection with some other customary commercial transaction; and
(li) With respect to each Mortgage Loan for which there are uncompleted
improvements, the only security for such Mortgage Loan (disregarding pledges
of rents, third party guarantees and any personal liability of the obligor)
is the real property securing such Mortgage Loan and at least 90% of the
funds received by the borrower under such Mortgage Loan have been spent or,
pursuant to a binding agreement, are required to be spent to acquire and/or
improve the related Mortgaged Property.
If the Mortgage Loan Seller has been notified of a Defect in any Mortgage
File or a breach of any of the foregoing representations and warranties (a
"Breach"), which, in either case, materially and adversely affects the value
of any Mortgage Loan or the interests of the Certificateholders therein, and
if the Mortgage Loan Seller cannot cure such Defect or Breach within a period
of 90 days following the
S-144
<PAGE>
earlier of its receipt of such notice or its discovery of the Defect or
Breach, then the Mortgage Loan Seller will be obligated pursuant to the
Mortgage Loan Purchase Agreement (the relevant rights under which will be
assigned, together with the Depositor's interests in the Mortgage Loans, by
the Depositor to the Trustee) to repurchase the affected Mortgage Loan within
such 90-day period at a price (the "Purchase Price") equal to the sum of (i)
the outstanding principal balance of such Mortgage Loan as of the date of
purchase, (ii) all accrued and unpaid interest on such Mortgage Loan at the
related Mortgage Rate in effect from time to time, to but not including the
Due Date in the Due Period of purchase, (iii) all related unreimbursed
Servicing Advances plus accrued and unpaid interest on related Advances at
the Reimbursement Rate, and unpaid Servicing, Primary Servicing and Special
Servicing Fees allocable to such Mortgage Loan and (iv) all reasonable
out-of-pocket expenses reasonably incurred or to be incurred by the Servicer,
the Special Servicer, the Depositor and the Trustee in respect of the Defect
or Breach giving rise to the repurchase obligation, including any expenses
arising out of the enforcement of the repurchase obligation.
The foregoing repurchase obligation will constitute the sole remedy
available to the Certificateholders and the Trustee for any Defect in a
Mortgage File or any Breach of the Mortgage Loan Seller's representations and
warranties regarding the Mortgage Loans. The Mortgage Loan Seller will be the
sole warranting party in respect of the Mortgage Loans sold by the Mortgage
Loan Seller to the Depositor, and none of the Depositor, the Servicer, the
Special Servicer, the Trustee, the Underwriter or any of their affiliates
(other than the Mortgage Loan Seller) will be obligated to repurchase any
affected Mortgage Loan in connection with a breach of the Mortgage Loan
Seller's representations and warranties if the Mortgage Loan Seller defaults
on its obligation to do so and no assurance can be given that the Mortgage
Loan Seller will fulfill such obligation. However, the Depositor will not
include any Mortgage Loan in the Trust Fund if anything has come to the
Depositor's attention prior to the Closing Date that causes it to believe
that the representations and warranties made by the Mortgage Loan Seller
regarding such Mortgage Loan will not be correct in all material respects
when made.
Any Defect or any Breach of a representation or warranty that, in either
case, causes any Mortgage Loan not to be a "qualified mortgage" within the
meaning of the REMIC provisions of the Code, shall be deemed to materially
and adversely affect the interests of Certificateholders therein, requiring
the Mortgage Loan Seller to purchase the affected Mortgage Loan from the
Trust Fund at the Purchase Price.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Servicer and the Special Servicer will service and administer the
Mortgage Loans for which it is responsible on behalf of the Trust Fund and in
the best interests of and for the benefit of the Certificateholders (as
determined by the Servicer or the Special Servicer, as the case may be, in
its good faith and reasonable judgment), in accordance with applicable law
and, to the extent consistent with the foregoing, the terms of the respective
Mortgage Loans or Specially Serviced Mortgage Loan and, to the extent
consistent with the foregoing, the terms of the Pooling and Servicing
Agreement and, to the extent consistent with the foregoing, in accordance
with the higher of the following standards of care: (i) the same manner in
which, and with the same care, skill, prudence and diligence with which the
Servicer or Special Servicer, as the case may be, services and administers
similar commercial or multifamily mortgage loans for other third-party
portfolios, giving due consideration to the customary and usual standards of
practice of prudent institutional commercial or multifamily mortgage lenders
servicing their own mortgage loans and (ii) the same care, skill, prudence
and diligence with which the Servicer or Special Servicer, as the case may
be, services and administers similar commercial or multifamily mortgage loans
owned by the Servicer or Special Servicer, as the case may be, in either case
exercising reasonable business judgment and acting in accordance with
applicable law, the respective Mortgage Loans or Specially Serviced Mortgage
Loans, as applicable, and, to the extent not inconsistent with the foregoing,
the terms of the Pooling and Servicing Agreement, and with a view to the
maximization, on a present value basis (discounting at the related Mortgage
Rate), of timely recovery of principal and interest on the Mortgage Loans or
Specially Serviced Mortgage Loans, as applicable, and the best interests of
the Trust Fund and the Certificateholders, as determined by the Servicer or
the Special Servicer, as the case may be, in its reasonable judgment, but
without regard to: (A) any relationship that the Servicer or the Special
Servicer, as the case may be, or any affiliate thereof, may have with the
related Mortgagor or any other party to
S-145
<PAGE>
the Pooling and Servicing Agreement; (B) the ownership of any Certificate by
the Servicer or the Special Servicer, as the case may be, or any affiliate
thereof; (C) the Servicer's obligation to make Advances; and (D) the
Servicer's or the Special Servicer's, as the case may be, right to receive
compensation for its services under the Pooling and Servicing Agreement or
with respect to any particular transaction (the foregoing, collectively
referred to as the "Servicing Standard").
The Servicer will enter into a sub-servicing agreement (the
"Seller-Servicer Agreement") with certain seller-servicers (each, a
"Seller-Servicer") pursuant to which, in the event the Servicer is terminated
or resigns, the successor to the Servicer (other than the Trustee or its
designee) will succeed to the rights and obligations of the Servicer under
the Seller-Servicer Agreement. The Seller-Servicer Agreement provides that
the Seller-Servicers are not terminable unless certain events of default or
termination events occur thereunder. In addition, the Servicer and the
Special Servicer are permitted, at their own expense, to employ
sub-servicers, agents or attorneys in performing any of their respective
obligations under the Pooling and Servicing Agreement, but will not thereby
be relieved of any such obligation and will remain liable to the Trustee and
the Certificateholders for the acts and omissions of any such subservicers,
agents or attorneys. The Pooling and Servicing Agreement provides, however,
that neither the Servicer, the Special Servicer nor any of their respective
directors, officers, employees or agents shall have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith, or for errors in judgment. The foregoing
provision would not protect the Servicer or the Special Servicer for the
breach of its representations or warranties in the Pooling and Servicing
Agreement, the breach of certain specified covenants therein or any liability
by reason of willful misfeasance, bad faith, fraud or negligence in the
performance of its duties or by reason of its grossly negligent disregard of
obligations or duties under the Pooling and Servicing Agreement. Under the
Pooling and Servicing Agreement and the Seller-Servicer Agreement, the
Servicer is primarily liable to the Trust Fund for the servicing of Mortgage
Loans by the Seller-Servicers and each Seller-Servicer has agreed to
indemnify the Servicer for any liability that the Servicer may incur as a
result of the Seller-Servicer's failure to perform its obligations under the
Seller-Servicer Agreement.
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, including,
if applicable, to receive reimbursement of Servicing Fees and Primary
Servicing Fees. Consistent with the above, the Servicer or Special Servicer
may, in its discretion, waive any Penalty Charges in connection with any
delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan. With respect to the ARD Loans, the Servicer and Special Servicer will
be directed in the Pooling and Servicing Agreement not to take any
enforcement action with respect to payment of Excess Interest or principal in
excess of the principal component of the constant Monthly Payment, other than
requests for collections, prior to the final maturity date. With respect to
any Specially Serviced Mortgage Loan, subject to the restrictions set forth
below under "--Realization Upon Mortgage Loans," the Special Servicer will be
entitled to pursue any of the remedies set forth in the related Mortgage,
including the right to acquire, through foreclosure, all or any of the
Mortgaged Properties securing such Mortgage Loan. The Special Servicer may
elect to extend a Mortgage Loan (subject to conditions described herein)
notwithstanding its decision to foreclose on certain of the Mortgaged
Properties.
The Mortgage Loan Seller established a single Cash Collateral Account for
all of the New Store Loans in connection with the origination thereof. The
amount on deposit in the Cash Collateral Account relating to a New Store Loan
is generally equal to the sum of an amount for budgeted construction costs
for the related New Store, an amount for certain contingency costs and an
amount sufficient to pay interest on such New Store Loan for six months (the
period within which the tenant or the lease guarantor, CVS Corporation
("CVS"), has guaranteed completion of such New Store). Pursuant to the terms
of the Pooling and Servicing Agreement, the Servicer will be obligated to:
(i) administer draw requests from such Cash Collateral Account, (ii) obtain
and review title insurance policy date-down reports and forward copies of any
such reports to the Special Servicer and CVS, (iii) compare the construction
budget for the related New Store to the prototype construction budget and the
related appraised value and (iv) prior to the final disbursement for the
related New Store Loan, perform or cause to be performed an inspection for
the sole purpose of confirming that a New Store has been built at the
specified site. If the Servicer
S-146
<PAGE>
receives any change order request which CVS certifies does not result in an
aggregate change of more than 10 percent in the budget and does not vary from
the appraisal by more than 10 percent, the Servicer will approve such change
order. The Servicer may not approve any other change orders without the
consent of the Special Servicer. If the Servicer receives any draw request
which would require advancing more funds than are available under a New Store
Loan after netting out required retainage and construction period interest,
the Servicer may not fund such draw request without receiving written
instructions from the Special Servicer. If the Servicer receives a final draw
request which would require advancing more funds than are available in the
related Cash Collateral Account, including any retainage amounts, but
excluding the construction period interest reserve, the Servicer may not fund
such final draw request until receiving written instructions from the Special
Servicer. Any such activity by the Special Servicer will not constitute a
Servicing Transfer Event. Pursuant to the terms of a sub-servicing agreement
between the Servicer and a sub-servicer (the "CVS Sub-Servicer") selected by
the Mortgage Loan Seller and CVS, the CVS Sub-Servicer will be delegated the
responsibilities of the Servicer with respect to the New Store Loans. After
completion of a New Store, the CVS Sub-Servicer will continue to administer
and sub-service the related New Store Loan. Both before and after the
completion of a New Store, the fees of the CVS Sub-Servicer will be
separately paid by CVS and therefore no Primary Servicing Fee is applicable
with respect to such Mortgage Loans.
ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Servicer will be obligated, subject to the
recoverability determination described below, to make advances (each, a "P&I
Advance") out of its own funds or, subject to the replacement thereof as
provided in the Pooling and Servicing Agreement, certain funds held in the
Certificate Account that are not required to be part of the Available
Distribution Amount for such Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate
of: (i) all Monthly Payments (net of any related Servicing Fees and Primary
Servicing Fees, except to the extent that the related borrower is obligated
to reimburse such fees, as provided herein), other than Balloon Payments,
which were due during any related Due Period and delinquent (or not advanced
by any sub-servicer) as of the business day preceding such Servicer
Remittance Date; and (ii) in the case of each Mortgage Loan delinquent in
respect of its Balloon Payment as of the end of the related Due Period
(including any REO Loan as to which the Balloon Payment would have been past
due), an amount (the "Assumed Scheduled Payment") equal to the sum of (a) the
principal portion of the Monthly Payment that would have been due on such
Mortgage Loan on the related Due Date based on the constant payment required
by the related Mortgage Note or the original amortization schedule thereof
(as calculated with interest at the related Mortgage Rate), if applicable,
assuming such Balloon Payment had not become due, after giving effect to any
modification of such Mortgage Loan, and (b) interest on the Stated Principal
Balance of such Mortgage Loan at the applicable Net Mortgage Rate (net of
interest at the Servicing Fee Rate, except to the extent that the related
borrower is obligated to reimburse Servicing Fees). The Servicer's
obligations to make P&I Advances in respect of any Mortgage Loan or REO
Property will continue through liquidation of such Mortgage Loan or
disposition of such REO Property, as the case may be. To the extent the
Servicer fails to make a P&I Advance that it is required to make under the
Pooling and Servicing Agreement, the Trustee is obligated to make such
required P&I Advance pursuant to the Pooling and Servicing Agreement.
With respect to Loan No. 112, the related Mortgage Loan provides for a
five-day grace period for payment defaults. As a result, failure to make
payments on such Mortgage Loan by the P&I Advance Date in a given month may
not constitute an event of default thereunder. Pursuant to the Pooling and
Servicing Agreement, the Servicer has agreed to make a P&I Advance with
respect to such Mortgage Loan for any month in which such grace period is
still in effect on the related Servicer Remittance Date and not charge
interest thereon at the Reimbursement Rate until after such grace period has
ended or unless an event of default has otherwise occurred thereunder. For
the purposes of determining whether a Servicing Transfer Event has occurred
or reporting the number of P&I Advances made with respect to a given
Distribution Date, any P&I Advance made during such grace period with respect
to such loan will not be counted unless the related Monthly Payment has not
been received by the end of such grace period.
S-147
<PAGE>
With respect to any Distribution Date, the amount required to be advanced
in respect of delinquent Monthly Payments or Assumed Scheduled Payments on a
Mortgage Loan that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount with respect to such Mortgage Loan for such Distribution Date. Neither
the Servicer nor the Trustee will be required or permitted to make a P&I
Advance for Penalty Charges, Yield Maintenance Charges, Excess Interest,
Balloon Payments or Prepayment Premiums. If the monthly payment on any
Mortgage Loan has been reduced or if the final maturity on any Mortgage Loan
is extended in connection with a bankruptcy or similar proceeding involving
the related Mortgagor or a modification, waiver or amendment granted or
agreed to by the Special Servicer, and the monthly payment due and owing
during the extension period is less than the related Assumed Scheduled
Payment, then the Servicer shall, as to such Mortgage Loan only, advance only
the amount of the monthly payment due and owing after taking into account
such reduction (net of related Primary Servicing Fees and Servicing Fees,
except to the extent the related borrower is obligated to reimburse such
amounts), in the event of subsequent delinquencies thereon.
In addition to P&I Advances, the Servicer will also be obligated (subject
to the limitations described herein) to make advances ("Servicing Advances"
and, collectively with P&I Advances, "Advances") in connection with the
servicing and administration of any Mortgage Loan or in connection with the
servicing and administration of any Mortgaged Property or REO Property, to
pay delinquent real estate taxes, assessments, hazard insurance premiums,
environmental inspections and remediation, operating, leasing, managing and
liquidation expenses for REO Properties and to cover other similar costs and
expenses. To the extent that the Servicer fails to make a Servicing Advance
that it is required to make under the Pooling and Servicing Agreement and a
responsible officer of the Trustee has been notified in writing of such
failure, the Trustee will make such required Servicing Advance pursuant to
the Pooling and Servicing Agreement.
The Servicer or the Trustee, as applicable, will be entitled to recover
any Advance made out of its own funds from any amounts collected in respect
of the Mortgage Loan as to which such Advance was made, whether in the form
of related payments, insurance and condemnation proceeds, Liquidation
Proceeds, any revenues from REO Properties or otherwise from the Mortgage
Loan ("Related Proceeds"). Notwithstanding the foregoing, neither the
Servicer nor the Trustee will be obligated to make any Advance that it
determines in its reasonable good faith judgment would, if made, not be
recoverable (including interest thereon) out of Related Proceeds (a
"Nonrecoverable Advance"), and the Servicer or the Trustee will be entitled
to recover any Advance that it so determines to be a Nonrecoverable Advance
out of general funds on deposit in the Certificate Account. The Trustee will
be entitled to rely conclusively on any non-recoverability determination of
the Servicer. Nonrecoverable Advances will represent a portion of the losses
to be borne by the Certificateholders.
In connection with its recovery of any Advance, each of the Servicer and
the Trustee will be entitled to be paid, out of any amounts then on deposit
in the Certificate Account, interest at the Prime Rate (the "Reimbursement
Rate") accrued on the amount of such Advance from the date made to but not
including the date of reimbursement.
The "Prime Rate" shall be the rate, for any day, set forth as such in the
"Money Rates" section of The Wall Street Journal, New York edition. Each
Distribution Date Statement delivered by the Trustee to the
Certificateholders will contain information relating to the amount of
Advances made with respect to the related Distribution Date. See "--Reports
to Certificateholders; Available Information" herein.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred with respect to a Mortgage
Loan, an Appraisal Reduction will be calculated for such Mortgage Loan. An
"Appraisal Reduction Event" will occur on the earliest of (i) the third
anniversary of the date on which the first extension of the maturity date of
a Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not decrease the
aggregate amount of Monthly Payments on the Mortgage Loan, (ii) 120 days
after an uncured delinquency occurs in respect of a Mortgage Loan, (iii) the
date on which a reduction in the amount of Monthly Payments on a Mortgage
Loan, or a change in any other
S-148
<PAGE>
material economic term of the Mortgage Loan (other than an extension of its
maturity) becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer, (iv) 60 days after a receiver has been
appointed, (v) 60 days after a borrower declares bankruptcy and (vi)
immediately after a Mortgage Loan becomes an REO Loan; provided, however,
that an Appraisal Reduction Event shall not occur at any time when the
aggregate Certificate Balances of all Classes of Certificates (other than the
Senior Certificates) have been reduced to zero. The "Appraisal Reduction" for
any Distribution Date and for any Mortgage Loan as to which any Appraisal
Reduction Event has occurred will be an amount equal to the excess, if any,
of (a) the outstanding Stated Principal Balance of such Mortgage Loan over
(b) the excess of (i) 90% of the appraised value of the related Mortgaged
Property as determined (A) by one or more independent MAI appraisals with
respect to any Mortgage Loan with an outstanding principal balance equal to
or in excess of $2,000,000 (the costs of which shall be paid by the Servicer
as a Servicing Advance) or (B) by an independent MAI appraisal or an internal
valuation performed by the Special Servicer with respect to any Mortgage Loan
with an outstanding principal balance less than $2,000,000 over (ii) the sum
of (A) to the extent not previously advanced by the Servicer or the Trustee,
all unpaid interest on such Mortgage Loan at a per annum rate equal to its
Mortgage Rate, (B) all unreimbursed Advances and interest thereon at the
Reimbursement Rate in respect of such Mortgage Loan and (C) all currently due
and unpaid real estate taxes and assessments, insurance premiums, ground
rents and all other amounts due and unpaid with respect to such Mortgage Loan
(which taxes, assessments, premiums, ground rents and other amounts have not
been subject to an Advance by the Servicer or the Trustee and/or for which
funds have not been escrowed). If required to obtain an MAI appraisal
pursuant to the foregoing, the Special Servicer must receive such appraisal
within 60 days of the occurrence of such event (taking into account the
passage of any time period set forth in the definition of Appraisal Reduction
Event). If such appraisal is not received by such date or if, for any
Mortgage Loan with a Stated Principal Balance of $1,000,000 or less, the
Special Servicer elects not to obtain an appraisal, the Appraisal Reduction
for the related Mortgage Loan will be 35% of the Stated Principal Balance of
such Mortgage Loan as of the date of the related Appraisal Reduction Event.
On the first Determination Date occurring on or after the delivery of such
MAI appraisal, the Special Servicer will be required to calculate and report
to the Servicer, and the Servicer will report to the Trustee, the Appraisal
Reduction to take into account such appraisal.
As a result of calculating an Appraisal Reduction with respect to a
Mortgage Loan, the P&I Advance for such Mortgage Loan for the related
Servicer Remittance Date will be reduced, which will have the effect of
reducing the amount of interest available for distribution to the Subordinate
Certificates in reverse alphabetical order of the Classes. See "--Advances"
above. The "Appraisal Reduction Amount" for any Distribution Date and any
Mortgage Loan for which an Appraisal Reduction has been calculated will equal
the product of (i) the Reduction Rate (as defined below) for such
Distribution Date and (ii) the Appraisal Reduction with respect to such
Mortgage Loan. The "Reduction Rate" will be a rate per annum equal to the
average of the Pass-Through Rates of each Class to which Appraisal Reductions
have been allocated pursuant to the Pooling and Servicing Agreement, weighted
on the basis of the amount of the Appraisal Reductions allocated to each such
Class. In addition, Appraisal Reductions will be allocated to the Subordinate
Certificates in reverse alphabetical order of the Classes for purposes of
determining Voting Rights and the identity of the Controlling Class. See
"--Voting Rights" below and "--Realization Upon Mortgage Loans" herein.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred (unless such Mortgage Loan has become a Corrected Mortgage Loan and
has remained current for twelve consecutive Monthly Payments and no other
Appraisal Reduction Event has occurred and is continuing), the Special
Servicer is required, within 30 days before each anniversary of such
Appraisal Reduction Event, to order an appraisal (which may be an update of a
prior appraisal) or, with respect to any Mortgage Loan with an outstanding
principal balance less than $2,000,000, perform an internal valuation or
obtain an appraisal (which may be an update of a prior appraisal), the cost
of which shall be paid by the Servicer as a Servicing Advance recoverable
from the Trust Fund. Based upon such appraisal, internal valuation or, as
described in the second preceding paragraph, percentage calculation of the
Appraisal Reduction, as the case may be, the Special Servicer shall
redetermine and report to the Trustee and the Servicer the amount of the
Appraisal Reduction with respect to such Mortgage Loan, and such redetermined
Appraisal Reduction
S-149
<PAGE>
shall replace the prior Appraisal Reduction with respect to such Mortgage
Loan. Notwithstanding the foregoing, the Special Servicer will not be
required to obtain an appraisal or perform an internal valuation, as the case
may be, with respect to a Mortgage Loan which is the subject of an Appraisal
Reduction Event if the Special Servicer has obtained an appraisal with
respect to the related Mortgaged Property within the 12-month period
immediately prior to the occurrence of such Appraisal Reduction Event.
Instead, the Special Servicer may use such prior appraisal in calculating any
Appraisal Reduction with respect to such Mortgage Loan.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred and which has become current and has remained current for twelve
consecutive Monthly Payments, and with respect to which no other Appraisal
Reduction Event has occurred and is continuing, the Special Servicer may,
within 30 days after the date of such twelfth Monthly Payment, order an
appraisal (which may be an update of a prior appraisal) or, with respect to
any Mortgage Loan with an outstanding principal balance less than $2,000,000,
perform an internal valuation or obtain an appraisal (which may be an update
of a prior appraisal), the cost of which shall be paid by the Servicer as a
Servicing Advance recoverable from the Trust Fund. Based upon such appraisal,
the Special Servicer shall redetermine and report to the Trustee the amount
of the Appraisal Reduction with respect to such Mortgage Loan, and such
redetermined Appraisal Reduction shall replace the prior Appraisal Reduction
with respect to such Mortgage Loan.
ACCOUNTS
Lockbox Accounts. With respect to 181 Mortgage Loans, which represent in
the aggregate 98.10% of the initial Trust Fund balance, one or more accounts
in the name of the related borrower (which are the Lockbox Accounts) have
been, or upon the occurrence of certain events will be, established into
which rents or other revenues from the related Mortgaged Properties are
deposited by the related tenants or manager. Agreements governing the Lockbox
Accounts provide that the borrower has no withdrawal or transfer rights with
respect thereto and that all funds on deposit in the Lockbox Accounts are
periodically swept into the Cash Collateral Accounts (as defined below).
Additionally, for substantially all ARD Loans for which a Lockbox Account has
not already been established such loans require the related mortgagee to
establish a Lockbox Account prior to its Anticipated Repayment Date. The
Lockbox Accounts will not be assets of the Trust Fund.
Cash Collateral Accounts. With respect to each Mortgage Loan that has a
Lockbox Account, one or more accounts in the name of the Servicer (the "Cash
Collateral Accounts") have been established into which funds in the related
Lockbox Accounts will be swept on a regular basis. Unless certain trigger
events occur as specified in the related Mortgage Loan, any excess over the
amount necessary to fund the Monthly Payment, the Escrow Accounts and any
other amounts due under the Mortgage Loans will be returned to or retained by
the related borrower, provided, that, no event of default of which the
Servicer is aware has occurred and is continuing with respect to such
Mortgage Loan. However, as described under "Description of the Mortgage Loans
- -- Certain Terms and Conditions of the Mortgage Loans -- Excess Interest,"
after the respective Anticipated Repayment Date, if applicable, all or
substantially all amounts in the related Cash Collateral Account in excess of
the amount necessary to fund the Monthly Payment and Escrow Accounts will be
applied to (i) operating and capital expenses, (ii) the reduction of the
principal balance of the related Mortgage Loan until such principal is paid
in full and (iii) Excess Interest, in that order. The Cash Collateral
Accounts will not be an asset of the Trust Fund.
Certificate Account. The Servicer will establish and maintain a segregated
account (the "Certificate Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Certificate Account for application towards the Monthly
Payment, net of Servicing Fees and Primary Servicing Fees and other amounts
due the Servicer or applicable Seller-Servicer and not required to be
deposited into the Certificate Account. The Servicer will also deposit into
the Certificate Account within one business day of receipt all other payments
in respect of the Mortgage Loans, other than amounts to be deposited into any
Escrow Account, net of Servicing Fees and Primary Servicing Fees and other
amounts due the Servicer or applicable Seller-Servicer and not required to be
deposited into the Certificate Account.
S-150
<PAGE>
Distribution Accounts. The Trustee will establish and maintain one or
more segregated accounts (the "Lower-Tier Distribution Account") in the name
of the Trustee for the benefit of the holders of Certificates. With respect
to each Distribution Date, the Servicer will deliver to the Trustee for
deposit into the Lower-Tier Distribution Account, to the extent of funds on
deposit in the Certificate Account, on the Servicer Remittance Date an
aggregate amount of immediately available funds. The Servicer will deposit
all P&I Advances into the Lower-Tier Distribution Account on the related
Servicer Remittance Date. To the extent the Servicer fails to do so, the
Trustee shall deposit all P&I Advances into the Lower-Tier Distribution
Account as described herein. See "Description of the Offered Certificates --
Distributions" herein.
Interest Reserve Account. The Servicer will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in the name of the
Trustee for the benefit of the holders of the Certificates. On each Servicer
Remittance Date in any February and on any Servicer Remittance Date in any
January which occurs in a year which is not a leap year, the Servicer will be
required to deposit, in respect of the Mortgage Loans that accrue on an
Actual/360 basis, into the Interest Reserve Account, an amount withheld from
the related Monthly Payment or Advance equal to one day's interest collected
on the Stated Principal Balance of such Mortgage Loan as of the Due Date
occurring in the month preceding the month in which such Servicer Remittance
Date occurs at the related Mortgage Rate, to the extent a full Monthly
Payment or P&I Advance is made in respect thereof (all amounts so deposited
in any consecutive January and February, "Withheld Amounts"). On each
Servicer Remittance Date occurring in March, the Servicer will be required to
withdraw from the Interest Reserve Account an amount equal to the Withheld
Amounts from the preceding December and January Interest Accrual Periods, if
any, and deposit such amount (excluding any net investment income thereon)
into a Distribution Account.
The Trustee will also establish and maintain one or more segregated
accounts for each of the "Upper-Tier Distribution Account" and the "Excess
Interest Distribution Account", each in the name of the Trustee for the
benefit of the holders of the Certificates.
The Cash Collateral Accounts, Certificate Account, any REO Account, the
Escrow Accounts, the Lower-Tier Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account and the Excess Interest
Distribution Account will be held in the name of the Trustee (or the Servicer
on behalf of the Trustee) on behalf of the holders of Certificates and the
Servicer will be authorized to make withdrawals from the Cash Collateral
Accounts, the Certificate Account and the Interest Reserve Account. Each of
the Cash Collateral Account, Certificate Account, any REO Account, the
Interest Reserve Account, the Escrow Accounts and the Excess Interest
Distribution Account will be either (i) (A) an account or accounts maintained
with a depository institution or trust company the short term unsecured debt
obligations or commercial paper of which are rated at least "A-1" by S&P,
"P-1" by Moody's and "F-1+" by Fitch (if rated by Fitch) in the case of
accounts in which funds are held for 30 days or less (or, in the case of
accounts in which funds are held for more than 30 days, the long term
unsecured debt obligations of which are rated at least "A+" by Fitch (if
rated by Fitch), "AA-" by S&P and "Aa3" by Moody's, each, as defined herein)
or (B) as to which the Trustee has received written confirmation from each of
the Rating Agencies that holding funds in such account would not cause any
Rating Agency to qualify, withdraw or downgrade any of its then current
ratings on the Certificates or (ii) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which, in the case of a state
chartered depository institution, is subject to regulations substantially
similar to 12 C.F.R. Section 9.10(b), having in either case a combined
capital surplus of at least $50,000,000 and subject to supervision or
examination by federal and state authority, or any other account that, as
evidenced by a written confirmation from each Rating Agency that such account
would not, in and of itself, cause a downgrade, qualification or withdrawal
of the then current ratings assigned to the Certificates, which may be an
account maintained with the Trustee or the Servicer (an "Eligible Bank").
Amounts on deposit in the Certificate Account, Excess Interest Distribution
Accounts, any Servicing Accounts, Cash Collateral Account, any REO Account
and the Interest Reserve Account may be invested in certain United States
government securities and other high-quality investments specified in the
Pooling and Servicing Agreement ("Permitted Investments"). Interest or other
income earned on funds in the Certificate Account, Excess Interest
Distribution Account, any
S-151
<PAGE>
Escrow Accounts and Cash Collateral Accounts will be paid to the Servicer
(except to the extent required to be paid to the related borrower) as
additional servicing compensation and interest or other income earned on
funds in any REO Account will be payable to the Special Servicer. Interest or
other income earned on funds in the Interest Reserve Account will be paid to
the Mortgage Loan Seller. Amounts on deposit in the Distribution Accounts
shall remain uninvested.
WITHDRAWALS FROM THE CERTIFICATE ACCOUNT
The Servicer may make withdrawals from the Certificate Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit to the Trustee for deposit
in the Distribution Accounts the amounts required to be remitted or that may
be applied to make P&I Advances; (ii) to pay itself unpaid Servicing Fees or
to pay any unpaid Primary Servicing Fees, and the Special Servicer unpaid
Special Servicing Fees, Liquidation Fees and Workout Fees; (iii) to reimburse
itself or the Trustee, for unreimbursed P&I Advances; (iv) to reimburse
itself or the Trustee, for unreimbursed Servicing Advances; (v) to reimburse
itself or the Trustee, for Nonrecoverable Advances; (vi) to pay itself or the
Trustee, any interest accrued and payable thereon for any unreimbursed P&I
Advances, Servicing Advances or Nonrecoverable Advances; (vii) to reimburse
itself, the Special Servicer, the Depositor or the Trustee, as the case may
be, for any unreimbursed expenses reasonably incurred by such Person in
respect of any breach or defect giving rise to a repurchase obligation of the
Mortgage Loan Seller, or the enforcement of such obligation, under the
Mortgage Loan Purchase Agreement; (viii) to pay itself, as additional
servicing compensation any net investment earnings and Penalty Charges on
Mortgage Loans (other than Specially Serviced Mortgage Loans), but only to
the extent collected from the related Mortgagor; and to pay the Special
Servicer, as additional servicing compensation, Penalty Charges on Specially
Serviced Mortgage Loans; (ix) to recoup any amounts deposited in the
Certificate Account in error; (x) to pay itself, the Special Servicer, the
Depositor or any affiliate, and their respective directors, officers,
employees and agents, any amounts payable pursuant to any indemnification
clauses in the Pooling and Servicing Agreement; (xi) to pay for (a) the cost
of the opinions of counsel for purposes of REMIC Administration or amending
the Pooling and Servicing Agreement and (b) the cost of obtaining an REO
Extension; (xii) to pay for any and all federal, state and local taxes
imposed on the Upper-Tier REMIC, the Lower-Tier REMIC or either of their
assets or transactions; (xiii) to reimburse the Servicer and the Special
Servicer for expenses incurred by and reimbursable to each of them by the
Trust Fund; (xiv) to pay to any Person, with respect to each Mortgage Loan
previously purchased by such Person, all amounts received thereon subsequent
to the date of purchase; (xv) to pay for costs and expenses incurred by the
Trust Fund due to actions taken pursuant to an environmental assessment; and
(xvi) to clear and terminate the Certificate Account.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or
may at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Special
Servicer will be required to enforce any such due-on-sale clause, unless the
Special Servicer determines, in accordance with the Servicing Standard, that
granting such consent would likely result in a greater recovery, on a present
value basis (discounting at the related Mortgage Rate), than would
enforcement of such clause. If the Special Servicer determines that granting
such consent would likely result in a greater recovery, the Special Servicer,
is authorized to take or enter into an assumption agreement from or with the
proposed transferee as obligor thereon, provided that (a) the credit status
of the prospective transferee is in compliance with the Special Servicer's
regular commercial mortgage origination or Servicing Standard and criteria
and the terms of the related Mortgage and (b) with respect to any Mortgage
Loan (i) the principal balance of which is $20,000,000 or more or (ii) that
is a Mortgage Loan, part of a group of Crossed Loans or a group of Related
Borrower Loans that, in each case, in the aggregate represents 5% or more of
the aggregate outstanding. Certificate Balance of all Classes at such time,
the Special Servicer has received written confirmation from each of Fitch,
Moody's and S&P that such assumption or substitution would not, in and of
itself, cause a
S-152
<PAGE>
downgrade, qualification or withdrawal of the then current ratings assigned
to the Certificates. No assumption agreement may contain any terms that are
different from any term of any Mortgage or related Mortgage Note, except
pursuant to the provisions described under "--Realization Upon Mortgage
Loans" and "--Modifications," herein.
The consent of the Special Servicer and, except as described herein, the
receipt of a rating confirmation will not be required in the event that the
holder of Mezzanine Debt forecloses upon the equity in a borrower under a
Mortgage Loan.
The Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
Mortgage Loans shall (or may at the mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property or (b) require the consent of the related mortgagee to the
creation of any such lien or other encumbrance on the related Mortgaged
Property. The Special Servicer will be required to enforce such
due-on-encumbrance clauses and in connection therewith will be required to
(i) accelerate payments thereon or (ii) withhold its consent to such lien or
encumbrance unless the Special Servicer, (x) determines, in accordance with
the Servicing Standard, that such enforcement would not be in the best
interests of the Trust Fund and (y) receives prior written confirmation from
each of Fitch, Moody's and S&P, that (1) not accelerating payments on the
related Mortgage Loan or (2) granting such consent would not, in and of
itself, cause a downgrade, qualification or withdrawal of any of the then
current ratings assigned to the Certificates. See "Certain Legal Aspects of
the Mortgage Loans -- Enforceability of Certain Provisions -- Due-on-Sale
Provisions and Secondary Financing; Due-on-Encumbrance Provisions" in the
Prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Servicer (or, with respect to the Specially Serviced Mortgage Loans,
the Special Servicer) will perform (at its own expense), or shall cause to be
performed (at its own expense), physical inspections of each Mortgaged
Property at such times and in such manner as are consistent with the
Servicing Standard, but in any event shall inspect each Mortgaged Property
securing a Mortgage Note with a Stated Principal Balance of (A) $2,000,000 or
more at least once every 12 months and (B) less than $2,000,000 at least once
every 24 months, in each case commencing in January 1998; provided, however,
that if the related Mortgage Loan (i) has a DSCR of less than 1.0x, (ii)
becomes a Specially Serviced Mortgage Loan, or (iii) is delinquent for 60
days, the Special Servicer shall inspect the related Mortgaged Property as
soon as practicable and thereafter at least every 12 months for so long as
such condition exists. The Special Servicer or the Servicer, as applicable,
will prepare a written report of each such inspection describing the
condition of the Mortgaged Property.
Most of the Mortgages obligate the related borrower to deliver quarterly,
and all Mortgages require annual, property operating statements. However,
there can be no assurance that any operating statements required to be
delivered will in fact be delivered, nor is the Special Servicer or the
Servicer likely to have any practical means of compelling such delivery in
the case of an otherwise performing Mortgage Loan.
INSURANCE POLICIES
To the extent permitted by the related Mortgage Loan and required by the
Servicing Standard, the Servicer (or, with respect to the Specially Serviced
Mortgage Loans, the Special Servicer) will use its reasonable best efforts to
cause each Mortgagor to maintain, and if the Mortgagor does not so maintain,
shall itself maintain to the extent available at commercially reasonable
rates (as determined by the Servicer in accordance with the Servicing
Standard), any insurance policy coverage determined to be applicable by the
Servicer or, with respect to any Specially Serviced Mortgage Loan, by the
Special Servicer, in accordance with the Servicing Standard. The coverage of
each such policy will be in an amount that is not less than the lesser of the
full replacement cost of the improvements securing such Mortgage Loan or the
outstanding principal balance owing on such Mortgage Loan. During all such
times as the Mortgaged Property is located in an area identified as a
federally designated special flood hazard area (and such flood insurance has
been made available), the Servicer or the Special Servicer, as applicable,
will use its reasonable best efforts to cause each Mortgagor to maintain (to
the extent required by the related
S-153
<PAGE>
Mortgage Loan), and if the Mortgagor does not so maintain, shall itself
maintain to the extent available at commercially reasonable rates (as
determined by the Servicer or the Special Servicer, as applicable, in
accordance with the Servicing Standard), a flood insurance policy in an
amount representing coverage not less than the lesser of (i) the outstanding
principal balance of the related Mortgage Loan and (ii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973,
as amended. The Special Servicer will be required to maintain (or cause to be
maintained) fire and hazard insurance on each REO Property in an amount that
is not less than the lesser of the full replacement cost of the improvements
on such Mortgaged Property or the outstanding principal balance owing on such
Mortgage Loan. In addition, during all such times as the REO Property is
located in an area identified as a federally designated special flood hazard
area, the Special Servicer will cause to be maintained, to the extent
available at commercially reasonable rates (as determined by the Special
Servicer in accordance with the Servicing Standard), a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration in an amount representing coverage not less than the maximum
amount of insurance which is available under the Flood Disaster Protection
Act of 1973, as amended. The Pooling and Servicing Agreement provides that
the Servicer and the Special Servicer may satisfy their respective
obligations to cause each borrower to maintain a hazard insurance policy by
maintaining a blanket policy insuring against hazard losses on the Mortgage
Loans. Any losses incurred with respect to Mortgage Loans due to uninsured
risks (including earthquakes, mudflows and floods) or insufficient hazard
insurance proceeds may adversely affect payments to Certificateholders. Any
cost incurred by the Servicer in maintaining any such insurance policy if the
borrower defaults on its obligation to do so shall be advanced by the
Servicer as a Servicing Advance and will be charged to the related borrower.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer and the Special
Servicer to cause a firm of nationally recognized independent public
accountants, which is a member of the American Institute of Certified Public
Accountants, to furnish to the Trustee, the Depositor and the Rating Agencies
on or before March 15 of each year, beginning March 15, 1998, a statement to
the effect that such firm has examined the servicing operations of the
reporting person and that on the basis of their examination, conducted
substantially in compliance with the Uniform Single Attestation Program
("USAP") for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC (the "Audit Program"), the Servicer and the Special Servicer have
complied with the minimum servicing standards identified in USAP or the Audit
Program, in all material respects, except for such significant exceptions or
errors in records that, in the opinion of each such firm, the USAP or the
Audit Program require such firm to report, in which case such exceptions and
errors shall be so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement in
all material respects throughout the preceding year or, if there has been a
material default, specifying each material default known to such officer and
the action proposed to be taken with respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE TRUSTEE, THE SERVICER AND THE
SPECIAL SERVICER
The Pooling and Servicing Agreement permits the Depositor, the Servicer
and the Special Servicer to resign from their respective obligations
thereunder only upon (a) with respect to the Servicer or Special Servicer,
the appointment of, and the acceptance of such appointment by, a successor
thereto and receipt by the Trustee of written confirmation from each
applicable Rating Agency that such resignation and appointment will, in and
of itself, not result in a downgrade, withdrawal or qualification of the then
applicable rating assigned by such Rating Agency to any Class of Certificates
or (b) a determination that such obligations are no longer permissible under
applicable law. No such resignation will become effective until the Trustee
or other successor has assumed the obligations and duties of the resigning
Servicer or Special Servicer, as the case may be, under the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement will provide that none of the
Servicer, the Special Servicer, the Trustee (whether acting in such capacity
or as the Authenticating Agent or Certificate Registrar), the
S-154
<PAGE>
Depositor, the Directing Certificateholder or any affiliate, director,
officer, employee or agent of any of them will be under any liability to the
Trust Fund or the Certificateholders for any action taken, or not taken, in
good faith pursuant to the Pooling and Servicing Agreement or for errors in
judgment; provided, however, that none of the Servicer, the Special Servicer,
the Trustee, the Directing Certificateholder, the Depositor or any such
person will be protected against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of obligations or duties thereunder or by reason of grossly
negligent disregard of such obligations and duties. The Pooling and Servicing
Agreement will also provide that the Servicer, the Special Servicer, the
Trustee (whether acting in such capacity or as the Authenticating Agent or
Certificate Registrar), the Depositor, the Directing Certificateholder and
any affiliate, director, officer, employee or agent of any of them will be
entitled to indemnification by the Trust Fund against any loss, liability or
expense incurred in connection with any legal action that relates to the
Pooling and Servicing Agreement, the Mortgage Loans or the Certificates;
provided, however, that such indemnification will not extend to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties under the Pooling and
Servicing Agreement, by reason of grossly negligent disregard of such
obligations or duties, or in the case of the Depositor and any of its
directors, officers, employees and agents, any violation by any of them of
any state or federal securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Servicer, the Special Servicer, the Trustee (whether acting in such
capacity or as the Authenticating Agent or Certificate Registrar), the
Directing Certificateholder or the Depositor will be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
respective responsibilities under the Pooling and Servicing Agreement and
that in its opinion may involve it in any expense or liability. However, each
of the Servicer, the Special Servicer, the Trustee, the Directing
Certificateholder and the Depositor will be permitted, in the exercise of its
discretion, to undertake any such action that it may deem necessary or
desirable with respect to the enforcement and/or protection of the rights and
duties of the parties to the Pooling and Servicing Agreement 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 Servicer,
the Special Servicer, the Trustee, the Directing Certificateholder or the
Depositor, as the case may be, will be entitled to reimbursement from the
Certificate Account or Lower-Tier Distribution Account, as applicable,
therefor.
Pursuant to the Pooling and Servicing Agreement, the Servicer and Special
Servicer will each be required to maintain a fidelity bond and errors and
omissions policy or their equivalent that provides coverage against losses
that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions permitted by the Pooling and Servicing Agreement.
Notwithstanding the foregoing, the Servicer or the Special Servicer will be
allowed to self-insure with respect to a fidelity bond so long as certain
conditions set forth in the Pooling and Servicing Agreement are met.
Any person into which the Servicer, the Special Servicer or the Depositor
may be merged or consolidated, or any person resulting from any merger or
consolidation to which the Servicer, the Special Servicer or the Depositor is
a party, or any person succeeding to the business of the Servicer, the
Special Servicer or the Depositor, will be the successor of the Servicer, the
Special Servicer or the Depositor, as the case may be, under the Pooling and
Servicing Agreement; provided, however, that such merger, consolidation or
succession will not, or has not, resulted in a withdrawal, downgrade or
qualification of the then current ratings of the Certificates that have been
so rated, as confirmed in writing by each Rating Agency. The Servicer and the
Special Servicer may have other normal business relationships with the
Depositor or the Depositor's affiliates.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Servicer or the Special Servicer, as the case may be, will include,
without limitation, (i) any failure by the Servicer to make any remittance
required to be made by the Servicer by 4:00 p.m. on the Servicer Remittance
Date; (ii) any failure by the Special Servicer to deposit into the REO
Account, or to remit to the Servicer for deposit
S-155
<PAGE>
in the Certificate Account, any such remittance required to be made by the
Special Servicer on the day such remittance is required to be made under the
Pooling and Servicing Agreement; (iii) any failure by the Servicer or the
Special Servicer duly to observe or perform in any material respect any of
its other covenants or obligations under the Pooling and Servicing Agreement,
which failure continues unremedied for thirty days (or fifteen days for
payment of premiums on any insurance policies or 60 days so long as such
Servicer is in good faith diligently pursuing such obligation) after written
notice thereof has been given to the Servicer or the Special Servicer, as the
case may be, by any other party to the Pooling and Servicing Agreement, or to
the Servicer or the Special Servicer, the Depositor and the Trustee, by
Certificateholders of any Class, evidencing, as to such Class, Percentage
Interests aggregating not less than 25%; (iv) any breach by the Servicer or
Special Servicer of a representation or warranty contained in the Pooling and
Servicing Agreement which materially and adversely affects the interests of
the Certificates and continues unremedied for thirty days; (v) certain events
of insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings in respect of or relating to the Servicer or the Special
Servicer, and certain actions by or on behalf of the Servicer or the Special
Servicer indicating its insolvency or inability to pay its obligations; and
(vi) the Trustee shall have received written notice from any Rating Agency
that the continuation of the Servicer or the Special Servicer in such
capacity would result, or has resulted, in a downgrade, qualification or
withdrawal of any rating then assigned by such Rating Agency to any Class of
Certificates if the Servicer or Special Servicer is not replaced.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Servicer or the Special
Servicer under the Pooling and Servicing Agreement, then, in each and every
such case, so long as the Event of Default remains unremedied, the Trustee
will be authorized, and at the direction of Certificateholders entitled to
not less than 51% of the Voting Rights, the Trustee will be required, to
terminate all of the rights and obligations of the defaulting party as
Servicer or Special Servicer, as applicable, under the Pooling and Servicing
Agreement, whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the defaulting party as Servicer or Special
Servicer, as applicable, under the Pooling and Servicing Agreement and will
be entitled to similar compensation arrangements as the terminated party. If
the Trustee is unwilling or unable so to act or is not approved by each
Rating Agency, it may (or, at the written request of Certificateholders
entitled to not less than 51% of the Voting Rights, it will be required to)
appoint, or petition a court of competent jurisdiction to appoint as
successor to the Servicer or Special Servicer, as the case may be, any
established mortgage loan servicing institution or other entity as to which
the Trustee has received written notice from each Rating Agency that such
appointment would not result in the downgrading, qualification or withdrawal
of the then current ratings assigned to any Class of Certificates by such
Rating Agency.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless such holder previously has given to
the Trustee written notice of default and the continuance thereof and unless
the holders of Certificates of any Class evidencing not less than 25% of the
aggregate Percentage Interests constituting such Class 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 after receipt of such request and indemnity has
neglected or refused to institute any such proceeding. However, the Trustee
will be under no obligation to exercise any of the trusts or powers vested in
it by the Pooling and Servicing Agreement or to institute, conduct or defend
any litigation 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
costs, expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates (i) to cure any
ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or with this Prospectus
Supplement
S-156
<PAGE>
or the Prospectus or to correct any error, (iii) to change the timing and/or
nature of deposits in the Certificate Account, the Distribution Accounts or
the REO Account, provided that (A) the Servicer Remittance Date shall not be
later than the related Distribution Date, (B) such change would not adversely
affect in any material respect the interests of any Certificateholder, as
evidenced by an opinion of counsel (at the expense of the party requesting
the amendment) and (C) such change would not result in the downgrading,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates by any Rating Agency, as evidenced by a letter from each
Rating Agency, (iv) to modify, eliminate or add to any of its provisions (A)
to such extent as shall be necessary to maintain the qualification of the
Trust Fund (or either the Upper-Tier REMIC or Lower-Tier REMIC) as a REMIC or
to avoid or minimize the risk of imposition of any tax on the Trust Fund,
provided that the Trustee has received an opinion of counsel (at the expense
of the party requesting the amendment) to the effect that (1) such action is
necessary or desirable to maintain such qualification or to avoid or minimize
such risk and (2) such action will not adversely affect in any material
respect the interests of any holder of the Certificates or (B) to restrict
the transfer of the Residual Certificates, provided that the Depositor has
determined that the then-current ratings of any Class of the Certificates
will not be downgraded, qualified or withdrawn, as evidenced by a letter from
each Rating Agency, and that any such amendment will not give rise to a
federal tax with respect to the transfer of the Residual Certificates to a
non-permitted transferee (see "Certain Federal Income Tax Consequences" in
the Prospectus), (v) to make any other provisions with respect to matters or
questions arising under the Pooling and Servicing Agreement or any other
change, provided that such action will not adversely affect in any material
respect the interests of any Certificateholder or (vi) to amend or supplement
any provision of the Pooling and Servicing Agreement to the extent necessary
to maintain the then current ratings assigned to each Class of Certificates
by each Rating Agency as confirmed in writing.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each Class
affected thereby evidencing, in each case, not less than 66 2/3% of the
aggregate Percentage Interests constituting such Class for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or of modifying in any
manner the rights of the holders of the Certificates, except that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of,
payments received on the Mortgage Loans which are required to be distributed
on a Certificate of any Class without the consent of the holder of such
Certificate, (ii) reduce the aforesaid percentage of 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 then
outstanding, (iii) adversely affect the Voting Rights of any Class of
Certificates without the consent of the holders of all Certificates of such
Class then outstanding and (iv) amend the section of the Pooling and
Servicing Agreement that relates to the provisions described in this
paragraph.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the Trust Fund's expense) to the effect
that such amendment or the exercise of any power granted to the Servicer, the
Special Servicer, the Depositor, the Trustee or any other specified person in
accordance with such amendment will not result in the imposition of a tax on
the REMIC constituted by the Trust Fund or cause the Trust Fund (or either
the Upper-Tier REMIC or Lower-Tier REMIC) to fail to qualify as a REMIC.
VOTING RIGHTS
For any date of determination, the voting rights for the Certificates (the
"Voting Rights") shall be allocated among the respective Classes of
Certificateholders as follows: (i) 2% in the case of the Class A-X
Certificates, and (ii) in the case of any other Class of Certificates (other
than the Class V-1 and the Residual Certificates), a percentage equal to the
product of 98% and a fraction, the numerator of which is the aggregate
Certificate Balance of such Class, in each case, determined as of the
Distribution Date immediately preceding such date of determination, and the
denominator of which is equal to the aggregate Certificate Balance of all
Classes of Certificates, each determined as of the Distribution Date
immediately preceding such date of determination. None of the Class V-1,
Class R or Class LR Certificates will be entitled to any Voting Rights. For
purposes of determining Voting Rights, the Certificate Balance of any Class
shall be deemed reduced by allocation of Collateral Support Deficit to
S-157
<PAGE>
such Class. Voting Rights allocated to a Class of Certificateholders shall be
allocated among such Certificateholders in proportion to the Percentage
Interests evidenced by their respective Certificates. Solely for purposes of
giving any consent, approval or waiver pursuant to the Pooling and Servicing
Agreement, none of the Servicer, the Special Servicer, the Depositor or any
affiliate will be entitled to exercise any Voting Rights with respect to any
Certificates registered in its name, if such consent, approval or waiver
would in any way increase its compensation or limit its obligations in such
capacity under the Pooling and Servicing Agreement; provided, however, the
Servicer and Special Servicer will be entitled to exercise such Voting Rights
as to matters which could adversely affect its compensation or increase its
liabilities or obligations; provided, however, that such restrictions will
not apply to the exercise of the Special Servicer's rights as a member of the
Controlling Class.
REALIZATION UPON MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, if a default on a
Mortgage Loan has occurred or, in the Special Servicer's judgment, a payment
default is imminent, the Special Servicer, on behalf of the Trust Fund, may
at any time institute foreclosure proceedings, exercise any power of sale
contained in the related Mortgage or otherwise acquire title to the related
Mortgaged Property. The Special Servicer shall not, however, acquire title to
any Mortgaged Property or take any other action with respect to any Mortgaged
Property that would cause the Trustee, for the benefit of the
Certificateholders, or any other specified person to be considered to hold
title to, to be a "mortgagee-in-possession" of or to be an "owner" or an
"operator" of such Mortgaged Property within the meaning of certain federal
environmental laws, unless the Special Servicer has previously received a
report prepared by a person who regularly conducts environmental audits
(which report will be a Servicing Advance) and either:
(i) such report indicates that (a) the Mortgaged Property is in compliance
with applicable environmental laws and regulations and (b) there are no
circumstances or conditions present at the Mortgaged Property for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any applicable environmental laws and regulations; or
(ii) the Special Servicer, based solely (as to environmental matters and
related costs) on the information set forth in such report, determines that
taking such actions as are necessary to bring the Mortgaged Property into
compliance with applicable environmental laws and regulations and/or taking
the actions contemplated by clause (i)(b) above, is reasonably likely to
increase the net proceeds of the liquidation of such Mortgaged Property, than
not taking such actions.
The Pooling and Servicing Agreement grants to the Special Servicer a right
(or to the Servicer, to the extent that the Special Servicer does not
exercise its right) to purchase from the Trust Fund, at the Purchase Price,
any Mortgage Loan as to which a specified number of scheduled payments are
delinquent. In addition, the Special Servicer may offer to sell any defaulted
Mortgage Loan if and when the Special Servicer determines, consistent with
the Servicing Standard, that such a sale would produce a greater recovery, on
a present value basis, than would liquidation of the related Mortgaged
Property. In the absence of any such sale, the Special Servicer will
generally be required to proceed against the related Mortgaged Property,
subject to the discussion above.
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, on behalf of the Trust Fund, will be required to sell the
Mortgaged Property within two years of acquisition, unless (i) the Internal
Revenue Service (the "IRS") grants an extension of time to sell such property
or (ii) the Trustee receives an opinion of independent counsel to the effect
that the holding of the property by the Trust Fund for more than two years
after its acquisition will not result in the imposition of taxes on
"prohibited transactions" on the REMIC constituted by the Trust Fund or cause
the Trust Fund (or either the Upper-Tier REMIC or the Lower-Tier REMIC) to
fail to qualify as a REMIC under the Code at any time that any Certificate is
outstanding. The Special Servicer will also be required to ensure that any
REO Property acquired by the Trust Fund is administered so that it
constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of such property does not result in
the receipt by the Trust Fund of any income from nonpermitted assets as
described in Code Section 860F(a)(2)(B). If the Trust Fund acquires title to
any Mortgaged Property, the Special Servicer, on behalf of the Trust Fund,
will retain an independent contractor to manage and operate such property.
The
S-158
<PAGE>
retention of an independent contractor, however, will not relieve the Special
Servicer of its obligation to manage such Mortgaged Property as required
under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxed on income received with respect to a Mortgaged Property acquired by the
Trust Fund to the extent that it constitutes "rents from real property,"
within the meaning of Code Section 856(c)(3)(A) and Treasury regulations
thereunder. "Rents from real property" include fixed rents and rents based on
the receipts or sales of a tenant but do not include the portion of any
rental based on the net income or profit of any tenant or sub-tenant. No
determination has been made whether rent on any of the Mortgaged Properties
meets this requirement. "Rents from real property" include charges for
services customarily furnished or rendered in connection with the rental of
real property, whether or not the charges are separately stated. Services
furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located,
tenants in buildings which are of similar class are customarily provided with
the service. No determination has been made whether the services furnished to
the tenants of the Mortgaged Properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a Mortgaged Property owned by the Trust Fund,
presumably allocated based on the value of any non-qualifying services, would
not constitute "rents from real property." Any of the foregoing types of
income may instead constitute "net income from foreclosure property," which
would be taxable to the Lower-Tier REMIC at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local
taxes. Because these sources of income, if they exist, are already in place
with respect to the Mortgaged Properties, it is generally viewed as
beneficial to Certificateholders to permit the Trust Fund to continue to earn
them if it acquires a Mortgaged Property, even at the cost of this tax. Any
such taxes would be chargeable against the related income for purposes of
determining the proceeds available for distribution to holders of
Certificates. See "Certain Federal Income Tax Consequences."
To the extent that Liquidation Proceeds collected with respect to any
Mortgage Loan are less than the sum of (i) the outstanding principal balance
of such Mortgage Loan, (ii) interest accrued thereon, (iii) interest accrued
on any P&I Advances made with respect to such Mortgage Loan and (iv) the
aggregate amount of outstanding reimbursable expenses (including any
unreimbursed Servicing Advances and unpaid and accrued interest on such
Advances) incurred with respect to such Mortgage Loan, then the Trust Fund
will realize a loss in the amount of such shortfall. The Trustee, the
Servicer and/or the Special Servicer will be entitled to reimbursement out of
the Liquidation Proceeds recovered on any Mortgage Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, of any and
all amounts that represent unpaid servicing compensation in respect of such
Mortgage Loan, certain unreimbursed expenses incurred with respect to such
Mortgage Loan and any unreimbursed Advances made with respect to such
Mortgage Loan. In addition, amounts otherwise distributable on the
Certificates will be further reduced by interest payable to the Servicer or
Trustee on any such Advances.
If any Mortgaged Property suffers damage such that the proceeds, if any,
of the related hazard insurance policy are insufficient to restore fully the
damaged property, the Servicer will not be required to expend its own funds
to effect such restoration unless (i) the Special Servicer determines that
such restoration will increase the proceeds to Certificateholders on
liquidation of the Mortgage Loan after reimbursement of the Special Servicer
or the Servicer, as the case may be, for its expenses and (ii) the Servicer
determines that such expenses will be recoverable by it from related
Liquidation Proceeds.
With respect to any Mortgage Loan (i) as to which a payment default has
occurred at its maturity date, (ii) as to which any Monthly Payment (other
than a Balloon Payment) is more than 60 days delinquent, (iii) as to which
the borrower has (a) filed for, or consented to, bankruptcy, appointment of a
receiver or conservator or a similar insolvency proceeding, (b) become the
subject of a decree or order for such a proceeding which is not stayed or
discharged within 60 days, or (c) has admitted in writing its inability to
pay its debts generally as they become due, (iv) as to which the Servicer
shall have received notice of the foreclosure or proposed foreclosure of any
other lien on the Mortgaged Property, (v) as to which, in the judgment of the
Servicer, a payment default has occurred or is imminent and is not likely to
be cured by the borrower within 60 days or (vi) any other default has
occurred which has materially and adversely affected the value of the related
Mortgage Loan, and prior to acceleration of amounts due
S-159
<PAGE>
under the related Mortgage Note or commencement of any foreclosure or similar
proceedings, the Servicer will transfer its servicing responsibilities to the
Special Servicer, but will continue to receive payments on such Mortgage Loan
(including amounts collected by the Special Servicer), to make certain
calculations with respect to such Mortgage Loan and to make remittances and
prepare certain reports to the Trustee with respect to such Mortgage Loan. If
the related Mortgaged Property is acquired in respect of any such Mortgage
Loan (upon acquisition, an "REO Property") whether through foreclosure,
deed-in-lieu of foreclosure or otherwise, the Special Servicer will continue
to be responsible for the operation and management thereof. The Mortgage
Loans serviced by the Special Servicer and any Mortgage Loans that have
become REO Properties are referred to herein as the "Specially Serviced
Mortgage Loans." The Servicer will have no responsibility for the performance
by the Special Servicer of its duties under the Pooling and Servicing
Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing Mortgage Loan for three consecutive Monthly Payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will return servicing
of such Mortgage Loan (a "Corrected Mortgage Loan") to the Servicer.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Servicer,
the Directing Certificateholder (as defined below) and the Rating Agencies.
The Directing Certificateholder may object to any Asset Status Report within
10 business days of receipt; provided, however, that the Special Servicer
shall implement the recommended action as outlined in such Asset Status
Report if it makes an affirmative determination that such objection is not in
the best interest of all the Certificateholders. In connection with making
such affirmative determination, the Special Servicer will request a vote by
all the Certificateholders. If the Directing Certificateholder does not
disapprove an Asset Status Report within 10 business days, the related
Special Servicer shall implement the recommended action as outlined in such
Asset Status Report. If the Directing Certificateholder disapproves such
Asset Status Report and the Special Servicer has not made the affirmative
determination described above, the Special Servicer will revise such Asset
Status Report as soon as practicable thereafter, but in no event later than
30 days after such disapproval. The Special Servicer will revise such Asset
Status Report until the Directing Certificateholder fails to disapprove such
revised Asset Status Report as described above or until the Special Servicer
makes a determination that such objection is not in the best interests of the
Certificateholders.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified
by the Certificate Registrar to the Trustee from time to time by such holder
(or Certificate Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate Class of Certificates then outstanding that has a Certificate
Balance at least equal to 25% of the initial Certificate Balance of such
Class (or if no such Class exists, the most subordinate Class then
outstanding). For purposes of determining identity of the Controlling Class,
the Certificate Balance of each Class shall be deemed to be reduced by the
amount allocated to such Class of any Appraisal Reductions relating to
Mortgage Loans as to which Liquidation Proceeds or other final payment has
not yet been received.
The Controlling Class as of the Closing Date will be the Class J
Certificates.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling and Servicing
Agreement, including the Servicing Standard, or the REMIC Provisions.
MODIFICATIONS
The Pooling and Servicing Agreement will permit the Special Servicer to
modify, waive or amend any term of any Mortgage Loan if (a) it determines, in
accordance with the Servicing Standard, that it is appropriate to do so and
(b) except as described in the following paragraph, such modification, waiver
or
S-160
<PAGE>
amendment, will not (i) affect the amount or timing of any scheduled payments
of principal, interest or other amount (including Prepayment Premiums and
Yield Maintenance Charges) payable under the Mortgage Loan, (ii) affect the
obligation of the related borrower to pay a Prepayment Premium or Yield
Maintenance Charge or permit a principal prepayment during the applicable
Lockout Period, (iii) except as expressly provided by the related Mortgage or
in connection with a material adverse environmental condition at the related
Mortgaged Property, result in a release of the lien of the related Mortgage
on any material portion of such Mortgaged Property without a corresponding
principal prepayment or (iv) in the judgment of the Special Servicer,
materially impair the security for the Mortgage Loan or reduce the likelihood
of timely payment of amounts due thereon.
Notwithstanding clause (b) of the preceding paragraph, the Special
Servicer may (i) reduce the amounts owing under any Specially Serviced
Mortgage Loan by forgiving principal, accrued interest and/or any Prepayment
Premium or Yield Maintenance Charge, (ii) reduce the amount of the Monthly
Payment on any Specially Serviced Mortgage Loan, including by way of a
reduction in the related Mortgage Rate, (iii) forbear in the enforcement of
any right granted under any Mortgage Note or Mortgage relating to a Specially
Serviced Mortgage Loan, (iv) waive Excess Interest if such waiver conforms to
the Servicing Standard and/or (v) accept a principal prepayment during any
Lockout Period; provided that (w) the related borrower is in default with
respect to the Specially Serviced Mortgage Loan or, in the judgment of the
Special Servicer, such default is reasonably foreseeable, (x) in the sole,
good faith judgment of the Special Servicer, such modification, waiver or
amendment would increase the recovery to Certificateholders on a net present
value basis documented to the Trustee and (y) such modification, waiver or
amendment does not result in a tax being imposed on the Trust Fund or cause
any REMIC created pursuant to the Pooling and Servicing Agreement to fail to
qualify as a REMIC at any time the Certificates are outstanding. In no event
will the Special Servicer be permitted to (i) extend the maturity date of a
Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, (ii) extend the maturity date of any Mortgage Loan at an
interest rate less than the lower of (a) the interest rate in effect prior to
such extension or (b) the then prevailing interest rate for comparable loans,
as determined by the Special Servicer by reference to available indices for
commercial mortgage lending, (iii) if the Mortgage Loan is secured by a
ground lease, extend the maturity date of such Mortgage Loan beyond a date
which is 10 years prior to the expiration of the term of such ground lease;
(iv) reduce the Mortgage Rate to a rate below the lesser of (x) 7.5415% per
annum and (y) the then prevailing interest rate for comparable loans, as
determined by the Special Servicer by reference to available indices for
commercial mortgage lending; or (v) defer interest due on any Mortgage Loan
in excess of 5% of the Stated Principal Balance of such Mortgage Loan.
Neither the Servicer nor the Special Servicer may permit or modify a loan to
permit a voluntary prepayment of a Mortgage Loan (other than a Specially
Serviced Mortgage Loan) on any day other than its Due Date, unless the
Servicer or Special Servicer also collects interest thereon through the Due
Date following the date of such prepayment or unless otherwise permitted
under the Mortgage Loan Documents. Prepayments of Specially Serviced Mortgage
Loans will be permitted to be made on any day without the payment of interest
through the following Due Date.
With respect to Loan No. 67, which is subject to "negative amortization,"
and with respect to any Mortgage Loan the modification of which would create
a deferral of interest, the Pooling and Servicing Agreement will provide that
the amount of Certificate Deferred Interest resulting from such negative
amortization or any such modification will be allocated to reduce the Monthly
Interest Distributable Amount of the Class or Classes (other than the Class
A-X Certificates) with the latest alphabetical designation then outstanding
and, to the extent so allocated, shall be added to the Certificate Balance of
such Class or Classes (other than for the purposes of determining Voting
Rights or the identity of the Controlling Class).
The Special Servicer will notify the Servicer and the Trustee of any
modification, waiver or amendment of any term of any Mortgage Loan and must
deliver to the Trustee or the Custodian for deposit in the related mortgage
file an original counterpart of the agreement related to such modification,
waiver or amendment, promptly following the execution thereof. The special
Servicer will notify the Rating Agencies of any modification, waiver or
amendment of any term of any Mortgage Loan (i) the principal balance of which
is $20,000,000 or more or (ii) that is a Mortgage Loan, part of a group of
S-161
<PAGE>
Crossed Loans or a group of loans made to affiliated borrowers that, in each
case, in the aggregate represent 5% or more of the aggregate outstanding
principal balances of all of the Mortgage Loans. Copies of each agreement
whereby any such modification, waiver or amendment of any term of any
Mortgage Loan is effected are to be available for review during normal
business hours, upon reasonable advance written notice, at the offices of the
Trustee.
OPTIONAL TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in
respect thereof) or other liquidation of the last Mortgage Loan or REO
Property subject thereto or (ii) the purchase of all of the assets of the
Trust Fund by the Mortgage Loan Seller, the holders of the Controlling Class
or the Servicer. Written notice of termination of the Pooling and Servicing
Agreement will be given to each Certificateholder, and the final distribution
will be made only upon surrender and cancellation of the Certificates at the
office of the Certificate Registrar or other location specified in such
notice of termination.
Subject to the requirement set forth in the last sentence of this
paragraph, the Mortgage Loan Seller will have the option to purchase all of
the assets of the Trust Fund. If the Mortgage Loan Seller does not exercise
such option within 60 days after it becomes exercisable, the holders of a
majority of the Percentage Interests in the Controlling Class can notify the
Mortgage Loan Seller of their intention to exercise such option and if the
Mortgage Loan Seller does not exercise such option within ten Business Days
thereafter, such holders of the Controlling Class will be entitled to
exercise such option. If the Controlling Class does not exercise its option
to purchase all of the assets of the Trust Fund within 60 days after such
option becomes exercisable, the Servicer can notify the Mortgage Loan Seller
and the holders of the Controlling Class of its intention to exercise such
option and if neither the Mortgage Loan Seller nor the holders of a majority
of the Percentage Interests in the Controlling Class exercise such option
within ten Business Days, the Servicer will be entitled to exercise such
option. Any such purchase of all the Mortgage Loans and other assets in the
Trust Fund is required to be made at a price equal to the sum of (i) the
aggregate Purchase Price of all the Mortgage Loans (in each case exclusive of
REO Loans) then included in the Trust Fund and (ii) the aggregate fair market
value of all REO Properties then included in the Trust Fund (which fair
market value for any REO Property may be less than the Purchase Price for the
corresponding REO Loan), as determined by an appraiser selected and mutually
agreed upon by the Servicer and the Trustee. Such purchase will effect early
retirement of the then outstanding Offered Certificates, but the right of the
Mortgage Loan Seller or of the holders of the Controlling Class to effect
such termination is subject to the requirement that the then aggregate Stated
Principal Balance of the Mortgage Loans, any REO Mortgage Loans be less than
3.75% of the Initial Pool Balance.
On the final Distribution Date, the aggregate amount paid by the Mortgage
Loan Seller, the holders of the Controlling Class or the Servicer, as the
case may be, for the Mortgage Loans and other assets in the Trust Fund (if
the Trust Fund is to be terminated as a result of the purchase described in
the preceding paragraph), together with all other amounts on deposit in the
Certificate Account and not otherwise payable to a person other than the
Certificateholders (see "Description of the Pooling Agreements -- Certificate
Account" in the Prospectus), will be applied generally as described above
under "Description of the Offered Certificates -- Distributions -- Priority."
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank") will act as
Trustee pursuant to the Pooling and Servicing Agreement. Norwest Bank, a
direct, wholly owned subsidiary of Norwest Corporation, is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank. Norwest Bank's principal office is
located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota 55479.
Certificate transfer services are conducted at Norwest Bank's offices in
Minneapolis. Norwest Bank otherwise conducts its trustee and securities
administration services at its offices in Columbia, Maryland. Its address
there is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. In
addition, Norwest Bank maintains a trust office in New York located at 3 New
York Plaza, New York, New York 10004. Certificateholders and other interested
parties should direct their
S-162
<PAGE>
inquiries to the New York Office. The telephone number is (212) 509-7900. As
compensation for the performance of its duties, the Trustee will be paid a
fee (the "Trustee Fee"). The Trustee Fee will be payable monthly on a
loan-by-loan basis and will accrue at a rate (the "Trustee Fee Rate") equal
to 0.0015% per annum, and will be computed on the basis of a 360-day year
consisting of twelve 30-day months on the Stated Principal Balance of the
related Mortgage Loan. In addition, the Trustee will be entitled to recover
from the Trust Fund all reasonable unanticipated expenses and disbursements
incurred or made by the Trustee in accordance with any of the provisions of
the Pooling and Servicing Agreement, but not including expenses incurred in
the ordinary course of performing its duties as Trustee under the Pooling and
Servicing Agreement, and not including any such expense, disbursement or
advance as may arise from its willful misconduct, negligence or bad faith.
CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
Norwest Bank will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of recording and otherwise providing
for the registration of the Offered Certificates and of transfers and
exchanges of the Definitive Certificates, if issued, and as authenticating
agent of the Certificates (in such capacity, the "Authenticating Agent").
DUTIES OF THE TRUSTEE
In the event that the Servicer fails to make a required Advance, the
Trustee shall make such Advance, provided that the Trustee shall not be
obligated to make any Nonrecoverable Advance. The Trustee shall be entitled
to rely conclusively on any determination by the Servicer or the Special
Servicer that an Advance, if made, would not be recoverable. The Trustee will
be entitled to reimbursement for each Advance, with interest, made by it in
the same manner and to the same extent as the Servicer or the Special
Servicer.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling and Servicing Agreement.
Upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee is required to examine such
documents and to determine whether they conform on their face to the
requirements of the Pooling and Servicing Agreement.
THE SERVICER
First Union National Bank, in its capacity as servicer under the Pooling
and Servicing Agreement (in such capacity, the "Servicer"), will be
responsible for servicing the Mortgage Loans (other than Specially Serviced
Mortgage Loans and REO Properties). Although the Servicer is authorized to
employ agents, including sub-servicers, to directly service the Mortgage
Loans for which it is responsible, the Servicer will remain liable for its
servicing obligations under the Pooling and Servicing Agreement. The Servicer
is a wholly owned subsidiary of First Union Corporation. The Servicer's
principal servicing offices are located at One First Union Center, TW9, 301
South College Street, Charlotte, North Carolina 28288-1075.
As of November 30, 1997, the Servicer and its affiliates serviced
approximately 2,635 commercial and multifamily loans, totaling approximately
$13.0 billion in aggregate outstanding principal amounts, including loans
securitized in mortgage-backed securitization transactions.
The information concerning the Servicer set forth herein has been provided
by the Servicer, and none of the Mortgage Loan Seller, the Special Servicer,
the Depositor, the Trustee or the Underwriter makes any representation or
warranty as to the accuracy thereof.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Servicer (the "Servicing Fee") will be payable monthly on a
loan-by-loan basis from interest received, will accrue at a rate (the
"Servicing Fee Rate") of 0.03% per annum, and will be computed on the basis
of a 360-day year consisting of twelve 30-day months on the Stated Principal
Balance of the related Mortgage Loan. The Servicer and certain
Seller-Servicers will be entitled to retain
S-163
<PAGE>
out of amounts to be remitted to the Trust Fund a fee (each, a "Primary
Servicing Fee") that accrues on the Stated Principal Balance of the related
Mortgage Loans at a rate (the "Primary Servicing Fee Rate") per annum set
forth herein under "Description of the Mortgage Loans --Additional Mortgage
Loan Information -- Mortgage Notes." The Primary Servicing Fee with respect
to each Mortgage Loan will be calculated in the same manner as interest on
such Mortgage Loan. The Servicer will be required to pay the fees and
expenses of any other sub-servicer retained by the Servicer out of the
Servicing Fee. Except to the extent set forth in the related Seller-Servicer
Agreement, in no event will the Servicer or any Seller-Servicer be entitled
to retain a servicing fee from the amount of any P&I Advance or to pay itself
separate servicing compensation from amounts otherwise constituting
Prepayment Interest Excess, regardless of whether the related borrower is
obligated to reimburse Servicing Fees or Primary Servicing Fees. In addition
to the Servicing Fee, the Servicer will be entitled to retain, as additional
servicing compensation, (i) 50% of all assumption fees paid by the Mortgagors
on Mortgage Loans that are not Specially Serviced Mortgage Loans (other than
ECC Loans) and (ii) late payment charges and default interest (collectively,
"Penalty Charges") paid by the borrowers and collected by the Servicer, but
only to the extent such amounts are not needed to pay outstanding interest on
all Advances accrued with respect to such Mortgage Loan. The remainder of the
assumption fees shall be delivered to the Special Servicer as additional
servicing compensation. The Servicer also is authorized but not required to
invest or direct the investment of funds held in the Certificate Account in
Permitted Investments, and the Servicer will be entitled to retain any
interest or other income earned on such funds (but only to the extent such
interest or other income is not required, together with the Servicing Fee, to
cover Prepayment Interest Shortfalls) and will bear any losses resulting from
the investment of such funds. The Servicer also is entitled to invest or
direct the investments held in the Cash Collateral Accounts, Lockbox Accounts
or Escrow Accounts and to retain any interest to the extent such interest is
not required to be paid to the related borrowers. Finally, the Servicer is
entitled to retain any miscellaneous fees collected from borrowers. The
Servicer will pay the annual fees of each Rating Agency and shall be
reimbursed therefor by the Mortgage Loan Seller. The Servicer is also
entitled to receive all Prepayment Interest Excesses as additional servicing
compensation unless such Prepayment Interest Excess results from the Servicer
accepting a voluntary prepayment with respect to a Mortgage Loan and waiving
a right under such Mortgage Loan to collect interest thereon through the Due
Date following the date of prepayment.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee. The "Special Servicing Fee" will accrue
with respect to each Specially Serviced Mortgage Loan at a rate equal to
0.25% per annum (the "Special Servicing Fee Rate") on the basis of the same
principal amount and for the same period respecting which any related
interest payment due or deemed due on such Specially Serviced Mortgage Loan
is computed, and will be payable monthly from the Trust Fund. A "Workout Fee"
will in general be payable with respect to each Corrected Mortgage Loan. As
to each Corrected Mortgage Loan, the Workout Fee will be payable out of, and
will be calculated by application of a "Workout Fee Rate" of (i) 1.0% for any
Mortgage Loan with a Stated Principal Balance of less than $10,000,000, (ii)
0.75% for any Mortgage Loan with a Stated Principal Balance equal to or
greater than $10,000,000 but less than $20,000,000 and (iii) 0.5% for any
Mortgage Loan with a Stated Principal Balance equal to or greater than
$20,000,000, to each collection of interest and principal (including
scheduled payments, prepayments, Balloon Payments and payments at maturity)
received on such Mortgage Loan for so long as it remains a Corrected Mortgage
Loan. The Workout Fee with respect to any Corrected Mortgage Loan will cease
to be payable if such loan again becomes a Specially Serviced Mortgage Loan;
provided that a new Workout Fee will become payable if and when such Mortgage
Loan again becomes a Corrected Mortgage Loan. If the Special Servicer is
terminated (other than for cause), it shall retain the right to receive any
and all Workout Fees payable with respect to Mortgage Loans that became
Corrected Mortgage Loans during the period that it acted as Special Servicer
and were still such at the time of such termination or resignation (and the
successor Special Servicer shall not be entitled to any portion of such
Workout Fee), in each case until the Workout Fee for any such loan ceases to
be payable in accordance with the preceding sentence. A "Liquidation Fee"
will be payable with respect to each Specially Serviced Mortgage Loan as to
which the Special Servicer obtains a full or discounted payoff with respect
thereto from the related Mortgagor and, except as otherwise described below,
with respect to any Specially
S-164
<PAGE>
Serviced Mortgage Loan or REO Property as to which the Special Servicer
receives any amounts in connection with a taking of a Mortgaged Property by
exercise of a power of eminent domain or condemnation or the liquidation of a
defaulted Mortgage Loan, by foreclosure or otherwise ("Liquidation
Proceeds"). As to each such Specially Serviced Mortgage Loan, the Liquidation
Fee will be payable from, and will be calculated by application of a
"Liquidation Fee Rate" of (i) 1.0% for any Mortgage Loan with a Stated
Principal Balance of less than $10,000,000, (ii) 0.75% for any Mortgage Loan
with a Stated Principal Balance equal to or greater than $10,000,000 but less
than $20,000,000 and (iii) 0.5% for any Mortgage Loan with a Stated Principal
Balance equal to or greater than $20,000,000, to the net liquidation proceeds
received with respect to such Specially Serviced Mortgage Loan.
Notwithstanding anything to the contrary described above, no Liquidation Fee
will be payable based on, or out of, Liquidation Proceeds received in
connection with the repurchase of any Mortgage Loan by the Mortgage Loan
Seller for a breach of representation or warranty or for defective or
deficient Mortgage Loan documentation, the purchase of any Specially Serviced
Mortgage Loan by the Servicer or the Special Servicer or the purchase of all
of the Mortgage Loans and REO Properties in connection with an optional
termination of the Trust Fund. If, however, Liquidation Proceeds are received
with respect to any Corrected Mortgage Loan and the Special Servicer is
properly entitled to a Workout Fee, such Workout Fee will be payable based on
and out of the portion of such Liquidation Proceeds that constitutes
principal and/or interest. The Special Servicer will be entitled to
additional servicing compensation in the form of (i) all assumption fees on
all Specially Serviced Mortgage Loans, (ii) 50% of all assumption fees on any
Mortgage Loans other than Specially Serviced Mortgage Loans or ECC Loans and
(iii) all extension fees and modification fees received on or with respect to
any Mortgage Loans. The Special Servicer will also be entitled to Penalty
Charges collected by the Special Servicer on any Specially Serviced Mortgage
Loans net of any outstanding interest on Advances accrued thereon.
Although the Servicer and the Special Servicer are each required to
service and administer the Mortgage Loans in accordance with the Servicing
Standard above and, accordingly, without regard to their right to receive
compensation under the Pooling and Servicing Agreement, additional servicing
compensation in the nature of assumption and modification fees may under
certain circumstances provide the Servicer or the Special Servicer, as the
case may be, with an economic disincentive to comply with such standard.
As and to the extent described herein under "Advances," the Servicer will
be entitled to receive interest on Advances at the Reimbursement Rate, such
interest to be paid contemporaneously with the reimbursement of the related
Advance.
Each of the Servicer and the Special Servicer generally will be required
to pay all expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement and will not be entitled
to reimbursement therefor except as expressly provided in the Pooling and
Servicing Agreement. In connection therewith, the Servicer will be
responsible for all fees of any sub-servicers.
PREPAYMENT INTEREST SHORTFALLS
Any Prepayment Interest Shortfall in excess of the sum of (i) the
Servicing Fee attributable to a Mortgage Loan (other than a Specially
Serviced Mortgage Loan) being prepaid and (ii) the investment income accruing
on the related Principal Prepayment due to the Servicer for the period from
the date of such prepayment to the following Servicer Remittance Date (or, in
the case of a Specially Serviced Mortgage Loan, for the period from the date
of such prepayment to the immediately following Due Date) (such excess
amount, an "Uncovered Prepayment Interest Shortfall") will be allocated to
each Class of Regular Certificates, pro rata, based on amounts distributable
to each such Class. Any Prepayment Interest Excess on a Mortgage Loan (other
than a Mortgage Loan the terms of which expressly permit collections of
interest through the following Due Date in connection with any voluntary
principal prepayment) will be paid to the Servicer.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR Property
Corporation ("LNR"), will serve as the Special Servicer and in such capacity
will be responsible for servicing the Specially
S-165
<PAGE>
Serviced Mortgage Loans. The principal executive offices of the Special
Servicer are located at 760 N.W. 107th Avenue, Miami, Florida 33172, and its
telephone number is (305) 485-2000. LNR and its subsidiaries and affiliates
are involved in the real estate investment and management business and engage
principally in (i) developing, acquiring and actively managing commercial and
residential multi-family rental real estate, (ii) acquiring portfolios of
commercial mortgage loans and properties and providing workout, property
management and asset sale services with regard to the portfolio assets, (iii)
acting as special servicer with regard to commercial mortgage pools which are
the subject of commercial mortgage backed securities ("CMBS"), (iv) acquiring
unrated and rated CMBS issued with regard to commercial mortgage pools as to
which the Special Servicer acts as special servicer, and (v) making mortgage
loans to companies and individuals engaged in commercial real estate
activities and to developers and builders of residential communities. The
Special Servicer has regional offices located in Florida, Georgia, and
California. As of September 30, 1997, the Special Servicer and its affiliates
were managing a portfolio including, in most states, over 6,800 assets with
an original face value of over $19.9 billion, most of which are commercial
real estate assets. Included in this managed portfolio are $14 billion of
commercial real estate assets representing 37 securitization transactions,
for which the Special Servicer is the servicer or special servicer. The
Special Servicer and its affiliates own and are in the business of acquiring
assets similar in type to the assets of the Trust Fund. Accordingly, the
assets of the Special Servicer and its affiliates may, depending upon the
particular circumstances, including the nature and location of such assets,
compete with the Mortgaged Properties for tenants, purchasers, financing and
so forth.
The information set forth herein concerning the Special Servicer has been
provided by the Special Servicer, and neither the Depositor nor the
Underwriter makes any representation or warranty as to the accuracy or
completeness of such information.
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the holders of Certificates representing more than
50% of the Percentage Interest of the Controlling Class, provided that each
Rating Agency confirms in writing that such replacement of the Special
Servicer, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict relating to the Servicer's or Special Servicer's duties
pursuant to the Pooling and Servicing Agreement and the Servicer's or Special
Servicer's interest as a holder of Certificates, especially to the extent
that certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling and Servicing Agreement provides that
the Servicer or Special Servicer shall administer the Mortgage Loans in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. Based solely on information provided in monthly reports
prepared by the Servicer regarding the Mortgage Loans (which may also publish
such reports on the Internet), and the Special Servicer, and delivered to the
Trustee, the Trustee will prepare and forward on each Distribution Date to
each Certificateholder, the Depositor, the Servicer, the Special Servicer,
the Underwriter, each Rating Agency and, if requested, any potential
investors in the Certificates, all of which will be made available
electronically to any interested party via the Trustee's Website, electronic
bulletin board and/or, with respect to Distribution Date Statements only, its
fax-on-demand service:
(a) A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the aggregate amount of distributions, if any, made on such
Distribution Date to the holders of each Class of Certificates applied to
reduce the respective Certificate Balances thereof; (ii) the aggregate amount
of distributions, if any, made on such Distribution Date to holders of each
Class of Certificates allocable to (A) such Class's Optimal Interest
Distribution Amount and, separately stated, the portion thereof representing
the Unpaid Interest Shortfall Amount for such Class, (B) Prepayment Premiums
and Yield Maintenance Charges; (iii) the number of outstanding Mortgage
Loans, the aggregate unpaid principal
S-166
<PAGE>
balance of the Mortgage Loans at the close of business on the related
Determination Date; (iv) the number and aggregate unpaid principal balance of
Mortgage Loans (A) delinquent one Due Period, (B) delinquent two Due Periods,
(C) delinquent three or more Due Periods, (D) that are Specially Serviced
Mortgage Loans and are not delinquent, or (E) as to which foreclosure
proceedings have been commenced; (v) with respect to any Mortgage Loan as to
which the related Mortgaged Property became a REO Property during the
preceding calendar month, the city, state, property type, latest DSCR, Stated
Principal Balance and unpaid principal balance of such Mortgage Loan as of
the date such Mortgaged Property became an REO Property; (vi) as to any
Mortgage Loan repurchased by the Mortgage Loan Seller or otherwise liquidated
or disposed of during the related Due Period, the loan number thereof and the
amount of proceeds of any repurchase of a Mortgage Loan, Liquidation Proceeds
and/or other amounts, if any, received thereon during the related Due Period
and the portion thereof included in the Available Distribution Amount for
such Distribution Date; (vii) with respect to any REO Property included in
the Trust Fund as of the close of business on the related Due Date, the loan
number of the related Mortgage Loan, the value of such REO Property based on
the most recent appraisal or valuation and the amount of any other income
collected with respect to any REO Property, net of related expenses and any
other amounts, if any, received on such REO Property during the related Due
Period and the portion thereof included in the Available Distribution Amount
for such Distribution Date; (viii) with respect to any REO Property sold or
otherwise disposed of during the related Due Period, (A) the loan number of
the related Mortgage Loan and the amount of the sale proceeds and other
amounts, if any, received in respect of such REO Property during the related
Due Period and the portion thereof included in the Available Distribution
Amount for such Distribution Date and (B) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Balance or Notional Balances
of each Class of Certificates before and after giving effect to the
distributions made on such Distribution Date, separately identifying any
reduction in the aggregate Certificate Balance of each such Class due to any
Collateral Support Deficit; (x) the amount of Principal Prepayments (in the
aggregate and broken out on a loan-by-loan basis) made during the related Due
Period, the amount of any Yield Maintenance Charges and/or Prepayment
Premiums (in the aggregate and broken out on a loan-by-loan basis) paid
during the related Due Period and the aggregate amount of any Prepayment
Interest Shortfalls not covered by the Servicer for such Distribution Date;
(xi) the Pass-Through Rate for each Class of Certificates applicable for such
Distribution Date; (xii) the aggregate amount of the Trustee Fee, the
Servicing Fee, Primary Servicing Fee, Special Servicing Fee and any other
servicing or special servicing compensation retained by the Trust or paid to
the Servicer and the Special Servicer during the related Due Period; (xiii)
the Collateral Support Deficit, if any, for such Distribution Date; (xiv)
certain Trust Fund expenses incurred during the related Due Period as
described in the Pooling and Servicing Agreement; (xv) the aggregate amount
of Servicing Advances and P&I Advances outstanding which have been made by
the Servicer, the Special Servicer and the Trustee; and (xvi) the amount of
any Appraisal Reduction Amounts allocated during the related Due Period on a
loan-by-loan basis and the total Appraisal Reduction Amounts as of such
Distribution Date on a loan-by-loan basis. In the case of information
furnished pursuant to subclauses (i), (ii), (viii) and (ix) above, the
amounts shall be expressed as a dollar amount in the aggregate for all
Certificates of each applicable Class and per $1,000 of original Certificate
Balance or Notional Balance, as the case may be.
(b) A report containing information regarding the Mortgage Loans as of the
end of the related Due Period, which report shall contain substantially the
categories of information regarding the Mortgage Loans set forth in this
Prospectus Supplement in the tables under the caption "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans"
(reported, where applicable, solely on the basis of the most recent relevant
information provided by the borrowers to the Servicer or the Special Servicer
and by the Servicer or the Special Servicer, as the case may be, to the
Trustee) and such information shall include a loan-by-loan listing (in
descending balance order) showing loan name, property type, location, unpaid
principal balance, Mortgage Rate, paid through date, maturity date, net
interest portion of the Monthly Payment, principal portion of the Monthly
Payment and any Prepayment Premiums or Yield Maintenance Charges received.
Such loan-by-loan listing will be made available electronically in accordance
with the provisions of the Pooling and Servicing Agreement; provided,
however, that the Trustee will provide Certificateholders with a written copy
of such report upon written request.
S-167
<PAGE>
Servicer Reports. The Servicer is required to deliver to the Trustee on
the Business Day prior to each Distribution Date, and the Trustee is to
deliver to each Certificateholder, the Depositor, the Underwriter, each
Rating Agency and, if requested in writing, any potential investor in the
Certificates, on each Distribution Date, the following six reports, all of
which will be made available electronically to any interested party via the
Trustee's Website and electronic bulletin board:
(a) A "Comparative Financial Status Report," in the form set forth in
Annex C-1, setting forth, among other things, the occupancy, revenue, net
operating income and DSCR for the Mortgage Loans as of the current
Determination Date for each of the following three periods: (i) the most
current available year-to-date, (ii) the previous two full fiscal years
and (iii) the "base year" (representing the original analysis of
information used as of the Cut-off Date).
(b) A "Delinquent Loan Status Report," in the form set forth in Annex
C-2, setting forth, among other things, those Mortgage Loans which, as of
the close of business on the Determination Date immediately preceding the
preparation of such report, were delinquent 30 to 59 days, delinquent 60
to 89 days, delinquent 90 days or more, current but specially serviced, or
in foreclosure but not an REO Property.
(c) An "Historical Loan Modification Report," in the form set forth in
Annex C-3, setting forth, among other things, those Mortgage Loans which,
as of the close of business on the Determination Date immediately
preceding the preparation of such report, have been modified pursuant to
the Pooling and Servicing Agreement (i) during the related Due Period and
(ii) since the Cut-off Date, showing the original and the revised terms
thereof.
(d) An "Historical Loss Estimate Report," in the form set forth in Annex
C-4, setting forth, among other things, as of the close of business on the
Determination Date immediately preceding the preparation of such report,
(i) the aggregate amount of Liquidation Proceeds, both for the related Due
Period and historically, and (ii) the amount of realized losses occurring
on the Mortgage Loans during the related Due Period, set forth on a
Mortgage Loan-by-Mortgage Loan basis.
(e) An "REO Status Report," in the form set forth in Annex C-5, setting
forth, among other things, with respect to each REO Property that was
included in the Trust Fund as of the close of business on the
Determination Date immediately preceding the preparation of such report,
(i) the acquisition date of such REO Property, (ii) the amount of income
collected with respect to any REO Property net of related expenses and
other amounts, if any, received on such REO Property during the related
Due Period and (iii) the value of the REO Property based on the most
recent appraisal or other valuation thereof available to the Special
Servicer as of such date of determination.
(f) A "Servicer Watch List," in the form set forth in Annex C-6, setting
forth, among other things, any Mortgage Loan that, as of the Determination
Date immediately preceding the preparation thereof, is in jeopardy of
becoming a Specially Serviced Mortgage Loan.
The information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Servicer at least two business days
prior to the Servicer Remittance Date. Absent manifest error, none of the
Servicer, the Special Servicer or the Trustee shall be responsible for the
accuracy or completeness of any information supplied to it by a borrower or
third party that is included in any reports, statements, materials or
information prepared or provided by the Servicer, the Special Servicer or the
Trustee, as applicable.
The Servicer is also required to deliver to the Trustee on or before May
30 of each year, commencing with May 30, 1998, with respect to each Mortgaged
Property and REO Property, an "Operating Statement Analysis" as of the end of
the preceding fiscal year, together with copies of the operating statements
and rent rolls (but only to the extent the related borrower is required by
the Mortgage to deliver, or otherwise agrees to provide such information) for
such Mortgaged Property or REO Property as of the end of the preceding fiscal
year. The Servicer (or the Special Servicer in the case of Specially Serviced
Mortgage Loans and REO Properties) is required to use its best reasonable
efforts to obtain said annual operating statements and rent rolls.
S-168
<PAGE>
The Trustee is to deliver a copy of each Operating Statement Analysis
report that it receives from the Servicer to the Depositor, the Underwriter
and each Rating Agency promptly after its receipt thereof. Upon written
request, the Trustee will make such reports available to the
Certificateholders and the Special Servicer.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. The Trustee shall be deemed to have
satisfied this requirement to the extent it has complied with applicable
provisions of the Code. Such information is to include the amount of original
issue discount accrued on each Class of Certificate held by persons other
than holders exempted from the reporting requirements and information
regarding the expenses of the Trust Fund.
Other Information. The Pooling and Servicing Agreement requires that the
Trustee make available at its offices, during normal business hours, upon not
less than two Business Days' prior written notice, for review by any Holder
of a Certificate, the Depositor, the Special Servicer, the Servicer, any
Rating Agency, any potential investor in the Certificates or any other Person
to whom the Depositor believes such disclosure is appropriate, originals or
copies of, among other things, the following items (except to the extent not
permitted by applicable law or under any of the Mortgage Loan documents): (i)
the Pooling and Servicing Agreement and any amendments thereto, (ii) all
Distribution Date Statements delivered to holders of the relevant Class of
Offered Certificates since the Closing Date, (iii) all annual officers'
certificates and accountants' reports delivered by the Servicer and Special
Servicer to the Trustee since the Closing Date regarding compliance with the
relevant agreements, (iv) the most recent property inspection report prepared
by or on behalf of the Servicer or the Special Servicer with respect to each
Mortgaged Property, (v) the most recent annual operating statements, rent
rolls (to the extent such rent rolls have been made available by the related
borrower) and/or lease summaries and retail "sales information", if any,
collected by or on behalf of the Servicer or the Special Servicer with
respect to each Mortgaged Property, (vi) any and all modifications, waivers
and amendments of the terms of a Mortgage Loan entered into by the Servicer
and/or the Special Servicer, and (vii) any and all officers' certificates and
other evidence delivered to or by the Trustee to support the Servicer's or
the Trustee's, as the case may be, determination that any Advance, if made,
would be a Nonrecoverable Advance. Copies of any and all of the foregoing
items will be available from the Trustee upon written request; however, the
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies.
The Trustee will make available each month, to any interested party, the
Distribution Date Statement and the Servicer Reports via the Trustee's
Website, electronic bulletin board and/or, with respect to Distribution Date
Statements only, its fax-on-demand service. The Trustee's Website will be
located at "www.trustlink.com". Prior to June 1, 1998, such information will
be available at "www.securitieslink.net/ cmbs". The Trustee's electronic
bulletin board may be accessed by calling (301) 815-6670, and its
fax-on-demand service may be accessed by calling (301) 815-6660. In addition,
the Trustee will also make Mortgage Loan information as presented in the CSSA
loan setup file and CSSA loan periodic update file format available each
month to any Certificateholder, any Certificate Owner, the Rating Agencies,
the parties hereto or any other interested party via the Trustee's Website
and electronic bulletin board. In addition, pursuant to the Pooling and
Servicing Agreement, the Trustee will make available, as a convenience for
interested parties (and not in furtherance of the distribution of the
Prospectus or the Prospectus Supplement under the securities laws), the
Pooling and Servicing Agreement, the Prospectus and the Prospectus Supplement
via the Trustee's Website and electronic bulletin board. The Trustee will
make no representations or warranties as to the accuracy or completeness of
such documents and will assume no responsibility therefor.
In connection with providing access to the Trustee's and/or the Servicer's
Website or electronic bulletin board, the Trustee or the Servicer, as the
case may be, may require registration and the acceptance of a disclaimer.
Neither the Servicer nor the Trustee shall be liable for the dissemination of
information in accordance with the Pooling and Servicing Agreement.
S-169
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary and the discussion in the Prospectus under the
heading "Certain Federal Income Tax Consequences" are a general discussion of
the anticipated material federal income tax consequences of the purchase,
ownership and disposition of the Offered Certificates and are based on the
advice of Brown & Wood llp. The summary below and such discussion in the
Prospectus do not purport to address all federal income tax consequences that
may be applicable to particular categories of investors, some of which may be
subject to special rules. In addition, such summary and such discussion do
not address state, local or foreign tax issues with respect to the
acquisition, ownership or disposition of the Offered Certificates. The
authorities on which such summary and such discussion are based are subject
to change or differing interpretations, and any such change or interpretation
could apply retroactively. Such summary and such discussion reflect the
applicable provisions of the Code, as well as regulations (the "REMIC
Regulations") promulgated by the U.S. Department of the Treasury. Investors
should consult their own tax advisors in determining the federal, state,
local, foreign or any other tax consequences to them of the purchase,
ownership and disposition of Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Excess
Interest and certain assumption fees collected with respect to the Mortgage
Loans and the right to receive Yield Protection Payments, including the
collateral pledged to secure the payment of such obligation (such portion of
the Trust Fund, the "Trust REMICs"), as two separate REMICs (the "Upper-Tier
REMIC" and the "Lower-Tier REMIC," respectively) within the meaning of Code
Section 860D. The reserve accounts, the Lockbox Accounts and the Cash
Collateral Accounts will be treated as beneficially owned by the respective
borrowers for federal income tax purposes. The Lower-Tier REMIC will hold the
Mortgage Loans (exclusive of Excess Interest and certain assumption fees),
proceeds therefrom, the Collection Account, the Distribution Account and any
REO Property, and will issue (i) certain uncertificated classes of regular
interests (the "Lower-Tier Regular Interests") to the Upper-Tier REMIC and
(ii) the Class LR Certificates, which will represent the sole class of
residual interests in the Lower-Tier REMIC. The Upper-Tier REMIC will hold
the Lower-Tier Regular Interests and the Upper-Tier Distribution Account in
which distributions thereon will be deposited, and will issue the Class A-1,
Class A-2, Class A-3, Class A-X, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I and Class J Certificates (the "Regular
Certificates") as classes of regular interests and the Class R Certificates
as representing the sole class of residual interests in the Upper-Tier REMIC.
Qualification as a REMIC requires ongoing compliance with certain conditions.
Assuming (i) the making of appropriate elections, (ii) compliance with the
Pooling and Servicing Agreement and (iii) compliance with any changes in the
law, including any amendments to the Code or applicable temporary or final
regulations of the United States Department of the Treasury ("Treasury
Regulations") thereunder, in the opinion of Brown & Wood llp the Upper-Tier
REMIC and the Lower-Tier REMIC will each qualify as a separate REMIC.
References in this discussion to the "REMIC" will, unless the context
dictates otherwise, refer to each of the Upper-Tier REMIC and the Lower-Tier
REMIC. The Class V-1 Certificates will represent pro rata undivided
beneficial interests in the portion of the Trust Fund consisting of Excess
Interest, and such portion will be treated as a grantor trust for federal
income tax purposes.
The Offered Certificates (excluding the right to receive Yield Protection
Payments) will be treated as "loans . . . secured by an interest in real
property which is . . . residential real property" or "loans secured by an
interest in . . . health . . . institutions or facilities, including
structures designed or used primarily for residential purposes for . . .
persons under care" for domestic building and loan associations (but only to
the extent of the allocable portion of the Mortgage Loans secured by
multifamily properties or nursing homes and assisted living facilities,
respectively) and will be treated as "real estate assets" for real estate
investment trusts, to the extent described in the Prospectus. As of the
Cut-off Date, Multifamily Loans and Senior Housing Loans represent
approximately 10.44% and 0.44%, respectively, of the Mortgage Loans by unpaid
principal balance. The right to receive Yield Protection Payments will not
S-170
<PAGE>
be treated as a Real Estate Asset for purposes of Section 856(c)(4)(A) of the
Code and income from such payments will not be treated as income described in
Section 856(c)(3) of the Code and may not qualify as income described in
Section 856(c)(2).
The Offered Certificates (excluding the right to receive Yield Protection
Payments) generally will be treated as newly originated debt instruments for
federal income tax purposes. Beneficial owners of the Offered Certificates
will be required to report income on such regular interests in accordance
with the accrual method of accounting. Based on expected issue prices, it is
anticipated that the Class A-X Certificates will be issued with original
issue discount and no other Class of Offered Certificates will be issued with
original issue discount. See "Certain Federal Income Tax Consequences --
Taxation of the REMIC and its Holders" and "--Taxation of Regular Interests"
in the Prospectus.
The rights of the Class A-X Certificates and any other Class of Offered
Certificates to receive Yield Protection Payments will be treated as an asset
separate from the REMIC regular interest represented by each such Class. Each
Holder of Class A-X Certificates and any other Class of Offered Certificates
entitled to receive Yield Protection Payments must allocate such holder's
purchase price between the REMIC regular interest and the right to receive
the Yield Protection Payments on the basis of the relative fair market value
of each, and the Trust will account for such rights as discrete property
rights. The manner in which any portion of the purchase price allocated to
the right to receive Yield Protection Payments can be used to offset or
reduce income from the receipt of such payments is unclear, but in general a
Certificateholder should be able to reduce any income from the receipt of
such payments, or claim a loss equal to such allocated purchase price, no
later than the date on which the final such payment is received or the right
to receive such payments lapses. Although certain hedge instruments can be
integrated with debt instruments under the Treasury regulations applicable to
the calculation of original issue discount, such regulations expressly
exclude REMIC regular interests from their application. Because the Class A-X
Certificates and any other Class of Offered Certificates entitled to receive
Yield Protection Payments will not be treated solely as REMIC regular
interests during the period in which each such Classes also embody the right
to receive Yield Protection Payments, they may not be suitable for inclusion
in another REMIC. Investors should consult with their tax advisors as to the
correct manner to account for the right to receive the Yield Protection
Payments.
The manner in which income should be accrued on the Class A-X Certificates
is unclear. The Trustee, for purposes of calculating the income on the
Upper-Tier REMIC and reporting income to the Class A-X Certificateholders
intends to take the position that the Class A-X Certificates will be treated
as having been issued with OID for federal income tax purposes in an amount
equal to the excess of all expected payments of interest on such Certificates
(based on the Prepayment Assumption) over their issue price. Accruing income
in such a manner could result in the accrual of negative amounts for certain
periods. Such negative amounts cannot be deducted currently but may only be
offset against future accruals of income. Although unclear, a holder of a
Class A-X Certificate may be entitled to deduct a loss to the extent that its
remaining tax basis exceeds the maximum amount of future payments to which
such Certificateholder would be entitled if there were no further prepayments
on the Mortgage Loans. Investors in the Class A-X Certificates should consult
their tax advisors as to the manner in which income should be accrued on such
Certificates and the timing and character of any loss that could result from
such investment.
For purposes of accruing original issue discount, determining whether such
original issue discount is de minimis and amortizing any premium, the
Prepayment Assumption will be 0% CPR, with all ARD Loans prepaying on their
related Anticipated Repayment Dates. See "Prepayment and Yield
Considerations" herein. No representation is made as to the rate, if any, at
which the Mortgage Loans will prepay.
For a discussion of the tax consequences of the ownership of Offered
Certificates by any person who is not a citizen or resident of the United
States, a corporation or partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof
or is a foreign estate or trust, see "Certain Federal Income Tax Consequences
- -- Tax Treatment of Foreign Investors" in the Prospectus.
S-171
<PAGE>
ERISA CONSIDERATIONS
SENIOR CERTIFICATES
The purchase by or transfer to an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or a
governmental plan (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code (each, a
"Plan"), or a collective investment fund in which such Plans are invested, an
insurance company using the assets of separate accounts or general accounts
which include assets of Plans (or which are deemed pursuant to ERISA or any
Similar Law to include assets of Plans) or other Persons acting on behalf of
any such Plan or using the assets of any such Plan to acquire the Senior
Certificates is restricted. Accordingly, except as specifically referenced
herein, the following discussion does not purport to discuss the
considerations under ERISA, Section 4975 of the Code or Similar Law with
respect to the purchase, holding or disposition of the Senior Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a
Plan in the Senior Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by
the United States Department of Labor (the "Department") that may be
applicable to an investment by a Plan in the Senior Certificates. The
Department has granted to CS First Boston Corporation (the former name of
Credit Suisse First Boston Corporation) an administrative exemption
(Prohibited Transaction Exemption 89-90, 54 Fed. Reg. 42597 (October 17,
1989), referred to herein as the "Exemption," for certain mortgage-backed and
asset-backed certificates underwritten in whole or in part by the
Underwriter. The Exemption might be applicable to the initial purchase, the
holding, and the subsequent resale by a Plan of certain certificates, such as
the Senior Certificates, underwritten by the Underwriter, representing
interests in pass-through trusts that consist of certain receivables, loans
and other obligations, provided that the conditions and requirements of the
Exemption are satisfied. The loans described in the Exemption include
mortgage loans such as the Mortgage Loans.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition, holding and resale of the Senior Certificates are the
following:
(1) The acquisition of Senior Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable to
the Plan as they would be in an arm's-length transaction with an unrelated
party;
(2) The rights and interests evidenced by Senior Certificates acquired by
the Plan are not subordinate to the rights and interests evidenced by the
other Certificates of the Trust Fund;
(3) The Senior Certificates acquired by the Plan have received a rating at
the time of such acquisition that is one of the three highest generic rating
categories from any of Standard & Poor's Ratings Services, Moody's Investors
Service, Inc., Fitch Investors Service, Inc. (a predecessor of Fitch IBCA,
Inc.) or Duff & Phelps Credit Rating Co. ("DCR");
(4) The Trustee is not an affiliate of any other member of the Restricted
Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Senior Certificates represents not more
than reasonable compensation for underwriting the Certificates. The sum of
all payments made to and retained by the Depositor pursuant to the assignment
of the Mortgage Loans to the Trust Fund represents not more than the fair
market value of such Mortgage Loans. The sum of all payments made to and
retained by the Servicer and any other servicer represents not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
S-172
<PAGE>
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the type
that have been included in other investment pools;
(b) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or DCR for
at least one year prior to the Plan's acquisition of the Senior Certificates
pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior
to any Plan's acquisition of the Senior Certificates pursuant to the
Exemption.
If all of the conditions of the Exemption are met, whether or not a Plan's
assets would be deemed to include an ownership interest in the Mortgage
Loans, the acquisition, holding and resale of the Senior Certificates by
Plans would be exempt from the prohibited transaction provisions of ERISA and
the Code.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust, provided that, among other requirements, (a)
in the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each class of certificates in which
Plans have invested is 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); (b) such fiduciary (or its affiliate) is an obligor with
respect to five percent or less of the fair market value of the obligations
contained in the trust; (c) the Plan's investment in certificates of any
class does not exceed twenty-five percent of all of the certificates of that
class outstanding at the time of the acquisitions; and (d) immediately after
the acquisition no more than twenty-five percent of the assets of the Plan
with respect to which such person is a fiduciary are invested in certificates
representing an interest in one or more trusts containing assets sold or
served by the same entity.
The Exemption does not apply to the purchasing or holding of Senior
Certificates by Plans sponsored by the Depositor, the Underwriter, the
Trustee, the Servicer, any obligor with respect to Mortgage Loans included in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted Group").
The Underwriter believes that the conditions to the applicability of the
Exemption will generally be met with respect to the Senior Certificates,
other than possibly those conditions which are dependent on facts unknown to
the Underwriter or which it cannot control, such as those relating to the
circumstances of the Plan purchaser or the Plan fiduciary making the decision
to purchase any such Class of Certificates. However, before purchasing a
Senior Certificate, a fiduciary of a Plan should make its own determination
as to the availability of the exemptive relief provided by the Exemption or
the availability of any other prohibited transaction exemptions, and whether
the conditions of any such exemption will be applicable to the Senior
Certificates. A fiduciary of a Plan that is a governmental Plan should make
its own determination as to the need for and the availability of any
exemptive relief under any Similar Law.
Any fiduciary of a Plan considering whether to purchase a Senior
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus.
The sale of Senior Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that this investment is appropriate for
Plans generally or any particular Plan.
MEZZANINE CERTIFICATES
Under current law, the purchase and holding of Mezzanine Certificates by
or on behalf of any Plan may result in a "prohibited transaction" within the
meaning of ERISA and the Code or any similar Law.
S-173
<PAGE>
Consequently, no transfer of a Mezzanine Certificate shall be made unless the
prospective transferee (i) executes an investment representation letter
substantially in the form set forth as an exhibit to the Pooling and
Servicing Agreement stating that the prospective transferee is not (a) a Plan
or (b) a person acting on behalf of or using the assets of any such Plan
(including an entity whose underlying assets include Plan assets by reason of
investment in the entity by such Plan and the application of Department of
Labor Regulation Section 2510.3-101), other than an insurance company using
the assets of its general account under circumstances whereby the purchase
and holding of Mezzanine Certificates by such insurance company would be
exempt from the prohibited transaction provisions of ERISA and the Code under
Prohibited Transaction Class Exemption 95-60 or (ii) provides to the
Certificate Registrar an opinion of counsel in form and substance
satisfactory to the Certificate Registrar and the Depositor to the effect
that the acquisition and holding of such Certificate by such prospective
transferee will not result in the assets of the Trust Fund being deemed to be
"plan assets" and subject to the fiduciary responsibility provisions of
ERISA, the prohibited transaction provisions of the Code or the provisions of
any Similar Law, will not constitute or result in a "prohibited transaction"
within the meaning of ERISA, Section 4975 of the Code or any Similar Law and
will not subject the Trustee, the Certificate Registrar, the Servicer, the
Special Servicer, the Underwriter or the Depositor to any obligation or
liability (including obligations or liabilities under ERISA, Section 4975 of
the Code or any such Similar Law) in addition to those set forth in the
Pooling and Servicing Agreement. Such opinion of counsel shall not be an
expense of the Depositor, the Trustee, the Servicer, the Special Servicer,
the Trust Fund, the Underwriter or the Certificate Registrar. Each transferee
of any interest in a Mezzanine Certificate that is not a Definitive
Certificate shall be deemed to represent that it is not a person described in
clauses (a) or (b) above.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. No representation is made as to the proper characterization of the
Offered Certificates for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase the Offered Certificates under applicable legal
investment restrictions. These uncertainties may adversely affect the
liquidity of the Offered Certificates. Accordingly, all institutions whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what
extent the Offered Certificates constitute a legal investment or are subject
to investment, capital or other restrictions. See "Legal Investment" in the
Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and Credit Suisse First Boston Corporation
(the "Underwriter"), the Offered Certificates will be purchased from the
Depositor by the Underwriter upon issuance. Credit Suisse First Boston
Corporation is an affiliate of the Depositor. Proceeds to the Depositor from
the sale of the Offered Certificates will be approximately 109.68% of the
initial aggregate principal balance thereof as of the Cut-off Date, plus
accrued interest from the Cut-off Date, before deducting expenses payable by
the Depositor.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. The Underwriter may effect such
transactions by selling the Offered Certificates to or through dealers, and
such dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter. In connection with the
purchase and sale of the Offered Certificates, the Underwriter may be deemed
to have received compensation from the Depositor in the form of underwriting
discounts. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the Offered Certificates may be deemed to
be "underwriters" within the meaning of the Securities Act and any profit on
the resale of the Offered Certificates positioned by them may be deemed to be
underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities
S-174
<PAGE>
Act in connection with reoffers and sales by them of Offered Certificates.
Certificateholders should consulting with their legal advisors in this regard
prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriter that the
Underwriter currently intends to make a market in the Offered Certificates;
however, the Underwriter does not have any obligation to do so, any market
making may be discontinued at any time and there can be no assurance that an
active public market for the Offered Certificates will develop. See "Risk
Factors -- The Offered Certificates -- Limited Liquidity" herein.
The Depositor has agreed to indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the Underwriter and each
such controlling person with respect to, certain liabilities, including
certain civil liabilities under the Securities Act. The Mortgage Loan Seller
has agreed to indemnify the Depositor with respect to certain liabilities,
including certain civil liabilities under the Securities Act, relating to the
Mortgage Loans sold by it to the Depositor.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and for Credit
Suisse First Boston Corporation by Brown & Wood LLP, New York, New York.
RATING
It is a condition to the issuance of the Offered Certificates that they
receive the following credit ratings from Moody's Investors Service, Inc.
("Moody's"), Fitch IBCA, Inc. ("Fitch") and Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc. ("S&P" and, together
with Fitch and Moody's, the "Rating Agencies"):
<TABLE>
<CAPTION>
MOODY'S FITCH S&P
----------- --------- -------
<S> <C> <C> <C>
Class A-1..... Aaa AAA AAA
Class A-2..... Aaa AAA AAA
Class A-3..... Aaa AAA AAA
Class A-X..... Aaa AAA NR
Class B....... Aa2 AA NR
Class C....... A2 A NR
Class D....... Baa2 BBB- NR
Class E....... Baa3 NR NR
</TABLE>
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment
of principal by the Rated Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of the Mortgage Loans,
structural and legal aspects associated with the Offered Certificates, and
the extent to which the payment stream in the Trust Fund is adequate to make
payments required under the Offered Certificates. Ratings on mortgage
pass-through certificates do not, however, represent an assessment of the
likelihood, timing or frequency of principal prepayments (both voluntary and
involuntary) by mortgagors, or the degree to
which such prepayments might differ from those originally anticipated. The
security ratings do not address the possibility that Certificateholders might
suffer a lower than anticipated yield. In addition, ratings on mortgage
pass-through certificates do not address the likelihood of receipt of
Prepayment Premiums, Yield Maintenance Charges, Yield Protection Payments or
Excess Interest or the timing or frequency of the receipt thereof. In
general, the ratings thus address credit risk and not prepayment risk. Also,
a security rating does not represent any assessment of the yield to maturity
that investors may experience or the possibility that the holders of the
Class A-X Certificates might not fully recover their initial investment in
the event of delinquencies or rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary prepayments). As described herein,
the amounts payable with respect to the Class A-X Certificates consist only
of interest. If the entire pool were to prepay in the initial month, with the
result that the Class A-X Certificateholders receive only a single month's
interest and thus suffer a
S-175
<PAGE>
nearly complete loss of their investment, all amounts "due" to such holders
will nevertheless have been paid, and such result is consistent with the
rating received on the Class A-X Certificates. Accordingly, the ratings of
the Class A-X Certificates should be evaluated independently from similar
ratings on other types of securities. With respect to Credit Lease Loans, a
downgrade in the credit rating of the related Tenants, Guarantors and/or of
the issuer of the Lease Enhancement Policy may have a related adverse effect
on the rating of the Offered Certificates.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so,
what such rating would be. A rating assigned to the Offered Certificates by a
rating agency that has not been requested by the Depositor to do so may be
lower than the rating assigned by the Rating Agencies pursuant to the
Depositor's request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
S-176
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
1995 NOI .................................... S-90
1996 NOI .................................... S-90
1997 NOI..................................... S-90
30/360....................................... S-77, S-91
57th Street Borrower......................... S-65
57th Street Building Loan.................... S-65
57th Street Manager.......................... S-65
57th Street Mezzanine Borrower .............. S-66
57th Street Mezzanine Loan................... S-66
57th Street Property ........................ S-65
78 Corporate Center Borrower................. S-76
78 Corporate Center Loan..................... S-76
% of Total Square Feet ...................... S-92
A
ACMs ........................................ S-46
Act/360...................................... S-77, S-91
Actual Ongoing Capital Item Deposits ........ S-92
ADA ......................................... S-49
Additional Collateral Loan................... S-18
Additional Rights ........................... S-85
Advances .................................... S-148
AIG ......................................... S-36
AISLIC....................................... S-36
Allocated Loan Amount ....................... S-90
Anchor Tenant ............................... S-92
Anchored Properties ......................... S-31
Annual Debt Service ......................... S-91
Anticipated Remaining Term .................. S-91
Anticipated Repayment Date .................. S-16, S-91
Appraisal Reduction ......................... S-149
Appraisal Reduction Amount .................. S-149
Appraisal Reduction Event ................... S-148
ARD Loans ................................... S-16
Asset Status Report ......................... S-160
Assumed Final Distribution Date ............. S-2, S-122
Assumed Maturity Date ....................... S-10, S-122
Assumed Scheduled Payment ................... S-147
Audit Program................................ S-154
Authenticating Agent ........................ S-163
Available Distribution Amount ............... S-20, S-113
B
Balloon Loans ............................... S-16, S-78
Balloon Payment ............................. S-16, S-78
BAM.......................................... S-76
Base Interest Fraction ...................... S-121
Beverly Borrower............................. S-67
Beverly Connection Loan...................... S-67
Beverly Mezzanine Loan....................... S-68
Beverly Mortgage............................. S-67
Beverly Property............................. S-67
Bond-Type Leases ............................ S-85
Bondable Leases ............................. S-85
Boulder Cascade Property..................... S-73
Breach ...................................... S-144
C
Capital Items................................ S-59
Cash Collateral Accounts .................... S-150
Casualty or Condemnation Rights ............. S-85
Cede ........................................ S-10
CERCLA ...................................... S-46
Certificate Account ......................... S-113, S-150
Certificate Balance ......................... S-109
Certificate Deferred Interest ............... S-123
Certificate Owner ........................... S-110
Certificate Registrar ....................... S-163
Certificateholder ........................... S-111
Certificates ................................ Cover, S-8, S-109
Chubb ....................................... S-36
Class ....................................... S-109
Class A-1 Pass-Through Rate ................. S-2, S-116
Class A-2 Pass-Through Rate ................. S-2, S-116
Class A-3 Pass-Through Rate.................. S-2, S-116
Class A-X Pass-Through Rate ................. S-116
Class B Pass-Through Rate ................... S-2, S-116
Class C Pass-Through Rate.................... S-2, S-116
Class D Pass-Through Rate ................... S-2, S-116
Class E Pass-Through Rate ................... S-2, S-116
Class F Pass-Through Rate ................... S-116
Class G Pass-Through Rate ................... S-116
Class H Pass-Through Rate ................... S-116
Class I Pass-Through Rate ................... S-116
Class J Pass-Through Rate ................... S-116
CMBS......................................... S-166
Code ........................................ S-26
Collateral Substitution Deposit ............. S-82
Collateral Support Deficit .................. S-123
Commission .................................. S-11
Comparative Financial Status Report ........ S-168
Component Rate .............................. S-116
Constant Prepayment Rate..................... S-126
Controlling Class ........................... S-8, S-160
Controlling Class Certificateholder ........ S-160
Cooperative Loan ............................ S-55
Cooperative Property ........................ S-55
Corrected Mortgage Loan ..................... S-160
CP-MZ........................................ S-67
CPR.......................................... S-126
Credit Lease Assignments .................... S-13
Credit Lease Default ........................ S-85
Credit Lease Loans .......................... S-13
Credit Lease Properties ..................... S-13
Credit Leases ............................... S-13
Credit Support Crossover Date ............... S-117
Crossed Loans ............................... S-14, S-84
Cut-off Date Aggregate LTV................... S-41
Cut-off Date Allocated Loan Amount .......... S-91
Cut-off Date Principal Balance .............. S-93
S-177
<PAGE>
Cut-off Date Principal Balance/Unit ........ S-91
Cut-off Date Principal Loan Balance ........ S-91
CVS Sub-Servicer ............................ S-147
D
DCR.......................................... S-172
Debt Service Coverage Ratio.................. S-91
Defeasance Lockout Period ................... S-17, S-82
Defeasance Option ........................... S-17, S-82
Defect ...................................... S-137
Definitive Certificates...................... S-112
Delinquent Loan Status Report ............... S-168
Department .................................. S-172
Depositor ................................... Cover
Direct Participants ......................... S-110
Distribution Accounts ....................... S-113
Distribution Date ........................... S-2, S-112
Distribution Date Statement ................. S-166
Double Net Leases ........................... S-85
DSCR ........................................ S-91
DTC ......................................... Cover, S-3, S-10
Due Date..................................... S-77
Due-on-Encumbrance........................... S-83
Due-on-Sale.................................. S-83
Due Period .................................. S-113
E
ECC Borrower................................. S-72
ECC Loans ................................... S-72
ECC Properties .............................. S-73
Eligible Bank ............................... S-151
Embassy Suites Hotel......................... S-72
Embassy Suites Borrower...................... S-72
Embassy Suites Loan.......................... S-72
Embassy Suites Manager....................... S-72
Enhancement Insurers ........................ S-36
EPA ......................................... S-46
ERISA ....................................... S-26, S-172
Escrow Account .............................. S-59
Events of Default ........................... S-155
Excess Cash Flow............................. S-78
Excess Interest ............................. S-16, S-77
Excess Interest Distribution Account ....... S-151
Excess Rate ................................. S-117
Exemption ................................... S-26, S-172
F
Final Recovery Determination ................ S-167
Fitch........................................ Cover, S-27, S-175
Form 8-K .................................... S-11, S-109
G
Gift Center Borrower......................... S-69
Gift Center Loan............................. S-69
Gift Center Property......................... S-69
Graoch Associates Borrower................... S-68
Graoch Associates Loans...................... S-68
Graoch Associates Properties................. S-68
Graoch Associates Property................... S-68
Guarantor ................................... S-35
H
Hard Lockbox ................................ S-15, S-82
Historical Loan Modification Report ........ S-168
Historical Loss Estimate Report ............. S-168
Hospitality Loan ............................ S-55
Hospitality Property ........................ S-55
I
IBM.......................................... S-62
Indirect Participants ....................... S-110
Industrial Loan ............................. S-55
Industrial Property ......................... S-55
Initial Pool Balance......................... S-55
Interest Accrual Period ..................... S-117
Interest Calc. .............................. S-91
Interest Reserve Account .................... S-151
Interest Shortfall Amount ................... S-117
IRS ......................................... S-75, S-158
J
Johnson City/Stone Mountain Borrower ........ S-69
Johnson City/Stone Mountain Loan............. S-69
Johnson City/Stone Mountain Properties ...... S-69
Johnson City Property........................ S-69
L
Lease Enhancement Policies .................. S-14
Lease Expiration Date ....................... S-93
Lease Extension Fund......................... S-75
Liquidation Fee ............................. S-164
Liquidation Fee Rate ........................ S-165
Liquidation Proceeds ........................ S-165
LNR.......................................... S-165
Loan to Value Ratio ......................... S-93
Lockout Period .............................. S-16, S-78
Lower-Tier Distribution Account ............. S-113, S-151
Lower-Tier Regular Interests ................ S-170
Lower-Tier REMIC ............................ S-25, S-170
LTV.......................................... S-93
M
Maintenance Rights .......................... S-85
Market-Post Tower Borrower................... S-75
Market-Post Tower Loan....................... S-75
Market-Post Tower Property................... S-75
Maturity Date/Anticipated Repayment Date LTV S-92
Mesa Regal Property.......................... S-73
Mezzanine Certificates ...................... Cover, S-109
Mezzanine Intercreditor Agreement............ S-42
Mezzanine Lender............................. S-42
Mezzanine Loan............................... S-42
Mezzanine Loans ............................. S-41
MGM Exercise Date............................ S-64
MGM Exit Fee................................. S-64
MGM Intercreditor Agreement.................. S-63
MGM LLC Agreement............................ S-63
MGM Mezzanine Borrower....................... S-63
S-178
<PAGE>
MGM Mezzanine Lender......................... S-63
MGM Mezzanine Loan........................... S-63
MGM Plaza Borrower........................... S-60
MGM Plaza Loan............................... S-60
MGM Plaza Management Agreement............... S-62
MGM Plaza Manager............................ S-62
MGM Plaza Mortgage........................... S-60
MGM Plaza Property........................... S-60
MGM Preferred Equity Interest................ S-63
MGM Special Member........................... S-63
MGM Subordinate Loan......................... S-63
Mobile Home/Recreational Vehicle Loan ....... S-55
Mobile Home/Recreational Vehicle Property ... S-55
Modified Lockbox............................. S-15, S-82
Monthly Interest Distributable Amount ...... S-20, S-117
Monthly Payment ............................. S-77, S-91
Monthly Payments ............................ S-15
Monthly Rental Payments ..................... S-13
Moody's...................................... Cover, S-27, S-175
Mortgage .................................... S-55
Mortgage Deferred Interest................... S-124
Mortgage File ............................... S-137
Mortgage Interest Accrual Period............. S-117
Mortgage Loan ............................... S-11, S-120
Mortgage Loan Assumptions ................... S-127
Mortgage Loan Purchase Agreement ............ S-56
Mortgage Loan Seller ........................ Cover, S-9
Mortgage Loans .............................. Cover, S-11, S-120
Mortgage Note ............................... S-55
Mortgage Pass-Through Rate .................. S-117
Mortgage Rate ............................... S-15, S-16, S-77
Mortgaged Properties ........................ S-13
Mortgages ................................... S-13
Mortgagor ................................... S-36
Multifamily Loan ............................ S-55
Multifamily Property ........................ S-55
N
Net Cash Flow ............................... S-89, S-90
Net Lease.................................... S-93
Net Mortgage Pass-Through Rate............... S-118
Net Mortgage Rate ........................... S-118
New Store.................................... S-36
New Store Loan............................... S-36
Nonrecoverable Advance ...................... S-148
Norwest Bank................................. S-162
Note ........................................ S-55
Notional Balance ............................ S-19
O
Occupancy ................................... S-92
Occupancy Period ............................ S-92
Offered Certificates ........................ Cover, S-109
Office Loan ................................. S-55
Office Property ............................. S-55
Open ........................................ S-79
Optimal Interest Distribution Amount ....... S-20, S-118
Original Amortization Term .................. S-92
Original Principal Loan Balance ............. S-91
Other Loan................................... S-53
Other Property............................... S-53
Outside Completion Date...................... S-36
P
P&I Advance ................................. S-24, S-147
Paramount Hotel.............................. S-66
Paramount Hotel Loan......................... S-66
Paramount Hotel Borrower .................... S-66
Paramount Manager ........................... S-66
Paramount Mezzanine Loan..................... S-66
Paramount Mortgage .......................... S-66
Participants ................................ S-110
Pass-Through Rate ........................... S-119
Penalty Charges ............................. S-164
Percentage Interest ......................... S-110
Permitted Investments ....................... S-151
Plan ........................................ S-26, S-172
Pool Loans .................................. S-14, S-84
Pooling and Servicing Agreement ............. Cover, S-8,
S-19, S-137
Premium ..................................... S-79
Prepayment Assumptions....................... S-127
Prepayment Interest Excess................... S-119
Prepayment Interest Shortfall................ S-119
Prepayment Premium Period ................... S-17, S-78
Prepayment Premiums ......................... S-17, S-78
Primary Servicing Fee........................ S-164
Primary Servicing Fee Rate................... S-164
Primary Term ................................ S-85
Prime Rate .................................. S-148
Principal Distribution Amount ............... S-119
Private Certificates ........................ Cover, S-109
Purchase Price............................... S-145
R
Ramada Suites Borrower....................... S-74
Ramada Suites Expansion...................... S-74
Ramada Suites Hotel.......................... S-74
Ramada Suites Loan........................... S-74
Ramada Suites Manager........................ S-74
Rated Final Distribution Date ............... S-122
Rating Agencies ............................. Cover, S-27, S-175
RCRA ........................................ S-46
Realmark Borrower............................ S-70
Realmark Loans............................... S-70
Realmark Mortgage............................ S-70
Realmark Properties.......................... S-71
Realmark Property............................ S-70
Record Date ................................. S-112
Reduction Rate............................... S-149
S-179
<PAGE>
Regular Certificates ........................ Cover, S-25,
S-109, S-170
Reimbursement Rate .......................... S-148
REIT ........................................ S-63
Related Borrower Loans ...................... S-14, S-37, S-38
Related Proceeds ............................ S-148
Release Date ................................ S-82
Remaining Amortization Term ................. S-93
Remaining Lockout ........................... S-92
Remaining Lockout and YM..................... S-92
Remaining Principal Distributable Amount .... S-119
REMIC ....................................... S-3, S-25, S-170
REMIC Regulations ........................... S-170
Rents from Real Property..................... S-159
REO Loan .................................... S-120
REO Property................................. S-109, S-160
REO Status Report ........................... S-168
Required Prepayment.......................... S-18, S-89
Residual Certificates ....................... Cover, S-25, S-109
Restricted Group ............................ S-173
Retail Loan.................................. S-55
Retail Property ............................. S-55
Rev ......................................... S-90
Revised Rate ................................ S-77
Rules ....................................... S-111
S
S&P.......................................... Cover, S-27, S-175
Seasoning ................................... S-92
Secured Creditor Exclusion................... S-46
Self-Storage Facility Loan .................. S-55
Self-Storage Facility Property .............. S-55
Seller-Servicer ............................. S-146
Seller-Servicer Agreement.................... S-146
Senior Certificates ......................... Cover, S-109
Senior Housing Loan ......................... S-55
Senior Housing Property ..................... S-55
Senior Lender................................ S-42
Servicer .................................... Cover, S-8, S-163
Servicer Remittance Date .................... S-147
Servicer Watch List ......................... S-168
Servicing Advances .......................... S-148
Servicing Fee ............................... S-163
Servicing Fee Rate .......................... S-163
Servicing Standard .......................... S-146
Sherwood Forest Borrower..................... S-73
Sherwood Forest Junior Loan.................. S-73
Sherwood Forest Property..................... S-73
Significant Loan Concentration............... S-60
Similar Law ................................. S-172
single-purpose entity ....................... S-142
Special Servicer ............................ Cover, S-8
Special Servicing Fee ....................... S-164
Special Servicing Fee Rate .................. S-164
Specially Serviced Mortgage Loans ........... S-160
Springing Lockbox ........................... S-15, S-83
Stated Maturity Date ........................ S-91
Stated Principal Balance .................... S-120
Stone Mountain Loan.......................... S-69
Stone Mountain Property...................... S-69
Subordinate Certificates .................... S-2
T
Tenant ...................................... S-13, S-92
Tenant 1 .................................... S-92
Tenant 2 .................................... S-92
Tenant 3 .................................... S-92
Tenants ..................................... S-13
Treasury Regulations ........................ S-170
Triple Net Leases ........................... S-85
Trust Fund .................................. Cover
Trust REMICs ................................ S-170
Trustee ..................................... Cover, S-9
Trustee Fee ................................. S-163
Trustee Fee Rate ............................ S-163
U
Uncovered Prepayment Interest Shortfall ..... S-165
Uncovered Prepayment Interest Shortfall
Amount...................................... S-119
Underwriter ................................. Cover, S-174
Underwritten NOI............................. S-90
Unit of Measure ............................. S-92
Units ....................................... S-92
Unpaid Interest Shortfall Amount ............ S-120
Upper-Tier Distribution Account ............. S-113, S-151
Upper-Tier REMIC ............................ S-25, S-170
USAP......................................... S-154
U/W NOI ..................................... S-90
U/W Occupancy ............................... S-92
U/W Rev ..................................... S-90
V
Value ....................................... S-92
Voting Rights ............................... S-157
W
Weighted Average DSCR ....................... S-93
Weighted Average LTV ........................ S-93
Weighted Average Net Mortgage Rate........... S-120
Withheld Amounts ............................ S-151
Workout Fee ................................. S-164
Workout Fee Rate ............................ S-164
Y
Year Built/Renovated ........................ S-92
Yield Maintenance Charge .................... S-79
Yield Maintenance Period .................... S-17, S-78
Yield Protection Payments.................... S-18, S-50
Yield Rate .................................. S-79
YM .......................................... S-79
Z
Zoning Laws ................................. S-49
</TABLE>
S-180
<PAGE>
ANNEX A
LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
Loan Asset CSFB
# # Control # Property Name Address
- ---- ----- --------- ------------- -------
<S> <C> <C> <C> <C>
1 118 MGM Plaza 2400 Colorado Avenue and 2400-2500 Broadway
2 3 135 East 57th Street* 135 East 57th Street
3 128 Paramount Hotel 235 West 46th Street
4 25 Beverly Connection 8480-90 Beverly Boulevard
5 79 The Gift Center & Jewelry Mart 888 Brannan Street
6 73 Embassy Suites Hotel - Washington, DC 1250 22nd Street, NW
7 138 Ramada Suites Hotel at Lincoln Harbor* 500 Harbor Boulevard
8 115 Market-Post Tower 55 South Market Street
9 12 78 Corporate Center 180 Washington Valley Road
10 7 240 West 40th Street 240 West 40th Street
11 172 Stone Mountain Square Shopping Center 5370 U.S. Highway 78
12 34 Buena Vista Plaza 2411 West Olive Avenue
13 104 Kmart Store #4983 - San Jose 777 Story Road
14 117 Mesa Regal RV Resort 4700 East Main Street
15 94 Johnson City Crossing Shopping Center Southeast Side of State of Franklin Road
16 99 Kmart Store #4990 - Canton, MI 41660 Ford Road
17 2 131 State Street 131 State Street
18 121 Dara Gardens Cooperative 150-10/20/30/40 71st Avenue & 150-11/15/25/29
72nd Road
19 89 Holiday Inn/One RT 46 - Summary Various
19 1 089A Holiday Inn Totowa One Route 46 West
19 2 089B One Route 46 West Retail One Route 46 West
20 97 Kendig Square Shopping Center* 2600 North Willow Street Pike
21 5 1515 Industrial Way 1515 Industrial Way
22 103 Kmart Store #4991 - Maple Heights, OH 5500 Warrenville Center Road
23 16 Arapahoe East 9600 E. Arapahoe Road
24 41 Cobb Theaters - Ocala, FL SW 19th & SW 27th Avenue
25 53 Court of Flags Apartments 22804 91st Way South
26 113 Malibu Creek Plaza 23357-23361 Pacific Coast Hwy. & 3822-3896
Cross Creek Road
27 23 Bannockburn Executive Plaza 2275 Half Day Road
28 86 Holiday Inn - Harrisburg West 5401 Carlisle Pike
29 167 Sherwood Forest 5300 W Irlo Bronson Memorial Highway
30 135 Polo Club Apartments 3806 78th Ave. Ct. W
31 126 NorthTech Business Park 20 & 22 Firstfield Rd., 1300 Quince Orchard Blvd.
32 175 Fox Creek-Summary Various
32 1 175A Fox Creek Apts. 4303 County Road
32 2 175B Spanish Trace/Spanish Trails 1400 East 35th Street
32 3 175C Fox Creek Camden 1485 Country Cub Rd.
32 4 175D Fox Creek Magnolia 2121 Lacari Rd.
33 66 Delevan/Westdayl - Summary Various
33 1 066A Delavan Plaza Wright Street
33 2 066B Westdayl Plaza SEC of Rte 136
34 109 Logan Industrial Park 440 William McClellan Highway
35 183 Waterfront Centre 800 9th Street, S.W.
36 78 Garden Ridge 2512 South Stemmons Freeway
37 32 Brighton Beach Shopping Center 2851-2885 West 6th Street a/k/a 532 Neptune Avenue
38 51 Commerce Plaza III NWC Blackwood-Clemeton and Millbridge Roads
39 88 Timonium Holiday Inn Select* 2004 Greenspring Drive
40 69 Eagles Landing 2201 104th Street South
41 110 Lorraine Apartments 245 West Loraine Street
42 024A Best Western Grant Park Hotel 1100 Michigan Avenue
43 024B The Evanston Holiday Inn & Conference Center 1501 Sherman Avenue
44 75 Fox Jewelry Plaza and Los Angeles Theatre 610 South Hill / 615 Broadway
45 184 Wellington Centre 18650 W. Corporate Drive
46 28 Boulder Cascade Mobile Home Park 1601 S. Sandhill Road
47 100 Kmart Store #3718 - Dallas, Tx - Skillman 6000 Skillman Street
48 122 Residence Inn by Marriott - New Haven, CT* 3 Long Wharf Drive
49 102 Kmart Store #3863 - Houston, Tx - Cypress Point 310 FM 1960 West
50 101 Kmart Store #3809 - Houston, Tx - Willowbrook 17717 State Highway 249
51 112 Los Gatos Lodge 50 Los Gatos Saratoga Road
52 174 Tarzana Medical Office Building* 18370 Burbank Blvd
53 108 Lenox Plaza Shopping Center 1750 Route 46 W. - Route 46 & McBride Avenue
54 176 Kratsa Hotels - Summary* Various
54 1 176A Kratsa Hotels - Comfort Inn 10 Landings Drive
54 2 176B Kratsa Hotels - Days Inn 4 Beta Road
54 3 176C Kratsa Hotels - Super 8 8 Landings Drive
55 38 The Sedona Apartments 3324 Castle Heights Avenue
56 8 Kent Park - Executive House - Summary Various
56 1 008A Kent Park - Executive House 35, 37 and 39 Danbury Road
56 2 008B The Kent Building - 43 Danbury Road 43 Danbury Road
56 3 008C The Kent Building - 57 Danbury Road 57 Danbury Road
57 123 Newbrite Shopping Center 60 East Main Street
58 87 Holiday Inn - Huntsville, AL 5903 University Drive
59 68 Donnybrook/Orangeburg Summary Various
59 1 068A Donnybrook Shopping Center 1461 Weaver Street
59 2 068B Orangeburg Shopping Center Dutch Hill Road and Orangeburg Road
60 182 Washington Centre 415 Egg Harbor Road
61 67 Dick's Clothing & Sporting Goods Store 6221 Columbia Crossing Circle
62 81 Hampshire Ambassador Hotel* 132 West 45th Street
63 173 Stonehurst/Zenith-Summary Various
63 1 173A Stonehurst-Baltek Manufacturing Facility/Zenith 10 Fairway Court and 140 La Grand Ave.
Laboratories
63 2 173B Zenith Laboratories 140 LeGrand Ave.
64 077A Furr's - Mesa (946) 6910 North Mesa Drive
65 031A Brandywine - Towne North Plaza 8371 Creedmoor Road
66 192 Saddleback Plaza 3501 - 3533 East Chapman Avenue
67 178 Union Camp 9797 Sweet Valley Drive
68 156 RM - Research Triangle 4900 Prospectus Drive
69 133 Plaza Arcade 27 West 47th Street
70 18 Autumn Run Apartments One Trafalgar Square
71 72 El Paseo North 73-080 & 73-100 El Paseo
72 9 443 Third Avenue* 443-447 Third Avenue (A.K.A. 206 East 31st Street)
73 119 Motel 6 - Summary* Various
73 1 119A Motel 6 - Shepherdsville, KY 144 Paroquet Springs Drive
73 2 119B Motel 6 - Georgetown, KY 401 Delphlain Road
73 3 119C Motel 6 - Corapolis, PA 1170 Thorn Run Road
74 39 Amazon.com Building* Centerpoint Business Complex
75 169 Southern Slope Apartments 4334 E. 66th Street
76 165 Select Inn - Summary Various
76 1 165A Select Inn of Janesville 3520 Milton Avenue
76 2 165B Select Inn of Madison 4845 Hayes Road
76 3 165C Select Inn of Waukesha 2510 Plaza Court
76 4 165D Econo-Lodge of Madison 4726 East Washington Avenue
77 36 RM - Camelot East Apartments 1239 West Lynne Way
78 30 Bradbury Apartments 2222 Huntington Drive
79 180 Victoria's Secret/Limited Express Summary Various
79 1 180A Victoria's Secret/The Limited Express 1721-1723 Chestnut Street
79 2 180B The Limited Express 1730-1732 Chestnut Street
80 83 Heartland Place* 212 South Central Avenue
81 139 Residence Inn by Marriott - Fishers, IN 9765 Cross Point Boulevard
82 92 Inland Business Center 9004 Archibald Ave.
83 131 Parkway Plaza Office Building 23945 Calabasas Road
84 21 BALLY'S - Miami, Florida 3455 Northeast 207th Street
85 171 RM - St. Rita's Office Building 2350 North Forest Road
86 20 BALLY'S - Davie, Florida 2701 South University Drive
87 91 Howard Johnson Hotel 16500 Northwest Second Avenue
88 22 BALLY'S - Virginia 12255 Hornsbury Lane
89 76 Freehold Gardens Hotel 50 Gibson Place
90 158 RM - The Fountains Apartments 6615 Fountains Boulevard
91 077H Furr's - Eubank (875) 5850 Eubank Boulevard, NE
92 27 Boott Mills South and Storage 30 French Street/102-1 John Street
93 077G Furr's - Louisiana (876)* 4016 Louisiana Boulevard NE
94 136 Quakerbridge Shoppes Shopping Center 3800 Quakerbridge Road
95 74 Emerald Pointe Apartments 1405 Clearbrook Dr. S.E.
96 61 CVS - Natick, MA 137 Central Street
97 125 Northgate Plaza 1401-15 North Belt Highway
98 129 Paramount Best Western 27 Tanzman Road
99 111 Los Angeles Fine Arts & Wine Storage Company 2290 S. Centinela Avenue
100 077C Furr's - Geo. Dieter (938) 1590 George Dieter Drive
101 84 Heritage Paradise 8777 Skyway
102 077D Furr's - Viscount (937) 9480 Viscount Boulevard
103 40 Citrus Park Apartments 320 South Citrus St
104 161 RM - Williamsburg North 3838 Williamsburg Way
105 170 Spartan Business Center 1249-1269, 1271, 1275, 1279 & 1285 Alma Court
106 077B Furr's Americas (944) 115 South Americas Avenue
107 031C Brandywine - Alexander Plaza II 1203 Murfreesboro Road
108 80 Gold River Racquet Club 2201 Gold Rush Drive
109 1 1278-1284 First Avenue 1278-1284 First Avenue
110 26 Bonita Center 860 East Carson Street
111 93 Interlaken Inn 74 Interlaken Road
112 107 Le Reve Hotel 8822 Cynthia Street
113 160 RM - Wayne Estates 6851 Wayne Estates Boulevard
114 140 Rite Aid - 86th, New York, NY 225 East 86th Street
115 71 Eckerd's Drug Store - Plano, TX 2450 Jupiter Boulevard
116 189 Windsor Gardens 220 East 24th Street
117 031B Brandywine - Clear Point Plaza 2525 U.S. Highway 90
118 82 Havana Park Center 10600-10782 East Iliff Avenue
119 031E Brandywine - Windward Village 6291 Windward Boulevard
120 116 Maumee Marketplace 1504-1552 South Reynolds Drive
121 47 Colton - 2302 Martin 2302 Martin
122 58 CVS Pharmacy - Greenville, SC Marue St. & Henrydale Ave.
123 155 RM - Players Club 26675 Players Circle
124 105 Lafayette Business Park 1900-1940 Lafayette Street
125 50 Comfort Inn - Garland 3536 West Kingsley Drive
126 10 7-Eleven - Anaheim, CA 611 West Katella Avenue
127 202 CVS Pharmacy - Hyannis, MA North Street & High School Road Ext
128 159 RM - The Villa Apartments 55 Villa Road
129 157 RM - Stonegate Townhomes 6701 Dickens Ferry Road
130 114 Marina Lakes Plaza* 21st Street and 2021 North Amidon
131 13 8 Bow Street 8 Bow Street
132 148 Rite Aid - Kingston, NY 345-361 Flatbush Avenue
133 191 CVS Pharmacy - Culpeper, Va West Street/South Main Street
134 45 Colton - 18952 MacArthur Blvd. 18952 MacArthur Blvd.
135 206 Hook-SupeRx, Inc. - Knoxville Street, Peoria, IL Knoxville Street and Lindbergh
136 44 Colton - 18872 MacArthur Blvd. 18872 MacArthur Blvd.
137 57 CVS - Garfield, NJ Midland & Van Winkle
138 17 Arbor Place Apartments 739 Heritage Avenue
139 152 RM - Inducon Columbia* 101 and 121 Trade Zone Drive
140 186 Westpark Shopping Center North side of Baltimore National Pike
141 59 CVS Pharmacy - Lilburn, Ga Beaver Ruin Road and Burns Road
142 207 Hook-SupeRx, Inc - Prospect Road, Peoria, IL Prospect Road and Kelly Street
143 177 Tustin Plaza 13821-13891 Newport Avenue
144 077E Furr's - Montana (934) 3518 Montana Avenue
145 194 CVS Pharmacy - Kernersville, NC 817 South Main Street
146 49 Comfort Inn Hotel 2115 Aerotech Drive
147 70 Eckerd's Drug Store - Acworth Mars Hill Road
148 205 Hook-SupeRx, Inc - Big Hollow Road, Peoria, IL Big Hollow Road and U.S. 50
149 204 Revco Discount Drug Center - Elkin, NC North Bridge Street & Oakland Street
150 154 RM - O'Hara Apartments 200 Mitchell Road
151 141 Rite Aid - Augusta, ME 83 Hospital Street
152 153 RM - Jackson Park 1206 East Hillcrest Drive
153 077F Furr's - Ruidoso (905) 205 Highway 70 West
154 96 Kendall Professional Building 9150 SW 87th Avenue
155 62 CVS Pharmacy - North Conway, NH Route 302/Route 16
156 60 CVS Pharmacy - Monroe, NC Highway 74
157 163 Seaman's Furniture 32-27 Steinway Street
158 65 Revco Discount Drug Center - 1795 Columbus Avenue
Washington Court House, OH
159 168 South Towne Office Park 6000-6400 Gisholt and 2000 Engel Drive
160 54 CVS Pharmacy - Anderson, SC Highway 81
161 56 CVS Pharmacy - Cumming, Ga Highway 20 & Haw Creek Circle
162 64 CVS Pharmacy - Philadelphia, PA 6344 Stenton Avenue
163 146 Rite Aid - Jonesboro, Battle Creek NWC Battle Creek Rd. at 7267 Tara Blvd.
164 55 CVS Pharmacy - Burnsville, NC U.S. Highway 19 East
165 15 Airport Plaza 20 Passaic Avenue
166 143 Rite Aid - Gastonia, NC 1525 S. York Road
167 43 Colton Plaza 2171 Campus Drive
168 196 CVS Pharmacy - Athens, WV 101 South State Street
169 63 CVS Pharmacy - Oxford, Ma 302 Main Street
170 162 Saufley Square Shopping Center 4500 Saufley Field Road
171 147 Rite Aid - Jonesboro, Flint, GA Flint River Road
172 46 Colton - 2222 Martin Street 2222 Martin Street
173 6 2192 Martin 2192 Martin
174 164 A-Secured Self and Vehicle Storage Facility 550 North Power Road
175 37 Casa Del Lago Apartments 132 Oyster Creek Drive
176 132 Peachtree Apartments 58-128 Peachtree Memorial Drive
177 151 RM - Beaver Creek 500 Center Grange Road
178 145 Rite Aid - Hinesville Route 196
179 031D Brandywine - Kash N'Karry, Pasadena 6851 Gulfport Boulevard
180 124 North Ranch Center 6425 East Bell Road
181 142 Rite Aid - Claxton, GA N/W/C East Main Street & Duval Street
182 35 Caldonian/Transcript Various
182 1 035A The Caledonian 185-191 High Street
182 2 035B The Transcript Building 164-180 High Street
183 90 Hollywood Video 5921 University Avenue
184 14 AAA-Discount Storage 6747 South Sixth Street
185 48 Colton - Chanteclair Restaurant 18912 MacArthur Blvd
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original Cut-off Date Cut-off Date
Principal Principal Loan Principal
City State Zip Property Type Loan Balance Balance Balance/Unit
---- ----- --- ------------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Santa Monica CA 90404 Office 146,000,000 145,894,648 135
New York NY 10010 Office 75,000,000 75,000,000 182
New York NY 10036 Hotel-Full Svc 74,000,000 73,867,407 125,199
Los Angeles CA 90048 Retail-Anchored 63,000,000 63,000,000 248
San Francisco CA 94103 Retail-Unanchored 43,000,000 42,969,590 138
Washington DC 20037 Hotel-Full Svc 37,100,000 37,100,000 116,667
Weehawken NJ 7087 Hotel-Full Svc 33,500,000 33,462,179 137,140
San Jose CA 95113 Office 32,000,000 31,935,966 110
Bedminster Township NJ 7921 Office 32,000,000 31,834,631 180
New York NY 10018 Office 25,000,000 25,000,000 159
Stone Mountain GA 30087 Retail-Anchored 24,000,000 23,981,901 71
Burbank CA 91506 Office 21,400,000 21,348,483 185
San Jose CA 95013 Net Lease 20,046,310 20,026,222 116
Mesa AZ 85205 Mobile Home Park 18,500,000 18,465,911 9,210
Johnson City TN 37601 Retail-Anchored 18,250,000 18,236,237 74
Canton MI 48187 Net Lease 17,559,252 17,541,461 99
Boston MA 2109 Multifamily 16,500,000 16,433,341 NAP
Kew Garden Hills NY 11367 Multifamily 16,362,000 16,350,311 30,561
Various Various Various Multiprop 15,500,000 15,471,333 142
Totowa NJ 7512 Hotel-Full Svc 7,336,406 47,332
Totowa NJ 7512 Retail-Unanchored 8,134,926 75
West Lampeter Township PA 17584 Retail-Anchored 15,250,000 15,238,431 59
Belmont CA 94002 Industrial 14,000,000 14,000,000 62
Maple Heights OH 44137 Net Lease 13,770,416 13,756,464 94
Greenwood Village CO 80112 Retail-Unanchored 13,000,000 12,985,696 62
Ocala FL 34475 Net Lease 11,263,143 11,257,025 173
Kent WA 98031 Multifamily 11,100,000 11,091,562 50,879
Malibu CA 90265 Retail-Unanchored 10,600,000 10,581,350 208
Bannockburn IL 60015 Office 10,500,000 10,492,393 80
Mechanicsburg PA 17055 Hotel-Full Svc 10,500,000 10,488,447 44,069
Kissimmee FL 34748 Mobile Home Park 10,400,000 10,380,836 13,499
University Place WA 98466 Multifamily 10,300,000 10,291,853 42,883
Gaithersburg MD 20878 Industrial 10,250,000 10,228,345 63
Various Various Various Multifamily 10,000,000 9,989,012 17,934
Texarkana AR 71854 Multifamily 3,785,180 23,657
Texarkana AR 75502 Multifamily 2,866,687 12,518
Camden AR 71701 Multifamily 2,170,502 18,088
Magnolia AR 71753 Multifamily 1,166,643 24,305
Various Various Various Retail-Anchored 9,600,000 9,592,761 30
Delavan WI 53115 Retail-Anchored 4,996,229 33
West Baraboo WI 53913 Retail-Anchored 4,596,531 26
Boston MA 2128 Industrial 9,500,000 9,455,544 80
Washington DC 20024 Office 9,468,342 9,436,244 78
Lewisville TX 75067 Net Lease 9,326,339 9,315,796 76
Brooklyn NY 11224 Retail-Anchored 9,300,000 9,290,316 147
Gloucester NJ 8030 Retail-Anchored 9,100,000 9,093,968 100
Timonium MD 21093 Hotel-Full Svc 9,000,000 8,990,810 36,108
Tacoma WA 98444 Multifamily 8,500,000 8,493,590 36,929
Glendale CA 91202 Multifamily 8,400,000 8,400,000 63,636
Chicago IL 60603 Hotel-Full Svc 7,600,000 7,589,503 44,125
Evanston IL 60201 Hotel-Full Svc 7,600,000 7,589,503 47,733
Los Angeles CA 90014 Office 7,500,000 7,494,707 82
Brookfield WI 53045 Office 7,400,000 7,390,724 77
Las Vegas NV 89104 Mobile Home Park 7,200,000 7,200,000 24,080
Dallas TX 75231 Net Lease 7,144,050 7,136,812 74
New Haven CT 6511 Hotel-Suites 7,100,000 7,078,875 63,204
Houston TX 77090 Net Lease 6,964,967 6,957,911 72
Houston TX 77064 Net Lease 6,706,125 6,699,331 70
Los Gatos CA 95032 Hotel-Full Svc 6,700,000 6,693,508 52,293
Tarzana CA 91356 Office 6,600,000 6,595,351 100
Little Falls/West Paterson NJ 7424 Retail-Anchored 6,600,000 6,586,437 133
Various Various Various Hotel-Lim Svc 6,550,000 6,538,566 29,060
Harmar Township PA 15238 Hotel-Lim Svc 2,657,372 42,181
Harmer Township PA 15238 Hotel-Lim Svc 1,962,862 19,244
Harmar Township PA 15238 Hotel-Lim Svc 1,918,332 31,972
Los Angeles CA 90034 Multifamily 6,500,000 6,500,000 54,622
Various Various Various Multiprop 6,400,000 6,393,623 64
Wilton CT 6897 Mixed Use 3,796,214 60
Wilton CT 6897 Office 1,308,695 67
Wilton CT 6897 Mixed Use 1,288,715 77
New Britain CT 6051 Retail-Anchored 6,400,000 6,393,433 40
Huntsville AL 35806 Hotel-Full Svc 6,375,000 6,354,129 31,771
Various Various Various Multiprop 6,200,000 6,195,472 75
New Rochelle NY 10583 Retail-Unanchored 2,198,393 156
Orangetown NY 10962 Retail-Anchored 3,997,079 58
Washington Township NJ 8080 Retail-Anchored 6,200,000 6,195,426 40
Columbia MA 21045 Retail-Single Tenant 6,120,000 6,114,199 102
New York NY 10036 Hotel-Lim Svc 6,000,000 5,957,845 85,112
Various Various Various Industrial 5,959,000 5,949,616 34
Northvale NJ 7647 Industrial 2,974,808 33
Northvale NJ 7647 Industrial 2,974,808 36
El Paso TX 79912 Net Lease 5,855,974 5,855,974 87
Raleigh NC 27613 Retail-Anchored 5,760,000 5,755,860 56
Orange CA 92669 Retail-Unanchored 5,638,000 5,638,000 108
Valley View OH 44125 Net Lease 5,618,551 5,625,643 44
Durham NC 27713 Industrial 5,575,000 5,558,723 49
New York NY 10036 Office 5,500,000 5,495,943 154
Louisville KY 40218 Multifamily 5,500,000 5,495,902 26,941
Palm Desert CA 92260 Retail-Unanchored 5,500,000 5,486,070 188
New York NY 10016 Multifamily 5,500,000 5,475,550 78,222
Various Various Various Net Lease 5,421,033 5,421,033 18,629
Shepherdsville KY 40165 Net Lease 1,807,011 18,439
Georgetown KY 40324 Net Lease 1,807,011 18,439
Corapolis PA 15108 Net Lease 1,807,011 19,021
New Castle DE 92309 Industrial 5,350,000 5,343,901 27
Tulsa OK 74136 Multifamily 5,200,000 5,196,086 36,592
Various Various Various Hotel-Lim Svc 5,050,000 5,044,699 14,131
Janesville WI 53545 Hotel-Lim Svc 811,148 12,875
Madison WI 53704 Hotel-Lim Svc 1,559,361 16,243
Waucksha WI 53186 Hotel-Lim Svc 1,643,273 16,270
Madison WI 53704 Hotel-Lim Svc 1,030,917 10,628
Louisville KY 40222 Multifamily 4,900,000 4,896,290 24,001
Duarte CA 91010 Multifamily 4,600,000 4,600,000 41,071
Various Various Various Net Lease 4,633,539 4,400,254 425
Philadelphia PA 19103 Net Lease 2,641,342 664
Philadelphia PA 19103 Net Lease 1,758,912 276
Clayton MO 63105 Office 4,400,000 4,395,178 83
Fishers IN 46256 Hotel-Suites 4,400,000 4,395,096 56,347
Rancho Cucamonga CA 91730 Mixed Use 4,400,000 4,387,917 21
Calabasas CA 91302 Office 4,300,000 4,296,971 82
Aventura FL 33180 Net Lease 4,314,170 4,291,414 122
Amherst NY 14068 Office 4,250,000 4,247,241 67
Davie FL 33025 Net Lease 4,170,552 4,148,553 118
North Miami FL 33169 Hotel-Full Svc 4,100,000 4,094,451 28,834
Newport News VA 23602 Net Lease 4,026,724 4,005,484 107
Freehold NJ 7728 Hotel-Full Svc 4,000,000 3,995,848 35,051
Union Township OH 45069 Multifamily 3,900,000 3,889,671 18,091
Albequerque NM 87111 Net Lease 3,887,373 3,887,373 87
Lowell MA 1852 Office 3,839,000 3,831,542 19
Albuquerque NM 87110 Net Lease 3,831,286 3,831,286 89
Hamilton NJ 8648 Retail-Anchored 3,832,500 3,828,117 89
Lacey WA 98503 Multifamily 3,800,000 3,796,394 37,964
Natick MA 1760 Net Lease 3,684,207 3,671,358 363
Saint Joseph MO 64506 Retail-Anchored 3,669,000 3,659,149 23
Parksville NY 12768 Hotel-Lim Svc 3,600,000 3,596,961 19,656
Los Angeles CA 90064 Self-Storage 3,600,000 3,596,291 95
El Paso TX 79936 Net Lease 3,488,346 3,488,345 80
Paradise CA 95969 Nursing Home 3,500,000 3,487,244 35,225
El Paso TX 79925 Net Lease 3,484,438 3,484,438 85
West Covina CA 91791 Multifamily 3,450,000 3,450,000 49,286
Columbus IN 47274 Multifamily 3,455,000 3,448,916 17,963
San Jose CA 95112 Industrial 3,400,000 3,392,230 37
El Paso TX 79907 Net Lease 3,335,814 3,335,814 70
Franklin TN 39576 Retail-Anchored 3,300,000 3,297,628 47
Gold River CA 95626 Special Purpose 3,300,000 3,294,684 144
New York NY 10021 Multifamily 3,300,000 3,291,600 57,747
Carson CA 90745 Retail-Unanchored 3,200,000 3,197,787 113
Lakeville CT 6039 Hotel-Lim Svc 3,200,000 3,196,822 40,466
West Hollywood CA 90069 Hotel-Lim Svc 3,100,000 3,087,300 40,095
Huber Heights OH 45424 Multifamily 3,095,000 3,086,520 19,535
New York NY 10028 Retail-Single Tenant 3,075,000 3,068,610 568
Plano TX 75074 Net Lease 3,040,542 3,015,326 269
National City CA 91950 Nursing Home 3,000,000 2,997,302 30,585
Gautier MS 39553 Retail-Anchored 2,950,000 2,947,880 24
Aurora CO 80014 Retail-Unanchored 2,943,750 2,941,508 42
Spring Hill FL 34607 Mobile Home Park 2,900,000 2,897,882 11,409
Maumee OH 43537 Retail-Anchored 2,830,000 2,824,901 29
Irvine CA 92612 Office 2,741,026 2,733,899 50
Greenville SC 29605 Net Lease 2,724,101 2,723,636 269
Lutz FL 33549 Multifamily 2,704,589 2,703,147 18,772
Santa Clara CA 95050 Industrial 2,700,000 2,695,167 41
Garland TX 75041 Hotel-Lim Svc 2,700,000 2,693,936 26,155
Anaheim CA 92802 Net Lease 2,676,386 2,668,289 920
Hyannis MA 2601 Net Lease 2,659,530 2,659,530 273
Greenville SC 29615 Multifamily 2,650,000 2,642,493 13,763
Mobile AL 36608 Multifamily 2,645,000 2,638,649 20,297
Wichita KS 67203 Retail-Anchored 2,600,000 2,595,544 15
Freeport ME 4032 Retail-Anchored 2,475,000 2,471,008 196
Kingston NY 12401 Net Lease 2,420,599 2,410,663 216
Culpeper VA 22701 Net Lease 2,384,475 2,384,068 235
Irvine CA 92612 Office 2,316,538 2,310,515 51
Peoria IL 61602 Net Lease 2,232,301 2,232,301 220
Irvine CA 92612 Office 2,229,051 2,223,256 48
Garfield NJ 7026 Net Lease 2,210,521 2,210,521 211
Gretna LA 70056 Multifamily 2,210,000 2,205,392 16,216
West Columbia SC 29172 Industrial 2,200,000 2,195,741 24
Baltimore MD 21228 Retail-Unanchored 2,200,000 2,189,683 60
Lilburn GA 30247 Net Lease 2,169,619 2,169,236 214
Peoria IL 61603 Net Lease 2,167,717 2,167,717 214
Tustin CA 92680 Office 2,150,000 2,146,355 50
El Paso TX 79903 Net Lease 2,120,742 2,120,742 58
Kernsville NC 27284 Net Lease 2,107,872 2,107,872 208
Colorado Springs CO 80916 Hotel-Lim Svc 2,100,000 2,097,918 47,680
Acworth GA 30101 Net Lease 2,076,649 2,069,291 195
Peoria IL 61615 Net Lease 2,046,885 2,046,885 202
Elkin NC 28621 Net Lease 2,024,659 2,024,659 200
Greenville SC 29615 Multifamily 2,025,000 2,020,616 20,206
Augusta ME 4330 Net Lease 2,016,439 2,012,829 180
Seymour IN 47274 Multifamily 1,935,000 1,930,085 18,922
Ruidoso NM 88345 Net Lease 1,923,027 1,923,027 60
Miami FL 33176 Office 1,900,000 1,898,530 85
North Conway NH 3860 Net Lease 1,881,852 1,880,945 186
Monroe NC 28111 Net Lease 1,879,670 1,879,337 186
Astoria NY 11354 Retail-Single Tenant 1,875,000 1,873,174 78
Washington Court House OH 43160 Net Lease 1,840,621 1,840,312 182
Monona WI 53713 Office 1,840,000 1,837,909 33
Anderson SC 29622 Net Lease 1,764,705 1,763,832 174
Cumming GA 30130 Net Lease 1,764,586 1,763,399 174
Philadelphia PA 19138 Net Lease 1,762,981 1,761,774 167
Jonesboro GA 30260 Net Lease 1,743,359 1,736,367 153
Burnsville NC 28714 Net Lease 1,728,379 1,728,085 171
Fairfield NJ 7004 Industrial 1,705,000 1,701,939 48
Gaston NC 28052 Net Lease 1,687,906 1,677,618 150
Irvine CA 92612 Office 1,631,619 1,627,376 48
Athens WV 24712 Net Lease 1,596,647 1,596,647 158
Oxford MA 1540 Net Lease 1,576,752 1,575,943 180
Pensacola FL 32526 Retail-Anchored 1,554,000 1,549,406 24
Jonesboro GA 30236 Net Lease 1,536,837 1,533,695 135
Irvine CA 92612 Office 1,535,343 1,531,351 50
Irvine CA 92612 Office 1,500,000 1,496,100 49
Mesa AZ 85205 Self-Storage 1,475,000 1,470,942 40
Lake Jackson TX 77566 Multifamily 1,450,000 1,449,077 17,251
Atlanta GA 30309 Multifamily 1,400,000 1,394,043 39,830
Monaca (Center Township) PA 10561 Multifamily 1,350,000 1,347,430 16,843
Hinesville GA 31313 Net Lease 1,350,000 1,340,932 119
South Pasadena FL 33707 Retail-Single Tenant 1,310,000 1,309,059 23
Scottsdale AZ 85254 Retail-Unanchored 1,280,000 1,277,941 52
Claxton GA 30417 Net Lease 1,250,000 1,237,929 109
Various Various Various Multiprop (Various) 1,150,000 1,149,236 48
Holyoke MA 1040 Office 649,568 27
Holyoke MA 1040 Multifamily 499,668 15,615
San Diego CA 92115 Retail-Single Tenant 1,050,000 1,049,295 161
Klamath Falls OR 97603 Self-Storage 1,000,000 996,899 14
Irvine CA 92612 Special Purpose 546,424 545,003 68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 NOI 1996 NOI 1997 NOI 1997 Period Type U/W NOI 1995 Rev 1996 Rev
-------- -------- -------- ----------- ---- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
25,573,534 29,866,752 30,800,790 6/30/97 Trailing 12 25,832,513 39,104,990 43,633,845
9,205,897 10,916,223 11,750,875 5/31/97 Annualized 10,235,766 16,893,551 18,625,310
12,288,406 14,323,830 14,638,839 7/31/97 Trailing 12 11,696,904 31,828,644 35,359,236
6,680,603 6,800,435 6,839,592 5/31/97 Trailing 12 7,176,828 9,602,882 9,799,512
4,464,378 4,593,209 5,229,896 9/30/97 Annualized 5,344,875 7,991,409 8,268,571
5,112,687 5,243,316 5,348,398 9/30/97 Trailing 12 5,416,392 14,261,359 14,146,743
4,592,030 5,127,400 5,848,100 7/31/97 Trailing 12 5,158,786 8,911,887 9,817,096
3,781,717 3,759,526 4,182,596 4/30/97 Annualized 4,522,287 5,512,044 5,627,633
4,140,580 3,793,323 3,545,281 8/31/97 Trailing 12 3,655,006 4,316,945 3,958,948
4,315,727 3,291,857 3,777,269 8/31/97 Trailing 12 3,061,644 6,297,283 5,721,089
-- 2,911,227 2,716,529 9/30/97 Trailing 12 2,807,027 -- 3,733,950
2,915,399 2,773,901 2,772,861 3/31/97 Trailing 12 2,803,578 3,895,198 3,777,202
2,114,721 2,575,209 9/30/97 Annualized 2,615,709 3,634,999 4,175,260
-- -- 1,264,912 9/30/97 Annualized 2,244,560 -- --
-- -- 2,139,170 2,104,752 -- --
1,503,056 1,437,183 -- 2,291,503 3,748,062 3,741,985
1,063,269 2,135,785 2,183,464 7/31/97 Annualized 2,563,639 5,663,718 6,879,204
360,690 1,002,189 1,207,308 1,196,442 4,858,196 5,498,008
702,579 1,133,596 976,156 1,367,197 805,522 1,381,196
-- 1,727,267 1,899,526 9/30/97 Annualized 1,688,303 -- 2,453,649
-- -- 1,236,461 10/31/97 Annualized 1,994,923 -- --
1,320,021 1,744,733 1,506,483 9/30/97 Annualized 1,732,062 2,073,850 2,383,794
1,022,810 1,075,393 1,182,188 9/30/97 Trailing 12 1,226,569 1,646,752 1,712,273
1,253,465 1,381,873 1,404,441 5/31/97 Trailing 12 1,412,228 1,645,870 1,772,226
1,795,407 1,338,500 1,323,792 8/31/97 Trailing 12 1,493,237 2,566,100 2,132,900
1,426,000 1,524,000 2,397,000 8/31/97 Trailing 12 2,017,000 7,566,000 8,150,000
1,007,647 1,173,407 1,384,915 7/31/97 Annualized 1,398,864 1,853,433 1,950,811
1,034,966 1,099,464 1,146,443 7/31/97 Trailing 12 1,140,512 1,637,583 1,694,214
1,219,233 1,601,623 1,663,005 3/31/97 Trailing 12 1,592,471 1,776,077 2,093,112
1,231,393 960,915 1,062,083 6/30/97 Annualized 1,142,210 2,333,328 2,188,561
455,782 359,981 375,959 417,641 796,248 727,787
394,778 300,657 336,081 334,443 842,323 789,447
249,568 195,099 237,995 254,841 495,292 468,358
131,265 105,178 112,048 135,285 199,465 202,969
729,935 1,307,233 1,432,324 8/31/97 Trailing 12 1,373,723 744,481 1,527,539
-- 665,253 742,318 709,137 -- 785,968
729,935 641,980 690,006 664,586 744,481 741,571
1,248,158 1,363,169 942,702 4/30/97 Annualized 1,479,366 1,574,488 1,748,882
2,177,647 2,267,987 2,244,731 1/31/97 Trailing 12 1,726,789 3,334,042 3,340,983
1,231,708 1,320,620 -- 1,186,712 1,582,785 1,655,374
1,172,491 1,117,251 1,001,778 6/1/97 Annualized 1,049,808 1,469,334 1,474,633
1,006,068 1,013,760 1,577,870 7/31/97 Trailing 12 1,635,941 6,580,266 6,640,227
892,934 950,790 910,219 6/30/97 Trailing 12 955,719 1,524,346 1,579,299
-- 640,854 -- 954,079 -- 1,016,941
898,000 1,014,000 1,094,681 8/31/97 Trailing 12 1,149,000 2,813,000 3,438,000
937,000 1,197,000 1,638,000 8/31/97 Trailing 12 1,152,000 3,375,000 3,899,000
1,282,022 1,565,780 -- 1,156,585 1,963,357 2,344,261
1,116,134 925,822 956,858 7/31/97 Annualized 1,009,901 1,708,704 1,541,322
713,532 891,306 897,025 9/30/97 Annualized 895,810 1,452,929 1,577,469
1,153,753 1,223,032 1,380,645 9/30/97 Trailing 12 1,247,245 3,647,056 3,682,590
-- 774,684 1,099,744 7/31/97 Trailing 12 1,007,756 -- 3,106,584
1,027,283 997,650 1,107,188 7/31/97 Annualized 979,247 1,909,456 1,903,047
475,022 542,356 -- 946,458 704,434 775,256
721,186 1,067,081 1,023,157 7/31/97 Trailing 12 980,051 2,237,939 2,698,081
264,113 399,990 411,515 320,947 777,986 989,535
260,450 360,328 323,205 431,556 871,835 973,275
196,623 306,763 288,437 227,548 588,118 735,271
-- -- 733,917 -- --
877,424 899,908 -- 913,150 1,390,248 1,406,628
481,425 539,125 -- 540,939 698,174 734,520
198,319 183,909 -- 191,764 395,251 372,670
197,680 176,874 -- 180,447 296,823 299,438
988,493 855,560 860,900 8/1/97 Annualized 888,941 1,458,367 1,425,167
995,926 832,206 1,070,004 6/30/97 Trailing 12 1,038,269 4,306,976 4,398,340
501,413 550,177 637,599 7/31/97 Trailing 12 797,522 981,942 1,137,494
148,405 148,124 199,384 259,959 331,903 386,632
353,008 402,053 438,215 537,563 650,039 750,862
371,975 -- 477,640 9/30/97 Annualized 846,083 649,860 --
-- -- -- 772,094 -- --
338,000 929,460 1,470,000 4/30/97 Trailing 12 1,276,617 1,941,000 2,895,125
886,385 893,416 933,490 6/30/97 Annualized 824,793 891,407 900,029
886,385 893,416 933,490 824,793 891,407 900,029
-- -- -- -- -- --
659,329 676,561 669,769 9/30/97 Trailing 12 710,547 753,494 769,060
-- 526,864 638,204 10/15/97 Trailing 12 685,161 -- 714,456
772,902 866,929 887,091 6/30/97 Trailing 12 932,208 946,481 1,032,617
525,791 671,988 632,008 9/30/97 Trailing 12 721,312 1,177,910 1,203,668
618,079 652,221 567,463 6/30/97 Trailing 12 681,778 1,168,069 1,239,690
804,824 710,805 754,660 4/1/97 Trailing 12 793,360 1,087,290 963,968
501,864 881,006 -- 814,355 1,468,351 1,500,380
-- -- -- 670,292 -- --
579,429 654,472 625,379 7/31/97 Trailing 12 611,374 901,387 959,348
738,667 948,005 952,282 8/31/97 Trailing 12 979,587 2,557,717 2,838,729
153,903 161,133 153,165 150,221 489,046 474,755
256,935 296,492 299,365 323,350 745,877 819,111
232,791 303,460 330,413 287,812 728,176 851,708
95,038 186,920 169,339 218,204 594,618 693,155
667,272 659,257 659,523 8/31/97 Trailing 12 645,204 1,211,915 1,223,547
-- 537,749 531,928 6/30/97 Trailing 12 522,357 -- 949,314
353,540 476,362 -- 681,441 561,837 753,482
-- 246,000 758,000 10/10/97 Trailing 12 658,181 -- 841,000
831,834 816,137 -- 821,132 1,261,443 1,278,200
696,230 613,446 631,823 9/30/97 Annualized 600,971 821,127 834,920
583,049 511,367 458,316 6/30/97 Trailing 12 543,035 899,593 946,275
837,439 861,603 885,749 4/30/97 Trailing 12 852,178 1,710,013 1,830,558
551,293 573,030 665,996 6/30/97 Trailing 12 717,716 3,780,971 3,558,485
588,605 554,744 452,777 8/31/97 Trailing 12 524,778 1,240,865 1,153,391
-- 539,640 878,158 924,434
519,303 519,973 562,612 9/30/97 Trailing 12 513,022 715,588 746,858
396,780 415,584 432,105 6/30/97 Trailing 12 432,454 686,574 694,118
682,610 169,031 258,293 5/31/97 Annualized 486,182 944,945 459,293
741,611 699,944 774,306 8/1/97 Trailing 12 772,501 4,527,778 4,290,768
472,520 502,852 547,844 7/31/97 Trailing 12 518,673 757,805 825,426
1,040,742 943,805 -- 645,526 4,587,165 4,483,854
-- -- 395,894 -- --
447,793 427,250 464,764 8/31/97 Trailing 12 456,377 1,015,086 965,356
480,789 496,606 499,028 5/31/97 Annualized 503,680 581,623 596,562
437,533 441,020 447,361 9/30/97 Trailing 12 419,279 514,340 527,593
576,787 693,652 661,700 8/31/97 Annualized 575,252 1,654,585 1,729,435
299,880 412,336 -- 477,703 500,543 625,760
-- 318,458 372,369 7/31/97 Annualized 458,975 -- 412,177
755,719 662,384 701,009 8/31/97 Trailing 12 725,638 3,420,007 3,218,449
816,881 869,706 829,856 2/28/97 Trailing 12 615,355 2,349,375 2,551,229
399,987 416,987 448,913 8/31/97 Trailing 12 454,119 821,981 831,133
387,086 386,183 -- 365,017 437,500 437,500
515,426 579,010 691,623 7/31/97 Trailing 12 414,090 3,812,818 4,149,224
373,968 398,325 461,335 9/28/97 Trailing 12 408,185 463,959 499,109
425,523 491,006 319,734 8/20/97 Partial Year 470,975 617,726 670,698
221,901 272,128 325,273 9/30/97 Trailing 12 298,329 397,977 435,153
531,258 428,169 -- 437,144 656,927 578,482
390,863 -- 544,959 2/28/97 Annualized 523,649 849,996 --
358,143 308,702 394,482 8/31/97 Trailing 12 359,289 765,354 762,106
-- 206,796 510,674 6/30/97 Annualized 544,768 -- 298,309
550,252 586,213 503,003 3/31/97 Trailing 12 575,497 1,391,351 1,370,171
473,308 415,410 334,506 8/31/97 Trailing 12 352,351 935,931 914,892
384,931 384,631 373,165 8/31/97 Trailing 12 380,946 847,376 822,630
359,098 299,463 341,981 6/30/97 Annualized 384,388 559,945 525,437
383,334 412,614 458,405 6/30/97 Annualized 383,279 435,919 466,567
293,256 -- 491,421 3/1/97 Annualized 428,959 618,747 --
187,403 -- 420,629 2/1/97 Annualized 416,822 517,306 --
244,423 276,064 324,769 9/30/97 Annualized 302,303 510,422 544,969
370,175 441,409 421,022 6/30/97 Trailing 12 369,632 608,703 704,689
263,699 314,440 -- 370,299 376,785 424,336
-- -- 417,738 4/30/97 Annualized 300,480 -- --
-- 364,211 541,490 6/30/97 Trailing 12 421,309 -- 712,903
254,648 227,770 288,807 8/31/97 Trailing 12 272,222 500,944 494,893
295,473 246,627 283,013 8/31/97 Trailing 12 264,632 551,047 548,842
236,105 236,211 237,962 6/30/97 Annualized 210,960 415,242 407,835
273,800 290,258 299,500 9/30/97 Annualized 257,829 275,000 291,042
262,282 308,595 -- 335,525 600,271 631,296
202,114 238,792 228,904 6/1/97 Annualized 224,252 263,467 304,663
160,905 -- 316,082 2/28/97 Annualized 284,546 448,894 --
171,084 195,520 228,240 5/31/97 Trailing 12 240,879 254,064 271,247
250,158 -- 335,805 2/28/97 Annualized 298,025 493,473 --
63,183 -- 292,689 2/28/97 Annualized 276,843 283,396 --
-- -- 150,023 5/31/97 Trailing 12 196,748 -- --
109,301 149,397 159,185 7/31/97 Annualized 187,174 423,759 403,550
177,940 211,887 228,649 3/31/97 Trailing 12 220,129 335,099 370,736
195,580 161,160 207,867 8/31/97 Trailing 12 189,089 455,469 427,325
211,573 212,104 211,414 9/30/97 Trailing 12 189,185 251,021 250,744
175,539 205,233 219,007 5/31/97 Trailing 12 217,897 292,255 313,231
119,693 63,255 91,716 6/30/97 Trailing 12 201,974 347,065 344,193
56,780 30,099 27,754 106,003 178,323 174,999
62,913 33,156 63,962 95,971 168,742 169,194
-- 139,650 93,100 10/29/97 Partial Year 124,705 -- 139,650
80,098 163,520 162,024 3/31/97 Trailing 12 158,572 114,238 224,525
97,329 -- 107,360 2/1/97 Annualized 93,559 144,905 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stated Anticipated
U/W Net Annual Debt Mortgage Interest Maturity Repayment
U/W Rev Cash Flow DSCR Service Rate Calc. Date Date
------- --------- ---- ------- ---- ----- ---- ----
<C> <C> <C> <C> <C> <C> <C> <C>
39,736,900 23,432,056 1.89 12,418,630 7.64 Actual/360 11/11/27 11/11/04
17,850,128 9,103,930 1.3 7,022,532 8.66 Actual/360 9/11/29 9/11/07
35,251,092 9,934,349 1.42 7,007,372 8.26 Actual/360 10/11/22 10/11/07
10,056,152 7,042,989 1.23 5,707,669 8.12 Actual/360 9/11/27 9/11/07
8,978,726 5,114,629 1.38 3,693,122 7.74 Actual/360 12/11/27 12/11/07
14,606,696 4,686,037 1.42 3,295,783 7.52 Actual/360 12/11/22 12/11/07
9,676,638 4,674,954 1.57 2,986,451 7.56 Actual/360 11/11/22 11/11/07
6,513,959 4,237,103 1.37 3,092,514 9.01 Actual/360 7/11/27 7/11/07
3,703,234 3,612,103 1.06 3,400,000 7.41 Actual/360 1/11/33 5/11/14
5,557,155 2,822,454 1.34 2,114,102 7.58 Actual/360 12/11/27 11/11/12
3,582,894 2,419,866 1.21 1,997,985 7.42 Actual/360 11/11/27 11/11/07
3,864,954 2,486,827 1.24 2,000,149 8.49 Actual/360 8/11/27 8/11/07
1,903,968 8.2954 30 / 360 11/1/22
4,188,287 2,515,459 1.39 1,803,872 8.92 Actual/360 6/1/24 9/1/03
2,912,059 2,171,543 1.43 1,519,301 7.42 Actual/360 11/11/27 11/11/07
1,658,192 8.2276 30 / 360 11/1/22
2,713,191 2,043,204 1.26 1,625,519 9.11 Actual/360 8/1/25 4/1/07
4,763,280 2,157,753 1.54 1,398,500 7.69 30 / 360 11/1/12
6,752,024 2,184,857 1.51 1,447,921 8.1 Actual/360 10/11/22 10/11/07
5,080,712 942,406 NAP
1,671,312 1,242,451 NAP
2,507,058 1,509,742 1.19 1,265,807 7.39 Actual/360 11/11/27 11/11/12
2,163,177 1,736,302 1.48 1,170,082 7.46 Actual/360 12/11/27 12/11/07
1,300,397 8.2276 30 / 360 11/1/22
2,490,136 1,549,995 1.32 1,175,242 7.72 Actual/360 11/11/22 11/11/07
1,059,960 8.6104 30 / 360 10/11/22
1,887,511 1,172,069 1.27 920,433 7.38 Actual/360 11/11/27 11/11/07
1,838,601 1,334,043 1.42 942,231 8.1 Actual/360 9/11/27 9/11/07
2,348,524 1,206,616 1.35 891,387 7.62 Actual/360 11/11/27 11/11/12
8,831,000 1,576,000 1.66 949,234 7.72 Actual/360 11/11/22 11/11/07
2,193,608 1,349,343 1.33 1,014,069 8.92 Actual/360 6/1/24 9/1/03
1,779,301 1,080,512 1.29 837,309 7.18 Actual/360 11/11/27 11/11/07
2,174,368 1,338,503 1.45 924,058 8.25 Actual/360 8/11/27 8/11/07
2,245,393 976,643 1.1 887,219 8.08 Actual/360 10/11/27 10/11/07
746,127 372,041 NAP
779,215 267,804 NAP
508,557 216,921 NAP
211,494 119,877 NAP
1,902,838 1,263,170 1.58 799,194 7.42 Actual/360 11/11/27 11/11/07
977,439 664,278 NAP
925,399 598,892 NAP
1,886,382 1,367,274 1.43 957,465 9.01 Actual/360 6/11/22 6/11/07
2,870,223 1,495,385 1.62 920,266 8.57 Actual/360 9/11/22 9/11/07
923,033 8.3453 Actual/360 10/11/20
1,715,880 1,103,596 1.27 865,788 8.06 30 / 360 11/11/22 11/11/07
1,463,337 989,909 1.23 805,843 8.06 Actual/360 11/1/27 11/11/07
7,232,976 1,274,293 1.51 846,480 8.18 Actual/360 11/11/22 11/11/07
1,619,050 898,219 1.27 707,620 7.42 Actual/360 11/11/27 11/11/07
1,394,558 921,079 1.25 736,941 7.77 Actual/360 8/11/27 8/11/07
3,496,000 974,000 1.33 733,463 8.68 Actual/360 10/11/22 10/11/07
3,674,000 968,000 1.32 733,463 8.68 Actual/360 10/11/22 10/11/07
2,002,952 995,725 1.54 644,771 7.75 Actual/360 11/11/27 11/11/12
1,696,114 862,764 1.38 625,774 7.58 Actual/360 10/11/27 10/11/12
1,601,662 880,860 1.3 676,934 8.705 Actual/360 2/1/27 2/1/04
674,642 8.2276 30 / 360 11/1/22
3,591,599 1,067,665 1.34 798,068 7.67 Actual/360 11/11/12 11/11/07
657,730 8.2276 30 / 360 11/1/22
633,287 8.2276 30 / 360 11/1/22
3,856,138 853,510 1.32 647,403 8.5 Actual/360 11/11/22 11/11/07
1,874,047 846,020 1.49 567,946 7.76 Actual/360 11/11/27 11/11/07
1,235,776 887,108 1.48 600,580 8.35 Actual/360 8/11/27 8/11/07
2,641,458 847,978 1.35 627,093 8.39 Actual/360 10/11/22 10/11/07
924,271 274,733 NAP
1,060,681 378,522 NAP
656,506 194,723 NAP
1,090,455 703,453 1.27 556,037 7.5 Actual/360 11/11/27 11/11/07
1,431,315 795,135 1.3 609,641 8.33 Actual/360 11/11/22 11/11/07
742,291 468,304 NAP
386,374 167,194 NAP
302,650 159,637 NAP
1,459,942 787,084 1.31 600,406 8.15 Actual/360 11/11/22 10/11/07
4,337,640 698,759 1.11 628,420 8.74 Actual/360 8/11/22 8/1/06
1,324,250 736,060 1.4 524,297 7.58 Actual/360 11/11/27 11/11/07
450,415 242,201 NAP
873,835 493,859 NAP
1,320,888 755,035 1.45 521,745 7.53 Actual/360 11/11/27 11/11/07
926,927 703,094 1.23 570,425 8.61 Actual/360 10/11/27 10/11/07
2,798,806 1,165,972 1.78 654,843 9.38 Actual/360 11/11/18 6/11/07
857,325 731,623 1.23 594,715 8.89 Actual/360 10/11/22 10/11/07
857,325 731,623 NAP
-- -- NAP
566,513 9.11 Actual/360 12/11/19 11/11/07
845,513 591,471 1.2 490,892 7.66 Actual/360 11/11/27 11/11/07
883,784 622,117 1.21 513,248 7.8 Actual/360 12/1/07
411,816 7.5781 30 / 360 5/1/22
1,103,672 745,782 1.44 519,007 8.06 Actual/360 9/11/22 3/11/06
1,315,547 642,610 1.39 462,832 7.53 Actual/360 11/11/27 11/11/07
1,287,288 629,595 1.37 460,578 7.48 Actual/360 11/11/27 11/11/07
1,074,525 733,069 1.48 495,836 8.25 Actual/360 8/11/27 8/11/07
1,459,162 793,955 1.53 519,055 8.22 Actual/360 7/11/22 7/11/07
489,127 8.4907 Actual/360 5/11/16
NAP
NAP
NAP
998,497 573,292 1.21 474,432 7.5 Actual/360 11/11/22 11/11/07
930,617 575,874 1.33 433,323 7.43 Actual/360 11/11/27 11/11/07
2,901,268 837,998 1.79 468,122 8.01 Actual/360 11/11/22 12/11/07
487,352 126,383 NAP
871,721 280,758 NAP
845,776 246,726 NAP
696,419 184,131 NAP
1,235,779 587,471 1.44 407,119 7.4 Actual/360 11/11/27 5/11/06
949,617 482,597 1.2 403,563 7.77 Actual/360 8/11/27 8/11/07
828,221 6.528 Actual/360 2/11/04
NAP
NAP
965,977 635,942 1.63 390,746 8.09 Actual/360 10/11/27 10/11/07
1,779,966 569,183 1.44 395,008 7.64 Actual/360 11/11/22 11/11/07
1,296,109 620,808 1.47 421,253 8.39 Actual/360 9/11/22 9/11/07
833,796 542,870 1.47 370,025 7.76 Actual/360 10/11/27 10/11/07
465,468 9.351 Actual/360 12/11/17
963,351 432,567 1.18 365,459 7.82 Actual/360 11/11/27 11/11/07
449,973 9.3551 Actual/360 12/11/17
1,868,672 758,744 1.75 432,941 9.59 Actual/360 10/11/22 10/11/07
434,455 9.3551 Actual/360 12/11/17
3,616,482 536,892 1.44 373,019 8.08 Actual/360 11/11/22 11/11/07
1,160,495 472,103 1.31 359,852 8.5 Actual/360 6/1/27 12/1/05
385,808 9.11 Actual/360 12/11/19 11/11/07
1,008,335 430,347 1.21 355,857 8.55 Actual/360 8/11/27 8/11/07
383,755 9.11 Actual/360 8/31/19 11/11/07
753,979 454,592 1.34 339,264 7.48 Actual/360 11/11/22 11/11/07
731,088 405,972 1.33 305,832 7.08 Actual/360 11/11/27 11/11/07
336,374 7.0438 Actual/360 1/11/18
764,060 401,511 1.13 354,822 8.51 Actual/360 9/11/22 9/11/07
4,290,768 557,963 1.5 372,345 9.33 Actual/360 11/11/22 11/11/07
873,806 509,235 1.51 337,008 8.125 Actual/360 11/11/22 11/11/07
349,363 9.11 Actual/360 12/11/19 11/11/07
4,504,454 620,776 1.88 330,027 8.21 Actual/360 8/11/22 8/11/07
349,365 9.11 Actual/360 12/11/19 11/11/07
600,322 372,304 1.26 295,127 7.5 Actual/360 11/11/27 11/11/07
978,658 401,849 1.33 301,637 7.9 Actual/360 8/11/27 1/11/06
633,086 422,360 1.42 297,104 7.92 Actual/360 8/11/27 8/11/07
332,610 9.11 Actual/360 12/11/19 11/11/07
538,366 338,832 1.2 281,240 7.66 Actual/360 11/11/27 11/11/07
1,713,403 531,303 1.56 341,656 8.42 Actual/360 12/11/17 12/11/07
766,547 462,296 1.42 326,646 8.79 Actual/360 9/11/22 9/11/04
553,011 426,377 1.54 277,761 7.85 Actual/360 11/11/27 11/11/07
3,407,252 555,276 1.82 305,335 8.35 Actual/360 11/11/22 11/11/07
2,491,924 515,678 1.51 341,909 9.3 Actual/360 9/11/17 9/11/07
874,615 409,879 1.45 282,947 8.4 Actual/360 6/1/27 12/1/05
436,500 358,807 1.29 278,775 8.31 Actual/360 8/11/27 8/11/07
290,902 7.936 30 / 360 1/11/17 1/11/17
3,894,201 389,590 1.29 300,879 8.95 Actual/360 11/11/22 11/11/07
532,918 357,946 1.42 251,412 7.66 Actual/360 11/11/27 11/11/07
656,392 350,900 1.44 243,861 7.37 Actual/360 11/11/27 11/11/07
493,258 285,579 1.16 245,236 7.58 Actual/360 11/11/27 11/11/07
599,617 395,620 1.41 281,105 9.32 Actual/360 7/11/27 7/11/07
875,068 442,678 1.81 245,031 8.16 Actual/360 7/11/27 7/11/07
186,930 6.6572 30 / 360 5/6/18
803,040 316,089 1.26 249,887 8.48 Actual/360 6/11/27 12/11/05
720,482 486,281 2.04 238,418 8.03 Actual/360 9/11/27 9/11/07
1,464,116 502,292 1.78 281,503 9.43 Actual/360 9/11/22 9/11/07
259,000 8.3825 Actual/360 12/11/13
180,711 6.5886 30 / 360 6/6/18
884,515 299,359 1.25 240,021 8.3 Actual/360 6/1/27 12/1/05
813,290 337,656 1.39 242,480 8.43 Actual/360 7/11/27 12/11/05
612,326 292,046 1.16 250,810 8.48 Actual/360 10/11/22 10/11/07
442,245 363,768 1.42 256,054 8.41 Actual/360 11/11/17 11/11/07
231,000 6.9705 Actual/360 12/11/16
163,579 6.6553 30 / 360 5/6/18
670,831 312,319 1.51 207,084 8.16 Actual/360 7/11/27 7/11/07
151,724 6.571 30 / 360 6/6/18
657,260 297,182 1.49 199,263 8.16 Actual/360 7/11/27 7/11/07
199,425 6.8083 Actual/360 4/11/17
597,422 268,303 1.37 195,636 7.48 Actual/360 10/11/22 10/11/07
658,853 253,071 1.26 201,439 7.867 Actual/360 10/11/22 4/11/06
491,895 328,255 1.48 221,548 9 Actual/360 6/11/22 6/11/07
152,025 6.8062 30 / 360 5/6/18
147,335 6.571 30 / 360 6/6/18
564,742 247,752 1.25 198,380 8.5 Actual/360 9/11/27 8/11/07
212,657 9.11 Actual/360 12/11/19 11/11/07
142,904 6.573 30 / 360 6/6/18
930,516 374,783 1.87 200,545 8.36 Actual/360 11/11/22 11/11/07
191,456 6.9832 Actual/360 3/11/17
139,122 6.571 30 / 360 6/6/18
136,835 6.5526 30 / 360 6/6/18
528,454 245,422 1.34 183,554 8.29 Actual/360 6/1/27 12/7/05
189,520 7.0161 30 / 360 9/11/17
561,286 235,868 1.34 175,654 8.31 Actual/360 6/11/27 12/11/05
188,631 9.11 Actual/360 12/11/17 11/11/07
420,438 182,925 1.17 156,155 7.29 Actual/360 11/11/27 11/11/07
136,888 7.0825 30 / 360 2/6/18
131,916 6.8062 30 / 360 5/6/18
272,250 230,229 1.27 180,721 8.47 Actual/360 11/11/22 11/11/07
130,298 6.8772 30 / 360 4/6/18
666,659 233,025 1.43 163,457 7.52 Actual/360 11/11/22 11/11/07
128,014 7.0573 30 / 360 3/6/18
126,068 6.9443 30 / 360 1/6/18
122,883 6.7665 30 / 360 1/6/18
162,927 6.9461 30 / 360 10/11/17
118,868 6.6729 30 / 360 5/6/18
298,104 199,213 1.23 161,317 8.25 Actual/360 10/11/22 10/11/07
164,172 7.303 30 / 360 2/11/17
486,639 226,943 1.56 145,857 8.16 Actual/360 7/11/27 7/11/07
108,490 6.5886 30 / 360 6/6/18
110,026 6.7741 30 / 360 2/6/18
324,083 199,289 1.33 149,406 8.44 Actual/360 9/11/22 9/11/07
141,319 6.7417 Actual/360 11/11/17
510,327 218,344 1.59 137,250 8.16 Actual/360 7/11/27 7/11/07
455,276 239,633 1.79 134,091 8.16 Actual/360 7/11/27 7/11/07
294,386 186,019 1.32 141,097 8.38 Actual/360 9/11/22 9/11/07
502,645 162,652 1.24 130,843 8.26 Actual/360 11/11/27 11/11/07
360,529 199,315 1.48 134,487 8.43 Actual/360 7/11/22 7/11/07
433,534 165,489 1.36 121,641 8.23 Actual/360 7/11/27 12/11/05
137,222 8.17 30 / 360 7/11/17
239,253 120,865 1.08 111,644 7.66 Actual/360 11/11/27 11/11/07
327,696 164,852 1.4 117,670 8.46 Actual/360 9/11/27 8/11/07
132,424 8.57 30 / 360 6/11/17
393,260 147,735 1.45 101,741 8.05 Actual/360 11/11/27 11/11/07
208,922 61,096 NAP
184,338 86,639 NAP
159,270 117,201 1.27 92,454 8 Actual/360 11/11/27 11/11/07
222,335 147,510 1.46 100,704 9 Actual/360 8/11/22 8/11/07
116,000 73,409 1.5 48,847 8.16 Actual/360 7/11/27 7/11/07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Anticipated Remaining Anticipated Original
Remaining Remaining Lockout Repayment Amortization
Term Lockout and YM Lockbox Value LTV Date LTV Term
---- ------- ------ ------- ----- --- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
83 83 83 Hard 325,000,000 45 41 360
117 45 117 Hard 120,000,000 63 57 360
118 46 46 Hard 103,000,000 72 58 300
117 111 111 Hard 84,000,000 75 67 336
120 115 115 Modified 55,700,000 77 67 360
120 120 120 Springing 51,000,000 73 58 300
119 115 115 Springing 38,200,000 72* 39 300
115 108 108 Hard 49,200,000 65* 58 360
197 173 173 Hard 40,000,000 80 44 422
179 172 172 Springing 35,000,000 71 54 360
119 112 112 Modified 27,300,000 74* 64 360
116 109 109 Hard 31,000,000 69 60 339
299 295 295 Hard 300
69 62 62 Hard 29,475,000 63 59 333
119 112 112 Modified 24,400,000 75 65 360
299 295 295 Hard 300
112 40 105 Hard 25,300,000 65 57 342
179 119 119 None 28,500,000 57 360
118 114 114 Modified 67* 55 300
-- NAP 11,000,000 --
-- NAP 12,000,000 --
179 176 176 Modified 19,000,000 80 60 360
120 120 120 Springing 21,600,000 65 56 360
299 295 295 Hard 300
119 115 115 Modified 18,850,000 69 55 300
298 298 298 Hard 300
119 112 112 Modified 14,300,000 78 67 360
117 113 113 Springing 14,600,000 72 64 360
179 175 175 Springing 16,600,000 63 48 360
119 112 112 Modified 14,000,000 75 60 300
69 62 62 Hard 16,000,000 65 61 333
119 112 112 Hard 12,530,000 82 71 360
116 109 109 Hard 13,600,000 75 66 360
118 111 111 Springing 74 65 360
-- NAP 5,200,000 --
-- NAP 4,250,000 --
-- NAP 2,800,000 --
-- NAP 1,310,000 --
119 112 112 Springing 73 63 360
-- NAP 6,900,000 --
-- NAP 6,200,000 --
114 107 107 Hard 12,500,000 76 63 300
117 110 110 Hard 14,900,000 63 52 300
274 274 274 Hard 267
119 112 112 Modified 12,600,000 74 60 300
119 117 117 Modified 11,450,000 79 70 360
119 112 112 Springing 15,500,000 58 47 300
119 112 112 Modified 10,750,000 79 75 360
116 113 113 Springing 11,300,000 74 66 336
118 118 118 Hard 8,950,000 85 72 300
118 118 118 Hard 11,225,000 68 57 300
179 172 172 Springing 10,500,000 71 54 360
178 176 176 Springing 9,750,000 76 57 360
74 67 67 Hard 9,675,000 74 70 360
299 299 299 Hard 300
119 115 115 Hard 9,500,000 75 35 180
299 295 295 Hard 300
299 295 295 Hard 300
119 112 112 Modified 13,300,000 50 41 300
119 112 112 Modified 9,850,000 67 58 360
116 109 109 Springing 9,800,000 67 60 360
118 114 114 Modified 78 64 300
-- NAP 3,315,000
-- NAP 2,460,000
-- NAP 2,585,000
119 116 116 Modified 8,200,000 79 70 336
119 112 112 Modified 64 52 300
-- NAP 6,200,000
-- NAP 2,150,000
-- NAP 1,625,000
118 113 113 Springing 8,400,000 76 62 300
104 97 97 Springing 9,200,000 69 59 300
119 115 115 Springing 74 64 360
-- NAP 3,020,000
-- NAP 5,400,000
119 115 115 Modified 8,000,000 77 67 360
118 111 111 Modified 8,000,000 76 68 360
114 107 107 Hard 8,000,000 74 56 252
118 113 113 Hard 66 55 300
-- NAP 4,300,000
-- NAP 4,700,000
119 115 115 Hard 265
119 116 116 Modified 7,200,000 80 70 360
120 116 116 Modified 7,200,000 78 300
293 293 293 Hard 299
99 95 95 Springing 7,700,000 72 61 300
119 117 117 Modified 7,100,000 77 67 360
119 112 112 Modified 7,800,000 70 61 360
116 109 109 Springing 7,000,000 78 69 360
115 108 108 Modified 8,800,000 62 51 360
221 217 217 Hard 222
-- NAP
-- NAP
-- NAP
119 112 112 Modified 7,150,000 75 60 300
119 112 112 Modified 6,400,000 81 70 360
120 113 113 Modified 73 59 300
-- NAP 1,100,000
-- NAP 2,150,000
-- NAP 2,260,000
-- NAP 1,385,000
101 97 97 Springing 6,500,000 75 67 360
116 113 113 Springing 6,200,000 74 66 336
74 74 74 Hard 80
-- NAP
-- NAP
118 114 114 Modified 6,500,000 68 59 360
119 116 116 Springing 6,600,000 67 53 300
117 110 110 Springing 8,600,000 51 42 300
118 111 111 Modified 5,900,000 73 64 360
240 236 236 Hard 245
119 115 115 Modified 5,500,000 77 68 370
240 236 236 Hard 245
118 114 114 Springing 5,790,000 71 59 300
240 236 236 Hard 245
119 112 112 Modified 6,500,000 61 50 300
96 92 92 Springing 5,700,000 68 62 360
119 115 115 Hard 265
116 112 112 Hard 5,525,000 69 62 360
119 115 115 Hard 265
119 117 117 Modified 5,650,000 68 54 300
119 112 112 Modified 4,830,000 79 68 360
241 237 237 Hard 243
117 112 112 Hard 4,600,000 80 65 300
119 112 112 Hard 5,200,000 69 58 300
119 115 115 Modified 5,150,000 70 57 300
119 115 115 Hard 265
116 109 109 Springing 5,225,000 67 54 300
119 115 115 Hard 265
119 116 116 Modified 4,100,000 84 74 336
97 93 93 Springing 5,000,000 69 62 360
116 109 109 Springing 6,000,000 57 50 360
119 115 115 Hard 265
119 116 116 Modified 4,150,000 79 69 360
120 113 113 Springing 5,700,000 58 40 240
81 74 74 Springing 4,450,000 74 66 300
119 115 115 Modified 4,400,000 73 64 360
119 117 117 Modified 6,800,000 47 38 300
117 104 104 Springing 8,200,000 38 27 240
96 92 92 Springing 4,100,000 75 69 360
116 109 109 Hard 4,100,000 75 66 360
229 225 225 Hard 235
119 112 112 Modified 4,100,000 73 60 300
119 116 116 Modified 4,200,000 70 61 360
119 112 112 Hard 4,000,000 74 64 360
119 116 116 Modified 4,460,000 65 62 360
115 111 111 Hard 3,925,000 72 65 360
115 112 112 Springing 4,490,000 61 54 360
245 241 241 Modified 246
96 92 92 Springing 4,150,000 65 59 360
117 110 110 Springing 6,000,000 51 40 360
117 110 110 Springing 4,600,000 59 49 300
192 192 192 Hard 195
246 242 242 Modified 246
96 92 92 Springing 5,100,000 52 47 360
96 92 92 Springing 3,540,000 75 68 360
118 113 113 Hard 4,100,000 63 52 300
119 112 112 Springing 3,450,000 72 50 240
228 228 228 Hard 226
245 241 241 Modified 246
115 112 112 Springing 3,700,000 62 55 360
246 242 242 Modified 246
115 112 112 Springing 3,550,000 63 55 360
232 228 228 Hard 233
118 116 116 Modified 2,800,000 79 63 300
100 96 96 Springing 4,100,000 54 45 300
114 107 107 Modified 3,150,000 70 58 300
245 241 241 Modified 246
246 242 242 Modified 246
116 113 113 Modified 3,400,000 63 56 360
119 115 115 Hard 265
246 242 242 Modified 246
119 117 117 Springing 3,050,000 69 56 300
231 231 231 Hard 233
246 242 242 Modified 246
246 242 242 Modified 246
96 93 93 Springing 2,700,000 75 68 360
237 237 237 Hard 238
96 92 92 Springing 2,800,000 69 63 360
119 115 115 Hard 241
119 117 117 Modified 2,460,000 77 67 360
242 238 238 Modified 245
245 241 241 Modified 246
119 112 112 Modified 2,500,000 75 61 300
244 240 240 Modified 245
119 115 115 Springing 2,400,000 77 61 300
243 239 239 Modified 246
241 237 237 Modified 245
241 237 237 Modified 245
238 238 238 Hard 236
245 241 241 Modified 246
118 113 113 Hard 2,100,000 81 66 300
230 226 226 Hard 229
115 112 112 Springing 2,720,000 60 53 360
246 242 242 Modified 246
242 238 238 Modified 245
117 112 112 Hard 2,500,000 62 51 300
239 239 239 Hard 240
115 112 112 Springing 2,510,000 61 54 360
115 112 112 Springing 2,560,000 58 52 360
117 110 110 Springing 2,965,000 50 41 300
119 112 112 Modified 1,750,000 83 73 360
115 108 108 Springing 2,050,000 68 56 300
96 92 92 Springing 1,800,000 75 68 360
235 231 231 Hard 240
119 116 116 Springing 2,300,000 57 50 360
116 109 109 Springing 2,125,000 60 53 360
234 230 230 Hard 233
119 117 117 Modified 74 65 360
NAP 730,000
NAP 830,000
119 112 112 Springing 1,465,000 72 63 360
116 109 109 Hard 1,500,000 66 48 300
115 112 112 Springing 1,075,000 51 45 360
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Actual
Year Built/ Unit of Occupancy U/W Ongoing Capital
Renovated Unit Measure Occupancy Period Occupancy Items Deposits
--------- ---- ------- --------- ------ --------- --------------
<S> <C> <C> <C> <C> <C> <C>
1991 1,079,076 Sq Ft 99% 8/20/97 92% $0.20
1988 412,436 Sq Ft 99% 9/12/97 96% $0.20
1925/1998 590 Rooms 83% 9/1/97 79% 4%
1947/1990 254,302 Sq Ft 100% 8/4/97 99% $0.35
1920/1996 311,144 Sq Ft 97% 10/1/97 95% $0.20
1987/1997 318 Rooms 76% 9/30/97 76% 4%
1991 244 Rooms 88% 12/31/96 80% 4%
1985 289,893 Sq Ft 98% 4/1/97 96% $0.20
1989 176,682 Sq Ft 100% 9/5/97 100% $0.20
1923/1997 156,864 Sq Ft 100% 8/31/97 93%
1991 336,663 Sq Ft 84% 9/30/97 85% $0.15
1991 115,130 Sq Ft 100% 7/3/97 95% $2.40
1997 171,962 Sq Ft 100% 10/15/97 100%
1979/1996 2,005 Pads 83% 7/25/97 83% $50
1997 246,621 Sq Ft 88% 9/30/97 98% $0.15
1997 177,757 Sq Ft 100% 10/15/97 100%
1901/1996 94/116,025 Units/Sq Ft 95% 5/13/97 92% $531
1952/1986 535 Units 99% 8/31/97 95%
NAP NAP
1982/1996 155 Rooms 80% 8/2/97 75%
1982/1996 108,475 Sq Ft 78% 7/18/97 78%
1991 260,224 Sq Ft 96% 10/15/97 94% $0.15
1950/1997 224,888 Sq Ft 100% 11/1/97 96% $0.15
1997 145,678 Sq Ft 100% 10/15/97 100%
1980 209,272 Sq Ft 99% 9/1/97 95% $0.15
1997 64,940 Sq Ft 100% 9/30/97 100%
1990/1992 218 Units 99% 10/16/97 95% $200
1972/1990 50,948 Sq Ft 100% 8/15/97 98% $0.15
1978/1997 131,580 Sq Ft 87% 9/1/97 87% $0.22
1970/1996 238 Rooms 70% 10/27/97 71%
1987/1993 769 Pads 86% 8/31/97 80% $50
1990 240 Units 98% 9/22/97 95% $250
1981 163,387 Sq Ft 100% 10/1/97 92% $0.20
557 Units
1985 160 Units 87% 8/19/97 82%
1984/1997 229 Units 85% 9/1/97 74%
1985 120 Units 99% 9/20/97 91%
1983 48 Units 94% 8/19/97 92%
323,224 Sq Ft
1989 149,695 Sq Ft 100% 8/31/97 99%
1989 173,529 Sq Ft 100% 8/31/97 98%
1966/1991 118,705 Sq Ft 94% 7/1/97 95% $0.20
1986 120,838 Sq Ft 100% 7/29/97 95% $0.25
1997 122,400 Sq Ft 100% 9/30/97 100%
1931/1985 63,150 Sq Ft 100% 11/7/97 95%
1990 90,530 Sq Ft 100% 9/29/97 97% $0.17
1981/1997 249 Rooms 76% 5/31/97 63% 5%
1990 230 Units 90% 9/23/97 91% $250
1970/1996 132 Units 97% 7/24/97 95% $273
1961/1995 172 Rooms 69% 8/31/97 66% 5%
1973 159 Rooms 81% 7/9/97 75% 5%
1931/1997 91,920 Sq Ft 96% 9/30/97 95% $0.21
1987 95,544 Sq Ft 100% 9/26/97 89% $0.20
1971 299 Pads 100% 10/31/97 93% $50
1993 97,000 Sq Ft 100% 10/15/97 100%
1988 112 Rooms 91% 11/3/97 80% 5%
1994/1997 96,000 Sq Ft 100% 10/15/97 100%
1993/1997 96,000 Sq Ft 100% 10/15/97 100%
1958/1970 128 Rooms 70% 7/29/97 65%
1975 65,629 Sq Ft 100% 10/31/97 95% $0.23
1961/1997 49,415 Sq Ft 100% 5/15/97 95% $0.20
225 Rooms
1995 63 Rooms 68% 7/31/97 63%
1989 102 Rooms 46% 7/31/97 59%
1998 60 Rooms 71% 7/31/97 69%
1987 119 Units 100% 4/29/97 95% $258
99,466 Sq Ft
1978 63,162 Sq Ft 98% 9/1/97 95%
1985 19,656 Sq Ft 89% 9/1/97 89%
1987 16,648 Sq Ft 100% 3/3/97 95%
1966/1997 160,093 Sq Ft 100% 8/7/97 95% $0.15
1985/1997 200 Rooms 73% 4/23/97 71% 4%
82,983 Sq Ft
1954/1987 14,094 Sq Ft 100% 10/1/97 95%
1978/1983 68,889 Sq Ft 93% 11/1/97 93%
1980/1996 153,716 Sq Ft 88% 10/31/97 88% $0.09
1997 60,000 Sq Ft 100% 8/15/97 95%
1899/1997 70 Rooms 90% 4/30/97 80% 5%
173,749 Sq Ft
1968/1975 91,269 Sq Ft 100% 8/18/97 95%
1968 82,480 Sq Ft 100% 8/18/97 100%
1989 67,262 Sq Ft 100% 11/18/97 100%
1987/1996 103,544 Sq Ft 100% 10/1/97 97%
1989 52,103 Sq Ft 91% 10/31/97 91%
1996 127,200 Sq Ft 100% 4/11/97 100%
1987 114,071 Sq Ft 100% 8/1/97 94% $0.27
1923/1977 35,700 Sq Ft 96% 9/30/97 91% $0.20
1972 204 Units 85% 10/16/97 88% $250
1980/1990 29,129 Sq Ft 97% 5/1/97 95% $0.21
1979 70 Units 99% 4/23/97 95% $273
291 Rooms
1987/1997 98 Rooms 100% 4/30/97 100%
1987/1997 98 Rooms 100% 4/30/97 100%
1987/1997 95 Rooms 100% 4/30/97 100%
1997 200,000 Sq Ft 100% 11/1/97 94% $0.05
1983 142 Units 93% 10/6/97 90% $250
357 Rooms
1973 63 Rooms 65% 10/1/97 64%
1979/1984 96 Rooms 66% 10/1/97 66%
1981 101 Rooms 64% 10/1/97 61%
1975 97 Rooms 53% 10/1/97 48%
1971 204 Units 96% 2/26/97 95% $283
1979/1996 112 Units 98% 8/24/96 91% $250
10,359 Sq Ft
1900/1990 3,979 Sq Ft 100% 11/1/97 100%
1900/1990 6,380 Sq Ft 100% 11/1/97 100%
1961/1996 53,050 Sq Ft 100% 8/1/97 94% $0.20
1996 78 Rooms 81% 10/10/97 80% 4%
1979 212,002 Sq Ft 99% 4/1/97 98% $0.15
1986 52,337 Sq Ft 100% 9/11/97 95% $0.20
1988 35,164 Sq Ft 100% 6/13/97 100%
1991 63,359 Sq Ft 100% 10/1/97 90% $0.20
1985 35,164 Sq Ft 100% 6/12/97 100%
1974 142 Rooms 64% 6/5/97 64% 5%
1990 37,500 Sq Ft 100% 6/11/97 100%
1978/1996 114 Rooms 62% 8/1/97 64% 5%
1971 215 Units 92% 2/26/97 81% $245
1985 44,722 Sq Ft 100% 11/18/97 100%
1870/1991 198,875 Sq Ft 60% 8/1/97 65% $0.17
1982 43,100 Sq Ft 100% 11/18/97 100%
1990 42,963 Sq Ft 100% 10/10/97 95% $0.36
1990 100 Units 98% 9/22/97 95% $250
1957/1977 10,125 Sq Ft 100% 9/30/97 100%
1983 156,081 Sq Ft 85% 10/27/97 82% $0.15
1940/1993 183 Rooms 73% 10/21/97 73% 5%
1954/1990 37,751 Sq Ft 84% 9/18/97 84% $0.25
1985 43,512 Sq Ft 100% 11/18/97 100%
1987 99 Beds 86% 4/10/97 86%
1986 41,219 Sq Ft 100% 11/18/97 100%
1973 70 Units 98% 9/29/97 95% $420
1965 192 Units 90% 2/5/97 89% $284
1981 92,143 Sq Ft 100% 6/4/97 95% $0.11
1984 47,544 Sq Ft 100% 11/18/97 100%
1982 69,954 Sq Ft 100% 10/13/97 97% $0.15
1985 22,890 Sq Ft 100% 10/30/97 95% $0.96
1930 57 Units 95% 7/24/97 94% $327
1988 28,346 Sq Ft 100% 9/1/97 94% $0.15
1974/1996 79 Rooms 61% 8/31/97 63% 4%
1978/1987 77 Rooms 87% 3/1/97 80% 5%
1979 158 Units 97% 2/26/97 93% $280
1984 5,400 Sq Ft 100% 4/4/97 95% $0.15
1996 11,200 Sq Ft 100% 4/29/97 100%
1968 98 Beds 95% 4/15/97 95% $275
1980 123,759 Sq Ft 100% 10/6/97 92% $0.17
1985 69,488 Sq Ft 100% 8/1/97 92% $0.23
1984 254 Pads 74% 10/16/97 74% $50.20
1984 98,800 Sq Ft 98% 3/18/97 94% $0.23
1973 54,801 Sq Ft 100% 11/30/97 95% $0.20
1998 10,125 Sq Ft 100% 10/29/97 100%
1986 144 Units 94% 3/26/97 93% $300
1973/1996 65,400 Sq Ft 100% 9/18/97 95%
1985/1995 103 Rooms 64% 5/16/97 66% 4%
1988 2,900 Sq Ft 100% 8/11/97 100%
1998 9,750 Sq Ft 100% 11/25/97 100%
1971 192 Units 85% 2/26/97 90% $276
1983 130 Units 92% 2/28/97 85% $333
1972/1983 168,191 Sq Ft 86% 8/12/97 75% $0.15
Various Years 12,588 Sq Ft 100% 10/31/97 94% $0.59
1996 11,180 Sq Ft 100% 9/25/97 100%
1998 10,125 Sq Ft 100% 11/4/97 100%
1976 45,454 Sq Ft 95% 11/30/97 95% $0.20
1998 10,125 Sq Ft 100% 11/26/97 100%
1976 46,625 Sq Ft 100% 11/30/97 95% $0.20
1997 10,500 Sq Ft 100% 5/1/97 100%
1973/1992 136 Units 100% 9/1/97 95%
1991 90,910 Sq Ft 98% 8/1/97 98% $0.20
1984 36,668 Sq Ft 88% 4/15/97 88% $0.21
1998 10,125 Sq Ft 100% 10/17/97 100%
1998 10,125 Sq Ft 100% 11/26/97 100%
1986 43,220 Sq Ft 87% 7/1/97 87% $0.20
1972 36,813 Sq Ft 100% 11/18/97 100%
1998 10,125 Sq Ft 100% 11/19/97 100%
1996 44 Rooms 80% 7/1/97 75%
1997 10,594 Sq Ft 100% 3/8/97 100%
1998 10,125 Sq Ft 100% 11/26/97 100%
1998 10,125 Sq Ft 100% 11/26/97 100%
1973 100 Units 95% 2/26/97 93% $268
1997 11,180 Sq Ft 100% 11/1/97 100% $0.30
1970 102 Units 92% 1/26/97 94% $282
1985 32,251 Sq Ft 100% 11/18/97 100%
1973/1997 22,428 Sq Ft 100% 9/12/97 94% $0.22
1998 10,125 Sq Ft 100% 9/2/97 100%
1998 10,125 Sq Ft 100% 10/17/97 100%
1927/1993 24,000 Sq Ft 100% 10/10/97 90% $0.15
1998 10,125 Sq Ft 100% 10/21/97 100%
1987 56,319 Sq Ft 91% 10/10/97 91% $0.04
1998 10,125 Sq Ft 100% 8/15/97 100%
1998 10,125 Sq Ft 100% 7/17/97 100%
1998 10,568 Sq Ft 100% 7/31/97 100%
1997 11,325 Sq Ft 100% 9/22/97 100% $0.29
1998 10,125 Sq Ft 100% 10/17/97 100%
1970/1985 35,291 Sq Ft 100% 5/30/97 95% $0.19
1997 11,180 Sq Ft 100% 8/28/97 100% $0.24
1973 33,791 Sq Ft 100% 11/30/97 95% $0.20
1998 10,125 Sq Ft 100% 11/20/97 100%
1998 8,760 Sq Ft 100% 9/24/97 100%
1973 65,400 Sq Ft 84% 6/9/97 83% $0.15
1997 11,325 Sq Ft 100% 9/30/97 100% $0.30
1973 30,932 Sq Ft 100% 11/30/97 95% $0.20
1973 30,773 Sq Ft 100% 11/30/97 95% $0.20
1996 37,125 Sq Ft 74% 7/1/97 74% $0.24
1972 84 Units 88% 9/29/97 90% $500
1920 35 Units 91% 3/29/97 91% $0.24
1975 80 Units 88% 2/6/97 95% $295
1997 11,288 Sq Ft 100% 7/1/97 100% $1.65
1978/1995 56,000 Sq Ft 100% 8/25/97 100% $0.18
1985 24,558 Sq Ft 100% 6/7/97 95% $0.30
1997 11,325 Sq Ft 100% 5/23/97 100% $0.14
NAP NAP
1874/1988 23,670 Sq Ft 72% 10/29/97 72%
1890/1987 32 Units 94% 10/29/97 94%
1995 6,525 Sq Ft 100% 1/18/96 95% $0.20
1994/1996 73,744 Sq Ft 85% 6/5/97 86% $0.14
1975 8,000 Sq Ft 100% 11/30/97 95% $0.20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lease Lease Lease
Expiration % of Expiration % of Expiration % of
Tenant 1 Date 1 Total SF Tenant 2 Date 2 Total SF Tenant 3 Date 3 Total SF
-------- ------ -------- -------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MGM 3-May 24 MGM 4-May 2
ING Bank 4-Feb 33 Daffy\'s 11-Jan 13 Boston Consulting 4-Nov 9
Ralphs 4-Jan 20 General Cinema 5-May 17
GSA/IRS & Expansions 7-Nov 47 MFS DataNet 7-Dec 10
Cellco (Bell Atlantic) 6-Jun 100
Donna Karan New York 8-Dec 83
Media Play 9-Jan 14 Sportslife 7-Jan 11 T.J. Maxx 1-Oct 10
Walt Disney Company 1-Mar 43 Walt Disney Company 2-Mar 29 Walt Disney Company Mar-00 28
(3, 4 & 5) (6 & 7) (1 & 2)
Kmart Corporation 22-Oct 100
Service Merchandise 13-Apr 20 Stein Mart 7-Apr 15 Circuit City 18-Jan 11
Kmart Corporation 22-Oct 100
COMP USA 13-Dec 25
Kmart 16-Sep 33 Weis Market 6-Sep 19
KLN Prescision Machining 2-Jun 46 Inhale Therapeutic 9-Jun 54
Corp. Systems
Kmart Corporation 22-Oct 100
US Post Office 1-Aug 12
Cobb Theatres II, Inc. 21-Dec 100
Super Care Drug Jul-99 10
Corem Healthcare 1-Aug 23
International Data Products Feb-00 34 Penril Sep-99 34 Penrit Datacomm Aug-00 16
Networks, Inc.
Kmart 14-Mar 58 Pick'nSave 9-Mar 27
Kmart 13-Oct 50 Pick'n Save 8-Dec 27
Air Express International 1-Jun 28
District of Columbia Oct-98 100
Garden Ridge 17-Oct 100
State of New York- 1-Nov 21
Facilities
Superfresh 15-Jun 49
Northwestern National Jan-98 45
Kmart Corporation 22-Oct 100
Kmart Corporation 22-Oct 100
Kmart Corporation 22-Oct 100
Sneaker Stadium 7-Jan 37
Adams Super Food Store 2-Apr 51
Auguste Restaurant 7-Apr 22
C-Town Supermarket 17-Feb 28
Acme Stores 20-Dec 43
Dick's Clothing & 17-Jun 100
Sporting Gds
Baltek Manufacturing 2-Feb 100
Zenith Laboratories Jan-99 100
Furr's Supermarkets, Inc. 19-Dec 100
Kroger 20-Jul 55
25 Hour Fitness 10-Jan 42
The Alling & Cory Co. 22-Apr 100
PBM Graphics Mar-99 69
Frederica, Ltd. Aug-00 6
California Pizza Kitchen 7-Aug 18
Maurello Inc. Sep-00 4
Amazon.com 2-Oct 100
Victoria's Secret 4-Jan 100
The Limited (Express) 4-Jan 100
Heartland Bank 6-Jun 26
Mini Storage-473 Units 15-Mar 31 Aurora Pump Jan-99 14 Cucamonga Christian Jan-00 14
Fellowship
National Comm Aug-98 20
Bally Total Fitness Club 17-Dec 100
Voice Technologies Feb-00 41
Grp-Office
Bally Total Fitness Club 17-Dec 100
Bally Total Fitness Club 17-Dec 100
Furr's Supermarkets, Inc. 19-Dec 100
TRC Jul-00 27 Cogenex 2-Oct 14
Furr's Supermarkets, Inc. 19-Dec 100
Mercerville Medical Dec-98 10
Speen Street CVS, Inc. 18-Jan 100
Hobby Lobby Stores 11-Apr 34 Consolidated Stores 1-Jan 16
Corp.
Furr's Supermarkets, Inc. 19-Dec 100
Furr's Supermarkets, Inc. 19-Dec 100
Oakgrove Youth Football Oct-98 13
Furr's Supermarkets, Inc. 19-Dec 100
Big Lots (Kroger sublease) 7-Mar 49
404 Check Express 7-Apr 5
Road House Cafe Mar-98 13
Rite Aid 4-Jul 100
Eckerd Corporation 16-Jun 100
Kmart 5-Sep 49 Delchamps 5-Sep 23
Solid Rock Center 1-Oct 28
Hills Stores Company 10-Jan 81
G.S.A.-Marine Corp. Apr-98 12
CVS Pharmacy 19-Jan 100
Vaultline, Inc. 1-Sep 8
The Southland Corporation 13-Dec 100
CVS Pharmacy 19-Jan 100
Woolworth Corp #6297 3-Jan 61
JCrew Factory Store 2-Mar 48
Rite Aid of New York, Inc. 16-Dec 100
CVS Pharmacy 19-Jan 100
Windsor Vineyards 2-Mar 12
Hook-SupeRx, Inc 19-Jan 100
Auto-By-Tel Corporation 1-Sep 26
Garfield CVS, INc. 17-Apr 100
Premier Graphics Aug-99 29
Maryland Sunworks, Inc. Oct-98 11
CVS Pharmacy 19-Jan 100
Hook-SupeRx, Inc. 19-Jan 100
YMCA 2-Jul 26
Furr's Supermarkets, Inc. 19-Dec 100
CVS Pharmacy 19-Jan 100
Eckerd Corporation 17-Mar 100
Hook-SupeRx, Inc. 19-Jan 100
Revco Discount Drug 19-Jan 100
Center - E
Rite Aid 17-Sep 100
Furr's Supermarkets, Inc. 19-Dec 100
Image Equities, Inc. Feb-00 11
CVS Pharmacy 19-Jan 100
CVS Pharmacy 19-Jan 100
Seaman Furniture Co., Inc. 3-May 100
CVS Pharmacy 19-Jan 100
Power Systems Engineering Sep-99 19
CVS Pharmacy 19-Jan 100
CVS Pharmacy 18-Jan 100
CVS Pharmacy 18-Feb 100
Rite Aid Of Georgia, Inc. 17-Oct 100
CVS Pharmacy 19-Jan 100
Chatterly Elegant Desserts 4-Dec 83
Rite Aid/Kerr Drug, Inc. 17-Mar 100
International Data Group Mar-99 37
CVS Pharmacy 19-Jan 100
CVS Pharmacy 19-Jan 100
Winn-Dixie 5-Jan 43
Rite-Aid 17-Nov 100
Golden Gate University Jul-98 20
Westland Insurance 1-Feb 20
Rite Aid - Hinesville 17-Jun 100
Kash n' Karry 3-Feb 100
Gee22 L.L.C. 6-Feb 17
Rite Aid of Georgia, Inc. 17-Jun 100
Western Mass Training 2-Jun 9 Hannifan Associates 1-Mar 8 Advance Neck & Dec-00 6
Back Center
Able Physical Therapy, Inc. 3-Jul 7
Hollywood Video 10-Nov 100
Chanteclair Restaurant Jun-00 100
</TABLE>
<PAGE>
ANNEX B
CREDIT LEASE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
CSFB
Loan Asset Control
No. No. # Property Name/Location Tenant/Lease Guarantor
--- --- ------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
88 22 BALLY'S-Newport News, Virginia Bally Total Fitness Holding Corp
84 21 BALLY'S-Miami, Florida Bally Total Fitness Holding Corp
86 20 BALLY'S-Davie, Florida Bally Total Fitness Holding Corp
24 41 Cobb Theaters - Ocala, FL Cobb Theatres II, Inc.
96 61 CVS - Natick, MA CVS Center, Inc
122 58 CVS Pharmacy - Greenville, SC CVS Corporation
127 202 CVS Pharmacy - Hyannis, MA CVS Corporation
133 191 CVS Pharmacy - Culpeper, Va CVS Corporation
135 206 Hook-SupeRx, Inc. - Knoxville Street, Peoria, IL CVS Corporation
137 57 CVS-Garfield, NJ CVS Corporation
141 59 CVS Pharmacy - Lilburn, Ga CVS Corporation
142 207 Hook-SupeRx, Inc - Prospect Road, Peoria, IL CVS Corporation
145 194 CVS Pharmacy - Kernersville, NC CVS Corporation
148 205 Hook-SupeRx, Inc - Big Hollow Road, Peoria, IL CVS Corporation
149 204 Revco Discount Drug Center - Elkin, NC CVS Corporation
155 62 CVS Pharmacy - North Conway, NH CVS Corporation
156 60 CVS Pharmacy - Monroe, NC CVS Corporation
158 65 Revco Discount Drug Center - Washington Court House, OH CVS Corporation
160 54 CVS Pharmacy - Anderson, SC CVS Corporation
161 56 CVS Pharmacy - Cumming, Ga CVS Corporation
162 64 CVS Pharmacy - Philadelphia, PA CVS Corporation
164 55 CVS Pharmacy - Burnsville, NC CVS Corporation
168 196 CVS Pharmacy - Athens, WV CVS Corporation
169 63 CVS Pharmacy - Oxford, Ma CVS Corporation
115 71 Eckerd's Drug Store - Plano, TX Eckerd Corporation
147 70 Eckerd's Drug Store - Acworth, GA Eckerd Corporation
64 077A Furr's - Mesa (946) El Paso, TX Furr's Supermarkets, Inc.
91 077H Furr's - Eubank (875) Albuquerque, NM Furr's Supermarkets, Inc.
93 077G Furr's - Louisiana (876) Albuquerque, NM Furr's Supermarkets, Inc.
100 077C Furr's - Geo. Dieter (938) El Paso, TX Furr's Supermarkets, Inc.
102 077D Furr's - Viscount (937) El Paso, TX Furr's Supermarkets, Inc.
106 077B Furr's Americas (944) El Paso, TX Furr's Supermarkets, Inc.
144 077E Furr's - Montana (934) El Paso, TX Furr's Supermarkets, Inc.
153 077F Furr's - Ruidoso (905) Ruidoso, NM Furr's Supermarkets, Inc.
36 78 Garden Ridge- Lewisville, TX Garden Ridge LP
13 104 Kmart Store #4983 - San Jose, CA Kmart Corporation
16 99 Kmart Store #4990 - Canton, MI Kmart Corporation
22 103 Kmart Store #4991 - Maple Heights, OH Kmart Corporation
47 100 Kmart Store #3718 - Skillman - Dallas, Tx Kmart Corporation
49 102 Kmart Store #3863 - Cypress Point - Houston, Tx Kmart Corporation
50 101 Kmart Store #3809 - Willowbrook - Houston, Tx Kmart Corporation
73 119 Motel 6-Summary Motel 6 GP, Inc.
73 1 119A Motel 6 - Shepherdsville, KY Motel 6 GP, Inc.
73 2 119B Motel 6 - Georgetown, KY Motel 6 GP, Inc.
73 3 119C Motel 6 - Corapolis, PA Motel 6 GP, Inc.
132 148 Rite Aid - Kingston, NY Rite Aid Corporation
151 141 Rite Aid - Augusta, ME Rite Aid Corporation
163 146 Rite Aid - Jonesboro, Battle Creek, GA Rite Aid Corporation
166 143 Rite Aid - Gastonia, NC Rite Aid Corporation
171 147 Rite Aid - Jonesboro, Flint, GA Rite Aid Corporation
178 145 Rite Aid - Hinesville, GA Rite Aid Corporation
181 142 Rite Aid - Claxton, GA Rite Aid Corporation
79 180 Victoria's Secret/Limited Express Summary The Limited Inc.
79 1 180A Victoria's Secret / The Limited Express- Philadelphia, PA The Limited Inc.
79 2 180B The Limited Express- Philadelphia, PA The Limited Inc.
126 10 7-Eleven - Anaheim, CA The Southland Corporation
67 178 Union Camp-Valley View, OH Union Camp Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cut-off
Property Tenant/Lease Date
Occupancy Guarantor Rating Principal Leased
Property Type (%) (S&P/ Moody's)(7) Lease Type Balance Value (1)
- ------------- --- ----------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Health Club 100 B+ B1 Bondable $4,005,484 $4,100,000
Health Club 100 B+ B1 Bondable $4,291,414 $4,300,000
Health Club 100 B+ B1 Bondable $4,148,553 $4,300,000
Theater 100 NA NA Triple Net $11,257,025 $11,500,000
Retail 100 NA NA Double Net $3,671,358 $3,600,000
Retail 100 A- A3 Bondable $2,723,636 $2,810,000
Retail 100 A- A3 Bondable $2,659,530 $3,115,000
Retail 100 A- A3 Bondable $2,384,068 $2,560,000
Retail 100 A- A3 Bondable $2,232,301 $2,355,000
Retail 100 A- A3 Double Net $2,210,521 $2,250,000
Retail 100 A- A3 Bondable $2,169,236 $2,250,000
Retail 100 A- A3 Bondable $2,167,717 $2,450,000
Retail 100 A- A3 Bondable $2,107,872 $2,150,000
Retail 100 A- A3 Bondable $2,046,885 $2,420,000
Retail 100 A- A3 Bondable $2,024,659 $2,030,000
Retail 100 A- A3 Bondable $1,880,945 $2,185,000
Retail 100 A- A3 Bondable $1,879,337 $1,950,000
Retail 100 A- A3 Bondable $1,840,312 $1,870,000
Retail 100 A- A3 Bondable $1,763,832 $1,800,000
Retail 100 A- A3 Bondable $1,763,399 $1,830,000
Retail 100 A- A3 Bondable $1,761,774 $1,920,000
Retail 100 A- A3 Bondable $1,728,085 $1,790,000
Retail 100 A- A3 Bondable $1,596,647 $1,740,000
Retail 100 A- A3 Bondable $1,575,943 $1,830,000
Retail 100 A- (7) Baa1 (7) Triple Net $3,015,326 $3,140,000
Retail 100 A- (7) Baa1 (7) Double Net $2,069,291 $2,300,000
Retail 100 NA NA Bondable $5,855,974 $5,950,000
Retail 100 NA NA Bondable $3,887,373 $3,980,000
Retail 100 NA NA Bondable $3,831,286 $3,860,000
Retail 100 NA NA Bondable $3,488,345 $3,520,000
Retail 100 NA NA Bondable $3,484,438 $3,520,000
Retail 100 NA NA Bondable $3,335,814 $4,140,000
Retail 100 NA NA Bondable $2,120,742 $2,150,000
Retail 100 NA NA Bondable $1,923,027 $2,080,000
Retail 100 NA NA Triple Net $9,315,796 $9,800,000
Retail 100 B+ Ba3 Bondable $20,026,222 $21,300,000
Retail 100 B+ Ba3 Bondable $17,541,461 $18,000,000
Retail 100 B+ Ba3 Bondable $13,756,464 $13,900,000
Retail 100 B+ Ba3 Bondable $7,136,812 $7,200,000
Retail 100 B+ Ba3 Bondable $6,957,911 $7,400,000
Retail 100 BB Ba3 Bondable $6,699,331 $7,200,000
Hotel NA NA NA Triple Net $5,421,033 $5,670,000
Hotel NA NA NA Triple Net NA $1,720,000
Hotel NA NA NA Triple Net NA $1,320,000
Hotel NA NA NA Triple Net NA $2,630,000
Retail 100 BBB+ Baa1 Double Net $2,410,663 $2,600,000
Retail 100 BBB+ Baa1 Double Net $2,012,829 $2,200,000
Retail 100 BBB+ Baa1 Double Net $1,736,367 $1,800,000
Retail 100 BBB+ Baa1 Double Net $1,677,618 $1,800,000
Retail 100 BBB+ Baa1 Double Net $1,533,695 $1,600,000
Retail 100 BBB+ Baa1 Double Net $1,340,932 $1,700,000
Retail 100 BBB+ Baa1 Double Net $1,237,929 $1,600,000
Retail NA BBB+ Baa2 Double Net $4,400,254 $5,500,000
Retail 100 BBB+ Baa2 Double Net NA $2,200,000
Retail 100 BBB+ Baa2 Double Net NA $3,300,000
Retail 100 BB+ (7) Ba1 Triple Net $2,668,289 $2,800,000
Industrial 100 A- A1 Bondable $5,625,643 $5,650,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stated Expiration Cut-Off Date
Leased Dark Dark Maturity of Primary Annual Debt Cut-Off Date
LTV Value (2) LTV Date Lease Term Service Annual Net Rent DSCR
--- --------- --- ---- ---------- ------- --------------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
98% $2,800,000 143% 12/11/17 12/31/17 $434,455 $458,469 1.06
100% $3,000,000 143% 12/11/17 12/31/17 $465,468 $491,194 1.06
96% $2,900,000 143% 12/11/17 12/31/17 $449,973 $474,836 1.06
98% $9,300,000 121% 10/11/22 12/19/21 $1,059,961 $1,068,300 1.01
102% $3,200,000 115% 1/11/18 1/31/18 $336,374 $349,313 1.04
97% $2,775,000 98% 5/6/18 1/31/19 $186,930 NAP 1
85% $3,050,000 87% 6/6/18 1/31/19 $180,711 NAP 1
93% $2,500,000 95% 5/6/18 1/31/19 $163,579 NAP 1
95% $2,350,000 95% 6/6/18 1/31/19 $151,724 NAP 1
98% $1,900,000 116% 4/11/17 1/31/18 $199,425 $201,285 1.01
96% $2,250,000 96% 5/6/18 1/31/19 $152,265 NAP 1
88% $2,425,000 89% 6/6/18 1/31/19 $147,335 NAP 1
98% $2,150,000 99% 6/6/18 1/31/19 $142,904 NAP 1
85% $2,410,000 85% 6/6/18 1/31/19 $139,122 NAP 1
100% $1,990,000 102% 6/6/18 1/31/19 $136,835 NAP 1
86% $2,135,000 88% 2/6/18 1/31/19 $136,888 NAP 1
96% $1,950,000 96% 5/6/18 1/31/19 $131,916 NAP 1
98% $1,825,000 101% 4/6/18 1/31/19 $130,298 NAP 1
98% $1,800,000 98% 3/6/18 1/31/19 $128,014 NAP 1
96% $1,830,000 96% 1/6/18 1/31/18 $126,068 NAP 1
92% $1,920,000 92% 1/6/18 2/1/18 $122,883 NAP 1
97% $1,760,000 98% 5/6/18 1/31/19 $118,868 NAP 1
92% $1,695,000 94% 6/6/18 1/31/19 $108,490 NAP 1
86% $1,800,000 88% 2/6/18 1/31/19 $110,026 NAP 1
96% $2,100,000 144% 1/11/17 1/5/17 $290,902 $290,902 1
90% $1,700,000 122% 3/11/17 3/7/17 $191,456 $193,575 1.01
98% $4,630,000 126% 12/11/19 12/31/19 $566,513 $574,263 1.01
98% $3,170,000 123% 12/11/19 12/31/19 $385,808 $408,252 1.06
99% $2,570,000 149% 12/11/19 12/31/19 $383,755 $408,252 1.06
99% $2,450,000 142% 12/11/19 12/31/19 $349,363 $361,146 1.03
99% $2,730,000 128% 12/11/19 12/31/19 $349,365 $361,146 1.03
81% $2,190,000 152% 12/11/19 12/31/19 $332,610 $423,954 1.27
99% $2,130,000 100% 12/11/19 12/31/19 $212,657 $219,828 1.03
92% $1,130,000 170% 12/11/17 12/31/19 $188,631 $208,257 1.1
95% $7,888,000 118% 10/11/20 10/31/17 $923,033 $929,288 1.01
94% $17,200,000 116% 11/1/22 10/31/22 $1,903,968 $1,903,968 1
97% $14,500,000 121% 11/1/22 10/31/22 $1,658,192 $1,658,192 1
99% $11,300,000 122% 11/1/22 10/31/22 $1,300,397 $1,300,397 1
99% $5,600,000 127% 11/1/22 10/31/22 $674,642 $674,642 1
94% $5,800,000 120% 11/1/22 10/31/22 $657,730 $657,730 1
93% $5,500,000 122% 11/1/22 10/31/22 $633,287 $633,287 1
96% $8,500,000 64% 5/11/16 5/30/16 $489,127 $500,000 1.02
NA $2,900,000 NA
NA $2,400,000 NA
NA $3,200,000 NA
93% $2,100,000 115% 12/11/16 12/29/16 $231,000 $233,236 1.01
91% $1,800,000 112% 9/11/17 9/5/17 $189,520 $202,350 1.07
96% $1,600,000 109% 10/11/17 10/17/17 $162,927 $166,324 1.02
93% $1,400,000 120% 2/11/17 3/16/17 $164,172 $165,879 1.01
96% $1,300,000 118% 11/11/17 11/30/17 $141,319 $146,172 1.03
79% $1,400,000 96% 7/11/17 6/30/17 $137,222 $156,051 1.14
77% $1,300,000 95% 6/11/17 6/1/17 $132,424 $143,883 1.09
80% $2,100,000 210% 2/11/04 3/31/04 $828,221 $842,957 1.02
NA $800,000 NA
NA $1,300,000 NA
95% $2,200,000 121% 12/11/13 12/31/13 $259,000 $259,008 1
100% $4,600,000 122% 5/1/22 4/30/22 $411,816 $411,816 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First Step First Step First Step First Step Second Step Second Step Second Step Second Step
Date of Date Annual Date Annual Date Date of Date Annual Date Annual Date
Debt Service Debt Service Net Rent DSCR (3) Debt Service Debt Service Net Rent DSCR (3)
- ------------ ------------ -------- -------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8/11/02 $447,489 $472,223 1.06 8/11/07 $460,913 $486,390 1.06
8/11/02 $479,433 $505,929 1.06 8/11/07 $493,816 $521,107 1.06
8/11/02 $463,472 $489,083 1.06 8/11/07 $477,377 $503,755 1.06
11/11/02 $1,091,760 $1,100,349 1.01 11/11/07 $1,124,513 $1,133,359 1.01
10/11/07 $361,187 $374,625 1.04
6/6/98 $230,614 $230,614 1 5/6/03 $244,451 $244,451 1
7/6/98 $223,884 $246,156 1.1 6/6/03 $237,317 $260,925 1.1
6/6/98 $201,831 $201,831 1 5/6/03 $213,941 $213,941 1
7/6/98 $200,613 $236,925 1.18
7/11/07 $215,467 $217,350 1.01 7/11/12 $232,872 $234,780 1.01
6/6/98 $185,913 $185,914 1 5/6/03 $197,068 $197,068 1
7/6/98 $194,809 $232,875 1.2
7/6/98 $177,217 $177,218 1 6/6/03 $187,850 $187,850 1
7/6/98 $183,950 $229,939 1.25
9/6/98 $170,649 $170,649 1 8/6/03 $180,888 $180,888 1
4/6/98 $161,725 $185,794 1.15 3/6/03 $174,663 $198,754 1.14
6/6/98 $161,068 $161,068 1 5/6/03 $170,732 $170,732 1
6/6/98 $158,988 $158,988 1 5/6/03 $168,527 $168,527 1
4/6/98 $154,334 $154,334 1 3/6/03 $163,594 $163,594 1
3/6/98 $153,001 $156,933 1.03 2/6/03 $162,417 $166,349 1.02
3/6/98 $150,689 $154,305 1.02 2/6/03 $159,947 $163,563 1.02
6/6/98 $146,508 $146,508 1 5/6/03 $155,298 $155,298 1
7/6/98 $134,409 $134,409 1 6/6/03 $142,473 $142,473 1
4/6/98 $135,061 $148,307 1.1 3/6/03 $143,164 $157,154 1.1
2/11/02 $305,447 $305,447 1 2/11/07 $320,719 $320,719 1
4/11/02 $196,753 $198,872 1.01 4/11/07 $202,050 $204,169 1.01
1/11/99 $588,888 $596,944 1.01 1/11/01 $612,396 $620,774 1.01
1/11/01 $406,878 $430,548 1.06 1/11/04 $429,423 $454,404 1.06
1/11/01 $404,713 $430,548 1.06 1/11/04 $427,137 $454,404 1.06
1/11/01 $368,442 $380,869 1.03 1/11/04 $388,858 $401,973 1.03
1/11/01 $368,445 $380,869 1.03 1/11/04 $388,860 $401,973 1.03
1/11/01 $350,775 $447,107 1.27 1/11/04 $370,211 $471,881 1.27
1/11/01 $224,270 $231,833 1.03 1/11/04 $236,697 $244,679 1.03
1/11/01 $201,836 $222,835 1.1 1/11/04 $215,965 $238,434 1.1
6/11/99 $534,476 $546,357 1.02 6/11/00 $545,166 $557,284 1.02
11/11/00 $929,376 $944,112 1.02
4/11/98 $259,008 $259,006 1 1/11/99 $295,008 $295,008 1
5/1/02 $473,588 $473,588 1 5/1/07 $544,627 $544,627 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Third Step Third Step Third Step Third Step Fourth Step Fourth Step Fourth Step Fourth Step
Date of Date Annual Date Annual Date Date of Date Annual Date Annual Date
Debt Service Debt Service Net Rent DSCR (3) Debt Service Debt Service Net Rent DSCR (3)
- ------------ ------------ -------- -------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8/11/12 $474,741 $500,981 1.06
8/11/12 $508,630 $536,740 1.06
8/11/12 $491,698 $518,868 1.06
11/11/12 $1,158,248 $1,167,360 1.01 11/11/17 $1,192,995 $1,202,381 1.01
5/6/08 $259,117 $259,117 1 5/6/13 $274,668 $274,668 1
6/6/08 $251,556 $276,581 1.1 6/6/13 $266,649 $293,176 1.1
5/6/08 $226,777 $226,777 1 5/6/13 $240,384 $240,384 1
5/6/08 $208,892 $208,892 1 5/6/13 $221,426 $221,426 1
6/6/08 $199,121 $199,121 1 6/6/13 $211,068 $211,069 1
8/6/08 $191,741 $191,741 1 8/6/13 $203,245 $203,245 1
3/6/08 $188,636 $212,726 1.13 3/6/13 $203,727 $227,813 1.12
5/6/08 $180,976 $180,976 1 5/6/13 $191,834 $191,835 1
5/6/08 $178,639 $178,639 1 5/6/13 $189,357 $189,357 1
3/6/08 $173,410 $173,410 1 3/6/13 $183,815 $183,815 1
2/6/08 $172,398 $176,330 1.02 2/6/13 $182,978 $186,910 1.02
2/6/08 $169,761 $173,377 1.02 2/6/13 $180,163 $183,780 1.02
5/6/08 $164,616 $164,616 1 5/6/13 $174,493 $174,493 1
6/6/08 $151,022 $151,022 1 6/6/13 $160,083 $160,083 1
3/6/08 $151,754 $166,615 1.1 3/6/13 $160,860 $176,602 1.1
2/11/12 $336,755 $336,755 1
4/11/12 $207,347 $209,466 1.01
1/11/03 $637,094 $645,810 1.01 1/11/05 $663,043 $672,114 1.01
1/11/07 $453.55 $479,930 1.06 12/11/07 $479,930 $479,930 1
1/11/07 $451,131 $479,930 1.06 12/11/07 $479,930 $479,930 1
1/11/07 $410,702 $424,554 1.03 12/11/07 $424,554 $424,554 1
1/11/07 $410,705 $424,554 1.03 12/11/07 $424,554 $424,554 1
1/11/07 $391,008 $498,389 1.27 12/11/07 $498,389 $498,389 1
1/11/07 $249,994 $258,424 1.03 12/11/07 $258,424 $258,424 1
1/11/07 $231,082 $255,124 1.1 12/11/07 $255,124 $255,124 1
6/11/01 $556,069 $568,430 1.02 6/11/02 $567,191 $579,798 1.02
1/11/02 $310,008 $310,008 1 1/11/05 $320,004 $320,004 1
5/1/12 $626,321 $626,321 1 5/1/17 $720,269 $720,269 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fifth Step Fifth Step Fifth Step Fifth Step Sixth Step Sixth Step Sixth Step Sixth Step
Date of Date Annual Date Annual Date Date of Date Annual Date Annual Date
Debt Service Debt Service Net Rent DSCR (3) Debt Service Debt Service Net Rent DSCR (3)
- ------------ ------------ -------- -------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1/11/07 $690,304 $699,748 1.01 12/11/07 $699,748 $699,748 1
1/11/12 $499,439 $499,439 1 1/11/17 $519,924 $519,924 1
1/11/12 $499,439 $499,439 1 1/11/17 $519,924 $519,924 1
1/11/12 $441,812 $441,812 1 1/11/17 $459,934 $459,934 1
1/11/12 $441,812 $441,812 1 1/11/17 $459,934 $459,934 1
1/11/12 $518,649 $518,649 1 1/11/17 $539,922 $539,922 1
1/11/12 $268,929 $268,929 1 1/11/17 $279,959 $279,959 1
1/11/12 $267,880 $267,880 1
6/11/03 $578,535 $591,394 1.02 6/11/04 $590,105 $603,222 1.02
1/11/09 $328,008 $328,008 1.00
</TABLE>
<PAGE>
ANNEX C
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
COMPARATIVE FINANCIAL STATUS REPORT
as of ______________________
<TABLE>
<CAPTION>
ORIGINAL UNDERWRITING INFORMATION
---------------------------------
BASIS YEAR
-------------------
LAST
CURRENT PAID ANNUAL PROPERTY FINANCIAL
LOAN SCHED THRU DEBT IMPACT INFO AS OF % TOTAL $ (1)
NUMBER CITY STATE BALANCE DATE SERVICE DATE DATE OCC REVENUE NOI DSC
- ------ ---- ----- ------- ---- ------- -------- ---------- --- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans currently in deal with or with out information largest to smallest loan
Total: $ $ WA $ $ WA
- --------------------------------------------------------------------------------------------------
RECEIVED
FINANCIAL INFORMATION: LOANS BALANCE
# % $ %
CURRENT FULL YEAR:
CURRENT FULL YR. RECEIVED WITH DSC LESS THAN 1:
PRIOR FULL YEAR:
PRIOR FULL YR. RECEIVED WITH DSC LESS THAN 1:
QUARTERLY FINANCIALS:
- -----------------------------------------------------------------------------------------------------
<CAPTION>
PRIOR FULL YEAR OPERATING INFORMATION CURRENT ANNUAL OPERATING INFORMATION
----------------------------------------- -------------------------------------
AS OF____________ NORMALIZED AS OF ____________ NORMALIZED
-------------- -------------
LAST LAST
PROPERTY FINANCIAL (1) PROPERTY FINANCIAL
IMPACT INFO AS OF % TOTAL $ DSC IMPACT INFO AS OF % TOTAL $ (1)
DATE DATE OCC REVENUE NOI X DATE DATE OCC REVENUE NOI DSC
- --------- ---------- ---- ------- --- --- -------- ---------- --- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WA $ $ WA WA $ $ WA
- --------------------------------------------------------------------------------------------------------------------
REQUIRED
LOANS BALANCE
# % $ %
- ---------------------------------------------------------------
<PAGE>
<CAPTION>
"ACTUAL" (2)
YTD FINANCIAL INFORMATION NET CHANGE
- -------------------------------- --------------
MONTH REQUIRED CURRENT & BASIS
-------------- ----------------
FINANCIAL %
INFO AS OF % TOTAL $ % $ TOTAL (1)
DATE OCC REVENUE NOI DSC OCC REV DSC
- ------------ ---- ------- --- --- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C>
WA $ $ WA WA $ WA
- --------------------------------------------------------------------------------------
</TABLE>
(1) DSC calculated using NOI / Debt Service
(2) Net change should compare the latest year to the underwriting year
C-1
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
DELINQUENT LOAN STATUS REPORT
as of ______________________
<TABLE>
<CAPTION>
(A) (B) (C) (D)
SQ FT OR TOTAL TOTAL OTHER (E)=A+B+C+D
PROP- UNITS/ PAID OUTSTANDING P&I OUTSTANDING ADVANCES TOTAL CURRENT
LOAN # ERTY OCC %/ T0 SCHEDULED LOAN ADVANCES TO EXPENSES TO (TAXES & MONTHLY MONTHLY
CITY & STATE TYPE DATE DATE BALANCE DATE DATE ESCROW) EXPOSURE P&I
- ------------- ---- ------- ------ -------------- --------------- ------------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
DATE
NOI
MOST APPRAISAL TRANSFER (G)=(.92*F)-E FILED/
CURRENT LTM LTM ACCURATE BPO OR DATE/ LOSS USING FCL
INTEREST MATURITY NOI NOI/ VALUATION PROPERTY INTERNAL CLOSING 92% APPR. SALE
RATE DATE DATE DSCR DATE VALUE VALUE** DATE OR BPO (F) DATE STATUS* COMMENTS
- ------- -------- ------ --------- --------- --------- ----------- ------ ------------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90 + DAYS DELINQUENT
60 DAYS DELINQUENT
30 DAYS DELINQUENT
CURRENT & AT SPECIAL SERVICER
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months
* Status should contain a code indicating the current direction of each loan
such as (FCL - In Foreclosure, MOD - Modification, DPO - Discount Payoff, NS
- Note Sale, BK - Bankruptcy, PP - Payment Plan, Curr - Current, TBD - To Be
Determined etc...) It is possible to combine the status codes if the loan is
going in more than one direction (i.e., FCL/Mod, BK/Mod, BK/FCL/DPO)
C-2
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
HISTORICAL LOAN MODIFICATION REPORT
as of _____________________
<TABLE>
<CAPTION>
BALANCE
WHEN SENT BALANCE AT THE
MOD / EFFECT TO SPECIAL EFFECTIVE DATE OF # MTHS /
LOAN ID CITY/STATE EXTENTION DATE SERVICER REHABILITATION OLD RATE NEW RATE
- ------- ----------- --------- -------- ------------ ----------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FOR ALL LOANS:
TOTAL FOR LOANS IN CURRENT MONTH:
# OF LOANS $ BALANCE
MODIFICATIONS:
MATURITY DATE EXTENSIONS:
TOTAL:
<CAPTION>
(2) EST.
FUTURE
TOTAL # INTEREST LOSS
MTHS FOR (1) REALIZED TO TRUST $
OLD NEW CHANGE OF LOSS TO (RATE
OLD P&I NEW P&I MATURITY MATURITY MOD TRUST $ REDUCTION) COMMENT
- ------- ------- -------- -------- --------- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual principal loss taken by bonds
(2) Expected future loss due to a rate reduction. This is just an estimate
calculated at the time of the modification.
C-3
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD OR DISCOUNTED PAYOFF)
as of _________________________
<TABLE>
<CAPTION>
(c)=b/a (a) (b) (d) (c) (f)
LATEST
APPRAISAL OR NET AMT
SERVICER % RECEIVED BROKERS EFFECT DATE RECEIVED FROM SCHEDULED TOTAL P&I
LOAN ID PROPERTY NAME CITY/STATE FROM SALE OPINION OF SALE SALES PRICE SALE BALANCE ADVANCED
- --------- ------------- ----------- ---------- ------------ ------------ ----------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ALL LOANS:
CURRENT MONTH ONLY:
<CAPTION>
(g) (h) (i)=d-(f+g+h) (k)=i-e (m) (n)=k+m (o)=n/e
MINOR
DATE LOSS ADJ LOSS % OF
TOTAL ACTUAL LOSSES PASSED MINOR ADJ TO PASSED TOTAL LOSS WITH SCHEDULED
EXPENSES SERVICING FEES NET PROCEEDS PASSED THRU THRU TRUST THRU ADJUSTMENT BALANCE
- -------- -------------- --------------- -------------- ------------ ------------- ------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ALL LOANS:
CURRENT MONTH ONLY:
</TABLE>
C-4
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
REO STATUS REPORT
as of ________________
<TABLE>
<CAPTION>
(C)
(A) (B) OTHER (D)
PROP- SQ FT OR SCHEDULED TOTAL P&I ADVANCES TOTAL (E)=A+B+C+D CURRENT
LOAN NUM ERTY UNITS/ PAID TO LOAN ADVANCES (TAXES & EXPENSES TOTAL MONTHLY
/CITY & STATE TYPE OCC % DATE BALANCE TO DATE ESCROW) TO DATE EXPOSURE P&I
- ------------- ------ ------- -------- ---------- ---------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int - Internal Value
<CAPTION>
(YTD) (F) (1) (G)=(92*F)-E
MOST MOST APPRAISAL TRANSFER LOSS USING
CURRENT RECENT ACCURATE BPO DATE/ 92% REO
INTEREST MATURITY NOI AS NOI/ APPRAISAL PROPERTY INTERNAL CLOSING APPRAISAL ACQUISITION PENDING
RATE DATE OF DATE DSCR DATE VALUE VALUE DATE OR BPO (F) DATE OFFERS COMMENTS
- -------- -------- -------- --------- ---------- --------- -------- -------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Owned
</TABLE>
C-5
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
SERVICER WATCH LIST
as of __________________
<TABLE>
<CAPTION>
CURRENT PAID %
LOAN SCHED THRU MATURITY CURRENT
NUMBER PROPERTY TYPE CITY STATE BALANCE DATE DATE DSC COMMENT/REASON ON WATCH LIST
- ------ ------------- ---- ----- --------- ----- --------- -------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans on watch list and reason sorted in descending balance order.
Total: $
</TABLE>
C-6
<PAGE>
Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C2
OPERATING STATEMENT ANALYSIS REPORT
as of ______________
<TABLE>
<CAPTION>
<S> <C>
PROPERTY OVERVIEW
----------------
CSFB Control Number | |
------------------------------
Current Balance/Paid to Date | |
-------------------------------------------------------------------------------------------------
Property Name | |
-------------------------------------------------------------------------------------------------
Property Type | |
-------------------------------------------------------------------------------------------------
Property Address, City, State | |
-------------------------------------------------------------------------------------------------
Net Rentable Square Feet | |
------------------------------
Year Built/Year Renovated | |
-------------------------------------------------------------------------
Year of Operations | UNDERWRITING | 1993 | 1994 | 1995 | YTD |
-------------------------------------------------------------------------
Occupancy Rate* | | | | | |
-------------------------------------------------------------------------
Average Rental Rate | | | | | |
-------------------------------------------------------------------------
* OCCUPANCY RATES ARE YEAR END OR THE ENDING DATE OF THE FINANCIAL
STATEMENT FOR THE PERIOD.
INCOME:
NO. OF MOS.
-------------
Number of Mos. Annualized PRIOR YEAR CURRENT YR. | |
-------------------------------------------------------------------------------------------------
Period Ended | UNDERWRITING | 1993 | 1994 | 1995 | 1996 YTD** | 1995-BASE | 1995-1994 |
Statement Classification | BASE LINE | NORMALIZED | NORMALIZED | NORMALIZED | AS OF / /96 | VARIANCE | VARIANCE |
-------------------------------------------------------------------------------------------------
Rental Income (Category 1) | | | | | | | |
-------------------------------------------------------------------------------------------------
Rental Income (Category 2) | | | | | | | |
-------------------------------------------------------------------------------------------------
Rental Income (Category 3) | | | | | | | |
-------------------------------------------------------------------------------------------------
Pass Through/Escalations | | | | | | | |
-------------------------------------------------------------------------------------------------
Other Income | | | | | | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | % | % |
-------------------------------------------------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the underwriter or
Servicer
** Servicer wil not be expected to "Normalize" these YTD numbers.
OPERATING EXPENSES:
-------------------------------------------------------------------------------------------------
Real Estate Taxes | | | | | | | |
-------------------------------------------------------------------------------------------------
Property Insurance | | | | | | | |
-------------------------------------------------------------------------------------------------
Utilities | | | | | | | |
-------------------------------------------------------------------------------------------------
Repairs and Maintenance | | | | | | | |
-------------------------------------------------------------------------------------------------
Management Fees | | | | | | | |
-------------------------------------------------------------------------------------------------
Payroll & Benefits Expense | | | | | | | |
-------------------------------------------------------------------------------------------------
Advertising & Marketing | | | | | | | |
-------------------------------------------------------------------------------------------------
Professional Fees | | | | | | | |
-------------------------------------------------------------------------------------------------
Other Expenses | | | | | | | |
-------------------------------------------------------------------------------------------------
Ground Rent | | | | | | | |
-------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | % | % |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO | | | | | | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
NET OPERATING INCOME | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | | |
-------------------------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------------------------
Leasing Commissions | | | | | | | |
-------------------------------------------------------------------------------------------------
Tenant Improvements | | | | | | | |
-------------------------------------------------------------------------------------------------
Replacement Reserve | | | | | | | |
-------------------------------------------------------------------------------------------------
TOTAL CAPITAL ITEMS | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | | $0.00 |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
NOI AFTER CAPITAL ITEMS | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | | |
-------------------------------------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
(1) DSCR: (NOI/DEBT SERVICE) | | | | | | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
DSCR: (AFTER RESERVES/CAP EXP.) | | | | | | | |
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
SOURCE OF FINANCIAL DATA: | |
-------------------------------------------------------------------------------------------------
(i.e. operating statements, financial statements, tax
return, other)
</TABLE>
NOTES AND ASSUMPTIONS:
- -----------------------------------------------------------------------------
The years shown above will roll always showing a three year history. 1995 is
the current year financials; 1994 is the prior year financials.
This report may vary depending on the property type and because of the way
information may vary in each borrower's statement.
Rental Income need to be broken down whenever possible differently for each
property type as follows: Retail: 1) Base Rent 2) Percentage rents on cashflow
Hotel: 1) Room Revenue 2) Food/Beverage Nursing Home: 1) Private 2) Medicaid 3)
Medicare
INCOME: COMMENT
EXPENSE: COMMENT
CAPITAL ITEMS: COMMENT
C-7
<PAGE>
ANNEX D
WEIGHTED AVERAGE NET MORTGAGE RATES
The following table sets forth the Weighted Average Net Mortgage Rate for
each Distribution Date (prior to the distribution of principal on such
Distribution Date) based on the Mortgage Loan Assumptions and Prepayment
Assumptions and assuming each of the CPRs set forth in such table:
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
January 17, 1998 .. 7.940 7.941 7.941 7.941 7.941
February 17, 1998 . 7.940 7.939 7.939 7.939 7.939
March 17, 1998 ..... 7.962 7.960 7.960 7.960 7.960
April 17, 1998 ..... 8.185 8.183 8.183 8.183 8.183
May 17, 1998 ....... 7.948 7.946 7.946 7.946 7.946
June 17, 1998 ...... 8.185 8.184 8.184 8.184 8.184
July 17, 1998 ...... 7.948 7.946 7.946 7.946 7.946
August 17, 1998 ... 8.185 8.184 8.184 8.184 8.184
September 17, 1998 8.186 8.184 8.184 8.184 8.184
October 17, 1998 .. 7.948 7.947 7.947 7.947 7.947
November 17, 1998 . 8.186 8.184 8.184 8.184 8.184
December 17, 1998 . 7.948 7.947 7.947 7.947 7.947
January 17, 1999 .. 7.942 7.940 7.940 7.940 7.940
February 17, 1999 . 7.942 7.940 7.940 7.940 7.940
March 17, 1999 ..... 7.963 7.962 7.962 7.962 7.962
April 17, 1999 ..... 8.187 8.185 8.185 8.185 8.185
May 17, 1999 ....... 7.949 7.948 7.948 7.948 7.948
June 17, 1999 ...... 8.187 8.185 8.185 8.185 8.185
July 17, 1999 ...... 7.949 7.948 7.948 7.948 7.948
August 17, 1999 ... 8.187 8.186 8.186 8.186 8.186
September 17, 1999 8.187 8.186 8.186 8.186 8.186
October 17, 1999 .. 7.950 7.948 7.948 7.948 7.948
November 17, 1999 . 8.188 8.186 8.186 8.186 8.186
December 17, 1999 . 7.950 7.949 7.949 7.949 7.949
January 17, 2000 .. 8.188 8.186 8.186 8.186 8.186
February 17, 2000 . 7.943 7.942 7.942 7.942 7.942
March 17, 2000 ..... 7.958 7.956 7.956 7.956 7.956
April 17, 2000 ..... 8.188 8.187 8.187 8.187 8.187
May 17, 2000 ....... 7.951 7.949 7.949 7.949 7.949
June 17, 2000 ...... 8.189 8.187 8.187 8.187 8.187
July 17, 2000 ...... 7.951 7.950 7.950 7.950 7.950
August 17, 2000 ... 8.189 8.187 8.187 8.187 8.187
September 17, 2000 8.189 8.188 8.188 8.188 8.188
October 17, 2000 .. 7.951 7.950 7.950 7.950 7.950
November 17, 2000 . 8.189 8.188 8.188 8.188 8.188
December 17, 2000 . 7.952 7.950 7.950 7.950 7.950
January 17, 2001 .. 7.945 7.944 7.944 7.944 7.944
February 17, 2001 . 7.945 7.944 7.944 7.944 7.944
March 17, 2001 ..... 7.967 7.965 7.965 7.965 7.965
April 17, 2001 ..... 8.190 8.189 8.189 8.189 8.189
May 17, 2001 ....... 7.952 7.951 7.951 7.951 7.951
June 17, 2001 ...... 8.191 8.189 8.189 8.189 8.189
July 17, 2001 ...... 7.953 7.951 7.951 7.951 7.951
August 17, 2001 ... 8.191 8.189 8.189 8.189 8.189
September 17, 2001 8.191 8.190 8.190 8.190 8.190
October 17, 2001 .. 7.953 7.952 7.952 7.952 7.952
D-1
<PAGE>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
November 17, 2001 . 8.191 8.190 8.190 8.190 8.190
December 17, 2001 . 7.953 7.952 7.952 7.952 7.952
January 17, 2002 .. 7.947 7.945 7.945 7.945 7.945
February 17, 2002 . 7.947 7.946 7.945 7.945 7.945
March 17, 2002 ..... 7.968 7.967 7.967 7.966 7.966
April 17, 2002 ..... 8.192 8.190 8.190 8.190 8.189
May 17, 2002 ....... 7.954 7.953 7.952 7.952 7.951
June 17, 2002 ...... 8.193 8.191 8.190 8.190 8.188
July 17, 2002 ...... 7.955 7.953 7.952 7.952 7.951
August 17, 2002 ... 8.193 8.191 8.190 8.189 8.188
September 17, 2002 8.193 8.191 8.190 8.189 8.188
October 17, 2002 .. 7.955 7.953 7.952 7.952 7.950
November 17, 2002 . 8.193 8.191 8.190 8.189 8.188
December 17, 2002 . 7.955 7.953 7.952 7.952 7.950
January 17, 2003 .. 7.949 7.947 7.946 7.945 7.943
February 17, 2003 . 7.949 7.947 7.946 7.945 7.943
March 17, 2003 ..... 7.970 7.968 7.967 7.966 7.964
April 17, 2003 ..... 8.194 8.192 8.190 8.189 8.187
May 17, 2003 ....... 7.956 7.954 7.952 7.951 7.949
June 17, 2003 ...... 8.195 8.192 8.190 8.189 8.186
July 17, 2003 ...... 7.957 7.954 7.952 7.951 7.948
August 17, 2003 ... 8.195 8.192 8.190 8.188 8.185
September 17, 2003 8.195 8.192 8.190 8.188 8.184
October 17, 2003 .. 7.939 7.936 7.935 7.933 7.931
November 17, 2003 . 8.176 8.173 8.171 8.170 8.167
December 17, 2003 . 7.939 7.936 7.935 7.933 7.930
January 17, 2004 .. 8.177 8.173 8.171 8.170 8.166
February 17, 2004 . 7.934 7.931 7.930 7.928 7.925
March 17, 2004 ..... 7.944 7.940 7.938 7.937 7.934
April 17, 2004 ..... 8.173 8.170 8.168 8.166 8.163
May 17, 2004 ....... 7.937 7.933 7.931 7.930 7.926
June 17, 2004 ...... 8.174 8.170 8.168 8.166 8.162
July 17, 2004 ...... 7.937 7.933 7.931 7.929 7.926
August 17, 2004 ... 8.174 8.170 8.168 8.166 8.162
September 17, 2004 8.174 8.170 8.168 8.166 8.162
October 17, 2004 .. 7.935 7.931 7.929 7.927 7.924
November 17, 2004 . 8.172 8.168 8.166 8.164 8.160
December 17, 2004 . 7.980 7.976 7.974 7.972 7.969
January 17, 2005 .. 7.973 7.969 7.967 7.965 7.962
February 17, 2005 . 7.973 7.969 7.967 7.965 7.962
March 17, 2005 ..... 7.994 7.990 7.988 7.986 7.983
April 17, 2005 ..... 8.215 8.211 8.208 8.206 8.202
May 17, 2005 ....... 7.980 7.976 7.974 7.972 7.968
June 17, 2005 ...... 8.216 8.211 8.208 8.206 8.202
July 17, 2005 ...... 7.980 7.976 7.974 7.972 7.968
August 17, 2005 ... 8.216 8.211 8.208 8.206 8.202
September 17, 2005 8.216 8.211 8.208 8.206 8.202
October 17, 2005 .. 7.981 7.976 7.974 7.972 7.968
November 17, 2005 . 8.216 8.211 8.208 8.206 8.202
December 17, 2005 . 7.981 7.977 7.974 7.972 7.968
January 17, 2006 .. 7.970 7.965 7.963 7.960 7.957
February 17, 2006 . 7.970 7.965 7.962 7.960 7.957
D-2
<PAGE>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
March 17, 2006 ..... 7.991 7.986 7.983 7.981 7.977
April 17, 2006 ..... 8.211 8.206 8.202 8.200 8.196
May 17, 2006 ....... 7.977 7.972 7.969 7.967 7.963
June 17, 2006 ...... 8.214 8.209 8.205 8.203 8.198
July 17, 2006 ...... 7.980 7.975 7.972 7.969 7.966
August 17, 2006 ... 8.215 8.209 8.205 8.203 8.198
September 17, 2006 8.211 8.205 8.202 8.199 8.195
October 17, 2006 .. 7.977 7.971 7.968 7.966 7.962
November 17, 2006 . 8.211 8.205 8.201 8.198 8.194
December 17, 2006 . 7.977 7.971 7.968 7.965 7.961
January 17, 2007 .. 7.970 7.965 7.961 7.959 7.954
February 17, 2007 . 7.970 7.964 7.961 7.958 7.953
March 17, 2007 ..... 7.991 7.985 7.981 7.978 7.972
April 17, 2007 ..... 8.211 8.204 8.199 8.194 8.187
May 17, 2007 ....... 7.962 7.955 7.950 7.946 7.939
June 17, 2007 ...... 8.196 8.187 8.181 8.176 8.168
July 17, 2007 ...... 7.946 7.938 7.933 7.929 7.922
August 17, 2007 ... 8.141 8.131 8.125 8.120 8.112
September 17, 2007 8.116 8.108 8.102 8.096 8.089
October 17, 2007 .. 7.789 7.779 7.771 7.764 7.755
November 17, 2007 . 7.884 7.883 7.883 7.882 7.881
December 17, 2007 . 7.650 7.650 7.650 7.650 7.649
January 17, 2008 .. 7.799 7.799 7.799 7.799 7.799
February 17, 2008 . 7.675 7.675 7.675 7.676 7.676
March 17, 2008 ..... 7.682 7.682 7.682 7.683 7.684
April 17, 2008 ..... 7.799 7.799 7.800 7.801 7.802
May 17, 2008 ....... 7.678 7.679 7.679 7.680 7.682
June 17, 2008 ...... 7.799 7.800 7.801 7.802 7.804
July 17, 2008 ...... 7.678 7.679 7.680 7.681 7.683
August 17, 2008 ... 7.799 7.800 7.802 7.803 7.806
September 17, 2008 7.799 7.800 7.802 7.803 7.807
October 17, 2008 .. 7.678 7.679 7.681 7.682 7.685
November 17, 2008 . 7.799 7.801 7.803 7.805 7.808
December 17, 2008 . 7.678 7.680 7.681 7.683 7.686
January 17, 2009 .. 7.675 7.677 7.678 7.680 7.684
February 17, 2009 . 7.675 7.677 7.679 7.681 7.684
March 17, 2009 ..... 7.686 7.688 7.690 7.692 7.696
April 17, 2009 ..... 7.799 7.802 7.805 7.807 7.812
May 17, 2009 ....... 7.678 7.681 7.683 7.685 7.689
June 17, 2009 ...... 7.800 7.803 7.805 7.808 7.814
July 17, 2009 ...... 7.678 7.681 7.683 7.686 7.690
August 17, 2009 ... 7.800 7.803 7.806 7.809 7.815
September 17, 2009 7.800 7.803 7.807 7.810 7.816
October 17, 2009 .. 7.678 7.681 7.684 7.687 7.692
November 17, 2009 . 7.800 7.804 7.807 7.811 7.817
December 17, 2009 . 7.678 7.681 7.684 7.687 7.693
January 17, 2010 .. 7.675 7.678 7.682 7.684 7.690
February 17, 2010 . 7.675 7.679 7.682 7.685 7.690
March 17, 2010 ..... 7.686 7.689 7.693 7.696 7.702
April 17, 2010 ..... 7.800 7.805 7.809 7.813 7.820
May 17, 2010 ....... 7.678 7.682 7.686 7.689 7.695
June 17, 2010 ...... 7.800 7.805 7.810 7.814 7.822
D-3
<PAGE>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
July 17, 2010 ...... 7.678 7.682 7.686 7.690 7.696
August 17, 2010 ... 7.800 7.806 7.810 7.815 7.823
September 17, 2010 7.800 7.806 7.811 7.815 7.823
October 17, 2010 .. 7.678 7.683 7.687 7.691 7.697
November 17, 2010 . 7.800 7.806 7.811 7.816 7.825
December 17, 2010 . 7.678 7.683 7.687 7.691 7.698
January 17, 2011 .. 7.675 7.680 7.684 7.688 7.695
February 17, 2011 . 7.675 7.680 7.684 7.688 7.695
March 17, 2011 ..... 7.686 7.691 7.696 7.700 7.707
April 17, 2011 ..... 7.801 7.807 7.813 7.818 7.827
May 17, 2011 ....... 7.678 7.683 7.688 7.692 7.699
June 17, 2011 ...... 7.801 7.808 7.814 7.819 7.828
July 17, 2011 ...... 7.678 7.683 7.688 7.693 7.700
August 17, 2011 ... 7.801 7.808 7.814 7.820 7.829
September 17, 2011 7.801 7.808 7.815 7.820 7.829
October 17, 2011 .. 7.678 7.684 7.689 7.694 7.701
November 17, 2011 . 7.801 7.808 7.815 7.821 7.830
December 17, 2011 . 7.677 7.684 7.689 7.694 7.701
January 17, 2012 .. 7.801 7.809 7.816 7.822 7.831
February 17, 2012 . 7.674 7.681 7.686 7.691 7.699
March 17, 2012 ..... 7.681 7.688 7.693 7.698 7.706
April 17, 2012 ..... 7.801 7.809 7.817 7.823 7.832
May 17, 2012 ....... 7.677 7.684 7.690 7.695 7.703
June 17, 2012 ...... 7.801 7.810 7.817 7.824 7.833
July 17, 2012 ...... 7.677 7.684 7.691 7.696 7.705
August 17, 2012 ... 7.801 7.810 7.818 7.825 7.836
September 17, 2012 7.801 7.810 7.819 7.826 7.837
October 17, 2012 .. 7.676 7.685 7.693 7.700 7.711
November 17, 2012 . 7.802 7.813 7.823 7.831 7.844
December 17, 2012 . 7.817 7.818 7.820 7.822 7.827
January 17, 2013 .. 7.815 7.818 7.820 7.823 7.828
February 17, 2013 . 7.816 7.818 7.821 7.824 7.830
March 17, 2013 ..... 7.823 7.826 7.829 7.832 7.839
April 17, 2013 ..... 7.900 7.902 7.904 7.906 7.911
May 17, 2013 ....... 7.819 7.822 7.826 7.830 7.837
June 17, 2013 ...... 7.900 7.903 7.906 7.908 7.914
July 17, 2013 ...... 7.820 7.824 7.828 7.833 7.842
August 17, 2013 ... 7.901 7.905 7.908 7.911 7.917
September 17, 2013 7.902 7.905 7.909 7.912 7.919
October 17, 2013 .. 7.822 7.827 7.832 7.838 7.849
November 17, 2013 . 7.903 7.907 7.911 7.915 7.922
December 17, 2013 . 7.823 7.829 7.835 7.841 7.853
January 17, 2014 .. 7.822 7.829 7.835 7.842 7.855
February 17, 2014 . 7.823 7.830 7.837 7.844 7.858
March 17, 2014 ..... 7.831 7.838 7.845 7.852 7.866
April 17, 2014 ..... 7.906 7.912 7.917 7.922 7.932
May 17, 2014 ....... 7.827 7.835 7.843 7.851 7.866
June 17, 2014 ...... 7.978 7.978 7.978 7.978 7.978
July 17, 2014 ...... 7.934 7.934 7.934 7.934 7.934
August 17, 2014 ... 7.982 7.982 7.982 7.982 7.982
September 17, 2014 7.983 7.983 7.983 7.983 7.983
October 17, 2014 .. 7.940 7.940 7.940 7.940 7.940
D-4
<PAGE>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
November 17, 2014 . 7.987 7.987 7.987 7.987 7.987
December 17, 2014 . 7.945 7.945 7.945 7.945 7.945
January 17, 2015 .. 7.947 7.947 7.947 7.947 7.947
February 17, 2015 . 7.950 7.950 7.950 7.950 7.950
March 17, 2015 ..... 7.956 7.956 7.956 7.956 7.956
April 17, 2015 ..... 7.997 7.997 7.997 7.997 7.997
May 17, 2015 ....... 7.957 7.957 7.957 7.957 7.957
June 17, 2015 ...... 8.001 8.001 8.001 8.001 8.001
July 17, 2015 ...... 7.963 7.963 7.963 7.963 7.963
August 17, 2015 ... 8.006 8.006 8.006 8.006 8.006
September 17, 2015 8.008 8.008 8.008 8.008 8.008
October 17, 2015 .. 7.972 7.972 7.972 7.972 7.972
November 17, 2015 . 7.981 7.981 7.981 7.981 7.981
December 17, 2015 . 7.961 7.961 7.961 7.961 7.961
January 17, 2016 .. 7.987 7.987 7.987 7.987 7.987
February 17, 2016 . 7.969 7.969 7.969 7.969 7.969
March 17, 2016 ..... 7.973 7.973 7.973 7.973 7.973
April 17, 2016 ..... 7.996 7.996 7.996 7.996 7.996
May 17, 2016 ....... 7.981 7.981 7.981 7.981 7.981
June 17, 2016 ...... 8.003 8.003 8.003 8.003 8.003
July 17, 2016 ...... 7.990 7.990 7.990 7.990 7.990
August 17, 2016 ... 8.012 8.012 8.012 8.012 8.012
September 17, 2016 8.016 8.016 8.016 8.016 8.016
October 17, 2016 .. 8.007 8.007 8.007 8.007 8.007
November 17, 2016 . 8.027 8.027 8.027 8.027 8.027
December 17, 2016 . 8.019 8.019 8.019 8.019 8.019
January 17, 2017 .. 8.026 8.026 8.026 8.026 8.026
February 17, 2017 . 8.032 8.032 8.032 8.032 8.032
March 17, 2017 ..... 8.039 8.039 8.040 8.040 8.040
April 17, 2017 ..... 8.054 8.054 8.054 8.054 8.054
May 17, 2017 ....... 8.051 8.051 8.051 8.051 8.051
June 17, 2017 ...... 8.065 8.065 8.065 8.065 8.065
July 17, 2017 ...... 8.064 8.064 8.064 8.064 8.064
August 17, 2017 ... 8.076 8.076 8.076 8.076 8.076
September 17, 2017 8.082 8.082 8.082 8.082 8.082
October 17, 2017 .. 8.084 8.084 8.084 8.084 8.083
November 17, 2017 . 8.093 8.093 8.093 8.093 8.093
December 17, 2017 . 8.098 8.098 8.098 8.098 8.098
January 17, 2018 .. 8.106 8.106 8.106 8.106 8.106
February 17, 2018 . 8.118 8.118 8.118 8.118 8.118
March 17, 2018 ..... 8.128 8.128 8.129 8.129 8.129
April 17, 2018 ..... 8.138 8.138 8.139 8.139 8.139
May 17, 2018 ....... 8.148 8.148 8.149 8.149 8.149
June 17, 2018 ...... 8.158 8.158 8.158 8.158 8.158
July 17, 2018 ...... 8.164 8.164 8.164 8.164 8.164
August 17, 2018 ... 8.164 8.164 8.164 8.164 8.164
September 17, 2018 8.164 8.164 8.164 8.164 8.164
October 17, 2018 .. 8.165 8.165 8.165 8.165 8.165
November 17, 2018 . 8.165 8.165 8.165 8.165 8.165
December 17, 2018 . 8.165 8.165 8.165 8.165 8.165
January 17, 2019 .. 8.165 8.165 8.165 8.165 8.165
February 17, 2019 . 8.165 8.165 8.165 8.165 8.165
D-5
<PAGE>
DISTRIBUTION DATE 0% CPR 5% CPR 10% CPR 15%CPR 25% CPR
- ------------------- -------- -------- --------- -------- ---------
March 17, 2019 ..... 8.165 8.165 8.165 8.165 8.165
April 17, 2019 ..... 8.166 8.166 8.166 8.166 8.166
May 17, 2019 ....... 8.166 8.166 8.166 8.166 8.166
June 17, 2019 ...... 8.166 8.166 8.166 8.166 8.166
July 17, 2019 ...... 8.166 8.166 8.166 8.166 8.166
August 17, 2019 ... 8.167 8.167 8.167 8.167 8.167
September 17, 2019 8.167 8.167 8.167 8.167 8.167
October 17, 2019 .. 8.167 8.167 8.167 8.167 8.167
November 17, 2019 . 8.167 8.167 8.167 8.167 8.167
December 17, 2019 . 8.168 8.168 8.168 8.168 8.168
January 17, 2020 .. 8.168 8.168 8.168 8.168 8.168
February 17, 2020 . 8.168 8.168 8.168 8.168 8.168
March 17, 2020 ..... 8.169 8.169 8.169 8.169 8.169
April 17, 2020 ..... 8.169 8.169 8.169 8.169 8.169
May 17, 2020 ....... 8.169 8.169 8.169 8.169 8.169
June 17, 2020 ...... 8.170 8.170 8.170 8.170 8.170
July 17, 2020 ...... 8.170 8.170 8.170 8.170 8.170
August 17, 2020 ... 8.171 8.171 8.171 8.171 8.171
September 17, 2020 8.171 8.171 8.171 8.171 8.171
October 17, 2020 .. 8.172 8.172 8.172 8.172 8.172
November 17, 2020 . 8.172 8.172 8.172 8.172 8.172
December 17, 2020 . 8.173 8.173 8.173 8.173 8.173
January 17, 2021 .. 8.174 8.174 8.174 8.174 8.174
February 17, 2021 . 8.174 8.174 8.174 8.174 8.174
March 17, 2021 ..... 8.175 8.175 8.175 8.175 8.175
April 17, 2021 ..... 8.176 8.176 8.176 8.176 8.176
May 17, 2021 ....... 8.177 8.177 8.177 8.177 8.177
June 17, 2021 ...... 8.178 8.178 8.178 8.178 8.178
July 17, 2021 ...... 8.179 8.179 8.179 8.179 8.179
August 17, 2021 ... 8.181 8.181 8.181 8.181 8.181
September 17, 2021 8.182 8.182 8.182 8.182 8.182
October 17, 2021 .. 8.184 8.184 8.184 8.184 8.184
November 17, 2021 . 8.186 8.186 8.186 8.186 8.186
December 17, 2021 . 8.189 8.189 8.189 8.189 8.189
January 17, 2022 .. 8.192 8.192 8.192 8.192 8.192
February 17, 2022 . 8.196 8.196 8.196 8.196 8.196
March 17, 2022 ..... 8.200 8.200 8.200 8.200 8.200
April 17, 2022 ..... 8.206 8.206 8.206 8.206 8.206
May 17, 2022 ....... 8.213 8.213 8.213 8.213 8.213
June 17, 2022 ...... 8.212 8.212 8.212 8.212 8.212
July 17, 2022 ...... 8.211 8.211 8.211 8.211 8.211
August 17, 2022 ... 8.209 8.209 8.209 8.209 8.209
September 17, 2022 8.205 8.205 8.205 8.205 8.206
October 17, 2022 .. 8.197 8.198 8.198 8.198 8.199
November 17, 2022 . 8.165 8.165 8.165 8.165 8.165
</TABLE>
- ------------
* Prepayment speed includes Boot Mill Loan paying off in the first period.
D-6
<PAGE>
PROSPECTUS
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
DEPOSITOR
Commercial/Multifamily Mortgage Pass-Through Certificates
(Issuable in Series)
Credit Suisse First Boston Mortgage Securities Corp. (the "Depositor") from
time to time will offer Commercial/Multifamily Mortgage Pass-Through
Certificates (the "Certificates") in "Series" by means of this Prospectus and
a separate Prospectus Supplement for each Series. The Certificates of each
Series will evidence beneficial ownership interests in a trust fund (the
"Trust Fund") to be established by the Depositor. The Certificates of a
Series may be divided into two or more "Classes" which may have different
interest rates and which may receive principal payments in differing
proportions and at different times. In addition, rights of the holders of
certain Classes to receive principal and interest may be subordinated to
those of other Classes.
Each Trust Fund will consist of a pool (the "Mortgage Pool") of one or more
mortgage loans secured by first or junior liens on commercial real estate
properties, multifamily residential properties, cooperatively owned
multifamily properties and/or mixed residential/commercial properties, and
related property and interests, conveyed to such Trust Fund by the Depositor,
and other assets, including any reserve funds established with respect to a
Series, insurance policies on the Mortgage Loans, letters of credit,
certificate guarantee insurance policies or other enhancement described in
the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Mortgage Pool may also include participation interests in
such types of mortgage loans, installment contracts for the sale of such
types of properties and/or mortgage pass-through certificates. Such mortgage
loans, participation interests, mortgage pass-through certificates and
installment contracts are hereinafter referred to as the "Mortgage Loans."
The Mortgage Loans will have fixed or adjustable interest rates. Some
Mortgage Loans will fully amortize over their remaining terms to maturity and
others will provide for balloon payments at maturity. The Mortgage Loans will
provide for recourse against only the Mortgaged Properties or provide for
recourse against the other assets of the obligors thereunder. The Mortgage
Loans will be newly originated or seasoned, and will be acquired by the
Depositor either directly or through one or more affiliates. Information
regarding each Series of Certificates, including interest and principal
payment provisions for each Class, as well as information regarding the size,
composition and other characteristics of the Mortgage Pool relating to such
Series, will be furnished in the related Prospectus Supplement. The Mortgage
Loans will be serviced by a Master Servicer identified in the related
Prospectus Supplement.
The Certificates do not represent an obligation of or an interest in the
Depositor or any affiliate thereof. Unless so specified in the related
Prospectus Supplement, neither the Certificates nor the Mortgage Loans are
insured or guaranteed by any governmental agency or instrumentality or by any
other person or entity.
The Depositor, as specified in the related Prospectus Supplement, may elect
to treat all or a specified portion of the collateral securing any Series of
Certificates as a "real estate mortgage investment conduit" (a "REMIC"), or
an election may be made to treat the arrangement by which a Series of
Certificates is issued as a REMIC. If such election is made, each Class of
Certificates of a Series will be either Regular Interest Certificates or
Residual Interest Certificates (each, as defined herein), as specified in the
related Prospectus Supplement. If no such election is made, the Trust Fund,
as specified in the related Prospectus Supplement, will be classified as a
grantor trust for federal income tax purposes. See "Certain Federal Income
Tax Consequences."
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.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" AFTER THE SECTION CAPTIONED "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" HEREIN.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, which may include Credit
Suisse First Boston Corporation, an affiliate of the Depositor, as more fully
described under "Plan of Distribution" herein 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.
This Prospectus may not be used to consummate sales of the Certificates
offered hereby unless accompanied by a Prospectus Supplement.
CREDIT SUISSE FIRST BOSTON
Prospectus dated December 12, 1997.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to each Series of Certificates will,
among other things, set forth with respect to such Series of Certificates:
(i) the identity of each Class within such Series; (ii) the initial aggregate
principal amount, the interest rate (the "Pass-Through Rate") (or the method
for determining it) and the authorized denominations of each Class of
Certificates of such Series; (iii) certain information concerning the
Mortgage Loans relating to such Series, including the principal amount, type
and characteristics of such Mortgage Loans on the date of issue of such
Series of Certificates, and, if applicable, the amount of any Reserve Fund
for such Series; (iv) the circumstances, if any, under which the Certificates
of such Series are subject to redemption prior to maturity; (v) the final
scheduled distribution date of each Class of Certificates of such Series;
(vi) the method used to calculate the aggregate amount of principal available
and required to be applied to the Certificates of such Series on each
Distribution Date; (vii) the order of the application of principal and
interest payments to each Class of Certificates of such Series and the
allocation of principal to be so applied; (viii) the extent of subordination
of any Subordinate Certificates; (ix) the principal amount of each Class of
Certificates of such Series that would be outstanding on specified
Distribution Dates, if the Mortgage Loans relating to such Series were
prepaid at various assumed rates; (x) the Distribution Dates for each Class
of Certificates of such Series; (xi) relevant financial information with
respect to the Borrower(s) and the Mortgaged Properties underlying the
Mortgage Loans relating to such Series, if applicable; (xii) information with
respect to the terms of the Subordinate Certificates or Residual Interest
Certificates, if any, of such Series; (xiii) additional information with
respect to the Enhancement (as defined herein) relating to such Series; (xiv)
additional information with respect to the plan of distribution of such
Series; and (xv) whether the Certificates of such Series will be registered
in the name of the nominee of The Depository Trust Company or another
depository.
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 (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 "Act"). Statements contained in this Prospectus
and any Prospectus Supplement as to the contents of any contract or other
document referred to are summaries and in each instance reference is made to
the copy of the contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference. Copies of the Registration Statement may be obtained from
the Commission, upon payment of the prescribed charges, or may be examined
free of charge at the Commission's offices. The Depositor is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports and other information with the Commission.
Reports and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission at Seven World Trade Center, 13th Floor, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including Credit Suisse First Boston
Mortgage Securities Corp., that file electronically with the Commission.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Copies of the 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: Credit Suisse First Boston Mortgage Securities Corp.,
Eleven Madison Avenue, New York, New York 10010, telephone number (212)
325-2000.
2
<PAGE>
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,
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: Credit Suisse First Boston
Mortgage Securities Corp., Eleven Madison Avenue, New York, New York 10010,
telephone number (212) 325-2000.
3
<PAGE>
RISK FACTORS
INVESTORS SHOULD CONSIDER, IN CONNECTION WITH THE PURCHASE OF
CERTIFICATES, AMONG OTHER THINGS, THE FOLLOWING FACTORS AND CERTAIN OTHER
FACTORS AS MAY BE SET FORTH IN "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such
Series remain outstanding. Any such secondary market may provide less
liquidity to investors than any comparable market for securities evidencing
interests in single family mortgage loans. The market value of Certificates
will fluctuate with changes in prevailing rates of interest. Consequently,
sale of Certificates by a holder in any secondary market that may develop may
be at a discount from 100% of their original principal balance or from their
purchase price. Furthermore, secondary market purchasers may look only
hereto, to the related Prospectus Supplement and to the reports to
Certificateholders delivered pursuant to the related Agreement. Except to the
extent described herein and in the related Prospectus Supplement,
Certificateholders will have no redemption rights and the Certificates are
subject to early retirement only under certain specified circumstances
described herein and in the related Prospectus Supplement.
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only
obligations with respect to the Certificates or the Mortgage Loans will be
the obligations (if any) of the Depositor (or, if otherwise provided in the
related Prospectus Supplement, the person identified therein as the person
making certain representations and warranties with respect to the Mortgage
Loans, as applicable) pursuant to certain limited representations and
warranties made with respect to the Mortgage Loans. Since certain
representations and warranties with respect to the Mortgage Loans may have
been made and/or assigned in connection with transfers of such Mortgage Loans
prior to the Closing Date, the rights of the Trustee and the
Certificateholders with respect to such representations or warranties will be
limited to their rights as an assignee thereof. Unless otherwise specified in
the related Prospectus Supplement, none of the Depositor, the Master Servicer
or any affiliate thereof will have any obligation with respect to
representations or warranties made by any other entity. Unless otherwise
specified in the related Prospectus Supplement, neither the Certificates nor
the underlying Mortgage Loans will be guaranteed or insured by any
governmental agency or instrumentality, or by the Depositor, the Master
Servicer or any of their affiliates. Proceeds of the assets included in the
related Trust Fund for each Series of Certificates (including the Mortgage
Loans and any form of Enhancement) will be the sole source of payments on the
Certificates, and there will be no recourse to the Depositor or any other
entity in the event that such proceeds are insufficient or otherwise
unavailable to make all payments provided for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a Series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other Series. If the related Trust Fund is insufficient
to make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Distribution Account, the Collection Account
and the REO Account and any accounts maintained as Enhancement, may be
withdrawn under certain conditions, as described in the related Prospectus
Supplement. In the event of such withdrawal, such amounts will not be
available for future payment of principal of or interest on the Certificates.
If so provided in the Prospectus Supplement for a Series of Certificates that
includes one or more classes of Subordinate Certificates, on any Distribution
Date in respect of which losses or shortfalls in collections on the Trust
Funds have been incurred, the amount of such losses or shortfalls will be
borne first by one or more classes of the Subordinate Certificates, and,
thereafter, by the remaining classes of Certificates in the priority and
manner and subject to the limitations specified in such Prospectus
Supplement.
4
<PAGE>
PREPAYMENTS AND EFFECT ON AVERAGE LIFE OF CERTIFICATES AND YIELDS
Prepayments (including those caused by defaults) on the Mortgage Loans in
any Trust Fund generally will result in a faster rate of principal payments
on one or more classes of the related Certificates than if payments on such
Mortgage Loans were made as scheduled. Thus, the prepayment experience on the
Mortgage Loans may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans
varies between pools and from time to time is influenced by a variety of
economic, demographic, geographic, social, tax, legal and other factors.
There can be no assurance as to the rate of prepayment on the Mortgage Loans
in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest
rates fall significantly below the applicable mortgage interest rates,
principal prepayments are likely to be higher than if prevailing rates remain
at or above the rates borne by the Mortgage Loans underlying or comprising
the Mortgaged Properties in any Trust Fund. As a result, the actual maturity
of any class of Certificates could occur significantly earlier than expected.
A Series of Certificates may include one or more classes of Certificates with
priorities of payment and, as a result, yields on other classes of
Certificates of such Series may be more sensitive to prepayments on Mortgage
Loans. A Series of Certificates may include one or more classes offered at a
significant premium or discount. Yields on such classes of Certificates will
be sensitive, and in some cases extremely sensitive, to prepayments on
Mortgage Loans and, where the amount of interest payable with respect to a
class is disproportionately high, as compared to the amount of principal, as
with certain classes of Stripped Certificates, a holder might, in some
prepayment scenarios, fail to recoup its original investment. A Series of
Certificates may include one or more classes of Certificates that provide for
distribution of principal thereof from amounts attributable to interest
accrued but not currently distributable on one or more classes of
Certificates (the "Accrual Certificates") and, as a result, yields on such
Certificates will be sensitive to (a) the provisions of such Accrual
Certificates relating to the timing of distributions of interest thereon and
(b) if such Accrual Certificates accrue interest at a variable or floating
Pass-Through Rate, changes in such rate.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Loans will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
Series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an
investor purchasing a Certificate at a significant premium might fail to
recoup its initial investment under certain prepayment scenarios. Each
Prospectus Supplement will identify any payment to which holders of
Certificates of the related Series are entitled that is not covered by the
applicable rating.
The amount, type and nature of any Enhancement established with respect to
a Series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such
criteria are sometimes based upon an actuarial analysis of the behavior of
mortgage loans in a larger group. Such analysis is often the basis upon which
each Rating Agency determines the amount of credit support required with
respect to each such class. There can be no assurance that the historical
data supporting any such actuarial analysis will accurately reflect future
experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. No assurance can be
given that values of any Mortgaged Properties have remained or will remain at
their levels on the respective dates of origination of the related Mortgage
Loans. Moreover, there is no assurance that appreciation of real estate
values generally will limit loss experiences on the Mortgaged Properties. If
the commercial or multifamily residential real estate markets should
experience an overall decline in property values such that the outstanding
principal balances of the Mortgage Loans underlying or comprising the
Mortgage Loans in a particular Trust Fund and any secondary financing on the
related Mortgaged Properties become equal to or greater than the value of the
Mortgaged Properties, the rates of delinquencies, foreclosures and
5
<PAGE>
losses could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect
to any Trust Fund. To the extent that such losses are not covered by
Enhancement, if any, described in the related Prospectus Supplement, such
losses will be borne, at least in part, by the holders of one or more classes
of the Certificates of the related Series.
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. The ability of a mortgagor to repay a loan secured by an
income-producing property typically is dependent primarily upon the
successful operation of such property rather than any independent income or
assets of the mortgagor; thus, the value of an income-producing property is
directly related to the net operating income derived from such property. In
contrast, the ability of a mortgagor to repay a single family loan typically
is dependent primarily upon the mortgagor's household income, rather than the
capacity of the property to produce income; thus, other than in geographical
areas where employment is dependent upon a particular employer or an
industry, the mortgagor's income tends not to reflect directly the value of
such property. A decline in the net operating income of an income-producing
property will likely affect both the performance of the related loan as well
as the liquidation value of such property, whereas a decline in the income of
a mortgagor on a single family property will likely affect the performance of
the related loan but may not affect the liquidation value of such property.
Moreover, a decline in the value of a Mortgaged Property will increase the
risk of loss particularly with respect to any related junior Mortgage Loan.
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both.
The risks associated with such loans may be offset by the number of tenants
or, if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of a
mortgagor's default, recourse may be had only against the specific property
and such other assets, if any, as have been pledged to secure the related
Mortgage Loan. With respect to those Mortgage Loans that provide for recourse
against the mortgagor and its assets generally, there can be no assurance
that such recourse will ensure a recovery in respect of a defaulted Mortgage
Loan greater than the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single family loans both because the Mortgage Loans in a Trust Fund will
generally consist of a smaller number of loans than would a single family
pool of comparable aggregate unpaid principal balance and because of the
higher principal balance of individual Mortgage Loans. Mortgage Loans in a
Trust Fund may consist of only a single or limited number of Mortgage Loans
and/or relate to Leases to only a single Lessee or a limited number of
Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a Series of
Certificates may be described in the related Prospectus Supplement.
RISKS ASSOCIATED WITH MORTGAGE LOANS AND LEASES
If so described in the related Prospectus Supplement, each mortgagor under
a Mortgage Loan may be an entity created by the owner or purchaser of the
related Mortgaged Property solely to own or purchase such property, in part
to isolate the property from the debts and liabilities of such owner or
purchaser. Unless otherwise specified, each such Mortgage Loan will represent
a nonrecourse obligation
6
<PAGE>
of the related mortgagor secured by the lien of the related Mortgage and the
related Lease assignments. Whether or not such loans are recourse or
nonrecourse obligations, it is not expected that the mortgagors will have any
significant assets other than the Mortgaged Properties and the related
Leases, which will be pledged to the Trustee under the related Agreement.
Therefore, the payment of amounts due on any such Mortgage Loans, and,
consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the
Lessees. Such rental payments will, in turn, depend on continued occupancy
by, and/or the creditworthiness of, such Lessees, which in either case may be
adversely affected by a general economic downturn or an adverse change in
their financial condition. Moreover, to the extent a Mortgaged Property was
designed for the needs of a specific type of tenant (e.g., a nursing home,
hotel or motel), the value of such property in the event of a default by the
Lessee or the early termination of such Lease may be adversely affected
because of difficulty in re-leasing the property to a suitable substitute
lessee or, if re-leasing to such a substitute is not possible, because of the
cost of altering the property for another more marketable use. As a result,
without the benefit of the Lessee's continued support of the Mortgaged
Property, and absent significant amortization of the Mortgage Loan, if such
loan is foreclosed on and the Mortgaged Property is liquidated following a
lease default, the net proceeds might be insufficient to cover the
outstanding principal and interest owing on such loan, thereby increasing the
risk that holders of the Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-Off Date may not be fully amortizing over their terms to maturity and,
thus, will require substantial principal payments (i.e., balloon payments) at
their stated maturity. Mortgage Loans with balloon payments involve a greater
degree of risk because the ability of a mortgagor to make a balloon payment
typically will depend upon its ability either to timely refinance the loan or
to timely sell the related Mortgaged Property. The ability of a mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the level of available mortgage interest rates at the time of sale
or refinancing, the mortgagor's equity in the related Mortgaged Property, the
financial condition and operating history of the mortgagor and the related
Mortgaged Property, tax laws, rent control laws (with respect to certain
multifamily properties and mobile home parks), reimbursement rates (with
respect to certain nursing homes), renewability of operating licenses,
prevailing general economic conditions and the availability of credit for
commercial or multifamily real properties, as the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans
will be greater with respect to junior Mortgage Loans.
OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Mortgage Loans, a Master Servicer or a Special
Servicer will be permitted (within prescribed parameters) to extend and
modify Mortgage Loans that are in default or as to which a payment default is
imminent, including in particular with respect to balloon payments. In
addition, a Master Servicer or a Special Servicer may receive a workout fee
based on receipts from or proceeds of such Mortgage Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to
7
<PAGE>
which a payment default is imminent. Additionally, if so specified in the
related Prospectus Supplement, certain of the Mortgage Loans included in the
Mortgage Pool for a Series may have been subject to workouts or similar
arrangements following periods of delinquency and default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. The mortgagor's sophistication
and form of organization may increase the likelihood of protracted litigation
or bankruptcy in default situations.
ENHANCEMENT LIMITATIONS
The Prospectus Supplement for a Series of Certificates will describe any
Enhancement in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit
support, or combinations thereof. The use of Enhancement will be subject to
the conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Enhancement may not cover all potential losses or
risks. For example, Enhancement may or may not cover fraud or negligence by a
mortgage loan originator or other parties.
A Series of Certificates may include one or more classes of Subordinate
Certificates, if so provided in the related Prospectus Supplement. Although
subordination is intended to reduce the risk to holders of Senior
Certificates of delinquent distributions or ultimate losses, the amount of
subordination will be limited and may decline under certain circumstances. In
addition, if principal payments on one or more classes of Certificates of a
Series are made in a specified order of priority, any limits with respect to
the aggregate amount of claims under any related Enhancement may be exhausted
before the principal of the lower priority classes of Certificates of such
Series has been repaid. As a result, the impact of significant losses and
shortfalls on the Trust Funds may fall primarily upon those classes of
Certificates having a lower priority of payment. Moreover, if a form of
Enhancement covers more than one Series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust
will be subject to the risk that such Enhancement will be exhausted by the
claims of other Covered Trusts.
The amount of any applicable Enhancement supporting one or more classes of
Certificates, including the subordination of one or more classes of other
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level
of defaults, delinquencies, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Mortgage
Loans will not exceed such assumed levels.
Regardless of the form of Enhancement provided, the amount of coverage
will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the Enhancement for any Series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any Series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of
the downgrading of the obligations of any applicable Enhancement provider, or
as a result of losses on the related Mortgage Loans substantially in excess
of the levels contemplated by such Rating Agency at the time of its initial
rating analysis. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation to replace or supplement any Enhancement,
or to take any other action to maintain any rating of any Series of
Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which in general permits the
lender to accelerate the maturity of the Mortgage Loan if the mortgagor
sells, transfers or conveys the related Mortgaged Property or its interest in
the Mortgaged Property. Mortgages may also include a debt-acceleration
clause, which permits the lender to accelerate the debt upon a monetary or
non-monetary default by the mortgagor. Such clauses are generally enforceable
subject to certain exceptions. The courts of all states
8
<PAGE>
will enforce clauses providing for acceleration in the event of a material
payment default. The equity courts of any state, however, may refuse the
foreclosure of a mortgage or deed of trust when an acceleration of the
indebtedness would be inequitable or unjust or the circumstances would render
the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under
the leases on the related Mortgaged Property and the income derived therefrom
to the lender as further security for the related Mortgage Loan, while
retaining a license to collect rents for so long as there is no default. In
the event the mortgagor defaults, the license terminates and the lender is
entitled to collect rents. Such assignments are typically not perfected as
security interests prior to actual possession of the cash flows. Some state
laws may require that the lender take possession of the Mortgaged Property
and obtain a judicial appointment of a receiver before becoming entitled to
collect the rents. In addition, if bankruptcy or similar proceedings are
commenced by or in respect of the mortgagor, the lender's ability to collect
the rents may be adversely affected.
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination
of a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") a lender may be liable, as
an "owner" or "operator," for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents
or employees of the lender have become sufficiently involved in the
operations of the mortgagor, regardless of whether or not the environmental
damage or threat was caused by a prior owner. A lender also risks such
liability on foreclosure of the mortgage. Each Agreement will provide that
the Master Servicer, acting on behalf of the Trust Fund, may not acquire
title to a Mortgaged Property securing a Mortgage Loan or take over its
operation unless such Master Servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits,
that: (i) the Mortgaged Property is in compliance with applicable
environmental laws or, if not, that taking such actions as are necessary to
bring the Mortgaged Property in compliance therewith is likely to produce a
greater recovery on a present value basis, after taking into account any
risks associated therewith, than not taking such actions and (ii) there are
no circumstances present at the Mortgaged Property relating to the use,
management or disposal of any hazardous substances for which investigation,
testing, monitoring, containment, cleanup or remediation could be required
under any federal, state or local law or regulation, or that, if any
hazardous substances are present for which such action would be required,
taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis,
after taking into account any risks associated therewith, than not taking
such actions. Any additional restrictions on acquiring title to a Mortgaged
Property may be set forth in the related Prospectus Supplement.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular Series of Certificates may include Mortgage Loans that are past
due or are non-performing. Unless otherwise described in the related
Prospectus Supplement, the servicing of such Mortgage Loans as to which a
specified number of payments are delinquent will be performed by the Special
Servicer; however, the same entity may act as both Master Servicer and
Special Servicer. Enhancement provided with respect to a particular Series of
Certificates may not cover all losses related to such delinquent or
nonperforming Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the
rate of defaults and prepayments on the Mortgage Loans in such Trust Fund and
the yield on the Certificates of such Series.
9
<PAGE>
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject
to ERISA are urged to consult their own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the Certificates of any
Series.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL INTEREST CERTIFICATES
Holders of Residual Interest Certificates will be required to report on
their federal income tax returns as ordinary income their pro rata share of
the taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." Accordingly, under certain circumstances, holders of
Certificates that constitute Residual Interest Certificates may have taxable
income and tax liabilities arising from such investment during a taxable year
in excess of the cash received during such period. Individual holders of
Residual Interest Certificates may be limited in their ability to deduct
servicing fees and other expenses of the REMIC. In addition, Residual
Interest Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of Residual Interest Certificates, the
taxable income arising in a given year on a Residual Interest Certificate
will not be equal to the taxable income associated with investment in a
corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the
Residual Interest Certificate may be significantly less than that of a
corporate bond or stripped instrument having similar cash flow
characteristics. A Residual Interest Certificate acquired after January 3,
1995 cannot be marked-to-market.
CONTROL
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate balance of all outstanding
Certificates of a Series or a similar means of allocating decision-making
under the related Agreement ("Voting Rights") will be required to direct, and
will be sufficient to bind all Certificateholders of such Series to, certain
actions, including directing the Special Servicer or the Master Servicer with
respect to actions to be taken with respect to certain Mortgage Loans and REO
Properties and amending the related Agreement in certain circumstances.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more classes
of the Certificates will be initially represented by one or more certificates
registered in the name of Cede & Co., the nominee for The Depository Trust
Company ("DTC"), and will not be registered in the names of the beneficial
owners of such Certificates or their nominees. Because of this, unless and
until definitive certificates are issued, such beneficial owners will not be
recognized by the Trustee as "Certificateholders" (as that term is to be used
in the related Agreement). Hence, until such time, such beneficial owners
will be able to exercise the rights of Certificateholders only indirectly
through DTC and its participating organizations.
10
<PAGE>
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on December 31,
1985, and is a wholly-owned subsidiary of Credit Suisse First Boston
Management Corporation ("CSFBMC"). CSFBMC is a wholly-owned subsidiary of
Credit Suisse First Boston, Inc. Credit Suisse First Boston Corporation,
which may act as an underwriter in offerings made hereby, as described in
"PLAN OF DISTRIBUTION" below, is also a wholly-owned subsidiary of Credit
Suisse First Boston, Inc. The principal executive offices of the Depositor
are located at Eleven Madison Avenue, New York, N.Y. 10010. Its telephone
number is (212) 325-2000.
The Depositor was organized, among other things, for the purposes of
establishing trusts, selling beneficial interests therein and acquiring and
selling mortgage assets to such trusts. Neither the Depositor, its parent nor
any of the Depositor's affiliates will insure or guarantee distributions on
the Certificates of any Series.
The assets of the Trust Funds will be acquired by the Depositor directly
or through one or more affiliates.
USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each Series offered hereby and by the related Prospectus
Supplement to purchase the Mortgage Loans relating to such Series, to repay
indebtedness which has been incurred to obtain funds to acquire Mortgage
Loans, to establish the Reserve Funds, if any, for the Series, to obtain
other Enhancement, if any, for the Series and to pay costs of structuring and
issuing the Certificates. If so specified in the related Prospectus
Supplement, Certificates may be exchanged by the Depositor for Mortgage
Loans.
DESCRIPTION OF THE CERTIFICATES*
* Whenever in this Prospectus the terms "Certificates," "Trust Fund" and
"Mortgage Pool" are used, such terms will be deemed to apply, unless the
context indicates otherwise, to a specific Series of Certificates, the Trust
Fund underlying the related Series and the related Mortgage Pool.
The Certificates of each Series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Agreement") to be entered into among
the Depositor, the Master Servicer and the Trustee for that Series and any
other parties described in the applicable Prospectus Supplement,
substantially in the form filed as an exhibit to the Registration Statement
of which this Prospectus is a part or in such other form as may be described
in the applicable Prospectus Supplement. The following summaries describe
certain provisions expected to be common to each Series and the Agreement
with respect to the underlying Trust Fund. However, the Prospectus Supplement
for each Series will describe more fully the Certificates and the provisions
of the related Agreement, which may be different from the summaries set forth
below.
At the time of issuance, the Certificates of each Series will be rated
"investment grade," typically one of the four highest generic rating
categories, by at least one nationally recognized statistical rating
organization. Each of such rating organizations specified in the applicable
Prospectus Supplement as rating the Certificates of the related Series is
hereinafter referred to as a "Rating Agency." A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning Rating Agency.
GENERAL
The Certificates of each Series will be issued in registered or book-entry
form and will represent beneficial ownership interests in the trust fund (the
"Trust Fund") created pursuant to the Agreement for such Series. The Trust
Fund for each Series will comprise, to the extent provided in the Agreement:
(i) the Mortgage Pool, consisting primarily of the Mortgage Loans conveyed to
the Trustee pursuant to the Agreement; (ii) all payments on or collections in
respect of the Mortgage Loans; (iii) all property acquired by foreclosure or
deed in lieu of foreclosure with respect to the Mortgage Loans; and (iv) such
other assets or rights as are described in the related Prospectus Supplement.
In addition, the Trust Fund for a Series
11
<PAGE>
may include private mortgage pass-through certificates, certificates issued
or guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the
Federal National Mortgage Association ("FNMA") or the Governmental National
Mortgage Association ("GNMA") or mortgage pass-through certificates
previously created by the Depositor, as well as various forms of Enhancement,
such as, but not limited to, insurance policies on the Mortgage Loans,
letters of credit, certificate guarantee insurance policies, the right to
make draws upon one or more Reserve Funds or other arrangements acceptable to
each Rating Agency rating the Certificates. See "ENHANCEMENT." Such other
assets will be described more fully in the related Prospectus Supplement.
If so specified in the applicable Prospectus Supplement, Certificates of a
given Series may be issued in several Classes which may pay interest at
different rates, may represent different allocations of the right to receive
principal and interest payments, and certain of which may be subordinated to
other Classes in the event of shortfalls in available cash flow from the
underlying Mortgage Loans. Alternatively, or in addition, Classes may be
"time-tranched" and, therefore, structured to receive principal payments in
sequence. Each Class in a group of "time-tranched" Classes would be entitled
to be paid in full before the next Class in the group is entitled to receive
any principal payments. A Class of Certificates may also provide for payments
of principal only or interest only or for disproportionate payments of
principal and interest. Subordinate Certificates of a given Series of
Certificates may be offered in the same Prospectus Supplement as the Senior
Certificates of such Series or may be offered in a separate Prospectus
Supplement. Each Class of Certificates of a Series will be issued in the
minimum denominations specified in the related Prospectus Supplement.
The Prospectus Supplement for any Series including Classes similar to any
of those described above will contain a complete description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of Classes, (ii)
the risk that interest only, or disproportionately interest weighted, Classes
purchased at a premium may not return their purchase prices under rapid
prepayment scenarios and (iii) the degree to which an investor's yield is
sensitive to principal prepayments.
The Certificates of each Series will be freely transferable and
exchangeable at the office specified in the related Agreement and Prospectus
Supplement, provided, however, that certain Classes of Certificates may be
subject to transfer restrictions described in the related Prospectus
Supplement. If specified in the related Prospectus Supplement, the
Certificates may be transferable only on the books of The Depository Trust
Company or another depository identified in such Prospectus Supplement.
DISTRIBUTIONS ON CERTIFICATES
Distributions of principal and interest on the Certificates of each Series
will be made to the registered holders thereof ("Certificateholders" or
"Holders") by the Trustee (or such other paying agent as may be identified in
the related Prospectus Supplement) on the day (the "Distribution Date")
specified in the related Prospectus Supplement, beginning in the period
specified in the related Prospectus Supplement following the establishment of
the related Trust Fund. Distributions for each Series will be made by check
mailed to the address of the person entitled thereto as it appears on the
certificate register for such Series maintained by the Trustee, by wire
transfer or by such other method as is specified in the related Prospectus
Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, the final distribution in retirement of the Certificates of each
Series will be made only upon presentation and surrender of the Certificates
at the office or agency specified in the notice to the Certificateholders of
such final distribution. In addition, the Prospectus Supplement relating to
each Series will set forth the applicable due period, prepayment period,
record date, Cut-Off Date and determination date in respect of each Series of
Certificates.
With respect to each Series of Certificates on each Distribution Date, the
Trustee (or such other paying agent as may be identified in the applicable
Prospectus Supplement) will distribute to the Certificateholders the amounts
described in the related Prospectus Supplement that are due to be paid on
such Distribution Date. In general, such amounts will include previously
undistributed payments of
12
<PAGE>
principal (including principal prepayments, if any) and interest on the
Mortgage Loans received by the Trustee after a date specified in the related
Prospectus Supplement (the "Cut-Off Date") and prior to the day preceding
each Distribution Date specified in the related Prospectus Supplement.
ACCOUNTS
It is expected that the Agreement for each Series of Certificates will
provide that the Trustee establish an account (the "Distribution Account")
into which the Master Servicer will deposit amounts held in the Collection
Account from which account distributions will be made with respect to a given
Distribution Date. On each Distribution Date, the Trustee will apply amounts
on deposit in the Distribution Account generally to make distributions of
interest and principal to the Certificateholders in the manner described in
the related Prospectus Supplement.
It is also expected that the Agreement for each Series of Certificates
will provide that the Master Servicer establish and maintain a special trust
account (the "Collection Account") in the name of the Trustee for the benefit
of Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will deposit into the Collection Account, as
more fully described in the related Prospectus Supplement: (1) all payments
on account of principal, including principal prepayments, on the Mortgage
Loans; (2) all payments on account of interest on the Mortgage Loans and all
Prepayment Premiums; (3) all proceeds from any insurance policy relating to a
Mortgage Loan ("Insurance Proceeds") other than proceeds applied to
restoration of the related Mortgaged Property; (4) all proceeds from the
liquidation of a Mortgage Loan ("Liquidation Proceeds"), including the sale
of any Mortgaged Property acquired on behalf of the Trust Fund through
foreclosure or deed in lieu of foreclosure ("REO Property"); (5) all proceeds
received in connection with the taking of a Mortgaged Property by eminent
domain; (6) any amounts required to be deposited by the Master Servicer to
cover net losses on Permitted Investments made with funds held in the
Collection Account; (7) any amounts required to be deposited in connection
with the application of co-insurance clauses, flood damage to REO Properties
and blanket policy deductibles; (8) any amounts required to be deposited from
income with respect to any REO Property; and (9) any amounts received from
Borrowers which represent recoveries of Property Protection Expenses.
"Prepayment Premium" means any premium paid or payable by the related
Borrower in connection with any principal prepayment on any Mortgage Loan.
"Property Protection Expenses" comprise certain costs and expenses incurred
in connection with defaulted Mortgage Loans, acquiring title or management of
REO Property or the sale of defaulted Mortgage Loans or REO Properties, as
more fully described in the related Agreement. As set forth in the Agreement
for each Series, the Master Servicer will be entitled to make certain
withdrawals from the Collection Account to, among other things: (i) remit
certain amounts for the related Distribution Date into the Distribution
Account; (ii) reimburse Property Protection Expenses and pay taxes,
assessments and insurance premiums and certain third-party expenses in
accordance with the Agreement; (iii) pay accrued and unpaid servicing fees to
the Master Servicer out of all Mortgage Loan collections; and (iv) reimburse
the Master Servicer, the Trustee and the Depositor for certain expenses and
provide indemnification to the Depositor and the Master Servicer as described
in the Agreement.
The amount at any time credited to the Collection Account may be invested
in Permitted Investments that are payable on demand or in general mature or
are subject to withdrawal or redemption on or before the business day
preceding the next succeeding Master Servicer Remittance Date. The Master
Servicer will be required to remit amounts required for distribution to
Certificateholders to the Distribution Account on the business day preceding
the related Distribution Date (the "Master Servicer Remittance Date"). The
income from the investment of funds in the Collection Account in Permitted
Investments will constitute additional servicing compensation for the Master
Servicer, and the risk of loss of funds in the Collection Account resulting
from such investments will be borne by the Master Servicer. The amount of
each such loss will be required to be deposited by the Master Servicer in the
Collection Account immediately as realized.
It is expected that the Agreement for each Series of Certificates will
provide that a special trust account (the "REO Account") will be established
and maintained in order to be used in connection with REO Properties and, if
specified in the related Prospectus Supplement, certain other Mortgaged
13
<PAGE>
Properties. To the extent set forth in the Agreement, certain withdrawals
from the REO Account will be made to, among other things, (i) make
remittances to the Collection Account as required by the Agreement, (ii) pay
taxes, assessments, insurance premiums, other amounts necessary for the
proper operation, management and maintenance of the REO Properties and such
Mortgaged Properties and certain third-party expenses in accordance with the
Agreement and (iii) provide for the reimbursement of certain expenses in
respect of the REO Properties and such Mortgaged Properties.
The amount at any time credited to the REO Account will be fully insured
to the maximum coverage possible or will be invested in Permitted Investments
(as defined herein) that mature, or are subject to withdrawal or redemption,
on or before the business day on which such amounts are required to be
remitted to the Master Servicer for deposit in the Collection Account. The
income from the investment of funds in the REO Account in Permitted
Investments shall be deposited in the REO Account for remittance to the
Collection Account, and the risk of loss of funds in the REO Account
resulting from such investments will be borne by the Trust Fund.
Unless otherwise specified in the applicable Prospectus Supplement,
"Permitted Investments" will consist of one or more of the following:
(i) direct obligations of, or guarantees as to timely payment of
principal and interest by, the United States or any agency or
instrumentality thereof provided that such obligations are backed by the
full faith and credit of the United States of America;
(ii) direct obligations of, or guarantees as to timely payment of
principal and interest by, the FHLMC, FNMA or the Federal Farm Credit
System, provided that any such obligation, at the time of purchase of such
obligation or contractual commitment providing for the purchase thereof,
is qualified by each Rating Agency as an investment of funds backing
securities having ratings equivalent to each Rating Agency's highest
initial rating of the Certificates;
(iii) demand and time deposits in or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and
loan association or savings bank, provided that, in the case of
obligations that are not fully FDIC-insured deposits, the commercial paper
and/or long-term unsecured 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 unsecured
debt obligations of such holding company) have the highest rating
available for such securities by each Rating Agency (in the case of
commercial paper) or have received one of the two highest ratings
available for such securities by each Rating Agency (in the case of
long-term unsecured debt obligations), or such lower rating as will not
result in the downgrade or withdrawal of the rating or ratings then
assigned to the Certificates by any Rating Agency;
(iv) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia receiving one of the two highest
long-term debt ratings available for such securities by each Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the rating or ratings then assigned to the Certificates by
any such Rating Agency;
(v) commercial or finance company 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) that is rated by each Rating Agency in its
highest short-term unsecured rating category at the time of such
investment or contractual commitment providing for such investment, and is
issued by a corporation the outstanding senior long-term debt obligations
of which are then rated by each Rating Agency in one of its two highest
long-term unsecured rating categories, or such lower rating as will not
result in the downgrading or withdrawal of the rating or ratings then
assigned to the Certificates by any Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation rated in one of the two highest ratings
available to such issuers by each Rating Agency at the time of such
investment provided that any such agreement must by its terms provide that
it is terminable by the purchaser without penalty in the event any such
rating is at any time lower than such level;
14
<PAGE>
(vii) repurchase obligations with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or
trust company (acting as principal) meeting the ratings standard described
in (iii) 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 and rated by each Rating Agency in one of its two highest
long-term unsecured rating categories at the time of such investment or
contractual commitment providing therefor; provided, however, that
securities issued by any such corporation will not be Permitted
Investments to the extent that investment therein would cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the Collection Account or the Distribution Account to
exceed 20% of the aggregate principal amount of all Permitted Investments
held in the Collection Account and the Distribution Account;
(ix) units of taxable money market funds which funds are regulated
investment companies, seek to maintain a constant net asset value per
share and invest solely in obligations backed by the full faith and credit
of the United States, and have been designated in writing by each Rating
Agency as Permitted Investments with respect to this definition;
(x) if previously confirmed in writing to the Trustee, any other demand,
money market or time deposit, or any other obligation, security or
investment, as may be acceptable to each Rating Agency as an investment of
funds backing securities having ratings equivalent to each Rating Agency's
highest initial rating of the Certificates; and
(xi) such other obligations as are acceptable as Permitted Investments to
each Rating Agency;
provided, however, that (a) such instrument or security shall qualify as a
"cash flow investment" pursuant to the Internal Revenue Code of 1986, as
amended (the "Code") and (b) no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive
only interest payments or (ii) the stated interest rate on such investment is
in excess of 120% of the yield to maturity produced by the price at which
such investment was purchased.
AMENDMENT
The Agreement for each Series will provide that it may be amended by the
parties thereto without the consent of any of the Certificateholders to cure
any ambiguity, to correct or supplement any provision therein that may be
inconsistent with any other provision therein, to maintain the rating or
ratings assigned to the Certificates by a Rating Agency or to make other
provisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions of the Agreement, provided
that such action will not, as evidenced by an opinion of counsel acceptable
to the Depositor and the Trustee, adversely affect in any material respect
the interests of any Certificateholder.
Each Agreement will also provide that it may be amended by the parties
thereto with the consent of the Holders of Certificates representing an
aggregate outstanding principal amount of not less than a percentage
specified in the related Agreement of each Class of Certificates affected by
the proposed amendment for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement
or modifying in any manner the rights of Certificateholders; provided,
however, that no such amendment may (i) reduce in any manner the amount of,
or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of each
affected Certificateholder, (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 then
outstanding, or (iii) alter the servicing standard set forth in the
Agreement. Further, the Agreement for each Series may provide that the
parties thereto, at any time and from time to time, without the consent of
the Certificateholders, may amend the Agreement to modify, eliminate or add
to any of its provisions to such extent as shall be necessary to maintain the
qualification of the REMIC Pool as a REMIC at all times that any of the
Certificates are outstanding; provided, however, that such action, as
evidenced by an opinion of counsel acceptable to the Trustee, is necessary or
helpful to maintain such qualification, and would not adversely affect in any
material respect the interest of any Certificateholder.
15
<PAGE>
The Agreement relating to each Series may provide that no amendment to
such Agreement will be made unless there has been delivered in accordance
with such Agreement an opinion of counsel to the effect that such amendment
will not cause such Series to fail to qualify as a REMIC at any time that any
of the Certificates are outstanding.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the amendment of the related Agreement.
TERMINATION; REPURCHASE OF MORTGAGE LOANS
The obligations of the parties to the Agreement for each Series will
terminate upon: (i) the purchase of all of the assets of the related Trust
Fund, as described in the related Prospectus Supplement; (ii) the later of
(a) the distribution to Certificateholders of that Series of final payment
with respect to the last outstanding Mortgage Loan or (b) the disposition of
all property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; (iii) the sale of
the assets of the related Trust Fund after the principal amounts of all
Certificates have been reduced to zero under circumstances set forth in the
Agreement; or (iv) mutual consent of the parties and all Certificateholders.
With respect to each Series, the Trustee will give or cause to be given
written notice of termination of the Agreement to each Certificateholder and,
unless otherwise specified in the applicable Prospectus Supplement, the final
distribution under the Agreement will be made only upon surrender and
cancellation of the related Certificates at an office or agency specified in
the notice of termination.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution for each Series, the Trustee (or such
other paying agent as may be identified in the applicable Prospectus
Supplement) will forward to each Certificateholder a statement setting forth
such information relating to such distribution as is specified in the
Agreement and described in the applicable Prospectus Supplement.
THE TRUSTEE
The Depositor will select a bank or trust company to act as trustee (the
"Trustee") under the Agreement for each Series and the Trustee will be
identified, and its obligations under that Agreement will be described, in
the applicable Prospectus Supplement.
16
<PAGE>
THE MORTGAGE POOLS
GENERAL
Each Mortgage Pool will consist of mortgage loans secured by first or
junior mortgages, deeds of trust or similar security instruments
("Mortgages") on, or installment contracts ("Installment Contracts") for the
sale of, fee simple or leasehold interests in commercial real estate
property, multifamily residential property, cooperatively owned multifamily
properties and/or mixed residential/commercial property and related property
and interests (each such interest or property, as the case may be, a
"Mortgaged Property"). A Mortgage Pool may also include any or all of the
participation interests in such types of mortgage loans, private mortgage
pass-through certificates, certificates issued or guaranteed by FHLMC, FNMA
or GNMA and mortgage pass-through certificates previously created by the
Depositor. Each such mortgage loan, Installment Contract, participation
interest or certificate is herein referred to as a "Mortgage Loan."
All Mortgage Loans will be of one or more of the following types:
1. mortgage loans with fixed interest rates;
2. mortgage loans with adjustable interest rates;
3. mortgage loans whose principal balances fully amortize over their
remaining terms to maturity;
4. mortgage loans whose principal balances do not fully amortize but
instead provide for a substantial principal payment at the stated maturity
of the loan;
5. mortgage loans that provide for recourse against only the Mortgaged
Properties;
6. mortgage loans that provide for recourse against the other assets of
the related Borrowers (as defined below); and
7. any other types of mortgage loans described in the applicable
Prospectus Supplement.
Certain Mortgage Loans ("Simple Interest Loans") may provide that
scheduled interest and principal payments thereon are applied first to
interest accrued from the last date to which interest has been paid to the
date such payment is received and the balance thereof is applied to
principal, and other Mortgage Loans may provide for payment of interest in
advance rather than in arrears.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements or operating agreements relating to the
Mortgaged Property and in some cases by certain letters of credit, personal
guarantees or both. Pursuant to an assignment of leases and rents, the
obligor (the "Borrower") on the related promissory note (the "Note") assigns
its right, title and interest as landlord under each lease and the income
derived therefrom to the related lender, while retaining a license to collect
the rents for so long as there is no default. If the Borrower defaults, the
license terminates and the related lender is entitled to collect the rents
from tenants to be applied to the monetary obligations of the Borrower. State
law may limit or restrict the enforcement of the assignment of leases and
rents by a lender until the lender takes possession of the related Mortgaged
Property and a receiver is appointed. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS -- Leases and Rents."
A Trust Fund may consist of a single Mortgage Loan or a number of Mortgage
Loans with a single obligor or related obligors thereunder, or multiple
Mortgage Loans with multiple unrelated obligors thereunder, as specified in
the related Prospectus Supplement. The Mortgage Loans will be newly
originated or seasoned, and will be acquired by the Depositor either directly
or through one or more affiliates.
Unless otherwise specified in the Prospectus Supplement for a Series, the
Mortgage Loans will not be insured or guaranteed by the United States, any
governmental agency, any private mortgage insurer or any other person or
entity.
17
<PAGE>
The Prospectus Supplement relating to each Series will specify the
originator or originators relating to the Mortgage Loans, which may include,
among others, commercial banks, savings and loan associations, other
financial institutions, insurance companies or real estate developers, and
the underwriting criteria to the extent available in connection with
originating the Mortgage Loans. The criteria applied by the Depositor in
selecting the Mortgage Loans to be included in a Mortgage Pool will vary from
Series to Series. The Prospectus Supplement relating to each Series also will
provide specific information regarding the characteristics of the Mortgage
Loans, as of the Cut-Off Date, including, among other things: (i) the
aggregate principal balance of the Mortgage Loans; (ii) the types of
properties securing the Mortgage Loans and the aggregate principal balance of
the Mortgage Loans secured by each type of property; (iii) the interest rate
or range of interest rates of the Mortgage Loans; (iv) the origination dates
and the original and, with respect to seasoned Mortgage Loans, remaining
terms to stated maturity of the Mortgage Loans; (v) the loan-to-value ratios
at origination and, with respect to seasoned Mortgage Loans, current loan
balance-to-original value ratios of the Mortgage Loans; (vi) the geographic
distribution of the Mortgaged Properties underlying the Mortgage Loans; (vii)
the minimum interest rates, margins, adjustment caps, adjustment frequencies,
indices and other similar information applicable to adjustable rate Mortgage
Loans; (viii) the debt service coverage ratios relating to the Mortgage
Loans; and (ix) payment delinquencies, if any, relating to the Mortgage
Loans. The applicable Prospectus Supplement will also specify any inadequate,
incomplete or obsolete documentation relating to the Mortgage Loans and other
characteristics of the Mortgage Loans relating to each Series. If specified
in the applicable Prospectus Supplement, the Depositor may segregate the
Mortgage Loans in a Mortgage Pool into separate "Mortgage Loan Groups" (as
described in the related Prospectus Supplement) as part of the structure of
the payments of principal and interest on the Certificates of a Series. In
such case, the Depositor will disclose the above-specified information by
Mortgage Loan Group.
The Depositor will file a current report on Form 8-K (the "Form 8-K") with
the Securities and Exchange Commission within 15 days after the initial
issuance of each Series of Certificates (each, a "Closing Date"), as
specified in the related Prospectus Supplement, which will set forth
information with respect to the Mortgage Loans included in the Trust Fund for
a Series as of the related Closing Date. The Form 8-K will be available to
the Certificateholders of the related Series promptly after its filing.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates of each Series, the Depositor
will cause the Mortgage Loans to be assigned to the Trustee, together with,
as more fully specified in the related Prospectus Supplement, all principal
and interest due on or with respect to such Mortgage Loans, other than
principal and interest due on or before the Cut-Off Date and principal
prepayments received on or before the Cut-Off Date. The Trustee, concurrently
with such assignment, will execute and deliver Certificates evidencing the
beneficial ownership interests in the related Trust Fund to the Depositor in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Agreement for the related Series (the
"Mortgage Loan Schedule"). The Mortgage Loan Schedule will include, among
other things, as to each Mortgage Loan, information as to its outstanding
principal balance as of the close of business on the Cut-Off Date, as well as
information respecting the interest rate, the scheduled monthly (or other
periodic) payment of principal and interest as of the Cut-Off Date and the
maturity date of each Note.
In addition, except to the extent otherwise specified in the applicable
Prospectus Supplement, the Depositor will, as to each Mortgage Loan, deliver
to the Trustee: (i) the Note, endorsed to the order of the Trustee without
recourse; (ii) the Mortgage and an executed assignment thereof in favor of
the Trustee or otherwise as required by the Agreement; (iii) any assumption,
modification or substitution agreements relating to the Mortgage Loan; (iv) a
lender's title insurance policy (or owner's policy in the case of an
Installment Contract), together with its endorsements, or an attorney's
opinion of title issued as of the date of origination of the Mortgage Loan;
(v) if the assignment of leases, rents and profits is separate from the
Mortgage, an executed re-assignment of assignment of leases, rents and
profits to the Trustee; and (vi) such other documents as may be described in
the Agreement (such documents collectively, the "Mortgage Loan File"). Unless
otherwise expressly permitted by the Agreement, all documents included in the
Mortgage Loan File are to be original executed documents; provided, however,
18
<PAGE>
that in instances where the original recorded Mortgage, Mortgage assignment
or any document necessary to assign the Depositor's interest in Installment
Contracts to the Trustee, as described in the Agreement, has been retained by
the applicable jurisdiction or has not yet been returned from recordation,
the Depositor may deliver a photocopy thereof certified to be the true and
complete copy of the original thereof submitted for recording.
The Trustee will hold the Mortgage Loan File for each Mortgage Loan in
trust for the benefit of all Certificateholders. Pursuant to the Agreement,
the Trustee is obligated to review the Mortgage Loan File for each Mortgage
Loan within a specified number of days after the execution and delivery of
the Agreement. Unless otherwise specified in the related Prospectus
Supplement, if any document in the Mortgage Loan File is found to be
defective in any material respect, the Trustee will promptly notify the
Depositor and the Master Servicer. Unless otherwise specified in the related
Prospectus Supplement, if the Master Servicer or other entity cannot cure
such defect within the time period specified in such Prospectus Supplement,
the Master Servicer or such other entity will be obligated to either
substitute the affected Mortgage Loan for a Substitute Mortgage Loan or
Loans, or to repurchase the related Mortgage Loan from the Trustee within the
time period specified in such Prospectus Supplement at a price equal to the
principal balance thereof as of the date of purchase or, in the case of a
Series as to which an election has been made to treat the related Trust Fund
as a REMIC, at such other price as may be necessary to avoid a tax on a
prohibited transaction, as described in Section 860F(a) of the Code, in each
case together with accrued interest at the applicable Pass-Through Rate to
the first day of the month following such repurchase, plus the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. Unless otherwise specified in the applicable Prospectus Supplement,
this purchase obligation constitutes the sole remedy available to the Holders
of Certificates or the Trustee for a material defect in a constituent
document.
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES
The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage
Loans may be originated in contemplation of the transactions contemplated by
this Prospectus and the related Prospectus Supplement or may have been
originated by third-parties and acquired by the Depositor directly or through
its affiliates in negotiated transactions.
Except as otherwise set forth in the related Prospectus Supplement for a
Series, the originator of a Mortgage Loan will have applied underwriting
procedures intended to evaluate, among other things, the income derived from
the Mortgaged Property, the capabilities of the management of the project,
including a review of management's past performance record, its management
reporting and control procedures (to determine its ability to recognize and
respond to problems) and its accounting procedures (to determine cash
management ability, the obligor's credit standing and repayment ability and
the value and adequacy of the Mortgaged Property as collateral). Mortgage
Loans insured by the Federal Housing Administration ("FHA"), a division of
the United States Department of Housing and Urban Development ("HUD"), will
have been originated by mortgage lenders which are approved by HUD as an FHA
mortgagee in the ordinary course of their real estate lending activities and
will comply with the underwriting policies of FHA.
If so specified in the related Prospectus Supplement, the adequacy of a
Mortgaged Property as security for repayment will generally have been
determined by appraisal by appraisers selected in accordance with
preestablished guidelines established by or acceptable to the loan originator
for appraisers. If so specified in the related Prospectus Supplement, the
appraiser must have personally inspected the property and verified that it
was in good condition and that construction, if new, has been completed.
Unless otherwise stated in the applicable Prospectus Supplement, the
appraisal will have been based upon a cash flow analysis and/or a market data
analysis of recent sales of comparable properties and, when deemed
applicable, a replacement cost analysis based on the current cost of
constructing or purchasing a similar property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that
19
<PAGE>
appreciation of real estate values generally will limit loss experiences on
commercial properties or multifamily residential properties. If the
commercial real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans and
any additional 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. To the
extent that such losses are not covered by the methods of Enhancement or the
insurance policies described herein, the ability of the Depositor to pay
principal of and interest on the Certificates may be adversely affected. Even
where credit support covers all losses resulting from defaults and
foreclosure, the effect of defaults and foreclosures may be to increase
prepayment experience on the Mortgage Loans, thus shortening weighted average
life and affecting yield to maturity.
REPRESENTATIONS AND WARRANTIES
Unless otherwise specified in the related Prospectus Supplement, the
seller (the "Unaffiliated Seller") of a Mortgage Loan to the Depositor or any
of its affiliates (or the Master Servicer, if the Unaffiliated Seller is also
the Master Servicer under the Agreement) will have made representations and
warranties in respect of the Mortgage Loans sold by such Unaffiliated Seller
(or the Master Servicer) to the Depositor or its affiliates. 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 opinion of title) and any required
hazard insurance was effective at the origination of each Mortgage Loan, and
that each policy (or opinion of title) remained in effect on the date of
purchase of the Mortgage Loan from the Unaffiliated Seller; (ii) that the
Unaffiliated Seller had good and marketable title to each such Mortgage Loan;
(iii) with respect to each Mortgaged Property, that each mortgage constituted
a valid first lien on the Mortgaged Property (subject only to permissible
title insurance exceptions), unless otherwise specified in the related
Prospectus Supplement; (iv) that there were no delinquent tax or assessment
liens against the Mortgaged Property; and (v) that each Mortgage Loan was
current as to all required payments (unless otherwise specified in the
related Prospectus Supplement).
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 the 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 of
the Unaffiliated Seller described below will not arise if, on or after the
date of the sale of a Mortgage Loan by the Unaffiliated Seller to the
Depositor or its affiliates, the relevant event occurs that would have given
rise to such an obligation. 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. If so specified in the related Prospectus
Supplement, the Depositor will make certain representations and warranties
for the benefit of Holders of Certificates of a Series in respect of a
Mortgage Loan that relate to the period commencing on the date of sale of
such Mortgage Loan to the Depositor or its affiliates.
Unless otherwise set forth or specified in the related Prospectus
Supplement, 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, if so specified in the
related Prospectus Supplement, the Master Servicer will be obligated to
repurchase such Mortgage Loan at a purchase price equal to 100% of the unpaid
principal balance thereof at the date of repurchase or, in the case of a
Series of Certificates as to which the Depositor has elected to treat the
related Trust Fund as a REMIC, as defined in the Code, at such other price as
may be necessary to avoid a tax on a prohibited transaction, as described in
Section 860F(a) of the Code, in each case together with accrued interest at
the Pass-Through Rate for the related Mortgage Pool, to the first day of the
month following such repurchase and the amount of any unreimbursed
20
<PAGE>
advances made by the Master Servicer in respect of such Mortgage Loan. The
Master Servicer will be required to enforce such obligation of the
Unaffiliated Seller for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. Unless otherwise
specified in the applicable Prospectus Supplement and subject to the ability
of the Unaffiliated Seller or the Master Servicer to deliver Substitute
Mortgage Loans for certain Mortgage Loans as described below, this repurchase
obligation constitutes the sole remedy available to the Certificateholders of
such Series for a breach of a representation or warranty by an Unaffiliated
Seller.
Any obligation of the Master Servicer to purchase a Mortgage Loan if an
Unaffiliated Seller defaults on its obligation to do so is subject to
limitations, and no assurance can be given that an Unaffiliated Seller will
carry out its repurchase obligation with respect to the Mortgage Loans.
The Depositor will make representations and warranties with respect to the
Mortgage Loans in a Mortgage Pool, as specified in the related Prospectus
Supplement. Upon a breach of any representation or warranty by the Depositor
that materially and adversely affects the interests of the
Certificateholders, the Depositor will be obligated either to cure the breach
in all material respects or to purchase the related Mortgage Loan at the
purchase price set forth above. Unless otherwise specified in the applicable
Prospectus Supplement and subject to the ability of the Depositor to deliver
Substitute Mortgage Loans for certain Mortgage Loans as described below, this
repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for a breach of representation or warranty
by the Depositor.
The proceeds of any repurchase of a Mortgage Loan will be deposited,
subject to certain limitations set forth in the related Agreement, into the
Collection Account.
Within the period of time specified in the related Prospectus Supplement,
following the date of issuance of a Series of Certificates, the Depositor,
the Master Servicer or the Unaffiliated Seller, as the case may be, may
deliver to the Trustee Mortgage Loans ("Substitute Mortgage Loans") in
substitution for any one or more of the Mortgage Loans ("Deleted Mortgage
Loans") initially included in the Trust Fund but which do not conform in one
or more respects to the description thereof contained in the related
Prospectus Supplement, as to which a breach of a representation or warranty
is discovered, which breach materially and adversely affects the interests of
the Certificateholders, or as to which a document in the related Mortgage
Loan File is defective in any material respect. Unless otherwise specified in
the related Prospectus Supplement, the required characteristics of any
Substitute Mortgage Loan will generally include, among other things, that
such Substitute Mortgage Loan 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 Mortgage Loan (the amount of any shortfall to be
distributed to Certificateholders in the month of substitution), (ii) have a
per annum interest rate (the "Mortgage Interest Rate") not less than (and not
more than 1% greater than) the Mortgage Interest Rate of the Deleted Mortgage
Loan, (iii) have a remaining term to maturity not greater than (and not more
than one year less than) that of the Deleted Mortgage Loan and (iv) comply
with all the representations and warranties set forth in the Agreement as of
the date of substitution.
21
<PAGE>
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Prospectus Supplement related to a Series will identify the master
servicer, or if there is only one servicer of the Mortgage Loans, the
servicer thereof (as applicable, the "Master Servicer") and will set forth
certain information concerning the Master Servicer. The Master Servicer may
be an affiliate of the Depositor and may have other business relationships
with the Depositor and its affiliates.
The Master Servicer will be responsible for servicing the Mortgage Loans
pursuant to the Agreement for the related Series. If so specified in the
related Prospectus Supplement, the Master Servicer may subcontract the
servicing of all or a portion of the Mortgage Loans to one or more
sub-servicers and may subcontract the servicing of certain Mortgage Loans
that are in default or otherwise require special servicing (the "Specially
Serviced Mortgage Loans") to a special servicer (the "Special Servicer"), and
certain information with respect to the Special Servicer will be set forth in
such Prospectus Supplement. Such sub-servicers and the Special Servicer may
be an affiliate of the Depositor and may have other business relationships
with Depositor and its affiliates.
COLLECTIONS AND OTHER SERVICING PROCEDURES
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the related
Agreement, following such collection procedures as it deems necessary or
desirable. Consistent with the above, the Master Servicer may, in its
discretion, waive any late payment or assumption charge or penalty interests
in connection with late payment or assumption of a Mortgage Loan and, if so
specified in the related Prospectus Supplement, may extend the due dates for
payments due on a Note.
It is expected that the Agreement for each Series will provide that the
Master Servicer establish and maintain an escrow account (the "Escrow
Account") in which the Master Servicer will be required to deposit amounts
received from each Borrower, if required by the terms of the related Note,
for the payment of taxes, assessments, certain mortgage and hazard insurance
premiums and other comparable items. The Special Servicer, if any, will be
required to remit amounts received for such purposes on Mortgage Loans
serviced by it for deposit in the Escrow Account, and will be entitled to
direct the Master Servicer to make withdrawals from the Escrow Account as may
be required for servicing of such Mortgage Loans. Withdrawals from the Escrow
Account may be made to effect timely payment of taxes, assessments, mortgage
and hazard insurance premiums, to refund to Borrowers amounts determined to
be overages, to remove amounts deposited therein in error, to pay interest to
Borrowers on balances in the Escrow Account, if required, to repair or
otherwise protect the Mortgaged Properties and to clear and terminate such
account. The Master Servicer will be entitled to all income on the funds in
the Escrow Account invested in Permitted Investments not required to be paid
to Borrowers under applicable law. The Master Servicer will be responsible
for the administration of the Escrow Account. If amounts on deposit in the
Escrow Account are insufficient to pay any tax, insurance premium or other
similar item when due, such item will be payable from amounts on deposit in
the Collection Account or, to the extent such amounts are insufficient, in
the manner set forth in the Prospectus Supplement and Agreement for the
related Series.
INSURANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer maintain or
require each Borrower to maintain insurance in accordance with the related
Mortgage, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related
Mortgage, the coverage of each such standard hazard insurance policy will be
in an amount that is not less than the lesser of the full replacement cost of
the improvements securing such Mortgage Loan or the outstanding principal
balance owing on such Mortgage Loan. If a Mortgaged Property was located at
the time of origination of the related Mortgage Loan in a federally
designated special flood hazard area, the Master Servicer will also
22
<PAGE>
maintain or require the related Borrower to maintain flood insurance in an
amount equal to the lesser of the unpaid principal balance of the related
Mortgage Loan and the maximum amount obtainable with respect to the Mortgage
Loan. To the extent set forth in the related Prospectus Supplement, the cost
of any such insurance maintained by the Master Servicer will be an expense of
the Trust Fund payable out of the Collection Account. The Master Servicer
will cause to be maintained fire and hazard insurance with extended coverage
on each REO Property in an amount which is at least equal to the greater of
(i) an amount not less than the amount necessary to avoid the application of
any coinsurance clause contained in the related insurance policy and (ii) the
replacement cost of the improvements which are a part of such property. The
cost of any such insurance with respect to an REO Property will be an expense
of the Trust Fund payable out of amounts on deposit in the related REO
Account or, if such amounts are insufficient, from the Collection Account.
The Master Servicer will maintain flood insurance providing substantially the
same coverage as described above on any REO Property which was located in a
federally designated special flood hazard area at the time the related
Mortgage Loan was originated. The related Agreement will provide that the
Master Servicer may satisfy its obligation to cause hazard policies to be
maintained by maintaining a master, or single interest blanket, insurance
policy insuring against losses on the Mortgage Loans or REO Properties, as
the case may be. The incremental cost of such insurance allocable to any
particular Mortgage Loan, if not borne by the related Borrower, will be an
expense of the Trust Fund. Alternatively, the Master Servicer may satisfy its
obligation by maintaining, at its expense, a blanket policy (i.e., not a
single interest or master policy) insuring against losses on the Mortgage
Loans or REO Properties, as the case may be. If such a blanket policy
contains a deductible clause, the Master Servicer will be obligated to
deposit in the Collection Account all sums which would have been deposited
therein but for such clause.
In general, the standard form of fire and hazard 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. Since the standard hazard insurance
policies relating to the 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 conditions. Most such policies typically will not cover any physical
damage resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mud flows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list
is merely indicative of certain kinds of uninsured risks and is not intended
to be all-inclusive. Any losses incurred with respect to Mortgage Loans due
to uninsured risks (including earthquakes, mud flows and floods) or
insufficient hazard insurance proceeds could affect distributions to the
Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which,
in effect, will require the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of
the dwellings, structures and other improvements on the Mortgaged Property in
order to recover the full amount of any partial loss. If the insured's
coverage falls below this specified percentage, such clause will provide that
the insurer's liability in the event of partial loss will not exceed the
greater of (i) the actual cash value (the replacement cost less physical
depreciation) of the structures and other improvements damaged or destroyed
and (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.
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the Borrower to maintain other forms of insurance
including, but not limited to, loss of rent endorsements, business
interruption insurance and comprehensive public liability insurance, and the
related Agreement may require the Master Servicer to maintain public
liability insurance with respect to any REO Properties. Any cost incurred by
the Master Servicer in maintaining any such insurance policy will be added to
the amount owing under the Mortgage Loan where the terms of the Mortgage Loan
so permit;
23
<PAGE>
provided, however, that the addition of such cost will not be taken into
account for purposes of calculating the distribution to be made to
Certificateholders. Such costs may be recovered by the Master Servicer from
the Collection Account, with interest thereon, as provided by the Agreement.
Unless otherwise specified in the applicable Prospectus Supplement, no
pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans, nor will any Mortgage Loan be subject to FHA insurance.
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act of
1934, as amended, and the United States Housing Act of 1937, as amended. To
the extent specified in the related Prospectus Supplement, all or a portion
of the Mortgage Loans may be insured by the FHA. The Master Servicer will be
required to take such steps as are reasonably necessary to keep such
insurance in full force and effect.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer obtain and
maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring
against loss occasioned by fraud, theft or other intentional misconduct of
the officers, employees and agents of the Master Servicer. The related
Agreement will allow the Master Servicer to self-insure against loss
occasioned by the errors and omissions of the officers, employees and agents
of the Master Servicer so long as certain criteria set forth in the Agreement
are met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under the
Agreement for each Series will come from the payment to it or retention by
it, with respect to each Mortgage Loan, of a "Servicing Fee" (as defined in
the related Prospectus Supplement). The exact amount and calculation of such
Servicing Fee will be established in the Prospectus Supplement and Agreement
for the related Series. Since the aggregate unpaid principal balance of the
Mortgage Loans will generally decline over time, the Master Servicer's
servicing compensation will ordinarily decrease as the Mortgage Loans
amortize.
In addition, the Agreement for a Series may provide that the Master
Servicer be entitled to receive, as additional compensation, (i) Prepayment
Premiums, late fees and certain other fees collected from Borrowers and (ii)
any interest or other income earned on funds deposited in the Collection
Account (as described under "DESCRIPTION OF THE CERTIFICATES -- Accounts")
and, except to the extent such income is required to be paid to the related
Borrowers, the Escrow Account.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will pay the fees and expenses of the Trustee.
If the Master Servicer subcontracts the servicing of Specially Serviced
Mortgage Loans to a Special Servicer, the exact amount and calculation of the
Special Servicer Fee will be established in the Prospectus Supplement and
Agreement for the related Series.
In addition to the compensation described above, the Master Servicer (or
any other party specified in the applicable Prospectus Supplement) may
retain, or be entitled to the reimbursement of, such other amounts and
expenses as are described in the applicable Prospectus Supplement.
ADVANCES
The applicable Prospectus Supplement will set forth the obligations, if
any, of the Master Servicer to make any advances with respect to delinquent
payments on Mortgage Loans, payments of taxes, insurance and Property
Protection Expenses or otherwise. Any such advances will be made in the form
and manner described in the Prospectus Supplement and Agreement for the
related Series.
MODIFICATIONS, WAIVERS AND AMENDMENTS
If so specified in the related Prospectus Supplement, the Agreement for
each Series will provide that the Master Servicer or the Special Servicer, if
any, may have the discretion, subject to certain conditions
24
<PAGE>
set forth herein, to modify, waive or amend certain of the terms of any
Mortgage Loan without the consent of the Trustee or any Certificateholder.
The extent to which the Master Servicer or the Special Servicer, if any, may
modify, waive or amend any terms of the Mortgage Loans without such consent
will be specified in the related Prospectus Supplement.
The Special Servicer, if any, may, with respect to any Specially Serviced
Mortgage Loan, subject to the terms and conditions set forth in the
Agreement, modify, waive or amend the terms of such Mortgage Loan if the
Special Servicer determines that a material default has occurred or a payment
default has occurred or is reasonably foreseeable. The Special Servicer, if
any, may extend the maturity date of such Mortgage Loan to a date not later
than the date described in the related Prospectus Supplement.
Unless otherwise provided in the applicable Prospectus Supplement, the
Special Servicer, if any, will not agree to any modification, waiver or
amendment of the payment terms of a Mortgage Loan unless the Special Servicer
has determined that such modification, waiver or amendment is reasonably
likely to produce a greater recovery on a present value basis than
liquidation of the Mortgage Loan. Prior to agreeing to any such modification,
waiver or amendment of the payment terms of a Mortgage Loan, the Special
Servicer, if any, will give notice thereof in the manner set forth in the
Prospectus Supplement and Agreement for the related Series.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the modification, waiver or amendment of the terms of
the related Mortgage Loans.
EVIDENCE OF COMPLIANCE
The Agreement for each Series will provide that the Master Servicer, at
its expense, will cause a firm of independent public accountants to furnish
to the Trustee, annually on or before a date specified in the Agreement, a
statement as to compliance by the Master Servicer with the Agreement.
In addition, the Agreement will provide that the Master Servicer will
deliver to the Trustee, annually on or before a date specified in the
Agreement, a statement signed by an officer to the effect that, based on a
review of its activities during the preceding calendar year, to the best of
such officer's knowledge, the Master Servicer has fulfilled its obligations
under the Agreement throughout such year or, if there has been a default in
the fulfillment of any such obligation, specifying each such default and the
nature and status thereof.
CERTAIN MATTERS WITH RESPECT TO THE MASTER SERVICER, THE SPECIAL SERVICER AND
THE TRUSTEE
The Agreement for each Series will also provide that neither the Master
Servicer nor any of its directors, officers, employees or agents will 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 the Agreement, or for errors in judgment; provided, however, that
neither the Master Servicer nor any such person will be protected against any
breach of representations or warranties made by the Master Servicer in the
Agreement, or 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. The Agreement will further provide that the Master Servicer and
any of its directors, officers, employees or agents will be entitled to
indemnification by the Trust Fund and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Agreement or the Certificates, other than any loss, liability or expense
incurred (i) 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 or (ii) in certain other circumstances
specified in the Agreement. Any loss resulting from such indemnification will
reduce amounts distributable to Certificateholders and will be borne pro rata
by all Certificateholders without regard to subordination, if any, of one
Class to another.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer may not resign from its obligations and duties under the 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 Master Servicer has assumed the Master
Servicer's obligations and duties under the Agreement.
25
<PAGE>
If the Master Servicer subcontracts the servicing of Specially Serviced
Mortgage Loans to a Special Servicer, the standard of care for, and any
indemnification to be provided to, the Special Servicer will be set forth in
the related Agreement.
The Trustee under each 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 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 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 the Voting Rights specified in the applicable Prospectus
Supplement. 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.
EVENTS OF DEFAULT
Events of default (each, an "Event of Default") with respect to the Master
Servicer under the Agreement for each Series will, unless otherwise provided
in the applicable Prospectus Supplement, include: (i) any failure by the
Master Servicer to remit to the Trustee for deposit in the Distribution
Account for distribution to Certificateholders any payment required to be
made by the Master Servicer under the terms of the Agreement at least one
business day prior to the related Distribution Date; (ii) any failure on the
part of the Master Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Master
Servicer, which failure continues unremedied for a period of 90 days after
written notice of such failure has been given to the Master Servicer; (iii)
the entering against the Master Servicer of a decree or order of a court,
agency or supervisory authority for 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 for the winding-up or liquidation of its affairs; provided that
any such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; (iv) the consent by the Master Servicer to
the appointment of a conservator or receiver or liquidator or liquidating
committee in any insolvency, readjustment of debt, marshalling of assets and
liabilities, voluntary liquidation or similar proceedings of or relating to
the Master Servicer or of or relating to all or substantially all of its
property; and (v) the admission by the Master Servicer in writing of its
inability to pay its debts generally as they become due, the filing by the
Master Servicer of a petition to take advantage of any applicable insolvency
or reorganization statute or the making of an assignment for the benefit of
its creditors or the voluntary suspension of the payment of its obligations.
As long as an Event of Default remains unremedied, the Trustee may, and
(a) at the written direction of the Holders of Certificates (other than
Residual Interest Certificates) entitled to at least 25% of the aggregate
Voting Rights of the Certificates of any Class in the case of an Event of
Default described in clause (i) above, (b) at the written direction of
Holders of Certificates holding at least 25% of all of the Voting Rights, or
(c) in all cases of an Event of Default described in clauses (ii) through (v)
above, shall terminate all of the rights and obligations of the Master
Servicer whereupon the Trustee or another successor Master Servicer appointed
by the Trustee will succeed to all authority and power of the Master Servicer
under the Agreement and will be entitled to similar compensation
arrangements. "Voting Rights" means the portion of the voting rights of all
Certificates that is allocated to any Certificate in accordance with the
terms of the Agreement.
26
<PAGE>
ENHANCEMENT
GENERAL
If specified in the related Prospectus Supplement for any Series, credit
enhancement may be provided with respect to one or more Classes thereof or
the related Mortgage Loans (the "Enhancement"). Enhancement may be in the
form of a letter of credit, the subordination of one or more Classes of the
Certificates of such Series, the establishment of one or more reserve funds,
overcollateralization, cross collateralization provisions in the Mortgage
Loans, certificate guarantee insurance, the use of cross-support features or
another method of Enhancement described in the related Prospectus Supplement,
or any combination of the foregoing.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
If Enhancement is provided with respect to a Series, or the related
Mortgage Loans, the applicable Prospectus Supplement will include a
description of (a) the amount payable under such Enhancement, (b) any
conditions to payment thereunder not otherwise described herein, (c) the
conditions (if any) under which the amount payable under such Enhancement may
be reduced and under which such Enhancement may be terminated or replaced and
(d) the material provisions of any agreement relating to such Enhancement.
Additionally, the applicable Prospectus Supplement will set forth certain
information with respect to the issuer of any third-party Enhancement,
including (i) a brief description of its principal business activities, (ii)
its principal place of business, place of incorporation and the jurisdiction
under which it is chartered or licensed to do business, (iii) if applicable,
the identity of regulatory agencies which exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its stockholders'
or policyholders' surplus, if applicable, as of the date specified in such
Prospectus Supplement.
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be Subordinate Certificates. If so specified in the related
Prospectus Supplement, the rights of the Holders of subordinate Certificates
(the "Subordinate Certificates") to receive distributions of principal and
interest from the Collection Account on any Distribution Date will be
subordinated to such rights of the Holders of senior Certificates (the
"Senior Certificates") to the extent specified in the related Prospectus
Supplement. The Agreement may require a trustee that is not the Trustee to be
appointed to act on behalf of Holders of Subordinate Certificates.
A Series may include one or more Classes of Subordinate Certificates
entitled to receive cash flows remaining after distributions are made to all
other Senior Certificates of such Series. Such right to receive payments will
effectively be subordinate to the rights of other Holders of Senior
Certificates. A Series may also include one or more Classes of Subordinate
Certificates entitled to receive cash flows remaining after distributions are
made to other Subordinate Certificates of such Series. If so specified in the
related Prospectus Supplement, the subordination of a Class may apply only in
the event of (or may be limited to) certain types of losses not covered by
insurance policies or other credit support, such as losses arising from
damage to property securing a Mortgage Loan not covered by standard hazard
insurance policies.
The related Prospectus Supplement will set forth information concerning
the amount of subordination of a Class or Classes of Subordinate Certificates
in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, the manner of funding any related Reserve Fund and the
conditions under which amounts in any applicable Reserve Fund will be used to
make distributions to Holders of Senior Certificates and/or to Holders of
Subordinate Certificates or be released from the applicable Trust Fund. If
cash flows
27
<PAGE>
otherwise distributable to Holders of Subordinate Certificates secured by a
Mortgage Loan Group will be used as credit support for Holders of Senior
Certificates secured by another Mortgage Loan Group within the Trust Fund,
the applicable Prospectus Supplement will specify the manner and conditions
for applying such a cross-support feature.
CROSS-SUPPORT FEATURES
If the Mortgage Pool for a Series is divided into separate Mortgage Loan
Groups, each securing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions
be made on Senior Certificates secured by one Mortgage Loan Group prior to
distributions on Subordinate Certificates secured by another Mortgage Loan
Group within the Trust Fund. The related Prospectus Supplement for a Series
which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.
LETTER OF CREDIT
If specified in the related Prospectus Supplement, a letter of credit with
respect to a Series of Certificates will be issued by the bank or financial
institution specified in such Prospectus Supplement (the "L/C Bank"). Under
the letter of credit, the L/C Bank will be obligated to honor drawings
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, equal to the percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Loans on the
applicable Cut-Off Date or of one or more Classes of Certificates (the "L/C
Percentage"). If so specified in the related Prospectus Supplement, the
letter of credit may permit drawings in the event of losses not covered by
insurance policies or other credit support, such as losses arising from
damage not covered by standard hazard insurance policies. The amount
available under the letter of credit will, in all cases, 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
at the earlier of the date specified in the related Prospectus Supplement or
the termination of the Trust Fund. A copy of the letter of credit for a
Series, if any, will be filed with the Commission as an exhibit to a Current
Report on Form 8-K to be filed within 15 days of issuance of the Certificates
of the applicable Series.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a Series of Certificates will be
provided by one or more insurance companies. Such certificate guarantee
insurance will guarantee, with respect to one or more Classes of Certificates
of the applicable Series, timely distributions of interest and full
distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the certificate guarantee insurance will also guarantee against
any payment made to a Certificateholder which is subsequently covered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the
certificate guarantee insurance for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Certificates of the applicable
Series.
RESERVE FUNDS
If specified in the related Prospectus Supplement, one or more reserve
funds (each, a "Reserve Fund") may be established with respect to a Series,
in which cash, a letter of credit, Permitted Investments or a combination
thereof, in the amounts, if any, so specified in the related Prospectus
Supplement will be deposited. The Reserve Funds for a Series may also be
funded over time by depositing therein a specified amount of the
distributions received on the applicable Mortgage Loans if specified in the
related Prospectus Supplement. The Depositor may pledge the Reserve Funds to
a separate collateral agent specified in the related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified
28
<PAGE>
in the related Prospectus Supplement. A Reserve Fund may be provided to
increase the likelihood of timely payments of principal of and interest on
the Certificates, if required as a condition to the rating of such Series by
each Rating Agency. If so specified in the related Prospectus Supplement,
Reserve Funds may be established to provide limited protection, in an amount
satisfactory to each Rating Agency, against certain types of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies. Reserve Funds
may also be established for other purposes and in such amounts as will be
specified in the related Prospectus Supplement. Following each Distribution
Date amounts in any Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not
be available for further application by the Trustee.
Moneys deposited in any Reserve Fund will be invested in Permitted
Investments at the direction of the Depositor, except as otherwise specified
in the related Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, any reinvestment income or other gain from
such investments will be credited to the related Reserve Fund for such
Series, and any loss resulting from such investments will be charged to such
Reserve Fund. If specified in the related Prospectus Supplement, such income
or other gain may be payable to the Master Servicer as additional servicing
compensation, and any loss resulting from such investment will be borne by
the Master Servicer. The Reserve Fund, if any, for a Series will not be a
part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement, but the right of the Trustee to make draws on the Reserve Fund
will be an asset of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purpose for which funds in the Reserve Fund
may be applied to make distributions to Certificateholders and use of
investment earnings from the Reserve Fund, if any.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because many of the legal aspects
of mortgage loans are governed by applicable state laws (which may vary
substantially), the following summaries do not purport to be complete, to
reflect the laws of any particular state, to reflect all the laws applicable
to any particular Mortgage Loan or to encompass the laws of all states in
which the properties securing the Mortgage Loans are situated. The summaries
are qualified in their entirety by reference to the applicable federal and
state laws governing the Mortgage Loans. In the event that the Trust Fund for
a given Series includes Mortgage Loans having characteristics other than as
described below, the applicable Prospectus Supplement will set forth
additional legal aspects relating thereto.
MORTGAGES AND DEEDS OF TRUST GENERALLY
The Mortgage Loans (other than Installment Contracts) included in the
Mortgage Pool for a Series will consist of (or, in the case of mortgage
pass-through certificates, be supported by) loans secured by either mortgages
or deeds of trust or other similar security instruments. There are two
parties to a mortgage, the mortgagor, who is the borrower and owner of the
mortgaged property, and the mortgagee, who is the lender. In a mortgage
transaction, the mortgagor delivers to the mortgagee a note, bond or other
written evidence of indebtedness and a mortgage. A mortgage creates a lien
upon the real property encumbered by the mortgage as security for the
obligation evidenced by the note, bond or other evidence of indebtedness.
Although a deed of trust is similar to a mortgage, a deed of trust has three
parties, the borrower-property owner 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
irrevocably grants the property to the trustee, until the debt is paid, in
trust for the benefit of the beneficiary to secure payment of the obligation
generally with a power of sale. The trustee's authority under a deed of trust
and the mortgagee's authority under a mortgage are governed by applicable
law, the express provisions of the deed of trust or mortgage, and, in some
cases, the directions of the beneficiary.
29
<PAGE>
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in
real property such as a tenant's interest in a lease of land or improvements,
or both, and the leasehold estate created by such lease. A mortgage covering
an interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage to
protect the mortgagee against termination of such interest before the
mortgage is paid. Certain representations and warranties in the related
Agreement will be made with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate.
Priority of the lien on mortgaged property created by mortgages and deeds
of trust depends on their terms and, generally, on the order of filing with a
state, county or municipal office, although such priority may in some states
be altered by the mortgagee's or beneficiary's knowledge of unrecorded liens,
leases or encumbrances against the mortgaged property. However, filing or
recording does not establish priority over governmental claims for real
estate taxes and assessments or, in some states, for reimbursement of
remediation costs of certain environmental conditions. See "--Environmental
Risks." In addition, the Code provides priority to certain tax liens over the
lien of the mortgage.
INSTALLMENT CONTRACTS
The Mortgage Loans included in the Mortgage Pool for a Series may also
consist of Installment Contracts. Under an Installment Contract the seller
(hereinafter referred to in this Section as the "lender") retains legal title
to the property and enters into an agreement with the purchaser (hereinafter
referred to in this Section as the "borrower") for the payment of the
purchase price, plus interest, over the term of such contract. Only after
full performance by the borrower of the contract is the lender obligated to
convey title to the real estate to the purchaser. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower is generally responsible for maintaining the property in good
condition and for paying real estate taxes, assessments and hazard insurance
premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the borrower's equitable interest in the property is forfeited. The
lender in such a situation does not have to foreclose in order to obtain
title to the property, although in some cases a quiet title action is in
order if the borrower has filed the Installment Contract in local land
records and an ejectment action may be necessary to recover possession. In a
few states, particularly in cases of borrower default during the early years
of an Installment Contract, the courts will permit ejectment of the borrower
and a forfeiture of his or her interest in the property. However, most state
legislatures have enacted provisions by analogy to mortgage law protecting
borrowers under Installment Contracts from the harsh consequences of
forfeiture. Under such statutes, a judicial or nonjudicial foreclosure may be
required, the lender may be required to give notice of default and the
borrower may be granted some grace period during which the contract may be
reinstated upon full payment of the default amount and the borrower may have
a post-foreclosure statutory redemption right. In other states, courts in
equity may permit a borrower with significant investment in the property
under an Installment Contract for the sale of real estate to share in the
proceeds of sale of the property after the indebtedness is repaid or may
otherwise refuse to enforce the forfeiture clause. Nevertheless, generally
speaking, the lender's procedures for obtaining possession and clear title
under an Installment Contract for the sale of real estate in a given state
are simpler and less time-consuming and costly than are the procedures for
foreclosing and obtaining clear title to a mortgaged property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be secured by junior mortgages or deeds of trust which are subordinate to
senior mortgages or deeds of trust held by other lenders or institutional
investors. The rights of the Trust Fund (and therefore the
Certificateholders), as beneficiary under a junior deed of trust or as
mortgagee under a junior mortgage, are subordinate to those
30
<PAGE>
of the mortgagee or beneficiary under the senior mortgage or deed of trust,
including the prior rights of the senior mortgagee or beneficiary to receive
rents, hazard insurance and condemnation proceeds and to cause the property
securing the Mortgage Loan to be sold upon default of the mortgagor or
trustor, thereby extinguishing the junior mortgagee's or junior beneficiary's
lien unless the Master Servicer asserts its subordinate interest in a
property in foreclosure litigation or satisfies the defaulted senior loan. As
discussed more fully below, in many states a junior mortgagee or beneficiary
may satisfy a defaulted senior loan in full, or may cure such default and
bring the senior loan current, in either event adding the amounts expended to
the balance due on the junior loan. Absent a provision in the senior
mortgage, no notice of default is required to be given to the junior
mortgagee.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the senior mortgage or deed of trust will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the indebtedness secured by the senior mortgage or
deed of trust. Proceeds in excess of the amount of senior mortgage
indebtedness will, in most cases, be applied to the indebtedness of a junior
mortgage or deed of trust. The laws of certain states may limit the ability
of mortgagees or beneficiaries to apply the proceeds of hazard insurance and
partial condemnation awards to the secured indebtedness. In such states, the
mortgagor or trustor must be allowed to use the proceeds of hazard insurance
to repair the damage unless the security of the mortgagee or beneficiary has
been impaired. Similarly, in certain states, the mortgagee or beneficiary is
entitled to the award for a partial condemnation of the real property
security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence,
that additional amounts advanced to or on behalf of the mortgagor or trustor
by the mortgagee or beneficiary are to be secured by the mortgage or deed of
trust. While such a clause is valid under the laws of most states, the
priority of any advance made under the clause depends, in some states, on
whether the advance was an "obligatory" or "optional" advance. If the
mortgagee or beneficiary is obligated to advance the additional amounts, the
advance may be entitled to receive the same priority as amounts initially
made under the mortgage or deed of trust, notwithstanding that there may be
intervening junior mortgages or deeds of trust and other liens between the
date of recording of the mortgage or deed of trust and the date of the future
advance, and notwithstanding that the mortgagee or beneficiary had actual
knowledge of such intervening junior mortgages or deeds of trust and other
liens at the time of the advance. Where the mortgagee or beneficiary is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior mortgages or deeds of trust and other liens, the advance
may be subordinate to such intervening junior mortgages or deeds of trust and
other liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under
the loan agreement up to a "credit limit" amount stated in the recorded
mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on
the property, to maintain and repair the property and not to commit or permit
any waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee or
beneficiary under the mortgage or deed of trust. Upon a failure of the
mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under the mortgage or deed of trust to perform
the obligation itself, at its election, with the mortgagor or trustor
agreeing to reimburse the mortgagee or beneficiary for any sums expended by
the mortgagee or beneficiary on behalf of the trustor. All sums so expended
by the mortgagee or beneficiary become part of the indebtedness secured by
the mortgage or deed of trust.
31
<PAGE>
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute a lease unless the mortgagee or beneficiary executes
a written agreement with the tenant not to disturb the tenant's possession of
its premises in the event of a foreclosure. A senior mortgagee or beneficiary
may refuse to consent to matters approved by a junior mortgagee or
beneficiary with the result that the value of the security for the junior
mortgage or deed of trust is diminished. For example, a senior mortgagee or
beneficiary may decide not to approve a lease or to refuse to grant to a
tenant a non-disturbance agreement. If, as a result, the lease is not
executed, the value of the mortgaged property may be diminished.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action
initiated by the service of legal pleadings upon all necessary parties having
an interest in the real property. Delays in completion of foreclosure may
occasionally result from difficulties in locating necessary party defendants.
When the mortgagee's right to foreclose is contested, the legal proceedings
necessary to resolve the issue can be time-consuming. A judicial foreclosure
may be subject to most of the delays and expenses of other litigation,
sometimes requiring up to several years to complete. At the completion of the
judicial foreclosure proceedings, if the mortgagee prevails, the court
ordinarily issues a judgment of foreclosure and appoints a referee or other
designated official to conduct the sale of the property. Such sales are made
in accordance with procedures which vary from state to state. The purchaser
at such sale acquires the estate or interest in real property covered by the
mortgage. If the mortgage covered the tenant's interest in a lease and
leasehold estate, the purchaser will acquire such tenant's interest subject
to the tenant's obligations under the lease to pay rent and perform other
covenants contained therein.
In a majority of cases, foreclosure of a deed of trust is accomplished by
a non-judicial trustee's sale under a specific provision in the deed of trust
and/or applicable statutory requirements which authorizes the trustee,
generally following a request from the beneficiary, to sell the property at
public sale upon any default by the trustor under the terms of the note or
deed of trust. A number of states may also require that a beneficiary provide
notice of acceleration of a note to the trustor. Notice requirements under a
trustee's sale vary from state to state. In some states, prior to the
trustee's sale the trustee must record a notice of default and send a copy to
the trustor, to any person who has recorded a request for a copy of a notice
of default and notice of sale and to any successor in interest to the
trustor. In addition, the trustee must provide notice in some states to any
other person having an interest in the real property, including any junior
lienholders, and to certain other persons connected with the deed of trust.
In some states, the trustor, 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 (in some
states, limited to reasonable costs and expenses) incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses
and costs, including attorneys' fees, which may be recovered by a
beneficiary. If the deed of trust is not reinstated, a notice of sale must be
posted in a public place and, in most states, published for a specific 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 in the real property.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated official or by the trustee is often a
public sale. However, because of the difficulty a potential buyer at the sale
might have in determining the exact status of title to the property subject
to the lien of the mortgage or deed of trust and the redemption rights that
may exist (see "--Statutory Rights of Redemption" below), and because the
physical condition and financial performance of the property may have
deteriorated during the foreclosure proceedings and/or for a variety of other
reasons, a third party may be unwilling to purchase the property at the
foreclosure sale. Some states require that the lender disclose to potential
bidders at a trustee's sale all known facts materially affecting the value of
the property. Such disclosure may have an adverse effect on the trustee's
ability to sell the property or the sale
32
<PAGE>
price thereof. Potential buyers may further question the prudence of
purchasing property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company, other decisions that have followed the
reasoning of Durrett and the codification of the Durrett reasoning in the
federal bankruptcy code, as amended from time to time (11 U.S.C.) (the
"Bankruptcy Code"). Under the reasoning of Durrett, even a non-collusive,
regularly conducted foreclosure sale may be a fraudulent transfer, regardless
of the parties' intent, and, therefore, may be rescinded in favor of the
bankrupt's estate, if (i) the foreclosure sale is held while the debtor is
insolvent and not more than one year prior to the filing of the bankruptcy
petition (or if applicable state fraudulent conveyance law also allows the
avoidance of such a foreclosure sale, the applicable state statute of
limitations if the bankruptcy trustee elects to proceed under state
fraudulent conveyance law), and (ii) the price paid for the foreclosed
property does not represent "fair consideration." In May 1994 the Supreme
Court held in BFP v. RTC that in the absence of actual intent to defraud a
non-collusive, regularly conducted foreclosure sale cannot be rescinded as a
fraudulent transfer under federal bankruptcy law. However, BFP does not
address state law, and the impact of BFP on potential buyers' willingness to
purchase property at a foreclosure sale cannot yet be assessed. Prior to BFP,
a common practice was for the lender to purchase the property from the
trustee, referee or other designated official for an amount equal to the
outstanding principal amount of the indebtedness secured by the mortgage or
deed of trust, together with accrued and unpaid interest and the expenses of
foreclosure, in which event, if the amount bid by the lender equals the full
amount of such debt, interest and expenses, the mortgagee's debt will be
extinguished. Thereafter, the lender will assume the burdens of ownership,
including paying operating expenses and real estate taxes and making repairs.
The lender is then obligated as an owner until it can arrange a sale of the
property to a third party. Frequently, the lender employs a third-party
management company to manage and operate the property. The costs of operating
and maintaining commercial property may be significant and may be greater
than the income derived from that property. The costs of management and
operation of those mortgaged properties which are hotels, motels or nursing
or convalescent homes or hospitals may be particularly significant because of
the expertise, knowledge and, with respect to nursing or convalescent homes
or hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's
and the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. Furthermore, some states require that any
environmental hazards be eliminated before a property may be resold. In
addition, a lender may be responsible under federal or state law for the cost
of cleaning up a mortgaged property that is environmentally contaminated. See
"--Environmental Risks" below. As a result, a lender could realize an overall
loss on a mortgage loan even if the related mortgaged property is sold at
foreclosure or resold after it is acquired through foreclosure for an amount
equal to the full outstanding principal amount of the mortgage loan, plus
accrued interest.
In foreclosure proceedings, some courts have applied general equitable
principles. These equitable principles are generally designed to relieve the
borrower from the legal effect of his defaults under the loan documents.
Examples of judicial remedies that have been fashioned include judicial
requirements that the lender undertake affirmative and expensive actions to
determine the causes of 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 that
lenders reinstate loans or recast payment schedules in order to accommodate
borrowers who are suffering from temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose if the
default under the mortgage instrument is not monetary, such as the borrower's
failing to maintain adequately the property or the borrower's executing a
second mortgage or deed of trust affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that borrowers under deeds of trust or mortgages receive
33
<PAGE>
notices in addition to the statutorily prescribed minimum. 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.
Under the REMIC provisions of the Code and under the related Agreement,
the Master Servicer or Special Servicer, if any, may be permitted to hire an
independent contractor to operate any REO Property. The costs of such
operation may be significantly greater than the costs of direct operation by
the Master Servicer or Special Servicer, if any. See "SERVICING OF THE
MORTGAGE LOANS -- Collections and Other Servicing Procedures."
ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to potential
environmental risks. Of particular concern may be those mortgaged properties
which are, or have been, the site of manufacturing, industrial or disposal
activity. Such environmental risks may give rise to a diminution in value of
property securing any Mortgage Loan or, as more fully described below,
liability for cleanup costs or other remedial actions, which liability could
exceed the value of such property or the principal balance of the related
Mortgage Loan. In certain circumstances, a lender may choose not to foreclose
on contaminated property rather than risk incurring liability for remedial
actions.
Under the laws of certain states where the Mortgaged Properties are
located, the owner's failure to perform remedial actions required under
environmental laws may in certain circumstances give rise to a lien on the
Mortgaged Property to ensure the reimbursement of remedial costs incurred by
the state. In several states such lien has priority over the lien of an
existing mortgage against such property. Because the costs of remedial action
could be substantial, the value of a Mortgaged Property as collateral for a
Mortgage Loan could be adversely affected by the existence of an
environmental condition giving rise to a lien.
Under some circumstances, cleanup costs, or the obligation to take
remedial actions, can be imposed on a secured lender such as the Trust Fund
with respect to each Series. Under the laws of some states and under the
federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA"), current ownership or operation of a property
provides a sufficient basis for imposing liability for the costs of
addressing prior or current releases or threatened releases of hazardous
substances on that property. Under such laws, a secured lender who holds
indicia of ownership primarily to protect its interest in a property may, by
virtue of holding such indicia, fall within the literal terms of the
definition of "owner or operator"; consequently, such laws often specifically
exclude such a secured lender from the definitions of "owner" or "operator",
provided that the lender does not participate in the management of the
facility.
Whether actions taken by a secured creditor would constitute such
participation in the management of a facility or property, so that the lender
loses the protection of the secured creditor exclusion, has been a matter of
judicial interpretation of the statutory language, and court decisions have
historically been inconsistent. In 1990, the United States Court of Appeals
for the Eleventh Circuit suggested, in United States v. Fleet Factors Corp.,
that the mere capacity of the lender to influence a borrower's decisions
regarding disposal of hazardous substances was sufficient participation in
the management of the borrower's business to deny the protection of the
secured creditor exclusion to the lender, regardless of whether the lender
actually exercised such influence. Other judicial decisions did not interpret
the secured creditor exclusion as narrowly as did the Eleventh Circuit.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996
(the "Asset Conservation Act"), which took effect on September 30, 1996. The
Asset Conservation Act provides that in order to be deemed to have
participated in the management of a secured property, a lender must actually
participate in the operational affairs of the property or the borrower. The
Asset Conservation Act also provides that participation in the management of
the property does not include "merely having the capacity to influence, or
unexercised right to control" operations. Rather, a lender will lose the
protection of the
34
<PAGE>
secured creditor exclusion only if it exercises decision-making control over
the borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the secured property.
It should be noted that the secured creditor exclusion does not govern
liability for cleanup costs under federal laws other than CERCLA. CERCLA's
jurisdiction extends to the investigation and remediation of releases of
"hazardous substances". The definition of "hazardous substances" under CERCLA
specifically excludes petroleum products. Under federal law, the operation
and management of underground petroleum storage tanks (excluding heating oil)
is governed by Subtitle I of the Resource Conservation and Recovery Act
("RCRA"). Under the Asset Conservation Act, the protections accorded to
lenders under CERCLA are also accorded to the holders of security interests
in underground storage tanks. However, liability for cleanup of petroleum
contamination will most likely be governed by state law, which may not
provide any specific protection for secured creditors.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
Mortgaged Properties was conducted.
The related Agreement will provide that the Master Servicer, acting on
behalf of the Trust Fund, may not acquire title to, or possession of, a
Mortgaged Party underlying a Mortgage Loan, take over its operation or take
any other action that might subject a given Trust Fund to liability under
CERCLA or comparable laws unless the Master Servicer has previously
determined, based upon a phase I or other specified environmental assessment
prepared by a person who regularly conducts such environmental assessments,
that the Mortgaged Property is in compliance with applicable environmental
laws and that there are no circumstances relating to use, management or
disposal of any hazardous substances for which investigation, monitoring,
containment, clean-up or remediation could be required under applicable
environmental laws, or that it would be in the best economic interest of a
given Trust Fund to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith or as may be required under such laws.
This requirement effectively precludes enforcement of the security for the
related Note until a satisfactory environmental assessment is obtained or any
required remedial action is taken, reducing the likelihood that a given Trust
Fund will become liable for any environmental conditions affecting a
Mortgaged Property, but making it more difficult to realize on the security
for the Mortgage Loan. However, there can be no assurance that any
environmental assessment obtained by the Master Servicer will detect all
possible environmental conditions or that the other requirements of the
Agreement, even if fully observed by the Master Servicer will in fact
insulate a given Trust Fund from liability for environmental conditions.
If a lender is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners
or operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
bankrupt or otherwise judgment-proof. Furthermore, such action against the
Borrower may be adversely affected by the limitations on recourse in the loan
documents. Similarly, in some states anti-deficiency legislation and other
statutes requiring the lender to exhaust its security before bringing a
personal action against the borrower-trustor (see "--Anti-Deficiency
Legislation" below) may curtail the lender's ability to recover from its
borrower the environmental clean-up and other related costs and liabilities
incurred by the lender. Shortfalls occurring as the result of imposition of
any clean-up costs will be addressed in the Prospectus Supplement and
Agreement for the related Series.
STATUTORY RIGHTS OF REDEMPTION
In some states, after foreclosure sale pursuant to a deed of trust or 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 some states, redemption may occur only upon payment of the entire
principal balance of the loan, accrued interest and expenses of foreclosure.
In other states, redemption may be authorized if the former borrower pays
only a portion of the sums due. The effect of a statutory right of redemption
is to diminish the ability of the lender to sell the foreclosed property. The
right of redemption may defeat the title of any purchaser at a foreclosure
sale or any purchaser from the lender subsequent to a
35
<PAGE>
foreclosure sale. Certain states permit a lender to avoid a post-sale
redemption by waiving its right to a deficiency judgment. Consequently, the
practical effect of the redemption right is often to force the lender to
retain the property and pay the expenses of ownership until the redemption
period has run. In some states, there is no right to redeem property after a
trustee's sale under a deed of trust.
Borrowers under Installment Contracts generally do not have the benefits
of redemption periods such as exist in the same jurisdiction for mortgage
loans. Where redemption statutes do exist under state laws for Installment
Contracts, the redemption period is usually far shorter than for mortgages.
ANTI-DEFICIENCY LEGISLATION
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be nonrecourse loans as to which, in the event of default by a Borrower,
recourse may be had only against the specific property pledged to secure the
related Mortgage Loan and not against the Borrower's other assets. Even if
recourse is available pursuant to the terms of the Mortgage Loan against the
Borrower's assets in addition to the Mortgaged Property, certain states have
imposed statutory prohibitions which impose prohibitions against or
limitations on such recourse. For example, some state statutes limit the
right of the beneficiary or mortgagee to obtain a deficiency judgment against
the borrower following foreclosure or 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 net amount realized upon the
public sale of the real property and the amount due to the lender. Other
statutes 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 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
personal action against the borrower. Other statutory provisions limit any
deficiency judgment against the former borrower following a judicial sale to
the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
prevent a beneficiary or a mortgagee from obtaining a large deficiency
judgment against the former borrower as a result of low bids or the absence
of bids at the judicial sale.
BANKRUPTCY LAWS
Numerous statutory provisions, including the Bankruptcy Code and state
laws affording relief to debtors, may interfere with and delay the ability of
the secured mortgage lender to obtain payment of the loan, to realize upon
collateral and/or to enforce a deficiency judgment. For example, under the
Bankruptcy Code, virtually all actions (including foreclosure actions and
deficiency judgment proceedings) are automatically stayed upon the filing of
the bankruptcy petition, and, often, no interest or principal payments are
made during the course of the bankruptcy proceeding. The delay and
consequences thereof caused by such automatic stay can be significant. Also,
under the Bankruptcy Code, the filing of a petition in bankruptcy by or on
behalf of a junior lienor, including, without limitation, any junior
mortgagee or beneficiary, may stay the senior lender from taking action to
foreclose out such junior lien. Certain of the Mortgaged Properties may have
a junior "wraparound" mortgage or deed of trust encumbering such Mortgaged
Property. In general terms, a "wraparound" mortgage is a junior mortgage
where the full amount of the mortgage is increased by an amount equal to the
principal balance of the senior mortgage and where the junior lender agrees
to pay the senior mortgage out of the payments received from the mortgagor
under the "wraparound" mortgage. As with other junior mortgages, the filing
of a petition under the Bankruptcy Code by or on behalf of such a "wrap"
mortgagee may stay the senior lender from taking action to foreclose upon
such junior "wrap" mortgage.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage or deed
of trust secured by property of the debtor may be modified under certain
circumstances. The outstanding amount of the loan secured by the real
property may be reduced to the then current value of the property (with a
corresponding partial reduction of the
36
<PAGE>
amount of the lender's security interest), thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the
amount of each monthly payment, which reduction may result from a reduction
in the rate of interest and/or the alteration of the repayment schedule (with
or without affecting the unpaid principal balance of the loan), and/or an
extension (or reduction) of the final maturity date. Some bankruptcy courts
have approved plans, based on the particular facts of the reorganization
case, that effected the curing of a mortgage loan default by paying
arrearages over a number of years. Also, under the Bankruptcy Code, a
bankruptcy court may permit a debtor through its plan to de-accelerate a
secured loan and to reinstate the loan even though the lender accelerated the
mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the property had yet occurred) prior to the filing
of the debtor's petition. This may be done even if the full amount due under
the original loan is never repaid. Other types of significant modifications
to the terms of the mortgage may be acceptable to the bankruptcy court, often
depending on the particular facts and circumstances of the specific case.
A "deficient valuation" with respect to any mortgage loan is the excess of
(a)(i) the then outstanding principal balance of the mortgage loan, plus (ii)
accrued and unpaid interest and expenses reimbursable under the terms of the
related note to the date of the bankruptcy petition (collectively, the
"Outstanding Balance"), over (b) a valuation by a court of competent
jurisdiction of the mortgaged property which reduces the principal balance
receivable on such mortgage loan to an amount less than the Outstanding
Balance of the mortgage loan, which valuation results from a proceeding
initiated under the Bankruptcy Code. As used herein, "Deficient Valuation"
means, with respect to any Mortgage Loan, the deficient valuation described
in the preceding sentence, without giving effect to clause (a)(ii) thereof.
If the terms of a court order in respect of any retroactive Deficient
Valuation provide for a reduction in the indebtedness of a Mortgage Loan and
the earlier maturity thereof, the term Deficient Valuation includes an
additional amount equal to the excess, if any, of (a) the amount of principal
that would have been due on such Mortgage Loan for each month retroactively
affected (i.e. each month occurring after the effective date of such
Deficient Valuation but before the distribution of amounts in respect of such
Deficient Valuation to Certificateholders pursuant to the related Agreement),
based on the original payment terms and amortization schedule of such
Mortgage Loan over (b) the amount of principal due on such Mortgage Loan for
each such retroactive month (assuming the effect of such retroactive
application according to such Mortgage Loan's revised amortization schedule).
A "Debt Service Reduction," with respect to any Mortgage Loan, is a reduction
in the scheduled monthly payment, as described in the Agreement, for such
Mortgage Loan by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code, except such a reduction resulting from a Deficient
Valuation.
Federal bankruptcy law may also interfere with or affect the ability of
the secured mortgage lender to enforce an assignment by a mortgagor of rents
and leases related to the mortgaged property if the related mortgagor is in a
bankruptcy proceeding. Under Section 362 of the Bankruptcy Code, the
mortgagee will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue can be time-consuming and may
result in significant delays in the receipt of the rents. Rents may also
escape an assignment thereof (i) if the assignment is not fully perfected
under state law prior to commencement of the bankruptcy proceeding, (ii) to
the extent such rents are used by the borrower to maintain the mortgaged
property, or for other court authorized expenses, or (iii) to the extent
other collateral may be substituted for the rents.
To the extent a mortgagor's ability to make payment on a mortgage loan is
dependent on payments under a lease of the related property, such ability may
be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition
in bankruptcy by or on behalf of a lessee results in a stay in bankruptcy
against the commencement or continuation of any state court proceeding for
past due rent, for accelerated rent, for damages or for a summary eviction
order with respect to a default under the lease that occurred prior to the
filing of the lessee's petition.
In addition, federal bankruptcy law generally provides that a trustee or
debtor in possession in a bankruptcy or reorganization case under the
Bankruptcy Code may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed,
37
<PAGE>
the trustee or debtor in possession (or assignee, if applicable) must cure
any defaults under the lease, compensate the lessor for its losses and
provide the lessor with "adequate assurance" of future performance. Such
remedies may be insufficient, however, as the lessor may be forced to
continue under the lease with a lessee that is a poor credit risk or an
unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. Furthermore, there is likely to be a
period of time between the date upon which a lessee files a bankruptcy
petition and the date upon which the lease is assumed or rejected. Although
the lessee is obligated to make all lease payments currently with respect to
the post-petition period, there is a risk that such payments will not be made
due to the lessee's poor financial condition. If the lease is rejected, the
lessor will be treated as an unsecured creditor with respect to its claim for
damages for termination of the lease and the mortgagor must relet the
mortgaged property before the flow of lease payments will recommence. In
addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's
damages for lease rejection are limited.
In a bankruptcy or similar proceeding action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
ENFORCEABILITY OF CERTAIN PROVISIONS
Prepayment Provisions
Courts generally enforce claims requiring prepayment fees unless
enforcement would be unconscionable. However, the laws of certain states may
render prepayment fees unenforceable after a mortgage loan has been
outstanding for a certain number of years, or may limit the amount of any
prepayment fee to a specified percentage of the original principal amount of
the mortgage loan, to a specified percentage of the outstanding principal
balance of a mortgage loan, or to a fixed number of months' interest on the
prepaid amount. In certain states, prepayment fees payable on default or
other involuntary acceleration of a mortgage loan may not be enforceable
against the mortgagor. Some state statutory provisions may also treat certain
prepayment fees as usurious if in excess of statutory limits. See
"--Applicability of Usury Laws." Some of the Mortgage Loans included in the
Mortgage Pool for a Series may not require the payment of specified fees as a
condition to prepayment or such requirements have expired, and to the extent
some Mortgage Loans do require such fees, such fees generally may not deter
Borrowers from prepaying their Mortgage Loans.
Due-on-Sale Provisions
The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states, and in some cases, typically
involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, 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 exceptions. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures exercised their authority to regulate the enforceability
of such clauses with respect to mortgage loans that were (i) originated or
assumed during the "window period" under the Garn-St Germain Act, which ended
in all cases not later than October 15, 1982, and (ii) originated by lenders
other than national banks, federal savings institutions and federal credit
unions. FHLMC has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states," five states
(Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of
window period loans. Also, 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 rates.
The Agreement for each Series will provide that if any Mortgage Loan
contains a provision in the nature of a "due-on-sale" clause, which by its
terms provides that: (i) such Mortgage Loan shall (or may
38
<PAGE>
at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property; or (ii) such
Mortgage Loan may not be assumed without the consent of the related mortgagee
in connection with any such sale or other transfer, then, for so long as such
Mortgage Loan is included in the Trust Fund, the Master Servicer, on behalf
of the Trustee, shall take such actions as it deems to be in the best
interest of the Certificateholders in accordance with the servicing standard
set forth in the Agreement, and may waive or enforce any due-on-sale clause
contained in the related Note or Mortgage.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
Acceleration on Default
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
include a "debt-acceleration" clause, which permits the lender to accelerate
the full debt upon a monetary or nonmonetary default of the Borrower. The
courts of all states will enforce clauses providing for acceleration in the
event of a material payment default after giving effect to any appropriate
notices. The courts of any state, however, may refuse to permit foreclosure
of a mortgage or deed of trust when an acceleration of the indebtedness would
be inequitable or unjust or the circumstances would render the acceleration
unconscionable. Furthermore, in some states, the Borrower may avoid
foreclosure and reinstate an accelerated loan by paying only the defaulted
amounts and the costs and attorneys' fees incurred by the lender in
collecting such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from
the borrower may be deemed a waiver of the forfeiture clause. State courts
also may impose equitable grace periods for payment of arrearages or
otherwise permit reinstatement of the contract following a default. Not
infrequently, if a borrower under an Installment Contract has significant
equity in the property, equitable principles will be applied to reform or
reinstate the contract or to permit the borrower to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
Soldiers' and Sailors' Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a Borrower who enters military service after the
origination of such Borrower's Mortgage Loan (including a Borrower who is a
member of the National Guard or is in reserve status at the time of the
origination of the Mortgage Loan and is later called to active duty) may not
be charged interest (including fees and charges) above an annual rate of 6%
during the period of such Borrower's active duty status, unless a court
orders otherwise upon application of the lender. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent
not covered by any applicable Enhancements, could result in losses to the
Holders of the Certificates. The Relief Act applies to mortgagors who are
members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard and officers of the U.S. Public Health Service assigned to duty
with the military. Because the Relief Act applies to mortgagors who enter
military service (including reservists who are later called to active duty)
after origination of the related Mortgage Loan, no information can be
provided as to the number of Mortgage Loans that may be affected by the
Relief Act. Some of the Mortgaged Properties relating to Mortgage Loans
included in the Mortgage Pool for a Series may be owned by Borrowers who are
individuals. In addition, the Relief Act imposes limitations which would
impair the ability of the Master Servicer to foreclose on an affected
Mortgage Loan during the Borrower's period of active duty status and, under
certain circumstances, during an additional three months thereafter. Thus, in
the event that such a Mortgage Loan goes into default, there may be delays
and losses occasioned by the inability to realize upon the Mortgage Property
in a timely fashion.
39
<PAGE>
APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that lenders are entitled
to receive on a mortgage loan. In determining whether a given transaction is
usurious, courts may include charges in the form of "points" and "fees" as
"interest," but may exclude payments in the form of "reimbursement of
foreclosure expenses" or other charges found to be distinct from "interest."
If, however, the amount charged for the use of the money loaned is found to
exceed a statutorily established maximum rate, the form employed and the
degree of overcharge are both immaterial. Statutes differ in their provision
as to the consequences of a usurious loan. One group of statutes requires the
lender to forfeit the interest above the applicable limit or imposes a
specified penalty. Under this statutory scheme, the borrower may have the
recorded mortgage or deed of trust cancelled upon paying its debt with lawful
interest, or the lender may foreclose, but only for the debt plus lawful
interest. A second group of statutes is more severe. A violation of this type
of usury law results in the invalidation of the transaction, thereby
permitting the borrower to have the recorded mortgage or deed of trust
cancelled without any payment and prohibiting the lender from foreclosing.
Under the Agreement, a representation and warranty will be made to the
effect that the Mortgage Loans included in a given Trust Fund complied at
origination with applicable laws, including usury laws. If this
representation and warranty is breached with respect to any Mortgage Loan in
a manner that materially and adversely affects the interests of
Certificateholders, a Substitute Mortgage Loan will be substituted for such
Mortgage Loan or such Mortgage Loan will be repurchased in accordance with
the applicable Agreement. See "THE MORTGAGE POOLS -- Representations and
Warranties."
The Agreement for each Series will provide that the Master Servicer not
charge interest in excess of that permitted under any applicable state and
federal usury laws, notwithstanding that the applicable Note may provide for
a higher rate.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") with
respect to origination of alternative mortgage instruments by federal credit
unions, and all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks
and mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now the Office of Thrift Supervision) with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of
the provision of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
LEASES AND RENTS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
be secured by an assignment of leases (each, a "Lease") and rents of one or
more lessees (each, a "Lessee"), either through a separate document of
assignment or as incorporated in the mortgage. Under such assignments, the
Borrower under the mortgage loan typically assigns its right, title and
interest as landlord under each lease and the income derived therefrom to the
lender, while retaining a license to collect the rents for so long as there
is no default under the mortgage loan documentation. The manner of perfecting
the lender's
40
<PAGE>
interest in rents may depend on whether the borrower's assignment was
absolute or one granted as security for the loan. Failure to properly perfect
the lender's interest in rents may result in the loss of a substantial pool
of funds which could otherwise serve as a source of repayment for the loan.
In the event the Borrower defaults, the license terminates and the lender may
be entitled to collect rents. Some state laws may require that to perfect its
interest in rents, the lender must take possession of the property and/or
obtain judicial appointment of a receiver before becoming entitled to collect
the rents. Lenders that actually take possession of the property, however,
may incur potentially substantial risks attendant to being a mortgagee in
possession. Such risks include liability for environmental clean-up costs and
other risks inherent to property ownership. In addition, if bankruptcy or
similar proceedings are commenced by or in respect of the borrower, the
lender's ability to collect the rents may be adversely affected. In the event
of borrower default, the amount of rent the lender is able to collect from
the tenants can significantly affect the value of the lender's security
interest.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
not restrict secondary financing, thereby permitting the Borrower to use the
Mortgaged Property as security for one or more additional loans. Some of the
Mortgage Loans may preclude secondary financing (often by permitting the
first lender to accelerate the maturity of its loan if the Borrower further
encumbers the Mortgaged Property) or may require the consent of the senior
lender to any junior or substitute financing; however, such provisions may be
unenforceable in certain jurisdictions under certain circumstances. The
Agreement for each Series will provide that if any Mortgage Loan contains a
provision in the nature of a "due-on-encumbrance" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the mortgagee's option)
become due and payable upon the creation of any lien or other encumbrance on
the related Mortgaged Property; or (ii) requires the consent of the related
mortgagee to the creation of any such lien or other encumbrance on the
related Mortgaged Property, then for so long as such Mortgage Loan is
included in a given Trust Fund, the Master Servicer or, if such Mortgage Loan
is a Specially Serviced Mortgage Loan, the Special Servicer, if any, on
behalf of such Trust Fund, shall exercise (or decline to exercise) any right
it may have as the mortgagee of record with respect to such Mortgage Loan (x)
to accelerate the payments thereon, or (y) to withhold its consent to the
creation of any such lien or other encumbrance, in a manner consistent with
the servicing standard set forth in the Agreement.
Where the Borrower encumbers the Mortgaged Property with one or more
junior liens, the senior lender is subject to additional risk. First, the
Borrower may have difficulty servicing and repaying multiple loans. Second,
acts of the senior lender which prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the Borrower and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent an
existing junior lender is prejudiced or the Borrower is additionally
burdened. Third, if the Borrower defaults on the senior loan and/or any
junior loan or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior lender and can
interfere with, delay and in certain circumstances even prevent the taking of
action by the senior lender. Fourth, the bankruptcy of a junior lender may
operate to stay foreclosure or similar proceedings by the senior lender.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or
41
<PAGE>
convalescent homes may present special risks to lenders in large part due to
significant governmental regulation of the operation, maintenance, control
and financing of health care institutions. Mortgages on Mortgaged Properties
which are owned by the Borrower under a condominium form of ownership are
subject to the declaration, by-laws and other rules and regulations of the
condominium association. Mortgaged Properties which are hotels or motels may
present additional risk to the lender in that: (i) hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator; and (ii) the transferability of the
hotel's operating, liquor and other licenses to the entity acquiring the
hotel either through purchase or foreclosure is subject to the vagaries of
local law requirements. In addition, Mortgaged Properties which are
multifamily residential properties or cooperatively owned multifamily
properties may be subject to rent control laws, which could impact the future
cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, owners of public accommodations (such as
hotels, restaurants, shopping centers, hospitals, schools and social service
center establishments) must remove architectural and communication barriers
which are structural in nature from existing places of public accommodation
to the extent "readily achievable." In addition, under the ADA, alterations
to a place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable Person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the Borrower as owner or landlord.
Furthermore, since the "readily achievable" standard may vary depending on
the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the Borrower of complying with the requirements
of the ADA may be subject to more stringent requirements than those to which
the Borrower is subject.
42
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain anticipated federal income tax
consequences of the purchase, ownership, and disposition of the Certificates.
The summary is based upon the provisions of the Code, the regulations
promulgated thereunder, including, where applicable, proposed regulations,
and the judicial and administrative rulings and decisions now in effect, all
of which are subject to change or possible differing interpretations. The
statutory provisions, regulations, and interpretations on which this summary
is based are subject to change, and such change could apply retroactively.
As used herein, a "U.S. Person" means a beneficial owner of a Certificate
that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or a partnership (including
an entity treated as a corporoation or partnership for federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise), (iii)
an estate whose income is subject to United States federal income tax
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to control all
substantial decisions of the trust. Certain trusts not described in clause
(iv) above in existence on August 20, 1996 that elect to be treated as a
United States Person will also be a U.S. Person.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily
upon investors who will hold Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code,
but much of the discussion is applicable to other investors as well.
Potential purchasers of Certificates are advised to consult their own tax
advisers concerning the federal, state or local tax consequences to them of
the purchase, holding and disposition of Certificates.
TAXATION OF THE REMIC AND ITS HOLDERS
General. In the opinion of Brown & Wood llp or Orrick, Herrington &
Sutcliffe llp (as specified in the related Prospectus Supplement), special
counsel to the Depositor, if a REMIC election is made with respect to a
Series of Certificates, then the arrangement by which the Certificates of
that Series are issued will be treated as one or more REMICs as long as all
of the provisions of the applicable Agreement are complied with and the
statutory and regulatory requirements are satisfied. Certificates will be
designated as "Regular Interests" or "Residual Interests" in the REMICs, as
specified in the related Prospectus Supplement. The opinion of special
counsel may in certain cases be based on representations of the Depositor or
other persons.
If a REMIC election is made with respect to a Series of Certificates, (i)
Certificates held by a domestic building and loan association will constitute
"a regular or a residual interest in a REMIC" within the meaning of Code
Section 7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets
consist of cash, government securities, "loans secured by an interest in real
property," and other types of assets described in Code Section 7701(a)(19)(C)
(except that if the underlying Mortgage Loans are not residential Mortgage
Loans, the Certificates will not so qualify)); and (iii) Certificates held by
a real estate investment trust will constitute "real estate assets" within
the meaning of Code Section 856(c)(5)(A), and income with respect to the
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) (assuming, for both purposes, that at least 95% of the
REMIC's assets are qualifying assets). If less than 95% of the REMIC's assets
consist of assets described in (i) or (ii) above, then a Certificate will
qualify for the tax treatment described in (i), (ii) or (iii) in the
proportion that such REMIC assets are qualifying assets.
It is possible that various reserves or funds will reduce the proportion
of REMIC assets which qualify under the standards described above.
43
<PAGE>
TAXATION OF REGULAR INTERESTS
Interest and Acquisition Discount. Certificates representing Regular
Interests in a REMIC ("Regular Interest Certificates") are generally taxable
to Holders in the same manner as evidences of indebtedness issued by the
REMIC. Stated interest on the Regular Interest Certificates will be taxable
as ordinary income and taken into account using the accrual method of
accounting, regardless of the Certificateholder's normal accounting method.
Reports will be made annually to the Internal Revenue Service (the "IRS") and
to Holders of Regular Interest Certificates that are not excepted from the
reporting requirements regarding amounts treated as interest (including
accrual of original issue discount) on Regular Interest Certificates.
Certificates on which interest is not paid currently ("Compound Interest
Certificates") will, and certain of the other Certificates constituting
Regular Interests may, be issued with original issue discount ("OID") within
the meaning of Code Section 1273. Rules governing OID are set forth in
Sections 1271-1275 of the Code and certain final regulations of the U.S.
Department of the Treasury issued in 1994 and amended in 1996 (the "OID
Regulations"). The discussion herein is based in part on the OID Regulations,
which are subject to change before being adopted as final regulations and
which will not be effective for obligations issued before such final
regulations are adopted. Moreover, although the Code contains specific
provisions governing the calculation of OID on securities, such as the
Certificates, on which principal is required to be prepaid based on
prepayments of the underlying assets, regulations interpreting those
provisions have not yet been issued.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Regular Interest Certificate and its issue
price. A Holder of a Regular Interest Certificate must include such OID in
gross income as ordinary income as it accrues under a method taking into
account an economic accrual of the discount. In general, OID must be included
in income in advance of the receipt of the cash representing that income. The
amount of OID on a Regular Interest Certificate will be considered to be zero
if it is less than a de minimis amount determined under the Code.
The issue price of a Regular Interest Certificate of a Class will
generally be the initial offering price at which a substantial amount of the
Certificates in the Class is sold to the public, and will be treated by the
Depositor as including, in addition, the amount paid by the Certificateholder
for accrued interest that relates to a period prior to the issue date of such
Regular Interest Certificate. Under the Final Regulations, the stated
redemption price at maturity is the sum of all payments on the Certificate
other than any "qualified stated interest" payments. Qualified stated
interest is interest that is unconditionally payable at least annually during
the entire term of the Certificate at either (a) a single fixed rate that
appropriately takes into account the length of the interval between payments
or (b) the current values of (i) a single "qualified floating rate" or (ii) a
single "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 the variations
in which reasonably can be expected to measure contemporaneous variations in
the cost of newly borrowed funds in the currency in which the Regular
Interest Certificate is denominated (e.g., LIBOR). Such a rate remains
qualified even though it is multiplied by a fixed, positive multiple not less
than 0.65 and exceeding 1.35, increased or decreased by a fixed rate, or
both. Certain combinations of rates constitute a single qualified floating
rate, including (a) 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
qualified floating rate on the issue date is intended to approximate the
fixed rate, and (b) two or more qualified floating rates that can reasonably
be expected to have approximately the same values throughout the term of the
Regular Interest Certificate. A combination of such rates is conclusively
presumed to be a single qualified floating rate if the values of all rates on
the issue 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 issue 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 by a single formula that is fixed throughout the term of the
Regular Interest Certificate and is based on objective financial or economic
information. A rate will not be
44
<PAGE>
considered an objective rate, however, if it is reasonably expected that the
average value of the rate during the first half of the Regular Interest
Certificate's term will differ significantly from the average value of the
rate during the second half of its term. A combination of interest stated at
a fixed rate for an initial period of less than one year followed by an
objective rate is treated as a single objective rate if the value of the
objective rate on the issue date is intended to approximate the fixed rate;
such a combination of rates is conclusively presumed to be a single objective
rate if the value of the objective rate on the issue date does not differ
from the value of the fixed rate by more than 0.25 percentage points. The
rules for determining the qualified stated interest payable with respect to
certain variable rate Regular Interest Certificates not bearing interest at a
Single Variable Rate are discussed below under "--Variable Rate Regular
Interests." In the case of the Compound Interest Certificates, Interest
Weighted Certificates, and certain of the other Regular Interest
Certificates, none of the payments under the instrument will be considered
qualified stated interest, and thus the aggregate amount of all payments will
be included in the stated redemption price at maturity. Because
Certificateholders are entitled to receive interest only to the extent that
payments are made on the Mortgage Loans, interest might not be considered to
be "unconditionally payable."
The Holder of a Regular Interest Certificate issued with OID must include
in gross income, for all days during its taxable year on which it holds such
Regular Interest Certificate, the sum of the "daily portions" of such OID.
Under Code Section 1272(a)(6), the amount of OID to be included in income by
a Holder of a debt instrument, such as a Regular Interest Certificate, that
is subject to acceleration due to prepayments on other debt obligations
securing such instruments, is computed by taking into account the anticipated
rate of prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption"). The amount of OID includible in income by a Holder will be
computed by allocating to each day during a taxable year a pro-rata portion
of the OID that accrued during the relevant accrual period. The amount of OID
that will accrue during an accrual period (generally the period between
interest payments or compounding dates) is the excess(if any) of the sum of
(a) the present value of all payments remaining to be made on the Regular
Interest Certificate as of the close of the accrual period and (b) the
payments during the accrual period of amounts included in the stated
redemption price of the Regular Interest Certificate, over the "adjusted
issue price" of the Regular Interest Certificate at the beginning of the
accrual period. The adjusted issue price of a Regular Interest Certificate is
the sum of its issue price plus prior accruals of OID, reduced by the total
payments made with respect to such Regular Interest Certificate in all prior
periods, other than qualified stated interest payments. Code Section
1272(a)(6) requires the present value of the remaining payments to be
determined on the basis of three factors: (i) the original yield to maturity
of the Regular Interest Certificate (determined on the basis of compounding
at the end of each accrual period and properly adjusted for the length of the
accrual period), (ii) events which have occurred before the end of the
accrual period and (iii) the assumption that the remaining payments will be
made in accordance with the original Prepayment Assumption. The effect of
this method would be to increase the portions of OID required to be included
in income by a Certificateholder taking into account prepayments with respect
to the Mortgage Loans at a rate that exceeds the Prepayment Assumption, and
to decrease (but not below zero for any period) the portions of OID required
to be included in income by a Certificateholder taking into account
prepayments with respect to the Mortgage Loans at a rate that is slower than
the Prepayment Assumption. Although OID will be reported to
Certificateholders based on the Prepayment Assumption, no representation is
made to Certificateholders that Mortgage Loans will be prepaid at that rate
or at any other rate.
Certain classes of Certificates may represent more than one class of REMIC
Regular Interests. Unless the applicable Prospectus Supplement specifies
otherwise, the Trustee intends, based on the Final Regulations, to calculate
OID on such Certificates as if, solely for the purposes of computing OID, the
separate Regular Interests were a single debt instrument.
A subsequent Holder of a Regular Interest Certificate will also be
required to include OID in gross income, but such a Holder who purchases such
Regular Interest Certificate for an amount that exceeds its adjusted issue
price will be entitled (as will an initial Holder who pays more than a
Regular Interest Certificate's issue price) to offset such OID by comparable
economic accruals of portions of such excess.
45
<PAGE>
Interest Weighted Certificates. It is not clear how income should be
accrued with respect to Regular Interest Certificates the payments on which
consist solely or primarily of a specified portion of the interest payments
on qualified mortgages held by the REMIC ("Interest Weighted Certificate").
The Depositor intends to take the position that all of the income derived
from an Interest Weighted Certificate should be treated as OID and that the
amount and rate of accrual of such OID should be calculated by treating the
Interest Weighted Certificate as a Compound Interest Certificate. However,
the IRS could assert that income derived from an Interest Weighted
Certificate should be calculated as if the Interest Weighted Certificate were
a Certificate purchased at a premium equal to the excess of the price paid by
such Holder for the Interest Weighted Certificate over its stated principal
amount, if any. Under this approach, a Holder would be entitled to amortize
such premium only if it has in effect an election under Section 171 of the
Code with respect to all taxable debt instruments held by such holder, as
described below. Alternatively, the IRS could assert that the Interest
Weighted Certificate should be taxable under certain proposed rules governing
bonds issued with contingent principal payments, in which case a Holder might
recognize income at a slower rate than if the Interest Weighted Certificate
were treated as a Compound Interest Certificate.
Variable Rate Regular Interests. Regular Interest 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 Final 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 rates, or at (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 Regular Interest Certificates bearing a variable rate of
interest should be aware that there is uncertainty concerning the application
of Code Section 1272(a)(6), and the OID Regulations to such Certificates. In
the absence of other authority, the Depositor intends to be guided by the
provisions of the Final Regulations governing variable rate debt instruments
in adapting the provisions of Code Section 1272(a)(6) to such Certificates
for the purpose of preparing reports furnished to the IRS and
Certificateholders. In that regard, in determining OID with respect to
Regular Interest Certificates bearing interest at a Single Variable Rate, (a)
all stated interest with respect to a Regular Interest Certificate is treated
as qualified stated interest and (b) the amount and accrual of OID, if any,
is determined under the OID rules applicable to fixed rate debt instruments
discussed above by assuming that the Single Variable Rate is a fixed rate
equal to (i) in the case of a qualified floating rate or qualified inverse
floating rate, the issue date value of the rate, or (ii) in the case of any
other objective rate, a fixed rate that reflects the yield that is reasonably
expected for the Regular Interest Certificate. Interest and OID attributable
to Regular Interest Certificates bearing interest at a Multiple Variable Rate
similarly will be taken into account under a methodology that converts the
Certificate into an equivalent fixed rate debt instrument. However, in
determining the amount and accrual of OID, the assumed fixed rates are (a)
for each qualified floating rate, the value of each such rate as of the issue
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 issue date, and (c) for any other objective rate,
the fixed rate that reflects the yield that is reasonably expected for the
Certificate. 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 initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Certificate
provides for a qualified inverse floating rate). The qualified floating rate
or qualified inverse floating rate that replaces the fixed rate must be such
that the fair market value of the Regular Interest Certificate as of its
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating
rate or the qualified inverse floating rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Regular Interest
46
<PAGE>
Certificate is then converted into an equivalent fixed rate debt instrument
in the manner described above. If the interest paid or accrued with respect
to a Single Variable Rate or Multiple Variable Rate Certificate during an
accrual period differs from the assumed fixed interest rate, such difference
will be an adjustment (to interest or OID, as applicable) to the
Certificateholder's taxable income for the taxable period or periods to which
such difference relates.
Purchasers of Certificates bearing a variable rate of interest should be
aware that the provisions of the OID Regulations governing variable rate debt
instruments are limited in scope and may not apply to some Regular Interest
Certificates having variable rates. If such a Certificate is not subject to
the provisions of the OID Regulations governing variable rate debt
instruments, it may be subject to the Contingent Regulations described below.
In June 1996, the Internal Revenue Service (the "IRS") issued final
regulations (the "Contingent Regulations") governing the calculation of OID
on instruments having contingent interest payments. In general, the
Contingent Regulations would cause the timing and character of income, gain
or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. Specifically, the Contingent Regulations
generally require a U.S. Person that is a holder of such an instrument to
include future contingent and noncontingent interest payments in income as
such interest accrues based upon a projected payment schedule. Moreover, in
general, under the Contingent Regulations, any gain recognized by a U.S.
Person on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any
loss realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The Contingent Regulations apply to debt
instruments issued on or after August 13, 1996. Prospective purchasers of
variable rate Regular Interest Certificates should consult their tax advisers
concerning the appropriate tax treatment of such Certificates.
The Contingent Regulations specifically do not apply for purposes of
calculating OID on debt instruments subject to Code Section 1272(a)(6).
Additionally, the OID Regulations do not contain provisions specifically
interpreting Code Section 1272(a)(6). Until the Treasury issues guidance to
the contrary, the Trustee intends to base its computation on Code Section
1272(a)(6) and the OID Regulations as described in this Prospectus. However,
because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.
Market Discount and Premium. A purchaser of a Regular Interest Certificate
may also be subject to the market discount rules of the Code. Such purchaser
generally will be required to recognize accrued market discount as ordinary
income as payments of principal are received on such Regular Interest
Certificate, or upon sale or exchange of the Regular Interest Certificate. In
general terms, until regulations are promulgated, market discount may be
treated as accruing, at the election of the Holder, either (i) under a
constant yield method, taking into account the Prepayment Assumption, or (ii)
in proportion to accruals of OID (or, if there is no OID, in proportion to
accruals of stated interest). A Holder of a Regular Interest Certificate
having market discount may also be required to defer a portion of the
interest deductions attributable to any indebtedness incurred or continued to
purchase or carry the Regular Interest Certificate. As an alternative to the
inclusion of market discount in income on the foregoing basis, the Holder may
elect to include such market discount in income currently as it accrues on
all market discount instruments acquired by such Holder in that taxable year
or thereafter, in which case the interest deferral rule will not apply.
A Holder who purchases a Regular Interest Certificate (other than an
Interest Weighted Certificate, to the extent described above) at a cost
greater than its stated redemption price at maturity, generally will be
considered to have purchased the Certificate at a premium, which it may elect
to amortize as an offset to interest income on such Certificate (and not as a
separate deduction item) on a constant yield method. Although no regulations
addressing the computation of premium accrual on collateralized mortgage
obligations or REMIC Regular Interests have been issued, the legislative
history of the Tax Reform Act of 1986 (the "1986 Act") indicates that premium
is to be accrued in the same manner as market discount.
47
<PAGE>
Accordingly, it appears that the accrual of premium on a Regular Interest
Certificate will be calculated using the prepayment assumption used in
pricing such Regular Interest Certificate. If a Holder makes an election to
amortize premium on a Certificate, such election will apply to all taxable
debt instruments (including all REMIC Regular Interests) held by the Holder
at the beginning of the taxable year in which the election is made, and to
all taxable debt instruments acquired thereafter by such Holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
Regular Interest Certificates should consult their tax advisers regarding the
election to amortize premium and the method to be employed.
Interest Election. Under the Final Regulations, holders of Regular
Interest Certificates generally may elect to include all accrued interest on
a Regular Interest Certificate in gross income using the constant yield to
maturity method. For purposes of this election, interest includes stated
interest, original issue discount, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by
any premium. If a holder of a Regular Interest Certificate makes such an
election and (i) the Regular Interest Certificate has amortizable bond
premium, the holder is deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires, or (ii) the Regular Interest
Certificate has market discount, the holder is deemed to have made an
election to include market discount in income currently for all debt
instruments having market discount acquired during the year of the election
or thereafter. See "--Market Discount and Premium" above. A holder of a
Regular Interest Certificate should consult its tax adviser before making
this election.
Treatment of Subordinate Certificates. As described above under
"ENHANCEMENT -- Subordinate Certificates," certain Series of Certificates may
contain one or more Classes of Subordinate Certificates. Holders of
Subordinate 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 to the extent that it can be established that
such amounts are uncollectible. As a result, the amount of income reported by
a Holder of a Subordinate Certificate in any period could significantly
exceed the amount of cash distributed to such Holder in that period.
Although not entirely clear, it appears that a corporate Holder generally
should be allowed to deduct as an ordinary loss any loss sustained on account
of partial or complete worthlessness of a Subordinate Certificate. Although
similarly unclear, a noncorporate Holder generally should be allowed to
deduct as a short-term capital loss any loss sustained on account of complete
worthlessness of a Subordinate Certificate. A noncorporate Holder
alternatively may be allowed such a loss deduction as the principal balance
of a Subordinate Certificate is reduced by reason of realized losses
resulting from liquidated Mortgage Loans; however, the IRS could contend that
a noncorporate Holder should be allowed such losses only after all Mortgage
Loans in the Trust Fund have been liquidated or the Subordinate Certificates
otherwise have been retired. Special rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Holders of
Subordinate Certificates should consult their own tax advisers regarding the
appropriate timing, character and amount of any loss sustained with respect
to Subordinate Certificates.
REMIC EXPENSES
As a general rule, all of the expenses of a REMIC will be taken into
account by Holders of the Residual Interest Certificates. In the case of a
"single-class REMIC," however, the expenses will be allocated, under
temporary Treasury regulations, among the Holders of the Regular Interest
Certificates and the Holders of the Residual Interest Certificates on a daily
basis in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In the case of a Regular Interest
Certificateholder who is an individual or a "pass-through interest holder"
(including certain pass-through entities but not including real estate
investment trusts), such expenses will be deductible only to the extent that
such expenses, plus other "miscellaneous itemized deductions" of the
Certificateholder, exceed 2% of such Certificateholder's adjusted gross
income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross
48
<PAGE>
income exceeds the applicable amount (for 1996, $117,950, or $58,975, in the
case of a separate return of a married individual within the meaning of Code
Section 7703, which amounts will be adjusted annually for inflation) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the applicable amount, or (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. The disallowance of this deduction
may have a significant impact on the yield of the Regular Interest
Certificate to such a Holder. In general terms, a single-class REMIC is one
that either (i) would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single-class REMIC rules.
SALE OR EXCHANGE OF REMIC REGULAR INTEREST CERTIFICATES
A Regular Interest Certificateholder's tax basis in its Regular Interest
Certificate is the price such Holder pays for a Certificate, plus amounts of
OID or market discount included in income and reduced by any payments
received (other than qualified stated interest payments) and any amortized
premium. Gain or loss recognized on a sale, exchange, or redemption of a
Regular Interest Certificate, measured by the difference between the amount
realized and the Regular Interest Certificate's basis as so adjusted, will
generally be capital gain or loss, assuming that the Regular Interest
Certificate is held as a capital asset. If, however, a Certificateholder is a
bank, thrift, or similar institution described in Section 582 of the Code,
gain or loss realized on the sale or exchange of a Certificate will be
taxable as ordinary income or loss. In addition, gain from the disposition of
a Regular Interest Certificate that might otherwise be capital gain will be
treated as ordinary income to the extent of the excess, if any, of (i) the
amount that would have been includible in the Holder's income if the yield on
such Regular Interest Certificate had equaled 110% of the applicable federal
rate as of the beginning of such Holder's holding period, over (ii) the
amount of ordinary income actually recognized by the Holder with respect to
such Regular Interest Certificate.
In addition, all or a portion of any gain from the sale of a 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 of property
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.
TAXATION OF THE REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level taxation. Rather,
except in the case of a "single-class REMIC," the taxable income or net loss
of a REMIC is taken into account by the Holders of Residual Interests. The
Regular Interests are generally taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income
produced by the REMIC's assets, including stated interest and any OID or
market discount on loans and other assets, and (ii) deductions, including
stated interest and OID accrued on Regular Interest Certificates,
amortization of any premium with respect to loans, and servicing fees and
other expenses of the REMIC. A Holder of a Residual Interest Certificate that
is an individual or a "pass-through interest holder" (including certain
pass-through entities, but not including real estate investment trusts) will
be unable to deduct servicing fees payable on the loans or other
administrative expenses of the REMIC for a given taxable year to the extent
that such expenses, when aggregated with the Residual Interest
Certificateholder's other miscellaneous itemized deductions for that year, do
not exceed two percent of such Holder's adjusted gross income. In addition,
Code Section 68 provides that the amount of itemized deductions otherwise
allowable for the taxable year for an individual whose adjusted gross income
49
<PAGE>
exceeds the applicable amount (for 1996, $117,950, or $58,975 in the case of
a separate return of a married individual within the meaning of Code Section
7703, which amounts will be adjusted annually for inflation) will be reduced
by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount, or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the Regular Interests and the Residual Interests on the
Startup Day (generally, the day that the interests are issued). That
aggregate basis will be allocated among the assets of the REMIC in proportion
to their respective fair market values.
The OID provisions of the Code apply to loans of individuals originated on
or after March 2, 1984, and the market discount provisions apply to all
loans. Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of OID or market discount income on such loans will be
equivalent to the method under which Holders of Regular Interest Certificates
accrue OID (i.e., under the constant yield method taking into account the
Prepayment Assumption). The REMIC will deduct OID on the Regular Interest
Certificates in the same manner that the Holders of the Certificates include
such discount in income, but without regard to the de minimis rules. See
"--Taxation of Regular Interests" above. However, a REMIC that acquires loans
at a market discount must include such market discount in income currently,
as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the
life of the loans (taking into account the Prepayment Assumption) on a
constant yield method. Although the law is somewhat unclear regarding
recovery of premium attributable to loans originated on or before such date,
it is possible that such premium may be recovered in proportion to payments
of loan principal.
TAXATION OF HOLDERS OF RESIDUAL INTEREST CERTIFICATES
The Holder of a Certificate representing a residual interest (a "Residual
Interest Certificate") will take into account the "daily portion" of the
taxable income or net loss of the REMIC for each day during the taxable year
on which such Holder held the Residual Interest Certificate. The daily
portion is determined by allocating to each day in any calendar quarter its
ratable portion of the taxable income or net loss of the REMIC for such
quarter, and by allocating that amount among the Holders (on such day) of the
Residual Interest Certificates in proportion to their respective holdings on
such day.
Prohibited Transactions and Contributions Tax. The REMIC will be subject
to a 100% tax on any net income derived from a "prohibited transaction." For
this purpose, net income will be calculated without taking into account any
losses from prohibited transactions or any deductions attributable to any
prohibited transaction that resulted in a loss. In general, prohibited
transactions include (i) subject to limited exceptions, the sale or other
disposition of any qualified mortgage transferred to the REMIC; (ii) subject
to a limited exception, the sale or other disposition of a cash flow
investment; (iii) the receipt of any income from assets not permitted to be
held by the REMIC pursuant to the Code; or (iv) the receipt of any fees or
other compensation for services rendered by the REMIC. It is anticipated that
a REMIC will not engage in any prohibited transactions in which it would
recognize a material amount of net income. In addition, subject to a number
of exceptions, a tax is imposed at the rate of 100% on amounts contributed to
a REMIC after the close of the three-month period beginning on the Startup
Day. The Holders of Residual Interest Certificates will generally be
responsible for the payment of any such taxes imposed on the REMIC. To the
extent not paid by such Holders or otherwise, however, such taxes will be
paid out of the Trust Fund and will be allocated pro-rata to all outstanding
Classes of Certificates of such REMIC.
The Holder of a Residual Interest Certificate must report its
proportionate share of the taxable income of the REMIC whether or not it
receives cash distributions from the REMIC attributable to such income or
loss. The reporting of taxable income without corresponding distributions
could occur, for example, in certain REMICs in which the loans held by the
REMIC were issued or acquired at a discount, since mortgage prepayments cause
recognition of discount income, while the corresponding portion of the
50
<PAGE>
prepayment could be used in whole or in part to make principal payments on
REMIC Regular Interests issued without any discount or at an insubstantial
discount. (If this occurs, it is likely that cash distributions will exceed
taxable income in later years.) Taxable income may also be greater in the
earlier years of certain REMICs as a result of the fact that interest expense
deductions, as a percentage of outstanding principal of REMIC Regular
Interest Certificates, will typically increase over time as lower yielding
Certificates are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the Holder of a Residual Interest is taxed on the
net income of the REMIC, the taxable income derived from a Residual Interest
Certificate in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pre-tax yield. Therefore, the after-tax
yield on the Residual Interest Certificate may be less than that of such a
bond or instrument.
Limitation on Losses. The amount of the REMIC's net loss that a Holder may
take into account currently is limited to the Holder's adjusted basis at the
end of the calendar quarter in which such loss arises. A Holder's basis in a
Residual Interest Certificate will initially equal such Holder's purchase
price, and will subsequently be increased by the amount of the REMIC's
taxable income allocated to the Holder, and decreased (but not below zero) by
the amount of distributions made and the amount of the REMIC's net loss
allocated to the Holder. Any disallowed loss may be carried forward
indefinitely, but may be used only to offset income of the REMIC generated by
the same REMIC. The ability of Residual Interest Certificateholders to deduct
net losses may be subject to additional limitations under the Code, as to
which such Holders should consult their tax advisers.
Distributions. Distributions on a Residual Interest Certificate (whether
at their scheduled times or as a result of prepayments) will generally not
result in any additional taxable income or loss to a Holder of a Residual
Interest Certificate. If the amount of such payment exceeds a Holder's
adjusted basis in the Residual Interest Certificate, however, the Holder will
recognize gain (treated as gain from the sale of the Residual Interest
Certificate) to the extent of such excess.
Sale or Exchange. A Holder of a Residual Interest Certificate will
recognize gain or loss on the sale or exchange of a Residual Interest
Certificate equal to the difference, if any, between the amount realized and
such Certificateholder's adjusted basis in the Residual Interest Certificate
at the time of such sale or exchange. Any such loss may be a capital loss
subject to limitation; gain which might otherwise be capital may be treated
as ordinary income under certain circumstances. See "--Sale or Exchange of
REMIC Regular Interest Certificates" above. Except to the extent provided in
regulations, which have not yet been issued, any loss upon disposition or a
Residual Interest Certificate will be disallowed if the selling
Certificateholder acquires any residual interest in a REMIC or similar
mortgage pool within six months before or after such disposition.
EXCESS INCLUSIONS
The portion of a Residual Interest Certificateholder's REMIC taxable
income consisting of "excess inclusion" income may not be offset by other
deductions or losses, including net operating losses, on such
Certificateholder's federal income tax return. If the Holder of a Residual
Interest Certificate is an organization subject to the tax on unrelated
business income imposed by Code Section 511, such Residual Interest
Certificateholder's excess inclusion income will be treated as unrelated
business taxable income of such Certificateholder. In addition, under
Treasury regulations yet to be issued, if a real estate investment trust, a
regulated investment company, a common trust fund, or certain cooperatives
were to own a Residual Interest Certificate, a portion of dividends (or other
distributions) paid by the real estate investment trust (or other entity)
would be treated as excess inclusion income. If a Residual Certificate is
owned by a foreign person, excess inclusion income is subject to tax at a
rate of 30%, which rate may not be reduced by treaty and is not eligible for
treatment as "portfolio interest."
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to
a Residual Interest Certificate, over the daily accruals for such quarterly
period of (i) 120% of the long term applicable federal rate on the Startup
Day
51
<PAGE>
multiplied by (ii) the adjusted issue price of such Residual Interest
Certificate at the beginning of such quarterly period. The adjusted issue
price of a Residual Interest at the beginning of each calendar quarter will
equal its issue price (calculated in a manner analogous to the determination
of the issue price of a Regular Interest), increased by the aggregate of the
daily accruals for prior calendar quarters, and decreased (but not below
zero) by the amount of loss allocated to a Holder and the amount of
distributions made on the Residual Interest Certificate before the beginning
of the quarter. The long-term federal rate, which is announced monthly by the
Treasury Department, is an interest rate that is based on the average market
yield of outstanding marketable obligations of the United States government
having remaining maturities in excess of nine years.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a Residual Interest Certificateholder. First,
alternative minimum taxable income for such Residual Interest
Certificateholder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, a Residual
Interest Certificateholder's alternative minimum taxable income for a tax
year cannot be less than excess inclusions for the year. Third, the amount of
any alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. These rules are effective for tax
years beginning after December 31, 1986, unless a Residual Interest
Certificateholder elects to have such rules apply only to tax years beginning
after August 20, 1996.
Under the "REMIC Regulations," in certain circumstances, transfers of
Residual Certificates may be disregarded. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- Restrictions on Ownership and Transfer of Residual Interest
Certificates" and "--Tax Treatment of Foreign Investors."
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF RESIDUAL INTEREST CERTIFICATES
As a condition to qualification as a REMIC, reasonable arrangements must
be made to prevent the ownership of a Residual Interest Certificate by any
"Disqualified Organization." Disqualified Organizations include 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, a rural electric or telephone cooperative described in Section
1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
Sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income. Accordingly, the applicable Agreement will
prohibit Disqualified Organizations from owning a Residual Interest
Certificate. In addition, no transfer of a Residual Interest Certificate will
be permitted unless the proposed transferee shall have furnished to the
Trustee an affidavit representing and warranting that it is neither a
Disqualified Organization nor an agent or nominee acting on behalf of a
Disqualified Organization.
If a Residual Interest Certificate is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a
substantial tax will be imposed on the transferor of such Residual Interest
Certificate at the time of the transfer. In addition, if a Disqualified
Organization holds an interest in a pass-through entity (including, among
others, a partnership, trust, real estate investment trust, regulated
investment company, or any person holding as nominee) that owns a Residual
Interest Certificate, the pass-through entity will be required to pay an
annual tax on its allocable share of the excess inclusion income of the
REMIC.
The Taxpayer Relief Act of 1997 adds provisions to the Code that will
apply to an "electing large partnership." If an electing large partnership
holds a Residual Interest Certificate, all interests in the electing large
partnership are treated as held by disqualified organizations for purposes of
the tax imposed upon a pass-through entity by section 860E(e) of the Code. An
exception to this tax, otherwise available to a pass-through entity that is
furnished certain affidavits by record holders of interests in the entity and
that does not know such affidavits are false, is not available to an electing
large partnership.
Under the REMIC Regulations, if a Residual Interest Certificate is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Certificate to a United States person will be disregarded for all
Federal tax purposes unless no significant purpose of the transfer was to
impede the assessment or collection of tax. A Residual Interest Certificate
is a "noneconomic residual interest"
52
<PAGE>
unless, at the time of the transfer (i) the present value of the expected
future distributions on the Residual Interest Certificate at least equals the
product of the present value of the anticipated excess inclusions and the
highest rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which the taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the accrued
taxes. The present value is calculated based on the Prepayment Assumption,
using a discount rate equal to the "applicable federal rate" at the time of
transfer. If a transfer of a Residual Interest is disregarded, the transferor
would be liable for any Federal income tax imposed upon the taxable income
derived by the transferee from the REMIC. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of
transfer, knew or should have known that the transferee would be unwilling or
unable to pay taxes on its share of the taxable income of the REMIC. A
similar type of limitation exists with respect to certain transfers of
residual interests by foreign persons to United States persons. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- Tax Treatment of Foreign Investors."
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction, or credit, by the IRS
in a unified administrative proceeding.
TAX STATUS AS A GRANTOR TRUST
General. In the opinion of Brown & Wood llp or Orrick, Herrington &
Sutcliffe llp (as specified in the related Prospectus Supplement), special
counsel to the Depositor, if a REMIC election is not made with respect to a
Series of Certificates, the Trust Fund will be classified for federal income
tax purposes as a grantor trust under Subpart E, Part 1 of Subchapter J of
the Code and not as an association taxable as a corporation. In some Series
("Pass-Through Certificates"), there will be no separation of the principal
and interest payments on the Mortgage Loans. In such circumstances, a
Certificateholder will be considered to have purchased an undivided interest
in each of the Mortgage Loans. In other cases ("Stripped Certificates"), sale
of the Certificates will produce a separation in the ownership of the
principal payments and interest payments on the Mortgage Loans.
Each Certificateholder must report on its federal income tax return its
pro rata share of the gross income derived from the Mortgage Loans (not
reduced by the amount payable as fees to the Trustee and the Master Servicer
and similar fees (collectively, the "Trustee/Master Servicer Fee")), at the
same time and in the same manner as such items would have been reported under
the Certificateholder's tax accounting method had it held its interest in the
Mortgage Loans directly, received directly its share of the amounts received
with respect to the Mortgage Loans, and paid directly its share of the
Trustee/Master Servicer Fees. In the case of Pass-Through Certificates, such
gross income will consist of a pro rata share of all of the income derived
from all of the Mortgage Loans and, in the case of Stripped Certificates,
such income will consist of a pro rata share of the income derived from each
stripped bond or stripped coupon in which the Certificateholder owns an
interest. The Holder of a Certificate will generally be entitled to deduct
such Trustee/Master Servicer Fees under Section 162 or Section 212 of the
Code to the extent that such Trustee/Master Servicer Fees represent
"reasonable" compensation for the services rendered by the Trustee and the
Master Servicer. In the case of a noncorporate holder, however,
Trustee/Master Servicer Fees (to the extent not otherwise disallowed, e.g.,
because they exceed reasonable compensation) will be deductible in computing
such Holder's regular tax liability only to the extent that such fees, when
added to other miscellaneous itemized deductions, exceed 2% of adjusted gross
income and may not be deductible to any extent in computing such Holder's
alternative minimum tax liability. In addition, Code Section 68 provides that
the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds the applicable amount
(for 1996, $117,950, or $58,975
53
<PAGE>
in the case of a separate return of a married individual within the meaning
of Code Section 7703, which amount will be adjusted annually for inflation)
will be reduced by the lesser of (i) 3% of the excess of adjusted gross
income over the applicable amount, or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year.
Discount or Premium on Pass-Through Certificates. The Holder's purchase
price of a Pass-Through Certificate is to be allocated among the Mortgage
Loans in proportion to their fair market values, determined as of the time of
purchase of the Certificates. In the typical case, the Trustee believes it is
reasonable for this purpose to treat each Mortgage Loan as having a fair
market value proportional to the share of the aggregate principal balances of
all of the Mortgage Loans that it represents, since the Mortgage Loans,
unless otherwise specified in the applicable Prospectus Supplement, will have
a relatively uniform interest rate and other common characteristics. To the
extent that the portion of the purchase price of a Certificate allocated to a
Mortgage Loan (other than to a right to receive any accrued interest thereon
and any undistributed principal payments) is less than or greater than the
portion of the principal balance of the Mortgage Loan allocable to the
Certificate, the interest in the Mortgage Loan allocable to the Certificate
will be deemed to have been acquired at a discount or premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Mortgage Loan with OID in
excess of a prescribed de minimis amount, a Holder of a Certificate will be
required to report as interest income in each taxable year its share of the
amount of OID that accrues during that year, determined under a constant
yield method by reference to the initial yield to maturity of the Mortgage
Loan, in advance of receipt of the cash attributable to such income and
regardless of the method of federal income tax accounting employed by that
Holder. OID with respect to a Mortgage Loan could arise, for example, by
virtue of the financing of points by the originator of the Mortgage Loan, or
by virtue of the charging of points by the originator of the Mortgage Loan in
an amount greater than a statutory de minimis exception, in circumstances
under which the points are not currently deductible pursuant to applicable
Code provisions. However, the Code provides for a reduction in the amount of
OID includible in the income of a Holder who acquires an obligation after its
initial issuance at a price greater than the sum of the original issue price
of the Mortgage Loan and the previously accrued OID, less prior payments of
principal. Accordingly, if the Mortgage Loans acquired by a Certificateholder
are purchased at a price equal to the then unpaid principal amount of such
Mortgage Loans, any OID should be reduced or eliminated.
Certificateholders also may be subject to the market discount rules of
Sections 1276-1278 of the Code. A Certificateholder that acquires an interest
in Mortgage Loans with more than a prescribed de minimis amount of "market
discount" (generally, the excess of the principal amount of the Mortgage
Loans over the purchaser's purchase price) will be required under Section
1276 of the Code to include accrued market discount in income as ordinary
income in each month, but limited to an amount not exceeding the principal
payments on the Mortgage Loans received in that month and, if the
Certificates are sold, the gain realized. Such market discount would accrue
in a manner to be provided in Treasury regulations. The legislative history
of the 1986 Act indicates that, until such regulations are issued, such
market discount would in general accrue either (i) on the basis of a constant
interest rate or (ii) in the ratio of (a) in the case of Mortgage Loans not
originally issued with OID, stated interest payable in the relevant period to
total stated interest remaining to be paid at the beginning of the period, or
(b) in the case of Mortgage Loans originally issued at a discount, OID in the
relevant period to total OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination
date, the excess of interest paid or accrued to purchase or carry a loan with
market discount over interest received on such loan is allowed as a current
deduction only to the extent such excess is greater than the market discount
that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of any interest expense will be
deductible when such market discount is included in income, including upon
the sale, disposition, or repayment of the loan. A Holder may elect to
include market discount in income currently as it accrues, on all market
discount obligations acquired by such Holder during the taxable year such
election is made and thereafter, in which case the interest deferral rule
discussed above will not apply.
A Certificateholder who purchases a Certificate at a premium generally
will be deemed to have purchased its interest in the underlying Mortgage
Loans at a premium. A Certificateholder who holds a
54
<PAGE>
Certificate as a capital asset may generally elect under Section 171 of the
Code to amortize such premium as an offset to interest income on the Mortgage
Loans (and not as a separate deduction item) on a constant yield method. The
legislative history of the 1986 Act suggests that the same rules that will
apply to the accrual of market discount (described above) will generally also
apply in amortizing premium with respect to Mortgage Loans originated after
September 27, 1985. If a Holder makes an election to amortize premium, such
election will apply to all taxable debt instruments held by such Holder at
the beginning of the taxable year in which the election is made, and to all
taxable debt instruments acquired thereafter by such Holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
the Certificates should consult their tax advisers regarding the election to
amortize premium and the method to be employed. Although the law is somewhat
unclear regarding recovery of premium allocable to Mortgage Loans originated
before September 28, 1985, it is possible that such premium may be recovered
in proportion to payments of Mortgage Loan principal.
Discount or Premium on Stripped Certificates. A Stripped Certificate may
represent a right to receive only a portion of the interest payments on the
Mortgage Loans, a right to receive only principal payments on the Mortgage
Loans, or a right to receive certain payments of both interest and principal.
Certain Stripped Certificates ("Ratio Strip Certificates") may represent a
right to receive differing percentages of both the interest and principal on
each Mortgage Loan. Pursuant to Section 1286 of the Code, the separation of
ownership of the right to receive some or all of the interest payments on an
obligation from ownership of the right to receive some or all of the
principal payments results in the creation of "stripped bonds" with respect
to principal payments and "stripped coupons" with respect to interest
payments. Section 1286 of the Code applies the OID rules to stripped bonds
and stripped coupons. For purposes of computing OID, a stripped bond or a
stripped coupon is treated as a debt instrument issued on the date that such
stripped interest is purchased with an issue price equal to its purchase
price or, if more than one stripped interest is purchased, the ratable share
of the purchase price allocable to such stripped interest. The Code, Final
Regulations, Proposed Regulations (as defined herein), and judicial decisions
provide little direct guidance as to how the OID rules are to apply to
Stripped Certificates, although regulations indicate that in determining
whether the portion of the interest on a Mortgage Loan payable to a
particular Class of Certificates is "qualified stated interest," all
principal and interest payments payable to that Class from that Mortgage Loan
are taken into account. Under the method described above for REMIC Regular
Interest Certificates (the "Cash Flow Bond Method"), a prepayment assumption
is used and periodic recalculations are made which take into account with
respect to each accrual period the effect of prepayments during such period.
The Code prescribes the same method for debt instruments "secured by" other
debt instruments, the maturity of which may be affected by prepayments on the
underlying debt instruments. However, the Code does not, absent Treasury
regulations, appear specifically to cover instruments such as the Stripped
Certificates which technically represent ownership interests in the
underlying Mortgage Loans, rather than being debt instruments "secured by"
those loans. Nevertheless, it is believed that the Cash Flow Bond Method is a
reasonable method of reporting income for such Certificates, and it is
expected that OID will be reported on that basis unless otherwise specified
in the related Prospectus Supplement. In applying the calculation to Stripped
Certificates, the Trustee will treat all payments to be received with respect
to a Class of Certificates as payments on a single installment obligation.
The IRS could, however, assert that OID must be calculated separately for
each Mortgage Loan underlying a Class of Certificates.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Certificateholder's recognition of income. If, however, the
Mortgage Loans prepay at a rate slower that the prepayment assumption, in
some circumstances the use of this method may decelerate a
Certificateholder's recognition of income.
In the case of a Stripped Certificate the payments on which consist solely
or primarily of a specified portion of the interest payments on the Mortgage
Loans ("Interest Weighted Stripped Certificate"), additional uncertainty
exists because of the enhanced potential for applicability of the contingent
principal provisions of the Proposed Regulations.
Under the contingent principal provisions, "contingent principal"
represents the portion of the purchase price in excess of the amount of
principal payments. Under this method, the Certificateholder
55
<PAGE>
is in effect put on the cash method with respect to interest income at the
applicable federal rate. First, each payment denominated "interest" is
treated as interest to the extent of accrued and unpaid interest on the debt
instrument at the time that the payment is received. Second, the portion of a
payment denominated as interest that is not treated as interest, as described
in the preceding sentence, is treated as a repayment of contingent principal.
The interest for any accrual period is the product of the applicable federal
rate (published monthly by the Treasury Department and adjusted for the
length of the accrual period) at the time of the debt instrument's issuance
and the adjusted issue price at the beginning of the accrual period (the sum
of the purchase price of the instrument plus the accrued interest for all
prior accrual periods, reduced by the total of payments received in all prior
periods). The total of the payments denominated as interest with respect to
the Interest Weighted Stripped Certificate that may be treated as principal
may not exceed the amount of contingent principal. If the contingent
principal has been completely recovered, all subsequent payments will be
treated as interest.
The "Proposed Regulations" provide that if all contingent principal is not
recovered as of the final payment, then the final payment will be treated as
principal to the extent of such unrecovered principal and interest to the
extent of the remainder, if any. To the extent the final payment is not
sufficient to cover the principal amount, the Certificateholders will
recognize a loss. Any such loss may be an ordinary loss since loss recognized
on retirement of a debt instrument issued by a natural person (e.g., a
mortgage loan) is not a loss from a sale or exchange. However, the IRS might
contend that such loss should be a capital loss if the Certificateholder held
its Certificate as a capital asset within the meaning of Section 1221 of the
Code.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates described above are not the only possible
interpretations of the applicable Code provisions. Among other possibilities,
the IRS could contend that (i) in certain Series, each Stripped Certificate
other than an Interest Weighted Stripped Certificate is composed of an
unstripped, undivided ownership interest in Mortgage Loans and an installment
obligation consisting of stripped principal payments; (ii) the Stripped
Certificates other than the Interest Weighted Stripped Certificates are
subject to the contingent payment provisions of the Proposed Regulations; or
(iii) each Interest Weighted Stripped Certificate is composed of an
unstripped undivided ownership interest in Mortgage Loans and an installment
obligation consisting of stripped interest payments.
Given the variety of alternatives for treatment of the Certificates and
the different federal income tax consequences that result from each
alternative, potential purchasers are urged to consult their own tax advisers
regarding the proper treatment of the Certificates for federal income tax
purposes.
Character as Qualifying Mortgage Loans. In the case of Stripped
Certificates there is no specific legal authority existing regarding whether
the character of the Certificates, for federal income tax purposes, will be
the same as the Mortgage Loans. The IRS could take the position that the
Mortgage Loans' character is not carried over to the Certificates in such
circumstances. Pass-Through Certificates will be, and, although the matter is
not free from doubt, Stripped Certificates should be considered to represent
"real estate assets" within the meaning of Section 856(c)(5)(A) of the Code,
and "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code (except that if the underlying Mortgage
Loans are not residential Mortgage Loans, the Certificates will not so
qualify): interest income attributable to the Certificates should be
considered to represent "interest on obligations secured by mortgages on real
property or on interests in real property" within the meaning of Section
856(c)(3)(B) of the Code. Reserves or funds underlying the Certificates may
cause a proportionate reduction in the above-described qualification of
Certificates.
Sale of Certificates. As a general rule, 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 gain or loss
will generally be capital gain or loss if the Certificate is held as a
capital asset. In the case of Pass-Through Certificates, such tax basis will
generally equal the Holder's cost of the Certificate increased by any
discount income with respect to the loans represented by such Certificate
previously included in income, and decreased by the amount of any
distributions of principal previously received with respect to the
Certificate. Such gain, to the extent not
56
<PAGE>
otherwise treated as ordinary income, will be treated as ordinary income to
the extent of any accrued market discount not previously reported as income.
Gain attributable to a Certificate held as part of a conversion transaction
or subject to an election under Code Section 163(d)(4) may also be treated in
whole or part as ordinary income. See "--Sale or Exchange of REMIC Regular
Interest Certificates" above. In the case of Stripped Certificates, the tax
basis will generally equal the Certificateholder's cost for the Certificate,
increased by any discount income with respect to the Certificate previously
included in income, and decreased by the amount of all payments previously
received with respect to such Certificate.
MISCELLANEOUS TAX ASPECTS
Backup Withholding. A Certificateholder, other than a Residual Interest
Certificateholder, may, under certain circumstances, be subject to "backup
withholding" at the rate of 31% with respect to distributions or the proceeds
of a sale of certificates to or through brokers that represent interest or
original issue discount on the Certificates. This withholding generally
applies if the Holder of a Certificate (i) fails to furnish the Trustee with
its taxpayer identification number ("TIN"); (ii) furnishes the Trustee an
incorrect TIN; (iii) fails to report properly interest, dividends or other
"reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Trustee or such Holder's securities
broker with a certified statement, signed under penalty of perjury, that the
TIN provided is its correct TIN and that the Holder is not subject to backup
withholding. Backup withholding will not apply, however, with respect to
certain payments made to Certificateholders, including payments to certain
exempt recipients (such as exempt organizations) and to certain Nonresidents
(as defined below). Holders of the Certificates should consult their tax
advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining the exemption.
Final regulations dealing with withholding tax on income paid to foreign
persons, backup withholding on income paid to U.S. persons and related
matters (the "New Withholding Regulations") were issued by the Treasury
Department on October 6, 1997. The New Withholding Regulations will generally
be effective for payments made after December 31, 1998, subject to certain
transition rules. Prospective Certificateholders are strongly urged to
consult their own tax advisors with respect to the New Withholding
Regulations.
The Trustee will report to the Certificateholders and to the Master
Servicer for each calendar year the amount of any "reportable payments"
during such year and the amount of tax withheld, if any, with respect to
payments on the Certificates.
TAX TREATMENT OF FOREIGN INVESTORS
Under the Code, unless interest (including OID) paid on a Certificate
(other than a Residual Interest Certificate) is considered to be "effectively
connected" with a trade or business conducted in the United States by a
nonresident alien individual, foreign partnership or foreign corporation
("Nonresidents"), such interest will normally qualify as portfolio interest
(except where (i) the recipient is a holder, directly or by attribution, of
10% or more of the capital or profits interest in the issuer or (ii) the
recipient is a controlled foreign corporation as to which the issuer is a
related person) and will be exempt from Federal income tax. Upon receipt of
appropriate ownership statements, the issuer normally will be relieved of
obligations to withhold tax from such interest payments. These provisions
supersede the generally applicable provisions of United States law that would
otherwise require the issuer to withhold at a 30% rate (unless reduced or
eliminated by an applicable tax treaty) on, among other things, interest and
other fixed or determinable, annual or periodical income paid to
Nonresidents. Holders of Pass-Through Certificates and Stripped Certificates,
including Ratio Certificates, however, may be subject to withholding to the
extent that the Mortgage Loans were originated on or before July 18, 1984. In
addition, prospective Certificateholders who are Nonresidents are strongly
urged to consult their own tax advisors with respect to the New Withholding
Regulations. See "--Miscellaneous Tax Aspects -- Backup Withholding" above.
57
<PAGE>
Interest and OID of Certificateholders who are foreign persons are not
subject to withholding if they are effectively connected with a United States
business conducted by the Certificateholder. They will, however, generally be
subject to the regular United States income tax.
Payments to Holders of Residual Interest Certificates who are foreign
persons will generally be treated as interest for purposes of the 30% (or
lower treaty rate) United States withholding tax. Holders should assume that
such income does not qualify for exemption from United States withholding tax
as "portfolio interest." It is clear that, to the extent that a payment
represents a portion of REMIC taxable income that constitutes excess
inclusion income, a Holder of a Residual Interest Certificate will not be
entitled to an exemption from or reduction of the 30% (or lower treaty rate)
withholding tax. If the payments are subject to United States withholding
tax, they generally will be taken into account for withholding tax purposes
only when paid or distributed (or when the Residual Interest Certificate is
disposed of). The Treasury has statutory authority, however, to promulgate
regulations which would require such amounts to be taken into account at an
earlier time in order to prevent the avoidance of tax. Such regulations
could, for example, require withholding prior to the distribution of cash in
the case of Residual Interest Certificates that do not have significant
value. Under the Proposed Regulations, if a Residual Interest Certificate has
tax avoidance potential, a transfer of a Residual Interest Certificate to a
Nonresident will be disregarded for all Federal tax purposes. A Residual
Interest Certificate has tax avoidance potential unless, at the time of the
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee Residual Interest holder amounts that will equal at least 30%
of each excess inclusion, and 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. If a
Nonresident transfers a Residual Interest Certificate to a United States
person, and if the transfer has the effect of allowing the transferor to
avoid tax on accrued excess inclusions, then the transfer is disregarded and
the transferor continues to be treated as the owner of the Residual Interest
Certificate for purposes of the withholding tax provisions of the Code. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Excess Inclusions."
STATE TAX CONSIDERATIONS
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 requirements on employee benefit plans subject to ERISA
("ERISA Plans") and prohibits certain transactions between ERISA Plans and
persons who are parties in interest (as defined under ERISA) ("parties in
interest") with respect to assets of such Plans. Section 4975 of the Code
prohibits a similar set of transactions between certain plans ("Code Plans,"
and together with ERISA Plans, "Plans") and persons who are disqualified
persons (as defined in the Code) with respect to Code Plans. Certain employee
benefit plans, such as governmental plans and church plans (if no election
has been made under Section 410(d) of the Code), are not subject to the
requirements of ERISA or Section 4975 of the Code, and assets of such plans
may be invested in Certificates, subject to the provisions of other
applicable federal and state law. Any such plan which is qualified under
Section 401(a) of the Code and exempt from taxation under Section 501(a) of
the Code is, however, subject to the prohibited transaction rules set forth
in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance
with the documents governing the ERISA Plan. Before investing in a
Certificate, an ERISA Plan fiduciary should consider, among other factors,
whether to do so is appropriate in view of the overall
58
<PAGE>
investment policy and liquidity needs of the ERISA Plan. Such fiduciary
should especially consider the sensitivity of the investments to the rate of
principal payments (including prepayments) on the Mortgage Loans, as
discussed in the Prospectus Supplement related to a Series.
Based on the holding of the United States Supreme Court in John Hancock
Mutual Life Ins. Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993),
the assets of Plan may include assets held in the general account of an
insurance company. Before investing in a Certificate, an insurance company
should consider the effects of such holding on an investment of its general
accounts and the potential applicability of ERISA and Section 4975 of the
Code.
PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Code prohibit parties in
interest and disqualified persons with respect to ERISA Plans and Code Plans
from engaging in certain transactions involving such Plans or "plan assets"
of such Plans unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code and Sections 502(i) and 502(l) of ERISA
provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions.
The Depositor, the Master Servicer, any Special Servicer or the Trustee or
certain affiliates thereof may be considered or may become parties in
interest or disqualified persons with respect to an investing Plan. If so,
the acquisition or holding of Certificates by, on behalf of or with "plan
assets" of such Plan may be considered to give rise to a "prohibited
transaction" within the meaning of ERISA and/or the Section 4975 of Code
unless an administrative exemption described below or some other exemption is
available.
Special caution should be exercised before "plan assets" of a Plan are
used to purchase a Certificate if, with respect to such assets, the
Depositor, the Master Servicer, any Special Servicer or the Trustee or an
affiliate thereof either (a) has investment discretion with respect to the
investment of such assets, or (b) has authority or responsibility to give, or
regularly gives investment advice with respect to such assets for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.
Further, if the assets included in a Trust Fund were deemed to constitute
"plan assets," a Plan's investment in the Certificates may be deemed to
constitute a delegation, under ERISA, of the duty to manage plan assets by
the fiduciary deciding to invest in the Certificates, and certain
transactions involved in the operation of the Trust Fund may be deemed to
constitute prohibited transactions under ERISA and/or the Code. Neither ERISA
nor Section 4975 of the Code defines the term "plan assets."
The U.S. Department of Labor (the "Department") has issued regulations
(the "Regulations") concerning whether or not a Plan's assets would be deemed
to include an interest in the underlying assets of an entity (such as the
Trust Fund), for purposes of the reporting and disclosure and general
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code, if the Plan acquires an
"equity interest" (such as a Certificate) in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of
the Trust Fund. However, it cannot be predicted in advance, nor can there be
a continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of each class of equity interests is held by "benefit plan
investors," which are defined as ERISA Plans, Code Plans, and employee
benefit plans not subject to ERISA (for example, governmental plans), but
this exemption is tested immediately after each acquisition of an equity
interest in the entity whether upon initial issuance or in the secondary
market.
Pursuant to the Regulations, if the assets of the Trust Fund were deemed
to be "plan assets" by reason of the investment of assets of a Plan in any
Certificates, the "plan assets" of such Plan would include an undivided
interest in the Mortgage Loans, the mortgages underlying the Mortgage Loans
and
59
<PAGE>
any other assets held in the Trust Fund. Therefore, because the Mortgage
Loans and other assets held in the Trust Fund may be deemed to be "plan
assets" of each Plan that purchases Certificates, in the absence of an
exemption, the purchase, sale or holding of Certificates of any Series or
Class by or with "plan assets" of a Plan may result in a prohibited
transaction and the imposition of civil penalties or excise taxes.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase, sale or holding of
Certificates of any Series or Class by a Plan, for example, Prohibited
Transaction Class Exemption ("PTCE") 95-60, which exempts certain
transactions with insurance company general accounts; PTCE 91-38 (formerly
PTCE 80-51), which exempts certain transactions between bank collective
investment funds and parties in interest; PTCE 90-1 (formerly PTCE 78-19),
which exempts certain transactions between insurance company pooled separate
accounts and parties in interest; or PTCE 84-14, which exempts certain
transactions effected on behalf of a plan by a "qualified professional asset
manager." Also, the Department has issued administrative exemptions from
application of certain prohibited transaction restrictions of ERISA and the
Code to most underwriters of mortgage-backed securities (each, an
"Underwriter's Exemption"). Such an Underwriter's Exemption can only apply to
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which such underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If such an
Underwriter's Exemption might be applicable to a Series of Certificates, the
related Prospectus Supplement will refer to such possibility.
Any fiduciary or other Plan investor (which could include an insurance
company investing general accounts assets) who proposes to invest "plan
assets" of a Plan in 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 any such acquisition and ownership of such
Certificates.
UNRELATED BUSINESS TAXABLE INCOME -- RESIDUAL INTERESTS
The purchase of a Certificate evidencing an interest in the Residual
Interest in a Series that is treated as a REMIC by any employee benefit or
other plan that is exempt from taxation under Code Section 501(a), including
most varieties of Plans, may give rise to "unrelated business taxable income"
as described in Code Sections 511-515 and 860E. Further, prior to the
purchase of an interest in a Residual Interest, a prospective transferee may
be required to provide an affidavit to a transferor that it is not, nor is it
purchasing an interest in a Residual Interest on behalf of, a "Disqualified
Organization," which term as defined above includes certain tax-exempt
entities not subject to Code Section 511, such as certain governmental plans,
as discussed above under "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Taxation
of Holders of Residual Interest Certificates" and "--Restrictions on
Ownership and Transfer of Residual Interest Certificates."
Due to the complexity of these rules and the penalties imposed upon
Persons involved in prohibited transactions, it is particularly important
that individuals responsible for investment decisions with respect to ERISA
Plans and Code Plans consult with their counsel regarding the consequences
under ERISA and/or the Code of their acquisitions and ownership of
Certificates.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor or the applicable underwriter that such investment meets all
relevant legal requirements with respect to investments by Plans generally or
any particular Plan, or that such investment is appropriate for Plans
generally or any particular Plan.
LEGAL INVESTMENT
The Prospectus Supplement for each Series will identify those Classes of
Certificates, if any, which constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act").
Such Classes will constitute "mortgage related securities" for so long as
they (i) are rated in one of the two highest rating categories by at least
one nationally recognized statistical rating organization and (ii) are part
of a Series evidencing interests in a trust fund consisting of loans
originated by certain types
60
<PAGE>
of originators as specified in the Enhancement Act (the "SMMEA
Certificates"). As "mortgage related securities," the SMMEA Certificates will
constitute legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including, but not
limited to, state-chartered savings banks, commercial banks, savings and loan
associations and insurance companies, as well as trustees and state
government employee retirement systems) created pursuant to or existing under
the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued
by or guaranteed as to principal and interest by the United States or any
agency or instrumentality thereof constitute legal investments for such
entities. Pursuant to the Enhancement Act, a number of states enacted
legislation, on or before 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 the Enhancement Act. Pursuant to Section 347 of the Riegle Community
Development and Regulatory Improvement Act of 1994, which amended the
definition of "mortgage related security" to include, in relevant part,
certificates satisfying the rating and qualified originator requirements for
"mortgage related securities," but evidencing interests in a trust fund
consisting, in whole or in part, of first liens on one or more parcels of
real estate upon which are located one or more commercial structures, states
were authorized to enact legislation, on or before September 23, 2001,
specifically referring to Section 347 and prohibiting or restricting the
purchase, holding or investment by state-regulated entities in such types of
certificates. Accordingly, the investors affected by such legislation when
and if enacted, will be authorized to invest in SMMEA Certificates only to
the extent provided in such legislation.
The Enhancement Act also amended the legal investment authority of
federally chartered depository institutions as follows: federal savings and
loan associations and federal savings banks may invest in, sell or otherwise
deal with, mortgage related securities without limitation as to the
percentage of their assets represented thereby, federal credit unions may
invest in mortgage related securities, and national banks may purchase
mortgage related securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12
U.S.C. Section 24 (Seventh), subject in each case to such regulations as the
applicable federal regulatory authority may prescribe. In this connection,
effective December 31, 1996, the Office of the Comptroller of the Currency
(the "OCC") has amended 12 C.F.R. part 1 to authorize national banks to
purchase and sell for their own account, without limitation as to a
percentage of any such bank's capital and surplus (but subject to compliance
with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. Section 1.5), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(l) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part, "mortgage
related security" within the meaning of the Enhancement Act, provided that,
in the case of a "commercial mortgage-related security," it "represents
ownership of a promissory note or certificate of interest or participation
that is directly secured by a first lien on one or more parcels of real
estate upon which one or more commercial structures are located and that is
fully secured by interests in a pool of loans to numerous obligors." In the
absence of any rule or administrative interpretation by the OCC defining the
term "numerous obligors," no representation is made as to whether any Class
of Certificates will qualify as "commercial mortgaged-related securities,"
and thus as "Type IV securities," for investment by national banks. Federal
credit unions should review the 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
Section 703.5(f) through (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 FDIC, the Comptroller of the Currency and the Office of Thrift
Supervision and by the NCUA (with certain
61
<PAGE>
modifications) prohibits depository institutions from investing in certain
"high-risk" mortgage securities (including securities such as certain Series,
Classes or subclasses of 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 SMMEA
Certificates, as SMMEA Certificates may be deemed unsuitable investments, or
may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of the Enhancement Act).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits,
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income-paying," and provisions which may restrict
or prohibit investments in securities which are issued in book-entry form.
Investors should consult with their own legal advisers in determining
whether, and to what extent, SMMEA Certificates constitute legal investments
for such investors.
Other Classes of Certificates will not constitute "mortgage related
securities" under the Enhancement Act (the "Non-SMMEA Certificates"). The
appropriate characterization of the Non-SMMEA Certificates under various
legal investment restrictions, and thus the ability of investors subject to
these restrictions to purchase Non-SMMEA Certificates, may be subject to
significant interpretive uncertainties. All investors whose investment
authority is subject to legal restrictions should consult their own legal
advisers to determine whether, and to what extent, the Non-SMMEA Certificates
will constitute legal investments for them.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under the
Enhancement Act, the Depositor will make no representation as to the proper
characterization of the Certificates for legal investment 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.
PLAN OF DISTRIBUTION
Each Series of Certificates offered hereby and by means of the related
Prospectus Supplements may be sold directly by the Depositor or may be
offered through Credit Suisse First Boston Corporation, an affiliate of the
Depositor, or underwriting syndicates represented by Credit Suisse First
Boston Corporation (the "Underwriters"). The Prospectus Supplement with
respect to each such Series of Certificates will set forth the terms of the
offering of such Series of Certificates, 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 related Prospectus Supplement, the
Underwriters will be obligated to purchase all of the Certificates of a
Series described in the related Prospectus Supplement with respect to such
Series if any such Certificates are purchased. The Certificates may be
acquired by the Underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time
of sale.
If specified in the applicable 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.
62
<PAGE>
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 by means of
the related Prospectus Supplements from time to time in negotiated
transactions or otherwise, at prices determined at the time of sale. The
Depositor may effect such transactions by selling Certificates to or through
dealers, and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Depositor and any
purchasers of Certificates for whom they may act as agents.
The place and time of delivery for each Series of Certificates offered
hereby and by means of the related Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such Series.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will be
passed upon for the Depositor and for the Underwriters by Brown & Wood LLP,
One World Trade Center, New York, New York 10048 or by Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103-0001, as specified
in the related Prospectus Supplement.
63
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
1986 Act 47
A
Accrual Certificates 5
Act 2
ADA 42
Agreement 11
Asset Conservation Act 34
B
Balloon Mortgage Loans 7
Bankruptcy Code 33
Borrower 17
C
Cash Flow Bond Method 55
CERCLA 9, 34
Certificateholders 12
Certificates Cover
Classes Cover
Closing Date 18
Code 15
Code Plans 58
Collection Account 13
Commission 2
Compound Interest Certificates 44
Contingent Regulations 47
Covered Trust 8
CSFBMC 11
Cut-Off Date 13
D
Debt Service Reduction 37
Deficient Valuation 37
Deleted Mortgage Loans 21
Department 59
Depositor Cover
Disqualified Organization 52
Distribution Account 13
Distribution Date 12
DTC 10
E
Enhancement 27
Enhancement Act 60
ERISA 58
ERISA Plans 58
Escrow Account 22
Event of Default 26
F
FHA 19
64
<PAGE>
FHLMC 12
FNMA 12
Form 8-K 18
G
Garn-St Germain Act 38
GNMA 12
H
Holders 12
HUD 19
I
Installment Contracts 17
Insurance Proceeds 13
Interest Weighted Certificate 46
Interest Weighted Stripped Certificate 55
IRS 44, 47
L
L/C Bank 28
L/C Percentage 28
Lease 40
Lessee 40
Liquidation Proceeds 13
M
Master Servicer 22
Master Servicer Remittance Date 13
Mortgage Interest Rate 21
Mortgage Loan File 18
Mortgage Loan Groups 18
Mortgage Loan Schedule 18
Mortgage Loans Cover
Mortgage Pool Cover
Mortgaged Property 17
Mortgages 17
Multiple Variable Rate 46
N
NCUA 40
New Withholding Regulations 57
Nonresidents 57
Non-SMMEA Certificates 62
Note 17
O
OCC 61
OID 44
OID Regulations 44
Outstanding Balance 37
P
Pass-Through Certificates 53
Pass-Through Rate 2
65
<PAGE>
Permitted Investments 14
Plans 58
Policy Statement 61
Prepayment Assumption 45
Prepayment Premium 13
Property Protection Expenses 13
Proposed Regulations 56
PTCE 60
R
Rating Agency 11
Ratio Strip Certificates 55
RCRA 35
Registration Statement 2
Regular Interest Certificates 44
Regular Interests 43
Regulations 59
Relief Act 39
REMIC Cover
REMIC Regulations 52
REO Account 13
REO Property 13
Reserve Fund 28
Residual Interest Certificate 50
Residual Interests 43
S
Senior Certificates 27
Series Cover
Servicing Fee 24
Simple Interest Loans 17
Single Variable Rate 44
SMMEA Certificates 60
Special Servicer 22
Specially Serviced Mortgage Loans 22
Stripped Certificates 53
Subordinate Certificates 27
Substitute Mortgage Loans 21
T
TIN 57
Title VIII 40
Trust Fund Cover, 11
Trustee 16
Trustee/Master Servicer Fee 53
U
Unaffiliated Seller 20
Underwriters 62
Underwriter's Exemption 60
V
Voting Rights 10
</TABLE>
66
<PAGE>
[Photograph of Tustin Plaza, an office building.]
143. TUSTIN PLAZA
Tustin CA
[Photograph of KMart Dallas, a freestanding retail building.]
47. KMART DALLAS
Dallas TX
[Photograph of Holiday Inn, a hotel.]
39. HOLIDAY INN
Timonium MD
[Photograph of Heritage Paradise, a nursing home.]
101. HERITAGE PARADISE
Paradise CA
[Photograph of Malibu Creek Plaza, a strip center.]
26. MALIBU CREEK PLAZA
Malibu Beach CA
[Photograph of CVS, a freestanding retail building.]
96. CVS
Natick MA
[Photograph of Best Western, a hotel.]
42. BEST WESTERN
Chicago IL
[Photograph of Colton Plaza, an office building.]
18. COTTON PLAZA
Irvine CA
[Photograph of Rite Aid, a freestanding retail building.]
132. RITE AID
Kingston NY
<PAGE>
[Photograph of Kending Square Shopping Center, a strip center.]
20. KENDIG SQUARE SHOPPING CENTER
Lancaster PA
[Photograph of Waterfront Centre, an office building.]
35. WATERFRONT CENTER
Washington DC
[Photograph of El Paseo, a strip center.]
71. EL PASEO
Palm Desert CA
[Photograph of 240 West 40th Street, an office building.]
10. 240 WEST 40TH STREET
New York NY
[Photograph of Holiday Inn Totowa, a hotel.]
19. HOLIDAN INN TOTOWA
Totowa NJ
[Photograph of Wellington, an office building.]
45. WELLINGTON
Brokfield WI
<PAGE>
December 12, 1997
CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP.
Commercial Mortgage
Pass-Through Certificates
Series 1997-C2
CS97C2F.XLS
(Microsoft Excel Version 5.0)
Prospective investors are advised to read carefully, and should rely solely
on, the Prospectus Supplement, dated December 12, 1997 (the "PS"), relating to
the Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage
Pass-Through Certificates Series 1997-C2 (the "Certificates") in m aking their
investment decision.
The information contained on this diskette is provided to facilitate your
review of the collateral and other statistical information which is a part of
the PS and is not intended in any way to replace or supersede the rest of the
information contained therein. Any information contained on this dis kette is
more fully described in, and is superseded by, the description of the
collateral and structure and other information set forth in the PS. The
information on this diskette does not include any information relating to the
structure of the Certificates and does not include all relevant infor mation
relating to the underlying mortgage loans. Information relating to the
structure of the Certificates is set forth in the PS, and particular attention
should be paid to the risks and special considerations associated with an
investment in the Certificates described in the PS. Although the in formation
contained on this diskette is based on sources believed to be reliable no
representations or warranties are made that such information is accurate or
complete.
The information on this diskette should not be viewed as projections,
forecasts, predictions or opinions with respect to value, the actual rate or
timing of principal payments or prepayments on the underlying assets or the
performance characteristics of the Certificates. Prior to making any invest
ment decision, a prospective investor shall receive and should carefully
review the PS.
NOTHING CONTAINED ON THIS DISKETTE SHOULD BE CONSIDERED AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE CERTIFICATES.
<PAGE>
This diskette contains one spreadsheet file that can be put on a
user-specified hard drive or network drive. The file "CS97C2F.XLS" is a
Microsoft Excel(1), Version 5.0 spreadsheet. The file provides, in electronic
format, a worksheet consisting of certain loan level information shown in
ANNEX A and ANNEX B of the Prospectus Supplement, a worksheet consisting of
the table "Mortgage Notes" in the Prospectus Supplement and ANNEX D thereto.
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a securities law legend will be displayed.
READ THE LEGEND CAREFULLY. To view the ANNEX A and ANNEX B data in the
Microsoft Excel file, open the worksheet labeled "Annex A" or "Annex B",
respectively. To view the "Mortgage Notes" data, open the worksheet labeled
"Mortgage Notes." To view the ANNEX D data, open the worksheet labeled "Annex
D".
- ------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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, THE MORTGAGE LOAN SELLER OR THE UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE DEPOSITOR OR THE MORTGAGE LOAN SELLER SINCE SUCH DATE.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Certificateholders ........................ S-3
Executive Summary..................................... S-4
Mortgage Loan Executive Summary....................... S-5
Summary of Prospectus Supplement...................... S-8
Risk Factors.......................................... S-29
Description of the Mortgage Loans .................... S-55
Description of the Offered Certificates .............. S-109
Prepayment and Yield Considerations .................. S-125
The Pooling and Servicing Agreement................... S-137
Use of Proceeds ...................................... S-170
Certain Federal Income Tax Consequences .............. S-170
ERISA Considerations ................................. S-172
Legal Investment ..................................... S-174
Underwriting.......................................... S-174
Legal Matters......................................... S-175
Rating................................................ S-175
Loan Characteristics.................................. Annex A
Credit Lease Loan Characteristics .................... Annex B
Servicer Reports...................................... Annex C
Weighted Average Net Mortgage Rates .................. Annex D
PROSPECTUS
Prospectus Supplement................................. 2
Additional Information................................ 2
Incorporation of Certain Information by Reference .... 3
Risk Factors.......................................... 4
The Depositor......................................... 11
Use of Proceeds....................................... 11
Description of Certificates........................... 11
The Mortgage Pools.................................... 17
Servicing of the Mortgage Loans ...................... 22
Enhancement........................................... 27
Certain Legal Aspects of the Mortgage Loans .......... 29
Certain Federal Income Tax Consequences .............. 43
State Tax Considerations ............................. 58
ERISA Considerations ................................. 58
Legal Investment ..................................... 60
Plan of Distribution ................................. 62
Legal Matters ........................................ 63
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THE PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP.
Depositor
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
Mortgage Loan Seller
$1,293,736,000
(Approximate)
Credit Suisse First Boston
Mortgage Securities Corp.
Commercial Mortgage
Pass-Through Certificates
Series 1997-C2
$ 151,212,000 (APPROXIMATE) CLASS A-1 CERTIFICATES
$ 322,346,000 (APPROXIMATE) CLASS A-2 CERTIFICATES
$ 523,315,000 (APPROXIMATE) CLASS A-3 CERTIFICATES
$1,465,990,190 (APPROXIMATE) CLASS A-X CERTIFICATES
$ 95,289,000 (APPROXIMATE) CLASS B CERTIFICATES
$ 80,630,000 (APPROXIMATE) CLASS C CERTIFICATES
$ 95,289,000 (APPROXIMATE) CLASS D CERTIFICATES
$ 25,655,000 (APPROXIMATE) CLASS E CERTIFICATES
PROSPECTUS SUPPLEMENT
[CREDIT SUISSE FIRST BOSTON LOGO]
DECEMBER 12, 1997
- -------------------------------------------------------------------------------
